THE CANANDAIGUA FUNDS
* EQUITY PORTFOLIO
* BOND PORTFOLIO
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1999
THE EQUITY PORTFOLIO SEEKS LONG TERM GROWTH OF ASSET VALUES THROUGH CAPITAL
APPRECIATION AND DIVIDEND INCOME.
THE BOND PORTFOLIO SEEKS TO EARN A HIGH LEVEL OF CURRENT INCOME WITH
CONSIDERATION ALSO GIVEN TO SAFETY OF PRINCIPAL.
<PAGE>
THE CANANDAIGUA FUNDS
SUPERVISORY COMMITTEE:
- ----------------------
Robert J. Craugh, Canandaigua, New York
Retired, former Senior Vice President - Operations
The Canandaigua National Bank and Trust Company
Donald C. Greenhouse, Canandaigua, New York
President and Owner, Seneca Point Associates, Inc.
(Business and consulting firm)
Robert N. Coe, Bloomfield, New York
President and co-owner, W.W.Coe and Sons, Inc.
(Independent insurance agency)
Steven H. Swartout, Esq., Canandaigua, New York Partner
Lawrence, Werner, Kesselring, Swartout & Brown, LLP (Legal firm)
OFFICERS:
- ---------
Robert J. Craugh, Chairman
Steven H. Swartout, Esq. Secretary & Treasurer
OFFICES OF THE CANANDAIGUA FUNDS:
- ---------------------------------
SERVICING:
- ----------
72 South Main Street
Canandaigua, New York 14424
The Canandaigua National Bank and Trust Company
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
TRANSFER AGENT AND SHAREHOLDER
- ------------------------------
American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
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
14424
LEGAL COUNSEL:
- --------------
Stephen H. Waite, Esq.
Maureen E. Mulholland, Esq.
Underberg & Kessler
1800 Chase Square
Rochester, New York 14604
INDEPENDENT AUDITORS:
- ---------------------
Eldredge, Fox & Porretti, LLP
25 North Street
Canandaigua, New York
<PAGE>
Dear Shareholder:
THE EQUITY FUND
- ---------------
The Equity Fund was up 33.70% for the twelve-month period ending December 31,
1999. This return compares positively to the return on the Standard & Poor's 500
Composite Index (S&P 500) of 19.53% and CDA Weisenberger Domestic Growth Fund
peer group average return of 24.11% for the same period. The S&P 500 is a market
capitalization weighted index and the CDA Weisenberger Domestic Growth Fund peer
group figure represents an equally weighted index of mutual funds within the
stated investment category. This is the fifth consecutive year that the S&P 500
average has grown by an amount greater than historical averages.
THE BOND FUND
- -------------
The bond fund declined 1.71% for 1999 compared to the Lehman Brothers Aggregate
Bond Index decline of 0.83% and the median peer group decline 1.12%. This
decline is attributable to actions taken by the Federal Reserve in order to
control inflation. When the Fed raises rates, this leads to an increase in
interest rates and a corresponding decrease in the price of fixed income
instruments.
OVERVIEW OF 1999
- ----------------
While all three major indexes performed at above average levels for 1999, a
closer examination paints a different picture. Not all stocks were big winners.
Of the 500 stocks in the S&P 500 average for example, 241 ended the year on a
positive note, 3 were unchanged and 256 (more than half) were down for the year.
Similar disparity exists when looking at individual sectors. The Technology
sector was up 75% grabbing much of the headlines in the financial media while
the Utility sector was down 12% for the year.
The Federal Reserve became an active player in an attempt to control any hint of
inflation as it took back the three Fed Funds rate reductions from 1998. At the
close of 1999, the Fed Funds rate stood at 5.50%, up from 4.75% where it started
the year. The increase in interest rates has had no affect on the current
economic expansion. On February 1, we expect this expansion to become the
longest on record at 107 months surpassing the 106-month expansion of the 1960s.
As we closed 1999 and looked forward to a new millenium all eyes were cast upon
the media hype of potential "Y2K" disasters. These never materialized. We were
pleased at the efforts that went into the due diligence on behalf of the bank,
our vendors and companies that we were invested in that made this a nonevent as
we crossed into the year 2000.
<PAGE>
OVERVIEW FOR 2000
- -----------------
We continue to forecast the Fed fighting inflationary pressures before they
occur and hence at least one more increase in rates. Outside variables, such as
the Treasury Department's refunding of outstanding debt and reduced debt
issuance because of budget surpluses, should pressure long-term rates downward.
Historically, expansions such as the current one end with inflationary pressures
and, as a result, recession. The current Fed Policy makers are well aware of
this and have their finger on the button for a soft landing. Technology
improvements and internet based sale prices appear to be keeping inflation in
check in conjunction with Fed actions.
Inflation should remain at current low levels throughout the year. We will keep
an eye on tight labor markets (current unemployment figures are near 4%) and the
effect on wages.
Taking into account the various factors mentioned above we foresee another good
year for the stock market. We believe that the focus will be on corporate
earnings as justification for the high multiples in various stocks and sectors.
Our focus will be on companies that perform from an earnings standpoint and
those that lay the groundwork for the technological advances that we believe
will continue into 2000. In addition, part of our diversification process takes
advantage of those companies that had a down year and look like good investment
opportunities.
Sincerely, Sincerely,
/s/ JAY J. BACHSTEIN /S/ ROBERT J. SWARTOUT
- -------------------- ----------------------
Jay J. Bachstein Robert J. Swartout
Assistant Vice President Vice President
Investment Officer Investment Officer
The Canandaigua National Bank and Trust Co. The Canandaigua National Bank
and Trust Co.
<PAGE>
EQUITY FUND
HOW $10,000 HAS GROWN SINCE INCEPTION
[GRAPH OMITTED]
CANANDAIGUA EQUITY FUND, ENDING VALUE $30,484
WIESENBERGER: GROWTH-DOMESTIC-MF, ENDING VALUE $35,299
S&P 500 COMPOSITE, ENDING VALUE $35,166
CANANDAIGUA EQUITY FUND
-----------------------
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR 33.70%
FIVE YEARS 22.77%
SINCE INCEPTION 16.47%
WEISENBERGER: GROWTH - DOMESTIC - MF is an equally weighted index of mutual
funds within the stated investment category. The funds represented by this index
involve investment risks which may include the loss of principal invested. This
index represents the component funds at closing net asset value and includes all
annual asset-based fees and expenses charged to those funds, including
management and 12b-1 fees.
S&P 500 COMPOSITE is a market capitalization weighted price index composed of
500 widely held common stocks listed on the New York Stock Exchange, American
Stock Exchange and Over-The -Counter market. The value of the index varies with
the aggregate value of the common equity of each of the 500 companies. The
stocks represented by this index involve investment risks which may include loss
of principal invested.
Past performance is not indicative of future results. Shares of the CANANDAIGUA
EQUITY FUND are not deposits or obligations of, or guaranteed or endorsed by,
The Canandaigua National Bank and Trust Company, and the shares are not
federally insured by the Federal Deposit Insurance Corporation, The Federal
Reserve Board, or any other agency. Principal is subject to risk in the
investment marketplace. Investment returns and principal value of an investment
may fluctuate. Purchase of shares should only occur after you have read the
current prospectus. A current prospectus and application may be obtained by
writing the Investment Department at The Canandaigua National Bank and Trust
Company, 72 South Main Street, Canandaigua, New York 14424, or by calling
1-800-724-2621 extension 216.
<PAGE>
BOND FUND
HOW $10,000 HAS GROWN SINCE INCEPTION
[GRAPH OMITTED]
CANANDAIGUA BOND FUND, ENDING VALUE $14,502
WIESENBERGER: GENL BOND-INV GRADE-MF, ENDING VALUE $14,556
LEHMAN BROTHERS INTERM GOVT/CORP, ENDING VALUE $14,979
CANANDAIGUA BOND FUND
-----------------------
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR -1.71%
FIVE YEARS 7.76%
SINCE INCEPTION 5.21%
WEISENBERGER: CORP - INV GRADE - MF is an equally weighted index of mutual funds
within the stated investment category. The funds represented by this index
involve investment risks which may include the loss of principal invested. This
index represents the component funds at closing net asset value and includes all
annual asset-based fees and expenses charged to those funds, including
management and 12b-1 fees.
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE is an index based on all
publicly issued intermediate government and corporate debt securities. Average
maturity of 4-5 years. This index represents asset types which are subject to
risk, including loss of principal.
Past performance is not indicative of future results. Shares of the CANANDAIGUA
BOND FUND are not deposits or obligations of, or guaranteed or endorsed by, The
Canandaigua National Bank and Trust Company, and the shares are not federally
insured by the Federal Deposit Insurance Corporation, The Federal Reserve Board,
or any other agency. Principal is subject to risk in the investment marketplace.
Investment returns and principal value of an investment may fluctuate. Purchases
of shares should only occur after you have read the current prospectus. A
current prospectus and application may be obtained by writing the Investment
Department at The Canandaigua National Bank and Trust Company, 72 South Main
Street, Canandaigua, New York 14424, or by calling 1-800-724-2621 extension 216.
<PAGE>
THE CANANDAIGUA FUNDS
FINANCIAL STATEMENTS AS OF
--------------------------
DECEMBER 31, 1999
-----------------
TOGETHER WITH
-------------
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
<PAGE>
THE CANANDAIGUA FUNDS
---------------------
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1999
TABLE OF CONTENTS
-----------------
PAGE
Report of Independent Accountants 1
Statement of Assets and Liabilities as of December 31, 1999 2
Statement of Operations for the Year Ended December 31, 1999 3
Statements of Changes in Net Assets for the Years Ended 4
December 31, 1999 and 1998
Schedule of Fund Investments as of December 31, 1999:
- Bond Fund 6
- Equity Fund 9
Notes to Financial Statements 11
Selected Per-Share Data and Ratios/Supplemental Data:
- Bond Fund 18
- Equity Fund 19
<PAGE>
- -------------------------
EFP
ELDREDGE, FOX & PORRETTI, LLP
CERTIFIED PUBLIC ACCOUNTANTS BUSINESS CONSULTANTS
- --------------------------------------------------------------------------------
135 Corporate Woods, Suite 300
Rochester, NY 14623 (716) 427-8900
Fax 427-8947 25 North Street
Canandaigua, NY 14424 (716)
398-2880 Fax 394-7513
Other Offices: Geneva Webster Brockport Penn Yan
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Directors and Shareholders
of The Canandaigua Funds
We have audited the accompanying statement of assets and liabilities, including
the schedule of fund investments, of The Canandaigua Funds (The Fund - comprised
of the Bond and Equity Funds), as of December 31, 1999, and the related
statement of operations for the year then ended, the statements of changes in
net assets for the years ended December 31, 1999 and 1998 and the selected
per-share data and ratios/supplemental data for the years ended December 31,
1999, 1998, 1997, 1996, and 1995. These financial statements and per-share data
and ratios/supplemental data are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
per-share data and ratios/supplemental data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per-share data
and ratios/supplemental data are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1999, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and selected per-share data and
ratios/supplemental data referred to above present fairly, in all material
respects, the financial position of each of the respective funds of The
Canandaigua Funds as of December 31, 1999, the results of their operations for
the year then ended, the changes in their net assets for the years ended
December 1999 and 1998, and the selected per-share data and ratios/supplemental
data for the years ended December 31, 1999, 1998, 1997, 1996, and 1995, in
conformity with generally accepted accounting principles.
/S/ ELDREDGE, FOX & PORRETTI, LLP
---------------------------------
Canandaigua, New York
February 4, 2000
1
<PAGE>
THE CANANDAIGUA FUNDS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
FUND
BOND EQUITY
---- ------
ASSETS
INVESTMENT SECURITIES AT MARKET
<S> <C> <C>
(Bond Fund cost- $1,111,305; Equity Fund
cost- $28,389,262) $ 1,066,132 $34,932,937
----------- -----------
CASH AND CASH EQUIVALENT 8,947 273,321
----------- -----------
RECEIVABLES FOR:
Sales of fund's shares 546 78,531
Dividends and accrued interest 17,832 4,394
----------- -----------
Total receivables 18,378 82,925
----------- -----------
PREPAID EXPENSES 479 8,855
----------- -----------
Total assets 1,093,936 35,298,038
----------- -----------
LIABILITIES
PAYABLES FOR:
Repurchases of fund's shares 14 14,707
Professional fees 798 18,372
Custody fees 147 --
Investment advisory fees -- 28,218
----------- -----------
Total liabilities 959 61,297
----------- -----------
NET ASSETS AT DECEMBER 31, 1999: (equivalent $ 1,092,977 $35,236,741
=========== ===========
to $13.16 per share for Bond Fund and $26.71 per share
for Equity Fund, based on 83,084 shares and
1,319,048 shares outstanding for Bond and Equity
shares, respectively)
NET ASSETS CONSIST OF:
Capital stock $ 1,138,009 $28,583,955
Undistributed net investment income -- --
Accumulated net realized gain on investments 141 109,111
Net unrealized appreciation (depreciation)
on investments (45,173) 6,543,675
----------- -----------
NET ASSETS $ 1,092,977 $35,236,741
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
THE CANANDAIGUA FUNDS
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
FUND
BOND EQUITY
---- ------
INVESTMENT INCOME:
<S> <C> <C>
Interest income $ 65,419 $ 9,463
Dividend income -- 163,760
----------- -----------
Total investment income 65,419 173,223
----------- -----------
EXPENSES:
Investment management fees 11,118 286,368
Administration fees 18,312 30,355
Fund accounting fees 16,414 27,164
Transfer agency fees 11,462 11,845
Custodial fees 2,562 2,848
Professional fees 1,509 40,819
Registration and filing fees -- 4,014
Insurance expense 334 11,123
Tax expense 563 576
----------- -----------
Total expenses 62,274 415,112
Less reimbursed expenses (57,989) (22,001)
----------- -----------
Net expenses 4,285 393,111
----------- -----------
Net investment income (loss) 61,134 (219,888)
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain 126 6,140,284
Net change in unrealized appreciation (depreciation)
of investments (79,874) 2,586,807
----------- -----------
Net realized and unrealized gain (loss) on
Investments (79,748) 8,727,091
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (18,614) $ 8,507,203
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
FUND
BOND EQUITY
---- ------
FOR THE YEAR ENDED DECEMBER 31, 1999 -
OPERATIONS:
<S> <C> <C>
Net investment income (loss) $ 61,134 $ (219,888)
Net realized gain on investments 126 6,140,284
Net change in unrealized appreciation (depreciation)
on investments (79,874) 2,586,807
------------ ------------
Net increase (decrease) in net assets resulting
from operations (18,614) 8,507,203
------------ ------------
DIVIDENDS AND DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Dividends from net investment income (61,968) --
Distributions from net realized gain on investments -- (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
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
THE CANANDAIGUA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
FUND
BOND EQUITY
---- ------
FOR THE YEAR ENDED DECEMBER 31, 1998 -
OPERATIONS:
<S> <C> <C>
Net investment income (loss) $ 42,899 $ (64,572)
Net realized gain (loss) on investments 294 (1,629,590)
Net change in unrealized appreciation on investments 25,369 4,919,931
------------ ------------
Net increase in net assets resulting from operations 68,562 3,225,769
------------ ------------
DIVIDENDS AND DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Dividends from net investment income (39,727) --
Distributions from net realized gain on investments -- --
------------ ------------
Total dividends and distributions (39,727) --
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from shares sold (26,858 and 212,466 shares in the
Bond and Equity funds, respectively) 378,457 4,543,920
Proceeds from shares issued in reinvestment of net investment
Income dividends and distributions of net realized gain on
investments (2,830 shares in the bond fund) 39,727 --
Cost of shares repurchased (11,249 and 95,269 shares in the
Bond and Equity funds, respectively) (156,431) (1,988,934)
------------ ------------
Net increase in net assets resulting from fund
share transactions 261,753 2,554,986
------------ ------------
TOTAL INCREASE IN NET ASSETS 290,588 5,780,755
NET ASSETS - beginning of year 666,476 17,787,286
------------ ------------
NET ASSETS - end of year $ 957,064 $ 23,568,041
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SCHEDULE OF FUND INVESTMENTS
DECEMBER 31, 1999
MARKET
COST VALUE
------- --------
INVESTMENT SECURITIES:
U.S. GOVERNMENT NOTES & BONDS - 46.63%
<S> <C> <C> <C>
25,000 US Treasury Note, 6.125%, September 30, 2000 $24,983 $25,023
20,000 US Treasury Note, 4.000%, October 31, 2000 19,776 19,675
30,000 US Treasury Note, 5.500%, December 31, 2000 29,621 29,831
25,000 US Treasury Note, 5.250%, January 31, 2001 24,687 24,789
30,000 US Treasury Note, 6.375%, March 31, 2001 29,946 30,075
25,000 US Treasury Note, 5.500%, February 28, 2003 24,809 24,406
25,000 US Treasury Note, 5.750%, April 30, 2003 24,952 24,547
25,000 US Treasury Note, 5.875%, February 15, 2004 26,465 24,594
50,000 US Treasury Bond, 5.875%, November 15, 2005 49,987 48,563
25,000 US Treasury Note, 5.625%, February 15, 2006 24,955 23,930
40,000 US Treasury Note, 6.875%, May 15, 2006 40,104 40,713
30,000 US Treasury Note, 7.000%, July 15, 2006 30,053 30,731
35,000 US Treasury Note, 6.125%, August 15, 2007 35,365 34,125
40,000 US Treasury Note, 5.500%, February 15, 2008 39,776 37,488
50,000 US Treasury Note, 5.625%, May 15, 2008 50,935 47,031
50,000 US Treasury Note, 4.750%, November 15, 2008 48,267 44,125
------- -------
Total U.S. Government Notes & Bonds 46.63% 524,681 509,646
------ ------- -------
CORPORATE BONDS
CAPITAL EQUIPMENT - 3.43%
Aerospace & Military Technology
- -------------------------------
15,000 Lockheed Martin Corporation,6.750%, March 15, 2003 15,900 14,583
Machinery Construction and Mining
- ---------------------------------
25,000 Caterpillar Corp., Inc., 6.000%, May 1, 2007 23,863 22,914
------- -------
39,763 37,497
------- -------
CONSUMER GOODS - 18.18%
Beverage & Tobacco
- ------------------
25,000 Anheuser Busch, 6.750%, November 1, 2006 25,143 24,270
20,000 Coca-Cola Company, 6.000%, July 15, 2003 19,962 19,278
Paper
- -----
25,000 International Paper Company, 7.625%, August 1, 2004 26,700 25,115
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SCHEDULE OF FUND INVESTMENTS
DECEMBER 31, 1999
MARKET
COST VALUE
------- --------
CONSUMER GOODS (continued) -
Household Products
- ------------------
40,000 Colgate Palmolive Corp., 5.590%, April 17, 2000 40,167 39,959
Retail Trading
- --------------
25,000 Sears Roebuck & Company, 6.250%, January 15, 2004 23,680 23,683
20,000 Wal-Mart Company, 6.375%, March 1, 2003 20,930 19,763
Specialty Chemicals
- -------------------
25,000 Eastman Chemical Company, 6.375%, January 15, 2004 25,141 23,852
Multimedia
- ----------
25,000 Disney, Walt & Co. 5.800%, October 27, 2008 23,201 22,796
------- -------
204,924 198,716
------- -------
FINANCE - 16.45%
Banking
- -------
30,000 Citicorp, 6.750%, August 15, 2005 30,853 28,977
25,000 Morgan JP & Co., 6.000%, January 15, 2009 24,654 22,392
Financial Services
- ------------------
10,000 Ford Motor Credit Co., 6.850%, August 15, 2000 10,004 10,021
20,000 General Electric Capital Corp. 5.500%,
November 1, 2001 19,940 19,565
25,000 John Deere Capital Corp., 6.000%,
February 15, 2009 24,445 22,162
30,000 Merrill Lynch & Co., Inc., 6.250%,
October 15, 2008 29,681 27,386
30,000 Morgan Stanley Dean Witter & Co., 5.750%,
February 15, 2001 30,224 29,695
20,000 Salomon Inc., 6.750%, August 15, 2003 19,905 19,631
------- -------
189,706 179,829
------- -------
SERVICES - 12.85%
Industrial
- ----------
25,000 General Motors Corp., 6.250%, May 1, 2005 26,185 23,848
25,000 IBM Corp., 5.375%, February 1, 2009 24,945 22,003
Telecommunications
- ------------------
20,000 Pacific Bell, 6.250%, March 1, 2005 19,600 19,250
30,000 LCI, 7.250%, June 15, 2007 30,894 28,830
Hotels and Motels
- -----------------
25,000 Marriott Corp., 6.750%, December 15, 2003 25,017 24,108
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SCHEDULE OF FUND INVESTMENTS
DECEMBER 31, 1999
MARKET
COST VALUE
------- --------
SERVICES (continued) -
Waste Removal
- -------------
25,000 Waste Management Inc., 6.375%, December 1, 2003 25,590 22,405
-------- -------
152,231 140,444
------- -------- -------
Total Corporate Bonds 50.91% 586,624 556,486
------- -------- -------
TOTAL INVESTMENT SECURITIES 97.54% 1,111,305 1,066,132
--------- ---------
CASH AND CASH EQUIVALENTS 0.82%
8,947 Canandaigua National Bank Collective
Fixed Income 8,947 8,947
------- ---------- ---------
TOTAL INVESTMENTS 98.36% $1,120,252 1,075,079
==========
OTHER ASSETS LESS LIABILITIES 1.64% 17,898
------- ---------
NET ASSETS 100.00% $ 1,092,977
======= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
THE CANANDAIGUA FUNDS
CANANDAIGUA EQUITY FUND
SCHEDULE OF FUND INVESTMENTS
DECEMBER 31, 1999
MARKET
COST VALUE
------- --------
SHARES
- ------
<C> <S> <C> <C> <C>
INVESTMENT SECURITIES:
COMMON STOCKS
AUTOMATED PROCESSING 3.69%
32,500 Paychex Inc. $ 928,368 $1,300,000
----------- ----------
COMPUTERS HARDWARE 6.34%
10,000 Cisco Systems Inc. * 727,520 1,071,250
15,000 Sun Microsystems Inc. * 462,653 1,161,563
----------- ----------
1,190,173 2,232,813
----------- ----------
CONGLOMERATES 7.72%
2,500 General Electric Co. 294,794 386,875
60,000 Tyco International Ltd. 2,183,645 2,332,500
----------- ----------
2,478,439 2,719,375
----------- ----------
DRUGS 8.63%
20,000 American Home Products Corp. 871,416 788,750
40,000 Elan Corp PLC-Spons ADR * 1,175,441 1,180,000
16,000 Merck & Co Inc. 1,124,405 1,073,000
----------- ----------
3,171,262 3,041,750
----------- ----------
ELECTRONICS 5.48%
6,000 Sanmina Corp. * 577,370 599,250
14,000 Solectron Corp. * 1,041,800 1,331,750
----------- ----------
1,619,170 1,931,000
----------- ----------
FINANCIAL 7.68%
11,000 Goldman Sachs Group Inc. 701,821 1,036,062
20,000 Merrill Lynch & Co Inc. 1,506,886 1,670,000
----------- ----------
2,208,707 2,706,062
----------- ----------
INTERNET SOFTWARE/SERVICES 1.71%
8,000 America Online Inc. * $ 383,163 $ 603,500
----------- ----------
MEDICAL INSTRUMENTS & SUPPLIES 0.50%
15,000 Sybron Chemicals Inc. * 328,794 176,250
----------- ----------
RETAIL 16.32%
50,000 CVS Corp. 1,999,776 1,996,875
35,000 Circuit City Stores-Circuit City Group 1,177,311 1,577,187
24,000 Dayton Hudson Corp. 1,522,793 1,762,500
20,000 Staples Inc. * 381,388 415,000
----------- ----------
5,081,268 5,751,562
----------- ----------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA EQUITY FUND
SCHEDULE OF FUND INVESTMENTS
DECEMBER 31, 1999
MARKET
COST VALUE
------- --------
SHARES
- ------
SEMICONDUCTOR 12.52%
20,000 Intel Corp. 1,264,435 1,646,250
15,000 Texas Instruments Inc. 949,899 1,453,125
25,000 Vitesse Semiconductor Corp. * 1,184,415 1,310,938
----------- ----------
3,398,749 4,410,313
----------- ----------
SEMICONDUCTOR - CAPITAL EQUIPMENT 4.67%
13,000 Applied Materials Inc. * 974,685 1,646,937
----------- ----------
SPECIALTY FINANCE 5.65%
30,000 Capital One Financial Corp. 1,248,242 1,445,625
20,000 MBNA Corp. 500,770 545,000
----------- ----------
1,749,012 1,990,625
----------- ----------
TELECOMMUNICATIONS 14.58%
15,000 ADC Telecommunications Inc. * 633,395 1,088,437
7,000 Lucent Technologies Inc. 488,970 523,688
30,000 MCI Worldcom Inc. * 1,111,806 1,591,875
45,000 Qwest Communications Inc. * 1,378,136 1,935,000
----------- ----------
3,612,307 5,139,000
----------- ----------
TELECOMMUNICATIONS EQUIPMENT 3.64%
20,000 Tellabs Inc. * 1,265,165 1,283,750
----------- ----------
TOTAL COMMON STOCKS 99.13% 28,389,262 34,932,937
----------- ----------
CASH AND CASH EQUIVALENTS 0.78%
273,321 Canandaigua National Bank -------
Collective Equity Fund 273,321 273,321
----------- ----------
TOTAL INVESTMENTS 99.91% $28,662,583 35,206,258
===========
OTHER ASSETS LESS LIABILITIES 0.09% 30,483
------- -----------
NET ASSETS 100.00% $35,236,741
======= ============
<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
DECEMBER 31, 1999
(1) ORGANIZATION
------------
The Canandaigua Funds (the "Fund") is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment
company. The Fund offers two no-load mutual funds: the Canandaigua
Equity Fund ("Equity Fund"), which seeks long term growth of asset
values through capital appreciation and dividend income, and the
Canandaigua Bond Fund ("Bond Fund"), which seeks to earn a high level
of current income with consideration also given to safety of principal.
From inception in September, 1992 through February 9, 1998, the Fund
was designed solely for the investment of retirement funds held in
certain qualified trusts. Effective February 9, 1998, the Fund was
reorganized on a tax free basis from a collective investment trust to a
Delaware business trust. Among other things, this change enabled the
Fund to expand its shareholders from certain qualified individual
retirement trust accounts, to the general public.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
USE OF ESTIMATES -
The financial statements have been prepared in conformity with
generally accepted accounting principles and, as such, include amounts
based on informed estimates and judgments of management with
consideration given to materiality. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS -
Interest bearing cash accounts are considered cash equivalents.
VALUATION OF INVESTMENT SECURITIES AND INCOME RECOGNITION -
Investments consist of debt and equity investment securities of the
United States (U.S.) government and of corporations whose securities
are traded on recognized U.S. securities exchanges. Investment
securities are stated at market value based upon closing sales prices
reported on recognized securities exchanges on the last business day of
the year or, for listed securities having no sales reported and for
unlisted securities, upon last reported bid prices on that date. The
market value of investment securities is subject to daily fluctuations.
Short-term securities with 60
11
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(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
December 31, 1999 are disclosed in the accompanying Schedule of Fund
Investments.
As is customary in the industry, securities transactions are recorded
no later than the first business day after the securities are purchased
or sold. Interest income is reported on the accrual basis. Dividend
income is recorded on the ex-dividend date.
Realized gains and losses on sales of securities are calculated on the
identified cost basis.
Dividends and distributions to shareholders are recorded on the
ex-dividend date and are paid at least annually. Through February 9,
1998, when the Fund operated solely as a collective investment trust,
dividend distributions were not relevant for tax compliance purposes.
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. For the year ended December 31,
1998, $39,727 of dividends were declared and distributed to
shareholders of the Bond Fund.
12
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(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.
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
DECEMBER 31, 1999
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
VALUATION OF SHARES -
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
reductions resulted in a savings to the Bond Fund of $11,118 for the
year ended December 31, 1999.
14
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(3) AGREEMENTS (continued)
----------
The Fund has an administrative service agreement with American Data
Services, Inc. (ADS), for a three year period beginning December, 1997.
Monthly fees are based on a greater of: (1) a sliding scale of $1,500
for a fund with average net assets of under $5 million to $2,500 for a
fund with net assets of $20 million or more: or (2) 1/12 of 0.012% of
the average net assets of a fund for the month. For the year ended
December 31, 1999, the fees for the Bond Fund and Equity Fund amounted
to $18,312 and $30,355, respectively. These fees have historically been
paid by the Company, but for the year ended December 31, 1999 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 year ended
December 31, 1999, the fees for the Bond Fund and Equity Fund amounted
to $16,414 and $27,164, respectively. These fees have historically been
paid by the Company, but for the year ended December 31, 1999 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 year ended
December 31, 1999, the fees for the Bond Fund and Equity Fund amounted
to $11,462 and $11,845, respectively. These fees have historically been
paid by the Company, but for the year ended December 31, 1999 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 year ended December 31, 1999 for these services of $22,800 plus
expenses was paid by the Company for the Bond Fund and Equity Fund.
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.
15
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(3) AGREEMENTS (continued)
----------
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 fiscal 1999 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 $18,000 and Board of Trustee
fees and expenses for board and committee meeting attendance of
approximately $3,900, which fees were assumed by the Company.
During fiscal 1999, the Fund obtained, through a competitive bid
process, a professional liability insurance policy for $12,035 from an
insurance agency in which a director of the Fund has an ownership
interest.
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 year ended December 31, 1999, purchases and sales of
investment securities, excluding cash and cash equivalents, amounted to
the following:
FUND
-------------------------
BOND EQUITY
---- ------
Purchases $ 300,530 $67,130,918
========= ===========
Sales $ 50,011 $63,814,886
========= ===========
Purchases and sales of government securities included in the Bond Fund amounts
were $129,910 and $50,011, respectively. All other purchases and
16
<PAGE>
THE CANANDAIGUA FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(4) PURCHASES AND SALES OF SECURITIES (continued)
----------------------------------
sales in the Bond Fund and Equity Fund were of investment securities,
excluding government securities. Transaction fees paid during the year
ended December 31, 1999 to the Company and The Northern Trust Company
in the amount of approximately $3,450 and $4,225 respectively, were
recorded as an adjustment to the basis of the related securities in the
amount of approximately $7,400 in the Equity Fund and $275 in the Bond
Fund.
(5) UNREALIZED GAINS (LOSSES) ON INVESTMENTS
----------------------------------------
As of December 31, 1999, gross unrealized gains (losses) on investments
based on cost for Federal income taxes of $1,120,252 in the Bond Fund
and $28,761,035 in the Equity Fund are as follows:
FUND
-----------------------------
BOND EQUITY
---- ------
Gross unrealized gains $ 1,787 $6,745,109
Gross unrealized (losses) (46,960) (299,886)
-------- ----------
Net unrealized gain (loss) $(45,173) $6,445,223
======== ==========
The Equity Fund's book cost is higher than the cost for Federal Income
tax purposes due to wash sales in the amount of $98,452 for the year
ended December 31, 1999.
(6) SUBSEQUENT EVENT
----------------
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>
THE CANANDAIGUA FUNDS
CANANDAIGUA BOND FUND
SELECTED PER-SHARE DATA AND RATIOS/SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
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 $ 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>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
THE CANANDAIGUA FUNDS
CANANDAIGUA EQUITY FUND
SELECTED PER-SHARE DATA AND RATIOS/SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
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 (a) (0.20) (0.06) -- 0.01 0.04
Net realized and unrealized gains (losses)
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 (3.74) --
Distributions from net realized gains -- --
--------- -------
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
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>
The accompanying notes are an integral part of these financial statements.
19
