THE CANANDAIGUA FUNDS
* BOND PORTFOLIO
* EQUITY PORTFOLIO
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED JUNE 30, 2000
THE BOND PORTFOLIO SEEKS TO EARN A HIGH LEVEL OF CURRENT INCOME WITH
CONSIDERATION ALSO GIVEN TO SAFETY OF PRINCIPAL.
THE EQUITY PORTFOLIO SEEKS LONG TERM GROWTH OF ASSET VALUES THROUGH CAPITAL
APPRECIATION AND DIVIDEND INCOME.
<PAGE>
THE CANANDAIGUA FUNDS
SUPERVISORY COMMITTEE:
----------------------
Robert J. Craugh, Canandaigua, New York
Retired, former Senior Vice President - Operations Inc.
The Canandaigua National Bank and Trust Company
Donald C. Greenhouse, Canandaigua, New York
President and Owner, Seneca Point Associates, Inc.
(Business and consulting firm)
James W. Doran
President, FFTH Properties and
F.F.T. Senior Communities, Inc.
(Professional Buildings and Senior Care)
Robert N. Coe, Bloomfield, New York
President and co-owner, W.W.Coe and Sons,
(Independent insurance agency)
William B. Rayburn
Retired, former Chairman, President and CEO
Snap on Tools Corporation
OFFICERS:
---------
Robert J. Craugh, Chairman
Donald C. Greenhouse, Secretary & Treasurer
OFFICES OF THE CANANDAIGUA FUNDS:
---------------------------------
72 South Main Street
Canandaigua, New York 14424
The Canandaigua National Bank and Trust Company
TRANSFER AGENT AND SHAREHOLDER SERVICING:
-----------------------------------------
American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
INVESTMENT ADVISOR:
-------------------
The Canandaigua National Bank and Trust Company
72 South Main Street
Canandaigua, New York 14424
Gregory S. MacKay, Senior Vice President
Jay J. Bachstein, Assistant Vice President
DISTRIBUTOR:
------------
ADS, Inc.
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
CUSTODIAN OF ASSETS:
--------------------
The Northern Trust Company
50 South La Salle Street
Chicago, Illinois 60675
LEGAL COUNSEL:
--------------
Stephen H. Waite, Esq.
Maureen E. Mulholland, Esq.
Underberg & Kessler
1800 Chase Square
Rochester, New York 14604
INDEPENDENT AUDITORS:
---------------------
Eldredge, Fox, Porretti & Morga LLP
25 North Street
Canandaigua, New York 14424
<PAGE>
THE CANANDAIGUA FUNDS
FINANCIAL STATEMENTS AS OF
--------------------------
JUNE 30, 2000
(UNAUDITED)
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
FINANCIAL STATEMENTS AS OF
JUNE 30, 2000
(Unaudited)
TABLE OF CONTENTS
-----------------
PAGE
----
Statement of Assets and Liabilities as of June 30, 2000 1
Statement of Operations for the Six Months Ended 2
June 30, 2000
Statements of Changes in Net Assets for the Six Months Ended 3
June 30, 2000 and Year Ended December 31, 1999
Schedule of Fund Investments as of June 30, 2000:
- Bond Fund 5
- Equity Fund 8
Notes to Financial Statements 11
Selected Per-Share Data and Ratios/Supplemental Data:
- Bond Fund 18
- Equity Fund 19
<PAGE>
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2000
(UNAUDITED)
FUND
BOND EQUITY
---- ------
ASSETS
INVESTMENT SECURITIES AT MARKET
<S> <C> <C>
(Bond Fund cost- $1,075,829; Equity Fund
cost- $33,792,332) $ 1,039,566 $ 40,399,328
CASH AND CASH EQUIVALENT 28,212 1,605,190
RECEIVABLES FOR:
Sales of fund's shares 288 0
Dividends and accrued interest 17,864 10,063
------------ ------------
Total receivables 18,152 10,063
------------ ------------
PREPAID EXPENSES 927 4,079
------------ ------------
Total assets 1,086,857 42,018,660
============ ============
LIABILITIES
PAYABLES FOR:
Repurchases of fund's shares 3,104 37,327
Professional fees 932 18,256
Custody fees 195 317
Taxes 343 358
------------ ------------
Total liabilities 4,574 56,258
============ ============
NET ASSETS AT JUNE 30, 2000: (equivalent $ 1,082,283 $ 41,962,402
============ ============
to $13.19 per share for Bond Fund and $30.14 per share
for Equity Fund, based on 82,024 shares and
1,392,056 shares outstanding for Bond and Equity
shares, respectively)
NET ASSETS CONSIST OF:
Capital stock $ 1,121,967 $ 30,679,367
Undistributed net investment income (loss) 464 (144,922)
Accumulated net realized gain (loss) on investments (3,884) 4,820,961
Net unrealized appreciation (depreciation) on investments (36,264) 6,606,996
------------ ------------
NET ASSETS $ 1,082,283 $ 41,962,402
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
FUND
BOND EQUITY
---- ------
INVESTMENT INCOME:
<S> <C> <C>
Interest income $ 33,031 $ 24,145
Dividend income 0 84,743
----------- -----------
Total investment income 33,031 108,888
----------- -----------
EXPENSES:
Investment advisory fees 5,300 194,246
Administration fees 9,312 23,266
Fund accounting fees 5,208 10,308
Transfer agency fees 5,783 6,261
Custodial fees 1,348 1,528
Professional fees 709 20,121
Registration and filing fees 0 2,090
Insurance expense 248 5,500
Tax expense 340 343
----------- -----------
Total expenses 28,248 263,663
Less reimbursed expenses (25,856) (9,853)
----------- -----------
Net expenses 2,392 253,810
----------- -----------
Net investment income (loss) 30,639 (144,922)
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) (4,014) 4,711,851
Net change in unrealized appreciation of investments 8,909 63,321
----------- -----------
Net realized and unrealized gain on
Investments 4,895 4,775,172
----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 35,534 $ 4,630,250
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND YEAR ENDED DECEMBER 31, 1999
FUND
BOND EQUITY
(UNAUDITED) (UNAUDITED)
----------- -----------
FOR THE SIX MONTHS ENDED JUNE 30, 2000 -
OPERATIONS:
<S> <C> <C>
Net investment income (loss) $ 30,639 $ (144,922)
Net realized gain (loss) on investments (4,014) 4,711,851
Net change in unrealized appreciation on investments 8,909 63,321
------------ ------------
Net increase in net assets resulting from operations 35,534 4,630,250
------------ ------------
DIVIDENDS AND DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Dividends from net investment income (30,174) 0
Distributions from net realized gain on investments 0 0
------------ ------------
Total dividends and distributions (30,174) 0
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from shares sold (9,244 and 121,787 shares in the
Bond and Equity funds, respectively) 121,907 3,505,889
Proceeds from shares issued in reinvestment of net investment
income dividends and distributions of net realized gain on
investments (2,301 and 4 shares in the Bond and Equity
funds, respectively) 30,174 107
Cost of shares repurchased (12,605 and 48,782 shares in the
Bond and Equity funds, respectively) (168,135) (1,410,585)
------------ ------------
Net increase (decrease) in net assets resulting from fund
share transactions (16,054) 2,095,411
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (10,694) 6,725,661
NET ASSETS - beginning of period 1,092,977 35,236,741
------------ ------------
NET ASSETS - end of period $ 1,082,283 $ 41,962,402
============ ============
Undistributed net investment income (loss)
at end of period $ 464 $ (144,922)
============ ============
The accompanying notes are an integral part of these financial statements
(CONTINUED)
3
<PAGE>
THE CANANDAIGUA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND YEAR ENDED DECEMBER 31, 1999
FUND
BOND EQUITY
(UNAUDITED) (UNAUDITED)
----------- -----------
FOR THE YEAR ENDED DECEMBER 31, 1999 -
OPERATIONS:
Net investment income (loss) $ 61,134 $ (219,888)
Net realized gain (loss) on investments 126 6,140,284
Net change in unrealized appreciation on investments (79,874) 2,586,807
------------ ------------
Net increase in net assets resulting from operations (18,614) 8,507,203
------------ ------------
DIVIDENDS AND DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Dividends from net investment income (61,968) 0
Distributions from net realized gain on investments 0 (4,316,236)
------------ ------------
Total dividends and distributions (61,968) (4,316,236)
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from shares sold (26,134 and 217,563 shares in the
Bond and Equity funds, respectively) 360,576 5,663,126
Proceeds from shares issued in reinvestment of net investment
income dividends and distributions of net realized gain on
investments (4,585 and 163,010 shares in the Bond and Equity
funds, respectively) 61,968 4,314,875
Cost of shares repurchased (15,324 and 95,395 shares in the
Bond and Equity funds, respectively) (206,049) (2,500,268)
------------ ------------
Net increase in net assets resulting from fund
share transactions 216,495 7,477,733
------------ ------------
TOTAL INCREASE IN NET ASSETS 135,913 11,668,700
NET ASSETS - beginning of year 957,064 23,568,041
------------ ------------
NET ASSETS - end of year $ 1,092,977 $ 35,236,741
============ ============
Undistributed net investment income (loss)
at end of period $ 0 $ 0
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SCHEDULE OF FUND INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
PAR VALUE
VALUE COST (NOTE 2)
------------------ ---------- --------
INVESTMENT SECURITIES:
U.S. GOVERNMENT NOTES & BONDS - 41.54%
<S> <C> <C> <C>
20,000 US Treasury Note, 4.000%, October 31, 2000 $ 19,776 $ 19,850
30,000 US Treasury Note, 5.500%, December 31, 2000 29,621 29,869
25,000 US Treasury Note, 5.250%, January 31, 2001 24,687 24,836
30,000 US Treasury Note, 6.375%, March 31, 2001 29,946 29,972
25,000 US Treasury Note, 5.500%, February 28, 2003 24,809 24,469
25,000 US Treasury Note, 5.750%, April 30, 2003 24,952 24,625
25,000 US Treasury Note, 5.875%, February 15, 2004 26,465 24,664
50,000 US Treasury Bond, 5.875%, November 15, 2005 49,987 49,156
25,000 US Treasury Note, 5.625%, February 15, 2006 24,955 24,250
30,000 US Treasury Note, 7.000%, July 15, 2006 30,054 31,078
35,000 US Treasury Note, 6.125%, August 15, 2007 35,365 34,803
40,000 US Treasury Note, 5.500%, February 15, 2008 39,776 38,313
50,000 US Treasury Note, 5.625%, May 15, 2008 50,935 48,234
50,000 US Treasury Note, 4.750%, November 15, 2008 48,267 45,422
---------- ---------
Total U.S. Government Notes & Bonds 41.54% 459,595 449,541
--------- ---------- ---------
CORPORATE BONDS 54.51%
CAPITAL EQUIPMENT - 3.49%
AEROSPACE & MILITARY TECHNOLOGY
-------------------------------
15,000 Lockheed Martin Corporation, 6.750%, March 15, 2003 15,900 14,629
MACHINERY CONSTRUCTION AND MINING
---------------------------------
25,000 Caterpillar Corp., Inc., 6.000%, May 1, 2007 23,863 23,111
---------- ---------
39,763 37,740
---------- ---------
CONSUMER GOODS - 14.72%
BEVERAGE & TOBACCO
------------------
25,000 Anheuser Busch, 6.750%, November 1, 2006 25,142 24,211
20,000 Coca-Cola Company, 6.000%, July 15, 2003 19,962 19,405
PAPER
-----
25,000 International Paper Company, 7.625%, August 1, 2004 26,700 24,935
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SCHEDULE OF FUND INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
PAR VALUE
VALUE COST (NOTE 2)
------------------ -------- ----------
Consumer Goods (continued) -
RETAIL TRADING
--------------
25,000 Sears Roebuck & Company, 6.250%, January 15, 2004 $ 23,680 $ 24,088
20,000 Wal-Mart Company, 6.375%, March 1, 2003 20,930 19,709
SPECIALTY CHEMICALS
-------------------
25,000 Eastman Chemical Company, 6.375%, January 15, 2004 25,141 23,818
MULTIMEDIA
----------
25,000 Walt Disney & Co. 5.800%, October 27, 2008 23,201 23,174
--------- ----------
164,756 159,340
--------- ----------
FINANCE - 23.60%
BANKING
-------
30,000 Citicorp, 6.750%, August 15, 2005 30,853 29,032
25,000 Morgan JP & Co., 6.000%, January 15, 2009 24,654 22,195
20,000 US Bancorp, 8.125%, May 15, 2002 20,292 20,251
FINANCIAL SERVICES
------------------
25,000 Citifinancial, 6.875%, September 15, 2002 24,528 24,535
10,000 Ford Motor Credit Co., 6.850%, August 15, 2000 10,003 9,996
20,000 General Electric Capital Corp. 5.500%, November 1, 2001 19,940 19,580
12,000 Homeside Lending NA, 6.875%, June 30, 2002 11,600 11,869
20,000 Household Finance Co, 6.700%, June 15 2002 19,795 19,630
25,000 John Deere Capital Corp., 6.000%, February 15, 2009 24,445 21,929
30,000 Merrill Lynch & Co., Inc., 6.250%, October 15, 2008 29,681 27,079
30,000 Morgan Stanley Dean Witter & Co., 5.750%, February 15, 2001 30,224 29,762
20,000 Salomon Inc., 6.750%, August 15, 2003 19,905 19,592
--------- ----------
265,920 255,450
--------- ----------
SERVICES - 12.70%
INDUSTRIAL
----------
25,000 General Motors Corp., 6.250%, May 1, 2005 26,185 23,876
25,000 IBM Corp., 5.375%, February 1, 2009 24,945 22,147
TELECOMMUNICATIONS
------------------
20,000 AT&T Corporate, 6.60%, May 15, 2005 19,154 19,329
20,000 Pacific Bell, 6.250%, March 1, 2005 19,600 19,145
30,000 LCI, 7.250%, June 15, 2007 30,894 28,881
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SCHEDULE OF FUND INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
PAR VALUE/ VALUE
SHARES COST (NOTE 2)
------------------ ----------- ------------
HOTELS AND MOTELS
25,000 Marriott Corp., 6.750%, December 15, 2003 $ 25,017 $ 24,117
----------- ------------
145,795 137,495
----------- ------------
Total Corporate Bonds 54.51% 616,234 590,025
-------- ----------- ------------
TOTAL INVESTMENT SECURITIES 96.05% 1,075,829 1,039,566
----------- ------------
CASH AND CASH EQUIVALENTS 2.61%
28,212 Canandaigua Investment Cash Account
28,212 28,212
----------- ------------
TOTAL INVESTMENTS 98.66% 1,104,041 1,067,778
===========
OTHER ASSETS LESS LIABILITIES 1.34% 14,505
-------- ------------
NET ASSETS 100.00% $ 1,082,283
======== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SCHEDULE OF FUND INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
SHARES COST VALUE (NOTE 2)
------ ---- --------------
INVESTMENT SECURITIES:
COMMON STOCKS - 96.28%
<C> <S> <C> <C> <C>
AUTOMATED PROCESSING 5.08%
50,750 Paychex Inc. $1,123,445 $2,131,500
---------- ----------
COMMUNICATIONS EQUIPMENT 9.36%
6,000 CIENA Corporation* 848,785 1,000,125
8,000 Corning Inc. 1,388,522 2,159,000
4,000 JDS Uniphase Corporation* 371,910 479,500
2,000 Juniper Networks Inc.* 254,345 291,125
---------- ----------
2,863,562 3,929,750
---------- ----------
COMPUTERS HARDWARE 4.32%
46,000 Compaq Computer Corp. 1,375,699 1,175,875
7,000 Sun Microsystems Inc. * 320,574 636,563
---------- ----------
1,696,273 1,812,438
---------- ----------
COMPUTER SERVICES 3.20%
7,000 Digex Inc.* 507,385 475,562
7,000 Yahoo! Inc.* 880,510 867,125
---------- ----------
1,387,895 1,342,687
---------- ----------
CONGLOMERATES 4.18%
37,000 Tyco International Ltd. 1,227,993 1,752,875
---------- ----------
DRUGS 8.65%
20,000 American Home Products Corp. 886,200 1,175,000
20,000 Elan Corp PLC-Spons ADR * 585,790 968,750
15,000 Merck & Co Inc. 1,077,263 1,149,375
7,000 Pfizer Inc. 305,214 336,000
---------- ----------
2,854,467 3,629,125
---------- ----------
ELECTRONICS 12.36%
7,500 General Electric Co. 294,794 397,500
20,000 Sanmina Corp. * 1,250,537 1,710,000
38,000 SCI Systems Inc.* 1,441,511 1,489,125
38,000 Solectron Corp. * 1,346,654 1,591,250
---------- ----------
4,333,496 5,187,875
---------- ----------
The accompanying notes are an integral part of these financial statements
8
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SCHEDULE OF FUND INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
SHARES COST VALUE (NOTE 2)
------ ---- --------------
FINANCIAL 12.98%
49,000 Associates First Capital $1,057,188 $1,093,312
21,000 Chase Manhattan Corp. 1,025,417 967,312
13,000 Goldman Sachs Group Inc. 1,000,961 1,233,375
10,000 Merrill Lynch & Co Inc. 879,264 1,150,000
6,000 Morgan Stanley Dean Witter & Co. 422,934 499,500
13,000 Wells Fargo 482,320 503,750
---------- ----------
4,868,084 5,447,249
---------- ----------
FOOD PROCESSING 3.51%
30,000 ConAgra, Inc. 566,911 571,875
12,000 The Quaker Oats Co. 749,823 901,500
---------- ----------
1,316,734 1,473,375
---------- ----------
HEALTHCARE FACILITIES 0.78%
25,000 Health Management Association* 302,365 326,562
---------- ----------
OIL AND GAS OPERATIONS 1.60%
18,000 Noble Affiliates Inc. 533,240 670,500
---------- ----------
RETAIL 5.10%
3,000 Best Buy Co.* 183,507 189,750
25,000 CVS Corp. 853,185 1,000,000
15,000 Circuit City Stores-Circuit City Group 572,878 497,812
11,000 Lowe's Companies Inc. 548,928 451,688
---------- ----------
2,158,498 2,139,250
---------- ----------
SEMICONDUCTOR 4.72%
9,000 Intel Corp. 558,425 1,203,187
5,000 Linear Technology Corp.* 259,026 319,688
2,000 National Semiconductor Corp.* 113,944 113,500
5,000 Texas Instruments Inc. 391,145 343,438
---------- ----------
1,322,540 1,979,813
---------- ----------
SEMICONDUCTOR - CAPITAL EQUIPMENT 0.86%
4,000 Applied Materials Inc. * 304,474 362,500
---------- ----------
SOFTWARE AND PROGRAMMING 1.36%
11,000 BMC Software Inc.* 487,460 401,328
2,000 Oracle Corp.* 149,220 168,125
---------- ----------
636,680 569,453
---------- ----------
The accompanying notes are an integral part of these financial statements
9
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SCHEDULE OF FUND INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
SHARES COST VALUE (NOTE 2)
------ ---- --------------
SPECIALTY FINANCE 4.01%
19,500 Capital One Financial Corp. $ 940,621 $ 870,188
30,000 MBNA Corp. 737,772 813,750
---------- ----------
1,678,393 1,683,938
---------- ----------
TELECOMMUNICATIONS 6.42%
2,000 Nextlink Communications* 86,095 75,875
25,000 Qwest Communications Inc. * 872,740 1,242,188
30,000 WorldCom, Inc.* 1,193,655 1,376,250
---------- ----------
2,152,490 2,694,313
---------- ----------
UTILITIES 7.78%
28,000 AES Corp.* 1,076,260 1,277,500
10,000 CMS Energy Corp. 222,145 221,250
6,000 Capline Corp.* 303,132 394,500
10,500 Enron Corp. 749,454 677,250
20,000 Niagra Mohawk Holdings Inc.* 287,484 278,750
10,000 Williams Companies Inc. 393,228 416,875
---------- ----------
3,031,703 3,266,125
---------- ----------
TOTAL COMMON STOCKS 96.27% 33,792,332 40,399,328
---------- ----------
CASH AND CASH EQUIVALENTS 3.83%
-------
1,605,190 Canandaigua Investment Cash Account
1,605,190 1,605,190
---------- ----------
TOTAL INVESTMENTS 100.10% 35,397,522 42,004,518
========== ==========
LIABILITIES LESS OTHER ASSETS (0.10%) (42,116)
------ ----------
NET ASSETS 100.00% $41,962,402
====== ===========
<FN>
* Non-Income producing securities
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements
10
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(1) ORGANIZATION
------------
The Canandaigua Funds (the "Fund") is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment
company. The Fund offers two no-load mutual funds: the Canandaigua Bond
Fund ("Bond Fund"), which seeks to earn a high level of current income
with consideration also given to safety of principal, and the
Canandaigua Equity Fund ("Equity Fund"), which seeks long term growth
of asset values through capital appreciation and dividend income.
From inception in September, 1992 through February 9, 1998, the Fund
was designed solely for the investment of retirement funds held in
certain qualified trusts. Effective February 9, 1998, the Fund was
reorganized on a tax free basis from a collective investment trust to a
Delaware business trust. Among other things, this change enabled the
Fund to expand its shareholders from certain qualified individual
retirement trust accounts, to the general public.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
USE OF ESTIMATES -
The financial statements have been prepared in conformity with
generally accepted accounting principles and, as such, include amounts
based on informed estimates and judgments of management with
consideration given to materiality. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS -
Interest bearing cash accounts are considered cash equivalents.
VALUATION OF INVESTMENT SECURITIES AND INCOME RECOGNITION -
Investments consist of debt and equity investment securities of the
United States (U.S.) government and of corporations whose securities
are traded on recognized U.S. securities exchanges. Investment
securities are stated at market value based upon closing sales prices
reported on recognized securities exchanges on the last business day of
the period or, for listed securities having no sales reported and for
unlisted securities, upon last reported bid prices on that date. The
market value of investment securities is subject to daily fluctuations.
Short-term securities with 60
11
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
VALUATION OF INVESTMENT SECURITIES AND INCOME RECOGNITION - (continued)
days or less to maturity are amortized to maturity based on their cost
to the Fund if acquired within 60 days of maturity or, if already held
by the Fund on the 60th day, based on the value determined on the 61st
day.
Purchase premiums or discounts are amortized in investment interest
ratably over the term of an investment security with a remaining
maturity over 60 days. Securities for which quotations are not readily
available are valued at fair value as determined in good faith by the
Supervisory Committee of the Fund.
The fair value of receivables for sale of investments and payables for
purchase of investments are based on fair values as of the date of sale
or purchase of the investment security.
The estimated fair value of individual investment securities held at
June 30, 2000 are disclosed in the accompanying Schedule of Fund
Investments.
As is customary in the industry, securities transactions are recorded
no later than the first business day after the securities are purchased
or sold. Interest income is reported on the accrual basis. Dividend
income is recorded on the ex-dividend date.
Realized gains and losses on sales of securities are calculated on the
identified cost basis.
Dividends and distributions to shareholders are recorded on the
ex-dividend date and are paid at least annually. Through February 9,
1998, when the Fund operated solely as a collective investment trust,
dividend distributions were not relevant for tax compliance purposes.
For the six months ended June 30, 2000, $30,174 and $0 of dividends
were declared and distributed to shareholders of the Bond Fund and
Equity Fund, respectively. For the year ended December 31, 1999,
$61,968 and $4,316,236 of dividends were declared and distributed to
shareholders of the Bond Fund and Equity Fund, respectively.
12
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
INCOME TAXES -
It is the policy of the Fund to comply with applicable requirements of
the Internal Revenue Code. Effective February 9, 1998, the Fund began
accepting investments attributable to sources other than individual
retirement trust accounts. As a result, net investment income and net
realized gains on investments beginning in fiscal 1998 from February 9,
1998 forward, is taxable to the Fund if not substantially distributed
annually to its shareholders. It has been the practice, policy and
future intention of the Fund to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
to distribute all of its annual net taxable income, including any net
realized gains on investments, to its shareholders.
Prior to February 9, 1998, the Fund was exempt from Federal income tax
under Section 408 (e) of the Internal Revenue Code with respect to
interests in the Fund which are attributable to individual retirement
trust accounts maintained in conformity with Section 408 (e) of the
Internal Revenue Code, and exempt from Federal income tax under Section
501 (a) of the Internal Revenue Code with respect to interests in the
Fund which are attributable to pension or profit-sharing trusts
(including those benefiting self-employed individuals) maintained in
conformity with Section 401 (a) of the Internal Revenue Code. The Fund
was also not subject to taxation in New York State for these qualified
interests. For Federal income tax purposes, income earned by the Fund
for these qualified interests was not taxable to participating trusts
or participants until a participant receives a distribution from the
Fund. Withdrawals from the Fund which are paid to participating trusts
can be made at any time by participating trusts without penalty and
without the amount withdrawn being subject to Federal income tax.
VALUATION OF SHARES -
The Declaration of Trust provides that the Fund may issue an unlimited
number of shares of beneficial interest without par value. Currently,
the Fund is offering shares in a Bond Fund and an Equity Fund. The
shares are voting, non-assessable and have no preemptive rights or
preferences
13
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
VALUATION OF SHARES -
(continued)
as to conversion, exchange, dividends or retirement. The net asset
value per share of each fund is determined by dividing the total value
of the fund's net assets by the number of outstanding shares of the
fund. The net asset values per share in the accompanying financial
statements are calculated in consideration of all purchases and sales
transacted during the period. Share purchases are recorded when an
investor's request for a share purchase is accepted and share
distributions are recorded when an investor's request for distribution
is received. Accordingly, any accepted share purchase obligations for
which cash has not yet been received are reflected as a receivable for
sale of fund's shares and any approved distribution requests for which
cash has not yet been disbursed are reflected as a payable for
repurchases of fund's shares in the accompanying statement of assets
and liabilities.
(3) AGREEMENTS
----------
The Canandaigua National Bank and Trust Company (the Company) is the
investment advisor and sponsor of the Fund. The individual portfolio
managers of the Fund are also officers of the Company. Subject to the
direction of the Supervisory Committee of the Fund, which performs the
duties and undertakes the responsibilities of the Board of Directors of
an investment company, the Company manages all of the business and
affairs of the Fund. The Fund has entered into an Investment Management
Agreement with the Company. Under the terms of the agreement, the
Company will manage the investment of the assets of each fund in
conformity with the stated objectives and policies of that fund. For
these services, the Fund will pay investment management fees to the
Company, at the rate of 1% of assets annually of each fund. In April,
1994, however, the Supervisory Committee authorized a temporary
reduction of this fee for the Bond Fund to .5%. On July 9, 1997, the
Supervisory Committee authorized a temporary suspension of the total
investment management fee it pays for the Bond Fund. These rate
14
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(3) AGREEMENTS (continued)
----------
reductions resulted in a savings to the Bond Fund of $5,300 for the six
months ended June 30, 2000.
The Fund has an administrative service agreement with American Data
Services, Inc. (ADS), for a three year period beginning December, 1997.
Monthly fees are based on the greater of: (1) a sliding scale of $1,500
for a fund with average net assets of under $5 million to $2,500 for a
fund with net assets of $20 million or more: or (2) 1/12 of 0.012% of
the average net assets of a fund for the month. For the six months
ended June 30, 2000, the fees for the Bond Fund and Equity Fund
amounted to $9,312 and $23,266, respectively. These fees have
historically been paid by the Company, but for the six months ended
June 30, 2000 the Equity Fund paid its own fees.
In December, 1997, the Fund entered into a fund accounting agreement
with ADS for a three year period to calculate and transmit the Fund's
net asset value and maintain and keep current all books and records of
the Funds as required by Rule 31a-1 under the 1940 Act. Monthly fees
are based on the greater of: (1) a sliding scale of $800 for a fund
with average net assets of under $10 million to $1,400 for a fund with
net assets of $25 million to $30 million; or (2) 1/12 of 2.75 basis
points on nets assets in excess of $30 million. For the six months
ended June 30, 2000, the fees for the Bond Fund and Equity Fund
amounted to $5,208 and $10,308, respectively. These fees have
historically been paid by the Company, but for the six months ended
June 30, 2000 the Equity Fund paid its own fees.
In December, 1997, the Fund entered into a transfer agency agreement
with ADS for a three year period to provide a shareholder record
keeping and reporting services and to act as the dividend disbursing
agent for the Fund. Monthly fees consist of a minimum of $900
maintenance fee plus various transaction fees. For the six months ended
June 30, 2000, the fees for the Bond Fund and Equity Fund amounted to
$5,783 and $6,261, respectively. These fees have historically been paid
by the Company, but for the six months ended June 30, 2000 the Equity
Fund paid its own fees.
In December 1997 the Company also entered into a three year ninety day
cancelable distributor agreement with ADS Distributors, Inc. to act as
the principal underwriter and distributor of the Fund's shares. The fee
for the six months ended June 30, 2000 for these services of $11,400
plus expenses was paid by the Company for the Bond Fund and Equity
Fund.
15
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(3) AGREEMENTS (continued)
----------
Fees with ADS and ADS Distributors, Inc. are subject to annual
increases based on a defined increase in the Consumer Price Index for
the Northeast region.
The Northern Trust Company acts as a custodian of the assets of the
Fund. Custodial fees paid by the Fund are based on an agreed fee
schedule for asset holdings and transactions.
The Company has also historically assumed expenses, other than
primarily custodial and audit, incurred in the administration of the
Fund. During the six months ended June 30, 2000 this practice continued
for the Bond Fund. Effective January 1, 1999, the Equity Fund paid its
operating expenses other than professional legal fees primarily for the
general operations and filings of the fund, of approximately $8,500 and
Board of Trustee fees and expenses for board and committee meeting
attendance of approximately $1,600, which fees were assumed by the
Company.
The Company will reimburse the Fund for the amount by which the
expenses exceed the lower of (1) 1.5% of the average daily value of the
Fund's net assets during its fiscal year or (2) the most restrictive
expense limitation applicable to the Fund imposed by the securities
laws of any state in which the shares of the Fund are sold.
(4) PURCHASES AND SALES OF SECURITIES
---------------------------------
During the six months ended June 30, 2000, purchases and sales of
investment securities, excluding cash and cash equivalents, amounted to
the following:
Fund
---------------------------
BOND EQUITY
---- ------
Purchases $ 128,026 $38,120,102
========= ===========
Sales $ 159,487 $37,428,883
========= ===========
16
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(4) PURCHASES AND SALES OF SECURITIES (continued)
---------------------------------
Purchases and sales of government securities included in the Bond Fund
amounts were $0.00 and $66,980, respectively. All other purchases and
sales in the Bond Fund and Equity Fund were of investment securities,
excluding government securities. Transaction fees paid during the six
months ended June 30, 2000 to the Company and The Northern Trust
Company in the amount of approximately $2,600 and $2,000 respectively,
were recorded as an adjustment to the basis of the related securities
in the amount of approximately $4,400 in the Equity Fund and $200 in
the Bond Fund.
(5) UNREALIZED GAINS (LOSSES) ON INVESTMENTS
----------------------------------------
As of June 30, 2000, the unrealized gains (losses) on investments based
on cost for Federal income taxes of $1,104,042 in the Bond Fund and
$35,397,522 in the Equity Fund are as follows:
Fund
--------------------------
BOND EQUITY
---- ------
Gross unrealized gains $ 2,380 $7,379,208
Gross unrealized (losses) (38,644) (772,212)
--------- ----------
Net unrealized gain (loss) $ (36,264) $6,606,996
========= ==========
(6) CHANGE IN PORTFOLIO MANAGER
---------------------------
On January 24, 2000 one of the two individual portfolio managers for
the Fund provided notice of his intent to leave the employment of the
investment advisory Company effective February 8, 2000. The investment
advisory Company has since appointed a replacement portfolio manager
for the Fund to assist the other remaining portfolio manager of the
Fund.
17
<PAGE>
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SELECTED PER-SHARE DATA AND RATIOS/SUPPLEMENTAL DATA
FOR THE SIX FOR THE FOR THE FOR THE FOR THE FOR THE
MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 2000 DEC.31,1999 DEC.31,1998 DEC.31,1997 DEC. 31,1996 DEC. 31, 1995
----------------------------------------------------------------------------------
(Unaudited)
PER SHARE DATA:
<S> <C> <C> <C> <C> <C> <C>
(For a share outstanding throughout
each period)
Net asset value, beginning of period $ 13.16 $ 14.14 $ 13.53 $ 12.54 $ 12.25 $ 10.01
------------ ------------ ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS - 0.37 0.74 0.77 0.70 0.62 0.81
Net realized and unrealized gains (losses)
on investments 0.03 (0.98) 0.45 0.29 (0.33) 1.43
------------ ------------ ---------- ---------- ---------- ----------
Total income (loss) from investment operations 0.40 (0.24) 1.22 0.99 0.29 2.24
------------ ------------ ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS (B)
Dividends from net investment income (0.37) (0.74) (0.61)
Distributions from net realized gains 0.00 0.00 0.00
------------ ------------ ----------
Total dividends and distributions (0.37) (0.74) (0.61)
------------ ------------ ----------
Net Asset Value, end of period $ 13.19 $ 13.16 $ 14.14 $ 13.53 $ 12.54 $ 12.25
============ ============ ========== ========== ========== ==========
Total Return (c) 3.09% (1.71%) 9.05% 7.89% 2.37% 22.38%
============ ============ ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000 omitted) $ 1,082 $ 1,093 $ 957 $ 666 $ 501 $ 408
Ratio of Net Expenses to Average
Net Assets (a) 0.45% 0.38% 0.46% 0.77% 1.09% 0.89%
Ratio of Gross Expenses to Average
Net Assets (a) 5.30% 5.51% 7.13% 3.19% 4.15% 1.03%
Ratio of Net Investment Income
to Average Net Assets 5.75% 5.41% 5.47% 5.38% 5.17% 7.11%
Portfolio Turnover Rate 12.35% 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 June 30, 2000. In addition, during the periods
presented, certain administrative expenses of the Fund, other than
primarily custodial and audit fees, have been assumed by the investment
manager of the Fund. The resulting per share savings to the Bond Fund
related to these fees and expenses were $.28 (unaudited) for the six months
ended June 30, 2000 and $.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>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS
CANANDAIGUA EQUITY FUND
SELECTED PER-SHARE DATA AND RATIOS/SUPPLEMENTAL DATA
FOR THE SIX FOR THE FOR THE FOR THE FOR THE FOR THE
MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 2000 DEC.31,1999 DEC.31,1998 DEC.31,1997 DEC. 31,1996 DEC. 31, 1995
----------------------------------------------------------------------------------
(Unaudited)
PER SHARE DATA:
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
(For a share outstanding throughout
each period)
Net asset value, beginning of period $ 26.71 $ 22.80 $ 19.40 $ 16.67 $ 13.71 $ 10.89
----------- ---------- ---------- ---------- ---------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS -
Net investment income (loss) (a) (0.10) (0.20) (0.06) 0.00 0.01 0.04
Net realized and unrealized gains (losses)
on investments 3.53 7.85 3.46 2.73 2.95 2.78
----------- ---------- ---------- ---------- ---------- ---------
Total income (loss) from investment operations 3.43 7.65 3.40 2.73 2.96 2.82
----------- ---------- ---------- ---------- ---------- ---------
LESS DISTRIBUTIONS (B)
Dividends from net investment income 0.00 0.00 0.00
Distributions from net realized gains 0.00 (3.74) 0.00
----------- ---------- ----------
Total dividends and distributions 0.00 (3.74) 0.00
----------- ---------- ----------
Net Asset Value, end of period $ 30.14 $ 26.71 $ 22.80 $ 19.40 $ 16.67 $ 13.71
=========== ========== ========== ========== ========== =========
Total Return (c) 12.84% 33.70% 17.53% 16.38% 21.59% 25.90%
=========== ========== ========== ========== ========== =========
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000 omitted) $ 41,962 $ 35,237 $ 23,568 $ 17,787 $ 12,644 $ 8,433
Ratio of Net Expenses to Average
Net Assets (a) 1.31% 1.37% 1.14% 1.15% 1.12% 1.11%
Ratio of Gross Expenses to Average
Net Assets (a) 1.36% 1.45% 1.50% 1.44% 1.57% 1.25%
Ratio of Net Investment Income
to Average Net Assets (0.75%) (0.77%) (0.31%) 0.00% 0.03% 0.32%
Portfolio Turnover Rate 99.03% 224.59% 314.28% 398.23% 337.27% 375.30%
(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 and a per share savings of $.01(unaudited) for the six months
ended June 30, 2000.
(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.
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
