UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07963
The NYSA Series Trust
(Exact name of registrant as specified in charter)
507 Plum Street Suite 120
Syracuse, New York 13204
(Address of principal executive offices)(Zip code)
Robert Cuculich
Pinnacle Advisors LLC
507 Plum Street Suite 120
Syracuse, New York 13204
(Name and address of agent for service)
Registrant's telephone number, including area code: (315) 251-1101
Date of fiscal year end: March 31
Date of reporting period: September 30, 2013
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
NYSA FUND
A SERIES OF NYSA SERIES TRUST
SEMI-ANNUAL REPORT
SEPTEMBER 30, 2013
(UNAUDITED)
This report is provided for the general information of the shareholders of the NYSA Fund. This report is not intended for distribution to prospective investors in the Fund, unless preceded or accompanied by an effective prospectus.
NYSA FUND
PORTFOLIO ILLUSTRATION
SEPTEMBER 30, 2013 (UNAUDITED)
The following chart illustrates the allocation of the Fund’s portfolio among various market sectors as of September 30, 2013. The allocations based on the total market value of the Fund’s portfolio investments, and are calculated as a percentage of total investments.
![[nyencsrs002.gif]](https://capedge.com/proxy/N-CSRS/0001162044-13-001387/nyencsrs002.gif)
NYSA FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2013 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
NYSA Fund (“Fund”) is a non-diversified series of NYSA Series Trust (“Trust”), an open-end management investment company registered under the Investment Company Act of 1940, as amended (“1940 Act”). The Trust was organized as a Massachusetts business trust on November 20, 1996. The Fund was capitalized on February 18, 1997, when affiliates of Pinnacle Advisors LLC (“Adviser”) purchased the initial shares of the Fund at $10 per share. The Fund began the public offering of shares on May 12, 1997.
The following is a summary of the Fund's significant accounting policies followed by the Fund in the preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”):
Securities Valuation – Equity securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market value of such securities. Securities that are traded on any stock exchange or on the NASDAQ over-the-counter market are generally valued by the pricing service at the last quoted sale price. In the absence of a last sale price, an equity security is generally valued by the pricing service at its last bid price. When market quotations are not readily available, or the Adviser determines that the market quotation or the price provided by the pricing service does not accurately reflect the current market value, or when restricted or illiquid securities are being valued, such securities are valued as determined in good faith by the Board of Trustees. The Board has adopted Portfolio Securities Valuation Procedures that, among other things, provide guidelines for the valuation of portfolio securities and delegate the responsibility for determining the fair value of securities for which market quotations are not readily available to a Valuation Committee, subject to review and oversight by the Board of Trustees (“Board”).
The following table sets forth a summary of the changes in the fair value of the Fund’s level 3 investments for the six months ended September 30, 2013:
| | |
| | Investments |
Balance Beginning at April 1, 2013 | $ 313,595 |
Net Realized Gain/Loss on Sale of Investments | (100,000) |
Net Change in Unrealized Appreciation on Investments Held at Period End | 186,982 |
Net Transferred out of Level 3 | - |
Net Transferred into Level 3 | - |
Balance End at September 30, 2013 | $ 400,577 |
See the Fund’s schedule of investments for details on investments and levels.
Investment Income – Dividend income is recorded on the ex-dividend date. Interest income is accrued as earned.
Security Transactions – Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis.
Distributions to Shareholders – Distributions to shareholders arising from net investment income and net realized capital gains, if any, are distributed at least once each year and are recorded on the ex-dividend date. The amount of distributions from net investment income and net realized gains are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These “book/tax” differences are temporary in nature and are primarily due to losses deferred due to wash sales. For the six months ended September 30, 2013, the Fund did not pay any distributions to its shareholders.
Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the period. Actual results could differ from those estimates. Management has evaluated subsequent events through the date the financial statements were issued and determined no events require additional disclosure.
Federal Income Taxes – It is the Fund's policy to comply with the special provisions of the Internal Revenue Code applicable to regulated investment companies. As provided therein, in any fiscal year in which the Fund so qualifies and distributes at least 90% of its taxable net income, the Fund (but not the shareholders) will be relieved of federal income tax on the income distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated investment companies, it is the Fund's intention to declare as dividends in each calendar year at least 98% of its net investment income (earned during the calendar year) and 98% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts from prior years.
2. FAIR VALUE OF INVESTMENTS
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
Level 2 - Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an active market, price for similar instruments, interest rates, prepayment speeds, yield curves, default rates and similar data.
Level 3 - Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund's own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of inputs used as of September 30, 2013 in valuing the Fund’s investments carried at value:
| | | | |
Investments in Securities | Level 1 | Level 2 | Level 3 + | Total |
| | | | |
Common Stocks | $ 2,395,322 | $ - | $ 400,577 | $ 2,795,899 |
Municipal Bonds | - | 116,610 | - | 116,610 |
Debt Security | - | - | - | - |
Short-Term Investments: | | | | |
Huntington Money Market Fund IV | - | 15,564 | - | 15,564 |
| $ 2,395,322 | $ 132,174 | $ 400,577 | $ 2,928,073 |
+ Please see Footnote 1 in notes to financial statements for additional information on Level 3 securities.
There were no significant transfers into or out of Level 1 or Level 2 during the period. It is the Fund’s policy to recognize transfers into and out of Level 1 and Level 2 at the end of the reporting period.
3. INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales and maturities of investment securities, other than short-term investments, amounted to $2,283,539 and $1,980,400, respectively, for the six months ended September 30, 2013.
4. TRANSACTIONS WITH AFFILIATES
Advisory Agreement -Under the terms of an Advisory Agreement, the Fund pays the Advisor a fee, which is computed and accrued daily and paid monthly, at an annual rate of 1.00% of its average daily net assets up to $100 million; 0.95% of such assets from $100 million to $200 million; and 0.85% of such assets in excess of $200 million. For the six months ended September 30, 2013, Advisory Fees were $12,856 in which, $9,994 was voluntarily waived by the Advisor. At September 30, 2013, the Fund owed the Advisor $699.
Portfolio Transactions - Commissions paid by the Fund are based on the per transaction commission charge then in effect for the execution of a transaction for the Fund by the investment advisor. Commissions paid to Pinnacle Investments, Inc., an affiliate of the Advisor, were $9,922, for the six months ended September 30, 2013.
Implementation of a Service Fee Plan - The Fund has adopted a Service Fee Plan, pursuant to which the Fund is permitted to incur expenses of up to 0.25% per year of the Fund’s net assets. Under the Service Fee Plan, the Fund is permitted to reimburse Pinnacle Investments, LLC, the Underwriter, for a portion of its expenses incurred in servicing shareholder accounts. For the six months ended September 30, 2013, $3,331 was paid to the Underwriter for reimbursement of expenses in connection with shareholder accounts. As of September 30, 2013 there were no outstanding Service Fees.
5. CONTROL OWNERSHIP
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates a presumption of control of the fund, under Section 2(a)(9) of the Investment Company Act of 1940. As of September 30, 2013, National Financial Services, for the benefit of others, in aggregate owned approximately 80.24% of the Fund.
6. OTHER INVESTMENTS
Restricted Securities – The Fund purchased 84,332 units of Transluminal Technologies, LLC in an offering exempt from registration under the Securities Act of 1933, as amended. As such, the units are subject to restrictions such as transferability. Also, no market quotations are available for the purpose of valuing this portfolio holding. As of September 30, 2013, the Board valued the units of Transluminal Technologies, LLC at $4.75 per unit, having taken into consideration certain pertinent factors, including the results of operations and any recent offerings of Transluminal Technologies, LLC. Because there are no market quotations for this security, it is possible that the valuation assigned by the Board may differ significantly from the amount that might be ultimately realized in near term and the difference could be material.
The Fund also purchased a debt security from ESPSCO Syracuse LLC (“ESPSCO Note”) in an offering exempt from the registration requirements of the Securities Act of 1933, as amended, originally in the amount of $100,000. The ESPSCO Note has been deemed worthless by the Board due to a recent bankruptcy filing on ESPSCO. As a result, ESPSCO has been permanently written down at a realized loss of $100,000. The Fund did not collect any interest during the six months ended September 30, 2013.
7. TAX MATTERS
The Fund’s tax basis capital gains and losses and undistributable ordinary income are determined only at the end of each fiscal year. For tax purposes, as of March 31, 2013, the following represents that tax basis capital gains and losses and undistributed ordinary income:
Undistributed ordinary income $ -
Capital loss carry forwards expiring: + 3/31/2014
$ 267,408
3/31/2018 574,625
No Expiration 328,794
$ 1,170,827
Post October Capital Loss at 3/31/2013 carried to next fiscal year $445,972.
The Fund is a regulated investment company (as defined in internal revenue code section 851) and is subject to special rules under IRC section 1212 regarding capital loss carry backs and carryovers. These rules prohibit the corporation from carrying back capital losses to any year in which it was a regulated investment company, while allowing capital loss carryovers to eight taxable years (not the usual three) succeeding the loss year. For taxable years beginning after December 22, 2010, regulated investment companies are permitted unlimited carry forwards of net capital losses. Such losses retain their character as either short- or long-term capital losses.
Net capital losses that occurred before December 23, 2010, continue to be treated as short term, and expire according to their original schedule. Such losses are not available to offset capital gains until all net capital losses occurring after December 22, 2010, have been utilized. As a result, some net capital loss carryovers that originated prior to December 23, 2010 may expire.
As of March 31, 2013, the tax basis components of unrealized appreciation (depreciation) and cost of investment securities were as follows:
Gross unrealized appreciation on investment securities $ 192,241
Gross unrealized depreciation on investment securities ($ 337,692)
Net unrealized depreciation on investment securities ($ 145,451)
Cost of investment securities * $ 2,331,456
* The difference between the book cost and tax cost of investments represents disallowed wash sales for tax purposes.
+ The capital loss carryforward will be used to offset any capital gains realized by the Fund in future years through the expiration date. The Fund will not make distributions from capital gains while a capital loss carryforward remains.
8. CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue an unlimited number of no par value shares of separate series. The total paid-in-capital was $4,338,465, as of September 30, 2013. Transactions in capital for the six months ended September 30, 2013 and year ended March 31, 2013 were as follows:
| | | | | |
| Six Months Ended September 30, 2013 | | Year Ended March 31, 2013 |
| Shares | Amount | | Shares | Amount |
Shares sold | 131,745 | $ 914,181 | | 95,482 | $ 585,980 |
Shares redeemed | (83,146) | (571,456) | | (86,338) | (525,009) |
Net increase | 48,599 | $ 342,725 | | 9,144 | $ 60,971 |
9. NEW ACCOUNTING PRONOUNCEMENT
In January 2013, the FASB issued ASU 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which replaced ASU 2011-11. ASU 2011 was intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. ASU 2013-01 limits the scope of the new statement of assets and liabilities offsetting disclosures to derivatives, repurchase agreements and securities lending transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting arrangement or similar agreement. Both ASU 2011-11 and ASU 2013-01 are effective for interim or annual periods beginning on or after January 1, 2013. Management is currently evaluating the impact that these pronouncements may have on the Fund’s financial statements.
In June 2013, the FASB issued ASU 2013-08, Financial Services Investment Companies, which updates the scope, measurement, and disclosure requirements for U.S. GAAP including identifying characteristics of an investment company, measurement of ownership in other investment companies and requires additional disclosures regarding investment company status and following guidance in Topic 946 of the FASB Accounting Standards Codification (FASC). The ASU is effective for interim and annual reporting periods that begin after December 15, 2013. Management is currently evaluating the impact that these pronouncements may have on the Fund’s financial statements.
1 Mr. Williamson was elected to serve as a trustee at a meeting of the Board of Trustees held on March 29, 2013 to fill the vacancy created by the resignation of John Dobek on that date.
2 Mr. Cuculich, an employee of both Pinnacle Capital Advisors, LLC and Pinnacle Capital Management, LLC, has served as the Fund’s Portfolio Manager since February 1, 2013.
* Mr. Masella served as an Independent Trustee from 1997 – 2011.
Item 2. Code of Ethics. Not applicable.
Item 3. Audit Committee Financial Expert.
(a) The registrant’s Board of Trustees has determined that it does not have an audit committee financial expert serving on its audit committee. At this time, the registrant believes that the experience provided by each member of the audit committee together offer the registrant adequate oversight for the registrant’s level of financial complexity.
Item 4. Principal Accountant Fees and Services. Not applicable.
Item 5. Audit Committee of Listed Companies. Not applicable.
Item 6. Schedule of Investments.
Not applicable – schedule filed with Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not applicable.
Item 8. Portfolio Managers of Closed-End Funds. Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Funds. Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant has not adopted procedures by which shareholders may recommend nominees to the registrant's board of trustees.
Item 11. Controls and Procedures.
(a) The registrant’s president and chief financial officer concluded that the disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) were effective as of a date within 90 days of the filing date of this report, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Code of Ethics. Not Applicable.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(b) Certification pursuant to Section 906 Certification of the Sarbanes-Oxley Act of 2002. Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
The NYSA Series Trust
By /s/Robert Cuculich
*Robert Cuculich
President
Date December 3, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /s/Robert Cuculich
*Robert Cuculich
President
Date December 3, 2013
By /s/Benjamin R. Quilty
*Benjamin R. Quilty
Chief Financial Officer
Date December 3, 2013
* Print the name and title of each signing officer under his or her signature.
