THE CANANDAIGUA FUNDS
FINANCIAL STATEMENTS AS OF
--------------------------
JUNE 30, 1998
-------------
TOGETHER WITH
-------------
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
FINANCIAL STATEMENTS AS OF
JUNE 30, 1998
(Unaudited)
TABLE OF CONTENTS
-----------------
PAGE
----
Independent Accountants' Review Report 1
Statement of Assets and Liabilities as of June 30, 1998 2
Statement of Operations for the Six Months Ended June 30, 1998 3
Statement of Changes in Net Assets for the Six Months Ended
June 30, 1998 and the Year Ended December 31, 1997 4
Schedule of Fund Investments as of June 30, 1998:
- Bond Fund 5
- Equity Fund 7
Notes to Financial Statements/Supplemental Data 11
Selected Per-Share Data and Ratios:
- Bond Fund 15
- Equity Fund 16
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------
To the Board of Directors
The Canandaigua Funds
Canandaigua, New York
We have reviewed the accompanying statement of assets and liabilities, including
the schedule of fund investments of The Canandaigua Funds (The Fund - previously
Canandaigua National Collective Investment Fund for Qualified Trusts; comprised
of the Bond and Equity Funds), as of June 30, 1998, and the related statements
of operations and changes in net assets and the selected per-share data and
ratios/supplemental data for the six months then ended, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. These financial statements
and per-share data and ratios/supplemental data are the responsibility of the
Fund's management.
A review consists principally of inquiries of organization personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements and selected per-share data and
ratios/supplemental data in order for them to be in conformity with generally
accepted accounting principles.
The statement of changes in net assets for the year ended December 31, 1997 was
audited by us and we expressed an unqualified opinion on these statements of the
Fund as of December 31, 1997 and the year then ended in our report dated January
20, 1998 (except for the matter discussed in Note 5 to these financial
statements as to which date was February 9, 1998), but we have not performed any
auditing procedures since those dates.
MORGA JONES & HUFSMITH, P.C.
Canandaigua, New York
July 30, 1998
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------
JUNE 30, 1998
-------------
(Unaudited)
(See Independent Accountants' Review Report)
<TABLE>
<CAPTION>
FUND
-------------------------------
BOND EQUITY
---- ------
ASSETS
------
<S> <C> <C>
INVESTMENT SECURITIES, AT MARKET (bond fund cost -
$716,146; equity fund cost - $19,318,663) $ 731,059 $ 20,753,312
------------ ------------
CASH AND CASH EQUIVALENT 45,619 1,433,805
------------ ------------
RECEIVABLES FOR:
Sales of fund's shares -- 36,808
Sale of investments -- 276,071
Dividends and accrued interest 11,991 22,789
------------ ------------
Total receivables 11,991 335,668
------------ ------------
Total assets 788,669 22,522,785
------------ ------------
LIABILITIES
-----------
PAYABLES FOR:
Repurchases of fund's shares -- (8,422)
Purchase of investments -- (377,720)
Investment management fees -- (17,012)
Professional fees (380) (10,120)
Custodial fees (388) (397)
------------ ------------
Total liabilities (768) (413,671)
------------ ------------
NET ASSETS AT JUNE 30, 1998: (equivalent to $14.00 per
share for bond fund and $21.60 per share for equity
fund, based on 56,259 shares and 1,023,798 shares
outstanding for bond and equity shares, respectively) $ 787,901 $ 22,109,114
============ ============
NET ASSETS CONSIST OF:
Capital stock $ 753,259 $ 21,106,546
Undistributed net investment income (loss) 19,729 (35,764)
Accumulated net realized loss on investments -- (396,317)
Net unrealized appreciation on investments 14,913 1,434,649
------------ ------------
NET ASSETS $ 787,901 $ 22,109,114
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-2-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
STATEMENT OF OPERATIONS
-----------------------
FOR THE SIX MONTHS ENDED
------------------------
JUNE 30, 1998
-------------
(Unaudited)
(See Independent Accountants' Review Report)
<TABLE>
<CAPTION>
FUND
-------------------------------
BOND EQUITY
<S> <C> <C>
INVESTMENT INCOME:
Interest income $ 21,440 $ 6,120
Dividend income -- 73,231
----------- -----------
Total investment income 21,440 79,351
----------- -----------
EXPENSES:
Investment management fees -- (102,110)
Custodial fees (1,271) (1,413)
Professional fees (440) (11,592)
----------- -----------
Total expenses (1,711) (115,115)
----------- -----------
Net investment income (expense) 19,729 (35,764)
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss -- (396,317)
Net unrealized gain 5,581 2,397,713
----------- -----------
Net realized and unrealized gain on investments 5,581 2,001,396
----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 25,310 $ 1,965,632
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-3-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------------------------
(See Independent Accountants' Review Report)
<TABLE>
<CAPTION>
FUND
------------
BOND EQUITY
----------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
FOR THE SIX MONTHS ENDED JUNE 30, 1998 -
OPERATIONS:
Net investment income (loss) $ 19,729 $ (35,764)
Net realized loss on investments -- (396,317)
Net unrealized gain on investments 5,581 2,397,713
------------ ------------
Net increase in net assets resulting
from operations 25,310 1,965,632
------------ ------------
DIVIDENDS AND DISTRIBUTIONS PAID TO SHAREHOLDERS:
Dividends from net investment income -- --
Distributions from net realized gain on investments -- --
------------ ------------
Total dividends and distributions -- --
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from shares sold (16,399 and 153,720 shares
in the bond and equity funds, respectively) 225,648 3,354,169
Proceeds from any shares issued in reinvestment of net
investment income dividends and distributions of
net realized gain on investments -- --
Cost of shares purchased (9,390 and 46,595 shares in
the bond and equity funds, respectively) (129,533) (997,973)
------------ ------------
Net increase in net assets resulting from fund
share transactions 96,115 2,356,196
------------ ------------
TOTAL INCREASE IN NET ASSETS 121,425 4,321,828
NET ASSETS - beginning of period 666,476 17,787,286
------------ ------------
NET ASSETS - end of period (including undistributed net
investment income of $19,441 for bond fund) $ 787,901 $ 22,109,114
============ ============
FUND
------------
BOND EQUITY
----------------------
FOR THE YEAR ENDED DECEMBER 31, 1997 -
OPERATIONS:
Net investment income (loss) $ 31,853 $ (2,152)
Net realized gain (loss) on investments (107) 3,993,077
Net unrealized gain (loss) on investments 16,007 (1,742,549)
------------ ------------
Net increase in net assets resulting from
operations 47,753 2,248,376
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from shares sold (15,383 and 212,512 shares
in the bond and equity funds, respectively) 198,015 3,943,645
Cost of shares purchased (6,114 and 54,499 shares in
the bond and equity funds, respectively) (80,559) (1,048,542)
------------ ------------
Net increase in net assets resulting from fund
share transactions 117,456 2,895,103
------------ ------------
TOTAL INCREASE IN NET ASSETS 165,209 5,143,479
NET ASSETS - beginning of year 501,267 12,643,807
------------ ------------
NET ASSETS - end of year $ 666,476 $ 17,787,286
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-4-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
SCHEDULE OF FUND INVESTMENTS
----------------------------
JUNE 30, 1998
-------------
(Unaudited)
(See Independent Accountants' Review Report)
<TABLE>
<CAPTION>
BOND FUND
COST MARKET VALUE
------- ------------------------
PERCENTAGE
AMOUNT AMOUNT OF NET ASSETS
------ ------ -------------
<S> <C> <C> <C>
INVESTMENT SECURITIES:
U.S. GOVERNMENT NOTES & BONDS -
25,000 US Treasury Note, 5.625%, April 30, 2000 $ 24,978 $ 25,055 3.18%
25,000 US Treasury Note, 6.250%, August 31, 2000 24,944 25,367 3.22%
25,000 US Treasury Note, 6.125%, September 30, 2000 24,986 25,313 3.21%
30,000 US Treasury Note, 5.500%, December 31, 2000 29,684 29,981 3.81%
25,000 US Treasury Note, 5.250%, January 31, 2001 24,738 24,844 3.15%
30,000 US Treasury Note, 6.375%, March 31, 2001 29,954 30,628 3.89%
25,000 US Treasury Note, 5.500%, February 28, 2003 24,822 24,992 3.17%
25,000 US Treasury Note, 5.750%, April 30, 2003 24,953 25,250 3.20%
30,000 US Treasury Note, 5.875%, November 15, 2005 29,324 30,591 3.88%
25,000 US Treasury Note, 5.625%, February 15, 2006 24,958 25,109 3.19%
40,000 US Treasury Note, 6.875%, May 15, 2006 40,088 43,337 5.50%
30,000 US Treasury Note, 7.000%, July 15, 2006 30,050 32,775 4.16%
40,000 US Treasury Note, 5.500%, February 15, 2008 39,782 40,000 5.08%
-------- -------- -------
Total U.S. Government Notes & Bonds 373,261 383,242 48.64%
-------- -------- -------
CORPORATE BONDS -
CAPITAL EQUIPMENT
AEROSPACE & MILITARY TECHNOLOGY
-------------------------------
15,000 Lockheed Martin Corporation, 6.750%,
March 15, 2003 15,814 15,394 1.95%
MACHINERY CONSTRUCTION AND MINING
---------------------------------
25,000 Caterpillar, 6.000%, May 01, 2007 23,924 24,433 3.10%
------- ------- -------
TOTAL CAPITAL EQUIPMENT 39,738 39,827 5.05%
------- ------- -------
CONSUMER GOODS
BEVERAGE & TOBACCO
------------------
20,000 Coca-Cola Company, 6.000%, July 15, 2003 19,965 20,026 2.54%
25,000 Anheiser Busch, 6.750%, November 01, 2006 25,134 25,544 3.24%
RETAIL TRADING
--------------
25,000 Sears Roebuck & Company, 6.250%,
January 15, 2004 23,788 25,046 3.18%
SPECIALTY CHEMICALS
-------------------
25,000 Eastman Chemical Company, 6.375%,
January 15, 2004 25,129 25,126 3.19%
MULTIMEDIA
----------
25,000 Disney, 5.800%, October 27, 2008 23,283 24,692 3.14%
------- ------- -------
TOTAL CONSUMER GOODS 117,299 120,434 15.29%
-------- -------- -------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-5-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
SCHEDULE OF FUND INVESTMENTS
----------------------------
JUNE 30, 1998
-------------
(Unaudited)
(See Independent Accountants' Review Report)
<TABLE>
<CAPTION>
BOND FUND(CONTINUED)
COST MARKET VALUE
------- ------------------------
PERCENTAGE
AMOUNT AMOUNT OF NET ASSETS
------ ------ -------------
<S> <C> <C> <C>
FINANCE
BANKING
-------
30,000 Citicorp, 6.750%, August 15, 2005 30,798 31,036 3.94%
FINANCIAL SERVICES
------------------
10,000 Ford Motor Credit Co., 6.850%,
August 15, 2000 10,003 10,182 1.29%
20,000 General Electric Capital Corp. 5.500%,
November 01, 2001 19,947 19,718 2.51%
20,000 Salomon Inc., 6.750%, August 15, 2003 19,913 20,504 2.60%
30,000 Merrill Lynch & Company, Inc., 6.250%,
October 15, 2008 29,696 30,168 3.83%
-------- -------- ------
TOTAL FINANCE 110,357 111,608 14.17%
-------- -------- ------
SERVICES
TELECOMMUNICATIONS
------------------
20,000 Pacific Bell, 6.250%, March 01, 2005 19,628 20,201 2.57%
30,000 LCI, 7.250% June 15, 2007 30,847 30,104 3.82%
HOTELS AND MOTELS
-----------------
25,000 Marriott, 6.750%, December 15, 2003 25,016 25,643 3.25%
-------- -------- ------
TOTAL SERVICES 75,491 75,948 9.64%
-------- -------- ------
Total Corporate Bonds 342,885 347,817 44.15%
-------- -------- ------
TOTAL INVESTMENT SECURITIES 716,146 731,059 92.79%
CASH AND CASH EQUIVALENT:
Canandaigua National Bank Collective Fixed Income 45,619 45,619 5.79%
EXCESS OF RECEIVABLES OVER PAYABLES 11,223 11,223 1.42%
-------- -------- ------
NET ASSETS $ 772,988 $ 787,901 100.00%
========= ========= ========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-6-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
SCHEDULE OF FUND INVESTMENTS
----------------------------
JUNE 30, 1998
-------------
(Unaudited)
(See Independent Accountants' Review Report)
EQUITY FUND
<TABLE>
<CAPTION>
COST MARKET VALUE
------------- ----------------------------
PERCENTAGE
AMOUNT AMOUNT OF NET ASSETS
------ ------ -------------
INVESTMENT SECURITIES:
COMMON STOCK -
CAPITAL EQUIPMENT
<S> <C> <C> <C>
AUTO TRUCK PARTS AND EQUIPMENT
------------------------------
8,000 Dana Corp. $ 425,633 $ 428,000 1.94%
---------- ---------- -----
TOTAL CAPITAL EQUIPMENT 425,633 428,000 1.94%
---------- ---------- -----
TELECOMMUNICATIONS
TELEPHONE - INTEGRATED
----------------------
20,000 Global Telesystems Group, Inc. 814,330 975,000 4.41%*
---------- ---------- -----
TOTAL TELECOMMUNICATIONS 814,330 975,000 4.41%
---------- ---------- -----
SEMICONDUCTORS
SEMICONDUCTORS
--------------
3,000 Intel Corporation 203,270 222,375 1.00%
20,000 LSI Logic Corp. 436,170 461,250 2.09%*
---------- ---------- -----
TOTAL SEMICONDUCTORS 639,440 683,625 3.09%
---------- ---------- -----
PHARMACEUTICAL
PHARMACEUTICAL
--------------
20,000 American Home Products Corp. 796,823 1,035,000 4.68%
7,000 Merck & Company, Inc. 807,280 936,250 4.23%
8,000 Bristol-Meyers Squibb Company 831,670 919,500 4.16%
12,000 Zeneca Group ADR PLC 539,800 526,500 2.38%
---------- ---------- -----
TOTAL PHARMACEUTICAL 2,975,573 3,417,250 15.45%
---------- ---------- ------
ENERGY
UTILITIES
---------
20,000 AES Corporation 825,580 1,051,250 4.75%*
OIL COMPANIES - INTEGRATED
--------------------------
5,000 British Petroleum Co. 442,395 441,250 2.00%
6,000 Mobil Corp. 453,640 459,750 2.08%
---------- ---------- ------
TOTAL ENERGY 1,721,615 1,952,250 8.83%
---------- ---------- ------
<FN>
* Non-income producing
</FN>
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-7-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
SCHEDULE OF FUND INVESTMENTS
----------------------------
JUNE 30, 1998
-------------
(Unaudited)
(See Independent Accountants' Review Report)
EQUITY FUND (CONTINUED)
<TABLE>
<CAPTION>
COST MARKET VALUE
-------- ------------------------
PERCENTAGE
INVESTMENT SECURITIES: AMOUNT AMOUNT OF NET ASSETS
------ ------ -------------
<S> <C> <C> <C>
COMMON STOCK - (continued)
CONSUMER GOODS
ELECTRONICS
-----------
7,500 Philips Electronics NV (ADR) 643,596 637,500 2.88%
IMAGING
-------
4,000 Eastman Kodak Co. 283,919 292,250 1.32%
HEALTHCARE
----------
3,000 Johnson & Johnson 213,508 221,250 1.00%
RETAIL DRUG STORES
------------------
8,000 CVS Corp. 289,420 311,500 1.41%
COMPUTER SOFTWARE
-----------------
13,000 Computers Associates International, Inc. 758,962 722,312 3.27%
RETAIL DEPARTMENT STORES
------------------------
5,000 Fred Meyer, Inc. 224,895 212,500 0.96%
PAPER AND RELATED PRODUCTS
--------------------------
12,000 Mead Corporation 377,720 381,000 1.72%
--------- --------- ------
TOTAL CONSUMER GOODS 2,792,020 2,778,312 12.56%
--------- --------- ------
SERVICES
TELECOMMUNICATIONS
------------------
19,500 Boston Communication Group, Inc. 144,800 173,062 0.78%*
10,000 Scientific-Atlanta Inc. 243,520 253,750 1.15%
20,000 US Lec Corp CL A 459,565 417,500 1.89%*
25,000 Worldcom 821,290 1,210,938 5.48%*
AIRLINES
--------
3,000 Delta Air Lines, Inc. 362,982 387,750 1.75%
DIALYSIS CENTERS
----------------
10,000 Total Renal Care Holdings, Inc. 311,020 345,000 1.56%*
WATER TREATMENT SYSTEMS
-----------------------
5,000 United States Filter 143,645 140,312 0.63%*
ADVERTISING AGENCIES
--------------------
15,000 Young & Rubicam Inc. 375,020 480,000 2.17%*
--------- --------- ------
TOTAL SERVICES 2,861,842 3,408,312 15.41%
--------- --------- ------
<FN>
* Non-income producing
</FN>
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-8-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
SCHEDULE OF FUND INVESTMENTS
----------------------------
JUNE 30, 1998
-------------
(Unaudited)
(See Independent Accountants' Review Report)
EQUITY FUND (CONTINUED)
<TABLE>
<CAPTION>
COST MARKET VALUE
----------------- --------------------
PERCENTAGE
AMOUNT AMOUNT OF NET ASSETS
------ ------ -------------
FINANCE
CREDIT CARD
-----------
<S> <C> <C> <C>
30,000 MBNA Corporation 1,026,273 990,000 4.48%
5,000 Capital One Financial 468,083 620,938 2.81%
PROPERTY AND CASUAL INSURANCE
-----------------------------
16,000 Ace Limited 603,853 624,000 2.82%
BANKING
-------
5,000 Fleet Financial Group, Inc. 419,057 417,500 1.89%
1,000 M&T Bank Corp. 513,170 554,000 2.50%
6,000 Northern Trust Corp. 427,207 457,500 2.07%
FINANCIAL SERVICES
------------------
5,000 Merrill Lynch 427,395 461,250 2.09%
MULTI-LINE INSURANCE
--------------------
16,000 Travelers Group, Inc. 1,022,640 970,000 4.39%
--------- --------- ------
TOTAL FINANCE 4,907,678 5,095,188 23.05%
--------- --------- ------
TECHNOLOGY
MICRO COMPUTERS
---------------
33,000 Compaq Computer Corp. 992,268 936,375 4.24%
--------- --------- ------
TOTAL TECHNOLOGY 992,268 936,375 4.24%
--------- --------- ------
MULTI-INDUSTRY
MULTI-INDUSTRY
--------------
20,000 U.S. Industries Group, Inc. 540,559 495,000 2.24%
--------- --------- ------
TOTAL MULTI-INDUSTRY 540,559 495,000 2.24%
--------- --------- ------
ELECTRONICS
ELECTRONICS
-----------
6,000 Sanmina Corp. 251,590 260,250 1.18%*
--------- --------- ------
TOTAL ELECTRONICS 251,590 260,250 1.18%
--------- --------- ------
<FN>
* Non-income producing
</FN>
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-9-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
SCHEDULE OF FUND INVESTMENTS
----------------------------
JUNE 30, 1998
-------------
(Unaudited)
(See Independent Accountants' Review Report)
EQUITY FUND (CONTINUED)
<TABLE>
<CAPTION>
COST MARKET VALUE
---------------- -------------------------------
PERCENTAGE
AMOUNT AMOUNT OF NET ASSETS
------ ------ -------------
INVESTMENT SECURITIES:
COMMON STOCK - (continued)
SEMI-CAPITAL EQUIPMENT
SEMI-CAPITAL EQUIPMENT
----------------------
<S> <C> <C> <C>
10,000 Credence Systems Co. 246,845 190,000 0.86%*
5,000 Teradyne Inc. 149,270 133,750 0.60%*
---------- --------- -----
TOTAL SEMI-CAPITAL EQUIPMENT 396,115 323,750 1.46%
---------- --------- ------
TOTAL INVESTMENT SECURITIES (COMMON STOCK) 19,318,663 20,753,312 93.86%
CASH AND CASH EQUIVALENTS:
Canandaigua National Bank Collective Equity Fund 1,433,805 1,433,805 6.49%
EXCESS OF PAYABLES OVER RECEIVABLES (78,003) (78,003) (0.35%)
------------ ------------ ------
NET ASSETS $ 20,674,465 $ 22,109,114 100.00%
============ ============ =======
<FN>
* Non-income producing
</FN>
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-10-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
JUNE 30, 1998
-------------
(Unaudited)
(See Independent Accountants' Review Report)
(1) ORGANIZATION
The Canandaigua Funds (the Fund) is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment
company. The Fund offers two no-load mutual funds: the Canandaigua
Equity Fund ("Equity Fund"), which seeks long term growth of asset
values through capital appreciation and dividend income, and the
Canandaigua Bond Fund ("Bond Fund"), which seeks to earn a high level
of current income with consideration also given to safety of principal.
From inception in September, 1992 through February 9, 1998, the Fund
was designed solely for the investment of retirement funds held in
certain qualified trusts. Effective February 9, 1998, the Fund was
reorganized on a tax free basis from a collective investment trust to a
Delaware business trust. Among other things, this change enabled the
Fund to expand its shareholders from certain qualified individual
retirement trust accounts, to the general public.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES -
The financial statements have been prepared in conformity with
generally accepted accounting principles and, as such, include amounts
based on informed estimates and judgments of management with
consideration given to materiality. Actual results could differ from
those estimates. The interim financial statements, as of June 30, 1998,
include adjustments for the estimated effect of recurring annual
accrued charges which, in the opinion of management, are necessary for
the fair presentation of the interim financial statement.
CASH AND CASH EQUIVALENTS -
Interest bearing cash accounts are considered cash equivalents.
VALUATION OF INVESTMENT SECURITIES AND INCOME RECOGNITION -
Investments consist of debt and equity investment securities of the
United States (U.S.) government and of corporations whose securities
are traded on recognized U.S. securities exchanges. Investment
securities are stated at market value based upon closing sales prices
reported on recognized securities exchanges on the last business day of
the year or, for listed securities having no sales reported and for
unlisted securities, upon last reported bid prices on that date. The
market value of investment securities is subject to daily fluctuations.
Short-term securities with 60 days or less to maturity are amortized to
maturity based on their cost to the Fund if acquired within 60 days of
maturity or, if already held by the Fund on the 60th day, based on the
value determined on the 61st day. Effective January 1, 1998, any
purchase premiums or discounts are amortized in investment interest
ratably over the term of an investment security with a remaining
maturity over 60 days. Securities for which quotations are not readily
available are valued at fair value as determined in good faith by the
Supervisory Committee of the Fund.
The fair value of receivables for sale of investments and payables for
purchase of investments are based on fair values as of the date of sale
or purchase of the investment security.
The estimated fair value of individual investment securities held at
June 30, 1998 are disclosed in the accompanying Schedule of Fund
Investments.
As is customary in the industry, securities transactions recorded no
later than the first business day after the securities are purchased or
sold. Interest income is reported on the accrual basis. Dividend income
is recorded on the ex-dividend date.
-11-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
JUNE 30, 1998
-------------
(Unaudited)
(See Independent Accountants' Review Report)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
VALUATION OF INVESTMENT SECURITIES AND INCOME RECOGNITION - (continued)
Realized gains and losses on sales of securities are calculated on the
identified cost basis.
Dividends and distributions to shareholders are recorded on the
ex-dividend date and are paid at least annually. Through February 9,
1998, when the Fund operated solely as a collective investment trust,
dividend distributions were not relevant for tax compliance purposes.
There have been no dividends declared or distributed to share holders
through June 30, 1998.
INCOME TAXES -
It is the policy of the Fund to comply with applicable requirements of
the Internal Revenue Code. Effective February 9, 1998, the Fund began
accepting investments attributable to sources other than individual
retirement trust accounts. As a result, net investment income and net
realized gains on investments beginning for fiscal 1998, is taxable to
the Fund if not substantially distributed annually to its shareholders.
It is the intention and policy of the Fund to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its annual net taxable
income, including any net realized gains on investments, to its
shareholders. Accordingly, there was no income tax provision recorded
for the Fund as of June 30, 1998.
Prior to February 9, 1998, the Fund was exempt from Federal income tax
under Section 408 (e) of the Internal Revenue Code with respect to
interests in the Fund which are attributable to individual retirement
trust accounts maintained in conformity with Section 408 (e) of the
Internal Revenue Code, and exempt from Federal income tax under Section
501 (a) of the Internal Revenue Code with respect to interests in the
Fund which are attributable to pension or profit-sharing trusts
(including those benefiting self-employed individuals) maintained in
conformity with Section 401 (a) of the Internal Revenue Code. The Fund
was also not subject to taxation in New York State for these qualified
interests. For Federal income tax purposes, income earned by the Fund
for these qualified interests was not taxable to participating trusts
or participants until a participant receives a distribution from the
Fund. Withdrawals from the Fund which are paid to participating trusts
can be made at any time by participating trusts without penalty and
without the amount withdrawn being subject to Federal income tax.
VALUATION OF SHARES -
The Declaration of Trust provides that the Fund may issue an unlimited
number of shares of beneficial interest without par value. Currently,
the Fund is offering shares in a Bond Fund and an Equity Fund. The
shares are voting, non-assessable, and have no preemptive rights or
preferences as to conversion, exchange, dividends or retirement. The
net asset value per share of each fund is determined by dividing the
total value of the fund's net assets by the number of outstanding
shares of the fund. The net assets value per share in the accompanying
financial statements is calculated in consideration of all purchases
and sales transacted during the period. Share purchases are recorded
when an investor's request for a share purchase is accepted and share
distributions are recorded when an investor's request for distribution
is received. Accordingly, any accepted share purchase obligations for
which cash has not yet been received are reflected as sale of fund's
shares and any approved distribution requests for which cash has not
yet been disbursed are reflected as repurchases of fund's shares in the
accompanying statement of assets and liabilities.
-12-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
JUNE 30, 1998
-------------
(Unaudited)
(See Independent Accountants' Review Report)
(3) AGREEMENTS
The Canandaigua National Bank and Trust Company (the Company) is the
investment advisor of the Fund. The individual portfolio managers of
the Fund are also officers of the Company. Subject to the direction of
the Supervisory Committee of the Fund, which performs the duties and
undertakes the responsibilities of the Board of Directors of an
investment company, the Company manages all of the business and affairs
of the Fund.
The Fund has entered into an Investment Management Agreement with the
Company. Under the terms of the agreement, the Company will manage the
investment of the assets of each fund in conformity with the stated
objectives and policies of that fund. For these services, the Fund will
pay investment management fees to the Company, at the rate of 1% of
assets annually of each fund. In April, 1994, however, the Supervisory
Committee authorized a temporary reduction of this fee for the bond
fund to .5%. On July 9, 1997, the Supervisory Committee authorized a
temporary suspension of the total investment management fee it pays for
the bond fund. These rate reductions resulted in a savings to the bond
fund of $3,597 for the six month period ended June 30, 1998.
In addition, the Company has historically assumed expenses, other than
primarily custodial and audit, incurred in the administration of the
Fund. During the six months ended June 30, 1998, the Company also
assumed approximately $1,000 of audit fees related to the
reorganization of the Fund and approximately $1,400 of Board of
Trustee fees and expenses for board and committee meeting attendance.
The Company will reimburse the Fund for the amount by which the
expenses exceed the lower of (1) 1.5% of the average daily value of the
Fund's net assets during its fiscal year or (2) the most restrictive
expense limitation applicable to the Fund imposed by the securities
laws of any state in which the shares of the Fund are sold.
The Northern Trust Company acts as custodian of the assets of the Fund.
Custodial fees paid by the Fund are based on an agreed fee schedule for
asset holdings and transactions.
The Fund has an administrative service agreement with American Data
Services, Inc. (ADS), for a three year period beginning December, 1997.
Monthly fees are based on the greater of; (1) a sliding scale of $1,500
for a fund with average net assets of under $5 million to $2,500 for a
fund with net assets of $20 million or more; or (2) 1/12 of the 0.012%
of the average net assets of a fund for the month. These fees, $20,762
for the six months ended June 30, 1998, have historically been paid by
the Company.
In December, 1997, the Fund entered into a transfer agency agreement
with ADS for a three year period to provide shareholder record keeping
and reporting services and to act as the dividend disbursing agent for
the Fund. Monthly fees consist of a minimum $900 maintenance fee plus
various transaction fees. The $11,458 of fees through June 30, 1998
have been paid by the Company.
In December, 1997, the Fund entered into a three year ninety day
cancelable distributor agreement with ADS Distributors, Inc. to act as
the principal underwriter and distributor of each fund's shares. The
annual fee for these services is $22,750 plus expenses. The $11,375 of
fees through June 30, 1998 have been paid by the Company.
In December, 1997, the Fund entered into a fund accounting agent
agreement with ADS for a three year period to calculate and transmit
the Fund's net asset value and maintain and keep current all books and
records of the Fund as required by Rule 31a-1 under the 1940 Act.
Monthly fees are based on the greater of; (1) a sliding scale of $800
for a fund with average net assets of under $10 million to $1,400 for a
fund with net assets of $25 million to $30 million; or (2) 1/12 of 2.75
basis points on net assets in excess of $30 million. These fees,
$18,347 for the six months ended June 30, 1998, have historically been
paid by the Company.
Fees with ADS and ADS Distributors, Inc. are subject to annual
increases based on a defined increase in the Consumer Price Index for
the Northeast region.
-13-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
JUNE 30, 1998
-------------
(Unaudited)
(See Independent Accountants' Review Report)
(4) PURCHASES AND SALES OF SECURITIES
During the six months ended June 30, 1998, purchases and sales of
investment securities, excluding cash and cash equivalent, amounted to
the following:
FUND
--------------------------------
(Unaudited)
BOND EQUITY
---- ------
Purchases $ 114,513 $ 37,418,631
========= ============
Sales $ 45,035 $ 36,373,339
========== ============
Purchases and sales of government securities included in the Bond Fund
amounts were $114,513 and $45,035, respectively. All other purchases
and sales in the Bond Fund and Equity Fund were of investment
securities, excluding government securities. Transaction fees paid
during the six month period ended June 30, 1998 to the Company and The
Northern Trust Company in the amount of approximately $2,800 and
$5,000, respectively, were recorded as an adjustment to the basis of
the related securities in the amount of approximately $7,700 in the
equity fund and $100 in the bond fund.
UNREALIZED GAINS (LOSSES) ON INVESTMENTS -
As of June 30, 1998, gross unrealized gains (losses) on investments
with a cost of $716,146 in the Bond Fund and $19,318,663 in the Equity
Fund are as follows:
FUND
---------------------------------
(Unaudited)
BOND EQUITY
---- ------
Gross unrealized gains $ 16,308 $ 1,813,920
Gross unrealized (losses) (1,395) (379,271)
---------- -----------
Net unrealized gain $ 14,913 $ 1,434,649
========== ===========
-14-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
CANANDAIGUA BOND FUND
---------------------
SELECTED PER-SHARE DATA AND RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31
-----------------------------------------------------------------------
JUNE 30, 1998 1997 1996 1995 1994 1993
------------- ---- ---- ---- ---- ----
PER-SHARE DATA: (Unaudited) (RESTATED)
<S> <C> <C> <C> <C> <C> <C>
(For a share outstanding throughout each period)
Net Asset Value, beginning of period $ 13.53 $ 12.54 $ 12.25 $ 10.01 $ 10.48 $ 10.06
------- -------- -------- -------- -------- --------
Income (Loss) From Investment Operations -
Net investment income (a) 0.38 0.70 0.62 0.81 0.62 0.42
Net realized and unrealized gain (loss)
on investments 0.09 0.29 (0.33) 1.43 (1.09) --
------- -------- -------- -------- -------- --------
Total income (loss) from investment operations 0.47 0.99 0.29 2.24 (0.47) 0.42
------- -------- -------- -------- -------- --------
Less Distributions (b) -
Dividends from net investment income --
Distributions from net realized gains --
-------
Total distributions --
-------
Net Asset Value, end of period $ 14.00 $ 13.53 $ 12.54 $ 12.25 $ 10.01 $ 10.48
======= ======== ======== ======== ======== ========
Total Return (c) 7.01%(d) 7.89% 2.37% 22.38% (4.48%) 4.17%
======= ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000 omitted) $ 788 $ 666 $ 501 $ 408 $ 298 $ 555
Ratio of Expenses to Average Net Assets 0.51%(d) 0.77% 1.09% 0.89% 0.77% 1.14%
Ratio of Net Investment Income to Average
Net Assets 5.55%(d) 5.38% 5.17% 7.11% 6.16% 4.18%
Portfolio Turnover Rate 12.63%(d) 8.44% 30.46% 14.13% 24.45% 62.96%
<FN>
(a) The investment management fees for the Bond Fund were reduced from 1% to
.5% of assets annually from April, 1994 through July, 1997 and to zero from
August 1, 1997 through June 30, 1998, resulting in a per share savings of
$3,597 (unaudited) for the six months ended June 30, 1998 and of $.10,
$.06, $.06 and $.03 for the years ended December 31, 1997, 1996, 1995 and
1994, respectively. In addition, during the periods presented,
administrative expenses of the Fund, other than primarily custodial and
audit fees, have been assumed by the investment manager of the Fund.
(b) Dividend distributions were not relevant for tax compliance purposes prior
to February 9, 1998 when the Fund operated solely as a collective
investment trust. There have been no dividends declared or distributed
through June 30, 1998.
(c) Assumes reinvestment of dividends and capital gains distribution, if any.
(d) These ratios and percentages are based on annualized operations for the
period.
</FN>
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-15-
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
CANANDAIGUA EQUITY FUND
-----------------------
SELECTED PER-SHARE DATA AND RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------
<TABLE>
<CAPTION>
EQUITY FUND
---------------------------------------------------------------------------------------
SIX MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31
----------------------------------------------------------------------
JUNE 30, 1998 1997 1996 1995 1994 1993
------------- ---- ---- ---- ---- ----
PER-SHARE DATA: (Unaudited) (RESTATED)
(For a share outstanding throughout each period)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period $ 19.40 $ 16.67 $ 13.71 $ 10.89 $ 10.85 $ 10.26
----------- ---------- ----------- ---------- ---------- ---------
Income (Loss) From Investment Operations -
Net investment income (expense) (a) (0.04) -- 0.01 0.04 0.07 0.18
Net realized and unrealized gain (loss)
on investments 2.24 2.73 2.95 2.78 (0.03) 0.41
----------- ---------- ----------- ---------- ---------- ---------
Total income from investment operations 2.20 2.73 2.96 2.82 0.04 0.59
----------- ---------- ----------- ---------- ---------- ---------
Less Distributions (b) - --
Dividends from net investment income --
Distributions from net realized gains -----------
Total distributions --
-----------
Net Asset Value, end of period $ 21.60 $ 19.40 $ 16.67 $ 13.71 $ 10.89 $ 10.85
=========== ========== ========== ========= ========= =========
Total Return (c) 22.89%(d) 16.38% 21.59% 25.90% 0.37% 5.75%
=========== ========== ========== ========= ========= =========
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000 omitted) $ 22,109 $ 17,787 $ 12,644 $ 8,433 $ 5,777 $ 3,172
Ratio of Expenses to Average Net Assets 1.13%(d) 1.15% 1.12% 1.11% 1.09% 1.18%
Ratio of Net Investment Income (Expense) to
Average Net Assets (.37%)(d) 0.00% 0.03% 0.32% 0.69% 1.70%
Portfolio Turnover Rate 354.96%(d) 398.23% 337.27% 375.30% 234.81% 165.68%
<FN>
(a) During the periods presented, administrative expenses of the Fund, other
than primarily custodial and audit fees, have been assumed by the
investment manager of the Fund.
(b) Dividend distributions were not relevant for tax compliance purposes prior
to February 9, 1998 when the Fund operated solely as a collective
investment trust. There have been no dividends declared or distributed
through June 30, 1998.
(c) Assumes reinvestment of dividends and capital gains distribution, if any.
(d) These ratios and percentages are based on annualized operations for the
period.
</FN>
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-16-
