File No. 33-53698
and 811-7322
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 9
(Check Appropriate Box or Boxes)
--------------------
THE CANANDAIGUA FUNDS
(Exact Name of Registrant as Specified in Charter)
72 SOUTH MAIN STREET, CANANDAIGUA, NEW YORK 14424
(Address of Principal Executive Office and Zip Code)
REGISTRANT'S TELEPHONE NUMBER: 1-800-724-2621 (EXT. 216)
--------------------
Steven H. Swartout, Secretary and Treasurer
The Canandaigua Funds
72 South Main Street
CANANDAIGUA, NEW YORK 14424
(Name and Address of Agent for Service)
Copy to:
Stephen M. Waite, Esq.
Underberg & Kessler LLP
1800 Chase Square
Rochester, New York 14604
(Continued on next page)
<PAGE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Amendment becomes effective.
DECLARATION PURSUANT TO RULE 24F-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended, Registrant hereby registers an indefinite number or amount of
securities under the Securities Act of 1933, as amended.
It is proposed that this filing will become effective:
(Check appropriate box)
[ ] Immediately upon filing pursuant to Paragraph (b)
[ ] On [date] pursuant to Paragraph (b)
[X] 60 Days After Filing pursuant to Paragraph (a)(1)
[ ] On [date] pursuant to Paragraph (a)(1)
[ ] 75 days after filing pursuant to Paragraph (a)(2)
[ ] On [date] pursuant to Paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
FORM N-1A CROSS REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION (CAPTION)
<S> <C>
Item 1. Front and Back Cover Pages
Item 2. Questions Every Investor Should Ask Before Investing in
the Funds
Item 3. Fees and Expenses
Item 4. Investment Objectives, Strategies and Risk
Item 5. Questions Every Investor Should Ask Before Investing in
the Funds
Item 6. Organization and Capitalization
Item 7. Your Fund Account
Item 8. NA
Item 9. Financial Highlights
CROSS REFERENCE SHEET
PART B
N-1A ITEM NO. LOCATION (CAPTION)
Item 10 Cover Page & Table of Contents
Item 11. Organization and Capitalization
Item 12. Investment Restrictions, Other Investment Policies
Item 13. Management of the Canandaigua Funds
Item 14. Organization and Capitalization- Principal Shareholders
Item 15. Management of the Canandaigua Funds
Item 16. Portfolio Transactions
Item 17. Organization and Capitalization
Item 18. Net Asset Value
Item 19. Tax Information
Item 20. Management of the Canandaigua Funds - Distributor
Item 21. Performance Information
Item 22. NA
</TABLE>
<PAGE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
EXHIBIT
NUMBER DOCUMENT
a Declaration of Trust Dated October 31, 1997*
b Bylaws of Registrant*
c None
d Investment Advisory Agreement with Canandaigua National Bank
and Trust Company for the Equity Fund and the Bond Fund, dated
October 31, 1997*
e Distribution Agreement between Registrant and ADS
Distributors, Inc.*
f None
g.1 Equity Fund Custodian Agreement between Registrant and
Northern Trust Company*
EXHIBIT
NUMBER DOCUMENT
g.2 Bond Fund Custodian Agreement between Registrant and Northern
Trust Company*
h.1 Transfer Agency Agreement between Registrant and American Data
Services, Inc.*
h.2 Administrative Service Agreement between Registrant and
American Data Services, Inc.*
i Opinion and Consent of Underberg & Kessler LLP*
j Consent of Morga Jones & Hufsmith, P.C.**
k 1998 Annual Report to Shareholders including the notes thereto and the
Report of Independent Accountants ***
l None
m None
n Financial Data Schedule **
o None
- --------------------------
*Previously filed with and incorporated by reference to Post-Effective
Amendment No. 6 filed on December 8, 1997.
**Filed herewith.
*** As filed with the Securities and Exchange Commission under Rule 30d-1 on
February 26, 1999.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
<PAGE>
ITEM 25. INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to the Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a Trustee, officer, or controlling person of the Registrant in
connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such Trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The Declaration of Trust provides with regard to indemnification that:
A. The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Trust) by reason of the fact
that he/she is or was a Trustee, employee or officer of the Trust or is or was
serving at the request of the Trust as a director or officer of another
corporation, or as an official of a partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him/her in
connection with such action, suit or proceeding if he/she acted in good faith
and in a manner he/she reasonably believed to be in, or not opposed to, the best
interests of the Trust, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his/her conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he/she reasonably believed to be in, or not opposed to, the best interests of
the Trust, or, with respect to any criminal action or proceedings, that he/she
had reasonable cause to believe that his/her conduct was unlawful.
B. The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Trust to procure a judgment in its favor by
reason of the fact that he/she is or was a Trustee, employee or officer of the
Trust or is or was serving at the request of the Trust as a director or officer
of another corporation, or as an official of a partnership, joint venture, trust
or other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him/her in connection with the defense or settlement of
such action or suit if he/she acted in good faith and in a manner he/she
reasonably believed to be in, or not opposed to, the best interests of the
Trust, EXCEPT, however, that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his/her duty to the
Trust unless and only to the extent that an appropriate court shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
C. To the extent that a Trustee, employee or officer of the Trust has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections A or B above in defense of any claim,
issue or matter therein, he/she shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him/her in connection
therewith.
<PAGE>
D. Except as provided in subsection C above, any indemnification under
subsection A or B of this Section (unless ordered by a court) shall be made by
the Trust only as permitted under any applicable provisions of Title I of the
Employee Retirement Income Security Act of 1974, as amended, and as authorized
in the specific case upon a determination that indemnification of a Trustee,
employee or officer is proper in the circumstances because he/she has met the
applicable standard of conduct set forth in subsection A, B or H. Such
determination shall be made (1) by the Trustees by a majority vote of a quorum
consisting of Trustees who were not parties to such action, suit or proceeding,
or (2) if such a quorum is not obtainable, or, even if such a quorum is
obtainable and such quorum so directs, by independent legal counsel in a written
opinion.
E. Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Trust in advance of the
final disposition of such action, suit or proceeding as authorized by the
Trustees upon receipt of an undertaking by or on behalf of the Trustee, employee
or officer to repay such amount unless it shall ultimately be determined that
he/she is entitled to be indemnified by the Trust as authorized in this Section;
provided that such an undertaking must be secured by a surety bond or other
suitable insurance.
F. The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any rule, agreement, vote of the Shareholders or disinterested
Trustees or otherwise, both as to actions in his/her official capacity and as to
actions in any capacity while holding such office, and shall continue as to a
person who has ceased to be a Trustee, employee or officer and shall inure to
the benefit of the heirs, executors and administrators of such a person.
G. The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, employee or officer of the Trust, or is or was serving
at the request of the Trust as a director or officer of another corporation, or
as an official of a partnership, joint venture, trust or other enterprise
against any liability asserted against him/her and incurred by him/her in any
such capacity, or arising out of his/her status as such; provided, however, that
the Trust shall not purchase or maintain any such insurance in contravention of
any applicable provision of Title I of the Employee Retirement Income Security
Act of 1974, as amended.
H. Anything to the contrary in the foregoing subsections A through G
notwithstanding, no Trustee, employee or officer of the Trust shall be
indemnified against any liability to the Trust or the Shareholders to which
he/she would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his/her office, and no Trustee, employee or officer of the Trust shall be
indemnified in any other case in which the 1940 Act would restrict or prohibit
such indemnification.
<PAGE>
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS.
The business of The Canandaigua National Bank and Trust Company is
summarized under "Management of The Canandaigua Funds - Investment Advisor" in
the Statement of Additional Information constituting Part B of this Registration
Statement, which summary is incorporated herein by reference.
The following are, for the investment adviser, the directors and senior
officers who are or have been, at any time during the past two fiscal years,
engaged in any other business, profession, vocation or employment of a
substantial nature for their own account or in the capacity of director,
officer, employee, partner or trustee and a description of such business,
profession, vocation or employment of a substantial nature and, if engaged in
the capacity of director, officer, employee, partner or trustee, the name and
principal business address of the company with which the person specified is so
connected and the nature of such connection:
<TABLE>
<CAPTION>
OTHER BUSINESS,
POSITION WITH PROFESSION OR
NAME ADVISOR VOCATION
<S> <C> <C>
George W. Hamlin, IV President, Chief Executive President and
Officer, Trust Officer Director of Canandaigua National
and Director Corporation (parent holding
company of the Advisor) ("CNC")
Patricia A. Boland Director Executive Director,
Granger Homestead;
Director of CNC
Daniel P. Fuller Director Owner, Bristol Mountain Ski
Resort
David Hamlin, Jr. Director Farmer, Director of CNC
Frank H. Hamlin Director President, Sonnenberg Gardens,
Director of CNC
Stephen D. Hamlin Director President, Draper Development
Corp.; Director of CNC
Paul R. Kellogg Director Retired; Director of CNC
Eldred M. Sale Director Retired; Director of CNC
Robert G. Sheridan Senior Vice President, Secretary and Director of CNC
Cashier and Director
Caroline C. Shipley Director Educator and Area II Director,
New York State School Board
Association; Director of CNC
Alan J. Stone Director and Chairman of the Managing Partner, Stone
Board Properties; Director of CNC
</TABLE>
<PAGE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) As of the date hereof, in addition to acting as Distributor for the
Funds, ADS Distributors, Inc. acts as a principal underwriter, depositor or
investment advisor for the America Asia Allocation Fund.
(b) The information required by this item with respect to each director,
officer and partner of ADS Distributors, Inc. is incorporated by reference to
Schedule A of Form BD filed by ADS Distributors, Inc. under the Securities
Exchange Act of 1934 (SEC File Number 8-49995).
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Certain accounts, books and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules thereunder are
maintained at the offices of the Registrant or The Canandaigua National Bank and
Trust Company, each of which is 72 South Main Street, Canandaigua, New York
14424; ADS Distributors, Inc. and/or American Data Services, Inc., both with an
address of P.O. Box 5536, Hauppauge, New York 11788-0132. Records relating to
the duties of the Registrant's custodian are maintained by Northern Trust
Company, 50 South LaSalle Street, Chicago, Illinois 60675.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
None
<PAGE>
PROSPECTUS
February 28, 1999
THE CANANDAIGUA FUNDS
The Canandaigua Funds are:
-- The Equity Fund
-- The Bond Fund
Please read this Prospectus and keep it for future reference. It
contains important information, including information on how The Canandaigua
Funds invest and the services they offer to shareholders.
- --------------------------------------------------------------------------------
SHARES OF THE CANANDAIGUA FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT ENDORSED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
The Canandaigua Funds
Canandaigua National Bank and
Trust Company
72 South Main Street
Canandaigua, New York 14424
(716) 394-4260 ext 216
1
<PAGE>
TABLE OF CONTENTS
Questions Every Investor Should Ask Before Investing
in The Funds................................................................ 3
WHAT ARE THE FUNDS' OBJECTIVES?...................................... 3
WHAT ARE THE FUNDS' PRINCIPAL INVETMENT STRATEGIES?.................. 3
WHAT ARE THE PRINCIPAL RISKS IN INVESTING IN THE FUNDS?.............. 4
HOW HAVE THE FUNDS PERFORMED?........................................ 5
Organization and Capitalization............................................... 6
Management of the Funds....................................................... 7
Fees and Expenses............................................................. 9
Investment Objectives, Strategies and Risk....................................10
Your Fund Account.............................................................14
THE FUNDS' SHARE PRICE...............................................14
HOW TO PURCHASE SHARES...............................................14
HOW TO SELL SHARES...................................................15
HOW TO EXCHANGE SHARES...............................................17
DIVIDENDS, DISTRIBUTIONS AND TAX INFORMATION ON YOUR SHARES..........17
YEAR 2000............................................................18
Financial Highlights..........................................................18
Additional Information........................................................21
Appendix A....................................................................22
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION, AND, IF GIVEN OR
MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES, OR
AN OFFER TO OR A SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL.
2
<PAGE>
QUESTIONS EVERY INVESTOR SHOULD ASK BEFORE
INVESTING IN THE CANANDAIGUA FUNDS
1. WHAT ARE THE FUNDS' OBJECTIVES?
Each of the Equity Fund and the Bond Fund has its own investment
objectives, which are considered fundamental to each respective Fund. The Funds'
Board of Trustees may not change the investment objective of either Fund without
shareholder approval.
EQUITY FUND The Equity Fund seeks long-term growth of asset
-----------
value through capital appreciation and dividend
income. To achieve this growth, the Equity Fund
invests in a diversified group of companies, with an
emphasis on common stocks, but may also include debt
securities and preferred sock convertible into common
stock.
BOND FUND The Bond Fund seeks to earn a high
---------
level of current income while permitting
investors a degree of safety in principal.
To achieve this growth, the Bond Fund
invests primarily in fixed-income debt
securities. These include debt securities
such as:
-- Bonds and notes issued or guaranteed by
the United States government or its
agencies.
-- Bonds, notes and preferred stock of
United States corporations.
2. WHAT ARE THE FUNDS' PRINCIPAL INVESTMENT STRATEGIES?
Each of the Equity Fund and the Bond Fund has its own respective
investment strategies. The Funds' Board of Trustees may change the investment
strategies of either the Equity Fund or the Bond Fund without shareholder
approval.
THE EQUITY FUND. Generally the Investment Advisor will invest the
----------------
total value of the assets as follows:
[GRAPHIC OMITTED]
PIE CHART
65% Equity-based Securities
35% Cash Equivalents
3
<PAGE>
However, the Investment Advisor may decide to hold an additional
percentage of the Equity Fund, without limitation on amount, in cash equivalents
when market conditions dictate a temporary "defensive" investment strategy. Such
a decision, although not offering the opportunity for capital appreciation,
might be deemed prudent to protect net asset value. "Cash Equivalents" are
short-term, interest-bearing instruments in which funds are invested temporarily
pending longer-term investment, including commercial paper, certificates of
deposit, repurchase agreements, bankers' agreements and U.S Treasury Bills.
THE BOND FUND. Generally, the Advisor will invest the total value of
--------------
the assets as follows:
[GRAPHIC OMITTED]
PIE CHART
65% Bonds & Debentures
5% Zero Coupon Obligations
30% Cash Equivalents
The Advisor will invest primarily in debt obligations issued or
guaranteed by the United States Government, as well as debt securities of U.S.
corporations and securities receiving an acceptable rating form Moody's
Investment Services or Standard & Poor's Corporation (to be discussed later). As
with the Equity Fund, approximately 30% of the Fund's assets will be held in
cash equivalents, but the percentage may fluctuate due to market conditions.
3. WHAT ARE THE PRINCIPAL RISKS IN INVESTING IN THE FUNDS?
Investors in The Canandaigua Funds may lose money. There are risks
associated with investments in the types of securities in which the Funds
invest. These risks include:
- -- MARKET AND ECONOMIC RISK: The prices of the securities in which The Funds
invest may decline for a number of reasons.
- -- INTEREST RATE RISK: In general, the value of bonds and other debt
securities rise when interest rates fall and fall when interest rates
rise. The longer term obligations are usually more sensitive to
interest rate changes than shorter term obligations. While bonds and
other debt securities normally fluctuate less in price than common
4
<PAGE>
stocks, there have been extended periods of increases in interest rates
that have caused significant declines in bond prices.
- -- CREDIT RISK: The issuers of the bonds and other debt securities held by
The Funds may not be able to make interest or principal payments. Even
if these issuers are able to make interest or principal payments, they
may suffer adverse changes in financial conditions that would lower the
credit quality of the security, leading to greater volatility in the
price of the security.
- -- LIQUIDITY RISK: Lower or lack of trading volume may make it difficult
to sell securities held by The Funds at quoted market prices.
Because the Equity Fund will participate in the equity markets, it may
provide greater potential for capital appreciation and growth of current income
over the long term than the Bond Fund. However, the Equity Fund will generally
have a more volatile unit value and lower current yield than the Bond Fund.
Indeed, by stressing current yields through fixed-income securities, the Bond
Fund may provide greater stability of unit value than the Equity Fund. However,
Bond Fund investments should not be expected to appreciate in value to the same
extent as funds in the Equity Fund since there will be minimal participation in
the general equity markets.
Because of these risks, prospective investors who are uncomfortable
with an investment that will increase and decrease in value should not invest in
The Canandaigua Funds.
4. HOW HAVE THE FUNDS PERFORMED?
The bar charts and tables that follow provide some indication of the
risks of investing in the Equity Fund and the Bond Fund by showing changes in
each Funds' performance from year to year. Please remember that a Fund's past
performance is not necessarily an indication of its future performance. It may
perform better or worse in the future.
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS -
PER SHARE TOTAL RETURN PER CALENDAR YEAR
FUND 1998 1997 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY 17.53% 16.38% 21.59% 25.90% 0.37% 5.75% *
BOND 9.05% 7.89% 2.37% 22.38% (4.48%) 4.17% *
<FN>
________________
* Insignificant
</FN>
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
AVERAGE PERCENTAGE RETURN
FUND PAST YEAR PAST 5 YEARS SINCE THE INCEPTION
DATE OF THE FUND**
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY 17.53 16.00 13.95
BOND 9.05 7.08 6.36
<FN>
_____________________
* Period ending December 31, 1998
** September 9, 1992
</FN>
</TABLE>
ORGANIZATION AND CAPITALIZATION
From its inception in 1992 until February 9, 1998, The Canandaigua
Funds were organized by the Advisor as a Collective Investment Trust under New
York Law and the regulations of the U.S. Comptroller of the Currency,
participation in which was limited to qualified corporate accounts such as IRAs
and retirement and pension trusts. On February 9, 1998, the Collective
Investment Trust reorganized as a Delaware business trust. In connection with
this reorganization, the name of the Fund was changed from "Canandaigua National
Collective Investment Fund for Qualified Trusts" to "The Canandaigua Funds."
The Canandaigua Funds are authorized to issue an unlimited number of
shares. The Trustees of The Canandaigua Funds are responsible for the overall
management and supervision of its affairs. Each share represents an equal and
proportionate interest in the Fund to which it relates with each other share in
that Fund. Shares entitle their holders to one vote per share. Shares have
noncumulative voting rights, do not have preemptive or subscription rights and
are transferrable. Pursuant to the Investment Company Act, shareholders of each
Fund are required to approve the adoption of any investment advisory agreement
relating to such Fund and of any changes in fundamental investment restrictions
or policies of such Fund. Shares of the Fund will be voted with respect to that
Fund only, except for the election of Trustees and the ratification of
independent accountants. The Trustees are empowered by The Canandaigua Funds'
Declaration of Trust (the "Declaration of Trust") and Bylaws to create, without
shareholder approval, additional series of shares and to classify and reclassify
any new or existing series of shares into one or more classes.
As a Delaware business trust, The Canandaigua Funds are not required by
law to hold annual shareholder meetings but may, however, hold meetings from
time to time on important matters, and shareholders have the right to call
meeting to remove a Trustee or to take certain other actions as described in the
Declaration of Trust.
6
<PAGE>
MANAGEMENT OF THE FUNDS
BOARD OF TRUSTEES
The Canandaigua Funds are governed by a board of trustees, which is
responsible for protecting the interest of shareholders under Delaware law. The
Statement of Additional Information, discussed on Page 21 of this Prospectus,
contains general background information about each Trustee and Officer of The
Canandaigua Funds.
INVESTMENT ADVISOR
Subject to the direction of the Board of Trustees, The Canandaigua
National Bank and Trust Company acts as the Investment Advisor to each of the
Canandaigua Funds.
The Advisor's address is:
72 South Main Street
Canandaigua, New York 14424
The Advisor is a commercial bank offering a wide range of banking
services to its customers in the Canandaigua, New York area since 1887. As of
December 31, 1998, the Advisor had assets of $428,047,000, loans of $308,486,000
and deposits of $376,507,000, and provided personal, corporate and institutional
investment management and custodial services for accounts having an aggregate
market value of approximately $423,580,000.
Under its Investment Management Agreement with The Canandaigua Funds,
the Advisor manages the investment of the assets of each Fund in conformity with
the stated objectives and strategies of that Fund. It is the responsibility of
the Advisor to make investment decisions for each of the Funds and to provide
continuous supervision of their investment portfolios. In doing so, the Advisor
places orders to purchase and sell securities on behalf of each Fund and selects
broker-dealers that, in the Advisor's judgment, provide prompt and reliable
execution at favorable prices and reasonable commission rates. The Advisor
provides these services principally through the Portfolio Managers, who are
members of the Investment and Trust Departments of the Advisor.
The Canandaigua Funds pays to the Advisor a management fee computed
daily and paid monthly at the annual rate of one percent (1%) of the value of
the average daily net assets of each Fund. From 1994 through June 1997, the
board of trustees had approved a reduction of the fee for the Bond Fund to .50
percent, which was further temporarily reduced to .00 percent in August 1997.
With respect to the predecessor Collective Investment Trust, the Advisor's fee
included not only investment advisory services but fiduciary and administrative
services. As a result, the total expenses for the predecessor Collective
Investment Trust for all such services was therefore somewhat lower than the
total of such expenses for most mutual funds.
The Canandaigua Funds pays other expenses related to its daily
operations, such as custodian fees, Trustees' fees, transfer agency fees, legal
and auditing costs which are subject to reimbursement by the Advisor. More
information about the Investment administrative fees, fund accounting fees
Management Agreement and other expenses paid by
7
<PAGE>
The Canandaigua Funds is included in the Statement of Additional Information,
which also contains information about its brokerage policies and practices.
PORTFOLIO MANAGERS
Gregory S. MacKay and Robert J. Swartout are the Portfolio Managers for
the Funds and have been such since the inception of the predecessor Collective
Investment Trust. Mr. MacKay is a Senior Vice President of the Advisor and Mr.
Swartout is a Vice President and Investment Officer of the Advisor. Both Mr.
MacKay and Mr. Swartout have been officers of the Advisor for more than the past
six years.
DISTRIBUTOR
ADS Distributors, Inc., serves as the Distributor of each Fund's
shares. The Distributor's address is:
670 Second Street North
Suite A
Safety Harbor, Florida 34695
The Distributor is a Florida corporation and is a registered
broker-dealer.
TRANSFER AGENT, FUND ACCOUNTING AGENT AND ADMINISTRATOR
Under separate agreements with the Funds, American Data Services, Inc.
acts as the Transfer Agent, Fund Accounting Agent and as the Administrator of
each Fund. The Transfer Agent, Fund Accounting Agent and Administrator's address
is:
P.O. Box 5536
Hauppauge, New York 11788-0132
CUSTODIAN
Northern Trust Company acts as Custodian of the assets of each Fund.
8
<PAGE>
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you
buy and hold shares of The Canandaigua Funds.
SHAREHOLDER FEES AND EXPENSES
<TABLE>
<CAPTION>
THE EQUITY FUND THE BOND FUND
<S> <C> <C>
Maximum Sales Charge (Load) No Charge None
Imposed on Purchases (as a
percentage of the offering price)
Maximum Deferred Sales Charge No Charge No Charge
(Load)
Maximum Sales Charge (Load) No Charge No Charge
Imposed on Reinvested Dividends
and Distributions
Redemption Fee None None
Exchange Fee None None
Maximum Account Fee No Account Fee No Account Fee
</TABLE>
ANNUAL FUND OPERATING FEES AND EXPENSES
(expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
THE EQUITY FUND THE BOND FUND
--------------- -------------
<S> <C> <C>
Management Fees 1.00% 1.00%
Distribution and/or Service Fee (12b-1) 0.00% 0.00%
Other Expenses 0.50% 6.13%
----- -----
Total Fund Operating Expenses 1.50%* 7.13%*
===== =====
<FN>
_______________________
* Each of the Funds had actual Total Fund Operating Expenses for the most
recent fiscal year that were less than the amounts shown. The Investment
Advisor reimbursed each Fund to the extent necessary to insure that Total
Annual Fund Operating Expenses did not exceed 1.5%. The EquityFund's and
the Bond Fund's actual operating expense ratio for the fiscal year ended
December 31, 1998 after reimbursement was 1.14% and .46%, respectively.
</FN>
</TABLE>
EXAMPLE
-------
You would pay the following expenses on a $1,000 investment in either the Equity
Fund or the Bond Fund, assuming 5% annual return and a maximum of 1.5% annual
expense. The expenses would be the same for each time period whether or not
redemption occurred at the end of the period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Expenses: $15 $47 $82 $179
</TABLE>
9
<PAGE>
The table above is designed to assist you in understanding the direct and
indirect costs and expenses that you will bear as a shareholder. The example
above shows the amount of expenses you would pay on a $1,000 investment in
either of the Funds. Theses amounts assume the reinvestment of all dividends and
distributions, and payment by the relevant Fund of operating expenses as shown
in the Table under Total Fund Operating Expenses. the example is an illustration
only and actual expenses may be greater or less than those shown.
INVESTMENT OBJECTIVES, STRATEGIES AND RISK
The Equity Fund seeks long-term growth of asset value through capital
appreciation and dividend income. The Bond Fund seeks to earn a high level of
current income while permitting investors a degree of safety in principal.
However, please remember that an investment objective is not a guarantee. An
investment in The Canandaigua Funds might not earn income and investors could
lose money.
The investment strategies of each Fund described below are
non-fundamental, which means that they may be changed by The Canandaigua Funds'
Board of Trustees without shareholder approval. Still, The Canandaigua Funds has
adopted certain fundamental investment restrictions that are enumerated in
detail in the Statement of Additional Information and which may not be changed
without shareholder approval.
THE EQUITY FUND.
----------------
The Chart in the Equity Fund portion of the Section entitled "[w]hat
are the Funds' principal investment strategies?" reflects that at least 65% of
the total assets in the Equity Fund will, under normal market conditions, be
invested in equity-based securities, which consist mainly of common stocks as
well as debt securities and preferred stocks which are convertible into common
stocks. Normally, investments in the Equity Fund in cash equivalents will not
exceed 35% of its assets. However, when market conditions dictate a temporary
"defensive" investment strategy, the Advisor may decide to hold a portion of the
Equity Fund, without limitation on amount, in cash equivalents.
The Investment Advisor considers a number of factors in investing the
assets of the Equity Fund in equity-based securities:
-- Sales, growth and profitability prospects for the economic sector
and markets in which the company operates and for the products or
services the company provides
-- The financial condition of the company and its ability to meet its
liabilities and to provide income in the form of dividends
-- Prevailing price of the security
10
<PAGE>
-- How the prevailing price compares to historical price levels of the
securities, to current price levels in the general market, and to
the prices of competing companies
-- Projected earnings estimates and earnings growth rates for the
company and the relation of those figures to the current price. It
is expected that the volatility of the Equity Fund will be slightly
greater than that of the stock market as a whole. In order to limit
the level of risk, the Equity Fund will be invested in different
industries so that the value of its total assets invested in
issuer's conducting their principle business activities in the same
industry ordinarily does not exceed twenty-five percent (25%) of
the Equity Fund at the time of the purchase
In general, the Equity Fund will not invest in securities that have, in
the judgment of the Investment Advisor, a high level of debt as a percentage of
their total market capitalization. In making this determination, the Investment
Advisor will consider.
-- Compound annual growth rate to earnings and sales
-- Market price to current and projected earnings
-- Market price to book value
-- Market price to cash flow
-- Price to earnings
The Equity fund will not invest in securities of foreign issuers, but
may invest in American Depository Receipts that are traded on a U.S. securities
exchange or on The Nasdaq Stock Market (sm).
The Equity Fund will not invest in puts, calls and other future
contracts.
THE BOND FUND.
--------------
The Chart in The Bond Fund portion of the Section entitled "[w]hat are
the Funds' principal investment strategies?" reflects that at least 65% of the
total assets of The Bond Fund will, under normal market conditions, be invested
in bonds and debentures, which consist mainly of debt securities, such as bonds,
notes and debentures, issued by United States corporations, bonds and notes
issued or guaranteed by the United States Government or its agencies or
instrumentalities and preferred stock of the United States corporations.
Normally, investments in The Bond Fund in cash equivalents will not exceed 30%
of its assets. However, when market conditions dictate, a temporary "defensive"
investment strategy, the Advisor will decide to hold a portion of The Bond Fund,
without limitation on amount, in cash equivalents.
11
<PAGE>
Debt obligations issued or guaranteed by the United States Government
provide greater safety of principal but also generally provide lower current
income than debt obligations of corporations. They include issues of the U.S.
Treasury such as bills, notes and bonds and issues of agencies and
instrumentalities of the U.S. Government which are established under the
authorities of an act of Congress. The Advisor will consider investing in
securities issued or guaranteed by the following agencies:
-- Government National Mortgage Association
-- Federal National Mortgage Association
-- Farmers Home Administration
-- Federal Farm Credit Banks
-- Federal Home Loan Banks
-- Federal Home Loan Mortgage Corporation
-- Student Loan Marketing Association.
Some of these securities such as debenture obligations of the Farmers
Home Administration and securities of the Government National Mortgage
Association are supported by the full faith and credit of the U.S. Treasury;
others such as obligations of the Federal Home Loan Banks are supported by the
right of the issuer to borrow from the U.S. Treasury; others such as those of
the Federal Farm Credit Banks are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations. Still others such as
those of the Student Loan Marketing Association are supported only by the credit
of the instrumentality. No assurance can be given that the U.S. Government would
provide financial support to any of the foregoing when not obligated to do so by
law.
The Bond Fund will invest in debt securities of United States
corporations only if at the time of purchase they carry a rating of at least
"Baa" from Moody's Investors Services, Inc. or "BBB" from Standard & Poor's
Corporation. Debt securities carrying a rating of "Baa" from Moody's Investor
Services Inc. or "BBB" from Standard & Poor's Corporation have speculative
characteristics. See Appendix A for an explanation of the ratings. A reduction
below such rating for any debt security owned will not require disposition of
the security.
The Bond Fund's investments in securities other than debt of United
States corporations and debt obligations issued or guaranteed by the United
States Government, its agencies or instrumentalities (e.g., preferred stock and
all securities of foreign issuers) will be in those securities which, in the
judgment of the Advisor, would be of comparable quality to U.S. securities in
which the Bond Fund may invest, i.e., those securities having a rating of "Baa"
or better by Moody's or "BBB" or better by Standard & Poor's. This judgment may
be based upon such considerations as the issuer's financial strength, including
its historic and current financial condition, its historic and projected
earnings and
12
<PAGE>
its present and anticipated cash flow; the issuer's debt maturity schedules and
current and future borrowing requirements; and the issuer's continuing ability
to meet its future obligations.
The only non-interest paying securities to be held in the Bond Fund
will be (a) zero- coupon obligations of corporations, and (b) obligations
evidencing ownership of future interest and principal payments on United States
Treasury Bonds. Such zero-coupon obligations pay no current interest.
Zero-coupon obligations are sold at prices discounted from par value, with that
par value to be paid to the holder at maturity. The return on the zero-coupon
obligation, when held to maturity, equals the difference between the par value
and the original purchase price. Zero-coupon obligations may be purchased if the
Advisor considers the yield spread between these obligations and coupon issues
of the United States government and United States corporations to be
advantageous, giving consideration to the differing durations of the zero coupon
obligations and the coupon issues. The Bond Fund will only purchase zero-coupon
obligations if at the time of purchase such investments constitute less than 5%
of the value of the Bond Fund's total assets. Various forms of obligations exist
to evidence future interest or principal payments on Treasury securities.
Typically such obligations take the form of custodial receipts issued pursuant
to a custody agreement which evidence ownership of future interest and principal
payments on treasury securities deposited with the custodian. The interest and
principal payments on the underlying treasury securities are direct obligations
of the United States.
In general, in investing the assets of the Bond Fund, the Investment
Advisor will consider the governmental program under which the security was
issued as well as the ratings. The Bond Fund will invest primarily in
fixed-income securities with a maturity in excess of one year. However,
fixed-income securities can have maturities as long as 30 or more years. The
average maturity of securities in The Bond Fund will be based primarily upon the
Advisor's expectations for the future course of interest rates and
then-prevailing price and yield levels in the fixed-income market, and it is
expected that the dollar-weighted average maturity of The Bond Fund will not
exceed ten years. This limitation of the average maturity of the Fund is
expected to provide a more stable net asset value than would be the case with a
longer term fund.
The Bond Fund will not invest in securities of foreign issuers.
The Bond Fund will not invest in puts, calls or other futures
contracts.
AGAIN, THE FUNDS' OBJECTIVES, STATED ABOVE, ARE CONSIDERED FUNDAMENTAL
AND THEREFORE, THE BOARD OF TRUSTEES MAY NOT REVISE THEM. THE FUNDS' STRATEGIES,
HOWEVER, ARE CONSIDERED NON-FUNDAMENTAL AND THEREFORE THE TRUSTEES MAY REVISE
THEM, AS NECESSARY, FROM TIME TO TIME.
13
<PAGE>
YOUR FUND ACCOUNT
THE FUNDS' SHARE PRICE
The price at which investors purchase shares of each Fund and at which
shareholders redeem shares of each Fund is called its net asset value. Each Fund
calculates it net asset value as of the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m. Eastern Time) on each day the New York Stock
Exchange is open for trading. Each fund calculates its net asset value based on
the market prices of the securities, computed by adding the value of that Fund's
investment plus cash and other assets, deducting liabilities and then dividing
the results by the number of its shares outstanding. Each fund will process
purchase orders that it receives and accepts and redemption orders that it
receives prior to the close of regular trading on a day in which the New York
Stock Exchange is open at the net asset value determined LATER THAT DAY. It will
process purchase orders that it receives and accepts and redemptions orders that
it receives AFTER the close of regular trading at the net asset value determined
at the close of regular trading on the NEXT DAY the New York Stock Exchange is
open.
HOW TO PURCHASE SHARES
A. READ THIS PROSPECTUS CAREFULLY.
-------------------------------
B. DETERMINE HOW MUCH YOU WANT TO INVEST, KEEPING IN MIND THE FOLLOWING
MINIMUMS:
---------------------------------------------------------------------
1. New accounts - $250.00
2. Existing accounts - $50.00
C. COMPLETE THE FOLLOWING:
----------------------
1. For new accounts, the New Account Application accompanying
this Prospectus, carefully following the instructions.
2. For additional investments, prepare a brief letter stating:
-- the registration of your account
-- the name of the Fund whose shares you want to purchase
-- your account number
3. Make your check in the amount of the purchase price of the
shares payable to "The Equity Fund" or "The Bond Fund."
-- All checks must be drawn on U.S. Banks.
14
<PAGE>
-- Please write your account number on your check when you are
adding to an existing account.
-- The Funds will not accept cash or third party checks.
-- The Funds' Transfer Agent will charge a $15.00 fee
against a Shareholder's account for any payment check
returned for insufficient funds. The Shareholder will
also be responsible for any losses suffered by a Fund
as a result.
4. Send the application and check to:
American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132.
D. OTHER INFORMATION ABOUT PURCHASING SHARES OF THE FUNDS
The Funds may reject any share purchase application for any reason. The
Funds do not issue share certificates. The Funds will send investors a written
confirmation for all purchases of shares.
HOW TO SELL SHARES
A. REQUESTING THE SALE OF SHARES
1. Prepare a letter of instruction containing:
-- The name of the registered owner(s)
-- The name of the account(s)
-- The name of the Fund(s)
-- Account number
-- The amount of money or number of shares being sold
-- Name and address of person to receive the money
-- Additional information that the Fund(s) may require for
redemption by corporations, executors, administrators,
trustees, guardians, or others who hold shares in a fiduciary
or representative capacity.
Please contact the Funds' Transfer Agent, in advance, at 1-800-628-9403
if you have any questions.
15
<PAGE>
2. Sign the letter of instruction exactly as the shares are registered.
Joint ownership accounts must be signed by all owners.
3. Have the signatures guaranteed by one of the following financial
institutions:
-- A U.S. bank or trust company
-- Broker, dealer, municipal securities broker or dealer
-- Government securities broker or dealer
-- Credit union, authorized to provide signature guarantees
-- National Securities Exchange
-- Registered Securities Association or clearing agency
A NOTARIZED SIGNATURE IS NOT AN ACCEPTABLE SUBSTITUTE FOR A SIGNATURE
GUARANTEE.
4. Send a letter of instruction to:
The Canandaigua Funds
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
B. PAYMENT OF REDEMPTION PROCEEDS
------------------------------
The redemption price per share you receive for redemption requests is
the next determined net asset value after the Transfer Agent receives your
written request in proper form with all required information. Transfer Agent
will mail a check in the amount of the redemption proceeds no later than the 7th
day after it receives the written request in proper form with all required
information.
C. RETIREMENT ACCOUNTS
-------------------
To sell shares in an IRA or other retirement account, please contact
the Trustee at 72 South Main Street, Canandaigua New York 14424 or by calling
1-716-394-4260 ext 216 to request the appropriate distribution form and for
additional instructions.
16
<PAGE>
HOW TO EXCHANGE SHARES
Shares in either Fund may be exchanged, without cost, for shares in the
other Fund. To participate in the program you must do the following:
- -- Contact the Transfer Agent, P.O. Box 5536, Hauppauge, New York
11733-0132 or by calling 1-888-693-9276 to request the appropriate form
to enroll in this program, giving you the option of exchanging shares
between Funds.
- -- Once enrolled, exchanges may be made over the telephone but only
between Fund accounts registered in the same name, address and taxpayer
identification number and are subject to the requirements for initial
and subsequent investments, provided to you by the Transfer Agent upon
enrollment in the program, as in effect from time to time.
- -- The Transfer Agent uses procedures designed to confirm that
instructions received by telephone are genuine, including requiring
certain identifying information prior to acting on such instructions,
recording telephone instructions and sending written confirmation of
the telephone instructions received. To the extent such procedures are
reasonably designed to prevent unauthorized or fraudulent instructions
and are followed, neither The Canandaigua Funds nor the Transfer Agent
is responsible for any loss, expense or cost arising from any such
transaction.
- -- Any exchange of shares will be based on the net asset values of the
shares involved next computed after receipt of an exchange order.
Exchanges are subject to determination by the Transfer Agent that the
investment instructions are complete.
DIVIDENDS, DISTRIBUTIONS AND TAX INFORMATION ON YOUR SHARES
DIVIDENDS AND DISTRIBUTIONS
---------------------------
Each Fund distributes substantially all of its net investment income
and substantially all of its capital gain annually prior to the close of the
fiscal year in which the gains are earned. You have two distribution options:
- -- AUTOMATIC REINVESTMENT OPTION - both dividend and capital gains
distribution will be reinvested in additional fund shares.
- -- ALL CASH OPTION - both dividend and capital gains distributions will be
paid in cash.
Unless an election is made on the New Account Application selecting the
All Cash Option, the Automatic Reinvestment Option will be applied to each
account.
17
<PAGE>
TAXES
-----
Each Fund intends to qualify and elect to be treated each year as a
"regulated investment company" for federal income tax purposes. A regulated
investment company is not subject to regular income tax on any income or capital
gains distributed to its shareholders if it, among other things, distributes at
least ninety percent (90%) of its investment company taxable income to them
within applicable time periods.
For federal income tax purposes, dividends and distributions are
taxable to you whether paid in cash or reinvested in additional shares. You may
also be liable for tax on any gain realized upon the redemption of shares in
either Fund.
Shortly after the close of each calendar year, you will receive a
statement setting forth the dollar amounts of dividends and any distributions
for the prior calendar year and the tax status of the dividends and
distributions for federal income tax purposes. You should consult your tax
advisor to assess the federal, state and local tax consequences of investing in
the Funds. This discussion is not intended to address the tax consequences of an
investment by a non-resident alien.
YEAR 2000
The Funds are aware of the "Year 2000" issue. The "Year 2000" issue
stems from the use of a two-digit format to define the year in certain
date-sensitive computer application systems rather than the use of a four-digit
format. As a result, the date- sensitive software program could recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
major systems or process failures or the generation of erroneous data, which
would lead to disruptions in the Funds' business operations.
The Funds have no application systems of their own and are entirely
dependent on their service providers' systems and software. The Funds are
working with their service providers (including the Advisor, Administrator,
Transfer Agent and Custodian) to identify and remedy and Year 2000 issues.
However, the Funds cannot guarantee that all Year 2000 issues will be identified
and remedied. Failure to successfully identify and remedy all Year 2000 issues
could result in an adverse impact on the Funds.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand a
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the tables represent the rate that an investor would have earned on
an investment in the Fund (assuming reinvestment of all dividends and
distribution). This information has been audited by Morga, Jones & Hufsmith,
P.C., independent auditors, whose report, along with the Funds' financial
statements, are included in the Annual Report which is available upon request.
18
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SELECTED PER-SHARE DATA AND RATIOS/SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
1998 1997 1996 1995 1994 1993 1992(bb)
----- ---- ---- ---- ---- ---- -------
PER SHARE DATA:
(For a share outstanding throughout
each period)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
Period $ 13.53 $ 12.54 $ 12.25 $ 10.01 $ 10.48 $ 10.06 (cc)
-------- ------- ------- ------- ------- ------- -------
Income (Loss) From Investment Operations -
Net investment income (a) 0.77 0.70 0.62 0.81 0.62 0.42 (cc)
Net realized and unrealized gain (loss)
on investments 0.45 0.29 (0.33) 1.43 (1.09) -- (cc)
-------- ------- ------- ------- ------- ------- -------
Total income (loss) from investment
operations 1.22 0.99 0.29 2.24 (0.47) 0.42 (cc)
-------- ------- ------- ------- ------- ------- -------
Less Distributions (b)
Dividends from net investment
income (0.61)
Distributions from net realized
Gains -
--------
Total distributions (0.61)
--------
Net Asset Value, end of period $ 14.14 $ 13.53 $ 12.54 $ 12.25 $ 10.01 $ 10.48 $ 10.06
======== ======= ======= ======= ======= ======= =======
Total Return (c) 9.05% 7.89% 2.37% 22.38% (4.48%) 4.17% (cc)
======== ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
(000 omitted) $ 957 $ 666 $ 501 $ 408 $ 298 $ 555 $ 61
Ratio of Net Expenses to Average
Net Assets (a) 0.46% 0.77% 1.09% 0.89% 0.77% 1.14% (cc)
Ratio of Gross Expenses to Average
Net Assets (a) 7.13% 3.19% 4.15% 1.03% 0.95%
Ratio of Net Investment Income
to Average Net Assets 5.47% 5.38% 5.17% 7.11% 6.16% 4.18% (cc)
Portfolio Turnover Rate 9.04% 8.44% 30.46% 14.13% 24.45% 62.96% (cc)
<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 $.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.
(bb) For the period from inception (September 9, 1992) throiugh December 31, 1992.
(c) Assumes reinvestment of dividends and capital gains distribution, if any.
(cc) Insignificant.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 19 -
<PAGE>
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS
CANANDAIGUA EQUITY FUND
SELECTED PER-SHARE DATA AND RATIOS/SUPPLEMENTAL DATA
FOR THE YEARS ENDED DECEMBER 31
1998 1997 1996 1995 1994 1993 1992(bb)
---- ---- ---- ---- ---- ---- ------
PER SHARE DATA:
(For a share outstanding throughout
each period)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
Period $ 19.40 $ 16.67 $ 13.71 $ 10.89 $ 10.85 $ 10.26 (cc)
------- ------- ------- ------- ------ ------- -------
Income (Loss) From Investment Operations -
Net investment income (loss) (a) (0.06) - 0.01 0.04 0.07 0.18 (cc)
Net realized and unrealized gain (loss)
on investments 3.46 2.73 2.95 2.78 (0.03) 0.41 (cc)
------- ------- ------- ------- ------ -------
Total income (loss) from investment
operations 3.40 2.73 2.96 2.82 0.04 0.59 (cc)
------- ------- ------- ------- ------ ------- -------
Less Distributions (b)
Dividends from net investment
income -
Distributions from net realized
Gains -
-------
Total distributions -
-------
Net Asset Value, end of period $ 22.80 $ 19.40 $ 16.67 $ 13.71 $ 10.89 $ 10.85 $ 10.26
======= ======= ======= ======= ======= ======= =======
Total Return (c) 17.53% 16.38% 21.59% 25.90% 0.37% 5.75% (cc)
======= ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
(000 omitted) $23,568 $17,787 $12,644 $ 8,433 $ 5,777 $ 3,172 $ 93
Ratio of Net Expenses to Average
Net Assets (a) 1.14% 1.15% 1.12% 1.11% 1.09% 1.18% (cc)
Ratio of Gross Expenses to Average
Net Assets (a) 1.50% 1.44% 1.57% 1.25% 1.27%
Ratio of Net Investment Income
to Average Net Assets (.31%) 0.00% 0.03% 0.32% 0.69% 1.70% (cc)
Portfolio Turnover Rate 314.28% 398.23% 337.27% 375.30% 234.81% 165.68% (cc)
<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 $.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. There have been no Equity Fund dividends declared or
distributed through December 31, 1998.
(bb) For the period from inception (September 9, 1992) throiugh December 31, 1992.
(c) Assumes reinvestment of the dividends and capital gains distribution, if
any.
(cc) Insignificant.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
ADDITIONAL INFORMATION
To learn more about The Canandaigua Funds you may want to read The
Canandaigua Funds' Statement of Additional Information (or "SAI") which contains
additional information about The Canandaigua Funds. The Canandaigua Funds have
incorporated by reference the SAI into the Prospectus. This means that you
should consider the contents of the SAI to be part of this Prospectus.
You also may learn more about The Canandaigua Funds' investments by
reading The Canandaigua Funds' annual and semi-annual reports to shareholders.
The annual report includes a discussion of the market conditions and investment
strategies that significantly affected the performance of The Canandaigua Funds
during the last fiscal year.
The SAI and the annual and semi-annual reports are all available to
shareholders and prospective investors without charge, simply by calling
1-716-394-4260 ext. 216.
Prospective investors and shareholders who have questions about The
Canandaigua Funds may also call the following number or write to the following
address:
The Canandaigua Funds
The Canandaigua National Bank and Trust Company
72 South Main Street
Canandaigua, New York 14424
716-394-4260 ext. 216
The general public can review and copy information about The
Canandaigua Funds (including the SAI) at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. (please call
1-800-SEC-0330 for information on the operations of the Public Reference Room)
Reports and other information about The Canandaigua Funds are also available at
the Securities and Exchange Commission's Internet Site at http://www.sec.gov and
copies of this information may be obtained, upon payment of a duplicating fee,
by writing to:
Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-60090
Please refer The Canandaigua Funds Investment Company Act File No. 811-7322
when seeking information about The Canandaigua Funds from the Securities and
Exchange Commission.
21
<PAGE>
APPENDIX A
Description of Standard & Poor's Corporation's corporate bond ratings of BBB or
better:
AAA - Bonds rated AAA have the highest rating assigned by S&P to a
debt obligation. Capacity to pay interest and repay principal
is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues
only to a small degree.
A - Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated
categories.
Description of Moody's Investor Service, Inc.'s corporate bond ratings of Baa or
better:
AAA - Bonds which are rated Aaa are judged to be the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt-edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
AA - Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long term risks appear
somewhat larger than Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
1
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
THE CANANDAIGUA FUNDS
This Statement of Additional Information sets forth certain additional
information about The Canandaigua Funds, an open-end diversified management
investment company.
-----------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. THE INFORMATION
HEREIN SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE CANANDAIGUA
FUNDS DATED FEBRUARY 28, 1999, A COPY OF WHICH MAY BE OBTAINED FREE OF CHARGE BY
WRITING THE FUNDS' DISTRIBUTOR, ADS DISTRIBUTORS, INC., 670 SECOND STREET NORTH,
SUITE A, SAFETY HARBOR, FLORIDA 34695, OR BY CALLING 1-888-693-9276.
February 28, 1999
1
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TABLE OF CONTENTS
The Canandaigua Funds..................................................... 3
Investment Restrictions................................................... 3
Other Investment Policies................................................. 5
Management of The Canandaigua Funds....................................... 5
TRUSTEES AND OFFICERS............................................ 5
INVESTMENT ADVISOR............................................... 7
DISTRIBUTOR...................................................... 9
TRANSFER AGENT AND ADMINISTRATOR................................. 9
CUSTODIAN........................................................ 10
CODE OF ETHICS................................................... 10
Net Asset Value ........................................................ 10
Performance Information................................................... 12
Portfolio Transactions.................................................... 12
Tax Information ........................................................ 14
Organization and Capitalization........................................... 15
PRINCIPAL SHAREHOLDERS........................................... 16
Independent Accountants................................................... 17
Index to Financial Statements............................................. F-1
Report of Independent Accountants......................................... F-2
Financial Statements and Notes Thereto.................................... F-3
2
<PAGE>
THE CANANDAIGUA FUNDS
The Canandaigua Funds is registered with the SEC as an open-end
diversified management investment company (or mutual fund) consisting of two
separate, diversified series: the Canandaigua Equity Fund (the "Equity Fund")
and the Canandaigua Bond Fund (the "Bond Fund") (individually referred to as a
"Fund" and collectively as the "Funds"). Additional funds may be created by the
Trustees from time to time. The Canandaigua National Bank and Trust Company,
acts as investment advisor to both Funds.
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of The Canandaigua Funds dated
February 28, 1999, as amended or supplemented from time to time. A copy of the
Prospectus may be obtained without charge by calling 1-888-693-9276 or by
writing to the Funds' Distributor, ADS Distributors, Inc., 670 Second Street
North, Suite A, Safety Harbor, Florida 34695.
The EQUITY FUND seeks long term growth of asset values through capital
appreciation and dividend income.
The BOND FUND seeks to earn a high level of current income with
consideration also given to safety of principal.
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental to both the
Equity Fund and the Bond Fund and cannot be changed for either Fund without the
approval of the holders of a majority of the outstanding shares of the affected
Fund. Under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), a "fundamental" policy may not be changed without the vote of a
"majority of the outstanding voting securities" of a Fund, which is defined in
the Investment Company Act as the lesser of (a) 67%or more of the shares present
at a Fund meeting if the holders of more than 50%of the outstanding shares of
that Fund are present or represented by proxy or (b) more than 50% of the
outstanding shares of that Fund. An investment policy that is not "fundamental"
may be changed by vote of a majority of the Board of Trustees of The Canandaigua
Funds at any time.
As a matter of fundamental policy, neither Fund may:
(a) Purchase securities of any issuer (except securities issued or
guaranteed as to principal or interest by the United States Government, its
agencies or instrumentalities) if as a result more than 5% of the value of the
total assets of that Fund would be invested in the securities of such issuer or
both Funds together would own more than 10% of the outstanding voting securities
of such issuer (for purposes of this limitation, identification of the "issuer"
will be based on a determination of the source of assets and revenues committed
to meeting interest and principal payments of each security);
3
<PAGE>
(b) Invest in companies for the purpose of exercising control;
(c) Borrow money except from banks on a temporary basis for
extraordinary or emergency purposes, provided that a Fund is required to
maintain asset coverage of 300% for all borrowing (except with respect to cash
collateral received as a result of portfolio securities lending);
(d) Pledge, mortgage or hypothecate more than 10% of the total value of
its assets;
(e) Issue senior securities;
(f) Underwrite any issue of securities;
(g) Purchase or sell real estate or real estate mortgage loans (but
this shall not prevent investments in instruments secured by real estate or
interests therein or in marketable securities in real estate operations);
(h) Make loans to other persons, except that either Fund may make time
or demand deposits with banks, may purchase bonds, debentures or similar
obligations that are publicly distributed, may loan its securities in an amount
not in excess of 10% of the total value of its assets and may enter into
repurchase agreements as long as repurchase agreements maturing in more than
seven days do not exceed 10% of the total value of its assets;
(i) Purchase securities on margin or sell securities short;
(j) Purchase or retain securities of an issuer if the members of The
Canandaigua Funds' Board of Trustees, each of whom owns more than 1/2 of 1% of
such securities, together own more than 5% of the securities of such issuer;
(k) Purchase or sell commodities or commodity contracts;
(l) Invest its assets in securities of other investment companies
except as part of a merger, consolidation, reorganization or purchase of assets
approved by the shareholders of the Fund involved in such transaction;
(m) Except as may be permitted by clause (k), invest in or sell put,
call, straddle or spread options or interests in oil, gas or other mineral
exploration or development programs;
(n) Purchase any securities that would cause more than 25% of the value
of that Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry (except that there is no limitation with respect to obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities);
4
<PAGE>
(o) Invest more than 10% of the total value of its assets in
nonmarketable securities (including repurchase agreements and time deposits
maturing in more than seven days but excluding master demand notes and other
securities payable on demand). If through the appreciation of nonmarketable
securities, or the depreciation of marketable securities, a Fund has more than
10% of its assets invested in nonmarketable securities, that Fund will reduce
its holdings of nonmarketable securities to 10% or less of its total assets as
soon as practicable;
(p) Purchase securities of foreign issuers (except for American
Depository Receipts that are traded on a U.S. securities exchange or on The
Nasdaq Stock Market(sm)); or
(q) Purchase puts, calls or engage in other futures contracts.
If a percentage restriction is adhered to at the time of investment, then except
as noted in (o) above, a later increase or decrease in percentage resulting from
a change in values or assets will not constitute a violation of that
restriction.
OTHER INVESTMENT POLICIES
The following investment policies are not fundamental and may be
changed by the Board of Trustees of The Canandaigua Funds without the approval
of the shareholders of the affected Fund:
The Funds will not invest in securities which are subject to
restrictions on resale because they have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") or which are not
readily marketable, except for master demand notes, other securities payable
upon demand, repurchase agreements and instruments evidencing loans of
securities. Such securities may, however, become a part of a Fund's assets
through a merger, exchange or recapitalization involving securities already held
in a Fund.
Either Fund may, to the extent consistent with its investment
objectives, invest in master demand notes. A master demand note is a facility,
typically maintained by a bank, pursuant to which monies are lent on a daily
basis to a corporate borrower by a group of purchasers in amounts and at rates
negotiated daily. The loan is payable on demand. As with other debt obligations,
there is a risk that the borrower will fail to repay the obligation.
5
<PAGE>
MANAGEMENT OF THE CANANDAIGUA FUNDS
TRUSTEES AND OFFICERS
Information pertaining to the Trustees, Advisory Trustees and officers
of The Canandaigua Funds, including their principal occupations for the last
five years, is set forth below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME, AGE AND ADDRESS POSITION(S) WITH FUND DURING PAST FIVE YEARS
- --------- ----------- --------------------- ----------------------
<S> <C> <C>
Robert N. Coe, 48 Trustee President and co-owner,
c/o The Canandaigua Funds W.W. Coe & Son, Inc.
72 South Main Street (independent insurance
Canandaigua, NY 14424 agency) Canandaigua, New
York
Robert J. Craugh, 75 Chairman of the Board Retired since 1987; prior
c/o The Canandaigua Funds of Trustees thereto, Senior Vice
72 South Main Street President-Operations,
Canandaigua, NY, 14424 Canandaigua National Bank
and Trust Company,
Canandaigua, NY
Donald C. Greenhouse, 62 Trustee President and owner, Seneca
c/o The Canandaigua Funds Point Associates, Inc.
72 South Main Street (business consultants)
Canandaigua, NY 14424 Canandaigua, New York
Steven H. Swartout, 39 Trustee, Attorney-at-Law,
c/o The Canandaigua Funds Secretary and Treasurer Canandaigua, New York
72 South Main Street
Canandaigua, NY 14424
</TABLE>
COMPENSATION OF THE BOARD OF TRUSTEES. Trustees receive $200.00 from
-------------------------------------
The Canandaigua Funds for each Board and Committee meeting attended, together
with reimbursement of reasonable expenses incurred.
For 1997, the Trustees received the following compensation from The
Canandaigua Funds: Mr. Coe: $1,000.00; Mr. Craugh: $1,000.00; Mr. Greenhouse:
$600.00; and Mr. Swartout: $1,000.00. (There were no expense reimbursements
necessary for any meetings held during 1998.)
To comply with certain restrictions applicable to the Advisor under the
Glass-Steagall Act ("Glass-Steagall Act"), none of the Trustees or officers of
The Canandaigua Funds are directors, officers or employees of the Advisor.
As permitted by the regulations of the Federal Reserve Board under the
Glass-Steagall Act and the Bylaws of The Canandaigua Funds, the Board of
Trustees has established an Advisory Board of Trustees. The purpose of the
Advisory Board is to advise the Board of Trustees with respect to investment
policies and related matters. Members of the Advisory Board are selected for
their expertise in investment matters by the Board of Trustees, are appointed by
the Board of Trustees, serve for one-year terms, have no vote with respect to
any matters, and can be removed by the Board of Trustees at any time.
Information pertaining to the members of the Advisory Board, including
their principal occupations for the last five years, is set forth below.
6
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME, AGE AND ADDRESS POSITION(S) WITH FUND DURING PAST FIVE YEARS
- --------- ----------- --------------------- ----------------------
<S> <C> <C>
Gregory S. MacKay, 48 Advisory Trustee Treasurer, Canandaigua
72 South Main Street National Corporation
Canandaigua, NY 14424 (parent holding company of
the Advisor) and Senior
Vice President of the
Advisor
Robert J. Swartout, 36 Advisory Trustee Vice President and
72 South Main Street Investment Officer of the
Canandaigua, NY 14424 Advisor
</TABLE>
Advisory Trustees receive no compensation from The Canandaigua Funds
for their service in such capacity.
INVESTMENT ADVISOR
The Canandaigua National Bank and Trust Company, 72 South Main Street,
Canandaigua, New York 14424 is the Investment Advisor ("Advisor") for each Fund
pursuant to an investment advisory agreement (the "Investment Advisory
Agreement") that The Canandaigua Funds has entered into with the Advisor on
behalf of each Fund.
The Investment Advisory Agreement provides that the Advisor will
provide each Fund with investment research, advice and supervision and will
furnish continuously an investment program for that Fund consistent with the
investment objectives and policies of that Fund. The Advisor is responsible for
the payment of the salaries and expenses of all of its personnel, office rent
and the expenses of providing investment advisory, research and statistical data
and related clerical expenses.
Under the terms of the Investment Advisory Agreement, the Advisor
manages the investment of the assets of each Fund in conformity with the
investment objectives and policies of that Fund. It is the responsibility of the
Advisor to make investment decisions for each Fund and to provide continuous
supervision of the investment portfolios of each Fund. The Advisor has agreed to
maintain office facilities for the Funds, furnish the Funds with statistical and
research data, certain clerical, accounting and bookkeeping services, and
certain other services required by each Fund.
The Advisor pays all expenses incurred by it in connection with acting
as investment manager, other than costs (including taxes and brokerage
commissions, if any) of securities purchased for the Funds. Expenses incurred by
the Advisor in connection with acting as investment advisor include the costs of
accounting, data processing, bookkeeping and internal auditing services (other
than costs related to shareholder account servicing), and rendering periodic and
special reports to the Board of Trustees. The Advisor pays for all employees,
office space and facilities required by it to provide services under the
Investment Advisory Agreement, except for specific items of expense referred to
below.
7
<PAGE>
Under the terms of the Investment Advisory Agreement, the Advisor is
obligated to manage each Fund in accordance with applicable laws and
regulations, including the regulations and rulings of the United States
Comptroller of the Currency relating to fiduciary powers of national banks. In
accordance with these regulations, the Advisor will not invest the Funds' assets
in stock or obligations of, or property acquired from, the Advisor, its
affiliates or directors, officers or employees or other persons with substantial
connections with the Advisor, and assets of the Funds will not be sold or
transferred, by loan or otherwise, to the Advisor or persons connected with the
Advisor as described above, except that in accordance with applicable
regulations of the Comptroller of the Currency, assets of the Funds may be
placed in deposits with the Advisor pending investment or distribution.
For its services under the Investment Advisory Agreement, the Advisor
is paid with respect to each Fund a monthly management fee at the annual rate of
1.00% of each Fund's average daily net assets. During the fiscal years ended
December 31, 1997, December 31, 1996 and December 31, 1995, the Equity Portfolio
of the predecessor Collective Investment Trust paid the Advisor a net total of
$162,307, $108,183 and $70,751, respectively, in aggregate advisory fees, which
amounted to 1.00%, 1.00% and 0.99%, respectively, of that Fund's average annual
net assets for those periods. During the fiscal year ended December 31, 1998,
the Equity Fund paid the Advisor a net total of $206,484 in aggregate advisory
fees, which amounted to 1.00% of that Fund's average annual net assets for that
period. During the fiscal year ended December 31, 1997, December 31, 1996 and
December 31, 1995, the Bond Portfolio of the predecessor Collective Investment
Trust paid the Advisor a net total of $1,535, $2,442 and $1,653, respectively,
in aggregate advisory fees, which amounted to 0.26%, 0.50% and 0.50%,
respectively, of that Fund's average annual net assets for those periods. During
the fiscal year ended December 31, 1998, the Bond Fund did not pay the Advisor
any net advisory fee. Beginning in 1994, the Advisor had in effect a reduction
from 1.00% to 0.50% of the advisory fee applicable to the Bond Portfolio, which
the Trustees temporarily reduced to 0.00% during 1997.
Except for the expenses described above which have been assumed by the
Advisor, all expenses incurred in administration of The Canandaigua Funds will
be charged to the Funds or to a particular Fund, as the case may be, including
investment management fees; fees and expenses of the Board of Trustees; interest
charges; taxes; brokerage commissions; expenses of valuing assets; expenses of
continuing registration and qualification of The Canandaigua Funds and the
shares under federal and state law; share issuance expenses; fees and
disbursements of independent accountants and legal counsel; fees and expenses of
custodians, including subcustodians and securities depositories, transfer agents
and shareholder account servicing organizations; expenses of preparing, printing
and mailing prospectuses, reports, proxies, notices and statements sent to
shareholders; expenses of shareholder meetings; and insurance premiums. The
Canandaigua Funds is also liable for nonrecurring expenses, including litigation
to which it may from time to time be a party. Expenses incurred for the
operation of a particular Fund including the expenses of communications with its
shareholders, are paid by that Fund. Expenses that are general liabilities of
The Canandaigua Funds are allocated to the Equity Fund and the Bond Fund in
proportion to the total net assets of each Fund.
8
<PAGE>
OTHER INFORMATION. The Investment Advisory Agreement remains in effect
-----------------
initially for a two year term and continues in effect thereafter only if such
continuance is specifically approved at least annually by the Trustees or by
vote of a majority of the outstanding voting securities of the Funds (as defined
in the Investment Company Act) and, in either case, by a majority of the
Trustees who are not interested persons of The Canandaigua Funds or the Advisor.
The Investment Advisory Agreement provides that the Advisor shall not be liable
to a Fund for any error of judgment by the Advisor or for any loss sustained by
the Fund except in the case of the Advisor's willful misfeasance, bad faith,
gross negligence or reckless disregard of duty. The Investment Advisory
Agreement also provides that it shall terminate automatically if assigned and
that it may be terminated without penalty by vote of a majority of the
outstanding voting securities of the Funds or by either party upon 60 days'
written notice. No person other than the Advisor regularly furnishes advice to
the Funds with respect to the desirability of a Fund's investing in, purchasing
or selling securities.
DISTRIBUTOR
ADS Distributors, Inc. (the "Distributor") acts as the principal
underwriter and distributor of each Fund's shares and continually offers shares
of the Funds pursuant to a distribution agreement approved by the Trustees. The
Distributor is a Florida corporation, and a registered broker-dealer. Among its
functions, the Distributor approves and accepts new account applications,
processes subsequent account purchases and redemptions, and responds to requests
for information about the Funds. For its services, the Distributor will receive
an annual fee of $22,750, payable monthly, plus reimbursement of expenses.
TRANSFER AGENT, FUND ACCOUNTING AGENT AND ADMINISTRATOR
Under separate agreements, American Data Services, Inc. acts as the
Transfer Agent (the "Transfer Agent") Fund Accounting Agent (the "Fund
Accounting Agent") and as the Administrator (the "Administrator") for each Fund.
As Transfer Agent, American Data Services, Inc. provides various
recordkeeping services for the Funds, including maintenance of all Fund share
ownership books and records, recording of all purchase and redemption orders,
acting as dividend disbursing agent, generating transaction confirmation
statements and quarterly shareholder statements of account, and distributing
periodic reports and updated Fund Prospectuses to all shareholders. The Transfer
Agency Agreement has been approved by the Trustees of The Canandaigua Funds.
In its capacity as Fund Accounting Agent and Administrator of the
Funds, American Data Services, Inc. determines, for each Fund, its daily net
asset value per share (see "Net Asset Value" below), calculates all dividend and
capital gain distributions, maintains the Funds' corporate books and records,
prepares and files required tax returns and reports, and provides general data
processing, accounting and bookkeeping services to the Funds.
9
<PAGE>
The Administrative Services Agreement has been approved by the Trustees
of The Canandaigua Funds. This agreement provides that, for each Fund, the
Administrator will be paid a monthly fee equal to 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 average net assets of $20 million or more; or (2) 1/12th of
0.012% (12 basis points) of the average net assets of that Fund for the month.
CUSTODIAN
Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois
60675, serves as the custodian ("Custodian") of the assets of each Fund. The
Custodian holds all securities and other assets of the Funds. The Custodial
Agreement with each Fund, which the Trustees have approved, provides for the
general duties of the Custodian, permissible use of subcustodians, and book
entry systems of account.
CODE OF ETHICS
The Board of Trustees has determined that the personnel of The
Canandaigua Funds may engage in personal trading in compliance with general
fiduciary principles which are incorporated into The Canandaigua Fund's Code of
Ethics. This Code of Ethics substantially complies in all respects with Rule
17j-1 under the Investment Company Act, with the following exceptions: (1) the
disinterested Trustees of The Canandaigua Funds are not required to pre-clear
personal securities transactions, and (2) the disinterested Trustees are not
provided with information about the portfolio transactions contemplated for a
Fund or executed for a Fund for a period of 15 days before and after such
transactions.
NET ASSET VALUE
For each Fund, net asset value ("NAV") per share is determined by
dividing the total value of that Fund's assets, less any liabilities, by the
number of shares of that Fund outstanding.
The net asset value per share of each Fund is determined by the
Administrator as of the close of regular trading on the New York Stock Exchange
(normally 4 p.m., Eastern Time) on each day when the New York Stock Exchange is
open for trading. The New York Stock Exchange is closed on the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day as observed.
Except for debt securities with remaining maturities of 60 days or
less, assets for which market quotations are available are valued as follows:
(a) each listed security is valued at its closing price obtained from the
respective primary exchange on which the security is listed, or, if there were
10
<PAGE>
no sales on that day, at its last reported current bid price; (b) each unlisted
security is valued at the last current bid price obtained from the National
Association of Securities Dealers Automated Quotation System; (c) United States
Government and agency obligations are valued based upon bid quotations from the
Federal Reserve Bank for identical or similar obligations; (d) short-term money
market instruments (such as certificates of deposit, bankers' acceptances and
commercial paper) are most often valued by bid quotation or by reference to bid
quotations of available yields for similar instruments of issuers with similar
credit ratings. The Board of Trustees has determined that the values obtained
using the procedures described in (c) and (d) represent the fair values of the
securities valued by such procedures. All of these prices are obtained by the
Administrator from services which collect and disseminate such market prices.
Bid quotations for short-term money market instruments reported by such a
service are the bid quotations reported to it by the major dealers.
Debt securities with remaining maturities of 60 days or less are valued
on the basis of amortized cost. Under this method of valuation, the security is
initially valued at cost on the date of purchase or, in the case of securities
purchased with more than 60 days remaining to maturity, the market value on the
61st day prior to maturity. Thereafter the Fund assumes a constant proportionate
amortization in value until maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the security,
unless the Trustees determine that amortized cost no longer represents fair
value.
When approved by the Trustees, certain securities may be valued on the
basis of valuations provided by an independent pricing service when such prices
the Trustees believe reflect the fair value of such securities. These securities
would normally be those which have no available recent market value, have few
outstanding shares and therefore infrequent trades, or for which there is a lack
of consensus on the value, with quoted prices covering a wide range. The lack of
consensus would result from relatively unusual circumstances such as no trading
in the security for long periods of time, or a company's involvement in merger
or acquisition activity, with widely varying valuations placed on the company's
assets or stock. Prices provided by an independent pricing service may be
determined without exclusive reliance on quoted prices and may take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data.
In the absence of an ascertainable market value, assets are valued at
their fair value as determined by the Advisor using methods and procedures
reviewed and approved by the Trustees.
The proceeds received by each Fund for each issue or sale of its
shares, and all net investment income, realized and unrealized gain and proceeds
thereof, subject only to the rights of creditors, will be specifically allocated
to such Fund and constitute the underlying assets of that Fund. The underlying
assets of each Fund will be segregated on the books of account, and will be
charged with the liabilities in respect to such Fund and with a share of the
general liabilities of The Canandaigua Funds. Expenses with respect to both
Funds are to be allocated in proportion to the total net assets of the
respective Funds.
11
<PAGE>
PERFORMANCE INFORMATION
The average annual total return of each Fund is determined for a
particular period in accordance with SEC Rule 482 by calculating the actual
dollar amount of the investment return on a $1,000 investment in the Fund made
at the maximum public offering price (I.E., net asset value) at the beginning of
the period, and then calculating the annual compounded rate of return which
would produce that amount. Total return for a period of one year is equal to the
actual return of the Fund during that period. This calculation assumes that all
dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period.
The average annual total return for the Equity Fund and the Bond Fund
of the predecessor Collective Investment Trust for the one-year period and since
inception to December 31, 1998, was as follows:
<TABLE>
<CAPTION>
YEAR ENDED INCEPTION* TO
FUND 12/31/98 12/31/98
- ---- -------- --------
<S> <C> <C>
Equity Fund 17.53% 13.95%
Bond Fund 9.05% 6.36%
<FN>
- ------------
*Inception for both Funds was September 9, 1992
</FN>
</TABLE>
The performance data quoted represents historical performance and the
investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than original cost.
PORTFOLIO TRANSACTIONS
Purchases and sales of securities on a securities exchange are effected
by brokers, and the Funds pay a brokerage commission for this service. In
transactions on stock exchanges these commissions are negotiated. In the
over-the-counter market, securities (e.g., debt securities) are normally traded
on a "net" basis with dealers acting as principal for their own accounts without
a stated commission, although the price of the securities usually includes a
profit to the dealer. In underwritten offerings, securities are purchased at a
fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount.
The primary consideration in placing portfolio security transactions
with broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Advisor attempts to achieve this result by selecting
broker-dealers to execute portfolio transactions on behalf of each Fund on the
basis of the broker-dealers' professional capability, the value and quality of
their brokerage services and the level of their brokerage commissions.
12
<PAGE>
Although commissions paid on every transaction will, in the judgment of
the Advisor, be reasonable in relation to the value of the brokerage services
provided, under each Investment Advisory Agreement and as permitted by Section
28(e) of the Securities Exchange Act of 1934, the Advisor may cause a Fund to
pay a commission to broker-dealers who provide brokerage and research services
to the Advisor for effecting a securities transaction for a Fund. Such
commission may exceed the amount other broker-dealers would have charged for the
transaction, if the Advisor determines in good faith that the greater commission
is reasonable relative to the value of the brokerage and the research and
investment information services provided by the executing broker-dealer viewed
in terms of either a particular transaction or the Advisor's overall
responsibilities to the Funds and to its other clients. Such research and
investment information services may include advice as to the value of
securities, the advisability of investing in, purchasing or selling securities,
the availability of securities or of purchasers or sellers of securities,
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts,
and effecting securities transactions and performing functions incidental
thereto such as clearance and settlement.
Research provided by brokers is used for the benefit of all of the
clients of the Advisor and not solely or necessarily for the benefit of the
Funds. The Advisor's investment management personnel attempt to evaluate the
quality of research provided by brokers. Results of this effort are sometimes
used by the Advisor as a consideration in the selection of brokers to execute
portfolio transactions.
The investment advisory fees that the Funds pay to the Advisor will not
be reduced as a consequence of the Advisor's receipt of brokerage and research
services. To the extent a Fund's portfolio transactions are used to obtain such
services, the brokerage commissions paid by the Fund will exceed those that
might otherwise be paid, by an amount which cannot be presently determined. Such
services would be useful and of value to the Adviser in serving both the Funds
and other clients and, conversely, such services obtained by the placement of
brokerage business of other clients would be useful to the Advisor in carrying
out its obligations to the Funds.
Certain investments may be appropriate for the Funds and also for other
clients advised by the Advisor. Investment decisions for the Funds and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment and the size of their investments generally. To the
extent possible, Fund transactions are traded separately from trades of other
clients advised by the Advisor. Occasionally, a particular security may be
bought or sold for one or more clients in different amounts. In such event, and
to the extent permitted by applicable law and regulations, such transactions
will be allocated among the clients in a manner believed to be equitable to
each. Ordinarily, such allocation will be made on the basis of the weighted
average price of such transactions effected during a trading day, and if all
orders for the same security could be only partially executed during a trading
day, then Fund transactions will take precedence over transactions for other
clients of the Advisor.
13
<PAGE>
Securities owned by the Funds may not be purchased from or sold to the
Advisor or any affiliated person (as defined in the Investment Company Act) of
the Advisor except as may be permitted by the SEC and subject to the rules and
regulations of the Comptroller of the Currency. Affiliated persons of the
Advisor include its parent corporation, Canandaigua National Corporation, each
of their respective subsidiaries, and the officers and directors of any of such
entities.
The aggregate amounts of brokerage commissions paid by the Funds' for
the years ended December 31, 1998 and 1997 were $214,433 and $202,329,
respectively.
As of December 31, 1998 the Bond Fund held the following securities of
brokers or dealers, or their parent organizations, with which it regularly
conducts business: 30,000 Merrill Lynch & Co. 6.25% bonds due October 15, 2008.
TAX INFORMATION
The following discussion relates solely to U.S. Federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. Shareholders should consult their own tax advisors as to the federal,
state or local tax consequences of ownership of shares of the Funds in their
particular circumstances.
Each Fund is treated as a separate taxpayer for federal income tax
purposes.
Each Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). If
qualified as a regulated investment company, the Fund will pay no federal income
taxes on its investment company taxable income (that is, taxable income other
than net realized capital gains) and its net realized capital gains that are
distributed to shareholders. To qualify under Subchapter M, each Fund must,
among other things distribute to its shareholders at least 90% of its taxable
net investment income and net realized short-term capital gains. As a regulated
investment company, each Fund will be subject to a 4% non-deductible federal
excise tax on certain amounts not distributed (and not treated as having been
distributed) on a timely basis in accordance with annual minimum distribution
requirements. The Funds intend under normal circumstances to seek to avoid
liability for such tax by satisfying such distribution requirements.
In general, any gain or loss on the redemption or exchange of a Fund's
shares will be long-term capital gain or loss if held by the shareholder for
more than 18 months, mid-term capital gain or loss if held for more than one
year but not more than 18 months, and short-term capital gain or loss if held
for one year or less. However, if a shareholder receives a distribution taxable
as long-term capital gain with respect to a Fund's shares, and redeems or
exchanges the shares before holding them for more than six months, any loss on
the redemption or exchange up to the amount of the distribution will be treated
as a long-term capital loss to the extent of the capital gain distribution. For
redemptions or exchanges occurring after December 31, 2000, a holding period of
more than five years will entitle the shareholder to a long-term rate that is
lower than the normal long-term rate.
14
<PAGE>
Dividends of a Fund's investment income and distributions of its
short-term capital gains will be taxable as ordinary income. Distributions of
long-term capital gains (or credited undistributed net capital gains) will be
taxable as such at the appropriate rate, regardless of the length of time shares
of a Fund have been held. Only dividends that reflect a Fund's income from
certain dividend-paying stocks will be eligible for the federal
dividends-received deduction for corporate shareholders.
Provided that a Fund qualifies as a regulated investment company under
the Code, such Fund will be exempt from Delaware corporation income tax.
If a shareholder fails to furnish a correct taxpayer identification
number, fails to fully report dividend or interest income, or fails to certify
that he or she has provided a correct taxpayer identification number and that he
or she is not subject to such withholding, then the shareholder may be subject
to a 31 percent "backup withholding tax" with respect to (i) any taxable
dividends and distributions and (ii) any proceeds of any redemption of Fund
shares.
ORGANIZATION AND CAPITALIZATION
The Canandaigua Funds was initially organized by the Advisor in 1992 as
a Collective Investment Trust under New York law and the regulations of the U.S.
Comptroller of the Currency, participation in which was limited to qualified
retirement accounts such as IRAs and retirement and pension trusts. On February
9, 1998, the Collective Investment Trust was reorganized as a Delaware business
trust, pursuant to a Declaration of Trust (the "Declaration of Trust") dated
October 31, 1997.
Unless otherwise required by the Investment Company Act or the
Declaration of Trust, The Canandaigua Funds does not intend to hold annual
meetings of shareholders. Shareholders may remove a Trustee by the affirmative
vote of at least two-thirds of all outstanding shares and the Trustees shall
promptly call a meeting for such purpose when requested to do so in writing by
the record holders of not less than 10% of the outstanding shares entitled to
vote. Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
SHAREHOLDER AND TRUSTEE LIABILITY. The Canandaigua Funds is organized
---------------------------------
as a Delaware business trust, and, under Delaware law, the shareholders of such
a trust are not generally subject to liability for the debts or obligations of
the trust. Similarly, Delaware law provides that none of the Funds will be
liable for the debts or obligations of any other Fund. However, no similar
statutory or other authority limiting business trust shareholder liability
exists in many other states. As a result, to the extent that a Delaware business
15
<PAGE>
trust or a shareholder is subject to the jurisdiction of courts in such other
states, the courts may not apply Delaware law and may thereby subject the
Delaware business trust shareholders to liability. To guard against this risk,
the Declaration of Trust contains an express disclaimer of shareholder liability
for acts or obligations of The Canandaigua Funds. Notice of such disclaimer will
normally be given in each agreement, obligation or instrument entered into or
executed by The Canandaigua Funds or the Trustees. The Declaration of Trust
provides for indemnification by the relevant Fund for any loss suffered by a
shareholder as a result of an obligation of the Fund. The Declaration of Trust
also provides that The Canandaigua Funds shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of The
Canandaigua Funds and satisfy any judgment thereon. The Trustees believe that,
in view of the above, the risk of personal liability of shareholders is remote.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.
PRINCIPAL SHAREHOLDERS
As of December 31, 1998, no shareholder of record or beneficially owned
more than 5% of the outstanding shares of the Equity Fund. As of the same date,
the following persons owned more than 5% of the outstanding shares of the Bond
Fund:
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OF
OF OWNER BOND FUND*
-------- ----------
<S> <C>
Willard B. Becker 5.9%
3299 West Lake Road
Canandaigua, New York 14424
Ida Mae Sengle 7.1%
18 State Street
Pittsford, New York 14534
Paul H. Simmons 5.1%
5116 North Road
Canandaigua, New York 14424
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OF
OF OWNER BOND FUND*
-------- ----------
<S> <C>
Esther T. Wilson 8.2%
125 Roseland Lane
Canandaigua, New York 14424
Allied Builders Inc. 9.0%
Prevailing Wage Rate Retirement Plan
250 State Street
Brockport, New York
<FN>
- ------------------
* Figures shown represent percentage of shares owned both of record and
beneficially by the persons indicated.
</FN>
</TABLE>
As of December 31, 1998, the Trustees, Advisory Trustees and officers
of The Canandaigua Funds as a group did not own more than 1% of the outstanding
shares of either Fund, either beneficially or of record.
INDEPENDENT ACCOUNTANTS
Morga Jones & Hufsmith, P.C., 25 North Street, Canandaigua, New York
14424, independent public accountants, have been selected to examine the annual
financial statements of The Canandaigua Funds and render a report thereon.
17
<PAGE>
POWER OF ATTORNEY
Registrant and each person whose signature appears below hereby appoint
Steven H. Swartout as attorney-in-fact with full power of substitution, to
execute in their name and on behalf of the Registrant and each such person,
individually and in each capacity stated below, one or more amendments
(including post-effective amendments) to this Registration Statement as the
attorney-in-fact acting on the premise shall from time to time deem appropriate
and to file any such amendment to this Registration Statement with the
Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this Amendment
meets all of the requirements for effectiveness pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Canandaigua, New York on the 28th day of February, 1999.
THE CANANDAIGUA FUNDS
By: /S/ STEVEN H. SWARTOUT
-----------------------
Steven H. Swartout, Secretary and
Treasurer
Pursuant to the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
Robert N. Coe* Trustee February 28, 1999
Robert N. Coe
Robert J. Craugh* Trustee February 28, 1999
Robert J. Craugh
Donald C. Greenhouse* Trustee February 28, 1999
Donald C. Greenhouse
/S/ STEVEN H. SWARTOUT Trustee February 28, 1999
- ----------------------
Steven H. Swartout
*By: /S/ STEVEN H. SWARTOUT
----------------------
Steven H. Swartout, as Attorney-in-Fact
</TABLE>
Exhibit j
INDEPENDENT AUDITORS' CONSENT
As independent public accountants, we hereby consent to the use of
our report and all references to our Firm included in or made a part of this
Form N-1A Registration Statement Post-Effective Amendment No. 8/Registration
Statement under the Investment Company Act of 1940 Amendment No. 9 of
The Canandaigua Funds.
/s/ Morga Jones & Hufsmith, P.C.
Canandaigua, New York
March 1, 1999
[ARTICLE] 6
[CIK] 0000893730
[NAME] THE CANANDAIGUA FUNDS
[SERIES]
[NUMBER] 1
[NAME] CANANDAIGUA EQUITY FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 18932946
[INVESTMENTS-AT-VALUE] 22889813
[RECEIVABLES] 581932
[ASSETS-OTHER] 606440
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 24078185
[PAYABLE-FOR-SECURITIES] 468954
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 41190
[TOTAL-LIABILITIES] 510144
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 21326111
[SHARES-COMMON-STOCK] 1033870
[SHARES-COMMON-PRIOR] 916673
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1714937)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3956857
[NET-ASSETS] 23568041
[DIVIDEND-INCOME] 157736
[INTEREST-INCOME] 12446
[OTHER-INCOME] 0
[EXPENSES-NET] 234754
[NET-INVESTMENT-INCOME] (64572)
[REALIZED-GAINS-CURRENT] (1629590)
[APPREC-INCREASE-CURRENT] 4919931
[NET-CHANGE-FROM-OPS] 3225769
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 212466
[NUMBER-OF-SHARES-REDEEMED] 95269
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 5780755
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 206484
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 311850
[AVERAGE-NET-ASSETS] 20747149
[PER-SHARE-NAV-BEGIN] 19.40
[PER-SHARE-NII] (.06)
[PER-SHARE-GAIN-APPREC] 3.46
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 22.80
[EXPENSE-RATIO] 1.14
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[CIK] 0000893730
[NAME] THE CANANDAIGUA FUNDS
[SERIES]
[NUMBER] 2
[NAME] CANADAIGUA BOND FUND
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 861212
[INVESTMENTS-AT-VALUE] 895913
[RECEIVABLES] 15162
[ASSETS-OTHER] 46855
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 957930
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 866
[TOTAL-LIABILITIES] 866
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 922363
[SHARES-COMMON-STOCK] 67689
[SHARES-COMMON-PRIOR] 49250
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 34701
[NET-ASSETS] 957064
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 46488
[OTHER-INCOME] 0
[EXPENSES-NET] 3589
[NET-INVESTMENT-INCOME] 42899
[REALIZED-GAINS-CURRENT] 294
[APPREC-INCREASE-CURRENT] 25369
[NET-CHANGE-FROM-OPS] 68562
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 39727
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 26858
[NUMBER-OF-SHARES-REDEEMED] 11249
[SHARES-REINVESTED] 2830
[NET-CHANGE-IN-ASSETS] 290588
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7848
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 55872
[AVERAGE-NET-ASSETS] 783942
[PER-SHARE-NAV-BEGIN] 13.53
[PER-SHARE-NII] .77
[PER-SHARE-GAIN-APPREC] .45
[PER-SHARE-DIVIDEND] (.61)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 14.14
[EXPENSE-RATIO] .46
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
