THE CANANDAIGUA FUNDS
SEMI-ANNUAL FINANCIAL STATEMENTS AS OF
--------------------------------------
JUNE 30, 1999
-------------
(UNAUDITED)
-----------
<PAGE>
Dear Shareholder:
YEAR 2000
- ---------
We are satisfied with the level of preparedness for all of the Funds'
vendors as we approach the new year and do not anticipate that there will be any
material disruption of our operations as a result of the "Y2K" issue. We do
expect, however, that there will continue to be a growing flurry of commentary
in the press and by those who hope to profit from this situation as we get
closer to the new year. The regulatory authorities in the financial community
have been diligently supervising all of the market participants' preparation for
this event. We are satisfied that the securities industry as well as the banking
industry is well prepared and as such we do not anticipate any meaningful
disruption of our operations at the end of the year.
THE EQUITY FUND
- ---------------
The Equity fund was up 19.04% in the first six months of 1999, compared
with the S&P 500 and the CDA Weisenberger Domestic Growth Fund peer group
performance of 12.28% and 11.31%, respectively. The portfolio has enjoyed a
broad base of success in the first six months of 1999 with particular success
coming from the telecommunications sector. We continue to maintain a strong
representation in telecommunications, technology and pharmaceuticals. Although
the large capitalization pharmaceutical sector has underperformed the market as
a whole in the first six months, we are anxiously awaiting a string of exiting
new products that will enhance the earnings outlook for this sector in the next
four to six quarters. We do not expect any meaningful healthcare reform
legislation until after the next presidential election.
Technology enjoyed a stellar six-month return primarily due to the
performance in June. The NASDAQ composite which is heavily weighted with
technology companies was up 8% in June and continued a rotation out of some of
the more speculative internet companies into firms that have a more proven
record of earnings performance.
The Federal Reserve has tightened monetary policy by a quarter point
and indicated a reduced expectation for further tightening. The economic
indicators that will be most closely watched will be the overall growth of the
domestic economy as measured by gross domestic product followed by the
Department of Labor's statistical releases concerning the presence of wage
inflation due to a full employment environment. We believe that there is room
for the Fed to continue to tighten monetary policy without the risk of slowing
the economy below an annual rate of 3 to 4 percent. These additional moves
should provide some level of uncertainty for the equity markets but through the
end of the year and into 2000 prove to be very constructive for equity
performance.
THE BOND FUND
- -------------
The Bond fund was down 2.07% compared with the Lehman Brothers
Intermediate Government/Corporate Bond Index and the CDA Weisenberger General
Investment Grade Bond Fund Peer Group performance of down 2.27% and down 1.89%,
respectively. We have continued to maintain the Bond fund's weighted average
maturity of around 5 years and almost equal weighting between U.S. Treasury
securities and corporate bond issuance. Continued uncertainty regarding the
Fed's intentions to raise short-term interest rates has caused the overall yield
curve to rise over the course of the first six months of the year. We anticipate
that the bond market will remain unstable until there is some degree of
confidence that the Fed will not have to adjust short term rates again and that
there will be a return of price stability in this arena. We believe that the Fed
is ahead of any risk of inflation and there is room for the domestic economy to
slow without representing a threat to the ongoing economic expansion.
<PAGE>
OVERVIEW FOR THE REST OF 1999
- -----------------------------
1999 has continued to provide equity investors with above average
returns and while it is important for investors to have realistic goals for the
future, we are generally enthusiastic for the near term. Bond investors may be
in for a more bumpy road as uncertainty regarding the growth of inflation will
cause the Federal Reserve to make cautious statements through the financial
press and perhaps actually raise interest rate one or two more times this year.
If the Fed does take a firmer stance on monetary policy we are confident that it
is as a preemptive strike against the possibility of future inflationary
pressures. When it becomes apparent to the markets that these preemptive moves
are over we will be left with an economy that continues to enjoy low inflation
and strong growth which will continue to propel the investment markets forward.
As we approach the end of 1999 and the hype surrounding the Y2K bug
becomes even louder, we encourage you to contact us at your convenience with any
comments or questions you may have regarding the operation of the Funds or the
impact on the investment market as a whole.
Sincerely,
Robert J. Swartout
Vice President and Investment Officer
The Canandaigua National Bank and Trust Company
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
SEMI-ANNUAL FINANCIAL STATEMENTS AS OF
JUNE 30, 1999
(Unaudited)
TABLE OF CONTENTS
-----------------
PAGE
----
Statement of Assets and Liabilities as of June 30, 1999 1
Statement of Operations for the Six Months Ended 2
June 30, 1999
Statements of Changes in Net Assets for the Six Months Ended 3
June 30, 1999
Schedule of Fund Investments as of June 30, 1999:
- Bond Fund 5
- Equity Fund 8
Notes to Financial Statements 11
Selected Per-Share Data and Ratios/Supplemental Data:
- Bond Fund 19
- Equity Fund 20
<PAGE>
THE CANANDAIGUA FUNDS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
FUND
BOND EQUITY
---- ------
ASSETS
INVESTMENT SECURITES AT MARKET
<S> <C> <C>
(Bond Fund cost - $1,159,913; Equity Fund
cost - $25,284,198) $ 1,142,666 $ 29,844,980
RECEIVABLES FOR:
Sales of fund's shares 0 41,112
Dividends and accrued interest 17,993 13,185
------------ ------------
Total receivables 17,993 54,297
PREPAID EXPENSES 104 4,718
------------ ------------
Total assets 1,160,763 29,903,995
------------ ------------
LIABILITIES
PAYABLES FOR:
Repurchase of fund's shares 0 314
Purchase of investments 0 176,470
Professional fees 447 9,663
Custody fees 637 0
Investment advisory fees 0 802
------------ ------------
Total liabilities 1,084 187,249
------------ ------------
NET ASSETS AT JUNE 30, 1999: (equivalent $ 1,159,679 $ 29,716,746
============ ============
to $13.50 per share for Bond Fund and $27.14
per share for Equity Fund,
based on 85,932 shares and 1,094,966 shares
outstanding for Bond and
Equity shares, respectively)
NET ASSETS CONSIST OF:
Capital stock $ 1,175,777 $ 22,871,848
Undistributed net investment income 852 (81,153)
Accumulated net realized gain on investments 297 2,365,268
Net unrealized appreciation (depreciation)
on investments (17,247) 4,560,783
------------ ------------
NET ASSETS $ 1,159,679 $ 29,716,746
============ ============
</TABLE>
The accompanying notes are an integral part of theses financial statements.
-1-
<PAGE>
THE CANANDAIGUA FUNDS
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
FUND
BOND EQUITY
---- ------
INVESTMENT INCOME:
<S> <C> <C>
Interest income $ 31,180 $ 3,674
Dividenddincome 0 94,767
----------- -----------
Total investment income 31,180 98,441
----------- -----------
EXPENSES
Investment management fees 2,673 133,041
Administration fees 9,168 15,280
Fund accounting fees 5,128 8,974
Transfer agency fees 5,499 5,910
Custodial fees 1,271 1,405
Professional fees 372 20,256
Registration & filing fees 0 1,996
Insurance expense 241 5,432
----------- -----------
Total expenses 24,352 192,294
Less reimbursed expenses (22,468) (12,699)
----------- -----------
Net expenses 1,884 179,595
----------- -----------
Net investment income (loss) 29,296 (81,154)
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain 0 4,080,204
Net change in unrealized appreciation of investments (52,501) 603,916
----------- -----------
Net realized and unrealized gain on investments (52,501) 4,684,120
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ (23,205) $ 4,602,966
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
THE CANANDAIGUA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PORTFOLIO
-------------------------------
Bond Equity
(Unaudited) (Unaudited)
------------ --------------
FOR THE SIX MONTHS ENDED JUNE 30, 1999 -
OPERATIONS:
<S> <C> <C>
Net investment income (loss) $ 29,296 $ (81,154)
Net realized gain on investments 0 4,080,204
Net unrealized gain (loss) on investments (52,501) 603,916
------------ ------------
Net increase in net assets resulting from operations (23,205) 4,602,966
------------ ------------
DIVIDENDS AND DISTRIBUTIONS PAID TO SHAREHOLDERS:
Dividends from net investment income (28,445) --
Distributions from net realized gain on investments 0 --
------------ ------------
Total dividends and distributions (28,445) 0
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from shares sold (19,925 and 109,536 shares in the Bond and
Equity funds, respectively) 276,912 2,757,785
Proceeds from shares issued in reinvestment of net investment
income dividends and distributions of net realized gain on
investments (2,069 shares in the Bond fund) 28,445 --
Cost of shares repurchased (3,751 and 48,440 shares in the Bond and Equity
funds, respectively) (51,092) (1,212,046)
------------ ------------
Net increase in net assets resulting from fund
share transactions 254,265 1,545,739
------------ ------------
TOTAL INCREASE IN NET ASSETS 202,615 6,148,705
NET ASSETS - BEGINNING OF PERIOD 957,064 23,568,041
------------ ------------
NET ASSETS - END OF PERIOD $ 1,159,679 $ 29,716,746
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
THE CANANDAIGUA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PORTFOLIO
------------------------------
BOND EQUITY
(AUDITED) (AUDITED)
------------ ------------
FOR THE YEAR ENDED DECEMBER 31, 1998 -
OPERATIONS:
<S> <C> <C>
Net investment income (loss) $ 42,899 $ (64,572)
Net realized gain (loss) on investments 294 (1,629,590)
Net urnrealized gain on investments 25,369 4,919,931
------------ ------------
Net increase in net assets resulting from operations 68,562 3,225,769
------------ ------------
DIVIDENDS AND DISTRIBUTIONS PAID TO SHAREHOLDERS:
Dividends from net investment income (39,727) --
Distributions from net realized gain on investments -- --
------------ ------------
Total dividends and distributions (39,727) 0
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from shares sold (26,858 and 212,466 shares in the Bond and
Equity funds, respectively) 378,457 4,543,920
Proceeds from shares issued in reinvestment of net investment
income dividends and distributions of net realized gain on
investments 39,727 --
Cost of shares purchased (11,249 and 95,269 shares in the Bond and Equity
funds, respectively) (156,431) (1,988,934)
------------ ------------
Net increase in net assets resulting from fund
share transactions 261,753 2,554,986
------------ ------------
TOTAL INCREASE IN NET ASSETS 290,588 5,780,755
NET ASSETS - beginning of year 666,476 17,787,286
------------ ------------
NET ASSETS - end of year $ 957,064 $ 23,568,041
============ ============
</TABLE>
`
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SCHEDULE OF FUND INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COST VALUE
---------- -----------
INVESTMENT SECURITIES:
U.S. GOVERNMENT NOTES & BONDS
<S> <C> <C> <C>
$25,000 US Treasury Note, 5.375%, July 31, 2000 $ 24,953 $ 24,992
25,000 US Treasury Note, 6.250%, August 31, 2000 24,931 25,227
25,000 US Treasury Note, 6.125%, September 30, 2000 24,983 25,195
20,000 US Treasury Note,4.000%, October 31, 2000 19,776 19,644
30,000 US Treasury Note, 5.500%, December 31, 2000 29,621 30,019
25,000 US Treasury Note, 5.250%, January 31, 2001 24,687 24,914
30,000 US Treasury Note, 6.375%, March 31, 2001 29,946 30,431
25,000 US Treasury Note, 5.500%, February 28, 2003 24,809 24,828
25,000 US Treasury Note, 5.750%, April 30, 2003 24,952 25,031
25,000 US Treasury Note, 5.875%, February 15, 2004 26,465 25,141
50,000 US Treasury Bond, 5.875%, November 15, 2005 49,987 49,984
25,000 US Treasury Note, 5.625%, February 15, 2006 24,955 24,625
40,000 US Treasury Note, 6.875%, May 15, 2006 40,104 42,125
30,000 US Treasury Note, 7.000%, July 15, 2006 30,053 31,781
40,000 US Treasury Note, 5.500%, February 15, 2008 39,776 38,913
50,000 US Treasury Note, 5.625%, May 15, 2008 50,935 48,969
50,000 US Treasury Note, 4.750%, November 15, 2008 48,267 45,906
-------- --------
Total U.S. Government Notes & Bonds 46.37% 539,200 537,725
-------- --------
CORPORATE BONDS
CAPITAL EQUIPMENT - 3.32%
AEROSPACE & MILITARY TECHNOLOGY
- -------------------------------
15,000 Lockheed Martin Corporation,6.750%, March 15, 2003 15,900 15,024
MACHINERY CONSTRUCTION AND MINING
- ---------------------------------
25,000 Caterpillar Corp., Inc., 6.000%, May 1, 2007 23,863 23,441
-------- --------
39,763 38,465
-------- --------
CONSUMER GOODS - 14.02%
BEVERAGE & TOBACCO
- ------------------
20,000 Coca-Cola Company, 6.000%, July 15, 2003 19,962 19,567
25,000 Anheuser Busch, 6.750%, November 1, 2006 25,143 24,570
PAPER
- -----
25,000 International Paper Company, 7.625%, August 1, 2004 26,700 25,959
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SCHEDULE OF FUND INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
MARKET
CONSUMER GOODS (CONTINUED) - COST VALUE
----------- -------
RETAIL TRADING
- --------------
25,000 Sears Roebuck & Company, 6.250%, January 15, 2004 23,680 24,561
20,000 Wal-Mart Company, 6.375%, March 1, 2003 20,930 20,046
SPECIALTY CHEMICALS
- -------------------
25,000 Eastman Chemical Company, 6.375%, January 15, 2004 25,141 24,571
MULTIMEDIA
- ----------
25,000 Disney, Walt & Co. 5.800%, October 27, 2008 23,201 23,366
------- -------
164,757 162,640
------- -------
FINANCE - 15.87%
BANKING
- -------
30,000 Citicorp, 6.750%, August 15, 2005 30,853 29,787
25,000 Morgan JP & Co., 6.000%, January 15, 2009 24,654 22,976
FINANCIAL SERVICES
- ------------------
10,000 Ford Motor Credit Co., 6.850%, August 15, 2000 10,004 10,085
20,000 General Electric Capital Corp. 5.500%, November 1, 2001 19,940 19,684
25,000 John Deere Capital Corp., 6.000%, February 15, 2009 24,445 23,474
30,000 Merrill Lynch & Co., Inc., 6.250%, October 15, 2008 29,681 28,273
30,000 Morgan Stanley Dean Witter, 5.750%, February 15, 2001 30,224 29,742
20,000 Salomon Inc., 6.750%, August 15, 2003 19,905 20,051
------- -------
189,706 184,072
------- -------
SERVICES - 16.01%
INDUSTRIAL
- ----------
25,000 General Motors Corp., 6.250%, May 1, 2005 26,185 24,269
25,000 IBM Corp., 5.375%, February 1, 2009 24,945 22,864
HEALTHCARE
- ----------
40,000 Colgate Palmolive Corp., 5.590%, April 17, 2000 40,167 39,939
TELECOMMUNICATIONS
- ------------------
20,000 Pacific Bell, 6.250%, March 1, 2005 19,600 19,660
30,000 LCI, 7.250%, June 15, 2007 30,894 29,586
HOTELS AND MOTELS
- -----------------
25,000 Marriott Corp., 6.750%, December 15, 2003 25,017 24,644
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SCHEDULE OF FUND INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
MARKET
SERVICES (CONTINUED) - COST VALUE
----------- ----------
WASTE REMOVAL
- -------------
25,000 Waste Management Inc., 6.375%, December 1, 2003 25,590 24,713
---------- ----------
192,398 185,675
-------- ---------- ----------
Total Corporate Bonds 49.23% 586,624 570,852
-------- ---------- ----------
TOTAL INVESTMENT SECURITIES 95.59% 1,125,824 1,108,577
---------- ----------
CASH AND CASH EQUIVALENTS 2.94%
34,089 Canandaigua National Bank Collective
Fixed Income 34,089 34,089
-------- ---------- ----------
TOTAL INVESTMENTS 98.53% $1,159,913 1,142,666
==========
OTHER ASSETS LESS LIABILITIES 1.47% 17,013
------- ----------
NET ASSETS 100.00% $1,159,679
======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA EQUITY FUND
SCHEDULE OF FUND INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------- ---------- -----------
INVESTMENT SECURITIES:
COMMON STOCKS
<C> <S> <C> <C> <C>
AIRCRAFT 1.57%
15,000 Southwest Airlines Co. $ 495,721 $ 466,875
---------- ----------
AUTOMATED PROCESSING 5.36%
50,000 Paychex Inc. 1,449,006 1,593,750
---------- ----------
COMPUTERS 16.87%
5,000 Cisco Systems Inc. * 250,738 322,500
8,000 EMC Corp. * 445,940 440,000
17,000 Intel Corp. 1,043,352 1,011,500
10,000 Microsoft Corp. * 791,228 901,875
15,000 Sun Microsystems Inc. * 887,748 1,033,125
9,000 Texas Instruments Inc. 815,528 1,305,000
---------- ----------
4,234,534 5,014,000
---------- ----------
CONSUMER NON-CYCLICAL 6.11%
8,000 American Home Products Corp. 462,266 460,000
12,000 General Electric Co. 1,157,860 1,356,000
---------- ----------
1,620,126 1,816,000
---------- ----------
DISTRIBUTION/WHOLESALE 1.18%
10,000 Genuine Parts Co. 313,120 350,000
---------- ----------
DRUGS 16.56%
15,000 Bristol-Meyers Squibb Co 929,482 1,056,563
30,000 CVS Corp. 1,359,912 1,533,750
44,000 Elan Corp PLC-Spons ADR * 1,416,144 1,221,000
15,000 Merck & Co Inc 998,119 1,110,000
---------- ----------
4,703,657 4,921,313
---------- ----------
ELECTRONICS 5.66%
10,000 Molex Inc. 311,020 370,000
12,000 Sanmina Corp * 766,010 910,500
6,000 Solectron Corp. * 283,293 400,125
---------- ----------
1,360,323 1,680,625
---------- ----------
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA EQUITY FUND
SCHEDULE OF FUND INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
MARKET
SHARES COST VALUE
- ------------- ---------- -----------
FINANCIAL 13.67%
22,500 Capital One Financial Corp. 915,764 1,252,969
17,500 Merrill Lynch & Co Inc. 1,091,156 1,398,906
5,000 Morgan Stanley Dean Witter & Co. 417,000 512,500
21,000 Wells Fargo Co. 780,898 897,750
---------- ----------
3,204,818 4,062,125
---------- ----------
FOOD-RETAIL 2.82%
30,000 Kroger Co. * 818,229 838,125
---------- ----------
HEALTHCARE 1.33%
6,000 Smithkline Beecham PLC ADR Ordinary A * 422,375 396,375
---------- ----------
INTERNET SOFTWARE 2.65%
4,000 America Online Inc. * 326,627 442,000
2,000 Yahoo! Inc, * 333,845 344,500
---------- ----------
660,472 786,500
---------- ----------
MEDICAL INSTRUMENTS 2.10%
8,000 Medronic Inc. 562,820 623,000
---------- ----------
MISCELLANEOUS 3.13%
10,000 Circuit City Stores-Circuit City Group 366,866 930,000
---------- ----------
RETAIL 3.06%
14,000 Dayton Hudson Corp. 919,753 910,000
---------- ----------
TECHNOLOGY 2.98%
12,000 Applied Materials Inc. * 594,548 886,500
---------- ----------
TELECOMMUNICATIONS 14.21%
7,500 ADC Telecommunications * 295,645 341,719
20,000 Frontier Corp 884,048 1,180,000
16,000 MCI Worldcom Inc * 827,136 1,380,000
40,000 Qwest Communications Inc. * 1,205,428 1,322,500
---------- ----------
3,212,257 4,224,219
---------- ----------
The accompanying notes are an integral part of these financial statements
-9-
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA EQUITY FUND
SCHEDULE OF FUND INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
MARKET
SHARES COST VALUE
- ------------- ----------- -----------
TOTAL COMMON STOCKS 99.27% 24,938,624 29,499,406
----------- -----------
CASH AND CASH EQUIVALENTS 1.16%
-------
345,574 Canandaigua National Bank
Collective Equity Fund 345,574 345,574
----------- ------------
TOTAL INVESTMENTS 100.43% $25,284,198 29,844,980
===========
LIABILITIES LESS OTHER ASSETS -0.43% (128,235)
------- ------------
NET ASSETS 100.00% $ 29,716,746
======= ============
<FN>
* Non-Income producing securities
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements
-10-
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
(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 statement, as of June 30, 1999,
includes 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.
-11-
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
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, 1999 are disclosed in the accompanying Schedule of Fund
Investments.
As is customary in the industry, securities transactions are 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.
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
-12-
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
VALUATION OF INVESTMENT SECURITIES AND INCOME RECOGNITION - (continued)
distributions were not relevant for tax compliance purposes. For the
six month ended June 30, 1999, $28,445 of reinvested dividends were
declared and distributed to shareholders of the Bond Fund.
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 in fiscal 1998 from February 9,
1998 forward, is taxable to the Fund if not substantially distributed
annually to its shareholders. It has been the practice, policy and
future intention 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 a June 30,
1999. In addition, in connection with the Fund reorganization,
accumulated net investment income (loss) of $3,861 in the Bond Fund and
$ (285) in the Equity Fund and accumulated net realized gain (loss) of
investments of $3 in the Bond Fund and $85,347 in the Equity Fund as of
February 9, 1998, were transferred to additional paid-in capital.
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
-13-
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
INCOME TAXES - (continued)
------------
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. Differences
between financial and tax bases methods of reporting transactions of
the Fund are not significant.
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 asset values per share in the accompanying
financial statements are 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 a receivable for
sale of fund's shares and any approved distribution requests for which
cash has not yet been disbursed are reflected as a payable for
repurchases of fund's shares in the accompanying statement of assets
and liabilities.
-14-
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
(3) AGREEMENTS
The Canandaigua National Bank and Trust Company (the Company) is the
investment advisor and sponsor 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 $2,673 for the six
month period ended June 30, 1999.
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 a 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 0.012% of
the average net assets of a fund for the month. These fees, $15,280 for
the six months ended June 30, 1999, have historically been paid by the
Company.
In December, 1997, the Fund entered into a fund accounting 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 Funds 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
-15-
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
(3) AGREEMENTS (continued)
----------
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 nets
assets in excess of $30 million. These fees, $8,974 for the six months
ended June 30, 1999, 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 a shareholder record
keeping and reporting services and to act as the dividend disbursing
agent for the Fund. Monthly fees consist of a minimum of $900
maintenance fee plus various transaction fees. These fees, $5,910 for
the six months ended June 30, 1999, have historically been paid by the
Company.
The Northern Trust Company acts as a 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 Company has also historically assumed expenses, other than
primarily custodial and audit, incurred in the administration of the
Fund. During the six months ended June 30, 1999, the Company assumed
approximately $7,929 of professional fees related to certain statutory
filings of the Fund and approximately $0.00 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 Company, as sponsor of the Fund, paid approximately $12,699 of
legal expenses in the six months incurred primarily in connection with
the reorganization of the Fund. In addition, in December 1997 the
Company entered into a three year ninety day cancelable distributor
agreement with ADS Distributors, Inc. to act as the principal
underwriter and distributor of the Fund's shares. The fee for the six
months ended June 30, 1999 for these services of $11,375 plus expenses
was paid by the Company.
-16-
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
(3) AGREEMENTS (continued)
----------
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.
(4) PURCHASES AND SALES OF SECURITIES
---------------------------------
During the six months ended June 30, 1999, purchases and sales of
investment securities, excluding cash and cash equivalent, amounted to
the following:
FUND
----
BOND EQUITY
---- ------
Purchases $ 26,090 $30,413,422
======== ===========
Sales $ 0 $28,488,198
======== ===========
Purchases and sales of government securities included in the Bond Fund
amounts were $96,216 and $270,302, 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 June 30, 1999 to the Company and The
Northern Trust Company in the amount of approximately $2,300 and $1,800
respectively, were recorded as an adjustment to the basis of the
related securities in the amount of approximately $3,900 in the Equity
Fund and $200 in the Bond Fund.
-17-
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
UNREALIZED GAINS (LOSSES) ON INVESTMENTS -
As of June 30, 1999, gross unrealized gains (losses) on investments
with a cost of ($17,247) in the Bond Fund and $4,560,783 in the Equity
Fund are as follows:
FUND
----
BOND EQUITY
---- ------
Gross unrealized gains $ 6,836 $4,865,584
Gross unrealized (losses) (24,083) 304,801
Net unrealized gain (loss) $ (17,247) $4,560,783
========= ==========
-18-
<PAGE>
THE CANANDAIGUA FUNDS
CANADAIGUA BOND FUND
SELECTED PER-SHARE DATA AND RATIOS/SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
For the six For the For the For the For the For the
months year year year year year
ended ended, ended, ended, ended, ended,
June 30, Dec 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1997 1996 1995 1994
-------------------------------------------------------------------------
(Unaudited)
PER SHARE DATA:
(For a share outstanding throughout
each period)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.14 $13.53 $12.54 $12.25 $10.01 $10.48
------ ------ ------ ------ ------ ------
Income (Loss) from investment operations
Net investment income (a) 0.37 0.77 0.70 0.62 0.81 0.62
Net realized and unrealized gains (losses) on
investments (0.66) 0.45 0.29 (0.33) 1.43 (1.09)
------ ------ ------ ------ ------ ------
Total income (loss) from investment operations (0.29) 1.22 0.99 0.29 2.24 (0.47)
------ ------ ------ ------ ------ ------
Less distributions (b)
Dividend from net investment income (0.35) (0.61)
Distribution from net realized gains -- --
------ ------
Total dividends and distributions (0.35) (0.61)
------ ------
Net Asset Value, end of period $13.50 $14.14 $13.53 $12.54 $12.24 $10.01
====== ====== ====== ====== ====== ======
Total return (c) (2.07%) 9.05% 7.89% 2.37% 22.38% (4.48%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,160 $957 $666 $501 $408 $298
Ratio of Net Expenses to Average
Net Assets (a) 0.34% 0.46% 0.77% 1.09% 0.89% 0.77%
Ratio of Gross Expenses to Average
Net Assets (a) 4.46% 7.13% 3.19% 4.15% 1.03% 0.95%
Ratio of Net Investment Income
to Average Net Assets 5.36% 5.47% 5.38% 5.17% 7.11% 6.16%
Portfolio Turnover Rate 0.00% 9.04% 8.44% 30.46% 14.13% 24.25%
<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 December 31, 1998. In addition, during the
periods presented, certain administrative expenses of the Fund, other
than, primarily, custodial and audit fees, have been assumed by the
investment manager of the Fund. The resulting per share savings to the
Bond Fund related to these fees and expenses were $.28 (unaudited) for
the six months ended June 30, 1999 and $.94, $.31, $.37, $.02, and $.02
for the years ended December 31, 1998, 1997, 1996, 1995, and 1994,
respectively.
(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.
(c)Assumes reinvestment of dividends and capital gains distribution, if
any.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
-19-
<PAGE>
THE CANANDAIGUA FUNDS
CANADAIGUA EQUITY FUND
SELECTED PER-SHARE DATA AND RATIOS/SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
For the six For the For the For the For the For the
months year year year year year
ended ended, ended, ended, ended, ended,
June 30, Dec 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1997 1996 1995 1994
-------------------------------------------------------------------------
(Unaudited)
PER SHARE DATA:
(For a share outstanding throughout
each period)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 22.80 $ 19.40 $ 16.67 $ 13.71 $ 10.89 $ 10.85
Income (Loss) from investment operations
Net investment income (a) (0.08) (0.06) -- 0.01 0.04 0.07
Net realized and unrealized gains (losses)
on investments 4.42 3.46 2.73 2.95 2.78 (0.03)
-------- -------- -------- --------- --------- ---------
Total income (loss) from investment operations 4.34 3.40 2.73 2.96 2.82 0.04
-------- -------- -------- --------- --------- ---------
Less distributions (b)
Dividend from net investment income -- --
Distribution from net realized gains -- --
--------- ---------
Total dividends and distributions 0.00 0.00
--------- ---------
Net Asset Value, end of period $ 27.14 $ 22.80 $ 19.40 $ 16.67 $ 13.71 $ 10.89
========= ======== ======= ========= ========= =========
Total return (c) 19.04% 17.53% 16.38% 21.59% 25.90% 0.37%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 26,882 $ 23,568 $ 17,787 $ 12,644 $ 8,433 $ 5,777
Ratio of Net Expenses to Average
Net Assets (a) 1.35% 1.14% 1.15% 1.12% 1.11% 1.09%
Ratio of Gross Expenses to Average
Net Assets (a) 1.44% 1.50% 1.44% 1.57% 1.25% 1.27%
Ratio of Net Investment Income
to Average Net Assets (0.61%) (0.31%) 0.00% 0.03% 0.32% 0.69%
Portfolio Turnover Rate 107.46% 314.28% 398.23% 337.27% 375.30% 234.81%
<FN>
(a)During the periods presented, certain administrative expenses of the
Equity Fund, other than primarily custodial and audit fees, have been
assumed by the investment manager of the Equity Fund, resulting in per
share savings of $.01 (unaudited) for the six months ended June 30, 1999
and $.08, $.05, $.07, $.02 and $.02 for the years ended December 31,
1998, 1997. 1996, 1995 and 1994, respectively.
(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.
(c)Assumes reinvestment of dividends and capital gains distribution, if
any.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
-20-
