AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 2000
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549
FORM N-1A
Registration Statement Under The Securities Act of 1933
Post-Effective Amendment No. 14
and
Registration Statement Under The Investment Company Act of 1940
Amendment No. 15
THE CANANDAIGUA FUNDS
72 South Main Street
Canandaigua, New York 14424
1-800-724-2621 (Ext. 216)
Donald C. Greenhouse, Secretary and Treasurer
The Canandaigua Funds
72 South Main Street
Canandaigua, New York 14424
Copies to:
Stephen H. Waite, Esq. Michael Miola
Underberg & Kessler LLP American Data Services, Inc.
1800 Chase Square 150 Motor Parkway
Rochester, New York 14604 Hauppauge, NY 11788-0132
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to Rule 485,paragraph (b)
[x] on August 28, 2000 pursuant to Rule 485, paragraph (b)
[ ] 60 days after filing pursuant to Rule 485, paragraph (a)(i)
[ ] on ______________ pursuant to Rule 485, paragraph (a)(i)
[ ] 75 days after filing pursuant to Rule 485, paragraph(a)(ii)
[ ] on _____ pursuant to Rule 485, paragraph (a)(ii)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest
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PROSPECTUS
AUGUST 28, 2000
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 each Fund invests
shareholders' funds and the services that each Fund offers to shareholders.
SHARES OF THE CANANDAIGUA FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF ANY
BANK, AND ARE NOT GUARANTEED OR INSURED 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 & Trust Company
72 South Main Street
Canandaigua, New York 14424
(716) 394-4260 Ext. 216
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TABLE OF CONTENTS
Questions Every Investor Should Ask Before Investing in The Funds............4
WHAT ARE THE FUNDS' OBJECTIVES?..............................................4
WHAT ARE THE FUNDS' PRINCIPAL INVESTMENT STRATEGIES?.........................4
WHAT ARE THE PRINCIPAL RISKS IN INVESTING IN THE FUNDS?......................4
HOW HAVE THE FUNDS PERFORMED?................................................6
Fees and Expenses............................................................8
Management of The Funds......................................................9
Investment Objectives and Strategies.........................................11
Your Fund Account............................................................14
THE FUNDS' SHARE PRICE.......................................................14
HOW TO PURCHASE SHARES.......................................................14
HOW TO SELL SHARES...........................................................15
HOW TO EXCHANGE SHARES.......................................................16
DIVIDENDS, DISTRIBUTIONS AND TAX INFORMATION ON YOUR SHARES..................17
Financial Highlights.........................................................18
Additional Information.......................................................21
Appendix A...................................................................22
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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.
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QUESTIONS EVERY INVESTOR SHOULD ASK BEFOREINVESTING IN THE CANANDAIGUA FUNDS
1. WHAT ARE THE FUNDS' OBJECTIVES?
Each of The Equity Fund and The Bond Fund has its own investment objective,
which is considered fundamental to each respective Fund. The Funds' Board of
Trustees may not change the investment objective of either Fund without
shareholder approval.
THE EQUITY FUND. The Equity Fund seeks long-term growth of asset value through
capital appreciation and dividend income.
THE BOND FUND. The Bond Fund seeks to earn a high level of current income while
permitting investors a degree of safety in principal.
2. WHAT ARE THE FUNDS' PRINCIPAL INVESTMENT STRATEGIES?
Each of The Equity Fund and The Bond Fund has its own respective investment
strategies. The Board of Trustees may change the investment strategies of either
The Equity Fund or The Bond Fund without shareholder approval.
THE EQUITY FUND. Under normal market conditions, the Equity Fund invests at
least 70% of its assets in a diversified portfolio of common and preferred
stocks, convertible securities, and warrants of U.S. companies with mid- to
large-sized market capitalizations (generally in excess of $2 billion).
The Investment Adviser utilizes a blended approach to investing in order to
create a balanced portfolio of "growth" and "value" securities. The Investment
Adviser selects "growth" securities based on its analysis of an issuer's
earnings and dividends prospects, cash flows, the strength of management and
other market factors which may affect the issuer's competitive position. In
selecting "value" securities, the Investment Adviser seeks to identify issuers
with lower profit to expense, price to earnings, and price to book ratios than
the overall market or which have temporarily fallen out of favor with the
investing community due to a decline in the overall market or other short-term
adverse market conditions.
THE BOND FUND. Generally, the Fund invests substantially all of its net assets
in bonds and debentures. The Investment Adviser selects primarily debt
obligations issued or guaranteed by the United States Government, as well as
debt securities of U.S. corporations and securities receiving an "investment
grade" rating from Moody's Investment Services or Standard & Poor's Corporation.
It is expected that the dollar-weighted average credit quality will be A. In
making investments in The Bond Fund, the Investment Adviser will generally
select fixed-income securities with a maturity in excess of one year, but not
more than thirty years. However, it is expected that the dollar-weighted average
maturity of The Bond Fund will not exceed ten years.
3. WHAT ARE THE PRINCIPAL RISKS IN INVESTING IN THE CANANDAIGUA FUNDS?
Investors in the Funds may lose money. Shares of the Funds are not bank deposits
or obligations of any bank, and are not guaranteed or insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
There are risks associated with investments in the types of securities in which
the Funds invest. The most significant risks include:
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THE EQUITY AND BOND FUNDS:
MARKET AND ECONOMIC RISK: The prices of the securities in which the Funds invest
may decline for a number of reasons, including:
-- Actual earnings that do not meet generally accepted forecasts or
estimates of earnings.
-- Changes in the general interest rate environment may have a
negative impact on the valuation of earnings.
-- Social or national political changes may alter an investors'
future expectations of company earnings.
THE EQUITY FUND
VOLATILITY RISK: The Equity Fund may exhibit more share price volatility than
its benchmark index, the S&P 500. The volatility is partly a function of the
size of The Equity Fund and the fact that there are substantially less than 500
issues in the portfolio at any one time. Additionally, the Investment Adviser
may select companies whose anticipated earnings growth rate is greater than the
current price-to-earnings ratio. In the event of an earnings shortfall, these
companies' share price performance tends to react with substantial downward risk
exposure.
THE BOND FUND
INTEREST RATE RISK: In general, the value of bonds and other debt securities
falls when interest rates rise. Long 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 stocks, extended
periods of increases in interest rates may cause significant declines in bond
prices.
CREDIT RISK: The issuers of the bonds and other debt securities held by The Bond
Fund 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 their
securities, leading to decline in the price of those securities.
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, investments in The Bond Fund should not be
expected to appreciate in value to the same extent as investments 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 may fluctuate in value should not invest in the Funds.
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4. HOW HAVE THE CANANDAIGUA FUNDS PERFORMED?
The bar chart and table 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, beginning in 1993(1) and by showing how the
Fund's average annual returns for 1 and 5 years and since inception compare with
those of a broad measure of market performance. Please remember that neither
Fund's past performance is an indication of future performance. A Fund may
perform better or worse in the future.
THE CANANDAIGUA FUNDS (1)(2)
During the periods shown in the bar chart, the Equity Fund's best quarterly
performance was 25.97% (quarter ended December 31, 1998) and its lowest
quarterly performance was -16.20% (quarter ended September 30, 1998). The Bond
Fund's best quarterly performance was 7.25% (quarter ended March 31, 1995) and
its lowest quarterly performance was -2.25% (quarter ended March 31, 1994).
THE CANANDAIGUA FUNDS
PER SHARE TOTAL RETURN PER CALENDAR YEAR
EQUITY BOND
------ ----
1993 5.75% 4.17%
1994 0.37% - 4.48%
1995 25.90% 22.38%
1996 21.59% 2.37%
1997 16.38% 7.89%
1998 17.53% 9.05%
1999 33.70% - 1.71%
------------------------
(1) The year to date performance of The Equity Fund, as of June 30, 2000, was
12.84%.
(2) The year to date performance of the Bond Fund, as of June 30, 2000, was
3.09%.
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THE EQUITY FUND
PAST YEAR PAST 5 YEARS SINCE INCEPTION
OF THE FUND
--------------------------------------------------------------------------------
Equity Fund 33.70% 22.77% 16.47%
S&P 500 21.04% 28.51% 21.21%
THE BOND FUND
PAST YEAR PAST 5 YEARS SINCE INCEPTION
OF THE FUND
--------------------------------------------------------------------------------
Bond Fund -1.71% 7.76% 5.21%
Lehman Brothers
Intermediate 0.39% 7.10% 5.73%
Government/Corp.
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FEES AND EXPENSES
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of each of the Funds.
EQUITY FUND BOND FUND
----------- ---------
Maximum Sales Charge (Load) Imposed on None None
Purchases (as a % of the offering price)
Maximum Deferred Sales Charge (Load) None None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends and Distributions None None
Redemption Fee None None
Exchange Fee None None
FUND OPERATING FEES AND EXPENSES
(expenses that are deducted from Fund assets)
Management Fees 1.00% 1.00%
Distribution and/or Service Fees (12b-1 Fees) 0.00% 0.00%
Other Expenses 0.45% 4.51%
Total Fund Operating Expenses 1.45% 5.51%
Contractual Fee Waivers and
Expense Reimbursements None(1) -5.01%(2)
Net Annual Fund Operating Expenses 1.45%(1) 0.50%(2)
------------------------------
(1) As a result of contractual and voluntary fee waivers and expense
reimbursements by the Investment Adviser during 1999, the Equity Fund's actual
Total Annual Fund Operating Expenses were 1.37%. The Investment Adviser has
contractually agreed to waive its management fee and to reimburse expenses,
other than extraordinary or non-recurring expenses, so that the Total Annual
Operating Expenses of the Equity Fund do not exceed 1.50% for fiscal year 2000.
Voluntary fee waivers and reimbursements may be terminated by the Investment
Adviser at any time.
(2) As a result of voluntary fee waivers and expense reimbursements by the
Investment Adviser during 1999, the Bond Fund's actual Total Annual Fund
Operating Expenses were 0.38%. The Investment Adviser has contractually agreed
to waive its management fee and to reimburse expenses, other than extraordinary
or non-recurring expenses, so that the Total Annual Operating Expenses of the
Bond Fund do not exceed .50% for fiscal year 2000. Voluntary fee waivers and
reimbursements may be terminated by the Investment Adviser at any time.
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EXAMPLE
THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUNDS WITH COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME THAT
YOU INVEST $10,000 IN A FUND FOR THE TIME PERIODS INDICATED AND THEN REDEEM ALL
OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO ASSUMES THAT YOUR
INVESTMENT HAS A 5% ANNUAL RETURN, THAT YOU REINVEST ALL DIVIDENDS AND
DISTRIBUTIONS, AND THAT THE FUND'S OPERATING EXPENSES REMAIN THE SAME. ALTHOUGH
YOUR ACTUAL COSTS AND THE RETURN ON YOUR INVESTMENT MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS OF INVESTING IN EACH FUND WOULD BE:
YEAR EQUITY FUND(1) BOND FUND(2)
---- ----------- ---------
1 $148 $51
3 $459 $1,197
5 $792 $2,331
10 $1,735 $5,116
--------------------------------
(1)If the Equity Fund's actual percentage of net operating expenses, net of
reductions for voluntary fee waivers and expense reimbursements, for 1999 had
been used in the example above, the assumed cost of investing in the Equity Fund
would be for Year 1 - $139, Year 3 - $434, Year 5 - $750 and Year 10 - $1,646.
(2)If the Bond Fund's actual percentage of net operating expenses, net of
reductions for voluntary fee waivers and expense reimbursements, for 1999 had
been used in the example above, the assumed cost of investing in the Bond Fund
would be for Year 1 - $39, Year 3 - $122, Year 5 - $213 and Year 10 - $480.
MANAGEMENT OF THE FUNDSBOARD OF TRUSTEES
The Canandaigua Funds are governed by a Board of Trustees, which is
responsible for protecting the interests of shareholders under Delaware Law.
INVESTMENT ADVISER
Subject to the direction of the Board of Trustees, The Canandaigua
National Bank & Trust Company acts as the Investment Adviser to each of The
Funds. The Investment Adviser's address is:
72 South Main Street
Canandaigua, New York 14424
The Investment Adviser is a commercial bank offering a wide range of
banking services to its customers in the Canandaigua and Rochester, New York
area since 1887. As of December 31, 1999, the Adviser had assets of
$522,135,000, loans of $394,227,000, and deposits of $454,290,000 and provided
personal, corporate and institutional investment management and custodial
service for accounts having an aggregate market value of approximately
$586,815,000.
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Under its Investment Management Agreement with the Funds, the
Investment Adviser 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 Investment Adviser to make investment decisions for each
of the Funds and to provide continuous supervision of their investment
portfolios. In doing so, the Investment Adviser places orders to purchase and
sell securities on behalf of each Fund and selects broker-dealers that, in the
Investment Adviser's judgment, provide prompt and reliable execution at
favorable prices and reasonable commission rates. The Investment Adviser
provides these services principally through the portfolio managers, who are
members of the Investment and Trust Departments of the Investment Adviser.
The Funds pay to the Investment Adviser a management fee computed
daily and paid monthly at the annual rate of 1.00% 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 0.50%, which
was further reduced to 0.00% in August 1997.
The Funds pay other expenses related to its daily operations, such as
custodian fees, trustees' fees, administrative fees, fund accounting fees,
transfer agency fees, legal and auditing costs, which are subject to
reimbursement at the discretion of the Investment Adviser. More information
about the Investment Management Agreement and other expenses paid by the Funds
is included in the Statement of Additional Information ("SAI"), which also
contains information about brokerage policies and practices.
PORTFOLIO MANAGERS
Gregory S. MacKay and Jay J. Bachstein are the Funds' portfolio
managers. Mr. MacKay has been employed by the Investment Adviser for
approximately twenty seven years, and is currently Senior Vice President of
Investments. Mr. MacKay's responsibilities include management of the Investment
Services division of the Investment Adviser, with oversight responsibilities for
the Employee Benefit Programs, Individual Retirement Accounts, Bank Portfolios,
Mutual Funds, Money Center, and Investment Management divisions. Mr. Bachstein
joined the Investment Adviser in February 2000, bringing with him 9 years of
experience in investment and finance. Before coming to the Investment Adviser,
he was an Assistant Vice President and investment officer of Factory Point
National Bank in Vermont. Before that, he was an account executive at Dean
Witter Reynolds.
DISTRIBUTOR
AmeriMutual Fund Distributors, Inc., broker-dealer registered with the
National Association of Securities Dealers, Inc., distributes each Fund's
shares. The Distributor is located at 150 Motor Parkway, Hauppauge, New York
11788-0132.
TRANSFER AGENT AND ADMINISTRATOR
Under separate agreements with the Funds, American Data Services,
Inc. ("ADS"), acts as each Fund's Transfer Agent, Fund Accounting Agent and
Administrator of each Fund. ADS is located at 150 Motor Parkway, Hauppauge, New
York 11788-0132.
CUSTODIAN
Northern Trust Company acts as Custodian of the assets of each Fund.
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INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
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 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 Funds' Board of
Trustees without shareholder approval. The investment objective of each Fund,
however, is fundamental and may not be changed without shareholder approval.
There is no guarantee that either Fund will achieve its investment objective. An
investment in the Funds might not earn income and investors could lose money.
Additional information regarding the investment policies and restrictions of
each Fund has been provided for your review in the SAI.
THE EQUITY FUND
As stated above, The Equity Fund seeks to provide investors with
long-term growth of asset value through capital appreciation and dividend
income. Under normal circumstances, the Equity Fund seeks to achieve its
investment objective by investing at least 70% of its total assets in a
diversified portfolio of common and preferred stocks, convertible securities,
and warrants of U.S. companies with mid- to large-sized market capitalizations
(generally in excess of $2 billion). The Equity Fund may invest in American
Depositary Receipts for foreign companies that are traded on a U.S. securities
exchange or on the NASDAQ stock market. As a non-principal strategy, for
liquidity purposes or pending the investment in securities in furtherance of its
investment objective, the Fund may invest up to 10% of its net assets in U.S.
Government securities, repurchase agreements and high quality short-term debt
and money market instruments.
The Fund may also, from time to time, take temporary defensive
positions that are inconsistent with the Fund's principal investment strategies
in order to respond to adverse market, economic, political or other unfavorable
conditions. Under these circumstances, the Fund may invest a substantial portion
of its assets in high quality, short-term interest bearing debt securities and
money market instruments. These short-term debt securities and money market
instruments include commercial paper, certificates of deposit, repurchase
agreements, bankers' acceptances, and U.S. Government securities. Such a
decision, although not offering the opportunity for capital appreciation, might
be deemed prudent to protect net asset value. When the Fund is making such
defensive investments, the Fund may not achieve its investment objective.
The Investment Adviser utilizes a blended approach to investing in
order to create a balanced portfolio of both "growth" and "value" securities. In
selecting growth stocks for The Equity Fund, the Investment Adviser considers
companies that demonstrate:
-- Above-average earnings;
-- A strong franchise;
-- Strong and steady cash flows and a recurring revenue stream;
-- A solid competitive position within in an industry with barriers to
the entry of new competitors and the potential for high profit
margins;
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-- Strong management teams with clearly defined strategies; and
-- New products or services that may serve as catalysts to accelerated
growth.
In selecting value stocks for The Equity Fund, the Investment Adviser
considers companies:
-- Which are temporarily out of favor in the market due to a decline in
the overall market or other short-term adverse market conditions;
-- Whose stock prices are temporarily depressed because of one-time
earnings shortfalls;
-- Which have lower price-to-expense ratios than the overall market;
-- Which have lower price-to-book ratios than the overall market;
-- Which have lower price-to-sales ratios than the overall market; and
-- Which have lower price-to-earnings ratios than the overall market.
In general, The Equity Fund will not invest in securities that have,
in the judgment of the Investment Adviser, a high level of debt as a percentage
of their total market capitalization.
The Equity Fund is a diversified mutual fund which invests in the
market sectors represented in the S&P 500 Index. The Investment Adviser
generally utilizes a top-down approach in order to determine which market
sectors offer the best investment opportunities for The Equity Fund and the
extent to which The Equity Fund's assets should be allocated thereto. This
approach involves an analysis of general economic factors such as interest
rates, the rate of inflation, and the competitive environment within market
sectors.
PORTFOLIO TURNOVER. The frequency of The Equity Fund's portfolio
transactions will vary from year to year. Higher portfolio turnover rates
resulting from more actively traded portfolio securities generally result in
higher transaction costs, including brokerage commissions. The Investment
Adviser expects that the annual portfolio turnover rate for The Equity Fund will
be approximately 250%.
THE 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.
Under normal market conditions, The Bond Fund invests substantially
all of its assets will be invested in bonds and debentures, which consist mainly
of debt securities, such as bonds, notes and debentures issued by U.S.
companies, bonds and notes issued or guaranteed by the U.S. Government or its
agencies or instrumentalities and preferred stock of the U.S. companies.
Normally, investments in The Bond Fund in cash equivalents will be minimal.
However, when market conditions dictate a temporary "defensive" investment
strategy, the Investment Adviser may decide to hold a portion of The Bond Fund,
without limitation on amount, in cash equivalents.
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Debt obligations issued or guaranteed by the U.S. 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 authority of an act of Congress.
The Investment Adviser will consider investing in securities issued or
guaranteed by the following governmental 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 the United States
corporations rated at least "Baa" by Moody's Investors Services, Inc.
("Moody's") or "BBB" by Standard & Poor's Corporation ("S&P") at the time of
purchase. Debt securities carrying a rating of "Baa" from Moody's or "BBB" from
S&P have speculative characteristics. If the rating of a debt security owned by
the Fund is reduced below Baa/BBB, the Fund will not necessarily dispose of the
security.
The Bond Fund may also invest in other fixed-income securities such
as preferred stock and securities of U.S. issuers that are rated Baa by Moody's
or BBB by S&P, or unrated securities that the Investment Adviser determines are
of comparable quality based upon such considerations as the issuer's financial
strength, including its historic and current financial condition, its historic
and projected earnings, and 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 obligations evidencing ownership of future interest and principal
payments on U.S. Treasury Bonds. 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.
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In general, in investing the assets of The Bond Fund, the Investment
Adviser 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 maturities in excess of 1 year. The Investment
Adviser may, however, invest in fixed-income securities with maturities of up to
30 years. The average maturity of securities in The Bond Fund will be based
primarily upon the Investment Adviser's expectations of the future course of
interest rates and then-prevailing price and yield levels in the fixed-income
market. It is expected that the dollar-weighted average maturity of The Bond
Fund will not exceed ten years. This limitation on the average maturity of The
Bond Fund is expected to provide a more stable net asset value than would be the
case with a longer-term fund. As of December 31, 1999, The Bond Fund's
dollar-weighted average credit quality was AA, and its dollar-weighed average
maturity was 5.10 years.
Again, the Funds' objectives, stated above, are considered
fundamental and therefore, the Board of Trustees may not revise them without
shareholder approval. Each Fund's strategies, however, are considered
non-fundamental and therefore the Board of Trustees may revise them, as
necessary, from time to time, without shareholder approval.
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 Standard 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 in its investment
portfolio by adding the value of that Fund's investments 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 in
proper form 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 on that day. It will process purchase orders that it receives
in good and proper form 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 that the New York Stock Exchange is open for regular
trading.
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.
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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.
-- Include 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 either 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 REDEEM 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).
-- The Account number.
-- The amount of money or number of shares being sold.
-- Name and address of person to receive the money.
15
<PAGE>
-- 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 1-800-693-9276 if you
have any questions regarding the redemption of shares.
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:
-- 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 a redemption request
is the next determined net asset value after the Transfer Agent receives your
written request in proper form with all required information. The 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 redeem shares in an IRA or other retirement account, please
contact the Investment Adviser at 72 South Main Street, Canandaigua New York
14424 by calling (800) 724-2621 ext. 216 or ask the operator for the Investment
Division to request the appropriate distribution form and for additional
instructions.
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:
16
<PAGE>
-- Contact the Transfer Agent by writing American Data Services,
Inc., 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. Exchanges 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 Funds, the Investment Adviser 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.
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 90% of its investment company taxable income to them within applicable
time periods.
Each Fund intends on making distributions to shareholders that may be
taxed as ordinary income and capital gains (which may be taxable at different
rates depending on the length of time the Fund holds its assets). 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.
17
<PAGE>
An exchange of a Fund's shares for shares of another Fund will be
treated as a sale of the initial Fund's shares and any gain on the transaction
may be subject to federal income tax.
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.
The Investment Adviser will purchase and sell securities with primary
concern being the investment performance of the portfolios rather than tax
considerations of the shareholders.
FINANCIAL HIGHLIGHTS
The following financial highlights tables are intended to help you
understand each Fund's financial performance for the period of each Fund's
investment 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 or lost on an investment in each Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by Eldredge, Fox & Porretti, LLP, independent auditors, whose report,
along with The Funds' financial statements, are included in the Annual Report,
which is available upon request.
18
<PAGE>
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SELECTED PER-SHARE DATA AND RATIOS/SUPPLEMENTAL DATA
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31, DEC.31, DEC. 31, DEC. 31,
1999 1998 1997 1996 1995
----------------------------------------------------------------
PER SHARE DATA:
(For a share outstanding throughout
each period)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.14 $ 13.53 $ 12.54 $ 12.25 $ 10.01
--------- -------- --------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS -
Net investment income (a) 0.74 0.77 0.70 0.62 0.81
Net realized and unrealized gains (losses)
on investments (0.98) 0.45 0.29 (0.33) 1.43
--------- -------- --------- -------- --------
Total income (loss) from investment operations (0.24) 1.22 0.99 0.29 2.24
--------- -------- --------- -------- --------
LESS DISTRIBUTIONS (B)
Dividends from net investment income (0.74) (0.61)
Distributions from net realized gains -- --
--------- --------
Total dividends and distributions (0.74) (0.61)
--------- --------
Net Asset Value, end of period $ 13.16 $ 14.14 $ 13.53 $ 12.54 $ 12.25
========= ======== ========= ======== ========
Total Return (c) (1.71%) 9.05% 7.89% 2.37% 22.38%
========= ======== ========= ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000 omitted) $ 1,093 $ 957 $ 666 $ 501 $ 408
Ratio of Net Expenses to Average
Net Assets (a) 0.38% 0.46% 0.77% 1.09% 0.89%
Ratio of Gross Expenses to Average
Net Assets (a) 5.51% 7.13% 3.19% 4.15% 1.03%
Ratio of Net Investment Income
to Average Net Assets 5.41% 5.47% 5.38% 5.17% 7.11%
Portfolio Turnover Rate 4.67% 9.04% 8.44% 30.46% 14.13%
<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, 1999. 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 $.70 ,
$.94, $.31, $.37, and $.02 for the years ended December 31, 1999, 1998,
1997, 1996, and 1995, respectively.
(b) Dividend distributions were not relevant for tax compliance purposes prior
to February 9, 1998 when the Fund operated solely as a collective
investment trust.
(c) Assumes reinvestment of dividends and capital gains distribution, if any.
</FN>
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS
CANANDAIGUA EQUITY FUND
SELECTED PER-SHARE DATA AND RATIOS/SUPPLEMENTAL DATA
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31,1999 DEC.31,1998 DEC. 31, 1997 DEC.31,1996 DEC. 31,1995
------------------------------------------------------------------------
PER SHARE DATA:
(For a share outstanding throughout
each period)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 22.80 $ 19.40 $ 16.67 $ 13.71 $ 10.89
-------- -------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS -
Net investment income (loss) (a) (0.20) (0.06) -- 0.01 0.04
Net realized and unrealized gains
on investments 7.85 3.46 2.73 2.95 2.78
-------- -------- -------- -------- --------
Total income (loss) from investment operations 7.65 3.40 2.73 2.96 2.82
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS (B)
Dividends from net investment income -- --
Distributions from net realized gains (3.74) --
---------- --------
Total dividends and distributions (3.74) --
---------- --------
Net Asset Value, end of period $ 26.71 $ 22.80 $ 19.40 $ 16.67 $ 13.71
======== ======== ======== ======== ========
Total Return (c) 33.70% 17.53% 16.38% 21.59% 25.90%
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000 omitted) $ 35,237 $ 23,568 $ 17,787 $ 12,644 $ 8,433
Ratio of Net Expenses to Average
Net Assets (a) 1.37% 1.14% 1.15% 1.12% 1.11%
Ratio of Gross Expenses to Average
Net Assets (a) 1.45% 1.50% 1.44% 1.57% 1.25%
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.77%) (0.31%) 0.00% 0.03% 0.32%
Portfolio Turnover Rate 224.59% 314.28% 398.23% 337.27% 375.30%
<FN>
--------------------------
(a) Through December 31, 1998 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 and $.02 for the years ended December 31, 1998, 1997,
1996, and 1995, respectively. During fiscal 1999, the Equity Fund paid for
its administrative fees other than professional legal fees and Board of
Trustee fees and expenses assumed by the investment manager of the Equity
Fund, resulting in a per share savings of $.02 for the year ended December
31, 1999.
(b) Dividend distributions were not relevant for tax compliance purposes prior
to February 9, 1998 when the Fund operated solely as a collective
investment trust.
(c) Assumes reinvestment of the dividends and capital gains distribution, if
any.
</FN>
</TABLE>
20
<PAGE>
ADDITIONAL INFORMATION
To learn more about the Funds you may want to read the Funds'
Statement of Additional Information, or SAI, which contains additional
information about the Funds. The 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 Funds' investments by reading the
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 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 (800)
724-2621 ext. 216 or by asking the operator for the Investment Division.
Prospective investors and shareholders who have questions about the
Funds may write to:
The Canandaigua Funds
The Canandaigua National Bank and Trust Company
72 South Main Street
Canandaigua, New York 14424
Or call:
(800) 724-2621 ext. 216
The general public can review and copy information about the Funds
(including the SAI) at the Securities and Exchange Commission's Public Reference
Room in Washington, D.C. (please call 1-202-942-8090 for information on the
operations of the Public Reference Room). Reports and other information about
the 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 to the Funds Investment Company Act File No. 811-7322 when
seeking information about the 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.
22
<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 AUGUST 28, 2000, A COPY OF WHICH MAY BE OBTAINED FREE OF CHARGE BY
WRITING THE FUNDS' DISTRIBUTOR, AMERIMUTUAL FUND DISTRIBUTORS, INC., 670 SECOND
STREET NORTH, SUITE A, SAFETY HARBOR, FLORIDA 34695, OR BY CALLING
1-888-693-9276.
August 28, 2000
1
<PAGE>
TABLE OF CONTENTS
The Canandaigua Funds ...................................................... 3
Investment Restrictions .................................................... 4
Other Investment Policies .................................................. 5
Management of The Canandaigua Funds......................................... 6
TRUSTEES AND OFFICERS ............................................. 6
INVESTMENT ADVISOR ................................................ 7
DISTRIBUTOR ....................................................... 9
TRANSFER AGENT AND ADMINISTRATOR .................................. 9
CUSTODIAN ......................................................... 9
CODE OF ETHICS .................................................... 10
Net Asset Value ............................................................ 10
Performance Information .................................................... 11
Portfolio Transactions ..................................................... 11
Tax Information ............................................................ 13
Organization and Capitalization ............................................ 14
PRINCIPAL SHAREHOLDERS ............................................ 15
Independent Accountants .................................................... 15
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 August
28, 2000, 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, AmeriMutual Fund Distributors, Inc. 150 Motor Parkway,
Hauppauge, New York, NY 11788-0132.
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.
3
<PAGE>
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 ommitted
to meeting interest and principal payments of each security);
(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;
4
<PAGE>
(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) Invest in or sell puts, calls, or otherwise engage in 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);
(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 or engage in 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, 50 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, 77 Trustee, Chairman Retired since 1987; prior thereto,
c/o The Canandaigua Funds of the Board Senior Vice President-Operations,
72 South Main Street Canandaigua National Bank and
Canandaigua, NY, 14424 Trust Company, Canandaigua, NY
James W. Doran, 62 Trustee President, FFTH Properties, FFT Senior
c/o The Canandaigua Funds Communities, Inc.; Vice President
and
72 South Main Street Regional Sales Manager, Chase
Canandaigua, NY 14424 Manhattan Bank
Donald C. Greenhouse, 64 Trustee, President and owner, Seneca Point
c/o The Canandaigua Funds Secretary and Treasurer Associates, Inc. (business consultants)
72 South Main Street Canandaigua, New York
Canandaigua, NY 14424
William B. Rayburn, 75 Trustee Retired since March 1988; prior thereto,
C/o The Canandaigua Funds President, Chairman, and Chief Executive
72 South Main Street Officer, Snap On Tools Corp
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 1999, the Trustees received the following compensation from The
Canandaigua Funds: Mr. Coe: $1,000.00; Mr. Craugh: $1,000.00; Mr. Greenhouse:
$1,000.00; and Mr. Swartout: $1,000.00.
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, 50 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
Jay J. Bachstein, 35 Advisory Trustee Assistant Vice President 72
South Main Street and Investment Officer of
Canandaigua, NY 14424 the Advisor since July 1999;
Assistant Vice-president
and Investment Officer of
Factory Point National Bank
from July 1997 to July 1998
(bank trust department);
Account Executive, Morgan
Stanley Dean Witter from
September 1995 to August 1997
(broker-dealer).
</TABLE>
Advisory Trustees receive no compensation from The Canandaigua Funds
for their service in such capacity.
INVESTMENT ADVISOR
The Canandaigua National Bank & 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.
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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.
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, 1998, December 31, 1997, December 31, 1996 and December 31, 1995,
the Equity Fund paid the Advisor a net total of $206,484, $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, 1999, the Equity Fund
paid the Advisor a net total of $286,368 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 Fund 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, 1999, and 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 Fund, which the Trustees 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.
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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
AmeriMutual Fund 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 receives 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.
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.
9
<PAGE>
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, hanksgiving 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
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.
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<PAGE>
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.
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, 1999, was as follows:
YEAR ENDED INCEPTION* TO
FUND 12/31/99 12/31/99
-----------------------------------------------------------
Equity Fund 33.70% 16.47%
Bond Fund (1.71%) 5.21%
*Inception for both Funds was September 9, 1992 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.
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<PAGE>
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.
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.
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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, 1999 and 1998 were $205,586 and $214,433,
respectively.
As of December 31, 1999 the Equity and the Bond Fund held the following
securities of brokers or dealers, or their parent organizations, with which it
regularly conducts business: Equity Fund: 20.000, Bond Fund: 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.
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.
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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
From its inception in 1992 until February 9, 1998, The Canandaigua
Funds were organized by the Investment 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 individual 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.
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
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.
14
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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 August 28, 2000, 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:
NAME AND ADDRESS PERCENTAGE OF
OF OWNER BOND FUND*
----------------------------------------------------------
Anthony Brindisi 5.5%
417 Holiday Harbour
Canandaigua, New York 11424
---------------
* Figures shown represent percentage of shares owned both of record and
beneficially by the persons indicated.
As of August 28, 2000, the Trustees, Advisory Trustees and officers of
The Canandaigua Funds as a group did not own more than 5% of the outstanding
shares of either Fund, either beneficially or of record.
INDEPENDENT ACCOUNTANTS
Eldredge, Fox & Porretti, LLP, 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.
FINANCIAL STATEMENTS
The financial statements of the Equity Fund and the Bond Fund for the
year ended December 31, 1999 are incorporated herein by reference to the Fund's
Annual Report, filed electronically with the SEC on February 28, 2000. These
financial statements include the schedules of investments, statements of assets
and liabilities, statements of operations, statement of changes in net assets,
financial highlights, notes and independent auditors' reports.
15
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PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Declaration of Trust dated October 31, 1997(1)
(b) Bylaws of Registrant(1)
(c) Not applicable
(d) Investment Advisory Agreement with Canandaigua National Bank and
Trust Company for the Equity Fund and the Bond Fund, dated
October 31, 1997(1)
(e) Distribution Agreement between Registrant and AmeriMutual Fund
Distributors, Inc. (2)
(f) Not applicable
(g)(1) Equity Fund Custodian Agreement between Registrant and Northern Trust
Company(1)
(g)(2) Bond Fund Custodian Agreement between Registrant and Northern Trust
Company(1)
(h)(1) Transfer Agency Agreement between Registrant and American Data
Services, Inc.(1)
(h)(2) Administrative Service Agreement between Registrant and American Data
Services, Inc.(1)
(i) Opinion and Consent of Underberg & Kessler LLP(1)
(j) Consent of Eldredge, Fox & Porretti, LLP(3)
(k) Omitted Financial Statements(3)
(l) Not applicable
(m) Not applicable
(n) Financial Data Schedule(3)
(o) Not applicable
(1) Previously filed with and incorporated by reference to Post-Effective
Amendment No. 6 filed on December 8, 1997.
(2) To be filed with subsequent amendment.
16
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(3) Previously filed with and incorporated by reference to Post-effective
Amendment No. 9 filed on May 2, 2000.
(4) Previously filed with the Securities and Exchange Commission under Rule
30d-1 on February 28, 2000.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
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
17
<PAGE>
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.
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.
18
<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,
NAME POSITION WITH ADVISOR PROFESSION OR VOCATION
------------------------------------------------------------------------------
<S> <C> <C>
George W. Hamlin, IV President, Chief Executive President and
Officer, Trust Officer Director of Canandaigua
and Director National 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>
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 ICM Series Trust.
(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.
Registrant undertakes to furnish each person, to whom a prospectus is delivered
with a copy of Registrant's latest annual report to shareholders relating to the
portfolio or class thereof, to which the prospectus relates upon request and
without charge.
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.
19
<PAGE>
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 August, 2000.
THE CANANDAIGUA FUNDS
BY: /S/ DONALD C. GREENHOUSE
-------------------------------
Donald C. Greenhouse
Trustee, Secretary, and Treasurer
Pursuant to the Securities Act of 1933, this amendment to the registration
statement has been signed below by the following persons in the capacities
indicated, on this 28th day of August, 2000:
SIGNATURE TITLE DATE
--------- ----- ----
/S/ ROBERT N. COE* Trustee August 28, 2000
------------------
Robert N. Coe
/S/ ROBERT J. CRAUGH* Trustee, Chairman August 28, 2000
---------------------
Robert J. Craugh of the Board
/S/ WILLIAM B. RAYBURN* Trustee August 28, 2000
------------------------
William B. Rayburn
/S/ JAMES W. DORAN* Trustee August 28, 2000
-------------------
James W. Doran
*BY: /S/ DONALD C. GREENHOUSE
-----------------------------
Donald C. Greenhouse,
as Attorney-in-Fact
