<PAGE> 1
As filed with the Securities and Exchange Commission on November 26, 1997
Registration No. 2-82278
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
POST-EFFECTIVE AMENDMENT NO. 16 /x/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
AMENDMENT NO. 17 /x/
MUNICIPAL FUND FOR NEW YORK INVESTORS, INC.
(Exact Name of Registrant As Specified In Charter)
Bellevue Park Corporate Center
400 Bellevue Parkway, Suite 100
Wilmington, Delaware 19809
(Address of Principal Executive Offices)
Registrant's Telephone Number: (302) 792-2555
EDWARD J. ROACH
Bellevue Park Corporate Center
400 Bellevue Parkway, Suite 100
Wilmington, Delaware 19809
(Name and Address of Agent For Service)
Copies to:
MORGAN R. JONES, ESQ.
Drinker Biddle & Reath
1345 Chestnut Street, Suite 1100
Philadelphia, Pennsylvania 19107
It is proposed that this filing will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[x] on December 1, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
<PAGE> 2
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE> 3
NEW YORK INVESTORS, INC.
("New York Money Fund")
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350);
Suite 100 For current yield information call: 800-821-6006
Wilmington, Delaware 19809 (Code: New York Money-53; New York Money Dollar-55;
New York Money Plus-56).
For other information call: 800-821-7432 OR VISIT OUR
WEB SITE AT WWW.PIF.COM.
</TABLE>
Municipal Fund for New York Investors, Inc. (the "Fund") is a no-load,
open-end investment company. It is designed primarily to provide New York
institutional investors and their customers with as high a level of current
interest income that is exempt from federal income tax and, to the extent
possible, from New York State and New York City personal income taxes as is
consistent with the preservation of capital and relative stability of principal.
Portfolio securities held by the Fund will generally have remaining maturities
of 13 months or less and will be determined by the Fund's investment adviser to
have minimal credit risk. (See "Investment Objective and Policies.")
PNC Institutional Management Corporation ("PIMC") and PNC Bank,
National Association ("PNC Bank") serve as the Fund's adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor. Shares
may not be purchased by individuals directly but, as indicated above,
institutional investors, such as banks and broker-dealers, may purchase shares
for accounts maintained by individuals.
THE FUND MAY INVEST A SIGNIFICANT PERCENTAGE OF ITS ASSETS IN A SINGLE
ISSUER. THEREFORE, INVESTMENT IN THE FUND MAY BE RISKIER THAN AN INVESTMENT IN
OTHER TYPES OF MONEY MARKET FUNDS.
------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR
ENDORSED BY, PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY, GUARANTEED BY,
OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY.
INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED. THERE CAN BE NO ASSURANCE THAT
THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE.
------------------
This Prospectus briefly sets forth certain information about the Fund
that investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information has been filed with the
Securities and Exchange Commission. The current Statement of Additional
Information is available to investors without charge by calling the Fund at
800-821-7432. The Prospectus and Statement of Additional Information are also
available for reference, along with other related materials, on the SEC Internet
Web Site (http://www.sec.gov). The Statement of Additional Information, as may
be amended from time to time, is incorporated by reference in its entirety into
this Prospectus.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------
December 1, 1997
<PAGE> 4
BACKGROUND AND EXPENSE INFORMATION
The Fund was organized as a Maryland corporation on March 4, 1983 and
currently offers three separate series of shares-New York Money ("Money"), New
York Money Dollar ("Dollar") and New York Money Plus ("Plus"). The public
offering of Money shares commenced on August 22, 1983, and the public offering
of Dollar and Plus shares commenced on October 8, 1985. Shares of each series
represent equal pro rata interests in a single portfolio of high quality,
short-term, tax-exempt obligations maintained by the Fund (See "Investment
Objective and Policies"), except that Dollar and Plus shares bear service fees
payable by the Fund (at the rate of .25% per annum) to institutional investors
for distribution and/or support services they provide to the beneficial owners
of such shares. (See "Management of the Fund--Service Organizations.") Because
of the service fees borne by Dollar and Plus shares, the net yield on such
shares can be expected, at any given time, to be approximately .25% lower than
the net yield on Money shares.
EXPENSE SUMMARY
<TABLE>
<CAPTION>
Money Dollar Plus
Shares Shares Shares
(estimated)
------------- ------------- -------------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees After Fee Waivers................... .05% .05% .05%
12b-1 Fees.......................................... -- -- .25%
Other Expenses...................................... .15% .40% .15%
Administration Fees After Fee Waivers........... .05% .05% .05%
Non-12b-1 Fees.................................. -- .25% --
Other Expenses.................................. .10% .10% .10%
===== ===== =====
Total Fund Operating
Expenses After
Fee Waivers..................................... .20% .45% .45%
</TABLE>
<TABLE>
<CAPTION>
Example
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) an
hypothetical 5% annual return and (2) redemption at the end of each time
period with respect to the following share:
Money Shares................................................ $2 $ 6 $11 $26
Dollar Shares............................................... $5 $14 $25 $57
Plus Shares................................................. $5 $14 $25 $57
</TABLE>
The foregoing tables are intended to assist investors in understanding
the expenses the Fund pays. Investors bear these expenses indirectly since they
reduce the amount of income paid by the Fund to investors as dividends. In
addition, institutional investors may charge their customers fees for providing
services in connection with investments in the Fund's Dollar and Plus shares.
(For more complete descriptions of the various costs and expenses, see
"Management of the Fund" in the Prospectus and Statement of Additional
Information.) For the fiscal year ended July 31, 1997, absent voluntary fee
waivers by the Fund's service providers, "Total Fund Operating Expenses" for the
Fund's Money, Dollar and Plus shares would have been .49%, .74%, and .74%
(estimated), respectively, of the Fund's average daily net assets. The
investment advisor and administrators may from time to time waive the advisory
and administration fees otherwise payable to them or may reimburse the Fund for
its operating expenses.
-2-
<PAGE> 5
The foregoing table has not been audited by the Fund's independent accountants.
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RETURN OR OPERATING EXPENSES. ACTUAL INVESTMENT RETURN
AND OPERATING EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
-3-
<PAGE> 6
FINANCIAL HIGHLIGHTS
The tables of "Financial Highlights" below, a part of the Fund's
financial statements, set forth certain information concerning the historic
investment results for Money, Dollar and Plus shares. The financial highlights
for the fiscal years ended July 31, 1997, 1996, 1995, 1994 and 1993 have been
audited by Coopers & Lybrand L.L.P., the Fund's independent accountants, whose
report therein is incorporated by reference into the Statement of Additional
Information along with the financial statements. This information should be read
in conjunction with the Fund's financial statements and notes for the year ended
July 31, 1997, incorporated by reference into the Statement of Additional
Information. More information about the performance of the Fund is also
contained in the Annual Report to Shareholders, which may be obtained without
charge by calling 800-821-7432.
FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout each period)
<TABLE>
<CAPTION>
Money Shares
------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
7/31/97 7/31/96 7/31/95 7/31/94 7/31/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income From Investment Operations:
Net Investment Income 0.0334 0.0339 0.0338 0.0226 0.0230
-------- -------- -------- -------- --------
Total From Investment Operations 0.0334 0.0339 0.0338 0.0226 0.0230
-------- -------- -------- -------- --------
Less Distributions:
Dividends From Net Investment
Income (0.0334) (0.0339) (0.0338) (0.0226) (0.0230)
-------- -------- -------- -------- --------
Total Distributions (0.0334) (0.0339) (0.0338) (O.0226) (0.0230)
-------- -------- -------- -------- --------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Returns 3.39% 3.44% 3.43% 2.29% 2.33%
Ratios/Supplemental Data:
Net Assets, End of Year $(000) 269,821 272,145 246,650 279,483 204,670
Ratios of Expenses to Average Net Assets(1) 0.20% 0.20% 0.20% 0.20% 0.25%
Ratios of Net Investment Income to
Average Daily Net Assets 3.34% 3.37% 3.36% 2.28% 2.31%
</TABLE>
<TABLE>
<CAPTION>
Money Shares
------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
7/31/92 7/31/91 7/31/90 7/31/89 7/31/88
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income From Investment Operations:
Net Investment Income 0.0321 0.0441 0.0535 0.0548 0.0445
-------- -------- -------- -------- --------
Total From Investment Operations 0.0321 0.0441 0.0535 0.0548 0.0445
-------- -------- -------- -------- --------
Less Distributions:
Dividends From Net Investment
Income (0.0321) (0.0441) (0.0535) (O.0548) (0.0445)
-------- -------- -------- -------- --------
Total Distributions (0.0321) (0.0441) (0.0535) (0,0548) (0.0445)
-------- -------- -------- -------- --------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Returns 3.26% 4.50% 5.48% 5.62% 4.52%
Ratios/Supplemental Data:
Net Assets, End of Year $(000) 267,655 284,834 310,289 287,641 315,111
Ratios of Expenses to Average Net Assets(1) 0.30% 0.30% 0.30% 0.30% 0.30%
Ratios of Net Investment Income to
Average Daily Net Assets 3.20% 4.42% 5.35% 5.45% 4.46%
</TABLE>
- ------------------------
(1) Annualized operating expense ratios before waivers of fees by the
Investment Adviser and Administrator for Money shares for the years
ended July 31, 1997, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989 and
1988 were .49%, .50%, .49%, .48%, .51%, .49%, .49%, .49%, .49%, and
.49%, respectively.
-4-
<PAGE> 7
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Dollar Shares
----------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
7/31/97 7/31/96(1) 7/31/95(1) 7/31/94(1) 7/31/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income From Investment Operations:
Net Investment Income 0.0309 0.0089 0.000 0.0127 0.0205
-------- -------- -------- -------- --------
Total From Investment Operations . 0.0309 0.0089 0.000 0.0127 0.0205
-------- -------- -------- -------- --------
Less Distributions:
Dividends From Net Investment
Income (0.0309) (0.0089) 0.00 (0.0127) (0.0205)
-------- -------- -------- -------- --------
Total Distributions (0.0309) (0.0089) 0.00 (0.0127) (0.0205)
-------- -------- -------- -------- --------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Returns 3.14% 3.05%(2) -- 1.96%(2) 2.08%
Ratios/Supplemental Date:
Net Assets, End of Year $(000) 1,148 20 -- -- 46,509
Ratios of Expenses to Average
Net Assets(3) 0.45% 0.45%(2) -- 0.45%(2) 0.50%
Ratios of Net Investment Income to
Average Daily Net Assets 3.09%(2) 3.07%(2) -- 1.94%(2) 2.06%
</TABLE>
<TABLE>
<CAPTION>
Dollar Shares
--------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
7/31/92 7/31/91 7/31/90 7/31/89 7/31/88
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income From Investment Operations:
Net Investment Income 0.0296 0.0416 0.0510 0.0523 0.0420
-------- -------- -------- -------- --------
Total From Investment Operations . 0.0296 0.0416 0.0510 0.0523 0.0420
-------- -------- -------- -------- --------
Less Distributions:
Dividends From Net Investment
Income (0.0296) (0.0416) (0.0510) (0.0523) (0.0420)
-------- -------- -------- -------- --------
Total Distributions (0.0296) (0.0416) (0.0510) (0.0523) (0.0420)
-------- -------- -------- -------- --------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Returns 3.01% 4.25% 5.23% 5.37% 4.27%
Ratios/Supplemental Date:
Net Assets, End of Year $(000) 50,094 54,613 69,705 70,839 82,618
Ratios of Expenses to Average
Net Assets(3) 0.55% 0.55% 0.55% 0.55% 0.55%
Ratios of Net Investment Income to
Average Daily Net Assets 2.95% 4.17% 5.10% 5.20% 4.21%
</TABLE>
- ----------------------------
(1) There were no Dollar shares outstanding during the period from March
28, 1994 to April 14, 1996.
(2) Annualized.
(3) Annualized operating expense ratios before waivers of fees by the
Investment Adviser and Administrator for Dollar shares for the years
ended July 31, 1997, 1996, 1994, 1993, 1992, 1991, 1990, 1989 and 1988
were .74%, .75% (annualized), .73% (annualized), .76%, .74%, .74%,
.74%, .74% and .74%, respectively.
-5-
<PAGE> 8
<TABLE>
<CAPTION>
Plus Shares
------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
7/31/97(1) 7/31/96(1) 7/31/95(1) 7/31/94 7/31/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income From Investment Operations:
Net Investment Income 0.00 0.00 0.0090 0.0201 0.0205
-------- -------- -------- -------- --------
Total From Investment Operations 0.00 0.00 0.0090 0.0201 0.0205
-------- -------- -------- -------- --------
Less Distributions:
Dividends From Net Investment
Income 0.00 0.00 (0.0090) (0.0201) (0.0205)
-------- -------- -------- -------- --------
Total Distributions 0.00 0.00 (0.0090) (0.0201) (0.0205)
-------- -------- -------- -------- --------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Returns -- -- 2.69%(2) 2.04% 2.08%
Ratios/Supplemental Data:
Net Assets, End of Year $(000) -- -- -- 435 1,481
Ratios of expenses to Average
Net Assets(3) -- -- 0.45%(2) 0.45% 0.50%
Ratios of Net Investment Income to
Average Daily Net Assets -- -- 2.64%(2) 2.03% 2.06%
</TABLE>
<TABLE>
<CAPTION>
Plus Shares
---------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
7/31/92 7/31/91 7/31/90 7/31/89 7/31/88
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income From Investment Operations:
Net Investment Income 0.0296 0.0416 0.0510 0.0523 0.0420
-------- -------- -------- -------- --------
Total From Investment Operations 0.0296 0.0416 0.0510 0.0523 0.0420
-------- -------- -------- -------- --------
Less Distributions:
Dividends From Net Investment
Income (0.0296) (0.0416) (0.0510) (0.0523) (0.0420)
-------- -------- -------- -------- --------
Total Distributions (0.0296) (0.0416) (0.0510) (0.0523) (0.0420)
-------- -------- -------- -------- --------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Returns 3.01% 4.25% 5.23% 5.37% 4.27%
Ratios/Supplemental Data:
Net Assets, End of Year $(000) 243 461 404 513 1,381
Ratios of expenses to Average
Net Assets(3) 0.55% 0.55% 0.55% 0.55% 0.55%
Ratios of Net Investment Income to
Average Daily Net Assets 2.95% 4.17% 5.10% 5.20% 4.21%
</TABLE>
- -----------------------------
(1) There were no Plus shares outstanding during the period from December
2, 1994 to July 31, 1997.
(2) Annualized.
(3) Annualized operating expense ratios before waivers of fees by the
Investment Adviser and Administrator for Plus shares for the years
ended July 31, 1995, 1994, 1993, 1992, 1991, 1990, 1989, and 1988 were
.73% (annualized), .73%, .76%, .74%, .74%, .74%, .74% and .74%,
respectively.
-6-
<PAGE> 9
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund is a no-load, open-end, non-diversified investment company
which has an investment objective to provide investors with as high a level of
current interest income that is exempt from federal income tax and, to the
extent possible, from New York State and New York City personal income taxes as
is consistent with the preservation of capital and relative stability of
principal. There can be, of course, no assurance that the Fund will achieve its
investment objective. The Fund has a distribution plan applicable to one class
of its shares and a service plan applicable to another class of its shares. (See
"Service Organizations.")
Substantially all of the Fund's assets are invested in debt obligations
issued by or on behalf of the State of New York and other states, territories,
and possessions of the United States, the District of Columbia, and their
respective authorities, agencies, instrumentalities and political subdivisions,
and tax-exempt derivative securities such as tender option bonds, participations
beneficial interests in trusts and partnership interests ("Municipal
Obligations"). Dividends paid by the Fund that are derived from interest on
obligations that is exempt from taxation under the Constitution or statutes of
New York ("New York Municipal Obligations") are exempt from regular federal, New
York State and New York City personal income tax. New York Municipal Obligations
include municipal securities issued by the State of New York and its political
sub-divisions, as well as certain other governmental issuers such as the
Commonwealth of Puerto Rico. Dividends derived from interest on Municipal
Obligations other than New York Municipal Obligations are exempt from federal
income tax but may be subject to New York State and New York City personal
income tax. (See, however, "Taxes" below concerning treatment of exempt-interest
dividends paid by the Fund for purposes of the federal alternative minimum tax
applicable to particular classes of investors.) The Fund expects that, except
during temporary defensive periods or when acceptable securities are unavailable
for investment by the Fund, the Fund's assets will be invested primarily in New
York Municipal Obligations, although the amount of the Fund's assets invested in
such securities will vary from time to time.
The Fund will not knowingly purchase securities the interest on which
is subject to federal income tax; however, the Fund may hold uninvested cash
reserves pending investment during temporary defensive periods or, if in the
opinion of the Fund's investment adviser, suitable tax-exempt obligations are
unavailable. Uninvested cash reserves will not earn income.
The Fund invests in Municipal Obligations which are determined by the
Fund's investment adviser to present minimal credit risks pursuant to guidelines
approved by the Fund's Board of Directors pursuant to Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act"). Pursuant to these
guidelines, the Fund is authorized to purchase instruments that are determined
to have minimum credit risk and which are "Eligible Securities" under the Rule.
"Eligible securities" are (i) instruments which are rated at the time of
purchase in one of the top two rating categories by two unaffiliated nationally
recognized statistical rating organizations ("Rating Organizations"), (ii)
instruments rated in one of the top two rating categories by one such Rating
Organizations (if only one such organization rates the instrument), (iii)
instruments issued by issuers with short-term debt having such ratings, and (iv)
unrated instruments determined by the investment adviser, pursuant to procedures
approved by the Board of Directors, to be of comparable quality to such
instruments, (See the Appendix
-7-
<PAGE> 10
to the Statement of Additional Information for a description of applicable
ratings of the Rating Organizations).
The Fund intends to use its best efforts to maintain its net asset
value at $1.00 per share, and computes its net asset value using the amortized
cost method. In connection with its use of this valuation method, the Fund
limits the dollar-weighted average maturity of its portfolio to not more than 90
days and the remaining maturity of each portfolio security to not more than 13
months (with certain exceptions).
The Fund's investment objective and the policies described herein may
be changed by its Board of Directors without the affirmative vote of the holders
of a majority of the Fund's outstanding shares, except that the Fund may not
change the following investment limitations without such a vote of shareholders.
The Fund may not:
1. Invest less than 80% of its assets in securities the
interest on which is exempt from federal income tax, except during
defensive periods or during periods of unusual market conditions.
2. Purchase the securities of any issuer if as a result more
than 5% of the value of the Fund's total assets would be invested in
the securities of such issuer, except that (a) up to 50% of the value
of the Fund's total assets may be invested without regard to this 5%
limitation provided that no more than 25% of the value of the Fund's
total assets are invested in the securities of any one issuer and (b)
this 5% limitation does not apply to securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. For purposes of
this limitation, a security is considered to be issued by the
governmental entity (or entities) whose assets and revenues back the
security, or, with respect to a private activity bond that is backed
only by the assets and revenues of a non-governmental user, by such
non-governmental user. In certain circumstances, the guarantor of a
guaranteed security may also be considered to be an issuer in
connection with such guarantee, except that a guarantee of a security
shall not be deemed to be a security issued by the guarantor when the
value of all securities issued and guaranteed by the guarantor, and
owned by the Fund, does not exceed 10% of the value of the Fund's total
assets.
3. Borrow money except from banks for temporary purposes and
then in amounts not in excess of 10% of the value of the Fund's assets
at the time of such borrowing; or mortgage, pledge or hypothecate any
assets except in connection with any such borrowing and in amounts not
in excess of the lesser of the dollar amounts borrowed or 10% of the
value of the Fund's assets at the time of such borrowing. (This
borrowing provision is not intended for investment leverage, but solely
to facilitate management of the Fund's portfolio by enabling the Fund
to meet redemption requests when the liquidation of portfolio
securities is deemed to be disadvantageous or inconvenient, and hence
the Fund may not purchase any portfolio securities while its borrowings
are outstanding.)
4. Invest more than 10% of the value of the Fund's total
assets in illiquid securities which may be illiquid due to legal or
contractual restrictions on resale or the absence of readily available
market quotations.
5. Purchase any securities except securities issued by the
United States, any state territory or possession of the United States,
the District of Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions, which would cause more
than 25% of the value of the Fund's total assets at the time of
purchase to
-8-
<PAGE> 11
be invested in the securities of issuers conducting their principal business
activities in the same industry.
Opinions relating to validity of Municipal Obligations and to the
exemption of interest thereon from federal income tax (and, with respect to New
York Municipal Obligations, to the exemption of interest thereon from New York
State and New York City personal income taxes) are rendered by bond counsel to
the respective issuers at the time of issuance, and opinions relating to the
validity of and the tax-exempt status of payments received by the Fund from
tax-exempt derivatives are rendered by counsel to the respective sponsors of
such derivatives. The Fund and its investment adviser will rely on such opinions
and will not review independently the underlying proceedings relating to the
issuance of Municipal Obligations, the creation of any tax-exempt derivative
securities, or the bases for such opinions.
TYPES OF MUNICIPAL OBLIGATIONS
The two principal classifications of Municipal Obligations that may be
held by the Fund are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Revenue securities may include private activity bonds.
Such bonds may be issued by or on behalf of public authorities to finance
various privately operated facilities and are not payable from the unrestricted
revenues of the issuer. As a result, the credit quality of private activity
bonds is frequently related directly to the credit standing of private
corporations or other entities.
The Fund's portfolio may also include "moral obligation" securities,
which are normally issued by special purpose public authorities. If the issuer
of moral obligation securities is unable to meet its debt service obligations
from current revenues, it may draw on a reserve fund, the restoration of which
is a moral commitment but not a legal obligation of the state or municipality
that created the issuer.
OTHER INVESTMENT PRACTICES
Municipal Obligations purchased by the Fund may include variable and
floating rate demand instruments issued by industrial development authorities
and other governmental entities and which provide for adjustments in the
interest rate on certain reset dates or whenever a specified interest rate index
changes, respectively. Variable and floating rate instruments are subject to the
credit quality standards described above. In some cases the Fund may require
that the obligation to pay the principal of the instrument be backed by a letter
or line of credit or guarantee. Adverse developments affecting the banking
industry generally or a particular bank or financial institution that has
provided its credit or guarantee with respect to a Municipal Obligation held by
the Fund, including a change in the credit quality of any such bank or financial
institution, could result in a loss to the Fund and adversely affect the value
of its shares. Such instruments may carry stated maturities in excess of 13
months provided that the maturity-shortening provisions stated in Rule 2a-7 are
satisfied. Although a particular variable or floating rate demand instrument may
not be actively traded in a secondary market, in some cases, the Fund may be
entitled to principal on demand and may be able to resell such instruments in
the dealer market.
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<PAGE> 12
The Fund may also purchase Municipal Obligations on a "when-issued"
basis. When-issued securities are securities purchased for delivery beyond the
normal settlement date at a stated price and yield. The Fund generally will not
pay for such securities or start earning interest on them until they are
received. Securities purchased on a when-issued basis are recorded as an asset
and are subject to changes in value based upon changes in the general level of
interest rates. The Fund expects that commitments to purchase when-issued
securities will not exceed 25% of the value of its total assets absent unusual
market conditions, and that a commitment by the Fund to purchase when-issued
securities will not exceed 45 days. The Fund does not intend to purchase
when-issued securities for speculative purposes but only in furtherance of its
investment objective.
In addition, the Fund may acquire "stand-by commitments" with respect
to Municipal Obligations held in its portfolio. Under a stand-by commitment, a
dealer agrees to purchase at the Fund's option specified Municipal Obligations
at a price equal to their amortized cost value plus accrued interest. The Fund
will acquire stand-by commitments solely to facilitate portfolio liquidity and
does not intend to exercise its rights thereunder for trading purposes.
RISK FACTORS
The Fund is concentrated in securities issued by the State of New York
or entities within the State of New York and therefore, investment in the Fund
may be riskier than an investment in other types of money market funds.
The Fund intends to follow the diversification standards set forth in
the 1940 Act except to the extent, in the investment adviser's judgment, that
non-diversification is appropriate in order to maximize the percentage of the
Fund's assets that are New York Municipal Obligations. The investment return on
a non-diversified portfolio typically is dependent upon the performance of a
smaller number of issuers relative to the number of issuers held in a
diversified portfolio. In the event of changes in the financial condition of or
in the market's assessment of certain issuers, the Fund's maintenance of large
positions in the obligations of a small number of issuers may affect the value
of the Fund's portfolio to a greater extent than that of a diversified
portfolio.
Although the Fund does not presently intend to do so on a regular
basis, it may invest more than 25% of its assets in Municipal Obligations the
interest on which is paid solely from revenues of similar projects if such
investment is deemed necessary or appropriate by the Fund's investment adviser.
To the extent that the Fund's assets are concentrated in Municipal Obligations
payable from revenues on similar projects, the Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if the Fund's assets were not so concentrated.
Certain other risks with respect to portfolio securities which may be
held by the Fund from time to time are discussed herein and in the Statement of
Additional Information.
SPECIAL CONSIDERATIONS AFFECTING THE FUND
The Fund's ability to achieve its investment objective is dependent
upon the ability of the issuers of New York Municipal Obligations to meet their
continuing obligations for the payment of principal and interest. New York State
and New York City face long-term economic problems that could seriously affect
their ability and that of other issuers of New York Municipal Obligations to
meet their financial obligations.
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<PAGE> 13
Certain substantial issuers of New York Municipal Obligations
(including issuers whose obligations may be acquired by the Fund) have
experienced serious financial difficulties in recent years. These difficulties
have at times jeopardized the credit standing and impaired the borrowings
abilities of all New York issuers and have generally contributed to higher
interest costs for their borrowing and fewer markets for their outstanding debt
obligations. In recent years, several different issues of municipal securities
of New York State and its agencies and instrumentalities and of New York City
have been downgraded by Standard & Poor's Ratings Services ("S&P") and Moody's
Investors Service, Inc. ("Moody's"). On the other hand, strong demand for New
York Municipal Obligations has at times had the effect of permitting New York
Municipal Obligations to be issued with yields relatively lower, and after
issuance, to trade in the market at prices relatively higher, than comparably
rated municipal obligations issued by other jurisdictions. A recurrence of the
financial difficulties previously experienced by certain issuers of New York
Municipal Obligations could result in defaults or declines in the market values
of those issuers' existing obligations and, possibly, in the obligations of
other issuers of New York Municipal Obligations. Although as of the date of this
Prospectus, no issuers of New York Municipal Obligations are in default with
respect to the payment of their Municipal Obligations, the occurrence of any
such default could affect adversely the market values and marketability of all
New York Municipal Obligations and, consequently, the net asset value of the
Fund's portfolio.
Other considerations affecting the Fund's investments in New York
Municipal Obligations are summarized in the Statement of Additional Information.
PURCHASE OF SHARES
The Fund's shares are sold to institutional investors at the net asset
value per share next determined after receipt of a purchase order by PFPC, the
Fund's transfer agent.
Purchase orders for shares will be accepted by the Fund only on a day
on which both the New York Stock Exchange and the Federal Reserve Bank of
Philadelphia are open for business (a "Business Day"), and must be transmitted
to PFPC by telephone at 800-441-7450 (in Delaware: 302-791-5350) or through the
Fund's computer access program. Orders accepted by PFPC by Noon, Eastern Time,
will be executed the same day if PNC Bank, the Fund's Custodian, has received
payment by 4:00 P.M., Eastern Time, that day. Orders received after Noon,
Eastern Time and orders for which payment has not been received by 4:00 P.M.
Eastern Time, will not be accepted and notice thereof will be given to the
institution placing the order. Payment for shares may be made only in Federal
funds or other funds immediately available to PNC Bank. Payment for orders which
are not received or accepted will be returned after prompt inquiry by PNC Bank
to the sending institution.
The minimum initial investment is $5,000; however, broker-dealers and
other institutional investors may set a higher minimum for their customers.
There is no minimum subsequent investment. The Fund may in its discretion limit
or reject any order for shares.
Conflict of interest restrictions may apply to an institution's receipt
of compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar or Plus shares. Institutions, including banks regulated by the
Comptroller of the Currency and investment advisers and other money managers
subject to the jurisdiction of the Securities and Exchange Commission, the
Department of Labor or state securities commissions, should
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<PAGE> 14
consult legal counsel before investing in Dollar or Plus shares. (See also
"Management of the Fund - Banking Laws.")
REDEMPTION OF SHARES
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC by telephone in the
manner described under "Purchase of Shares." Shares are redeemed at the net
asset value per share next determined after receipt of the redemption order by
PFPC. While the Fund intends to use its best efforts to maintain the net asset
value per share of each of its series at $1.00, the proceeds paid upon
redemption may be more or less than the amount invested depending upon a share's
net asset value at the time of redemption.
Payment for redeemed shares for which a redemption order is accepted by
PFPC prior to Noon, Eastern Time, on a Business Day is normally made in Federal
funds wired to the redeeming shareholder on the same Business Day. Payment for
redeemed shares for which a redemption order is accepted by PFPC after Noon,
Eastern Time, on such a Business Day or on a day that PNC Bank is closed is
normally made in Federal funds wired to the redeeming shareholder on the next
Business Day that PNC Bank is open. The Fund reserves the right to wire
redemption proceeds within 7 days after receiving the redemption order if, in
the judgment of the Fund's administrator, an earlier payment could adversely
affect the Fund.
The Fund may suspend the right of redemption or postpone the date of
payment upon redemption (as well as suspend or postpone the recordation of the
transfer of its shares) for such periods as are permitted under the 1940 Act.
The Fund reserves the right to redeem the shares of the Fund owned by a
shareholder at their net asset value if the value of such shares is less than
$4,000. Any such shareholder will first be notified in writing that its shares
have a value of less than $4,000 and be allowed 60 days to make an additional
investment before the redemption is processed by the Fund. The Fund may also
redeem shares involuntarily (and restrict the transfer of the shares) under
certain special circumstances described in the Statement of Additional
Information under "Additional Purchase and Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase
and redemption orders is determined by PIMC as of Noon and 4:00 P.M., Eastern
Time, on each Business Day (excluding those holidays on which the Federal
Reserve Bank of Philadelphia or the New York Stock Exchange is closed).
Currently, the holidays which the New York Stock Exchange and the Federal
Reserve Bank of Philadelphia observe are New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day and the preceding Friday or subsequent Monday
when one of these holidays falls on a Saturday or Sunday, respectively.
Additionally, the Federal Reserve Bank of Philadelphia is closed on Veterans'
Day and Columbus Day. The net asset value per share of each of the Fund's series
is the same and is calculated by adding the value of all of the Fund's portfolio
securities and other assets, subtracting liabilities (including the liability
for the expenses of each series and dividends declared with respect to each
series) and dividing the result by the number of the Fund's outstanding shares
of such series. Portfolio securities are valued on the basis of amortized cost.
Under this method, the Fund values a portfolio security at cost on the date of
purchase and thereafter assumes a constant amortization of any discount or
premium until maturity of the security. As a
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<PAGE> 15
result, the value of the security for purposes of determining net asset value
normally does not change in response to fluctuating interest rates. While the
amortized cost method seems to provide certainty in portfolio valuation, it may
result in periods during which values, as determined by amortized cost, are
higher or lower than the amount the Fund would receive if it sold the
securities.
Shares of each of the Fund's series are sold and redeemed without
charge by the Fund, although Service Organizations (see below) and other
institutional investors purchasing or holding Fund shares for their customers'
accounts may charge customers for cash management and other services provided in
connection with their accounts including, for example, account maintenance fees,
compensating balance requirements or fees based upon account transactions,
assets or income. Such charges will reduce the yield of the Fund to such
customers. A customer should therefore read this Prospectus in light of the
terms governing its account with a Service Organization (or other institution)
before purchasing Fund shares. An institution purchasing or redeeming Fund
shares on behalf of its customers is responsible for transmitting orders to the
Fund in accordance with its agreements with the customers.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The business and affairs of the Fund are managed under the direction of
its Board of Directors.
The directors of the Fund are as follows:
Francis E. Drake, Jr. is the retired Chairman of the Board and Chief
Executive Officer of Rochester Gas and Electric Corp.
Rodney D. Johnson is President of Fairmount Capital Advisors, Inc.
Thomas A. Melfe is a Partner of the law firm of Donovan Leisure Newton
& Irvine.
Anthony M. Santomero is the Richard K. Mellon Professor of Finance at
The Wharton School, University of Pennsylvania.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned indirect subsidiary of PNC Bank, serves as the
Fund's investment adviser. PIMC is one of the largest bank managers of mutual
funds with assets currently under management in excess of $30 billion. PIMC was
organized in 1977 by PNC Bank to perform advisory services for investment
companies and has its principal offices at 400 Bellevue Parkway, Wilmington,
Delaware 19809. PNC Bank serves as the Fund's sub-adviser. PNC Bank is one of
the largest bank managers of investments for individuals in the United States,
and together with its predecessors has been in the business of managing the
investments of fiduciary and other accounts since 1847. PNC Bank is a
wholly-owned, indirect subsidiary of PNC Bank Corp. and has its principal
offices at 1600 Market Street, Philadelphia, Pennsylvania 19103. In 1973,
Provident National Bank (predecessor to PNC Bank) commenced advising the first
institutional money market mutual fund -- a U.S. dollar-denominated constant net
asset value fund -- offered in the United States.
PNC Bank Corp., a multi-bank holding company headquartered in
Pittsburgh, Pennsylvania, is one of the largest financial services
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<PAGE> 16
organizations in the United States, with banking subsidiaries in Pennsylvania,
New Jersey, Delaware, Ohio, Kentucky, Indiana, Massachusetts and Florida. Its
major businesses include corporate banking, consumer banking, real estate
banking, mortgage banking and asset management.
As investment adviser, PIMC manages the Fund's portfolio and is
responsible for all purchases and sales of the Fund's portfolio securities. PIMC
also maintains certain of the Fund's financial accounts and records and computes
the Fund's net asset value and net income. For the investment advisory services
provided and expenses assumed by it, PIMC is entitled to receive a fee, computed
daily and payable monthly at the annual rate of .20% of the Fund's average net
assets. PIMC and the administrators may from time to time reduce the investment
advisory and administration fees otherwise payable to them or may reimburse the
Fund for its operating expenses. For the fiscal year ended July 31, 1997, the
Fund paid advisory fees to PIMC (after fee waivers) of .05% of the Fund's
average daily net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the investment advisory fee paid by the Fund to PIMC (subject to certain
adjustment in certain circumstances). The sub-advisory fees paid by PIMC to PNC
Bank have no effect on the investment advisory fees payable to the Fund to PIMC.
The services provided by PNC Bank and PIMC and the fees payable by the Fund for
these services are described further in the Statement of Additional Information
under "Management of the Company."
ADMINISTRATORS
PFPC whose principal business address is 400 Bellevue Parkway,
Wilmington, Delaware 19809 and PDI, whose principal business address is Four
Falls Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428, serve
as co-administrators. PFPC is an indirect wholly-owned subsidiary of PNC Bank
Corp. All of the outstanding stock of PDI is owned by Monroe Haegele, PDI's
chief executive officer. The administrative services provided
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<PAGE> 17
by the administrators, which are described more fully in the Statement of
Additional Information, include providing and supervising the operation of an
automated data processing system to process purchase and redemption orders;
assisting in maintaining the Fund's Wilmington, Delaware office; performing
administrative services in connection with the Fund's computer access program
maintained to facilitate shareholder access to the Fund; accumulating
information for and coordinating the preparation of reports to the Fund's
shareholders and the SEC; and maintaining the registration or qualification of
the Fund's shares for sale under state securities laws. PFPC and PDI are each
responsible for carrying out the duties undertaken pursuant to the
Administration Agreement with the Fund.
For their administrative services, the administrators are entitled
jointly to receive a fee computed daily and payable monthly. (For information
regarding the administrators' waivers, see "Investment Adviser and Sub-Adviser"
above.) The Fund also reimburses each administrator for its reasonable
out-of-pocket expenses incurred in connection with the Fund's computer access
program. For the fiscal year ended July 31, 1997, the Fund paid PFPC and PDI
administrative fees (after fee waivers) aggregating .05% of its average daily
net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address is P.O. Box 8950, Wilmington, Delaware 19885-9628. The
services provided by PFPC and PDI and the fees payable by the Fund for these
services are described further in the Statement of Additional Information under
"Management of the Company."
DISTRIBUTOR
PDI, whose principal business is set forth above under
"Administrators," also serves as distributor of the Fund's shares. Fund shares
are sold on a continuous basis by the Distributor as agent. The Distributor pays
the cost of printing and distributing prospectuses to persons who are not
shareholders of the Fund (excluding preparation and printing expenses necessary
for the continued registration of the Fund's shares) and of printing and
distributing all sales literature. No compensation is payable by the Fund to the
distributor for its distribution services.
CUSTODIAN
PNC Bank serves as the custodian of the Fund's assets. The Fund pays
PNC Bank a fee for its
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<PAGE> 18
custodial services equal to $.25 per annum for each $1,000 of the Fund's average
gross assets.
SERVICE ORGANIZATIONS
As stated above, institutional investors ("Service Organizations") may
purchase Dollar or Plus shares offered by the Fund. Dollar shares are sold to
institutions other than broker/dealers, and Plus shares are sold to
broker/dealers, both of which enter into servicing agreements with the Fund
requiring them to provide support services to their customers who are the
beneficial owners of such shares in consideration for .25% (on an annualized
basis) of the average daily net asset value of the Dollar or Plus shares held by
the Service Organizations for the benefit of their customers. Such services,
which are described more fully in the Statement of Additional Information under
"Management of the Fund--Service Organizations," include aggregating and
processing purchase and redemption requests from customers and placing net
purchase and redemption orders with PFPC; processing dividend payments from the
Fund on behalf of customers; providing information periodically to customers
showing their positions in Dollar or Plus shares; and providing sub-accounting
with respect to shares beneficially owned by customers or the information
necessary for sub-accounting. In addition, broker-dealers purchasing Plus shares
may be requested to provide from time to time assistance (such as the forwarding
of sales literature and advertising to their customers) in connection with the
distribution of Plus shares. Under the terms of the agreements, Service
Organizations are required to provide to their customers a schedule of any fees
that they may charge such customers relating to the investment of such
customers' assets in Dollar or Plus shares. Money shares offered by the Fund may
be purchased by any type of institutional investor (including banks and
broker/dealers) which do not wish to enter into such servicing agreements with
the Fund in connection with their investments.
EXPENSES
Except as noted above, the Fund's service contractors bear all expenses
in connection with the performance of their services. The Fund bears the
expenses incurred in its operations. The ratios of the Fund's expenses to its
average annual net assets for the fiscal year ended July 31, 1997 were .20% for
the Fund's Money shares, and .45% for the Dollar shares. The estimated ratio of
the Fund's expenses to its average annual net assets for the fiscal year ended
July 31, 1997 for Plus Shares was .45%. No Plus shares were outstanding after
December 1, 1994.
BANKING LAWS
Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from issuing, underwriting, selling or distributing securities, but such banking
laws and regulations do not prohibit such a holding company or affiliate or
banks generally from acting as the investment adviser, transfer agent or
custodian to such an investment company, or from purchasing shares of such a
company as agent for and upon the order of customers. PNC Bank, PIMC, PFPC, as
well as certain Service Organizations (i.e., banks), are subject to such banking
laws and regulations.
Should future legislative, judicial or administrative action prohibit
or restrict the activities of bank Service Organizations in connection with the
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<PAGE> 19
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations generally and
change its method of operations. It is not anticipated, however, that any change
in the Fund's method of operations would affect its net asset value per share or
result in a financial loss to any customer.
DIVIDENDS
The Fund's net income is declared daily as a dividend to the holders of
record of each of the Fund's series of shares at the close of business on the
day of declaration. Dividends for each series are equal to net income available
for the particular class involved and are determined in the same manner across
series. Net income available for dividends on the Dollar shares is after
deduction of all fees paid to Service Organizations for their services with
respect to Dollar shares, and for the Plus shares is after deduction of all fees
paid to Service Organizations with respect to Plus shares. (See Management of
the Fund--Service Organizations.") Shares of each series begin accruing
dividends on the day the purchase order for the shares is executed and continue
to accrue dividends through, and including, the day before the redemption order
for the shares is executed. Dividends are paid monthly by check, or by wire
transfer if requested in writing by the shareholder, within 5 Business Days
after the end of the month or within 5 business days of the redemption of all of
a shareholder's shares of a particular series. The Fund does not expect to
realize net long-term capital gains.
Institutional shareholders may elect to have their dividends reinvested
in additional full and fractional shares of the same series with respect to
which dividends are declared valued at their net asset value on the payment
date. Reinvested dividends receive the same tax treatment as dividends paid in
cash. Such election, or any revocation thereof, must be made in writing to PFPC,
and will become effective with respect to dividends paid after its receipt by
PFPC.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). Such qualification generally relieves the Fund
of liability for Federal income taxes to the extent its earnings are distributed
in accordance with the Code. Qualification as a regulated investment company for
a taxable year requires, among other things, that the Fund distribute an amount
equal to at least the sum of (a) 90% of its net exempt-interest income, if any,
for the year, and (b) 90% of its investment company taxable income, if any, for
such year, which the Fund intends to do. Federal exempt-interest dividends may
be treated by the Fund's shareholders as items of interest excludable from their
gross income under Section 103(a) of the Code, unless under the circumstances
applicable to the particular shareholder exclusion would be disallowed. (See
Statement of Additional Information under "Additional Information Concerning
Taxes.")
If the Fund should hold certain "private activity bonds" issued after
August 7, 1986, the portion of dividends attributable to interest on such bonds
must be included in a shareholder's Federal alternative minimum taxable income,
as an item of tax preference, for the purpose of determining liability, if any,
for the 26% to 28% alternative minimum tax for individuals and the 20%
alternative minimum tax and the environmental tax applicable to corporations.
Corporate shareholders also must take all exempt-interest
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<PAGE> 20
dividends into account in determining certain adjustments for Federal
alternative minimum and environmental tax purposes. The environmental tax
applicable to corporations is imposed at the rate of .12% on the excess of the
corporation's modified Federal alternative minimum taxable income over $2
million. Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits.
Exempt-interest dividends derived from interest on New York Municipal
Obligations will be exempt from New York State and New York City personal income
taxes (but not corporate franchise taxes), provided the interest on such
obligations is and continues to be excluded or exempt from applicable Federal
income taxation and New York State and New York City income taxation. Dividends
and distributions derived from taxable income and capital gains, if any, are not
exempt from Federal income tax or from New York State and New York City taxes.
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of the Fund is not deductible for Federal, New York State or New
York City personal income tax purposes. Except as noted with respect to New York
State and New York City personal income taxes, dividends and distributions paid
to shareholders that are derived from income on Municipal Obligations may be
taxable income under state or local law even though all or a portion of such
dividends or distributions may be derived from interest on tax-exempt
obligations that, if paid directly to shareholders, would be tax-exempt income.
Shareholders will be advised at least annually as to the Federal income
tax, as well as the New York State and New York City personal income tax, status
and consequences of dividends and distributions made each year.
The foregoing is only a brief summary of some of the important tax
considerations generally affecting the Fund and its shareholders. No attempt is
made to present a detailed explanation of the Federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisers with specific reference to their own
tax situations.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Fund's Charter authorizes the Board of Directors to issue up to 2
billion full and fractional shares of capital stock, $.001 par value per share,
and to classify or reclassify any unissued shares of the Fund into one or more
classes or series by setting or changing in any one or more respects their
respective preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption. Pursuant to such authority, the Board of Directors has classified
1.4 billion of its shares as Money shares (Class A Common Stock), 300 million of
its shares as Dollar shares (Class A Common Stock-Special Series 1) and 300
million of its shares as Plus shares (Class A Common Stock-Special Series 2).
Each New York Money, Dollar and Plus share represents an equal
proportionate interest in the assets of the Fund. Shareholders of each series
are entitled to participate equally in any dividend or distribution declared by
the Fund's Board of Directors except as provided under "Dividends" and in the
net distributable assets of the Fund on liquidation. Fund shares have no
pre-emptive rights and only such conversion and exchange rights as the Board may
grant in its discretion. When issued for payment as described in this
Prospectus, the Fund's shares will be fully paid and non-assessable. Further,
shareholders of each series are entitled to one vote for each full share held
and proportionate fractional votes for fractional shares held, and will vote
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<PAGE> 21
in the aggregate and not by series, except where otherwise required by law and
except that only Dollar shares will be entitled to vote on matters submitted to
a vote of shareholders pertaining to the Fund's arrangements with Service
Organizations with respect to Dollar shares, and Plus shares will enjoy similar
voting rights on matters pertaining to the Fund's arrangements with Service
Organizations with respect to Plus shares. (See "Management of the Fund--Service
Organizations.") Shares of the Fund have non-cumulative voting rights and,
accordingly, the holders of more than 50% of the Fund's outstanding shares
(irrespective of series) may elect all of the directors.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Redemption of Shares."
YIELD
From time to time the Fund may advertise the "yields," "effective
yields" and "tax-equivalent yields" of its Money, Dollar and Plus shares. Yield
figures are based on historical earnings and are not intended to indicate future
performances. The "yield" for each series of Fund shares refers to the income
generated by an investment in the shares of such series over a seven-day period
(which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
the week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in a series
of Fund shares is assumed to be reinvested in shares of that series. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. The "tax-equivalent yield"
shows the level of taxable yield necessary to produce an after-tax yield
equivalent to the Fund's tax-free yield. It is calculated by increasing the
Fund's yield (calculated as above) by the amount necessary to reflect the
payment of Federal and New York income taxes at a stated tax rate. The
"tax-equivalent yield" will always be higher than the "yield."
The yield of any investment is generally a function of portfolio
quality and maturity, type of investment and operating expenses. The yield on
Money, as well as Dollar and Plus, shares will fluctuate and is not necessarily
representative of future results. Any fees charged by broker-dealers, banks or
others directly to their customers in connection with investments in the Fund
are not reflected in the yields on the Fund's shares, and such fees, if charged,
will reduce the actual return received by customers on their investments.
Investors may call 800-821-6006 to obtain the current yields on each series of
the Fund's shares.
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<PAGE> 22
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or the Fund's Statement of
Additional Information incorporated herein by reference, in connection with the
offering made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Fund or
its Distributor. This Prospectus does not constitute an offering by the Fund or
by the Distributor in any jurisdiction in which such offering may not lawfully
be made.
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TABLE OF CONTENTS
Page
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BACKGROUND AND EXPENSE
INFORMATION........................................................ 2
FINANCIAL HIGHLIGHTS........................................................ 4
INVESTMENT OBJECTIVE AND
POLICIES........................................................... 7
PURCHASE OF SHARES.......................................................... 11
REDEMPTION OF SHARES........................................................ 12
MANAGEMENT OF THE FUND...................................................... 13
DIVIDENDS................................................................... 17
TAXES ................................................................... 17
DESCRIPTION OF SHARES AND
MISCELLANEOUS...................................................... 18
YIELD ................................................................... 19
PIF-P-012-02
NEW YORK
MONEY FUND
AN INVESTMENT PORTFOLIO OFFERED BY
MUNICIPAL FUND FOR
NEW YORK INVESTORS, INC.
-
PROVIDENT
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INSTITUTIONAL
FUNDS
-
PROSPECTUS
DECEMBER 1, 1997
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MUNICIPAL FUND FOR NEW YORK INVESTORS, INC.
(the "Fund")
Statement of Additional Information
December 1, 1997
Table of Contents
Page
Investment Objective and Policies......................................... 1
Municipal Obligations..................................................... 5
Additional Purchase and Redemption Information............................ 29
Management of the Fund.................................................... 31
Additional Information Concerning Taxes................................... 38
Dividends................................................................. 40
Counsel................................................................... 44
Independent Accountants................................................... 44
Miscellaneous............................................................. 44
Financial Statements...................................................... 46
Appendix.................................................................. A-1
This Statement of Additional Information is meant to be read in
conjunction with the Fund's Prospectus dated December 1, 1997 and is
incorporated by reference in its entirety into that Prospectus. Because this
Statement of Additional Information is not itself a prospectus, no investment in
shares of the Fund should be made solely upon the information contained herein.
Copies of the Fund's Prospectus may be obtained by calling 800-821-7432.
Capitalized terms used but not defined herein have the same meanings as in the
Prospectus.
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INVESTMENT OBJECTIVE AND POLICIES
As stated in the Fund's Prospectus, the investment objective of the Fund
is to provide investors with as high a level of current interest income that is
exempt from federal income tax and, to the extent possible, from New York State
and New York City personal income taxes as is consistent with the preservation
of capital and relative stability of principal. The following policies
supplement the description of the Fund's investment objective and policies in
the Prospectus.
Additional Information on Investment Practices.
Variable and Floating Rate Demand Instruments. Variable and floating rate
demand instruments held by the Fund may have maturities of more than 13 months
provided: (i) the Fund is entitled to the payment of principal at any time or
during specified intervals not exceeding 13 months, subject to notice of no more
than 30 days, and (ii) the rate of interest on such instruments is adjusted
(based upon a pre-selected market sensitive index such as the prime rate of a
major commercial bank) at periodic intervals not exceeding 13 months. In
determining the Fund's average weighted portfolio maturity and whether a
variable or floating rate demand instrument has a remaining maturity of 13
months or less, the maturity of each instrument will be computed in accordance
with guidelines established by the Securities and Exchange Commission (the
"SEC"). In determining whether an unrated variable or floating rate demand
instrument is of comparable quality at the time of purchase to instruments with
minimal credit risks, the Fund's investment adviser will consider the earning
power, cash flow and other liquidity ratios of the issuer of the instrument and
will continuously monitor its financial condition. In addition, the Fund will
sometimes require that the issuer's obligation to pay the principal of the
instrument be backed by an unconditional bank letter or line of credit,
guarantee or commitment to lend.
Variable and floating rate notes that do not provide for payment within
seven days may be deemed illiquid and subject to the 10% limitation on such
investments.
When-Issued Securities. As stated in the Prospectus, the Fund may purchase
Municipal Obligations on a "when-issued" basis (i.e., for delivery beyond the
normal settlement date at a stated price and yield). When the Fund agrees to
purchase when-issued securities, its custodian will set aside cash or liquid
portfolio securities equal to the amount of the commitment in a separate
account. Normally, the custodian will set aside portfolio securities to satisfy
a purchase commitment, and in such a case the Fund may be required subsequently
to place additional assets in the separate account in order to ensure that
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the value of the account remains equal to the amount of the Fund's commitment.
It may be expected that the Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. Because the Fund will set aside cash or liquid assets
to satisfy its purchase commitments in the manner described, the Fund's
liquidity and ability to manage its portfolio might be affected in the event its
commitments to purchase when-issued securities ever exceeded 25% of the value of
its assets.
When the Fund engages in when-issued transactions, it relies on the seller
to consummate the trade. Failure of the seller to do so may result in the Fund's
incurring a loss or missing an opportunity to obtain a price considered to be
advantageous.
Stand-By Commitments. The Fund may acquire "stand-by commitments" with
respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at the Fund's option, specified
Municipal Obligations at their amortized cost value to the Fund plus accrued
interest, if any. (Stand-by commitments acquired by the Fund may also be
referred to as "put" options.) Stand-by commitments may be sold, transferred or
assigned only with the underlying instruments.
The Fund expects that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding stand-by commitments held in the Fund's portfolio is not
expected to exceed 1/2 of 1% of the value of the Fund's total assets calculated
immediately after each stand-by commitment is acquired.
The Fund intends to enter into stand-by commitments only with dealers,
banks and broker-dealers which, in the investment adviser's opinion, present
minimal credit risks. In evaluating the creditworthiness of the issuer of a
stand-by commitment, the investment adviser will review periodically the
issuer's assets, liabilities, contingent claims and other relevant financial
information.
The Fund would acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. Stand-by commitments acquired by the Fund would be valued at zero in
determining net asset value. Where the Fund paid any consideration directly or
indirectly for a stand-by commitment, its cost would be reflected
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as unrealized depreciation for the period during which the commitment was held
by the Fund.
Portfolio Transactions.
Subject to the general control of the Fund's Board of Directors, PNC
Institutional Management Corporation ("PIMC"), the Fund's investment adviser, is
responsible for, makes decisions with respect to and places orders for all
purchases and sales of portfolio securities. Purchases and sales of portfolio
securities are usually principal transactions without brokerage commissions.
Purchases, if any, from underwriters may include a commission or concession paid
by the issuer to the underwriter and purchases from dealers serving as market
markers may include the spread between the bid and asked prices. In transactions
with dealers, PIMC seeks to obtain the best net price and the most favorable
execution of orders. To the extent that the execution and price offered by more
than one dealer are comparable, PIMC may, in its discretion, effect transactions
in portfolio securities with dealers who provide the Fund with research advice
or other services such as information relating to the price of portfolio
securities.
Investment decisions for the Fund are made independently from those for
other investment company portfolios advised by PIMC. Such other investment
company portfolios may invest in the same securities as the Fund. When purchases
or sales of the same security are made at substantially the same time on behalf
of such other investment company portfolios, transactions are averaged as to
price, and available investments allocated as to amount, in a manner which PIMC
believes to be equitable to each investment company portfolio, including the
Fund. In some instances, this investment procedure may adversely affect the
price paid or received by the Fund or the size of the position obtained for the
Fund. To the extent permitted by law, PIMC may aggregate the securities to be
sold or purchased for the Fund with those to be sold or purchased for such other
investment companies in order to obtain best execution.
Portfolio securities will not be purchased from or sold to PIMC, PNC Bank,
National Association ("PNC Bank"), PFPC Inc. ("PFPC"), Provident Distributors,
Inc. ("PDI"), or any affiliated person of any of them (as such term is defined
in the Investment Company Act of 1940, hereinafter "1940 Act") except to the
extent permitted by the SEC. In addition, the Fund will not purchase Municipal
Obligations during the existence of any underwriting or selling group relating
thereto of which PNC Bank is a member, except to the extent permitted by the
SEC. Under certain circumstances, the Fund may be at a disadvantage because of
these limitations in comparison with other investment company portfolios which
have a similar investment objective but are not subject to such limitations.
Furthermore, with respect to such
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transactions, securities and deposits, the Fund will not give preference to
Service Organizations with whom the Fund enters into agreements concerning the
provision of support services to customers who beneficially own shares of New
York Money Dollar ("Dollar shares") or New York Money Plus ("Plus shares"). (See
the Prospectus, "Management of the Fund - Service Organizations.")
The Fund may participate, if and when practicable, in bidding for the
purchase of Municipal Obligations directly from an issuer in order to take
advantage of the lower purchase price available to members of such a group. The
Fund will engage in this practice, however, only when PIMC, in its sole
discretion, believes such practice to be otherwise in the Fund's interest.
The Fund does not intend to seek profits through short-term trading. The
Fund's annual portfolio turnover will be relatively high because of the
short-term nature of the instruments in which it invests, but the Fund's
portfolio turnover is not expected to have a material effect on its net income.
The Fund's portfolio turnover is expected to be zero for regulatory reporting
purposes.
Additional Investment Limitations.
In addition to the investment limitations disclosed in the Prospectus, the
Fund is subject to the following investment limitations, which may only be
changed by a vote of the holders of a majority of the Fund's outstanding shares
(as defined below under "Miscellaneous").
The Fund may not:
1. Make loans except that the Fund may purchase or hold debt obligations
in accordance with its investment objective, policies and limitations.
2. Underwrite any issue of securities except to the extent that the
purchase of debt obligations directly from the issuer thereof in accordance with
the Fund's investment objective, policies and limitations may be deemed to be
underwriting.
3. Purchase or sell real estate except that the Fund may invest in debt
obligations secured by real estate or interests therein.
4. Purchase securities on margin, make short sales of securities or
maintain a short position.
5. Write or sell puts, calls, straddles, spreads or combinations thereof.
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6. Purchase or sell commodities or commodity contracts, or invest in oil,
gas or mineral exploration or development programs.
7. Purchase securities of other investment companies except in connection
with a merger, consolidation, acquisition or reorganization.
Portfolio Valuation.
The Fund's portfolio securities are valued on the basis of amortized cost.
In connection with its use of amortized cost valuation, the Fund limits the
dollar-weighted average maturity of its portfolio to not more than 90 days and
does not purchase any instrument with a remaining maturity of more than 13
months (with certain exceptions). The Fund's Board of Directors has also
established procedures that are intended to stabilize the net asset value per
share of each of the Fund's series of shares for purposes of sales and
redemptions at $1.00. Such procedures include the determination, at such
intervals as the Board deems appropriate, of the extent, if any, to which the
Fund's net asset value per share calculated by using available market quotations
deviates from $1.00 per share. In the event such deviation exceeds 1/2 of 1%,
the Board will promptly consider what action, if any, should be initiated. If
the Board believes that the amount of any deviation from the Fund's $1.00
amortized cost price per share may result in material dilution or other unfair
results to investors or existing shareholders, it will take such steps as it
considers appropriate to eliminate or reduce to the extent reasonably
practicable any such dilution or unfair results. These steps may include selling
portfolio instruments prior to maturity; shortening the Fund's average portfolio
maturity; withholding or reducing dividends; redeeming shares in kind; reducing
the number of the Fund's outstanding shares without monetary consideration; or
utilizing a net asset value per share determined by using available market
quotations.
MUNICIPAL OBLIGATIONS
In General.
Municipal Obligations include debt obligations issued by governmental
entities to obtain funds for various public purposes, including the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses and the extension of loans to public
institutions and facilities. Private activity bonds that are issued by or on
behalf of public authorities to finance various privately-operated facilities
are included within the term Municipal Obligations if the interest paid thereon
is
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(subject to the federal alternative minimum tax) exempt from regular federal
income tax.
The Fund may hold tax-exempt derivatives which may be in the form of
tender option bonds, participations, beneficial interests in a trust,
partnership interests or other forms. A number of different structures have been
used. For example, interests in long-term fixed-rate Municipal Obligations, held
by a bank as trustee or custodian, are coupled with tender option, demand and
other features when the tax-exempt derivatives are created. Together, these
features entitle the holder of the interest to tender (or put) the underlying
Municipal Obligation to a third party at periodic intervals and to receive the
principal amount thereof. In some cases, Municipal Obligations are represented
by custodial receipts evidencing rights to receive specific future interest
payments, principal payments, or both, on the underlying municipal securities
held by the custodian. Under such arrangements, the holder of the custodial
receipt has the option to tender the underlying municipal security at its face
value to the sponsor (usually a bank or broker dealer or other financial
institution), which is paid periodic fees equal to the difference between the
bond's fixed coupon rate and the rate that would cause the bond, coupled with
the tender option, to trade at par on the date of a rate adjustment. The Fund
may hold tax-exempt derivatives, such as participation interests and custodial
receipts, for Municipal Obligations which give the holder the right to receive
payment of principal subject to the conditions described above. The Internal
Revenue Service has not ruled on whether the interest received on tax-exempt
derivatives in the form of participation interests or custodial receipts is
tax-exempt, and accordingly, purchases of any such interests or receipts are
based on the opinion of counsel to the sponsors of such derivative securities.
Neither the Fund nor its investment adviser will independently review the
underlying proceedings related to the creation of any tax-exempt derivatives or
the bases for such opinion.
Before purchasing a tax-exempt derivative for the Fund, the Adviser is
required by the Fund's procedures to conclude that the tax-exempt security and
the supporting short-term obligation involve minimal credit risks and are
Eligible Securities under the Fund's Rule 2a-7 procedures. In evaluating the
creditworthiness of the entity obligated to purchase the tax-exempt security,
the investment adviser will review periodically the entity's relevant financial
information. Currently, the Directors have authorized the purchase of tax-exempt
derivatives by the Fund so long as after any purchase not more than 10% of the
Fund's assets are invested in such securities.
As described in the Fund's Prospectus, the two principal classifications
of Municipal Obligations consist of
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"general obligation" and "revenue" issues, and the Fund's portfolio may include
"moral obligation" issues, which are normally issued by special purpose
authorities. There are, of course, variations in the quality of Municipal
Obligations, both within a particular classification and between
classifications, and the yields on Municipal Obligations depend upon a variety
of factors, including general money market conditions, the financial condition
of the issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
The ratings of Moody's and S&P represent their opinions as to the quality of
Municipal Obligations. It should be emphasized, however, that ratings are
general and are not absolute standards of quality, and Municipal Obligations
with the same maturity, interest rate and rating may have different yields while
Municipal Obligations of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to its purchase by the Fund, an
issue of Municipal Obligations may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Fund. The Fund's
investment adviser will consider such an event in determining whether the Fund
should continue to hold the obligation.
An issuer's obligations under its Municipal Obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the federal Bankruptcy Code, and laws, if any,
which may be enacted by federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the payment
of interest on and principal of its Municipal Obligations may be materially
adversely affected by litigation or other conditions.
Among other types of Municipal Obligations, the Fund may purchase
short-term General Obligation Notes, Tax Anticipation Notes, Bond Anticipation
Notes, Revenue Anticipation Notes, Tax-Exempt Commercial Paper, Construction
Loan Notes and other forms of short-term loans. Such instruments are issued with
a short-term maturity in anticipation of the receipt of tax funds, the proceeds
of bond placements or other revenues. In addition, the Fund may invest in other
types of tax-exempt instruments, including general obligation and private
activity bonds, provided they have remaining maturities of 13 months or less at
the time of purchase.
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Special Considerations Relating to New York Municipal Obligations.
Some of the significant financial considerations relating to the Fund's
investments in New York Municipal Obligations are summarized below. This summary
information is not intended to be a complete description and is principally
derived from official statements relating to issues of New York Municipal
Obligations that were available prior to the date of this Statement of
Additional Information. The accuracy and completeness of the information
contained in those official statements have not been independently verified.
STATE ECONOMY. New York is the third most populous state in the nation and has a
relatively high level of personal wealth. The State's economy is diverse with a
comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a very small share of the nation's
farming and mining activity. The State has a declining proportion of its
workforce engaged in manufacturing, and an increasing proportion engaged in
service industries. New York City (the "City"), which is the most populous city
in the State and nation and is the center of the nation's largest metropolitan
area, accounts for a large portion of the State's population and personal
income.
The State has historically been one of the wealthiest states in the
nation. For decades, however, the State has grown more slowly than the nation as
a whole, gradually eroding its relative economic position.
State per capita personal income has historically been significantly
higher than the national average, although the ratio has varied substantially.
According to data published by the US Bureau of Economic Analysis, total
personal income in the State has risen more slowly than the national average
since 1988. The total employment growth rate in the State has been below the
national average since 1987. The unemployment rate in the State dipped below the
national rate in the second half of 1981 and remained lower until 1991; since
then, it has been higher.
There can be no assurance that the State economy will not experience
worse-than-predicted results in the 1997-1998 fiscal year, with corresponding
material and adverse effects on the State's projections of receipts and
disbursements.
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STATE BUDGET. The State Constitution requires the governor (the
"Governor") to submit to the State legislature (the "Legislature") a balanced
executive budget which contains a complete plan of expenditures for the ensuing
fiscal year and all moneys and revenues estimated to be available therefor,
accompanied by bills containing all proposed appropriations or reappropriations
and any new or modified revenue measures to be enacted in connection with the
executive budget. The entire plan constitutes the proposed State financial plan
for that fiscal year. The Governor is required to submit to the Legislature
quarterly budget updates which include a revised cash-basis state financial
plan, and an explanation of any changes from the previous state financial plan.
The State's budget for the 1997-98 fiscal year was adopted by the
Legislature on August 4, 1997, more than four months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State operations
and other purposes, including necessary appropriations for State-supported debt
service. The State Financial Plan for the 1997-98 fiscal year was formulated on
August 11, 1997 and was based on the State's budget as enacted by the
Legislature, as well as actual results for the first quarter of the current
fiscal year (the "1997-98 State Financial Plan"). In recent years, the State has
failed to adopt a budget prior to the beginning of its fiscal year. There can be
no assurance that State budgets in future fiscal years will be adopted by the
April 1 statutory deadline.
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The adopted 1997-98 budget projected an increase in General Fund
disbursements of $1.7 billion or 5.2 percent over 1996-97 levels. The average
annual growth rate over the last three fiscal years was approximately 1.2
percent. State Funds disbursements (excluding federal grants) are projected to
increase by 5.4 percent from the 1996-97 fiscal year. All Governmental Funds
projected disbursements increase by 7.0 percent over the 1996-97 fiscal year.
The 1997-98 State Financial Plan is projected to be balanced on a cash
basis. The financial plan projections include a reserve for future needs of $530
million. As compared to the Governor's Executive Budget as amended in February
1997, the State's adopted budget for 1997-98 increased General Fund spending by
$1.7 billion, primarily from increases for local assistance ($1.3 billion).
Resources used to fund these additional expenditures include increased revenues
projected for the 1997-98 fiscal year, increased resources produced in the
1996-97 fiscal year that will be utilized in 1997-98, re-estimates of social
service, fringe benefit and other spending, and certain non-recurring resources.
The 1997-98 adopted budget includes multi-year reductions, including a
State funded property and local income tax reduction program, estate tax relief,
utility gross receipts tax reductions, permanent reductions in the State sales
tax on clothing, and elimination of assessments on medical providers. These
reductions are intended to reduce the overall level of State and local taxes in
New York and to improve the State's competitive position vis-a-vis other states.
The various elements of the State and local tax and assessments reductions have
little or no impact on the 1997-98 State Financial Plan, and do not begin to
materially affect the outyear projections until the State's 1999-2000 fiscal
year. The adopted 1997-98 budget also provided for significant investments in
education, and proposed a new $2.4 billion general obligation bond proposed for
school facilities to be submitted to the voters in November 1997.
The Division of the Budget estimates that the 1997-98 State Financial Plan
contains actions that provide non-recurring resources or savings totaling
approximately
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$270 million (or 0.7 percent of total General Fund receipts). These include the
use of $200 million in federal reimbursement funds available from retroactive
social service claims approved by the federal government in April 1997. The
balance is composed of various other actions, primarily the transfer of unused
special revenue fund balances to the General Fund.
The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. Those factors can be
very complex, may vary from fiscal year to fiscal year, and are frequently the
result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the federal government, that
are not under the control of the State. In addition, the financial plan is based
upon forecasts of national and State economic activity. Economic forecasts have
frequently failed to predict accurately the timing and magnitude of changes in
the national and the State economies. Actual results, however, could differ
materially and adversely from the projections set forth in the 1997-98 State
Financial Plan, and those projections may be changed materially and adversely
from time to time.
In the past, the State has taken management actions and made use of
internal sources to address potential State financial plan shortfalls, and the
Division of Budget believes it could take similar actions should variances occur
in its projections for the current fiscal year.
In recent years, State actions affecting the level of receipts and
disbursements, the relative strength of the State and regional economy, actions
of the federal government and other factors, have created structural budget gaps
for the State. These gaps resulted from a significant disparity between
recurring revenues and the costs of maintaining or increasing the level of
support for State programs. To address a potential imbalance in any given fiscal
year, the State would be required to take actions to increase receipts and/or
reduce disbursements as it enacts the budget for that year, and under the State
Constitution, the Governor is required to propose a balanced budget each year.
There can be no assurance, however, that the
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Legislature will enact the Governor's proposals or that the State's actions will
be sufficient to preserve budgetary balance in a given fiscal year or to align
recurring receipts and disbursements in future fiscal years.
Other actions taken in the 1997-98 adopted budget add further pressure to
future budget balance in New York State. For example, the fiscal effects of tax
reductions adopted in the 1997-98 budget are projected to grow more
substantially beyond the 1998-99 fiscal year, with incremental costs averaging
in excess of $1.3 billion annually over the last three years of the tax
reduction program. These incremental costs reflect the phase-in of State-funded
school property tax and local income tax relief, the phase-out of the
assessments on medical providers, and reductions in estate and gift levies,
utility gross receipts taxes, and the State sales tax on clothing. The full
annual cost of the enacted tax reduction package is estimated at approximately
$4.8 billion when fully effective in State fiscal year 2001-02. In addition, the
1997-98 budget included multi-year commitments for school aid and
pre-kindergarten early learning programs which could add as much as $1.4 billion
in costs when fully annualized in fiscal year 2001-02. These spending
commitments are subject to annual appropriation.
On September 11, 1997, the New York State Comptroller issued a report
which noted that the ability to deal with future budget gaps could become a
significant issue in the State's 2000- 2001 fiscal year, when the
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cost of tax cuts increases by $1.9 billion. The report contained projections
that, based on current economic conditions and current law for taxes and
spending, showed a gap in the 2000-2001 State fiscal year of $5.6 billion and of
$7.4 billion in the 2001-2002 State fiscal year. The report noted that these
gaps would be smaller if recurring spending reductions produce savings in
earlier years. The State Comptroller has also stated that if Wall Street
earnings moderate and the State experiences a moderate recession, the gap for
the 2001-2001 State fiscal year could grow to nearly $12 billion.
RECENT FINANCIAL RESULTS. The General Fund is the principal operating fund of
the State and is used to account for all financial transactions, except those
required to be accounted for in another fund. It is the State's largest fund and
receives almost all State taxes and other resources not dedicated to particular
purposes.
Total General Fund receipts and transfers from other funds in the 1997-98
fiscal year are projected to be $35.09 billion, an increase of over $2 billion
or approximately 6% from the $33.04 billion recorded in the prior fiscal year.
Total General Fund disbursements and transfers to other funds are projected at
$34.60 billion, an increase of $1.7 billion or approximately 5% from the total
in the prior fiscal year.
The State's financial position on a GAAP (generally accepted accounting
principles) basis as of March 31, 1997 showed a total equity balance in its
combined governmental funds of $826 million,
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reflecting assets of $15.87 billion and liabilities of $15.04 billion.
DEBT LIMITS AND OUTSTANDING DEBT. There are a number of methods by which the
State of New York may incur debt. Under the State Constitution, the State may
not, with limited exceptions for emergencies, undertake long-term general
obligation borrowing (i.e., borrowing for more than one year) unless the
borrowing is authorized in a specific amount for a single work or purpose by the
Legislature and approved by the voters. There is no limitation on the amount of
long-term general obligation debt that may be so authorized and subsequently
incurred by the State.
The State may undertake short-term borrowings without voter approval (i)
in anticipation of the receipt of taxes and revenues, by issuing tax and revenue
anticipation notes, and (ii) in anticipation of the receipt of proceeds from the
sale of duly authorized but unissued general obligation bonds, by issuing bond
anticipation notes. The State may also, pursuant to specific constitutional
authorization, directly guarantee certain obligations of the State of New York's
authorities and public benefit corporations ("Authorities"). Payments of debt
service on New York State general obligation and New York State-guaranteed bonds
and notes are legally enforceable obligations of the State of New York.
The State employs additional long-term financing mechanisms,
lease-purchase and contractual-obligation financings, which involve obligations
of public authorities or municipalities that are State-supported but are not
general obligations of the State. Under these financing arrangements, certain
public authorities and municipalities have issued obligations to finance the
construction and rehabilitation of facilities or the acquisition and
rehabilitation of equipment, and expect to meet their debt service requirements
through the receipt of rental or other contractual payments made by the State.
Although these financing arrangements involve a contractual agreement by the
State to make payments to a public authority, municipality or other entity, the
State's obligation to make such payments is generally expressly made subject to
appropriation by the Legislature and the actual availability of money to the
State for making the payments. The State has also entered into a
contractual-obligation financing arrangement with the Local Government
Assistance Corporation ("LGAC") to restructure the way the State makes certain
local aid payments.
In February 1997, the Job Development Authority ("JDA") issued
approximately $85 million of State-guaranteed bonds to refinance certain of its
outstanding bonds and notes in order to restructure and improve JDA's capital
structure. Due to concerns regarding the economic viability of its programs,
JDA's loan and
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loan guarantee activities had been suspended since the Governor took office in
1995. As a result of the structural imbalances in JDA's capital structure, and
defaults in its loan portfolio and loan guarantee program incurred between 1991
and 1996, JDA would have experienced a debt service cash flow shortfall had it
not completed its recent refinancing. JDA anticipates that it will transact
additional refinancings in 1999, 2000 and 2003 to complete its long-term plan of
finance and further alleviate cash flow imbalances which are likely to occur in
future years. The State does not anticipate that it will be called upon to make
any payments pursuant to the State guarantee in the 1997-98 fiscal year. JDA
recently resumed its lending activities under a revised set of lending programs
and underwriting guidelines.
In 1990, as part of a State fiscal reform program, legislation was enacted
creating LGAC, a public benefit corporation empowered to issue long-term
obligations to fund certain payments to local governments traditionally funded
through New York State's annual seasonal borrowing. The legislation empowered
LGAC to issue its bonds and notes in an amount to yield net proceeds not in
excess of $4.7 billion (exclusive of certain refunding bonds). Over a period of
years, the issuance of these long-term obligations, which were to be amortized
over no more than 30 years, was expected to eliminate the need for continued
short-term seasonal borrowing. The legislation also dedicated revenues equal to
one-quarter of the four cent State sales and use tax to pay debt service on
these bonds. The legislation also imposed a cap on the annual seasonal borrowing
of the State at $4.7 billion, less net proceeds of bonds issued by LGAC and
bonds issued to provide for capitalized interest, except in cases where the
Governor and the legislative leaders have certified the need for additional
borrowing and provided a schedule for reducing it to the cap. If borrowing above
the cap was thus permitted in any fiscal year, it was required by law to be
reduced to the cap by the fourth fiscal year after the limit was first exceeded.
As of June 1995, LGAC had issued bonds to provide net proceeds of $4.7 billion,
completing the program.
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On January 13, 1992, Standard & Poor's Ratings Services ("Standard &
Poor's") reduced its ratings on the State's general obligation bonds from A to
A- and, in addition, reduced its ratings on the State's moral obligation, lease
purchase, guaranteed and contractual obligation debt. On August 28, 1997,
Standard & Poor's revised its ratings on the State's general obligation bonds
from A- to A and revised its ratings on the State's moral obligation, lease
purchase, guaranteed and contractual obligation debt. On January 6, 1992,
Moody's Investors Service, Inc. ("Moody's") reduced its ratings on outstanding
limited-liability State lease purchase and contractual obligations from A to
Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's
general obligation long-term indebtedness.
The State anticipates that its capital programs will be financed, in part,
by State and public authorities borrowings in the 1997-98 fiscal year. The State
expects to issue $605 million in general obligation bonds (including $140
million for purposes of redeeming outstanding bond anticipation notes) and $140
million in general obligation commercial paper. The Legislature has also
authorized the issuance of $311 million in certificates of participation
(including costs of issuance, reserve funds and other costs) during the State's
1997-98 fiscal year for equipment purchases. The projection of State borrowings
for the 1997-98 fiscal year is subject to change as market conditions, interest
rates and other factors vary throughout the fiscal year.
In the 1997 legislative session, the Legislature approved a proposal to
present to the voters in November 1997, a $2.4 billion State general obligation
bond referendum to finance
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major capital improvements in public school facilities. If the School Facility
Health and Safety Bond Act is approved by the voters, the State does not
anticipate any issuance for this program during the 1997-98 fiscal year.
Borrowings by public authorities pursuant to lease-purchase and
contractual-obligation financings for capital programs of the State are
projected to total approximately $1.9 billion, including costs of issuance,
reserve funds, and other costs, net of anticipated refundings and other
adjustments for 1997-98 capital projects.
In the 1997 legislative session, the Legislature also approved two new
authorizations for lease-purchase and contractual obligation financings. An
aggregate $425 million was authorized for four public authorities for the
Community Enhancement Facility Program for economic development purposes. The
Legislature also authorized the issuance of up to $40 million to finance the
expansion and improvement of facilities at the Albany County airport.
Principal and interest payments on general obligation bonds and interest
payments on bond anticipation notes were $749.6 million for the 1996-97 fiscal
year, and are estimated to be $720.9 million for the 1997-98 fiscal year.
Principal and interest payments on fixed rate and variable rate bonds issued by
LGAC were $329.5 million for the 1996-97 fiscal year, and are estimated to be
$329.6 million for the 1997-98 fiscal year. State lease-purchase and
contractual-obligation payments were $1.74 billion in fiscal year 1996-97, and
are estimated of be $2.21 billion in fiscal year 1997-98.
New York State has never defaulted on any of its general obligation
indebtedness or its obligations under lease-purchase or contractual-obligation
financing arrangements and has never been called upon to make any direct
payments pursuant to its guarantees.
LITIGATION. Certain litigation pending against New York State or its officers or
employees could have a substantial or long-term adverse effect on New York State
finances. Among the more significant of these cases are those that involve (1)
the validity of agreements and treaties by which various Indian tribes
transferred title to New York State of certain land in central and upstate New
York; (2) certain aspects of New York
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State's Medicaid policies, including its rates, regulations and procedures; (3)
action against New York State and New York City officials alleging inadequate
shelter allowances to maintain proper housing; (4) challenges to the practice of
reimbursing certain Office of Mental Health patient care expenses from the
client's Social Security benefits; (5) alleged responsibility of New York State
officials to assist in remedying racial segregation in the City of Yonkers; (6)
challenges to regulations promulgated by the Superintendent of Insurance
establishing certain excess medical malpractice premium rates; (7) challenges to
certain aspects of petroleum business taxes; (8) action alleging damages
resulting from the failure by the State's Department of Environmental
Conservation to timely provide certain data; (9) challenges to the
constitutionality of Public Health Law 2807-d, which imposes a gross receipts
tax from certain patient care services; (10) an action seeking reimbursement
from the State for certain costs arising out of the provision of pre-school
services and programs for children with handicapped conditions; (11) action
seeking enforcement of certain sales and excise taxes and tobacco products and
motor fuel sold to non-Indian consumers on Indian reservations; and (12) a
challenge to the constitutionality of Clean Water/Clean Air Bond Act.
Several actions challenging the constitutionality of legislation enacted
during the 1990 legislative session which changed actuarial funding methods for
determining state and local contributions to state employee retirement systems
have been decided against the State. As a result, the Comptroller developed a
plan to restore the State's retirement systems to prior funding levels. Such
funding is expected to exceed prior levels by $116 million in fiscal 1996-97,
$193 million in fiscal 1997-98, peaking at $241 million in fiscal 1998-99.
Beginning in fiscal 2001-02, State contributions required under the
Comptroller's plan are projected to be less than that required under the prior
funding method. As a result of the United States Supreme Court decision in the
case of State of Delaware v. State of New York, on January 21, 1994, the State
entered into a settlement agreement with various parties. Pursuant to all
agreements executed in connection with the action, the State was required to
make aggregate payments of $351.4 million. Annual payments to the various
parties will continue through the State's 2002-03 fiscal year in amounts which
will not exceed $48.4 million in any fiscal year subsequent to the State's
1994-95 fiscal year. Litigation challenging the constitutionality of the
treatment of certain moneys held in a reserve fund was settled in June 1996 and
certain amounts in a Supplemental Reserve Fund
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previously credited by the State against prior State and local pension
contributions will be paid in 1998.
The legal proceedings noted above involve State finances, State programs
and miscellaneous cure rights, tort, real property and contract claims in which
the State is a defendant and the monetary damages sought are substantial,
generally in excess of $100 million. These proceedings could affect adversely
the financial condition of the State in the 1997-98 fiscal year or thereafter.
Adverse developments in these proceedings, other proceedings for which there are
unanticipated, unfavorable and material judgments, or the initiation of new
proceedings could affect the ability of the State to maintain a balanced
financial plan. An adverse decision in any of these proceedings could exceed the
amount of the reserve established in the State's financial plan for the payment
of judgments and, therefore, could affect the ability of the State to maintain a
balanced financial plan. In its audited financial statements for the 1996-97
fiscal year, the State reported its estimated liability for awarded and
anticipated unfavorable judgments to be $364 million, of which $134 million is
expected to be paid during the 1997-98 fiscal year.
Although other litigation is pending against New York State, except as
described herein, no current litigation involves New York State's authority, as
a matter of law, to contract indebtedness, issue its obligations, or pay such
indebtedness when it matures, or affects New York State's power or ability, as a
matter of law, to impose or collect significant amounts of taxes and revenues.
AUTHORITIES. The fiscal stability of New York State is related, in part, to the
fiscal stability of its Authorities, which generally have responsibility for
financing, constructing and operating revenue-producing public benefit
facilities. Authorities are not subject to the constitutional restrictions on
the incurrence of debt which apply to the State itself, and may issue bonds and
notes within the amounts of, and as otherwise restricted by, their legislative
authorization. The State's access to the public credit markets could be
impaired, and the market price of its outstanding debt may be materially and
adversely affected, if any of the Authorities were to default on their
respective obligations, particularly with respect to debt that are
State-supported or State-related. As of September 30, 1996, date of the latest
data available, there were 17 Authorities that had outstanding debt of $100
million or more. The aggregate outstanding debt, including refunding bonds, of
these 17 Authorities was $75.4 billion, only a portion of which constitutes
State-supported or State-related debt.
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Authorities are generally supported by revenues generated by the projects
financed or operated, such as fares, user fees on bridges, highway tolls and
rentals for dormitory rooms and housing. In recent years, however, New York
State has provided financial assistance through appropriations, in some cases of
a recurring nature, to certain of the Authorities for operating and other
expenses and, in fulfillment of its commitments on moral obligation indebtedness
or otherwise, for debt service. This operating assistance is expected to
continue to be required in future years. In addition, certain statutory
arrangements provide for State local assistance payments otherwise payable to
localities to be made under certain circumstances to certain Authorities. The
State has no obligation to provide additional assistance to localities whose
local assistance payments have been paid to Authorities under these
arrangements. However, in the event that such local assistance payments are so
diverted, the affected localities could seek additional State funds.
NEW YORK CITY AND OTHER LOCALITIES. The fiscal health of the State of New York
may also be impacted by the fiscal health of its localities, particularly the
City of New York, which has required and continues to require significant
financial assistance from New York State. The City depends on State aid both to
enable the City to balance its budget and to meet its cash requirements. There
can be no assurance that there will not be reductions in State aid to the City
from amounts currently projected or that State budgets will be adopted by the
April 1 statutory deadline or that any such reductions or delays will not have
adverse effects on the City's cash flow or expenditures. In addition, the
Federal budget negotiation process could result in a reduction in or a delay in
the receipt of Federal grants which could have additional adverse effects on the
City's cash flow or revenues.
For each of the 1981 through 1996 fiscal years, the City achieved balanced
operating results as reported in accordance with then applicable GAAP. The City
was required to close substantial budget gaps in recent years in order to
maintain balanced operating results. There can be no assurance that the City
will continue to maintain balanced operating results. There can be no assurance
that the City will continue to maintain a balanced budget as required by State
law without additional tax or other revenue increases or additional reductions
in City services or entitlement programs, which could adversely affect the
City's economic base.
In 1975, New York City suffered a fiscal crisis that impaired the
borrowing ability of both the City and New York State. In that year the City
lost access to the public credit
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markets. The City was not able to sell short-term notes to the public again
until 1979.
In 1975, Standard & Poor's suspended its A rating of City
bonds. This suspension remained in effect until March 1981, at which time the
City received an investment grade rating of BBB from Standard & Poor's. On July
2, 1985, Standard & Poor's revised its rating of City bonds upward to BBB+ and
on November 19, 1987, to A-. Moody's ratings of City bonds were revised in
November 1981 from B (in effect since 1977) to Ba1, in November 1983 to Baa, in
December 1985 to Baa1, in May 1988 to A and again in February 1991 to Baa1. On
July 10, 1995, Standard & Poor's downgraded its rating on the City's $23 billion
of outstanding general obligation bonds to "BBB+" from "A-", citing the City's
chronic structural budget problems and weak economic outlook. Standard & Poor's
stated that New York City's reliance on one-time revenue measures to close
annual budget gaps, a dependence on unrealized labor savings, overly optimistic
estimates of revenues and state and federal aid and the City's continued high
debt levels also contributed to its decision to lower the rating.
New York City is heavily dependent on New York State and federal
assistance to cover insufficiencies in its revenues. There can be no assurance
that in the future federal and State assistance will enable the City to make up
its budget deficits. To help alleviate the City's financial difficulties, the
Legislature created the Municipal Assistance Corporation ("MAC") in 1975. Since
its creation, MAC has provided, among other things, financing assistance to the
City by refunding maturing City short-term debt and transferring to the City
funds received from sales of MAC bonds and notes. MAC is authorized to issue
bonds and notes payable from certain stock transfer tax revenues, from the
City's portion of the State sales tax derived in the City and, subject to
certain prior claims, from State per capita aid otherwise payable by the State
to the City. Failure by the State to continue the imposition of such taxes, the
reduction of the rate of such taxes to rates less than those in effect on July
2, 1975, failure by the State to pay such aid revenues and the reduction of such
aid revenues below a specified level are included among the events of default in
the resolutions authorizing MAC's long-term debt. The occurrence of an event of
default may result in the acceleration of the maturity of all or a portion of
MAC's debt. MAC bonds and notes constitute general obligations of MAC and do not
constitute an enforceable obligation or debt of either the State or the City. As
of June 30, 1997, MAC had outstanding an aggregate
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of approximately $4.267 billion of its bonds. MAC is authorized to issue bonds
and notes to refunds its outstanding bonds and notes and to fund certain
reserves, without limitation as to principal amount, and to finance certain
capital commitments to the Transit Authority and the New York City School
Construction Authority through the 1997 fiscal year in the event the City fails
to provide such financing.
Since 1975, the City's financial condition has been subject to oversight
and review by the New York State Financial Control Board (the "Control Board")
and since 1978 the City's financial statements have been audited by independent
accounting firms. To be eligible for guarantees and assistance, the City is
required during a "control period" to submit annually for Control Board
approval, and when a control period is not in effect for Control Board review, a
financial plan for the next four fiscal years covering the City and certain
agencies showing balanced budgets determined in accordance with GAAP. New York
State also established the Office of the State Deputy Comptroller for New York
City ("OSDC") to assist the Control Board in exercising its powers and
responsibilities. On June 30, 1986, the City satisfied the statutory
requirements for termination of the control period. This means that the Control
Board's powers of approval are suspended, but the Board continues to have
oversight responsibilities.
The most recent quarterly modification to the City's financial
plan for the 1997 fiscal year, which was
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submitted to the Control Board on June 10, 1997 (the "1997 Modification"),
projected a balanced budget in accordance with GAAP for the 1997 fiscal year,
after taking into account an increase in projected tax revenues of $1.2 billion
during the 1997 fiscal year and a discretionary prepayment in the 1997 fiscal
year of $1.3 billion of debt service due in the 1998 and 1999 fiscal years.
On June 10, 1997, the City submitted to the Control Board the
Financial Plan (the "1998-2001 Financial Plan") for the 1998 through 2001 fiscal
years, relating
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to the City, the Board of Education ("BOE") and the City University of New York
("CUNY") and reflected the City's expense and capital budgets for the 1998
fiscal year, which were adopted on June 6, 1997. The 1998-2001 Financial Plan
projected revenues and expenditures for the 1998 fiscal year balanced in
accordance with GAAP. The financial plan included increased tax revenue
projections; reduced debt service costs; the assumed restoration of Federal
funding for programs assisting certain legal aliens; additional expenditures for
textbooks, computers, improved education programs and welfare reform, law
enforcement, immigrant naturalization, initiatives proposed by the City Council
and other initiatives; and a proposed discretionary transfer to the 1998 fiscal
year of $300 million of debt service due in the 1999 fiscal year for budget
stabilization purposes. In addition, the financial plan reflected the
discretionary transfer to the 1997 fiscal year of $1.3 billion of debt service
due in the 1998 and 1999 fiscal years, and included actions to eliminate a
previously projected budget gap for the 1998 fiscal year. These gap closing
actions included (i) additional agency actions totaling $621 million; (ii) the
proposed sale of various assets; (iii) additional State aid of $294 million,
including a proposal that the State accelerate a $142 million revenue sharing
payment to the City from March 1999; and (iv) entitlement savings of $128
million which would result from certain of the reductions in Medicaid spending
proposed in the Governor's 1997-1998 Executive Budget and the State making
available to the City $77 million of additional Federal block grant aid, as
proposed in the Governor's 1997-1998 Executive Budget. The 1998-2001 Financial
Plan also set forth projections for the 1999 through 2001 fiscal years and
projected gaps of $1.8 billion, $2.8 billion and $2.6 billion for the 1999
through 2001 fiscal years, respectively.
The 1998-2001 Financial Plan assumed approval by the State
Legislature and the Governor of (i) a tax reduction program proposed by the City
totaling $272 million, $435 million, $465 million and $481 million in the 1998
through 2001 fiscal years, respectively, which includes a proposed elimination
of the 4% City sales tax on clothing items under $500 as of December 1, 1997,
and (ii) a proposed State tax relief program, which would reduce the City
property tax and personal income tax, and which the financial plan assumed will
be offset by proposed increased State aid totaling $47 million, $254 million,
$472 million and $722 million in the 1998 through 2001 fiscal years,
respectively.
The 1998-2001 Financial Plan also assumed (i) approval by the
Governor and the State Legislature of the extension of the 14% personal income
tax surcharge, which is scheduled to expire on December 31, 1999 and the
extension of which is projected to provide revenue of $166 million and $494
million in the 2000 and 2001 fiscal years, respectively, and of the extension of
the 12.5% personal income tax surcharge, which
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is scheduled to expire on December 31, 1998 and the extension of which is
projected to provide revenue of $188 million, $527 million and $554 million in
the 1999 through 2001 fiscal years, respectively; (ii) collection of the
projected rent payments for the City's airports, totaling $385 million, $175
million, and $170 million in the 1999, 2000 and 2001 fiscal years, respectively,
which may depend on the successful completion of negotiations with the Port
Authority or the enforcement of the City's rights under the existing leases
through pending legal actions; and (iii) State approval of the costs containment
initiatives and State aid proposed by the City for the 1998 fiscal year, and
$115 million in State aid which is assumed in the financial plan but was not
provided for in the Governor's 1997-1998 Executive Budget. The 1998-2001
Financial Plan reflected the increased costs which the City is prepared to incur
as a result of welfare legislation recently enacted by Congress. The financial
plan provided no additional wage increases for City employees after their
contracts expire in fiscal years 2000 and 2001.
Since the preparation of the 1998-2001 Financial Plan, the State has
adopted its budget for the 1997-1998 fiscal year. The State budget enacted a
smaller sales tax reduction than the tax reduction program assumed by the City
in the financial plan, which will increase projected City sales tax revenues;
provided for State aid to the City which was less than assumed in the financial
plan; and enacted a State funded tax relief program which begins a year later
than reflected in the financial plan. In addition, the net effect of tax law
changes made in the Federal Balanced Budget Act of 1997 are expected to increase
tax revenues in the 1998 fiscal year.
Although the City has maintained balanced budgets in each of its last
sixteen fiscal years and is projected to achieve balanced operating results for
the 1997 fiscal year, there can be no assurance that the gap-closing actions
proposed in the 1998- 2001 Financial Plan can be successfully implemented or
that the City will maintain a balanced budget in future years without additional
State aid, revenue increases or expenditure reductions. Additional tax increases
and reductions in essential City services could adversely affect the City's
economic base.
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The projections set forth in the 1998-2001 Financial Plan were based on
various assumptions and contingencies which are uncertain and which may not
materialize. Changes in major assumptions could significantly affect the City's
ability to balance its budget as required by State law and to meet its annual
cash flow and financing requirements. Such assumptions and contingencies include
the condition of the regional and local economies, the impact on real estate tax
revenues of the real estate market, wage increases for City employees consistent
with those assumed in the 1998-2001 Financial Plan, employment growth, the
ability to implement proposed reductions in City personnel and other cost
reduction initiatives, the ability of the Health and Hospitals Corporation and
the BOE to take actions to offset reduced revenues, the ability to complete
revenue generating transactions, provision of State and Federal aid and mandate
relief and the impact on City revenues and expenditures of Federal and State
welfare reform and any future legislation affecting Medicare or other
entitlements.
Implementation of the 1998-2001 Financial Plan is also dependent upon the
City's ability to market its securities successfully. The City's financing
program for fiscal years 1998 through 2001 contemplates the issuance of $5.7
billion of general obligation bonds and $5.7 billion of bonds to be issued by
the proposed New York City Transitional Finance Authority (the "Finance
Authority") to finance City capital projects. The Finance Authority, was created
as part of the City's effort to assist in keeping the City's indebtedness within
the forecast level of the constitutional restrictions on the amount of debt the
City is authorized to incur. Despite this additional financing mechanism, the
City currently projects that, if no further action is taken, it will reach its
debt limit in City fiscal year 1999-2000. Indebtedness subject to the
constitutional debt limit includes liability on capital contracts that are
expected to be funded with general obligation bonds, as well as general
obligation bonds. On June 2, 1997, an action was commenced seeking a declaratory
judgment declaring the legislation establishing the Transitional Finance
Authority to be unconstitutional. If such legislation were voided, projected
contracts for the City capital projects would exceed the City's debt limit
during fiscal year 1997-98. Future developments concerning the City or entities
issuing debt for the benefit of the City, and public discussion of such
developments, as well as prevailing market conditions and securities credit
ratings, may affect the ability or cost to sell securities issued by the City
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or such entities and may also affect the market for their outstanding
securities.
The City Comptroller and other agencies and public officials have issued
reports and made public statements which, among other things, state that
projected revenues and expenditures may be different from those forecast in the
City's financial plans. It is reasonable to expect that such reports and
statements will continue to be issued and to engender public comment.
The City since 1981 has fully satisfied its seasonal financing needs in
the public credit markets, repaying all short-term obligations within their
fiscal year of issuance. Although the City's current financial plan projects
$2.4 billion of seasonal financing for the 1998 fiscal year, the City expects to
undertake only approximately $1.4 billion of seasonal financing. The City issued
$2.4 billion of short-term obligations in fiscal year 1997. Seasonal financing
requirements for the 1996 fiscal year increased to $2.4 billion from $2.2
billion and $1.75 billion in the 1995 and 1994 fiscal years, respectively.
Seasonal financing requirements were $1.4 billion in the 1993 fiscal year. The
delay in the adoption of the State's budget in certain past fiscal years has
required the City to issue short-term notes in amounts exceeding those expected
early in such fiscal years.
Certain localities, in addition to the City, have experienced financial
problems and have requested and received additional New York State assistance
during the last several State fiscal years. The potential impact
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on the State of any future requests by localities for additional assistance is
not included in the State's projections of its receipts and disbursements for
the 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the re-establishment of the Financial Control Board for the City of
Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board is
charged with oversight of the fiscal affairs of Yonkers. Future actions taken by
the State to assist Yonkers could result in increased State expenditures for
extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary
deficits that resulted in the establishment of a Supervisory Board for the City
of Troy in 1994. The Supervisory Board's powers were increased in 1995, when
Troy MAC was created to help Troy avoid default on certain obligations. The
legislation creating Troy MAC prohibits the city of Troy from seeking federal
bankruptcy protection while Troy MAC bonds are outstanding. Troy MAC has issued
bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance during the 1996
legislative session through $50 million in special appropriations targeted for
distressed cities, and that was largely continued in 1997. Twenty-eight
municipalities are scheduled to share in more than $32 million in targeted
unrestricted aid allocated in the 1997-98 budget. An additional $21 million will
be dispersed among all cities, towns and villages, a 3.97% increase in General
Purpose State Aid.
Municipalities and school districts have engaged in substantial short-term
and long-term borrowings. In 1995, the total indebtedness of all localities in
New York State other than New York City was approximately $19 billion. A small
portion (approximately $102.3 million) of that indebtedness represented
borrowing to finance budgetary deficits and was issued pursuant to enabling New
York State legislation. State law requires the comptroller to review and make
recommendations concerning the budgets of those local government units other
than New York City authorized by State law to issue debt to finance deficits
during the period that such deficit financing is outstanding. Eighteen
localities had outstanding indebtedness for deficit financing at the close of
their fiscal year ending in 1995.
From time to time, federal expenditure reductions could reduce, or in some
cases eliminate, federal funding of some local programs and accordingly might
impose substantial increased
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expenditure requirements on affected localities. If New York State, New York
City or any of the Authorities were to suffer serious financial difficulties
jeopardizing their respective access to the public credit markets, the
marketability of notes and bonds issued by localities within New York State
could be adversely affected. Localities also face anticipated and potential
problems resulting from certain pending litigation, judicial decisions and
long-range economic trends. Long-range potential problems of declining urban
population, increasing expenditures and other economic trends could adversely
affect localities and require increasing New York State assistance in the
future.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
In General.
Information on how to purchase and redeem Fund shares, and how such shares
are priced, is included in the Prospectus. The issuance of shares is recorded on
the books of the Fund, and share certificates are not issued unless expressly
requested in writing. Certificates are not issued for fractional shares.
Prior to effecting a redemption of shares represented by certificates,
PFPC must have received such certificates at its principal office. All such
certificates must be endorsed by the redeeming shareholder or accompanied by a
signed stock power, in each instance the signature must be guaranteed. A
signature guarantee may be obtained from a domestic bank or trust company,
broker, dealer, clearing agency or saving association who are participants in a
medallion program recognized by the Securities Transfer Association. The three
recognized medallion programs are Securities Transfer Agents Medallion Program
(STAMP), Stock Exchange Medallion Signature Program (MSP) and New York Stock
Exchange, Inc. Medallion Securities Program (MSP). Signature programs that are
not part of these programs would not be accepted. The Fund may require any
additional information reasonably necessary to evidence that a redemption has
been duly authorized.
Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the New
York Stock Exchange is closed, other than customary weekend and holiday
closings, or during which trading on said Exchange is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (The Fund may also
suspend or
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postpone the recordation of the transfer of its shares upon the occurrence of
any of the foregoing conditions.)
In addition, if, in the opinion of the directors of the Fund, ownership of
shares has or may become concentrated to an extent which would cause the Fund to
be deemed a personal holding company, the Fund may compel the redemption of,
reject any order for or refuse to give effect on the books of the Fund to the
transfer of the Fund's shares in an effort to prevent that consequence. The Fund
may also redeem shares involuntarily if such redemption appears appropriate in
light of the Fund's responsibilities under the 1940 Act or otherwise. If the
Fund's Board of Directors determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable, the Fund may make
payment wholly or partly in securities or other property. In certain instances,
the Fund may redeem shares pro rata from each shareholder of record without
payment of monetary consideration. (See Statement of Additional Information --
"Investment Objective and Policies (Portfolio Valuation)" for an example of when
such redemption or form of payment might be appropriate.)
Any institution purchasing shares on behalf of separate accounts will be
required to hold the shares in a single nominee name (a "Master Account").
Institutions investing in more than one series of the Fund's shares must
maintain a separate Master Account for each series. Institutions may arrange
with PFPC for certain sub-accounting services (such as purchase, redemption and
dividend recordkeeping) paid for by the Fund, if PFPC is provided with the
information necessary for sub-accounting. Sub-accounts may be established by
name or number.
The customary national business holidays which the Federal Reserve Bank of
Philadelphia and the New York Stock Exchange observe are New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day and the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday or Sunday respectively.
The Federal Reserve Bank of Philadelphia is also closed on Veterans' Day and
Columbus Day.
Net Asset Value.
As stated in the Fund's Prospectus, the Fund's net asset value per share
is calculated by adding the value of all of the Fund's portfolio securities and
other assets belonging to the Fund, subtracting the liabilities charged to the
Fund including dividends that have been declared but not paid, and dividing the
result by the number of the Fund's shares outstanding (irrespective of series).
The value of the Fund's assets is calculated using the amortized cost method
pursuant to procedures
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<PAGE> 54
adopted by the Board of Directors under Rule 2a-7. "Assets belonging to" the
Fund consist of the consideration received upon the issuance of the Fund's
shares together with all income, earnings, profits and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments and
any funds or payments derived from any re-investment of such proceeds. Assets
belonging to the Fund are charged with the direct liabilities of the Fund.
MANAGEMENT OF THE FUND
Directors and Officers.
The Fund's directors and officers, their addresses, principal occupations
during the past 5 years and other affiliations are as follows:
<TABLE>
<CAPTION>
Principal Occupations
during past 5 years
Name and Address Position and Other Affiliations(1)
- ---------------- -------- -------------------------
<S> <C> <C>
Thomas A. Melfe Chairman Partner of the law firm of
30 Rockefeller Plaza and Donovan Newton Leisure & Irvine
New York, NY 10112 Director since 1984; Director, Warburg
Age: 65 Pincus Funds.
Francis E. Drake, Jr. Director Retired; Chairman of Executive and
90 Knollwood Drive Finance Committee, Rochester Gas and
Rochester, NY 14618 Electric Corp. until December, 1988;
Age: 82 Chairman of the Board and Chief
Executive Officer, Rochester Gas and
Electric Corp. until 1980.
Rodney D. Johnson Director President, Fairmount Capital
Fairmount Capital Advisors, Inc. (financial advising)
Advisors, Inc. since 1987.
1435 Walnut Street
Drexel Building,
Philadelphia, PA
19102
Age: 55
</TABLE>
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<PAGE> 55
<TABLE>
<CAPTION>
Principal Occupations
during past 5 years
Name and Address Position and Other Affiliations(1)
- ---------------- -------- -------------------------
<S> <C> <C>
Anthony M. Santomero Director Richard K. Mellon Professor of
310 Keithwood Road Finance, since April 1984 and Dean's
Wynnewood, PA 19096 Advisory Council Member since July
Age: 51 1984, The Wharton School, University
of Pennsylvania; Director, Wharton
Financial Institutions Center,
since July 1995; Associate Editor,
Journal of Banking and Finance,
since June 1978; Associate Editor,
Journal of Economics and Business,
since October 1979; Associate
Editor, Journal of Money, Credit
and Banking, since January 1989;
Research Associate, New York
University Center for Japan-US
Business and Economic Studies,
since July 1989; Editorial
Advisory Board, Open Economics
Review, since November 1990;
Director, The Zweig Fund and The
Zweig Total Return Fund.
Edward J. Roach President Certified Public Accountant;
Bellevue Park and Treasurer Vice Chairman of the Board,
Corporate Center Fox Chase Cancer Center;
Suite 100 Trustee Emeritus, Pennsylvania
400 Bellevue Parkway School for the Deaf; Trustee
Wilmington, DE 19809 Emeritus, Immaculata College;
Age: 73 Officer of various investment
companies advised by PNC
Institutional Management
Corporation.
Morgan R. Jones Secretary Partner of the law firm of Drinker
1345 Chestnut Street Biddle & Reath LLP.
Suite 1100
Philadelphia, PA 19107-3496
Age: 57
</TABLE>
- ----------
(1) Additional affiliations with investment companies advised by PIMC or PNC
Bank are set forth below.
----------------------------
Mr. Johnson serves as a director of Temporary Investment Fund, Inc.
("TempFund") and as a trustee of Trust for Federal Securities ("FedFund") and
Municipal Fund for Temporary Investment ("MuniFund"). Messrs. Johnson and
Santomero serve as directors of Municipal Fund for California Investors, Inc.
("Calfornia Muni"). Mr. Santomero serves as a trustee of Compass Capital Funds
("Compass"). Each of these funds shares the same investment adviser and/or
sub-adviser as the Fund.
Mr. Roach is Vice President and Treasurer of TempFund, FedFund, MuniFund,
Independence Square Income Securities ("ISIS") and California Muni. In addition,
Mr. Roach is Treasurer of
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<PAGE> 56
Chestnut Street Exchange Fund ("Chestnut") and President and Treasurer of The
RBB Fund, Inc. ("RBB"); and Mr. Jones is Secretary of Chestnut and RBB. Each of
the investment companies named above receives various advisory or other services
from PIMC or PNC Bank. Of the above-mentioned funds, PDI and PFPC provide
distribution and administration services to TempFund, FedFund, MuniFund, Compass
and California Muni. In addition, PFPC provides administration services to RBB.
Each director is paid $5,000 annually, plus $250 for each Board meeting
attended, and is reimbursed for expenses incurred in connection with his
attendance at Board meetings. The Chairman of the Board receives an additional
$2,500 per annum for his services in such capacity.
The following table sets forth information about the fees received by the
Fund's directors for the fiscal year ended July 31, 1997, the Fund's most
recently completed fiscal year.
<TABLE>
<CAPTION>
Pension or Total
Retirement Estimated Compensation
Benefits Annual from Fund
Aggregate Accrued as Benefits and Fund
Name of Person Compensation Part of Fund Upon Complex(1) Paid
Position from Fund Expenses Retirement to Directors
- -------------- ------------ ------------ ---------- ---------------
<S> <C> <C> <C> <C>
Thomas A. Melfe 8,750 0.00 N/A (1) 8,750
Director and Chairman
Rodney D. Johnson 6,250 0.00 N/A (6) 56,250
Director
Francis E. Drake, Jr. 6,250 0.00 N/A (1) 6,250
Director
Anthony M. Santomero 6,250 0.00 N/A (3) 60,800
------ -------
Director 27,500 132,050
</TABLE>
(1) A "fund complex" means two or more investment companies that hold
themselves out to investors as related companies for purposes of
investment and investor services, or have a common investment adviser
or have an investment adviser that is an affiliated person of the
investment adviser of any of the other investment companies. The fund
complex consists of the Fund, Muni Fund, FedFund, Compass, TempFund,
California Muni, Chestnut Street Exchange Fund and Independence Square
Income Securities, Inc.
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<PAGE> 57
(2) Total number of investment companies each director serves on within the
fund complex.
In addition, the Fund contributed $1,341 for its last fiscal year to its
retirement plan for employees (who include Mr. Roach). No employee of PDI, PIMC,
PFPC or PNC Bank receives any compensation from the Fund for acting as an
officer or director of the Fund. The directors and officers of the Fund own less
than 1% of the Fund's shares.
By virtue of the responsibilities assumed by PDI, PIMC, PNC Bank and PFPC
under their respective agreements with the Fund, the Fund itself requires only
one part-time employee in addition to its officers. Drinker Biddle & Reath LLP,
of which Mr. Jones is a partner, receives legal fees as counsel to the Fund.
Adviser and Administrators.
The advisory and administrative services provided and the expenses assumed
by PIMC and the administrators, as well as the fees payable to each of them, are
described in the Prospectus. For the fiscal years ended July 31, 1995, 1996 and
1997 the Fund paid $134,630, $133,705 and $150,755, respectively, in advisory
fees to PIMC (net of waivers). For the fiscal years ended July 31, 1995, 1996
and 1997 the Fund paid administration fees to PFPC and PDI (net of waivers)
totalling $134,629, $133,705 and $150,755, respectively. During the fiscal years
ended July 31, 1995, 1996 and 1997 PIMC and PFPC and PDI each voluntarily waived
advisory and administration fees in amounts totalling $350,428 and $350,429,
respectively; $391,595 and $391,594, respectively; and $420,034 and $420,034,
respectively.
Banking Laws.
Certain banking laws and regulations with respect to investment companies
are discussed in the Fund's Prospectus. PIMC, PFPC and PNC Bank believe that
they may perform the services for the Fund contemplated by the respective
Advisory, Sub-Advisory, Transfer Agency and Custody Agreements without violation
of the Glass-Steagall Act or other applicable banking laws or regulations.
However, changes in legal requirements relating to the permissible activities of
banks and their affiliates, as well as further interpretations of present and
future requirements, could prevent PIMC, PNC Bank and PFPC from
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<PAGE> 58
continuing to perform such services for the Fund. If PIMC, PFPC or PNC Bank were
prohibited from continuing to perform such services, it is expected that the
Board of Directors would recommend that the Fund enter into new agreements with
other qualified firms. Any new advisory agreement would be subject to
shareholder approval.
Custodian and Transfer Agent.
As custodian of the Fund's assets, PNC Bank (i) maintains a separate
account or accounts in the name of the Fund, (ii) holds and disburses portfolio
securities on account of the Fund, (iii) makes receipts and disbursements of
money on behalf of the Fund, (iv) collects and receives all income and other
payments and distributions on account of the Fund's portfolio securities, (v)
responds to correspondence from security brokers and others relating to its
duties and (vi) makes periodic reports to the Fund's Board of Directors
concerning the Fund's operations. PNC Bank is authorized to select one or more
banks or trust companies to serve as sub-custodian on behalf of the Fund,
provided that PNC Bank remains responsible for the performance of all its duties
under its Custody Agreement with the Fund and holds the Fund harmless from the
acts and omissions of any sub-custodian chosen by PNC Bank.
As the Fund's transfer and dividend disbursing agent, PFPC (i) issues and
redeems shares of the Fund, (ii) addresses and mails all communications by the
Fund to its shareholders, including reports to shareholders, dividend and
distribution notices and proxy material for its meetings of shareholders, (iii)
responds to correspondence by shareholders and others relating to its duties,
(iv) maintains shareholder accounts and sub-accounts, (v) provides installation
and other services in connection with the Fund's computer access program
maintained to facilitate shareholder access to the Fund, and (vi) makes periodic
reports to the Fund's Board of Directors concerning the Fund's operations. PFPC
may, on 30 days' notice to the Fund, assign its duties thereunder to any other
affiliate of PNC Bank Corp. For its transfer agency, dividend disbursing and
sub-accounting services, the Fund pays PFPC $12.00 per account and sub-account
per annum plus $1.00 for each purchase or redemption transaction by an account
(other than a purchase transaction made in connection with the automatic
reinvestment of dividends).
PFPC sends each shareholder of record a monthly statement showing the
total number of shares owned as of the last business day of the month (as well
as the dividends paid during the current month and year), and provides each
shareholder of record with a daily transaction report for each day on which a
transaction occurs in the shareholder's Master Account with the Fund. Further,
an institution establishing sub-accounts with PFPC is provided with a daily
transaction report for each day on which a
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<PAGE> 59
transaction occurs in a sub-account and, as of the last calendar day of each
month, a report which sets forth the share balance for the sub-account at the
beginning and end of the month and income paid or reinvested during the month.
Service Organizations.
As stated in the Fund's Prospectus, the Fund enters into agreements with
institutional investors ("Service Organizations") requiring them to provide
support services to their customers who beneficially own Dollar or Plus shares
in consideration of .25% (on an annualized basis) of the average daily net asset
value of the Dollar or Plus shares held by the Service Organizations for the
benefit of their customers. Such services include: (i) aggregating and
processing purchase and redemption requests from customers and placing net
purchase and redemption orders with the transfer agent; (ii) providing customers
with a service that invests the assets of their accounts in Dollar or Plus
shares; (iii) processing dividend payments from the Fund on behalf of customers;
(iv) providing information periodically to customers showing their positions in
Dollar and Plus shares; (v) arranging for bank wires; (vi) responding to
customer inquiries relating to the services performed by the Service
Organizations; (vii) providing sub-accounting with respect to Dollar and Plus
shares beneficially owned by customers or the information necessary for
sub-accounting; (viii) forwarding shareholder communications from the Fund (such
as proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to customers, if required by law; and
(ix) other similar services if requested by the Fund. In addition,
broker/dealers purchasing Plus shares may be requested to provide from time to
time assistance (such as the forwarding of sales literature and advertising to
customers) in connection with the distribution of Plus shares. For the period
from August 1, 1994 through December 1, 1994, the Fund paid a total of $302 to
Service Organizations with respect to Plus shares (no Plus Shares were
outstanding from December 2, 1994 through July 31, 1997). For the period from
April 15, 1996 through July 31, 1996, the Fund paid a total of $22 to Service
Organizations with respect to Dollar shares. For the year ended July 31, 1997
the fund paid a total of $8,458 to Service Organizations with respect to Dollar
shares.
The Fund's agreements with Service Organizations are governed by Plans
(called "non-12b-1 Shareholder Services Plan" and "12b-1 Services Plan" for the
Dollar shares and Plus shares, respectively), which have been adopted by the
Fund's Board of Directors pursuant to applicable rules and regulations of the
SEC
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<PAGE> 60
and an exemptive order granted by the SEC in connection with the creation of the
Dollar and Plus shares. Pursuant to the Plans, the Board of Directors reviews,
at least quarterly, a written report of the amounts expended under the Fund's
agreements with Service Organizations and the purposes for which the
expenditures were made. In addition, the Fund's arrangements with Service
Organizations must be approved annually by a majority of the Fund's directors,
including a majority of the directors who are not "interested persons" of the
Fund as defined in the 1940 Act and have no direct or indirect financial
interest in such arrangements (the "Disinterested Directors").
The Board of Directors has approved the Fund's arrangements with Service
Organizations based on information provided to the Board that there is a
reasonable likelihood that the arrangements will benefit the Fund and its
shareholders by affording the Fund greater flexibility in connection with the
servicing of the accounts of the beneficial owners of its shares in an efficient
manner. Any material amendment to the Fund's arrangements with Service
Organizations must be made in a manner approved by a majority of the Fund's
Board of Directors (including a majority of the Disinterested Directors), and
any amendment to increase materially the costs under the 12b-1 Services Plan
adopted by the Board with respect to Plus shares must be approved by the holders
of a majority of the outstanding Plus shares. (It should be noted that while the
annual service fee with respect to Plus shares is currently set at .25%, the
Plan adopted by the Board of Directors permits the Board to increase this fee to
.40% without shareholder approval.) So long as the Fund's arrangements with
Service Organizations are in effect, the selection and nomination of the members
of the Fund's Board of Directors who are not "interested persons" (as defined in
the 1940 Act) of the Fund will be committed to the discretion of such
non-interested directors.
Expenses.
Except as noted in the Prospectus, the Fund's service contractors bear all
expenses in connection with performance of their services. The Fund bears the
expenses incurred in its operations. Fund expenses include taxes, interest, fees
and salaries of its directors and officers, SEC fees, state securities fees,
costs of preparing and printing prospectuses for regulatory purposes and for
distribution to shareholders, advisory and administration fees, charges of the
custodian, transfer agent and dividend disbursing agent, Service Organization
fees, certain insurance premiums, outside auditing and legal expenses, costs of
independent pricing service, costs of shareholder reports and shareholder
meetings and any extraordinary expenses. The Fund also pays for brokerage fees
and commissions (if any) in connection with the purchase of portfolio
securities.
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<PAGE> 61
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional federal tax considerations
generally affecting the Fund and its shareholders that are not described in the
Fund's Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Fund or its shareholders, and the discussion here and in
the Fund's Prospectus is not intended as a substitute for careful tax planning.
Investors should consult their tax advisers with specific reference to their own
tax situations.
As described above and in the Fund's Prospectus, the Fund is designed to
provide New York institutional investors and their customers with current
tax-exempt interest income. The Fund is not intended to constitute a balanced
investment program and is not designed for investors seeking capital
appreciation or maximum tax-exempt income irrespective of fluctuations in
principal. Shares of the Fund would not be suitable for tax-exempt institutions
and may not be suitable for retirement plans qualified under Section 401 of the
Internal Revenue Code of 1986, as amended (the "Code"), H.R. 10 plans and
individual retirement accounts because such plans and accounts are generally
tax-exempt and, therefore, not only would not gain any additional benefit from
the Fund's dividends being tax-exempt, but such dividends would be ultimately
taxable to the beneficiaries when distributed to them. In addition, the Fund may
not be an appropriate investment for persons that are either "substantial users"
of facilities financed by private activity bonds or "related persons" thereof.
"Substantial user" is defined under U.S. Treasury Regulations to include a
non-exempt person who regularly uses a part of such facilities in his trade or
business and (i) whose gross revenues derived with respect to the facilities
financed by the issuance of bonds are more than 5% of the total revenues derived
by all users of such facilities, (ii) who occupies more than 5% of the usable
area of such facilities, or (iii) for whom such facilities or a part thereof
were specifically constructed, reconstructed or acquired. "Related persons"
include certain related natural persons, affiliated corporations, a partnership
and its partners and an S corporation and its shareholders.
The percentage of total dividends paid by the Fund with respect to any
taxable year which qualifies as federal exempt-interest dividends will be the
same for all shareholders receiving dividends during such year. In order for the
Fund to pay exempt-interest dividends during any taxable year, at the close of
each fiscal quarter at least 50% of the aggregate value of the Fund's portfolio
must consist of federal tax-exempt interest obligations. In addition, the Fund
must distribute an amount that is equal to at least the sum of 90% of its net
exempt-interest income, if any, and 90% of its investment
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<PAGE> 62
company taxable income, if any, with respect to each taxable year. After the
close of its taxable year, the Fund will notify each shareholder of the portion
of the dividends paid by the Fund to the shareholder with respect to such
taxable year which constitutes an exempt-interest dividend. However, the
aggregate amount of dividends so designated cannot exceed the excess of the
amount of interest exempt from tax under Section 103 of the Code received by the
Fund during the taxable year over any amounts disallowed as deductions under
Sections 265 and 171(a)(2) of the Code.
Interest on indebtedness incurred by a shareholder to purchase or carry
Fund shares generally is not deductible for federal and New York State and New
York City personal income tax purposes if the Fund distributes exempt-interest
dividends during the shareholder's taxable year.
While the Fund does not expect to earn any investment company taxable
income, any such income earned by the Fund will be distributed. In general, the
Fund's investment company taxable income will be its taxable income (including,
for example, its short-term capital gains) subject to certain adjustments and
excluding the excess of any net long-term capital gain for the taxable year over
the net short-term capital loss, if any, for such year. To the extent such
income is distributed, it will be taxable to shareholders as ordinary income,
whether paid in cash or additional shares.
The Fund does not expect to realize long-term capital gains and therefore
does not expect to distribute any capital gain dividends.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date before the end of the year will be
deemed for federal income tax purposes to have been received by the shareholders
and paid by the Fund in that year in the event such dividends are actually paid
during January of the following year.
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to distribute with respect to each calendar year at least
98% of their ordinary taxable income and capital gain net income (excess of
capital gains over capital losses) for the 1-year period ending on October 31 of
such calendar year. The balance of such income must be distributed during the
next calendar year. The Fund intends to make sufficient distributions or deemed
distributions of any ordinary taxable income and any capital gain net income to
avoid liability for this excise tax.
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<PAGE> 63
Although the Fund expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all federal income taxes, the Fund
may be subject to the tax laws of states or localities depending upon the extent
of its activities in such states and localities in which its offices are
maintained, in which its agents or independent contractors are located or in
which it is otherwise deemed to be conducting business.
If for any taxable year the Fund does not qualify for the special federal
income tax treatment afforded regulated investment companies, all of its taxable
income will be subject to federal income tax at regular corporate rates (without
any deduction for distributions to its shareholders). In such event, dividend
distributions, including amounts derived from interest on tax-exempt
obligations, would be taxable to shareholders to the extent of current and
accumulated earnings and profits, and would be eligible for the dividends
received deduction in the case of corporate shareholders for corporations.
The Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or 31% of gross sale proceeds
paid to shareholders who have failed to provide a correct tax identification
number in the manner required, who are subject to withholding by the Internal
Revenue Service for failure properly to include on their return payments of
taxable interest or dividends, or who have failed to certify to the Fund that
they are not subject to backup withholding when required to do so or that they
are "exempt recipients."
The foregoing discussion is based on federal tax laws and regulations
which are in effect on the date of this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action. Shareholders are advised to consult their tax advisers concerning the
application of state and local taxes.
DIVIDENDS
General.
Net income for dividend purposes consists of interest accrued
and original discount earned on the Fund's assets for the applicable dividend
period, less amortization of market premium on such assets and accrued expenses
for such period. Net income for each of the Fund's three series of shares is
determined in the same manner, except that Dollar and Plus shares bear the fees
payable to Service Organizations for the services to the beneficial owners of
such shares. (See the Fund's
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<PAGE> 64
Prospectus under "Dividends.") Realized and unrealized gains and losses on
portfolio securities are reflected in net asset value.
Should the Fund incur or anticipate any unusual or unexpected significant
expense or loss which would affect disproportionately the income of the Fund for
a particular period, the Board of Directors would at that time consider whether
to adhere to the present dividend policy with respect to the Fund or to revise
it in order to mitigate to the extent possible the disproportionate effect of
such expense or loss on the income of the Fund. Such expense or loss may result
in the shareholder's receiving no dividends for the period during which it held
shares of the Fund and in it receiving upon redemption a price per share lower
than that which it paid.
Yield Information.
The "yields," "effective yields" and "tax-equivalent yields" of the Fund's
series of shares as described and shown in the Prospectus are calculated
according to formulas prescribed by the SEC. The standardized seven-day yield
for each of the Fund's three series of shares is computed separately for each
series by determining the net change in the value of a hypothetical pre-existing
account in the Fund having a balance of one share of the series involved at the
beginning of the period, dividing the net change by the value of the account at
the beginning of the period to obtain the base period return, and multiplying
the base period return by 365/7. The net change in the value of an account in
the Fund includes the value of additional shares purchased with dividends from
the original share and dividends declared on the original share and any such
additional shares, net of all fees charged to all shareholder accounts in
proportion to the length of the base period and the Fund's average account size,
but does not include gains and losses or unrealized appreciation and
depreciation. The Fund's "effective yield" is calculated by compounding the
unannualized base period return for each series of shares (calculated as above),
by adding one to the base period return for the series involved, raising that
sum to a power equal to 365/7, and subtracting one from the result. The Fund's
"tax-equivalent" yield is computed by: (a) dividing the portion of the Fund's
yield (calculated as above) that is exempt from both federal and New York State
income taxes by one minus a stated combined federal and New York State income
tax rate; (b) dividing the portion of the Fund's yield (calculated as above)
that is exempt from federal income tax only by one minus a stated federal income
tax rate; and (c) adding the figures resulting from (a) and (b) above to that
portion, if any, of the Fund's yield that is not exempt from federal income tax.
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<PAGE> 65
For the seven-day period ended July 31, 1997, the yields on Money and
Dollar Shares were 3.45% and 3.20%, respectively, the compounded effective
yields on Money and Dollars Shares were 3.29 and 3.03, respectively, and the
tax-equivalent yields on Money and Dollar shares were 5.34% and 4.95%,
respectively. These tax-equivalent yields assume a marginal Federal income tax
rate of 28%, a New York State and New York City marginal income tax rate of
10.25% and an overall tax rate taking into account the federal tax deduction for
state and local taxes paid of 35.38% Because actual income may vary considerably
from those assumptions, each investor should consider their own tax rate in
evaluating yields.
From time to time, in advertisements or in reports to shareholders, the
yields of the Fund may be quoted and compared to those of other mutual funds
with similar investment objectives and to stock or other relevant indices. For
example, the yield of the Fund may be compared to IBC Money Fund Average, which
is an average compiled by IBC Money Fund Report, a widely recognized independent
publication that monitors the performance of money market funds, or to the data
prepared by Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent service that monitors the performance of mutual funds.
The Fund may also from time to time include in advertisements, sales
literature, communications to shareholders and other materials ("Materials"),
discussions or illustrations of the effects of compounding. "Compounding" refers
to the fact that, if dividends or other distributions on an investment are
reinvested by being paid in additional Fund shares, any future income or capital
appreciation of the Fund would increase the value, not only of the original Fund
investment, but also of the additional Fund shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distributions had been paid in cash.
In addition, the Fund may also include in Materials discussions and/or
illustrations of the potential investment goals of a prospective investor
(including materials that describe general principles of investing,
questionnaires designed to help create a personal financial profile, worksheets
used to project savings needs based on certain assumptions and action plans
offering investment alternatives), investment management strategies, techniques,
policies or investment suitability of the Fund, economic and political
conditions, the relationship between sectors of the economy and the economy as a
whole, various securities markets, the effects of inflation and historical
performance of various asset classes, including but not limited to, stocks,
bonds and Treasury securities, and hypothetical investment returns based on
certain assumptions. From time to
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<PAGE> 66
time, Materials may summarize the substance of information contained in
shareholder reports (including the investment composition of the Fund), as well
as the views of the adviser and/or sub-adviser as to current market, economic,
trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to the Fund. In addition, selected indices may be used to illustrate
historical performance of select asset classes. The Fund may also include in
Materials charts, graphs or drawings which compare the investment objective,
return potential, relative stability and/or growth possibilities of the Fund
and/or other mutual funds, or illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to, stocks,
bonds, Treasury securities and shares of the Fund and/or other mutual funds.
Materials may include a discussion of certain attributes or benefits to be
derived by an investment in the Fund and/or other mutual funds (such as value
investing, market timing, dollar cost averaging, asset allocation, constant
ratio transfer, automatic accounting rebalancing, the advantages and
disadvantages of investing in tax-deferred and taxable investments), shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning and investment alternatives to
certificates of deposit and other financial instruments. Such Materials may
include symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein. Materials may include designations
assigned the Fund by various rating or ranking organizations, and Fund
identifiers (such as CUSIP numbers or NASDAQ symbols). Materials may include
lists of representative clients of the Fund's investment adviser, may include
discussions of other products and services (of the Fund's investment adviser and
affiliates of the investment adviser), may contain information regarding average
weighted maturity or other maturity characteristics, and may contain information
regarding the background, expertise, etc. of the investment adviser of the
Fund's portfolio manager. The following information has been provided by the
Fund's distributor: In managing the Fund's portfolio, the investment adviser
utilizes a "pure and simple" approach, which may include disciplined research,
stringent credit standards and careful management of maturities.
From time to time, the Fund may compare its total returns to rankings
prepared by independent services or other financial or industry publications
that monitor the performance of mutual funds. For example, such data is found in
IBC Money Fund Report and reports prepared by Lipper Analytical Services, Inc.
Total return is the change in value of an investment in the Fund over a
particular period, assuming that all distributions have been reinvested. SUCH
RANKINGS REPRESENT THE FUND'S PAST PERFORMANCE AND SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE RESULTS.
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<PAGE> 67
The Fund's yields will fluctuate and any quotation of the Fund's yield
should not be considered as representative of the future performance of the
Fund. Since yields fluctuate, yield data cannot necessarily be used to compare
an investment in the Fund's shares with bank deposits, savings accounts, and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is generally a function of kind and quality of the investments held in a
portfolio, portfolio maturity, operating expenses, and market conditions. Any
fees charged by banks or other financial institutions to customer accounts
investing in shares of the Fund will not be included in calculations of yield;
such fees would reduce the actual yield from that quoted.
COUNSEL
Drinker Biddle & Reath LLP, 1345 Chestnut Street, Suite 1100,
Philadelphia, Pennsylvania 19107, of which Mr. Jones, Secretary of the Fund, is
a partner, will pass upon certain legal matters for the Fund as its counsel.
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York,
New York 10022, acts as special New York counsel for the Fund and has reviewed
the portions of this Statement of Additional Information and the Fund's
Prospectus concerning New York taxes and the description of special
considerations relating to New York Municipal Obligations.
INDEPENDENT ACCOUNTANTS
The financial statements of the Fund incorporated by reference in this
Statement of Additional Information and the Financial Highlights which appear in
the Fund's Prospectus have been audited by Coopers & Lybrand L.L.P., independent
accountants, whose report thereon is incorporated by reference herein, and have
been included in the Fund's Prospectus in reliance upon the report of said firm
of independent accountants given upon their authority as experts in accounting
and auditing. Coopers & Lybrand L.L.P. has offices at 2400 Eleven Penn Center,
Philadelphia, Pennsylvania 19103.
MISCELLANEOUS
The Fund was organized as a Maryland corporation on March 4, 1983 under
the name of New York Municipal Fund for Temporary Investment, Inc. On July 18,
1983, the Fund changed its name to Municipal Fund for New York Investors, Inc.
-44-
<PAGE> 68
As used in this Statement of Additional Information and the Fund's
Prospectus, a "majority of the outstanding shares of the Fund" means, with
respect to the approval of an investment advisory agreement, distribution plan
or a change in an investment objective or fundamental investment policy, the
lesser of (1) 67% of the Fund's shares, irrespective of series, represented at a
meeting at which the holders of more than 50% of the outstanding shares are
present in person or by proxy, or (2) more than 50% of the Fund's outstanding
shares, irrespective of series.
As stated in the Prospectus, holders of the Fund's Money, Dollar and Plus
shares will vote in the aggregate and not by series on all matters, except where
otherwise required by law, except that only Dollar shares will be entitled to
vote on matters submitted to a vote of shareholders pertaining to the Fund's
arrangements with Service Organizations with respect to Dollar shares and only
Plus shares will be entitled to vote on matters submitted to a vote of
shareholders pertaining to the Fund's arrangements with Service Organizations
with respect to Plus shares.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of such Act or applicable state law, or otherwise,
to the holders of the outstanding securities of an investment company such as
the Fund shall not be deemed to have been effectively acted upon unless approved
by the holders of a majority of the outstanding shares of each series affected
by the matter. Rule 18f-2 further provides that a series shall be deemed to be
affected by a matter unless it is clear that the interests of each series in the
matter are identical or that the matter does not affect any interest of the
series. Under the Rule, the approval of an investment advisory agreement or any
change in a fundamental investment policy would be effectively acted upon with
respect to a series only if approved by the holders of a majority of the
outstanding voting securities of such series. However, the Rule also provides
that the ratification of the selection of independent accountants, the approval
of principal underwriting contracts and the election of directors are not
subject to the separate voting requirements and may be effectively acted upon by
shareholders of the investment company voting without regard to series.
As of November 5, 1997, the name, address and percentage of ownership of
each institutional investor that owned of record 5% or more of the outstanding
shares of the Fund were as follows: Chase Manhattan Bank, N.A., 1211 Avenue of
the Americas, 33rd Floor, New York, New York 10036, 12.54%; Trulin & Co., c/o
Chase Manhattan Bank,
-45-
<PAGE> 69
N.A., P.O. Box 1412, Rochester, New York 14603, 16.60%; Fleet New York, Fleet
Investment Services, 159 East Main Street, New York, New York 14638, 11.71%;
Marine Midland Bank NA, Marine Midland General Account #10, 1 Marine Midland
Center, 17th Floor, Buffalo, New York 14203, 06.36%; Saxon & Co., PNC Bank,
Attn: Income Collect 76-A-260, Airport Bus Ctr./Intl. Court 2, 200 Stevens
Drive, Lester, PA 19113, 06.530%; Chase Manhattan Bank, Administrative Services
(IFG), Attn: Sevan Marinos, AIS Section 31-270, 33rd Fl., 1211 Avenue of the
Americas, New York, New York 10036, 19.09%; The Park Associates, Inc., Attn:
Terry Shrider, 268 Main Street, East Aurora, New York 14052, 06.56% The Fund
does not know whether the entities named above are the beneficial owners of the
shares held by them.
The Fund does not currently intend to hold annual meetings of shareholders
(except as required by the 1940 Act or other applicable law). The law under
certain circumstances provides shareholders with the right to call for a meeting
of shareholders to consider the removal of one or more directors. To the extent
required by law, the Fund will assist in shareholder communication in such
matters.
Notwithstanding any provision of Maryland law requiring a greater vote of
the Fund's shares in connection with any corporate action, unless otherwise
provided by law or by the Fund's Charter, the Fund may take or authorize such
action upon the favorable vote of the holders of more than 50% of the Fund's
outstanding shares voting without regard to class or series. (See, however, the
Fund's Prospectus under "Description of Shares" regarding certain special voting
rights of Dollar and Plus shares on matters pertaining to the Fund's
arrangements with Service Organizations.)
FINANCIAL STATEMENTS
The Fund's Annual Report to Shareholders for the fiscal year ended July
31, 1997 has been filed with the Securities and Exchange Commission. The
financial statements in such Annual Report (the "Financial Statements") are
incorporated by reference into this Statement of Additional Information. The
Financial Statements included in the Annual Report have been audited by the
Fund's independent accountants, Coopers & Lybrand L.L.P., whose report thereon
also appears in such Annual Report and is incorporated herein by reference. The
Financial Statements in such Annual Report have been incorporated herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
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<PAGE> 70
APPENDIX
DESCRIPTION OF MUNICIPAL OBLIGATIONS RATINGS
The following summarizes the two highest ratings used by S&P Ratings Group
for municipal debt:
AAA - This designation represents the highest rating assigned by S&P to a
debt obligation and indicates an extremely strong capacity to pay interest and
repay principal.
AA - Debt is considered to have a very strong capacity to pay interest and
repay principal and differs from AAA issues only in small degree.
PLUS (+) OR MINUS (-) - To provide more detailed indications of credit
quality, the "AA" rating may be modified by the addition of a plus or minus sign
to show relative standing within this major rating category.
The following summarizes the two highest ratings used by Moody's Investors
Service, Inc. for municipal debt:
Aaa - Bonds are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edged."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds
rated Aa. The modifier 1 indicates that the issuer ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issuer ranks in the lower end of its generic
rating category.
A Standard and Poor's rating reflects the liquidity concerns and market
access risks unique to notes due in three years or less.
A-1
<PAGE> 71
SP-1 - The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus (+) designation.
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
credit risk. The following summarizes the two highest ratings used by Moody's
for short-term notes and variable rate demand obligations:
MIG-1/VMIG-1-Loans bearing these designations are of the best quality,
enjoying strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2-Loans bearing these designations are of high quality, with
margins of protection ample although not so large as in the preceding group.
Commercial paper rated A-1 by S&P indicates that the issuer's degree of
safety for timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted A-1+. Issuer's capacity for
timely payment on commercial paper rated A-2 is satisfactory, but the relative
degree of safety is not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earning coverage of fixed financial charges and high internal cash
generation; and well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) are considered
to have a strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
A-2
<PAGE> 72
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Included in Part A of the Registration
Statement: Financial Highlights for New York
Money Fund (Money Shares) for the fiscal
years ended July 31, 1997, 1996, 1995, 1994,
1993, 1992, 1991, 1990, 1989 and 1988; for
New York Money Fund (Dollar Shares) for the
fiscal years ended July 31, 1997, 1996,
1995, 1994, 1993, 1992, 1991, 1990, 1989 and
1988; and for New York Money Plus Fund (Plus
Shares) for the fiscal years ended July 31,
1997, 1996, 1995, 1994, 1993, 1992, 1991,
1990, 1989 and 1988.
(2) Incorporated by reference in Part B of the
Registration Statement: Statement of Net
Assets - July 31, 1997. Statement of
Operations for the fiscal year ended July
31, 1997. Statement of Changes in Net Assets
for the fiscal years ended July 31, 1997 and
July 31, 1996. Financial Highlights for New
York Money Fund (Money Shares) for the
fiscal years ended July 31, 1997, 1996,
1995, 1994, 1993 and 1992; for New York
Money Fund (Dollar Shares) for the fiscal
years ended July 31, 1997, 1996, 1995, 1994,
1993 and 1992; and for New York Money Plus
Fund (Plus Shares) for the fiscal years
ended July 31, 1997, 1996, 1995, 1994, 1993
and 1992. Notes to Financial Statements-July
31, 1997. Report of Independent Accountants
-September 5, 1997.
(3) All required financial statements are
included in Parts A and B hereof. All other
financial statements and schedules are
inapplicable.
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<PAGE> 73
(b) Exhibits:
(1) (a) Articles of Incorporation dated
February 23, 1983 are incorporated
herein by reference to Exhibit
(1)(a) of Registrant's Registration
Statement filed on November 27,
1996.
(b) Articles Supplementary to
Registrant's Articles of
Incorporation dated July 11, 1983
are incorporated herein by reference
to Exhibit (1)(b) of Registrant's
Registration Statement filed on
November 27, 1996.
(c) Articles of Amendment to
Registrant's Articles of
Incorporation dated July 15, 1983
are incorporated herein by reference
to Exhibit (1)(c) of Registrant's
Registration Statement filed on
November 27, 1996.
(d) Articles Supplementary to
Registrant's Articles of
Incorporation dated August 31, 1985
are incorporated herein by reference
to Exhibit (1)(d) of Registrant's
Registration Statement filed on
November 27, 1996.
(2) (a) By-Laws as approved and adopted
by Registrant's Board of Directors
are incorporated herein by reference
to Exhibit (2)(a) of Registrant's
Registration Statement filed on
November 27, 1996.
(b) Amendment No. 1 to By-Laws as
approved and adopted by
Registrant's Board of Directors on
July 26, 1984 is incorporated
herein by reference to Exhibit
(2)(b) of Post-Effective Amendment
No. 15 to Registrant's Registration
Statement filed on November 27,
1996.
(c) Amendment No. 2 to By-Laws as
approved and adopted by
Registrant's Board of
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<PAGE> 74
Directors on October 28, 1987 is
incorporated herein by reference to
Exhibit (2)(c) of Post-Effective
Amendment No. 15 to Registrant's
Registration Statement filed on
November 27, 1996.
(d) Amendment No. 3 to By-Laws as
approved and adopted by
Registrant's Board of
Directors on July 13, 1988 is
incorporated herein by reference to
Exhibit (2)(c) of Post-Effective
Amendment No. 15 to the
Registrant's Registration Statement
filed on November 27, 1997.
(3) None.
(4) (a) Specimen copy of share certificate
for Class A Common Stock is
incorporated herein by reference to
Exhibit (4) of Pre-Effective
Amendment No. 1 to Registrant's
Registration Statement filed on
July 27, 1983.
(b) Specimen copy of share certificate
for Class A Common Stock - Special
Series 1 is incorporated herein by
reference to Exhibit (4)(b) of
Post-Effective Amendment No. 5 to
Registrant's Registration Statement
filed on September 30, 1986.
(c) Specimen copy of share certificate
for Class A Common Stock - Special
Series 2 is incorporated herein by
reference to Exhibit (4)(c) of
Post-Effective Amendment No. 5 to
Registrant's Registration Statement
filed on September 30, 1986.
(5) (a) Amended Investment Advisory
Agreement between Registrant and
Provident Institutional Management
Corporation dated as of February 9,
1987 is incorporated herein by
reference to Exhibit (5)(a) of
Post-Effective Amendment No. 6 to
Registrant's Registration Statement
filed on September 29, 1987.
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<PAGE> 75
(b) Sub-Advisory Agreement between
Provident Institutional Management
Corporation and Provident National
Bank dated as of August 8, 1983 is
incorporated herein by reference to
Exhibit (5)(b) of Post-Effective
Amendment No. 1 to Registrant's
Registration Statement filed on
March 1, 1984.
(6) Distribution Agreement between Registrant
and Provident Distributors, Inc. dated
January 31, 1994 is incorporated herein by
reference to Exhibit (6) of Post-Effective
Amendment No. 13 to Registrant's
Registration Statement filed on November 30,
1994.
(7) Fund Office Retirement Profit-Sharing Plan
and Trust Agreement dated as of December 1,
1989 is incorporated herein by reference to
Exhibit (7) of Post-Effective Amendment No.
9 to Registrant's Registration Statement
filed on November 29, 1990.
(8) (a) Custody Agreement between
Registrant and Provident National
Bank dated as of July 20, 1983 is
incorporated herein by reference to
Exhibit (8) of Post-Effective
Amendment No. 1 to Registrant's
Registration Statement filed on
March 1, 1984.
(b) Amendment No. 1 dated as of July
31, 1985 to Custody Agreement
between Registrant and Provident
National Bank is incorporated
herein by reference to Exhibit
(8)(b) of Post-Effective Amendment
No. 4 to Registrant's Registration
Statement filed on October 7, 1985.
(c) Amendment No. 2 dated as of October
30, 1985 to Custody Agreement
between Registrant and Provident
National Bank is incorporated
herein by reference to Exhibit
(8)(c) of Post-Effective Amendment
No. 5 to Registrant's Registration
Statement filed on September 30,
1986.
(9) (a) Administration Agreement between
Registrant, Provident Distributors,
Inc. (formerly MFD Group, Inc.) and
PFPC Inc.
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<PAGE> 76
dated January 18, 1993 is
incorporated herein by reference to
Exhibit (9)(a) of Post-Effective
Amendment No. 12 to Registrant's
Registration Statement filed on
November 30, 1993.
(b) Transfer Agency Agreement between
Registrant and Provident Financial
Processing Corporation dated as of
August 8, 1983 is incorporated
herein by reference to Exhibit
(9)(b) of Registrant's Registration
Statement filed on March 1, 1984.
(c) Amendment No. 1 dated as of July
31, 1985 to Transfer Agency
Agreement between Registrant and
Provident Financial Processing
Corporation is incorporated herein
by reference to Exhibit (9)(d) of
Post-Effective Amendment No. 4 to
Registrant's Registration Statement
filed on October 7, 1985.
(10) None.
(11) (a) Consent of Coopers & Lybrand L.L.P.
(b) Consent of Willkie Farr & Gallagher.
(12) The Fund's Annual Report to Shareholders
(File No. 2-82278) for the fiscal year ended
July 31, 1997 as filed with the Commission
on September 18, 1997 is incorporated by
reference.
(13) None.
(14) None.
(15) 12b-1 Services Plan is incorporated herein
by reference to Exhibit (15) of
Post-Effective Amendment No. 3 to
Registrant's Registration Statement filed on
August 9, 1985.
(16) Schedule for Computation of Performance
Quotations is incorporated herein by
reference to Exhibit (16) of Post-Effective
Amendment No. 11 to Registrant's
Registration Statement filed on November 25,
1992.
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<PAGE> 77
(27) Financial Data Schedules.
Item 25. Persons Controlled by or under Common Control with
Registrant
Registrant is controlled by its Board of Directors.
Item 26. Number of Holders of Securities
The following information is as of November 5, 1997:
<TABLE>
<CAPTION>
Title of Class Number of
Record Holders
<S> <C>
Class A Common Stock (Money) 38
Class A Common Stock-Special Series 1 (Dollar) 1
Class A Common Stock-Special Series 2 (Plus) 0
</TABLE>
Item 27. Indemnification
Article VII, Section 3, of Registrant's Articles of
Incorporation, incorporated herein by reference as Exhibit (1)(a), and Article
VI, Section 2, of Registrant's By-Laws, incorporated herein by reference as
Exhibit (2)(a), require the indemnification of Registrant's directors and
officers to the full extent permissible under the General Laws of the State of
Maryland and the Investment Company Act of 1940. Indemnification of Registrant's
principal underwriter, custodian and transfer agent against certain losses is
provided for, respectively, in Section 6.b. of the Distribution Agreement, filed
as Exhibit (6) hereto, Section 22 of the Custody Agreement, incorporated herein
by reference as Exhibit (8)(a) hereto, and Section 15 of the Transfer Agency
Agreement, incorporated herein by reference as Exhibit (9)(b) hereto. The Fund
has obtained from a major insurance carrier a directors' and officers' liability
policy covering certain types of errors and omissions.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Registrant pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer or controlling person of Registrant in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling
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<PAGE> 78
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
(a) PIMC performs investment advisory services for Registrant
and certain other investment companies and accounts. PNC Bank and its
predecessors have been in the business of managing the investments of fiduciary
and other accounts in the Philadelphia area since 1847. In addition to its trust
business, PNC Bank provides commercial banking services.
To the Registrant's knowledge, none of the
directors or officers of PIMC or PNC Bank, except those set forth below, is, or
has been at any time during Registrant's past two fiscal years, engaged in any
other business, profession, vocation or employment of a substantial nature,
except that certain directors and officers of PNC Bank and PIMC also hold
various positions with, and engage in business for, PNC Bank Corp., which
indirectly owns all the outstanding stock of PNC Bank, or other subsidiaries of
PNC Bank Corp.
(b) The information required by this Item 28 with respect to
each director, officer and partner of PIMC is incorporated by reference to
Schedules A and D of Form ADV filed by PIMC with the Securities and Exchange
Commission pursuant to the Investment Advisers Act of 1940 (SEC File No.
801-13304).
Set forth below are the names and principal businesses of the
directors and certain executives of PNC Bank who are engaged in any other
business, profession, vocation or employment of a substantial nature.
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<PAGE> 79
<TABLE>
<CAPTION>
POSITION WITH TYPE
PNC BANK NAME OTHER BUSINESS CONNECTIONS OF BUSINESS
<S> <C> <C> <C>
Director B.R. Brown President and C.E.O. of Consol, Inc. Coal
Consol Plaza
Pittsburgh, PA 15241
Director Constance E. Clayton Associate Dean, School of Medical
Health & Professor of Pediatrics
Medical College of PA
Hahnemann University
430 East Sedgwick St.
Philadelphia, PA 19119
Director Eberhard Faber IV Chairman and C.E.O. Manufacturing
E.F.L., Inc.
450 Hedge Road
P.O. Box 49
Bearcreek, PA 18602
Director Dr. Stuart Heydt President and C.E.O. Medical
Geisinger Foundation
100 N. Academy Avenue
Danville, PA 17822
Director Edward P. Junker, III Vice Chairman Banking
PNC Bank, N.A.
Ninth and State Streets
Erie, PA 16553
Director Thomas A. McConomy President, C.E.O. and Manufacturing
Chairman, Calgon Carbon
Corporation
413 Woodland Road
Sewickley, PA 15143
Director Thomas H. O'Brien Chairman Banking
PNC Bank, National Association
One PNC Plaza, 30th Floor
Pittsburgh, PA 15265
Director Dr. J. Dennis O'Connor Provost, The Smithsonian Education
Institution
1000 Jefferson Drive, S.W.
Room 230, MRC 009
Washington, DC 20560
Director Rocco A. Ortenzio Chairman and C.E.O. Medical
Continental Medical Systems, Inc.
</TABLE>
C-12
<PAGE> 80
<TABLE>
<S> <C> <C> <C>
P.O. Box 715
Mechanicsburg, PA 17055
Director Jane G. Pepper President Horticulture
Pennsylvania Horticulture Society
100 North 20th Street
Philadelphia, PA 19103
Director Robert C. Robb, Jr. President, Lewis, Eckert, Robb Financial and
& Company Management
425 One Plymouth Meeting Consultants
Plymouth Meeting, PA 19462
Director James E. Rohr President and C.E.O. Bank Holding
PNC Bank, National Association Company
One PNC Plaza, 30th Floor
Pittsburgh, PA 15265
Director Daniel M. Rooney President, Pittsburgh Steelers Football
Football Club of the National
Football League
300 Stadium Circle
Pittsburgh, PA 15212
Director Seth E. Schofield Chairman and C.E.O. Airline
USAir, Inc.
2345 Crystal Drive
Arlington, VA 22227
</TABLE>
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
NAME POSITION WITH PNC BANK
John E. Alden Senior Vice President
James C. Altman Senior Vice President
Lila M. Bachelier Senior Vice President
R. Perrin Baker Chief Market Counsel, Northwest PA
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<PAGE> 81
NAME POSITION WITH PNC BANK
James R. Bartholomew Senior Vice President
Peter R. Begg Senior Vice President
Donald G. Berdine Senior Vice President
Ben Berzin, Jr. Senior Vice President
James H. Best Senior Vice President
Eva T. Blum Senior Vice President
Susan B. Bohn Senior Vice President
George Brikis Executive Vice President
Michael Brundage Senior Vice President
Anthony J. Cacciatore Senior Vice President
Richard C. Caldwell Executive Vice President
Craig T. Campbell Senior Vice President
J. Richard Carnall Executive Vice President
Edward V. Caruso Executive Vice President
Peter K. Classen President & CEO, PNC Bank, Northeast, Pa
Andra D. Cochran Senior Vice President
Sharon Coghlan Coordinating Market Chief Counsel,
Philadelphia
James P. Conley Senior Vice President/Credit Policy
C. David Cook Senior Vice President
Alfred F. Cordasco Supervising Counsel, Pittsburgh, PA
Robert Crouse Senior Vice President
Peter M. Crowley Senior Vice President
Keith P. Crytzer Senior Vice President
John J. Daggett Senior Vice President
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<PAGE> 82
NAME POSITION WITH PNC BANK
Peter J. Donchak Senior Vice President
Anuj Dhanda Senior Vice President
Victor M. DiBattista Chief Regional Counsel
Frank H. Dilenschneider Senior Vice President
Thomas C. Dilworth Senior Vice President
Alfred J. DiMatteis Senior Vice President
James Dionise Senior Vice President and C.F.O.
Patrick S. Doran Vice President, Head of Consumer Lending
Robert D. Edwards Senior Vice President
David J. Egan Senior Vice President
J. Lynn Evans Senior Vice President & Controller
William E. Fallon Senior Vice President
James M. Ferguson, III Senior Vice President
Charles J. Ferrero Senior Vice President
Frederick C. Frank, III Executive Vice President
William J. Friel Executive Vice President
John F. Fulgoney Senior Counsel and Corporate Secretary
Brian K. Garlock Senior Vice President
George D. Gonczar Senior Vice President
Richard C. Grace Senior Vice President
James S. Graham Senior Vice President
Michael J. Hannon Senior Vice President
Stephen G. Hardy Senior Vice President
Michael J. Harrington Senior Vice President
Marva H. Harris Senior Vice President
Maurice H. Hartigan, II Executive Vice President
G. Thomas Hewes Senior Vice President
Sylvan M. Holzer Executive Vice President
Bruce C. Iacobucci Senior Vice President
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<PAGE> 83
NAME POSITION WITH PNC BANK
John M Infield Senior Vice President
Philip C. Jackson Senior Vice President
William J. Johns Controller
William R. Johnson Audit Director
Edward P. Junker, III Vice Chairman
Robert D. Kane Senior Vice President
Michael D. Kelsey Chief Compliance Counsel
Jack Kelly Senior Vice President
Geoffrey R. Kimmel Senior Vice President
Randall C. King Senior Vice President
Christopher M. Knoll Senior Vice President
Richard C. Krauss Senior Vice President
Frank R. Krepp Senior Vice President & Chief Credit Policy
Officer
Kenneth P. Leckey Senior Vice President & Cashier
Marilyn R. Levins Senior Vice President
Carl J. Lisman Executive Vice President
George Lula Senior Vice President
Jane E. Madio Senior Vice President
Nicholas M. Marsini, Jr. Senior Vice President
John A. Martin Senior Vice President
David O. Matthews Senior Vice President
Walter B. McClellan Senior Vice President
James F. McGowan Senior Vice President
Charlotte B. McLaughlin Senior Vice President
James C. Mendelson Senior Vice President
James W. Meighen Senior Vice President
Scott C. Meves Senior Vice President
Ralph S. Michael, III Executive Vice President
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<PAGE> 84
NAME POSITION WITH PNC BANK
J. William Mills Senior Vice President
Barbara A. Misner Senior Vice President
Marlene D. Mosco Senior Vice President
Peter F. Moylan Senior Vice President
Michael B. Nelson Executive Vice President
Thomas J. Nist Senior Vice President
Thomas H. O'Brien Chairman
James F. O'Day Senior Vice President
Cynthia G. Osofsky Senior Vice President
Thomas E. Paisley, III Senior Vice President
Barbara Z. Parker Executive Vice President
George R. Partridge Senior Vice President
Daniel J. Panlick Senior Vice President
David M. Payne Senior Vice President
Charles C. Pearson, Jr. President and CEO, PNC Bank, Central PA
Helen P. Pudlin Senior Vice President
Edward V. Randall, Jr. President and CEO, PNC Bank, Pittsburgh
Arthur F. Rodman, III Senior Vice President
Richard C. Rhoades Senior Vice President
Bryan W. Ridley Senior Vice President
James E. Rohr President and Chief Executive Officer
Gary Royer Senior Vice President
Robert T. Saltarelli Senior Vice President
Robert V. Sammartino Senior Vice President
William Sayre, Jr. Senior Vice President
Alfred J. Schiavetti Senior Vice President
David W. Schoffstall Executive Vice President
Seymour Schwartzberg Senior Vice President
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<PAGE> 85
NAME POSITION WITH PNC BANK
Timothy G. Shack Senior Vice President
Douglas E. Shaffer Senior Vice President
Alfred A. Silva Senior Vice President
George R. Simon Senior Vice President
Richard L. Smoot President and CEO of PNC Bank, Philadelphia
Timothy N. Smyth Senior Vice President
Kenneth S. Spatz Senior Vice President
Darcel H. Steber Senior Vice President
Robert L. Tassome Senior Vice President
Jane B. Tompkins Senior Vice President
Robert B. Trempe Senior Vice President
Kevin M. Tucker Senior Vice President
Alan P. Vail Senior Vice President
Frank T. VanGrofski Executive Vice President
Ronald H. Vicari Senior Vice President
William A. Wagner Senior Vice President
Patrick M. Wallace Senior Vice President
Annette M. Ward-Kredel Senior Vice President
Robert S. Wrath Senior Vice President
Arlene M. Yocum Senior Vice President
Carole Yon Senior Vice President
George L. Ziminski, Jr. Senior Vice President
C-18
<PAGE> 86
NAME POSITION WITH PNC BANK
C-19
<PAGE> 87
Item 29. Principal Underwriter
(a) Provident Distributors, Inc. currently acts as
distributor for, in addition to the Company, Trust for Federal Securities,
Municipal Fund for Temporary Investment, Temporary Investment Fund, Inc. and
Municipal Fund for California Investors, Inc.
(b) The information required by this Item 29 with respect to
each director, officer or partner of Provident Distributors, Inc. is
incorporated by reference to Schedule A of Form BD filed by Provident
Distributors, Inc. with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 (SEC File No. 8-46564).
Item 30. Location of Accounts and Records
(1) PNC Bank, National Association, 1600 Market
Street, 28th Floor, Philadelphia,
Pennsylvania 19103 (records relating to its
functions as sub-investment adviser).
(2) PNC Bank, National Association, 200 Stevens
Drive, Lester, Pennsylvania 19113 (records
relating to its functions as custodian).
(3) Provident Distributors, Inc., Four Falls
Corporate Center, 6th Floor, West
Conshohocken, Pennsylvania 19428 (records
relating to its functions as distributor).
(4) PNC Institutional Management Corporation,
400 Bellevue Parkway, 4th Floor, Wilmington,
Delaware 19809 (records relating to its
functions as investment adviser).
(5) PFPC Inc., 400 Bellevue Parkway, Wilmington,
Delaware 19809 and Provident Distributors,
Inc., Four Falls Corporate Center, West
Conshohocken, Pennsylvania 19428 (records
relating to their functions as
administrators).
(6) PFPC Inc., 400 Bellevue Parkway, Wilmington,
Delaware 19809 (records relating to its
C-20
<PAGE> 88
functions as transfer agent and dividend
disbursing agent).
(7) Drinker Biddle & Reath LLP, 1100
Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania
19107 (Registrant's Articles of
Incorporation, ByLaws and Minute Books).
Item 31. Management Services
None.
Item 32. Undertakings
Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest
Annual Report to Shareholders upon request and without charge.
C-21
<PAGE> 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets all
the requirements for effectiveness of this Post-Effective Amendment No. 16 to
its Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment No. 16 to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Wilmington and State of Delaware on November 26,
1997.
MUNICIPAL FUND FOR
NEW YORK INVESTORS, Inc.
/s/ Edward J. Roach
-------------------
Edward J. Roach
President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment No. 16 to Registrant's Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
* Francis E. Drake, Jr. Director November 26, 1997
- ------------------------
Francis E. Drake, Jr.
* Rodney D. Johnson Director November 26, 1997
- ------------------------
Rodney D. Johnson
* Thomas A. Melfe Chairman of the November 26, 1997
- ------------------------
Thomas A. Melfe Board and Director
* Anthony M. Santomero Director November 26, 1997
- ------------------------
Anthony M. Santomero
/s/ Edward J. Roach President and November 26, 1997
- ------------------------
Edward J. Roach Treasurer
(Principal Financial and
Accounting Officer)
*By:/s/ Edward J. Roach
- ------------------------
Edward J. Roach
C-22
<PAGE> 90
Attorney-in-Fact
Powers of Attorney incorporated by reference to Post-
Effective Amendment No. 14 to the Registrant's Registration
Statement on Form N-1A filed on November 30, 1995.
C-23
<PAGE> 91
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
- --------------------------------------------------------------------------------
(11)(a) Consent of Coopers & Lybrand., L.L.P.
- --------------------------------------------------------------------------------
(b) Consent of Willkie Farr & Gallagher.
- --------------------------------------------------------------------------------
(27) Financial Data Schedules.
- --------------------------------------------------------------------------------
<PAGE> 1
Exhibit 11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the following with respect to Post-Effective Amendment No. 16 to
the Registration Statement No. 2-82278 on Form N-1A under the Securities Act
of 1933, as amended, of Municipal Fund for New York Investors, Inc.
The incorporation by reference of our report dated August 27, 1997, on our
audit of the financial statements and financial highlights, which report is
included in the Annual Report to Shareholders for the year ended July 31, 1997
which is incorporated by reference in the Post-Effective Amendment to the
Registration Statement.
The reference to our Firm under the heading "Financial Highlights" in the
Prospectuses and under the headings "Independent Accountants" and "Financial
Statements" in the Statement of Additional Information.
/s/ Coopers & Lybrand LLP
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
November 21, 1997
<PAGE> 1
Exhibit 11(b)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references
to our Firm under the caption "Counsel" included in the Statement of Additional
Information that is included in Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A under the Securities Act of 1933, as
amended, and Amendment No. 17 to the Registration Statement on Form N-1A under
the Investment Company Act of 1940, as amended (No. 2-82278) of Municipal Fund
for New York Investors, Inc.
/s/ Willkie Farr & Gallagher
---------------------------
Willkie Farr & Gallagher
November 20, 1997
New York, New York
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