<PAGE>
COMBINED PROSPECTUS FOR BNY HAMILTON EQUITY INCOME FUND
BNY HAMILTON INTERMEDIATE GOVERNMENT FUND
[LOGO] BNY HAMILTON INTERMEDIATE NEW YORK TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND OBJECTIVE FOR INVESTORS SEEKING
- ------------------------ ---------------------------------------------------- ---------------------------------
<S> <C> <C>
BNY HAMILTON EQUITY To provide long-term capital appreciation greater Capital appreciation, higher than
INCOME FUND than the appreciation of, and yield greater than the market average income with
yield of, the Standard & Poor's 500 Index; equal relatively low volatility
emphasis is placed on attaining income and capital
appreciation
- -----------------------------------------------------------------------------------------------------------------
BNY HAMILTON To earn as high a level of current income as Current income from U.S.
INTERMEDIATE GOVERNMENT is consistent with preservation of capital, moderate Government securities, minimal
FUND stability in net asset value and minimal credit risk credit risk and relatively stable
share price
- -----------------------------------------------------------------------------------------------------------------
BNY HAMILTON To provide income that is exempt from federal, New Triple tax-free income, moderate
INTERMEDIATE NEW YORK York State and New York City income taxes while risk and relative stability of
TAX-EXEMPT FUND maintaining relative stability of principal principal
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENTS IN ANY OF THE FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF OR
GUARANTEED OR INSURED BY THE BANK OF NEW YORK, AND THE SHARES IN ANY OF THE
FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENTAL AGENCY. INVESTMENTS IN ANY OF THE FUNDS INVOLVE INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the information that a prospective investor
should know about the three (3) members of BNY Hamilton Funds, Inc. noted in the
chart above (hereinafter referred to as the 'Funds') before investing and should
be retained for future reference. Additional information about the Funds and the
other fund in the BNY Hamilton Family of Funds has been filed with the
Securities and Exchange Commission in the Statement of Additional Information
for BNY Hamilton Funds, Inc., dated April 29, 1996. This information is
incorporated by reference and is available without charge upon request from the
Funds' distributor, BNY Hamilton Distributors, Inc., 125 West 55th Street, New
York, NY 10019, Attention: BNY Hamilton Funds, Inc., 1-800-426-9363.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS APRIL 29, 1996.
(AS REVISED JULY 15, 1996).
<PAGE>
TABLE OF
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table............................................... 1
Financial Highlights.................................... 3
Investment Objectives and Policies...................... 6
Description of Securities............................... 8
Additional Investment Information and Risk
Considerations.......................................... 13
Investment Restrictions................................. 28
Management of the Funds................................. 29
Summary of Shareholder Services......................... 31
Fund and Other Shareholder Services..................... 32
Purchase of Shares...................................... 34
Redemption of Shares.................................... 38
Exchange of Shares...................................... 40
Dividends and Distributions............................. 40
Net Asset Value......................................... 41
Organization............................................ 41
Taxes................................................... 42
Additional Information.................................. 44
Appendix................................................ 45
</TABLE>
<PAGE>
<TABLE>
<S> <C>
The following table illustrates the expenses an investor in any one of the Funds
FEE TABLE will incur. In addition, investments are subject to the annual fund operating
expenses (after expense waivers/reimbursements) set forth below.
</TABLE>
<TABLE>
<CAPTION>
BNY HAMILTON
INTERMEDIATE NEW
BNY HAMILTON BNY HAMILTON YORK
EQUITY INCOME INTERMEDIATE TAX-EXEMPT
FUND GOVERNMENT FUND FUND
----------------- ----------------- -----------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Sales Load Imposed on Purchases........... None None None
Sales Load Imposed on Reinvested
Dividends............................... None None None
Deferred Sales Load....................... None None None
Redemption Fees........................... None None None
Exchange Fees............................. None None None
ANNUAL FUND OPERATING EXPENSES AFTER EXPENSE
WAIVERS/REIMBURSEMENTS:
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
Management Fees........................... .80% .70% .55%
12b-1 Fees after expense
waivers/reimbursements*................. .00% .00% .00%
Other Expenses............................ .20% .36% .35%
------ ------ ------
Total Fund Operating Expenses after
expense waivers/reimbursements.......... 1.00% 1.06% .90%
------ ------ ------
------ ------ ------
</TABLE>
-------------------------------------------------
* Although each Fund has adopted a 12b-1 distribution plan
permitting payment of up to .25% per annum of average
daily net assets, none of the Funds has implemented the
plan as of the date of this Prospectus. The Funds will
not implement their 12b-1 Plans until such future date as
their Board of Directors deems appropriate.
EXAMPLE:
An investor would pay the
following expenses on a $1,000
investment, assuming (1) 5% annual
return and (2) redemption at the
end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
BNY Hamilton Equity Income Fund.............. $10 $32 $55 $123
BNY Hamilton Intermediate Government Fund.... $11 $34 $59 $130
BNY Hamilton Intermediate New York Tax-Exempt
Fund....................................... $ 9 $29 $50 $111
</TABLE>
This table is designed to assist investors in understanding the
various direct and indirect costs that an investor would bear.
The Adviser and Administrator (each as defined in 'Management of
the Funds') have agreed to limit expenses of the BNY Hamilton
Intermediate New York Tax-Exempt Fund to .90% of its average
daily net assets. Had such expenses not been limited, the
Management Fees would have been .70%; Other Expenses would have
been .50%; and
1
<PAGE>
Total Fund Operating Expenses would have been 1.20%. Expenses
are not limited by the Adviser or the Administrator for the BNY
Hamilton Equity Income Fund and the BNY Hamilton Intermediate
Government Fund. Management reserves the right to implement or
discontinue expense limitations at any time. See 'Fund and Other
Shareholder Services-Fee Waivers'.
For a description of contractual fee arrangements or the fees
and expenses included in Other Expenses, see 'Management of the
Funds' and 'Fund and Other Shareholder Services'. In connection
with the example, please note that $1,000 is less than the
generally applicable minimum initial investment required for
each of the Funds and that there are no redemption or exchange
fees of any kind. See 'Purchase of Shares' and 'Redemption of
Shares'.
THE ABOVE EXAMPLES ARE HYPOTHETICAL AND ARE INCLUDED SOLELY FOR
ILLUSTRATIVE PURPOSES. THEY SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE PERFORMANCE; ACTUAL EXPENSES
MAY BE MORE OR LESS THAN THOSE SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for an outstanding share of each of the Funds
included in this Prospectus was audited by Deloitte & Touche LLP, independent
accountants, whose report thereon was unqualified. This information should be
read in conjunction with the financial statements and related notes that
appear in the Statement of Additional Information. Further information about
the performance of any of the Funds is contained in the Funds' annual report
to shareholders, which may be obtained from the Funds upon request and
without charge.
BNY HAMILTON EQUITY INCOME FUND
<TABLE>
<CAPTION>
FOR THE
PERIOD
AUGUST 10,
1992*
YEAR ENDED DECEMBER 31, THROUGH
------------------------------- DECEMBER 31,
1995 1994 1993 1992
--------- --------- --------- ---------------
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value at beginning of period........ $ 10.70 $ 11.30 $ 10.43 $ 10.00
--------- --------- --------- ---------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income......................... 0.32 0.31 0.29 0.11
Net realized and unrealized gain (loss) on
investments................................. 2.41 (0.60) 0.94 0.47
--------- --------- --------- ---------------
Total from investment operations.............. 2.73 (0.29) 1.23 0.58
--------- --------- --------- ---------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income........ (0.32) (0.31) (0.28) (0.12)
Distributions from capital gains............ (0.12) -- (0.08) (0.03)
--------- --------- --------- ---------------
Total dividends and distributions............. (0.44) (0.31) (0.36) (0.15)
--------- --------- --------- ---------------
Net asset value at end of period.............. $ 12.99 $ 10.70 $ 11.30 $ 10.43
========= ========= ========= ===============
TOTAL RETURN.................................. 25.78% (2.58)% 11.94% 5.86%**
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000's omitted)... $ 169,841 $ 135,131 $ 112,849 $ 20,440
Ratio to average net assets of:
Expenses, net of waiver from The Bank
of New York............................... 1.00% 1.04% 1.09% 1.10%***
Expenses, prior to waiver from The Bank
of New York............................... 1.00% 1.04% 1.12% 2.12%***
Net investment income, net of waiver from
The Bank of New York...................... 2.66% 2.89% 2.82% 3.33%***
Portfolio turnover rate..................... 58% 51% 50% 25%
Average commission rate paid per share
traded.................................... $ .0557
</TABLE>
--------------------------------------------
* Commencement of investment operations.
** Not annualized.
*** Annualized.
3
<PAGE>
BNY HAMILTON INTERMEDIATE GOVERNMENT FUND
<TABLE>
<CAPTION>
FOR THE
PERIOD
AUGUST 10,
1992*
YEAR ENDED DECEMBER 31, THROUGH
------------------------------- DECEMBER 31,
1995 1994 1993 1992
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value at beginning
of period...... $ 9.10 $ 10.12 $ 9.87 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................. 0.53 0.50 0.51 0.18
Net realized and unrealized gain (loss)
on investments...................... 0.84 (1.02) 0.27 (0.13)
------- ------- ------- -------
Total from investment operations...... 1.37 (0.52) 0.78 0.05
------- ------- ------- -------
DIVIDENDS AND DISTRIBUTION
Dividends from net investment
income............................. (0.53) (0.50) (0.51) (0.18)
Distributions from capital gains.... -- -- (0.02) --
------- ------- ------- -------
Total dividends and distributions..... (0.53) (0.50) (0.53) (0.18)
------- ------- ------- -------
Net asset value at end of period....... $ 9.94 $ 9.10 $ 10.12 $ 9.87
======= ======= ======= =======
TOTAL RETURN........................... 15.40% (5.17)% 8.03% 0.51%**
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000's
omitted)............................ $60,659 $59,328 $72,069 $25,575
Ratio to average net assets of:
Expenses, net of waiver from The Bank
of New York....................... 1.06% 1.07% 0.86% 0.75%***
Expenses, prior to waiver from The
Bank of New York................... 1.06% 1.10% 1.15% 1.64%***
Net investment income, net of waiver
from The Bank of New York.......... 5.52% 5.30% 5.04% 4.62%***
Portfolio turnover rate.............. 48% 49% 67% 63%
--------------------------------------------
* Commencement of investment operations.
** Not annualized.
*** Annualized.
4
<PAGE>
BNY HAMILTON INTERMEDIATE NEW YORK TAX-EXEMPT FUND
</TABLE>
<TABLE>
<CAPTION>
FOR THE
PERIOD
AUGUST 10,
1992*
YEAR ENDED DECEMBER 31, THROUGH
------------------------------- DECEMBER 31,
1995 1994 1993 1992
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value at beginning
of period............................ $ 9.59 $ 10.37 $ 9.97 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................. 0.39 0.39 0.38 0.15
Net realized and unrealized gain (loss)
on investments...................... 0.75 (0.78) 0.40 (0.03)+
------- ------- ------- -------
Total from investment operations...... 1.14 (0.39) 0.78 0.12
------- ------- ------- -------
DIVIDENDS
Dividends from net investment
income............................. (0.39) (0.39) (0.38) (0.15)
------- ------- ------- -------
Net asset value at end of period.... $ 10.34 $ 9.59 $ 10.37 $ 9.97
======= ======= ======= =======
TOTAL RETURN.......................... 12.08% (3.81)% 7.99% 1.18%**
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000's
omitted)............................ $40,931 $43,213 $55,871 $19,717
Ratio to average net assets of:
Expenses, net of waiver from
The Bank of New York and
Administrator...................... 0.90% 0.85% 0.68% 0.60%***
Expenses, prior to waiver from
The Bank of New York and
Administrator...................... 1.20% 1.20% 1.30% 1.96%***
Net investment income, net of waiver
from The Bank of New York and
Administrator..................... 3.89% 3.92% 3.74% 3.79%***
Portfolio turnover rate............. 4% 18% 6% --
</TABLE>
--------------------------------------------
* Commencement of investment operations.
** Not annualized.
*** Annualized.
+ The amount shown is not in accordance with the change in the
aggregate gains and losses of the portfolio securities during
the period August 10, 1992 through December 31, 1992 due to
the timing of sales and repurchases of shares of the Fund.
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each of the Funds is described below,
together with a summary of the policies each Fund will employ in
its efforts to achieve its objective. There can be no assurance
that the Funds will attain their respective investment
objectives.
BNY HAMILTON EQUITY INCOME FUND
(THE 'EQUITY INCOME FUND')
The Equity Income Fund's investment objectives are to provide
long-term capital appreciation greater than the appreciation of,
and yield greater than the yield of, the Standard & Poor's 500
Index. Equal emphasis is placed on attaining income and capital
appreciation. The Equity Income Fund will invest primarily in
common stock and convertible securities issued by domestic
corporations, and may also invest in securities issued by foreign
corporations. In connection with its investment objectives, the
Equity Income Fund seeks to achieve capital appreciation in excess
of the market average represented by the Standard & Poor's 500
Index. During periods of rapid market capital appreciation, the
effect of the Equity Income Fund's dual investment objectives will
likely be that its net asset value will not rise as rapidly as the
market generally. Conversely, during periods of rapid market
depreciation, the Equity Income Fund's net asset value would not
be expected to decline as rapidly as the market.
The Equity Income Fund will invest in common stocks and securities
convertible into common stocks. The securities in which the Equity
Income Fund may invest include those listed on any domestic or
foreign securities exchange or traded in the over-the-counter
market. Under normal circumstances, the Equity Income Fund intends
to invest at least 65% of the value of its total assets in equity
or equity-related securities (such as preferred stock or corporate
debt that is convertible to common stocks) that pay dividends or
interest.
BNY HAMILTON INTERMEDIATE GOVERNMENT FUND
(THE 'INTERMEDIATE GOVERNMENT FUND')
The Intermediate Government Fund's investment objective is to earn
as high a level of income as is consistent with the preservation
of capital, moderate stability in net asset value and minimal
credit risk. The Intermediate Government Fund will attempt to
accomplish this objective by investing in obligations issued or
guaranteed by the United States Government and backed by the full
faith and credit of the United States. The Intermediate Government
Fund may also invest in obligations issued or guaranteed by United
States Government agencies or instrumentalities where the
Intermediate Government Fund must look principally to the issuing
or guaranteeing agency for ultimate repayment. Examples of
agencies or instrumentalities issuing these obligations are the
Federal Farm Credit Systems and the Federal Home Loan Banks.
Although the United States Government or its agencies or
instrumentalities are ultimately responsible for payment of these
obligations, they do not guarantee the market value of such
obligations. Under normal circumstances, the Intermediate
Government Fund will invest at least 65% of the value of its total
assets in guaranteed Government securities.
6
<PAGE>
In an effort to manage interest rate risk and principal stability
of the Intermediate Government Fund's net asset value, the
Intermediate Government Fund will invest in a portfolio of debt
instruments which, during normal market conditions, will have a
dollar weighted average maturity not less than three nor more than
ten years.
BNY HAMILTON INTERMEDIATE NEW YORK TAX-EXEMPT FUND
(THE 'INTERMEDIATE NEW YORK TAX-EXEMPT FUND')
The Intermediate New York Tax-Exempt Fund's investment objective
is to provide investors with income that is exempt from federal,
New York State and New York City income taxes while maintaining
relative stability of principal. The Intermediate New York
Tax-Exempt Fund will seek to accomplish this objective by
investing primarily in bonds issued by New York State and the
Commonwealth of Puerto Rico and their respective authorities,
agencies, instrumentalities and political subdivisions, which
bonds are exempt from federal, New York State and New York City
income taxes. (These type of bonds are hereinafter referred to as
'Municipal Obligations').
In an effort to manage interest rate risk and principal stability
of the Intermediate New York Tax-Exempt Fund's net asset value,
the Intermediate New York Tax-Exempt Fund will invest in a
portfolio of debt instruments and/or Municipal Obligations which,
during normal market conditions, will have a dollar weighted
average maturity of no more than eight nor less than three years.
During normal conditions, the Intermediate New York Tax-Exempt
Fund will attempt to invest 100%, and as a fundamental policy at
least 80%, of its net assets in Municipal Obligations. If, due to
market conditions or supply limitations, Municipal Obligations are
not available, the Intermediate New York Tax-Exempt Fund MAY
TEMPORARILY INVEST MORE THAN 20% OF THE VALUE OF ITS NET ASSETS IN
FIXED INCOME SECURITIES THAT ARE SUBJECT TO FEDERAL, NEW YORK
STATE OR NEW YORK CITY INCOME TAXES. These securities may include
(i) securities issued or guaranteed by the United States
Government; (ii) commercial paper; (iii) certificates of deposit
of the 100 largest domestic banks; or (iv) corporate debt. To
provide liquidity, the Intermediate New York Tax-Exempt Fund will
invest a portion of its assets in short-term Municipal Obligations
and may temporarily increase investment in short-term Municipal
Obligations for defensive purposes if, in the opinion of the
investment adviser, adverse market conditions so warrant. For a
further discussion of the types of securities that the
Intermediate New York Tax-Exempt Fund may invest in for temporary
defensive purposes and the associated risks, see 'Additional
Investment Information and Risk Considerations--Taxable
Investments' later in this Prospectus.
7
<PAGE>
DESCRIPTION OF SECURITIES
The following paragraphs describe the types of securities in
which the Funds are permitted to invest, along with the
specific Fund(s) intending to make such investments.
EQUITY SECURITIES
The Equity Income Fund may invest in common stock, which includes
the common stock of any class or series of domestic or foreign
corporation or any similar equity interest, such as a trust or
partnership interest. These investments may or may not pay
dividends and may or may not carry voting rights. Common stock
occupies the most junior position in a company's capital
structure.
CONVERTIBLE SECURITIES
The Equity Income Fund may invest in convertible securities, which
include any debt securities or preferred stock that may be
converted into common stock or that carry the right to purchase
common stock. Convertible securities entitle the holder to
exchange the securities for a specified number of shares of common
stock, usually of the same company, at specified prices within a
certain period of time. They also entitle the holder to receive
interest or dividends until the holder elects to exercise the
conversion privilege.
The terms of any convertible security determine its ranking in a
company's capital structure. In the case of subordinated
convertible debentures, the holder's claims on assets and earnings
are subordinate to the claims of other creditors, and are senior
to the claims of preferred and common stockholders. In the case of
convertible preferred stock, the holder's claims on assets and
earnings are subordinate to the claims of all creditors and are
senior to the claims of common stockholders. As a result of their
ranking in a company's capitalization, convertible securities that
are rated by nationally recognized securities rating organizations
are generally rated below other securities of the company and many
convertible securities are not rated. The Equity Income Fund does
not have any rating criteria applicable to its investments in
convertible securities.
FOREIGN EQUITY INVESTMENTS
The Equity Income Fund may invest in the securities of foreign
issuers. The Equity Income Fund does not expect more than 15% of
its foreign investments to be in securities that are not listed on
a securities exchange or, in the case of debt securities, that are
not United States dollar-denominated. Foreign investments may be
made directly in securities of foreign issuers or in the form of
American Depository Receipts ('ADRs') and Global Depository
Receipts ('GDRs'). Generally, ADRs and GDRs are receipts issued by
a bank or trust company that evidence ownership of underlying
securities issued by a foreign corporation and that are designed
for use in the domestic, in the case of ADRs, or global, in the
case of GDRs, securities markets. The Equity Income Fund only
expects to invest in ADRs and GDRs which are initiated and
maintained by the issuers of the underlying securities (so-called
'sponsored' ADRs and GDRs).
8
<PAGE>
Since investments in foreign securities may involve foreign
currencies, the value of the assets of the Equity Income Fund as
measured in United States dollars may be affected by changes in
currency rates and in exchange control regulations, including
currency blockage. The Equity Income Fund may enter into forward
commitments for the purchase or sale of foreign currencies in
connection with the settlement of foreign securities transactions
or to hedge the underlying currency exposure related to foreign
investments, but it will not enter into such commitments for
speculative purposes. In addition, to the extent that the Equity
Income Fund invests in foreign commercial paper, the paper must
not be subject to foreign withholding tax at the time of purchase.
For a description of additional risks associated with investing in
foreign securities, see 'Additional Investment Information and
Risk Considerations'.
MORTGAGE-BACKED SECURITIES AND ASSET-BACKED SECURITIES
The Intermediate Government Fund may invest in mortgage-backed
securities, including collateralized mortgage obligations ('CMOs')
and stripped mortgage-backed securities. A mortgage pass-through
security is a pro-rata interest in a pool of mortgages where the
cash flow generated from the mortgage collateral is passed through
to the security holder. CMOs are pass-through securities
collateralized by mortgages or mortgage-backed securities. CMOs
are issued in classes and series that have different maturities
and often are retired in sequence. Mortgage-backed securities
evidence an undivided interest in mortgage pools. These securities
are subject to more rapid repayment than their stated maturity
would indicate because prepayment of principal on mortgages in the
pool are passed through to the holder of the securities. During
periods of declining interest rates, prepayment of mortgages in
the pool can be expected to increase. The pass-through of these
prepayments would have the effect of reducing the Intermediate
Government Fund's positions in these securities and requiring it
to reinvest the prepayments at interest rates prevailing at the
time of reinvestment.
Stripped mortgage-backed securities are derivative multiclass
mortgage securities which may be issued by agencies or
instrumentalities of the United States Government or by private
originators of, or investors in, mortgage loans, including savings
and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the
foregoing. Stripped mortgage-backed securities issued by parties
other than agencies or instrumentalities of the United States
Government are considered, under current guidelines of the staff
of the Securities and Exchange Commission, to be illiquid
securities.
Stripped mortgage-backed securities are structured with two or
more classes of securities that receive different proportions of
the interest and principal distributions on a pool of mortgage
assets. A common type of stripped mortgage-backed security will
have at least one class receiving only a small portion of the
interest and a larger portion of the principal from the mortgage
assets, while the other classes will receive primarily interest
and only a small portion of the principal. In the most extreme
case, one class will receive all of the interest (the
interest-only or 'IO' class), while the other class will receive
all of the principal (the principal-only or 'PO' class). The yield
to maturity on an IO class is extremely sensitive to the rate of
principal payments (including prepayments) on the related
underlying mortgage
9
<PAGE>
assets, and a rapid rate of principal payments may have a material
adverse effect on such a security's yield to maturity. If the
underlying mortgage assets experience greater than anticipated
prepayments of principal, the Intermediate Government Fund may
fail to recoup fully its initial investment in these securities
even if the securities are rated AAA by Standard & Poor's
Corporation ('S&P') or Aaa by Moody's Investors Services
('Moody's').
The Intermediate Government Fund may also invest in asset-backed
securities. Asset-backed securities represent participation in
payment streams generated by particular assets such as motor
vehicle or credit card debt receivables. The asset-backed
securities in which the Intermediate Government Fund may invest
are subject to the Intermediate Government Fund's overall credit
requirements. Asset-backed securities in general, however, are
subject to certain risks. Most of these risks are related to
limited interests in the applicable collateral. For example,
credit card debt receivables are generally unsecured and the
debtors are entitled to the protection of a number of state and
federal consumer credit laws, many of which may have the effect of
reducing the balance due. Additionally, if a letter of credit is
issued on behalf of an asset-backed security (which typically
would guarantee payment up to a stated amount by a bank), and the
stated amount in the letter of credit is exhausted, holders of
asset-backed securities may also experience delays in payments or
losses if the full amounts due on the underlying sales contracts
are not realized.
MUNICIPAL OBLIGATIONS
The Intermediate New York Tax-Exempt Fund will invest primarily in
Municipal Obligations. Municipal Obligations include notes and
bonds issued by or on behalf of New York State and the
Commonwealth of Puerto Rico and their respective political
subdivisions, agencies, authorities and instrumentalities, the
interest on which is exempt from federal, New York State and New
York City income taxes. Such securities are traded primarily in
the over-the-counter market.
Tax-exempt bonds are issued to obtain funds for various public
purposes, including the construction of a wide range of public
facilities such as airports, bridges, highways, housing,
hospitals, mass transportation, schools, streets, water and sewer
works and gas and electric utilities. Tax-exempt bonds may also be
issued in connection with the refunding of outstanding
obligations, obtaining funds to lend to other public institutions
and for general operating expenses. Industrial development bonds
('IDBs'), which are considered tax-exempt bonds if the interest
paid thereon is exempt from federal income taxes, are issued by or
on behalf of public authorities to obtain funds to provide
privately operated facilities for business and manufacturing,
housing and pollution control and for airport, mass transit, port
and parking facilities.
Two principal classifications of tax-exempt bonds are 'general
obligation' and 'revenue.' General obligation bonds are secured by
the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue bonds 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. Although IDBs are
issued by municipal authorities, they are generally secured by the
revenues derived from payments of the
10
<PAGE>
industrial user. The payment of the principal and interest on IDBs
is dependent solely on the ability of the user of the facilities
financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as
security for such payment.
Tax-exempt notes are of short maturity, generally one year or
less. They include such securities as Tax Anticipation Notes,
Revenue Anticipation Notes, Bond Anticipation Notes and
Construction Loan Notes. Tax-exempt commercial paper consists of
short-term obligations generally having a maturity of less than
nine months.
INTEREST EARNED FROM CERTAIN TAX-EXEMPT SECURITIES (INCLUDING
CERTAIN IDBS) THAT ARE PRIVATE ACTIVITY BONDS, AS DEFINED IN THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE 'CODE'), IS TREATED
AS A PREFERENCE ITEM FOR PURPOSES OF THE ALTERNATIVE MINIMUM TAX.
IN THE EVENT THAT THE INTERMEDIATE NEW YORK TAX-EXEMPT FUND
INVESTS IN SUCH SECURITIES, NO MORE THAN 20% OF ITS NET ASSETS
WOULD BE INVESTED IN SUCH SECURITIES, TOGETHER WITH SECURITIES THE
INTEREST ON WHICH IS SUBJECT TO FEDERAL, NEW YORK STATE OR NEW
YORK CITY INCOME TAX.
RISK FACTORS REGARDING MUNICIPAL OBLIGATIONS
Investors should note that either general obligation or revenue
bonds may be adversely affected by local political and economic
conditions and developments within a particular state that
adversely affect issuers of such tax-exempt securities. Adverse
conditions in a state's significant industry could have a
correspondingly adverse effect on specific issuers within the
state or on anticipated revenue of the issuing state; conversely,
an improving economic outlook for a significant industry may have
a positive effect on such issuers or revenue. Other factors that
could affect a tax-exempt security include the change in a state's
economy (for example, from an industrial or agricultural based
economy to a service based economy); demographic factors such as
population growth or decline and foreign immigration, ecological
or environmental issues unique to a particular industry or area
within the state and statutory limitations on the state's ability
to increase taxes.
SPECIAL RISK FACTORS REGARDING NEW YORK STATE MUNICIPAL
OBLIGATIONS
Investors in the Intermediate New York Tax-Exempt Fund should
consider carefully the special risks inherent in investments in
Municipal Obligations. These risks result from the financial
condition of New York State, certain of its public bodies and
municipalities and New York City. Beginning in early 1975, New
York State, New York City and other entities faced serious
financial difficulties which jeopardized the credit standing and
impaired the borrowing abilities of such entities and contributed
to high interest rates on, and lower market prices for, debt
obligations issued by them. A recurrence of such financial
difficulties or a failure of certain financial recovery programs
could result in defaults or declines in the market values of
various Municipal Obligations in which the Intermediate New York
Tax-Exempt Fund may invest. If there should be a default or other
financial crisis relating to New York State, New York City, a
State or City agency, or other municipality, the market value and
marketability of outstanding Municipal Obligations in the
Intermediate New York Tax-Exempt Fund's portfolio
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and the interest income to the Fund could be adversely affected.
Moreover, the effects of the Federal Tax Reform Act of 1986 and
conforming State tax legislation have added substantial
uncertainty to estimates of the State's tax revenues. In 1991,
Moody's and S&P downgraded certain obligations backed by New York
State and have since placed other bonds on a watch list for
possible future downgrade. Potential recurring revenue shortfalls
in future fiscal years may adversely affect New York State.
The foregoing is only a summary and is based on information from
statements relating to securities offerings of New York issuers. A
more detailed description of special factors affecting investments
in Municipal Obligations of which investors should be aware is set
forth under 'Special Considerations Relating to Investments in New
York Municipal Obligations' in the Statement of Additional
Information.
Since the Intermediate New York Tax-Exempt Fund is classified as a
non-diversified series of a registered investment company, it is
not limited by the Investment Company Act of 1940 (the '1940 Act')
as to the proportion of its assets that it may invest in the
obligations of a single issuer. This classification may cause the
Intermediate New York Tax-Exempt Fund to be more susceptible to
adverse economic, political or regulatory developments affecting a
single issuer than would be the case if the Fund's investments
were required to be diversified across many Municipal Obligations.
QUALITY INFORMATION
The Intermediate New York Tax-Exempt Fund will limit its
investments to investment grade Municipal Obligations, which are
Municipal Obligations rated in the four highest investment rating
categories by Moody's or S&P. Securities rated in the lowest of
these rating categories (Baa by Moody's and BBB by S&P) are
normally considered to have adequate payment protection
parameters, although adverse conditions are more likely to lead to
a weakened capacity to pay principal and interest, as compared to
securities rated in the three higher categories. Securities rated
Baa or BBB are characterized by Moody's and S&P as investment
grade but are considered by Moody's to have speculative
characteristics as well. The Intermediate New York Tax-Exempt Fund
may also invest in short-term municipal obligations rated MIG-1 or
MIG-2 by Moody's or SP-1+ or SP-1 by S&P. If market conditions
warrant, the Intermediate New York Tax-Exempt Fund may invest in
tax-exempt commercial paper rated Prime-1 by Moody's or A-1 by
S&P. In the event that a security held by the Intermediate New
York Tax-Exempt Fund has its rating dropped below the tolerance
described above, the decision whether to sell or to retain such
security will be at the discretion of the investment adviser.
For a further description of securities ratings see 'Appendix
A--Description of Securities Ratings' in the Statement of
Additional Information.
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ADDITIONAL INVESTMENT INFORMATION AND RISK CONSIDERATIONS
The following paragraphs describe other types of securities
transactions in which the Funds may engage. Generally, the
following types of securities and transactions involve more risk
than those discussed above in Description of Securities. Unless
otherwise noted, the following paragraphs are applicable to all of
the Funds.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Each of the Funds may purchase securities on a when-issued
or delayed delivery basis. Delivery of and payment for
these securities may take as long as a month or more
after the date of the purchase commitment. The value
of these securities is subject to market fluctuation
during this period and no interest or income accrues to a
Fund until settlement. Each Fund will maintain with its
custodian a separate account with a segregated portfolio
of liquid assets consisting of cash, U.S. Government
securities or other liquid high-grade debt securities in
an amount at least equal to these commitments. When
entering into a when-issued or delayed delivery
transaction, a Fund will rely on the other party to
consummate the transaction; if the other party fails to do
so, the Fund may be disadvantaged. It is the current
policy of each of the Funds not to enter into when-issued
commitments exceeding in the aggregate 25% of the market
value of the Fund's total assets less liabilities
excluding the obligations created by these commitments.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements with
brokers, dealers or banks that meet the credit guidelines
established by the Board of Directors (the 'Directors') of BNY
Hamilton Funds, Inc. In a repurchase agreement, a Fund buys a
security from a seller that has agreed to repurchase it on a
mutually agreed upon date and at a price reflecting the interest
rate effective for the term of the agreement. The term of the
agreement is usually from overnight to one week. A repurchase
agreement may be viewed as a fully collateralized loan of money by
a Fund to the seller. A Fund always receives, as collateral,
securities with a market value at least equal to the purchase
price plus accrued interest and this value is maintained during
the term of the agreement. If the seller defaults and the
collateral value declines, a Fund might incur a loss. If
bankruptcy proceedings are commenced with respect to the seller, a
Fund's realization upon the collateral may be delayed or limited.
Investments in certain repurchase agreements and certain other
investments that may be considered illiquid are limited as set
forth under 'Investment Restrictions'.
LOANS OF PORTFOLIO SECURITIES
Subject to applicable investment restrictions, each Fund is
permitted to lend its securities. These loans must be secured
continuously by cash, U.S. Government securities or other liquid
high-grade short-term debt obligations in an account segregated by
the custodian or by a letter of credit at least equal to the
market value of the securities loaned plus accrued interest or
income. For more information, see 'Investment Objectives and
Policies--Loans of Portfolio Securities' in the Statement of
Additional Information.
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REVERSE REPURCHASE AGREEMENTS
Each of the Funds is permitted to enter into reverse repurchase
agreements. In a reverse repurchase agreement, a Fund sells a
security and agrees to repurchase it on a mutually agreed upon
date and at a price reflecting the interest rate effective for the
term of the agreement. This may also be viewed as the borrowing of
money by a Fund. A Fund will not invest the proceeds of a reverse
repurchase agreement for a period which exceeds the duration of
the reverse repurchase agreement. A Fund may not enter into
reverse repurchase agreements exceeding in the aggregate one-third
of the market value of its total assets, less liabilities other
than the obligations created by reverse repurchase agreements.
Each Fund will establish and maintain with its custodian a
separate account with a segregated portfolio of liquid assets
consisting of cash, U.S. Government securities or other liquid
high-grade debt securities in an amount at least equal to its
purchase obligations under its reverse repurchase agreements.
Reverse repurchase agreements involve the risk that the market
value of the securities retained by a Fund may decline below the
price of the securities it has sold but is obligated to repurchase
under the agreement. In the event the buyer of securities under a
reverse repurchase agreement files for bankruptcy or becomes
insolvent, a Fund's use of proceeds from the agreement may be
restricted pending a determination by the other party or its
trustee or receiver whether to enforce a Fund's obligation to
repurchase the securities.
INVESTMENT COMPANY SECURITIES
The Funds may invest in the securities of other investment
companies to the extent permitted under the 1940 Act. These limits
require that, as determined immediately after a purchase is made,
(i) not more than 5% of the value of a Fund's total assets will be
invested in the securities of any one investment company, (ii) not
more than 10% of the value of such Fund's total assets will be
invested in securities of investment companies as a group and
(iii) not more than 3% of the outstanding voting stock of any one
investment company will be owned by such Fund. As a shareholder of
another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment
company's expenses, including advisory fees. These expenses would
be in addition to the advisory and other expenses that such Fund
bears directly in connection with its own operations.
TAXABLE INVESTMENTS (INTERMEDIATE NEW YORK TAX-EXEMPT FUND)
The Intermediate New York Tax-Exempt Fund will attempt to invest
100% of its net assets in Municipal Obligations; however, it is
permitted to invest up to 20% of the value of its total assets in
securities the interest income on which is subject to federal, New
York State or New York City income tax. If, in adverse market
conditions, the Fund's investment adviser determines, in its
judgment, that Municipal Obligations satisfying the Intermediate
New York Tax-Exempt Fund's investment objectives are not
available, the investment adviser may, FOR DEFENSIVE PURPOSES
ONLY, TEMPORARILY INVEST MORE THAN 20% OF ITS NET ASSETS IN DEBT
SECURITIES THE INTEREST ON WHICH IS SUBJECT TO FEDERAL, NEW YORK
STATE OR NEW YORK CITY INCOME TAXES.
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Investments in taxable securities will be substantially in
securities issued or guaranteed by the United States Government
(such as bills, notes and bonds), its agencies, instrumentalities
or authorities, highly-rated corporate debt securities (rated AA
or better by S&P, or Aa or better by Moody's), prime commercial
paper (rated A-1+ by S&P or P-1 by Moody's) and certificates of
deposit of the 100 largest domestic banks in terms of assets,
which are subject to regulatory supervision by the United States
Government or state governments and the 50 largest foreign banks
in terms of assets with branches or agencies in the United States.
Investments in certificates of deposit of foreign banks and
foreign branches of United States banks involve certain risks not
generally associated with investments in domestic banks. While
domestic banks are required to maintain certain reserves and are
subject to other regulations, such requirements and regulations
may not apply to foreign branches. Investments in foreign banks
and branches may also be subject to other risks, including future
political and economic developments, the seizure or
nationalization of foreign deposits and the establishment of
exchange controls or other restrictions.
PUTS (INTERMEDIATE NEW YORK TAX-EXEMPT FUND)
The Intermediate New York Tax-Exempt Fund may purchase without
limit Municipal Obligations together with the right to resell them
at an agreed price or yield within a specified period prior to
maturity. This right to resell is known as a put. The aggregate
price paid for securities with puts may be higher than the price
that would otherwise be paid. Consistent with the Intermediate New
York Tax-Exempt Fund's investment objective and subject to the
supervision of the Directors, the purpose of this practice is to
permit the Intermediate New York Tax-Exempt Fund's portfolio to be
fully invested in tax-exempt securities while maintaining the
necessary liquidity to purchase securities on a when-issued basis,
to meet unusually large redemptions requests, to purchase at a
later date securities other than those subject to the put and to
facilitate the investment adviser's ability to manage the
portfolio actively. The principal risk of puts is that the put
writer may default on its obligation to repurchase. The
Intermediate New York Tax-Exempt Fund's investment adviser will
monitor each writer's ability to meet its obligations under puts.
The amortized cost method is used by the Intermediate New York
Tax-Exempt Fund to value Municipal Obligations with maturities of
less than 60 days because the Directors have determined that this
method of valuation will provide an accurate estimate of market
value; when these securities are subject to puts separate from the
underlying securities, no value is assigned to the puts. The cost
of any such put is carried as an unrealized loss from the time of
purchase until it is exercised or expires. See 'Investment
Objectives and Policies' in the Statement of Additional
Information for valuation procedure if the Intermediate New York
Tax-Exempt Fund invests in Municipal Obligations with maturities
of 60 days or more that are subject to separate puts.
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PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES
Each of the Funds may acquire, in privately negotiated
transactions, restricted securities that cannot be offered for
public sale in the United States without first being registered
under the Securities Act of 1933, as amended (the 'Securities
Act'). The price a Fund pays for these securities, or receives
upon resale, may be lower than the price the Fund would pay or
receive for similar securities with a more liquid market.
Accordingly, the valuation of these securities by a Fund will
reflect any limitations on their liquidity. (As a matter of
policy, the Intermediate New York Tax-Exempt Fund may invest up to
25% of its total assets in Municipal Obligations issued as part of
privately negotiated transactions between an issuer and one or
more purchasers.) Each of the Funds may also purchase certain
unregistered securities sold to institutional investors under Rule
144A of the Securities Act ('Rule 144A Securities'). Rule 144A
Securities that have a readily available market may be deemed to
be liquid for purposes of each Fund's 15% limitation on
investments in illiquid securities. The investment adviser will
monitor the liquidity of such restricted securities under the
supervision of, and pursuant to guidelines established by, the
Directors. In establishing and maintaining these guidelines, the
Directors take into account factors such as trading activity,
availability of reliable price information and other relevant
information. Investing in Rule 144A Securities could have the
effect of increasing the level of a Fund's illiquidity to the
extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities. Acquisition by a Fund
of illiquid investments (any investment that cannot be disposed of
within three (3) Business Days in the normal course of business at
approximately the amount at which it was valued by a Fund) is
subject to the 15% limitation described under Investment
Restrictions.
HEDGING
Hedging is a means of transferring risk that an investor does not
wish to assume during an uncertain market environment. The Funds
are permitted to enter into these transactions solely (a) to hedge
against changes in the market value of portfolio securities and
against changes in the market value of securities intended to be
purchased or (b) to close out or offset existing positions.
Hedging activity in the Equity Income Fund may include selling
futures contracts on stock indexes, options on stock index futures
traded on a national exchange or board of trade and options on
securities and on stock indexes traded on national securities
exchanges. The Equity Income Fund may also hedge a portion of its
portfolio by selling stock index futures contracts or purchasing
puts on these contracts to limit exposure to an actual or
anticipated market decline. Hedging activity in the Intermediate
Government Fund and the Intermediate New York Tax-Exempt Fund may
include selling futures contracts on debt securities and indexes
of debt securities and purchasing or writing (selling) options on
these futures, on debt securities and on indexes of debt
securities traded on registered securities exchanges and contract
markets. All hedging transactions must be appropriate for
reduction of risk; they cannot be for speculation.
Under regulations of the Commodity Exchange Act of 1936, as
amended (the 'Commodity Exchange Act'), an investment company
registered under the 1940 Act is exempt from the
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definition of 'commodity pool operator', and therefore not subject
to regulation under the Commodity Exchange Act, provided that the
entity agrees to restrict its investments in commodity futures and
commodity options contracts to (i) bona fide hedging transactions
within the meaning of the Commodity Futures Trading Commission's
regulations, without any limitation on quantity, and (ii) other
futures and options transactions in which the aggregate initial
margin and premiums do not exceed 5% of the liquidation value of
the entity's portfolio after taking into account unrealized
profits and unrealized losses on any such contracts. The Funds
will only use commodity futures and commodity options contracts in
a manner consistent with these requirements.
STOCK INDEX FUTURES (EQUITY INCOME FUND)
The Equity Income Fund may purchase and sell stock index futures
contracts as a hedge against changes resulting from market
conditions in the values of securities that are held in its
portfolio or that it intends to purchase or when such purchase or
sale is economically appropriate for the reduction of risks
inherent in the ongoing management of the Equity Income Fund. A
stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a
specific dollar amount times the difference between the value of a
specific stock index at the close of the last trading day of the
contract and the price at which the agreement is made. When the
contract is executed, each party deposits with a broker or in a
segregated custodial account a specified percentage of the
contract amount, called the initial margin, and during the term of
the contract, the amount of the deposit is adjusted based on the
current value of the futures contract by payments of variation
margin to or from the broker or segregated account. In the case of
options on stock index futures, the holder of the option pays a
premium and receives the right, upon exercise of the option at a
specified price during the option period, to assume the option
writer's position in a stock index futures margin account; if
exercised on the last trading day, cash in an amount equal to the
difference between the option exercise price and the closing level
of the relevant index on the expiration date is delivered.
The Equity Income Fund may not purchase or sell stock index
futures if, immediately thereafter, the sum of the amount of
margin deposits on its existing futures positions would exceed 5%
of the market value of its total assets. In instances involving
the purchase of stock index futures contracts by the Equity Income
Fund, an amount of cash, cash equivalents or United States
Government securities equal to the market value of the futures
contracts will be deposited in a segregated account with the
Equity Income Fund's custodian to collateralize the position and
thereby insure that the use of such futures is unleveraged.
The Equity Income Fund may hedge a portion of its portfolio by
selling stock index futures contracts or purchasing puts on these
contracts to limit exposure to an actual or anticipated market
decline. This provides an alternative to liquidation of securities
positions. Conversely, during a market advance or when the
investment adviser anticipates an advance, the Equity Income Fund
may hedge a portion of its portfolio by purchasing stock index
futures, options on these futures or options on stock indexes.
This affords a hedge against the Equity Income Fund's not
participating in a market advance when it is not fully invested
and serves as a temporary substitute for the purchase of
individual securities which may later be purchased in
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a more advantageous manner. The Equity Income Fund will sell
options on stock index futures and on stock indexes only to close
out existing hedge positions.
In the case of options on stock indexes, the holder of the option
pays a premium and receives the right, upon exercise of the option
at a specified price during the option period, to receive cash
equal to the dollar amount of the difference between the closing
price of the relevant index and the option exercise price times a
specified multiplier.
The Equity Income Fund will sell stock index futures only if the
amount resulting from the multiplication of the then current level
of the indexes upon which its futures contracts are based by the
number of futures contracts which would be outstanding does not
exceed one-third of the value of its net assets. Also, the Equity
Income Fund may not purchase or sell stock index futures or
purchase options on futures if, immediately thereafter, the sum of
the amount of margin deposits on its existing futures positions
and premiums paid for such options would exceed 5% of the market
value of its total assets. When the Equity Income Fund purchases
stock index futures contracts, it will deposit an amount of liquid
assets consisting of cash, U.S. Government securities or other
liquid high-grade debt securities equal to the market value of the
futures contracts in a segregated account with its custodian.
The Equity Income Fund's successful use of stock index futures
contracts and options on indices depends upon the investment
adviser's ability to predict the direction of the market and is
subject to various additional risks. The correlation between
movement in the price of the stock index future and the price of
the securities being hedged is imperfect and the risk from
imperfect correlation increases as the composition of the Equity
Income Fund's portfolio diverges from the composition of the
relevant index. In addition, if the Equity Income Fund purchases
futures to hedge against market advances before it can invest in
common stock in an advantageous manner and the market declines,
there may a be loss on the futures contracts. Particularly in the
case of options on stock indices, the Equity Income Fund's ability
to establish and maintain positions will depend on market
liquidity. In addition, the ability of the Equity Income Fund to
close out a futures position or an option depends on a liquid
secondary market. There is no assurance that liquid secondary
markets will exist for any particular futures contract or option
at any particular time. The risk of loss to the Equity Income Fund
is theoretically unlimited when the Equity Income Fund sells an
uncovered futures contract because there is an obligation to make
delivery unless the contract is closed out, regardless of
fluctuations in the price of the underlying security. The Equity
Income Fund's ability to engage in hedging activities may be
limited by certain federal income tax considerations. See 'Taxes'
in the Statement of Additional Information.
OPTIONS ON SECURITIES (EQUITY INCOME FUND)
The Equity Income Fund may purchase put options only on equity
securities held in its portfolio and write call options on stocks
only if they are covered as described below, and such call options
must remain covered so long as the Equity Income Fund is obligated
as a writer. The Equity Income Fund does not presently intend to
purchase put options and write call options on stocks that are not
traded on national securities exchanges or listed on the Nasdaq
National Market(Registered). Put options purchased and call
options written by the Equity
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Income Fund are considered to be illiquid securities as they
may be difficult to convert into cash during volatile market
conditions.
The Equity Income Fund may, from time to time, write call options
on its portfolio securities. The Equity Income Fund may only write
call options that are 'covered', meaning that it either owns the
underlying security or has an absolute and immediate right to
acquire that security, without additional cash consideration (or
for additional cash consideration held in a segregated account by
its custodian), upon conversion or exchange of other securities
currently held in its portfolio. In addition, the Equity Income
Fund will not permit the call to become uncovered prior to the
expiration of the option or termination through a closing purchase
transaction as described below. If the Equity Income Fund writes a
call option, the purchaser of the option has the right to buy (and
the Equity Income Fund has the obligation to sell) the underlying
security at the exercise price throughout the term of the option.
The initial amount paid to the Equity Income Fund by the purchaser
of the option is the 'premium'. The Equity Income Fund's
obligation to deliver the underlying security against payment of
the exercise price will terminate either upon expiration of the
option or earlier if the Equity Income Fund is able to effect a
'closing purchase transaction' through the purchase of an
equivalent option on an exchange. There can be no assurance that a
closing purchase transaction can be effected at any particular
time or at all.
The Equity Income Fund would not be able to effect a closing
purchase transaction after it had received notice of exercise. In
order to write a call option, the Equity Income Fund is required
to comply with the rules of The Options Clearing Corporation and
the various exchanges with respect to collateral requirements. The
Equity Income Fund may not purchase call options on individual
stocks except in connection with a closing purchase transaction.
It is possible that the cost of effecting a closing transaction
may be greater than the premium received by the Equity Income Fund
for writing the option.
The Equity Income Fund may also purchase listed put options. If
the Equity Income Fund purchases a put option, it has the option
to sell a given security at a specified price at any time during
the term of the option.
Purchasing put options may be used as a portfolio investment
strategy when the investment adviser perceives significant
short-term risk but substantial long-term appreciation for the
underlying security. The put option acts as an insurance policy,
as it protects against significant downward price movement while
it allows full participation in any upward movement. If the Equity
Income Fund is holding a stock that it feels has strong
fundamentals, but for some reason may be weak in the near term, it
may purchase a listed put on such security, thereby giving itself
the right to sell such security at a certain strike price
throughout the term of the option. Consequently, the Equity Income
Fund will exercise the put only if the price of such security
falls below the strike price of the put. The difference between
the put's strike price and the market price of the underlying
security on the date the Equity Income Fund exercises the put,
less transaction costs, will be the amount by which it will be
able to hedge against a decline in the underlying security. If
during the period of the option the market price for the
underlying security remains at or above the put's strike price,
the put will expire worthless, representing a loss of the price
the Equity Income Fund paid for the put, plus transaction costs.
If the price of the underlying security increases, the profit the
Equity
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Income Fund realizes on the sale of the security at such price
will be reduced by the premium paid for the put option less any
amount for which the put may be sold.
STOCK INDEX OPTIONS (EQUITY INCOME FUND)
Except as described below, the Equity Income Fund will write call
options on indices only if on such date it holds a portfolio of
stocks at least equal to the value of the index times the
multiplier times the number of contracts. When the Equity Income
Fund writes a call option on a broadly-based stock market index,
it will segregate or put into escrow with its custodian, as
collateral for the option, any combination of 'qualified
securities' (which consists of cash, United States Government
securities or other liquid high-grade debt obligations) with a
market value at the time the option is written of not less than
100% of the current index value times the multiplier times the
number of contracts.
If the Equity Income Fund has written an option on an industry or
market segment index, it will segregate or put into escrow with
its custodian, or pledge to a broker as collateral for the option,
one or more 'qualified securities', all of which are stocks of
issuers in such industry or market segment, with a market value at
the time the option is written of not less than 100% of the
current index value times the multiplier times the number of
contracts.
If at the close of business on any Business Day the market value
of such qualified securities so segregated, escrowed, or pledged
falls below 100% of the current index value times the multiplier
times the number of contracts, the Equity Income Fund will so
segregate, escrow or pledge an amount in cash, Treasury bills or
other liquid, high-grade, short-term debt obligations equal in
value to the difference. In addition, when the Equity Income Fund
writes a call on an index that is in-the-money at the time the
call is written, it will segregate with its custodian or pledge to
the broker as collateral cash, U.S. Government or other liquid
high-grade, short-term debt obligations equal in value to the
amount by which the call is in-the-money times the multiplier
times the number of contracts. Any amount segregated pursuant to
the foregoing sentence may be applied to the Equity Income Fund's
obligation to segregate additional amounts in the event that the
market value of the qualified securities falls below 100% of the
current index value times the multiplier times the number of
contracts. However, if the Equity Income Fund holds a call on the
same index as the call written where the exercise price of the
call held is equal to or less than the exercise price of the call
written or greater than the exercise price of the call written if
the difference is maintained in cash, short term U.S. Government
securities or other high-grade short-term debt obligations in a
segregated account with its custodian, it will not be subject to
the requirements described in this paragraph.
RISKS OF TRANSACTIONS IN STOCK OPTIONS (EQUITY INCOME FUND)
Writing of options involves the risk that there will be no market
in which to effect a closing transaction. An option position may
be closed out only on an exchange that provides a secondary market
for an option of the same series. Although the Equity Income Fund
will generally write only call options for which there appears to
be an active secondary market, there is no assurance that a liquid
secondary market on an exchange will exist for any
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particular option, or at any particular time, and for some options
no secondary market on an exchange may exist. If the Equity Income
Fund as a covered call option writer is unable to effect a closing
purchase transaction in a secondary market, it will not be able to
sell the underlying security until the option expires or it
delivers the underlying security upon exercise.
RISKS OF OPTIONS ON INDICES (EQUITY INCOME FUND)
The Equity Income Fund's purchase and sale of options on indices
will be subject to the risks described above under 'Risks of
Transactions in Stock Options'. In addition, the distinctive
characteristic of options on indices create certain risks that are
not present with stock options.
Since the value of an index option depends upon movements in the
level of the index rather than the price of a particular stock,
whether the Equity Income Fund will realize a gain or loss on the
purchase or sale of an option on an index will depend upon
movements in the level of stock prices in the stock market
generally or in an industry or market segment rather than
movements in the price of a particular stock. Accordingly,
successful use by the Equity Income Fund of options on indices
will be subject to the investment adviser's ability to predict
correctly movements in the direction of the stock market generally
or of a particular industry. This requires different skills and
techniques than predicting changes in the price of individual
stocks.
Index prices may be distorted if trading of certain stocks
included in the index is interrupted. Trading in index options
also may be interrupted in certain circumstances, such as if
trading is halted in a substantial number of stocks included in
the index. If this occurred, the Equity Income Fund would not be
able to close out options that it had purchased or written and, if
restrictions on exercise were imposed, might not be able to
exercise an option that it was holding, which could result in
substantial losses to the Equity Income Fund. It is the Equity
Income Fund's policy to purchase or write options only on indices
that include a number of stocks sufficient to minimize the
likelihood of a trading halt in the index, for example, the S&P
100 or S&P 500 index option.
Trading in index options commenced in April 1983 with the S&P 100
option (formerly called the CBOE 100). Since that time, a number
of additional index option contracts have been introduced,
including options on industry indices. Although the markets for
certain index option contracts have developed rapidly, the markets
for other index options are still relatively illiquid. The ability
to establish and close out positions in such options will be
subject to the development and maintenance of a liquid secondary
market. It is not certain that this market will develop in all
index option contracts. The Equity Income Fund will not purchase
or sell index option contracts unless and until, in the investment
adviser's opinion, the market for such options has developed
sufficiently that the risk in connection with these transactions
is no greater than the risk in connection with options on stock.
21
<PAGE>
FINANCIAL FUTURES CONTRACTS AND OPTIONS ON FUTURES,
DEBT SECURITIES AND INDEXES OF DEBT SECURITIES (INTERMEDIATE
GOVERNMENT FUND AND INTERMEDIATE NEW YORK TAX-EXEMPT FUND)
The Intermediate Government Fund and the Intermediate New York
Tax-Exempt Fund may (a) sell futures contracts on debt securities
and indexes of debt securities and (b) purchase or write (sell)
options on these futures, on debt securities and on indexes of
debt securities traded on registered securities exchanges and
contract markets. (The Intermediate New York Tax-Exempt Fund may
enter into these transactions with respect to municipal and
non-municipal debt securities.)
Presently, futures contracts are available in several types of
fixed income securities, including U.S. Treasury bonds and notes,
Government National Mortgage Association modified pass-through
mortgage backed securities, three-month U.S. Treasury bills and
bank certificates of deposit.
When a futures contract is entered into, each party deposits with
a broker or in a segregated custodial account a good faith deposit
of approximately 1 1/2-2% of the contract amount, called the
'initial margin'. Additionally, during the term of the contract,
the amount of the deposit is adjusted daily based on the current
value of the futures contract by payments of 'variation margin' to
or from the broker or segregated account.
Although most interest rate futures contracts call for making or
taking delivery of the underlying securities, these obligations
are typically canceled or closed out before the scheduled
settlement date. The closing is accomplished by purchasing (or
selling) an identical futures contract to offset a short (or long)
position. Such an offsetting transaction cancels the contractual
obligations established by the original futures transaction. Other
financial futures contracts call for cash settlements rather than
delivery of securities. If the price of the offsetting futures
transaction varies from the price of the original futures
transaction, the hedger will realize a gain or loss corresponding
to the difference. That gain or loss will tend to offset the
unrealized loss or gain on the hedged securities position, but may
not always or completely do so.
Financial futures contracts obligate the seller to deliver a
specific type of security, at a specified time for a specified
price. The contracts may be satisfied by actual delivery of the
securities or by an offsetting transaction. There are risks
associated with the use of futures contracts for hedging purposes.
In certain market conditions, as with rising interest rates,
futures contracts may not completely offset a decline in value of
portfolio securities. It may not always be possible to execute a
buy or sell order at the desired price or to close out an open
position due to market conditions, limits on open positions,
and/or daily price fluctuation limits. Changes in market interest
rates may differ substantially from those anticipated when hedge
positions were established. If the Intermediate Government Fund or
the Intermediate New York Tax-Exempt Fund has purchased futures to
hedge against rising interest rates and interest rates decline,
the value of the Fund's portfolio will increase, but at least part
of the benefit of the increase will be lost because of losses in
the futures positions. The Intermediate Government Fund and the
Intermediate New York Tax-Exempt Fund may have to sell securities
to meet daily maintenance margin requirements. The risk of loss to
the Intermediate Government Fund and the Intermediate New York
Tax-Exempt Fund is theoretically unlimited when an uncovered
22
<PAGE>
BNY HAMILTON
FAMILY OF FUNDS
NEW ACCOUNT APPLICATION
AND OPTIONAL SERVICES FORM
ACCOUNT APPLICATION
USE THIS FORM TO OPEN A NEW ACCOUNT OR TO AMEND
AN EXISTING BNY HAMILTON ACCOUNT
For help with this Application or to request an IRA New Account Application
call 1-800-426-9363 (1-800-4BNY-FND). THIS APPLICATION MAY NOT BE USED TO
ESTABLISH AN IRA ACCOUNT. A separate application must be used to open each new
account or to amend each existing account. If this application amends an
existing account, please indicate the account number:
ALL INVESTORS must sign the Signature and Taxpayer Certification (Section 11).
Mail completed, signed application to:
BNY HAMILTON FUNDS Promotion Code (For office use only)
DEPARTMENT L-1685
COLUMBUS, OH 43260-1685 ----------------------------------------
/ /
----------------------------------------
PLEASE PRINT CLEARLY
1. REGISTRATION
/ / Individual or Joint* Account
- -
- ------------------------------------------------------------------------------
Owner's First Name Middle Initial Last Name Social Security Number
- -
- ------------------------------------------------------------------------------
Joint Owner's First Name Middle Initial Last Name Social Security Number
*(Joint Tenants with Right of Survivorship, unless you indicate otherwise. For
joint accounts, signatures of both Owners are required in Section 11.)
/ / Gift/Transfer to Minor
- -
- ------------------------------------------------------------------------------
Custodian's First Name Middle Initial Last Name Social Security Number
- -
- ------------------------------------------------------------------------------
Minor's First Name Middle Initial Last Name Social Security Number
Under the Uniform Gift/Transfer to Minors Act.
----------------
State
/ / Corporation, Trust, Partnership or Other Entity
-
- ------------------------------------------------------------------------------
Name of Corporation or Other Entity Taxpayer I.D. Number
2. MAILING ADDRESS
- ------------------------------------------------------------------------------
Street or P.O. Box
- ------------------------------------------------------------------------------
City State Zip Code
( ) ( )
- ------------------------------------------------------------------------------
Telephone Number Day Evening
Are you a U.S. Citizen? / / Yes / / No If no, specify country of
citizenship __________________________________________________________________
3. EMPLOYER INFORMATION (FOR OWNER OR CUSTODIAN)
- ------------------------------------------------------------------------------
Employer's Name Your Occupation
- ------------------------------------------------------------------------------
Employer's Address
<PAGE>
4. INITIAL INVESTMENT
$2,000 minimum. $500 with Automatic Investment Program. (See Section 7.) A
separate application must be used to open each new account. Make check payable
to the Fund indicated below.
NAME OF FUND AMOUNT
/ / BNY Hamilton Equity Income Fund $
----------------
/ / BNY Hamilton Intermediate New York Tax-Exempt Fund
----------------
/ / BNY Hamilton Intermediate Government Fund
----------------
/ / BNY Hamilton Money Fund--Hamilton Classic Shares
----------------
/ / ---------------------------------------------------
----------------
INVESTMENT METHOD
/ / By check made payable to the Fund indicated above.
/ / By federal funds wire transfer on
------------------
Date
/ / By exchange from another BNY Hamilton Fund on
------------------
Date
- ------------------------------------------------------------------------------
Fund Name Account Number
5. DIVIDENDS AND CAPITAL GAINS
All your dividends and capital gains will be reinvested in additional Fund
shares unless you indicate otherwise.
/ / Pay all dividends to me by check and reinvest all capital gains in
additional Fund shares.
/ / Pay all dividends and capital gains to me by check.
/ / Pay all dividends to my existing bank account listed in Section 9 below
and reinvest all capital gains in additional Fund shares.
/ / Pay all dividends and capital gains to my existing bank account listed in
Section 9 below.
/ / Distributions to bank accounts will be sent via ACH unless you check
this box for wire transfers.
6. TELEPHONE PRIVILEGES
You can make free redemptions or exchanges by telephone among any BNY Hamilton
Equity Income Fund, BNY Hamilton Intermediate Government Fund, BNY Hamilton
Intermediate New York Tax-Exempt Fund and BNY Hamilton Money Fund-- Hamilton
Classic Shares account with the same registration. YOU ARE URGED TO READ THE
'EXCHANGE OF SHARES' SECTION OF THE FUND'S PROSPECTUS BEFORE EXCHANGING YOUR
SHARES. Redemption checks will automatically be sent to the account holder(s)
named in Section 1 or the bank account provided in Section 9. You will have
telephone privileges unless you check the appropriate option(s) below.
/ / I decline the telephone exchange privilege.
/ / I decline the telephone redemption privilege.
7. AUTOMATIC INVESTMENT PROGRAM (OPTIONAL)
You can invest an additional $100 or more monthly, or twice monthly, directly
from your bank account to your Fund account by completing this Section and
Section 9.
I authorize the Transfer Agent to debit $
----------------------
(minimum $100) from my bank account indicated in Section 9 on the 1ST AND/OR
15TH day of the month (or, if such day is not a business day, the next business
day) and invest it in Fund shares. (Debits will occur 2-3 days prior to your
selected investment date.) Please indicate by circling one or both days.
This privilege may be revoked without prior written notice if a debit of your
account is refused upon presentation. This privilege may be discontinued by
the Funds or the Transfer Agent upon 30 days written notice prior to a payment
date or by you by written notice to the Transfer Agent (effective 3 business
days following receipt of the notice) and your bank.
8. SYSTEMATIC WITHDRAWAL PLAN (OPTIONAL)
If your Fund account has a minimum value of $10,000, you can withdraw $50 or
more (in multiples of $50) monthly, quarterly, semi-annually, or annually and
have the money sent directly to your bank account indicated in Section 9.
Alternatively, a check can be sent to the account holder(s) named in Section 1
or to a third party. Please indicate your selection below:
/ / I authorize the Transfer Agent to redeem (at the appropriate redemption
price) $__________________________________________________________________
from my Fund account:
/ / monthly on the 1ST OR 15TH day of each month (please circle one)
/ / quarterly on the 1ST OR 15TH day of the month (please circle one) and
begin redemption in ____________________________________________________
(Month)
/ / semi-annually on the 1ST OR 15TH day of the month (please circle one)
and begin redemption in ________________________________________________
(Month)
/ / annually on the 1ST OR 15TH day of the month (please circle one) and
begin redemption in __________________________________________________________
(Month)
Send redemption proceeds to:
/ / Registered Owner via check
/ / Bank account via wire or ACH
--------- ---------
(Refer to Section 9 for explanation of wire/ACH and bank authorization)
/ / Third Party (listed below). YOU MUST OBTAIN A SIGNATURE GUARANTEE IN
SECTION 11.
THIRD PARTY AUTHORIZATION
Third Party Name and Address:
- ------------------------------------------------------------------------------
Name
- ------------------------------------------------------------------------------
Street Address City State Zip Code
9. BANK INFORMATION
You must complete this section to receive dividend income and/or capital gain
distributions via wire or ACH (Section 5); for Wire Redemption or Telephone
Privileges (Section 6); for Automatic Investment Program (Section 7); and for
Systematic Withdrawal Plan (Section 8).
- ------------------------------------------------------------------------------
Name of Your Bank Account Number
- ------------------------------------------------------------------------------
Your Bank's Address City State Zip Code
- ------------------------------------------------------------------------------
Name of Depositor Joint Depositor (if any)
Type of Account: / / Checking / / NOW / / Other ____________________
I (we) (1) hereby request and authorize you to honor all debit and credit
entries initiated by me (us) from time to time through the Transfer Agent, (2)
agree that your treatment of each such entry, and your rights with respect to
it, shall be the same as if it were signed personally by me (or either of us)
and further agree that if any such entries are dishonored with good and
sufficient cause, you shall be under no liability whatsoever, (3) further
agree that such authorization, unless sooner terminated by you in writing, is
to remain in effect until three (3) business days after receipt by you of
written notice from me (or either of us) of its revocation.
Please attach your voided or canceled check or bank deposit slip here.
WIRE AND ACH--Wire Redemption Privileges permit monies to be transmitted via
Federal Funds wire directly to your bank account. The Funds do not charge
for this service; however, your bank may impose a fee for wires. This type
of transfer allows the money to be available for use immediately upon
receipt of the wire by your bank. Telephone Privileges permit investment
and redemption by phone via the Automated Clearing House (ACH) network.
The Funds do not charge for this service. Money sent via ACH may be
held before clearing and may not be immediately available for your use.
10. FREE CHECK WRITING
Check writing is not available for the Equity Income Fund.
/ / Yes, I want to be able to write Fund checks for $500 or more.
Indicate number of signatures required on checks
---------------------
By signing below, I (we): o authorize the Transfer Agent to honor checks drawn
by me (us) on the above titled Fund account, o understand all checks will
require the signatures of each registered owner unless indicated to the
contrary, o will write checks only for $500 or more, o understand the Fund or
the Transfer Agent reserves the right to change or terminate this privilege at
any time and neither shall incur any liability to me (us) for honoring such
checks, or for returning checks which have not been accepted, o have read and
agree to the terms and conditions set forth in the Prospectus of the Fund in
which I (we) am (are) investing.
Signature (please use black ink) Signature of Joint Registrant (please
use black ink)
FOR OFFICE USE ONLY
ACCOUNT NUMBER (DO NOT FILL IN, TO BE ASSIGNED)
11. SIGNATURE AND TAXPAYER CERTIFICATION
By signing this form, I certify that:
o I have received, read, and agree to the terms of the Prospectus, have the
authority and legal capacity to purchase mutual fund shares, am of legal age
in my state, and believe such investment is suitable for me.
o I authorize BNY Hamilton Funds, The Bank of New York, the Transfer Agent,
BNY Hamilton Distributors, Inc., affiliates thereof, and the directors and
employees of such entities, to act on any instructions or inquiries
reasonably believed to be genuine and agree that they will not be liable for
any resulting loss or expense from such instructions or inquiries.
o Under penalty of perjury, the Social Security or Taxpayer Identification
Number indicated herein is correct. I am NOT currently subject to IRS backup
withholding because 1) I have not been notified that I am subject to such
withholding, or 2) I have received notice from the IRS that such withholding
has been terminated. (Cross out 'NOT' if you are currently subject to
withholding.)
o Upon any telephone order, which may be tape recorded for share purchases or
redemptions received from me or any person so representing him or herself,
the Transfer Agent is authorized, without the giving of any notice
regardless of the amount of any preceding transaction, to debit or credit my
account at my bank indicated in Section 9 (there are limitations as to
amount and frequency of transactions permissible through the Wire Redemption
Privilege. In order to determine current limitations, please call toll free
1-800-426-9363); further certify that by authorizing the Transfer Agent to
debit or credit my bank account pursuant to my instructions or those of any
person so representing him or herself, that I am waiving any and all rights
to have my bank account recredited in the event of an unauthorized debit
entry; further certify that I understand that this service may be terminated
at any time without notice, and that the Transfer Agent is not obligated to
advise me of the nonpayment of any debit or credit; further certify that I
understand that I may terminate this authorization at any time by written
notification to the Transfer Agent, and that any such notification will be
effective only as to entries initiated later than three (3) business days
following receipt of such notification.
<PAGE>
futures contract is sold because there is an obligation to make
delivery unless the contract is closed out, regardless of
fluctuations in the price of the underlying security.
The Intermediate Government Fund and the Intermediate New York
Tax-Exempt Fund intend to engage in transactions in futures
contracts and options on futures contracts as a hedge against
changes, resulting from market conditions, in the value of
securities which are held in the Intermediate Government Fund or
the Intermediate New York Tax-Exempt Fund's portfolio or which the
Intermediate Government Fund or the Intermediate New York
Tax-Exempt Fund intend to purchase. In accordance with current
Commodity Futures Trading Commission ('CFTC') regulations, neither
the Intermediate Government Fund nor the Intermediate New York
Tax-Exempt Fund will enter into any financial futures contract or
purchase related options (as defined in the CFTC regulations) if
immediately thereafter, the aggregate initial margin for its
outstanding futures contracts and premiums paid for such options
would exceed 5% of the fair market value of its total assets. In
addition, neither the Intermediate Government Fund nor the
Intermediate New York Tax-Exempt Fund will enter into any
financial futures contract or purchase related options (as defined
in the CFTC regulations) if immediately thereafter the sum of
initial and net cumulative variation margins on its outstanding
futures contracts, together with premiums paid on options thereon,
would exceed 20% of its total assets.
When either the Intermediate Government Fund or the Intermediate
New York Tax-Exempt Fund attempts to hedge its portfolio by
selling an interest rate futures contract, purchasing a put option
thereon or writing a call option thereon, it will own an amount of
United States Government securities corresponding to the open
futures or option position. With respect to long positions assumed
by the Intermediate Government Fund or the Intermediate New York
Tax-Exempt Fund, they will segregate with the custodian, or in a
margin account with a broker, an amount of liquid assets
consisting of cash, U.S. Government securities or other liquid
high-grade debt securities permitted by CFTC regulations equal to
the market value of the futures contracts and thereby insure that
the use of futures contracts is unleveraged.
The Intermediate Government Fund and the Intermediate New York
Tax-Exempt Fund may purchase call options and write (sell) put
options on debt securities to close out open option positions,
purchase put options to protect their holding from a decline in
market value, and write call options. The Intermediate Government
Fund and the Intermediate New York Tax-Exempt Fund may also
purchase put options and write call options on futures contracts
that are traded on an United States exchange or board of trade and
enter into closing transactions with respect to these options. The
Intermediate Government Fund and the Intermediate New York Tax-
Exempt Fund may use options on futures contracts under the same
conditions it uses put and call options on debt securities. The
effect of a futures contract may also be created by simultaneous
purchase of a put option and sale of a call option on the same
security. When the Intermediate Government Fund or the
Intermediate New York Tax-Exempt Fund purchases a put option or
call option, the maximum risk of loss is the price of the option
purchased. The use of options as a hedge rather than financial
futures contracts may result in partial hedges because of the
limits inherent in the exercise prices. Neither the Intermediate
Government Fund nor the Intermediate New York Tax-Exempt Fund will
invest more than 5% of its net assets in premiums on put options.
23
<PAGE>
The Intermediate Government Fund may utilize futures contracts on
bond indexes or related put and call options on these index
contracts. The Intermediate Government Fund's strategies in
employing these contracts would be similar to the strategies
applicable to futures and options contracts generally. The
Intermediate Government Fund may also buy put options and sell
call options on bond indexes.
The Intermediate New York Tax-Exempt Fund may also utilize futures
contracts on municipal bond indexes or related put and call
options on these index contracts. The Intermediate New York
Tax-Exempt Fund's strategies in employing these contracts would be
similar to the strategies applicable to futures and options
contracts generally. The Intermediate New York Tax-Exempt Fund may
also buy put options and sell call options on municipal bond
indexes. The Intermediate New York Tax-Exempt Fund may also
purchase put options or write (sell) call options on non-municipal
debt securities. In the event that options on municipal debt
securities become available, the Intermediate New York Tax-Exempt
Fund will consider purchasing or selling these options.
The hedging activities of the Intermediate Government Fund and the
Intermediate New York Tax-Exempt Fund are subject to several
additional restrictions. The ability of the Intermediate
Government Fund and the Intermediate New York Tax-Exempt Fund to
engage in hedging activities may be further limited by certain
income tax considerations. See 'Taxes' in the Statement of
Additional Information.
To the extent the Intermediate Government Fund or the Intermediate
New York Tax-Exempt Fund use hedging instruments that do not
involve specific portfolio securities, offsetting price changes
between the hedging instruments and the securities being hedged
will not always be possible, and the market value fluctuations of
the portfolio may not be completely eliminated. When using hedging
instruments that do not specifically correlate with securities in
either the Intermediate Government Fund or the Intermediate New
York Tax-Exempt Fund's portfolio, the investment adviser will
attempt to create a very closely correlated hedge.
Hedging activities based on non-municipal debt securities or
indexes may not correlate as closely to the Intermediate New York
Tax-Exempt Fund portfolio as hedging activities based on municipal
debt securities or indexes. Less closely correlated hedges are
likely to occur if the Intermediate New York Tax-Exempt Fund
hedges municipal securities with a futures contract on United
States Government obligations, other non-municipal securities or
an index that does not include municipal securities. This type of
hedging activity may be especially useful where closely correlated
hedging activities based on municipal securities or indexes are
not available.
The Intermediate Government Fund and the Intermediate New York
Tax-Exempt Fund may purchase put options on interest rate futures
contracts that are traded on United States commodity exchanges,
and write (i.e., sell) put and call options on such futures
contracts. The Intermediate Government Fund and the Intermediate
New York Tax-Exempt Fund only intend to engage in options on
futures contracts for bona fide hedging purposes in compliance
with CFTC regulations. An option on a futures contract gives the
purchaser the right, but not the obligation, to assume a position
in a futures contract (which position may be a long or short
position) at a specified exercise price at any time during the
option exercise period. The writer of the option is required upon
exercise to assume an offsetting futures position (which
24
<PAGE>
position may be a long or short position). Upon exercise of the
option, the assumption of offsetting futures positions by the
writer and holder of the option will be accompanied by delivery of
the accumulated balance in the writer's futures margin account
that represents the amount by which the market price of the
futures contract, at exercise, exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the
option on the futures contract. Currently, options can be
purchased or written with respect to futures contracts on United
States Treasury bonds and United States Treasury notes on the
Chicago Board of Trade.
When the Intermediate Government Fund or the Intermediate New York
Tax-Exempt Fund hedges its portfolio by purchasing a put option or
writing a call option on a futures contract, it will own a long
futures position or an amount of high-grade debt securities
corresponding to the open option position. When the Intermediate
Government Fund or the Intermediate New York Tax-Exempt Fund
writes a put option on a futures contract, it may, rather than
establish a segregated account, sell the futures contract
underlying the put option or purchase a similar put option. In
instances involving the purchase of a call option on a futures
contract, the Intermediate Government Fund or the Intermediate New
York Tax-Exempt Fund will deposit in a segregated account with its
custodian an amount in cash, cash equivalents or liquid, high-
grade, fixed-income debt securities equal to the market value of
the obligation underlying the futures contract, less any amount
held in the initial variation margin accounts.
The holder or writer of an option may terminate its position by
selling or purchasing an option of the same series. There is no
guarantee that such closing transactions can be effected at any
particular time or at all.
The Intermediate Government Fund and the Intermediate New York
Tax-Exempt Fund will be required to deposit initial and variation
margin with respect to put and call options on futures contracts
written by them pursuant to the Intermediate Government Fund and
the Intermediate New York Tax-Exempt Fund's futures commissions
merchants' requirements, which are similar to those applicable to
interest rate futures contracts described above.
MUNICIPAL BOND INDEX FUTURES CONTRACTS
(INTERMEDIATE NEW YORK TAX-EXEMPT FUND)
Futures contracts on municipal bond indexes began trading on the
Chicago Board of Trade in 1985. These contracts, which provide for
cash settlement rather than delivery of securities, are based on
the Bond Buyer Municipal Bond Index, an index of 40 actively
traded municipal bonds. To make the index as representative as
possible of price trends in the municipal securities market, twice
a month new issues are added to the index and an equal number of
the least actively traded issues are dropped from the index. Each
bond in the index is priced daily by a group of five brokers.
Municipal bond index contracts are designed to provide a way to
hedge municipal bond portfolios, since prices of existing futures
on taxable securities do not always correlate well with municipal
bond prices. Because the municipal bond index contract should
correlate better with the Intermediate New York Tax-Exempt Fund's
price changes than Treasury bond futures contracts, the investment
adviser expects to do most of its hedging using municipal
25
<PAGE>
bond index contracts. However, there may be times when the
investment adviser believes that Treasury bond contracts
correspond well with municipal bond prices and trades at a price
that makes hedging with these contracts less expensive than
hedging with municipal bond index contracts. Accordingly, the
Intermediate New York Tax-Exempt Fund intends to use both the
Treasury bond and the municipal bond index contracts for hedging
purposes.
RISKS OF FUTURES TRANSACTIONS (INTERMEDIATE GOVERNMENT FUND AND
INTERMEDIATE NEW YORK TAX-EXEMPT FUND)
The Intermediate Government Fund and the Intermediate New York
Tax-Exempt Fund's successful use of futures contracts and options
thereon will depend upon the ability of their investment adviser
to predict movements in the direction of interest rates and other
factors affecting markets for securities, and upon the degree of
correlation between prices of the futures contracts and the prices
of the securities being hedged. As a result, even a correct
forecast of interest rate changes may not result in a successful
hedging transaction. Although futures contracts and options
thereon may limit exposure to loss, they may also limit the
potential for capital gains. For example, if the Intermediate
Government Fund or the Intermediate New York Tax-Exempt Fund has
hedged against the possibility of an increase in interest rates
which would adversely affect the price of securities in its
portfolio and prices of such securities increase instead, there
would be a loss of part or all of the benefit of the increased
value of its securities because it will have offsetting losses in
its futures positions. In addition, in such situations, if either
the Intermediate Government Fund or the Intermediate New York
Tax-Exempt Fund has insufficient cash to meet daily variation
margin requirements, it may have to sell securities to meet such
requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising
market. The Intermediate Government Fund and the Intermediate New
York Tax-Exempt Fund may have to sell securities at a time when it
is disadvantageous to do so. Where futures are purchased to hedge
against the possible increase in price of securities before the
Intermediate Government Fund or the Intermediate New York Tax-
Exempt Fund is able to invest its cash in an orderly fashion, it
is possible that the market may decline instead; if the Fund's
investment adviser then concludes not to invest in securities at
that time because of concern as to possible future market decline
or for other reasons, there would be a realized loss on the
futures contract that is not offset by a reduction in the price of
the securities purchased. The risk of loss to the Intermediate
Government Fund or the Intermediate New York Tax-Exempt Fund is
theoretically unlimited if no investment in securities is made as
a result of the market conditions noted above. Although the
Intermediate Government Fund and the Intermediate New York
Tax-Exempt Fund will enter into futures contracts only on
exchanges where there appears to be a liquid market, there can be
no assurance that such liquidity will always exist.
Brokerage commissions on any of the Funds' financial futures and
options transactions and premium costs for purchasing options may
tend to reduce a Fund's yield.
For further information about any of the Funds' hedging
activities, see 'Investment Objectives and Policies-Hedging
Activities' in the Statement of Additional Information.
26
<PAGE>
FOREIGN INVESTMENT RISK (EQUITY INCOME FUND)
The Equity Income Fund may invest in certain foreign securities.
Investment in obligations of foreign issuers and in foreign
branches of domestic banks involve somewhat different investment
risks from those affecting obligations of United States domestic
issuers. There may be limited publicly available information with
respect to foreign issuers, and foreign issuers are not generally
subject to uniform accounting, auditing and financial standards
and requirements comparable to those applicable to domestic
companies. There may also be less government supervision and
regulation of foreign securities exchanges, brokers and issuers
than in the United States. Foreign securities markets have
substantially less volume than domestic securities exchanges, and
securities of some foreign issuers are less liquid and more
volatile than securities of comparable domestic issuers. Brokerage
commissions and other transaction costs on foreign securities
exchanges are generally higher than in the United States.
Dividends paid by foreign issuers may be subject to withholding
and other foreign taxes that may decrease the net return on
foreign investments as compared to dividends and interest paid to
the Equity Income Fund by domestic companies. Additional risks
include future political and economic developments, the
possibility that a foreign jurisdiction might impose or change
withholding taxes on income payable with respect to foreign
securities, the possible seizure, nationalization or expropriation
of the foreign issuer or foreign deposits and the possible
adoption of foreign governmental restrictions such as exchange
controls.
Since investments in foreign securities involve foreign
currencies, the value of their assets measured in United States
dollars may be affected by changes in currency rates and in
exchange control regulations, including currency blockage.
HIGH YIELD/HIGH RISK BONDS (COMMONLY KNOWN AS 'JUNK BONDS')
(EQUITY INCOME FUND)
Since the Equity Income Fund has no pre-established minimum
quality standards, a portion of the securities that it may hold,
particularly high-yield/high-risk securities, may be subject to
additional risk. Corporate debt securities that are below
investment grade (securities rated Ba or lower by Moody's or BB or
lower by S&P) and unrated securities, which the Equity Income Fund
may purchase and hold, are subject to higher risk of non-payment
of principal or interest, or both, than higher grade debt
securities. This greater degree of risk generally offers higher
potential yields. Although the Equity Income Fund may invest in
unrated convertible debt securities, the investment adviser will
not ordinarily invest in securities that, in its judgment, would
not be investment grade.
INTEREST RATE RISK (INTERMEDIATE GOVERNMENT FUND AND INTERMEDIATE
NEW YORK TAX-EXEMPT FUND)
In general, the prices of debt securities vary inversely with
interest rates. If interest rates rise, debt security prices
generally fall; if interest rates fall, debt security prices
generally rise. In addition, for a given change in interest rates,
longer-maturity debt securities fluctuate more in price (gaining
or losing more in value) than shorter-maturity debt securities,
and generally offer higher yields than shorter-maturity debt
securities, all other factors, including credit quality, being
equal.
27
<PAGE>
INVESTMENT RESTRICTIONS
EQUITY INCOME FUND AND INTERMEDIATE GOVERNMENT FUND
As a diversified series of a registered investment company,
75% of the total assets of each of the Equity Income Fund
and the Intermediate Government Fund's assets is subject to
The following limitations:
(a) neither may invest more than 5% of its total assets in the
securities of any one issuer, except obligations of the
United States Government and its agencies and instrumentalities
and (b) neither may own more than 10% of the outstanding voting
securities of any one issuer.
INTERMEDIATE NEW YORK TAX-EXEMPT FUND
As a non-diversified series of a registered investment company,
the Intermediate New York Tax-Exempt Fund is not limited by the
1940 Act as to the proportion of its assets that it may invest in
the obligations of a single issuer. The Intermediate New York
Tax-Exempt Fund may be more susceptible to adverse economic,
political or regulatory developments affecting a single issuer
than would be the case if it were a diversified company. Although
it is a non-diversified series, the Intermediate New York
Tax-Exempt Fund will observe certain diversification standards in
order to maintain its status as a regulated investment company
under the Code. See Taxes in the Statement of Additional
Information.
CERTAIN FUNDAMENTAL POLICIES
Each Fund also operates under certain investment restrictions
that, together with their investment objectives, are deemed
fundamental policies--i.e., they may be changed only with the
approval of the holders of a majority of a Fund's outstanding
shares.
The Equity Income Fund may not: (i) acquire any illiquid
securities if, as a result, more than 15% of the market value of
its net assets would be in investments that are illiquid; (ii)
enter into reverse repurchase agreements exceeding one-third of
the market value of its total assets, less certain liabilities;
(iii) borrow money, except from banks for extraordinary or
emergency purposes and then only in amounts up to 20% of the value
of the Equity Income Fund's total assets (taken at cost at the
time of borrowing) and except in connection with permitted reverse
repurchase agreements; or mortgage, pledge or hypothecate any
assets except in connection with any such borrowing in amounts up
to 20% of the value of the Equity Income Fund's net assets at the
time of borrowing; (iv) purchase securities while borrowings, as
described in clauses (ii) and (iii) above, exceed 5% of its total
assets or (v) invest more than 25% of its assets in securities of
issuers in any one industry.
The Intermediate Government Fund may not: (i) acquire any illiquid
securities if as a result more than 15% of the market value of its
net assets would be in investments that are illiquid; (ii) borrow
money, except from banks for extraordinary or emergency purposes
and then only in amounts up to 20% of the value of the
Intermediate Government Fund's total assets (taken at cost at the
time of borrowing) and except in connection with permitted reverse
repurchase agreements; or mortgage, pledge or hypothecate any
assets except in connection with such
28
<PAGE>
borrowing in amounts up to 20% of the value of the Intermediate
Government Fund's net assets at the time of such borrowing;
(iii) purchase securities while borrowings, as described in
clause (ii) above, exceed 5% of its total assets; (iv) purchase
securities or other obligations of issuers of the same industry
if, after such purchase, the value of the Intermediate
Government Fund's investments in such industry would exceed 25%
of the value of its total assets, provided that this restriction
will not apply to purchases of securities issued or guaranteed
by the United States Government, its agencies or
instrumentalities; (v) purchase the securities of an issuer if,
after such purchase, the Intermediate Government Fund owns more
than 10% of the outstanding voting securities of such issuer;
(vi) make loans, except through certain means; (vii) purchase
puts, calls, straddles, spreads or any combination thereof or
commodities except for hedging purposes; (viii) purchase
securities on margin or make short sales, except for certain
hedging purposes; (ix) invest in fixed time deposits except in
certain circumstances; (x) issue senior securities or (xi) act
as an underwriter of securities.
The Intermediate New York Tax-Exempt Fund may not: (i) acquire
any illiquid securities if as a result more than 15% of the
market value of its net assets would be in investments that are
illiquid; (ii) borrow money, except from banks for extraordinary
or emergency purposes and then only in amounts up to 20% of the
value of the Intermediate New York Tax-Exempt Fund's total
assets (taken at cost at the time of borrowing), and except in
connection with permitted reverse repurchase agreements; or
mortgage, pledge or hypothecate any assets except in connection
with any such borrowing in amounts up to 20% of the value of its
net assets at the time of borrowing; (iii) purchase securities
while borrowings, including reverse repurchase agreements,
exceed 5% of its total assets; (iv) purchase securities other
than those described under 'Investment Objectives and Policies';
(v) purchase securities of any one issuer if, after such
purchase, more than 5% of the value of its total assets would be
invested in the securities of any one such issuer, provided that
this limitation does not apply to securities issued by the
United States Government, its agencies or instrumentalities, or
to permitted investments of up to 50% of the Intermediate New
York Tax-Exempt Fund's total assets; (vi) invest more than 20%
of its total assets in investments that are not Municipal
Obligations or (vii) acquire industrial revenue bonds if as a
result more than 5% of the total assets would be invested in
industrial revenue bonds where payment of principal and interest
is the responsibility of companies with fewer than three years
of operating history.
For a more detailed discussion of the above investment
restrictions, see 'Investment Restrictions' and 'Additional
Information' in the Statement of Additional Information.
MANAGEMENT OF THE FUNDS
DIRECTORS
Pursuant to the Articles of Incorporation and Bylaws of BNY
Hamilton Funds, Inc., the Directors decide matters of general
policy and review the actions of the Funds' investment adviser,
administrator, disstributor and other service providers. The
Statement of Additional Information contains the name
and general business experience of each director of
BNY Hamilton Funds, Inc.
29
<PAGE>
INVESTMENT ADVISER
The Bank of New York serves as the investment adviser (the
'Adviser') to each of the Funds. The Adviser, which has its
principal offices at 48 Wall Street, New York, New York 10286,
is New York's first bank, founded by Alexander Hamilton in 1784,
and is one of the largest commercial banks in the United States,
having over $53 billion in assets at the end of 1995. It is the
leading retail bank in the greater New York suburban area,
having 384 branches at the end of 1995. As of December 31, 1995,
the Adviser provided administrative or advisory services to
approximately $54 billion in assets.
Robert G. Knott, Jr., Vice President, has been responsible for
day-to-day portfolio management for the Equity Income Fund since
its inception. Mr. Knott has been employed by the Adviser for
the past 28 years. Currently, he is a Group Head for the
Adviser's Personal Asset Management Division.
Mark A. Hemenetz, Senior Vice President, has been responsible
for the day-to-day portfolio management of the Intermediate
Government Fund since February 1993. Mr. Hemenetz has been
employed by the Adviser for the past 14 years. Currently, he is
the Division Head of the Adviser's Fixed Income Management
Division.
Colleen M. Frey, Vice President, has been responsible for the
day-to-day portfolio management for the Intermediate New York
Tax-Exempt Fund since its inception. Ms. Frey has been employed
by the Adviser for the past 29 years. Currently, she is a Group
Head for the Adviser's Tax-Exempt Bond Management Division.
The Adviser manages the investments of each Fund and is
responsible for all purchases and sales of each Fund's portfolio
securities. The Adviser's fee accrues daily and is payable
monthly at the annual rate of .60%, .50%, and .50% of average
daily net assets of the Equity Income Fund, the Intermediate
Government Fund, and the Intermediate New York Tax-Exempt Fund,
respectively.
ADMINISTRATOR
BNY Hamilton Distributors, Inc. ('BNY Hamilton Distributors')
serves as the Funds' administrator (the 'Administrator') and
will assist generally in supervising the operations of each
Fund. BNY Hamilton Distributors is a Delaware corporation
organized to administer and distribute mutual funds; its offices
are located at 3435 Stelzer Road, Columbus, Ohio 43219-3035.
The Administrator has agreed to provide facilities, equipment
and personnel to carry out administrative services for the
Funds, including, among other things, providing the services of
persons who may be appointed as officers or directors of BNY
Hamilton Funds, Inc., overseeing the performance of the Funds'
transfer agent, supervising purchase and redemption orders (made
via telephone and mail) and monitoring the Distributor's
compliance with the rules and regulations of the National
Association of Securities Dealers and federal and state
securities laws. The Administrator will also be responsible for
coordinating and overseeing compliance by the Directors with
Maryland corporate procedural requirements (as BNY Hamilton
Funds, Inc. is a Maryland corporation; see 'Organization'). In
addition, the
30
<PAGE>
Administrator's duties include assisting in the drafting and
printing of prospectuses and statements of additional
information, administering shareholder meetings, producing proxy
statements and annual and semi-annual reports, monitoring the
Adviser's compliance with the stated investment objectives and
restrictions of each Fund and monitoring the custodian, fund
accounting, transfer agency, administration, distribution,
advisory and legal services that are provided to the Funds.
The Administration Agreement permits the Administrator to
delegate certain of its responsibilities to other service
providers. Pursuant to this authority, the Administrator has
delegated certain administrative functions to The Bank of New
York. The Bank of New York is not an affiliated person of BNY
Hamilton Distributors.
Each Fund pays annual administration fees, accrued daily and
payable monthly, of .20% of average daily net assets of each
Fund up to $400 million (taken on an individual Fund by Fund
basis), and .15% of average daily net assets of each Fund (taken
on an individual Fund by Fund basis) in excess of $400 million.
DISTRIBUTOR
In addition to acting as the Administrator, BNY Hamilton
Distributors is the exclusive underwriter and distributor of
shares of each Fund (the 'Distributor'); its offices are located
at 125 West 55th Street, New York, New York 10019.
The Distributor makes a continuous offering of each Fund's
shares and bears the costs and expenses of distributing to
selected dealers and prospective investors copies of any
prospectuses, statements of additional information and annual
and interim reports of the Funds (after such items have been
prepared, set in type and sent by the Funds at their expense to
existing shareholders) that are used in connection with the
offering of shares, and the costs and expenses of preparing,
printing and distributing any other literature used by the
Distributor or furnished by it for use by selected dealers in
connection with the offering of each Fund's shares for sale to
the public.
The Administrator (and Distributor) is a wholly owned subsidiary
of The BISYS Group, Inc.
SUMMARY OF SHAREHOLDER SERVICES
A Fund's telephone representative will be happy to answer
any questions you may have.
Telephone For Information Regarding
--------- -------------------------
1-800-4BNY-FND o Any of the Funds' investment
(1-800-426-9363) objectives and policies
8 a.m. to 9 p.m., Eastern time o Opening an account
1-800-952-6276 o Current account balances
8 a.m. to 9 p.m., Eastern time o Shareholder address/
telephone changes
31
<PAGE>
You should note that neither the Funds nor their service
contractors will be responsible for any loss or expense for
acting upon telephone instructions that they believe to be
genuine. In attempting to confirm that telephone instructions
are genuine, the Funds will use procedures considered
reasonable, as described in 'Redemption of Shares' in the
Statement of Additional Information. To the extent that any of
the Funds does not use reasonable procedures to form its belief
as to the genuineness of accountholders' instructions, it and/or
its service contractors may be responsible for such instructions
that are fraudulent or unauthorized.
The Funds want you to be kept current regarding the status of
your account. To assist you, the following statements and
reports will be sent to you:
CONFIRMATION STATEMENTS After every transaction that
affects your account balance or
your account registration.
ACCOUNT STATEMENTS Monthly, showing any activity
during the month, any income
credited during the month and the
current value of your account.
FINANCIAL REPORTS Every six months, one copy of
most Fund reports and year-end
tax information will be mailed to
each household, regardless of how
many accounts are in the
household.
FUND AND OTHER SHAREHOLDER SERVICES
CUSTODIAN AND FUND ACCOUNTING AGENT
The Bank of New York, 90 Washington Street, New York, New
York 10286, serves as each Fund's custodian. BNY Hamilton Funds,
Inc. has also entered into a Cash Management and Related
Services Agreement with The Bank of New York pursuant to which
The Bank of New York, as custodian, will receive and disburse
funds in connection with the purchases and redemptions of each
Fund's shares.
The Bank of New York also serves as the fund accounting agent
for each Fund with responsibility for calculating the net asset
value of each Fund and for maintaining each Fund's books and
records.
TRANSFER AGENT
BISYS Fund Services, Inc. ('BISYS'), 3435 Stelzer Road,
Columbus, Ohio, 43219-3035, serves as each Fund's transfer
agent. BISYS is a wholly-owned subsidiary of The BISYS Group,
Inc. As transfer agent, BISYS maintains the records of each
shareholder's account, answers shareholder inquiries concerning
accounts, processes purchases and redemptions of each Fund's
shares, acts as dividend and distribution disbursing agent and
performs other shareholder service functions.
32
<PAGE>
DISTRIBUTION PLAN
The Directors have adopted a plan of distribution under Rule
12b-1 of the 1940 Act with respect to each Fund (collectively,
the '12b-1 Plans'). The 12b-1 Plans have not been implemented
for any of the Funds; however, they may be implemented at such
future date as the Directors deem appropriate.
Under each of the 12b-1 Plans, the relevant Fund may reimburse
the Distributor for expenses incurred by it in connection with
the distribution of that Fund's shares. Such distribution
expenses will include expenses incurred in connection with
advertising and marketing such Fund's shares and expenses
incurred in connection with preparing, printing and distributing
prospectuses for such Fund (except those used for regulatory
purposes or for distribution to existing shareholders of the
Fund) and in implementing and operating the 12b-1 Plan. Under
each of the 12b-1 Plans, reimbursements for distribution
expenses may not exceed .25% (annualized) of the relevant Fund's
average daily net assets, excluding from such calculation,
however, all shares acquired via a transfer of assets from
customer accounts at The Bank of New York. These amounts may be
reduced pursuant to undertakings by the Distributor. Payments
for distribution expenses under the 12b-1 Plans are subject to
Rule 12b-1 under the 1940 Act. Except for expenses related to
telemarketing operations established for the BNY Hamilton Family
of Funds, it is presently contemplated that the Distributor will
not be reimbursed for any of its overhead expenses by a Fund
under its 12b-1 Plan.
Each 12b-1 Plan provides that if in any month the Distributor is
due more monies than are immediately payable because of the
percentage limitation described above, the unpaid amount will be
'carried forward' from month to month while the 12b-1 Plan is in
effect until such time as it may be paid. Any 'carried forward'
amounts will not be payable beyond the fiscal year during which
the amounts are accrued. No interest, carrying or other finance
charge is borne by a Fund with respect to amounts 'carried
forward.'
FEE WAIVERS
Except as noted in this Prospectus and the Statement of
Additional Information, the Funds' service contractors bear all
expenses in connection with the performance of their services
and each Fund bears the expenses incurred in its operation. From
time to time during the course of the Funds' fiscal year, each
of the Administrator and the Adviser may voluntarily elect not
to receive payment of fees under their respective agreements
described above and/or to assume certain expenses of a Fund
while retaining the ability to be reimbursed by a Fund for such
amounts prior to the end of the fiscal year. This will have the
effect of increasing yield to investors at the time such fees
are not received or amounts are assumed by the Administrator or
the Adviser and decreasing yield when such fees or amounts are
reimbursed to the Administrator or the Adviser. See the Fee
Table for each Fund.
33
<PAGE>
PURCHASE OF SHARES
The following table summarizes the available methods of
investment in each of the Funds along with their respective
minimum investment requirements. Unless otherwise noted, the
investment method shown in the table is applicable to each
Fund described in this Prospectus.
<TABLE>
<CAPTION>
MINIMUM INVESTMENT REQUIRED
----------------------------------
INITIAL ADDITIONAL
TYPE OF INVESTMENT INVESTMENT INVESTMENT
-------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
Regular Account............................................... $ 2,000 $ 100
Regular Account with Automatic Investment Program............. $ 500 $ 100
Regular Accounts for employees and retirees of The Bank of New
York and its affiliates, and employees of each of the
Administrator, Distributor and their affiliates (1)......... $ 500 $ 40
Individual Retirement Account ('IRA') (2)..................... $ 250 $ 40
</TABLE>
--------------------------------------------
(1) Available exclusively for employees and retirees of The Bank
of New York and its affiliates and for the employees of BNY
Hamilton Distributors, Inc., and their affiliates. The
employees of The Bank of New York and its affiliates may
make investments through payroll deduction.
(2) Not available for the Intermediate New York Tax-Exempt Fund.
Shares of any of the Funds may be purchased at the net asset
value per share as described in the tables on pages 35-36.
INITIAL INVESTMENTS
Orders for purchases of a Fund's shares received by 4:00 P.M.
(New York City time) on any Business Day and transmitted to the
Fund's transfer agent by 5:00 P.M. (New York City time) will be
based on the next determined net asset value. (For purposes of
this Prospectus, 'Business Day' is defined to mean any day on
which both the New York Stock Exchange and the Custodian are
open for business.) Investors will begin to earn dividends on
the next Business Day after receipt of the purchase order. On
those days when the New York Stock Exchange or the Custodian
closes early as a result of such day being a partial holiday or
otherwise, the right is reserved to advance the time on that day
by which purchase and redemption requests must be received.
Prospective investors may purchase a Fund's shares by check, by
federal funds wire, by bank wire, or by direct deposit.
Additional investments may also be made through an Automatic
Investment Program. See the tables on the following pages.
34
<PAGE>
METHOD OF PURCHASE FOR INITIAL INVESTMENTS
BY CHECK
-- Complete and sign a New Account Application and mail it,
together with a check payable to the specific Fund, to: BNY
Hamilton Funds, Department L-1685, Columbus, Ohio
43260-1685.
-- The Funds will not permit shares purchased by check to be
redeemed until payment for the purchase has been collected,
which may take up to ten (10) Business Days after purchase.
-- Purchases by check must be payable in United States dollars
and drawn on United States banks. THE FUNDS WILL NOT ACCEPT
THIRD-PARTY CHECKS.
BY FEDERAL FUNDS WIRE
-- An investor desiring to purchase shares by wire should call
the transfer agent at 1-800-952-6276 and place a purchase
order.
-- Have your bank wire federal funds to the BNY Hamilton
Funds' bank account (see below). In order to ensure prompt
receipt by a Fund of a federal funds wire, an investor
should take the following steps:
A. Instruct your bank to wire the specified amount to the
specific Fund's account as follows (be sure to have your bank
include the name of the specific Fund selected, and state
that the wire is for a new account):
The Bank of New York
New York, NY 10286
ABA #021000018
BNY Hamilton Funds
DDA #8900275847
Attn: (specific Fund selected)
Ref: (your account number, your account
name and taxpayer identification number)
B. Complete the New Account Application and mail it to the
address shown in 'By Check' above.
-- Federal funds purchase orders will only be accepted on
Business Days as defined herein. Your bank may charge a
service fee for wiring funds.
BY BANK WIRE
-- Follow the same procedure outlined under 'By Federal Funds
Wire' above. Your bank may charge a service fee for wiring
funds.
BY DIRECT DEPOSIT
-- In certain circumstances, employees and retirees of The
Bank of New York and its affiliates may purchase Fund
shares by having payments automatically deposited into
their specific Fund account.
-- Call 1-800-4BNY-FND (1-800-426-9363) for details.
35
<PAGE>
METHOD OF PURCHASE FOR ADDITIONAL INVESTMENTS
BY CHECK
-- Make check payable to the specific Fund and send to: BNY
Hamilton Funds, P.O. Box 0806, Newark, New Jersey
07101-0806. If possible, please include the tear-off
payment stub that accompanies a Fund's confirmation
statement.
BY FEDERAL FUNDS WIRE
-- Have your bank wire federal funds according to the
instructions at left, except the wire should state that it
is an additional investment.
-- Please include your account number.
BY AUTOMATIC INVESTMENT PROGRAM
-- You may arrange, through the Automatic Investment Program,
for systematic purchases of Fund shares (minimum of $100)
by direct debit from your account at any domestic financial
institution that is an Automated Clearing House member.
-- To elect this feature, please complete Section 7 on the New
Account Application.
-- See Purchase of Shares-Automatic Investment Program or Call
1-800-4BNY-FND (1-800-426-9363) for further details on this
investment option.
BY BANK WIRE
-- The procedure is identical to 'By Federal Funds Wire'
above.
BY DIRECT DEPOSIT
-- Call 1-800-4BNY-FND (1-800-426-9363) for details.
-- Additional purchases will be processed in accordance with
your instructions.
AUTOMATIC INVESTMENT PROGRAM
You may arrange, through the Automatic Investment Program, for
systematic investments in your Fund account(s) in amounts of
$100 or more by direct debit from your account at the financial
institution designated by you on the new account application. At
your option, your checking, NOW or bank money market account
designated by you will be debited in the specified amount, and
Fund shares will be purchased, once a month, on either the first
or fifteenth day, or twice a month on both days. Only accounts
maintained at a domestic financial institution which permits
automatic withdrawals and is an Automated Clearing House member
are eligible.
The Automatic Investment Program enables shareholders to invest
a fixed dollar amount at predetermined intervals, an investment
strategy known as 'dollar cost averaging'. By applying this
technique consistently over time, investors usually purchase
more shares during periods of low share prices and fewer shares
as share prices increase. Of course, you may also implement
dollar cost averaging on your own initiative or through other
entities.
36
<PAGE>
To be effective, dollar cost averaging should be carried out
consistently for a sustained period of time. You should
understand, however, that purchases made through the Automatic
Investment Program will be made by the Fund without regard to
share price on the day of investment or to market trends. In
addition, while you may find dollar cost averaging to be
beneficial, it will not prevent a loss if you ultimately redeem
your shares at a price that is lower than their purchase price.
You may cancel this privilege or change the amount of purchase
at any time by mailing written notification to:
BNY Hamilton Funds
Department L-1685
Columbus, OH 43260-1685
Notification will be effective three business days following
receipt. The Fund may modify or terminate this privilege at any
time or charge a service fee, although no such fee currently is
contemplated.
OTHER PURCHASE INFORMATION
Investors may purchase Equity Income Fund or Intermediate
Government Fund shares, or a combination of those two Funds, in
increments of 10% through an individual retirement account made
available by BNY Hamilton Funds, Inc., as described in the
Minimum Investment Required table earlier in this section.
Please refer to a 'BNY Hamilton Funds Individual Retirement
Account' kit for details, which you may obtain by calling
1-800-4BNY-FND (1-800-426-9363). Investors are also advised to
consult with their own legal counsel or tax adviser regarding
these investments.
In the interest of economy and convenience and because of its
operating procedures, a Fund will not issue certificates
representing ownership of its shares. All shares purchased will
be confirmed to you and credited to your account on the specific
Fund's books maintained by the transfer agent. You will have the
same rights and ownership with respect to such shares as if
certificates had been issued.
To assure that checks are collected by a Fund, withdrawals of
investments made by check will not be permitted until payment
for the purchase has been received, which may take up to ten
(10) Business Days after the date of purchase. A Fund will
charge a $15.00 processing fee for checks returned unpaid. This
charge may be deducted from the account of the investor that
requested the purchase. In addition, you may be prohibited or
restricted from making future purchases in any of the Funds.
Investors may also invest in any of the Funds by purchasing
shares through registered broker-dealers, which are required to
effect the transaction at the net asset value next determined
after receipt of the order by the broker-dealer and are required
to transmit such orders promptly to the specific Fund.
Broker-dealers who make purchases for their customers may charge
a fee for such services.
37
<PAGE>
Federal regulations require that investors provide a social
security or taxpayer identification number upon opening or
re-opening an account. Investors should refer to the New Account
Application for further information about this requirement.
REDEMPTION OF SHARES
Investors may withdraw all or any portion of the shares in their
account at any time by redeeming such shares. INVESTORS SHOULD
BE AWARE THAT, UNLIKE A SAVINGS ACCOUNT, A REDEMPTION IN ANY OF
THE FUNDS IS A TAXABLE EVENT. CONSULT YOUR TAX ADVISER FOR THE
POTENTIAL TAX SITUATIONS THAT MAY ARISE AS A RESULT OF
A REDEMPTION OF SHARES.
METHOD OF REDEMPTION
A Fund will redeem shares at the next determined net asset value
per share. A Fund's net asset value per share will be determined
on each Business Day at 4:00 P.M. (New York City time). If an
investor has specifically requested that share certificates be
issued, certificates representing a specific Fund's shares being
redeemed must be returned with the redemption request. The Funds
recommend that share certificates be sent via registered mail.
The value of the shares redeemed may be more or less than their
original cost, depending upon a Fund's then-current net asset
value.
BY MAIL
-- Send your request to: BNY Hamilton Funds, Department
L-1685, Columbus, Ohio 43260-1685. (Be sure to include the
name of the specific Fund.)
BY TELEPHONE (1)
-- This option must have previously been elected. Call the
specific Fund and request that the redemption proceeds be
mailed to the address listed in the specific Fund's account
records or wired to the investor's bank as listed in the
specific Fund's records.
BY SYSTEMATIC WITHDRAWAL
-- YOUR ACCOUNT MUST HAVE A VALUE OF $10,000 OR MORE.
-- The record owner of shares may request a declining balance
withdrawal, a fixed dollar withdrawal, a fixed share
withdrawal, or a fixed percentage withdrawal (based on the
current value of shares in the account) on a monthly,
quarterly, semi-annual or annual basis.
-- Further information about establishing a Systematic
Withdrawal Plan may be obtained by calling 1-800-426-9363.
BY DRAFT (2)
-- Redemption checks may be made payable to the order of any
person in the amount of $500 or more. THIS REDEMPTION
OPTION IS NOT AVAILABLE TO INVESTORS IN THE EQUITY INCOME
FUND.
-- Redemption checks are free, but the transfer agent will
impose a fee for stopping payment of a redemption check at
your request or if the transfer agent cannot honor the
redemption check because of insufficient funds or any other
valid reason.
-- SHARES FOR WHICH CERTIFICATES HAVE BEEN ISSUED MAY NOT BE
REDEEMED BY REDEMPTION CHECK.
38
<PAGE>
--------------------------------------------
(1) In times of drastic market conditions, the telephone
redemption option may be difficult to implement. If you
experience difficulty in making a telephone redemption, you
may make your request by regular mail or express mail and it
will be implemented at the net asset value per share next
determined after the request is received.
(2) This privilege may be modified or terminated at any time by
the Intermediate Government Fund or the Intermediate New
York Tax-Exempt Fund upon notice to investors.
Each Fund will redeem its shares at the net asset value next
determined after the request is received in good order. 'Good
order' means that the request to redeem shares includes the
following documentation: (i) a letter of instruction or a stock
assignment containing the account number and taxpayer
identification number(s) of the shareholder(s), specifying the
number of shares or dollar amount to be redeemed and signed by
all registered owners of the shares in the exact names in which
they are registered; (ii) any required signature guarantees, see
Further Redemption Information below; and (iii) other supporting
legal documents, if required, in the case of estates, trusts,
guardianships, custodianships, corporations, pension and
profit-sharing plans and other organizations. The Funds may
adopt certain procedures as described in 'Redemption of Shares'
in the Statement of Additional Information to verify information
provided with a redemption request. Shareholders who are
uncertain of the requirements for redemption should consult with
a BNY Hamilton Funds, Inc. representative by calling
1-800-952-6276.
DISCRETIONARY REDEMPTION BY A FUND
If the value of a shareholder's holdings falls below $500
because of a redemption of shares, the shareholder's remaining
shares may be involuntarily redeemed after 60 days' written
notice, unless the value of the account is increased to $500 or
more.
FURTHER REDEMPTION INFORMATION
Normally, a Fund will make payment for all shares redeemed under
these procedures within one Business Day of receipt of the
request, but in no event will payment be made more than three
(3) Business Days after receipt of a redemption request in good
order. Notwithstanding the foregoing, a Fund will not make
payments to investors redeeming shares that were purchased by
check until payment for the purchase has been collected, which
may take up to ten (10) Business Days after the date of
purchase. A Fund reserves the right to suspend redemption or
postpone the date of redemption at times when the New York Stock
Exchange is closed or when trading on the Exchange is
restricted, under certain emergency circumstances and during
periods when such suspension is permitted by the Securities and
Exchange Commission. See the Statement of Additional
Information; 'Redemption of Shares--Further Redemption
Information'.
To change the address listed in a specific Fund's account
records or the name of the commercial bank or account designated
to receive redemption proceeds, an investor must send a written
request to: BNY Hamilton Funds, Department L-1685, Columbus,
Ohio 43260-1685. Such requests must be signed by each
shareholder, and, for requests to change the bank or account
designated to receive redemption proceeds, each signature must
be guaranteed.
39
<PAGE>
EXCHANGE OF SHARES
An investor may exchange shares between any of the Funds or
between shares of the Funds and BNY Hamilton Money Fund (not
included herein) without charge. An exchange may be made so
long as the shares to be exchanged have a value of at least
$500. Accordingly, when establishing a NEW account by exchange,
shares of the Fund being exchanged must have a value at least
equal to the minimum initial investment required by the fund
into which the exchange is being made (currently $2,000 for
each of the Funds described in this Prospectus and the
'Hamilton Classic Shares' of BNY Hamilton Money Fund). Shares
will be exchanged on the basis of relative net asset value per
share.
Investors who wish to exchange their shares for shares of BNY
Hamilton Money Fund will not be credited for any sales charge
previously paid. Exchanges are in effect redemptions from one
Fund and purchases of another Fund and the usual purchase and
redemption procedures and requirements are applicable to
exchanges. See 'Purchase of Shares' and 'Redemption of Shares'.
Before making any exchange, investors are advised to review the
sections of this Prospectus pertaining to the specific Fund or
the appropriate sections of the Prospectus for BNY Hamilton
Money Fund into which the exchange is being made.
Since an exchange is essentially a redemption from a specific
Fund, shareholders who exchange shares in any of the Funds for
shares in any of the other Funds may recognize a capital gain or
loss for tax purposes. The Funds reserve the right to
discontinue, alter or limit the exchange privilege at any time.
At least 60 days' notice will be given to shareholders of any
material modification or termination. The exchange privilege
will be honored only in those states where such exchanges are
legally permissible.
DIVIDENDS AND DISTRIBUTIONS
EQUITY INCOME FUND
All of the Equity Income Fund's net investment income will be
declared as dividends monthly and paid monthly within five (5)
Business Days after the end of the month. Dividends and
distributions will be payable to shareholders of record at the
time of declaration. The Directors may revise the Equity Income
Fund's dividend policy without shareholder action.
INTERMEDIATE GOVERNMENT FUND AND INTERMEDIATE NEW YORK
TAX-EXEMPT FUND
All of the Intermediate Government Fund and the Intermediate New
York Tax-Exempt Fund's net investment income will be declared as
dividends daily and paid monthly within five (5) Business Days
after the end of the month. Dividends and distributions will be
payable to shareholders of record at the time of declaration.
The net investment income of the Intermediate Government Fund
and the Intermediate New York Tax-Exempt Fund for each Business
Day will be determined immediately prior to the determination of
net asset value. Net investment income for other days will be
determined on the prior Business Day. Shares of the Intermediate
Government Fund and the Intermediate New York Tax-Exempt Fund
will begin earning dividends on the next Business Day after the
date of the investment. See Purchase of
40
<PAGE>
Shares and Redemption of Shares. The Directors may revise the
dividend policy of these Funds without shareholder action.
Each of the Funds will distribute substantially all of any
taxable net long-term gains realized on investments to
shareholders once annually in accordance with requirements under
the Code, as amended, and other applicable statutory and
regulatory requirements.
DIVIDEND AND GAIN DISTRIBUTION OPTIONS
Each Fund will pay dividends and gain distributions, if any, in
accordance with the current option on each shareholder's
account. If a shareholder does not select a dividend and gain
option, dividends and gains will be paid in additional shares.
Shareholders may choose to receive dividends in cash and any
gain distributions in shares or receive both dividends and any
gain distributions in cash. A shareholder can change the option
selected on his or her account by notifying the transfer agent
in writing at least five (5) Business Days prior to a dividend
or gain distribution payment date. In the event that a
shareholder redeems all shares in an account between the record
date and the payable date, the value of the gain distributions
declared and payable will be paid in cash regardless of the
existing election.
NET ASSET VALUE
Net asset value per share for each Fund will be determined by
subtracting from the value of the specific Fund's total assets
the amount of its liabilities and dividing the remainder by the
number of its outstanding shares, rounding to the nearest one
cent. Expenses, including the fees payable to the Adviser and
the Administrator, are accrued daily. See 'Net Asset Value' in
the Statement of Additional Information for more information on
valuation of portfolio securities for each Fund.
Each Fund will compute its net asset value once daily on Monday
through Friday, except that net asset value will not be computed
on any day in which no orders to purchase or redeem shares have
been received or on the holidays listed under Net Asset Value in
the Statement of Additional Information. Each Fund computes net
asset value as of the close of regular trading of the New York
Stock Exchange (normally 4:00 P.M., New York City time).
ORGANIZATION
BNY Hamilton Funds, Inc. is an open-end management investment
company that was organized as a Maryland corporation on May 1,
1992. As noted under Investment Restrictions, the Equity Income
Fund and the Intermediate Government Fund are diversified
series of, and the Intermediate New York Tax-Exempt Fund is a
non-diversified series of, BNY Hamilton Funds, Inc.
41
<PAGE>
The Articles of Incorporation of BNY Hamilton Funds, Inc.
currently permit the company to issue 20,000,000,000 shares of
common stock, par value $.001 per share, which have been
allocated among the Funds described in this Prospectus as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
FUND COMMON STOCK AUTHORIZED
------------------------------------------------------------------ ----------------------------
<S> <C>
Equity Income Fund................................................ 200,000,000
Intermediate Government Fund...................................... 200,000,000
Intermediate New York Tax-Exempt Fund............................. 200,000,000
</TABLE>
BNY Hamilton Funds, Inc. currently consists of four series,
although references to the Funds throughout this Prospectus
relate only to BNY Hamilton Equity Income Fund, BNY Hamilton
Intermediate Government Fund and BNY Hamilton Intermediate New
York Tax-Exempt Fund. The Directors may increase the number of
shares each Fund is authorized to issue without the approval of
shareholders. The Directors also have the power to designate one
or more series or classes of shares of common stock and to
classify and reclassify any unissued shares with respect to such
series or classes.
Shareholders of each series of BNY Hamilton Funds, Inc. are
entitled to one vote for each share and to the appropriate
fractional vote for each fractional share. There is no
cumulative voting and no shares have preemptive or conversion
rights. Shares of each Fund must be fully-paid upon issuance and
thereafter will be non-assessable by BNY Hamilton Funds, Inc.
and the specific Fund to which they belong. None of the series
of BNY Hamilton Funds, Inc. intends to hold meetings of
shareholders annually. The Directors may call meetings of
shareholders for action by shareholder vote as may be required
by the 1940 Act, or as permitted by the Articles of
Incorporation or Bylaws.
BNY Hamilton Funds, Inc., if requested to do so by the holders
of at least 10% of the shares of all series aggregated as a
class, will call a meeting of shareholders for the purpose of
voting upon the question of the removal of a director or
directors and will assist in communications with other
shareholders as required by Section 16(c) of the 1940 Act. For
further organization information, including certain shareholder
rights, see Description of Shares in the Statement of Additional
Information.
TAXES
The following discussion of federal income tax consequences is
based on the United States federal tax laws in effect on the date
of this Prospectus. These laws and regulations are subject to
change by legislative, judicial or administrative action.
Investors are urged to consult their own tax advisers with
respect to specific questions as to federal taxes and with
respect to the applicability of state, local or foreign taxes.
See Taxes in the Statement of Additional Information. Annual
statements as to the federal tax status of distributions, and for
the Intermediate New York Tax-Exempt Fund, as to the portion of
the Fund's distribution that is attributable to interest that is
exempt from New York State and New York City personal income tax,
if applicable, will be mailed to shareholders shortly after the
end of the year.
42
<PAGE>
FEDERAL INCOME TAXES
Each Fund intends to qualify as a 'regulated investment company'
under Subchapter M of the Code. As a regulated investment
company, each Fund will not be subject to federal income taxes
on the net investment income and capital gains distributed to
shareholders, provided that each Fund distributes at least 90%
of its net investment income and realized net short-term capital
gains in excess of net long-term capital losses.
UNLESS A SHAREHOLDER INCLUDES HIS OR HER TAXPAYER IDENTIFICATION
NUMBER (SOCIAL SECURITY NUMBER FOR INDIVIDUALS) ON THE ACCOUNT
APPLICATION AND CERTIFIES THAT HE OR SHE IS NOT SUBJECT TO
BACKUP WITHHOLDING, A FUND MAY BE REQUIRED TO WITHHOLD AND REMIT
TO THE U.S. TREASURY 31% OF TAXABLE DISTRIBUTIONS AND OTHER
REPORTABLE PAYMENTS TO THE SHAREHOLDER. SHAREHOLDERS SHOULD BE
AWARE THAT, UNDER REGULATIONS PROMULGATED BY THE INTERNAL
REVENUE SERVICE, A FUND MAY BE FINED UP TO $50 ANNUALLY FOR EACH
ACCOUNT FOR WHICH A CERTIFIED TAXPAYER IDENTIFICATION NUMBER IS
NOT PROVIDED. IN THE EVENT THAT SUCH A FINE IS IMPOSED WITH
RESPECT TO ANY UNCERTIFIED ACCOUNT IN ANY YEAR, A CORRESPONDING
CHARGE MAY BE MADE AGAINST THAT ACCOUNT.
EQUITY INCOME FUND AND INTERMEDIATE GOVERNMENT FUND
Distributions from net investment income and net realized
short-term capital gains in excess of net long-term capital
losses will be taxable to shareholders of the Equity Income Fund
and the Intermediate Government Fund as ordinary income, whether
such distributions are taken in cash or reinvested in additional
shares. Only a portion of such dividends to corporate
shareholders of the Equity Income Fund will be eligible for the
dividends-received deduction. Such distributions will not be
eligible for the dividends-received deduction to shareholders of
the Intermediate Government Fund.
Distributions of net long-term capital gains in excess of net
short-term capital losses will be taxable to shareholders of the
Equity Income Fund and the Intermediate Government Fund as
long-term capital gains regardless of how long the shareholders
have held their shares and regardless of whether taken in cash
or reinvested in additional shares. Long-term capital gain
distributions to corporate shareholders will not be eligible for
the dividends-received deduction.
INTERMEDIATE NEW YORK TAX-EXEMPT FUND
The Intermediate New York Tax-Exempt Fund intends to meet the
requirements of the Code so that net interest income on
obligations that are exempt from federal income tax and held by
the Intermediate New York Tax-Exempt Fund when distributed to
shareholders, and designated by the Intermediate New York
Tax-Exempt Fund as 'exempt-interest dividends', will be exempt
from federal income tax in the hands of shareholders.
Distributions from the Intermediate New York Tax-Exempt Fund's
taxable net investment income or from net realized short-term
gains will be taxable to shareholders as ordinary income,
whether received in cash or in additional shares. Distributions
will not, generally, be eligible for the dividends-received
deduction. Distributions of net capital gains, i.e., the excess
of net long-term capital gains over net short-term capital
losses, will be taxable to shareholders as long-term capital
gains, whether received in cash or additional shares, regardless
of how long a shareholder has held the shares.
43
<PAGE>
Shareholders are urged to consult their tax advisers concerning
the effect of federal income taxes in their individual
circumstances. Under the Code, interest on indebtedness incurred
or continued to purchase or carry shares will not be deductible
to the extent that the interest relates to exempt-interest
dividends received by the shareholder. In addition, persons who
may be 'substantial users' (or 'related persons' of substantial
users) of facilities financed by industrial development bonds or
private activity bonds should consult their tax advisers before
purchasing shares of the Intermediate New York Tax-Exempt Fund.
A portion of the exempt-interest dividends distributed by the
Intermediate New York Tax-Exempt Fund may be treated as a
preference item for purposes of the federal alternative minimum
tax. Moreover, exempt-interest dividends paid to a corporate
shareholder by the Intermediate New York Tax-Exempt Fund
(whether or not from interest on private activity bonds) will be
taken into account in determining its federal alternative
minimum tax and certain other taxes.
NEW YORK STATE AND NEW YORK CITY TAXES
(INTERMEDIATE NEW YORK TAX-EXEMPT FUND)
Shareholders who are generally subject to New York State and New
York City personal income tax on dividends will not be subject
to such taxes on distributions from the Intermediate New York
Tax-Exempt Fund to the extent that such distributions qualify as
exempt-interest dividends that are attributable to federally
tax-exempt obligations of the State of New York, its
subdivisions, agencies and instrumentalities. To the extent that
the Intermediate New York Tax-Exempt Fund's distributions are
derived from other income, including long-term or short-term
capital gains, such distributions will not be exempt from New
York State or New York City personal income taxes.
Dividends of the Intermediate New York Tax-Exempt Fund are not
excluded in determining New York State and New York City
franchise taxes on corporations and financial institutions.
Except during temporary defensive periods, the Intermediate New
York Tax-Exempt Fund will retain at least 80% of the value of
its net assets in debt obligations which are exempt from federal
income tax and New York State and New York City personal income
taxes.
ADDITIONAL INFORMATION
Each Fund will send to its shareholders annual and semi-annual
reports. The financial statements appearing in the annual reports
will be audited by independent auditors. Shareholders will also
receive confirmations of each purchase and redemption and monthly
statements, reflecting all account activity, including dividends
reinvested in additional shares or credited as cash. Written
inquiries about any of the Funds should be sent to BNY Hamilton
Funds, Department L-1685, Columbus, Ohio 43260-1685.
Any of the Funds may make historical performance information
available and may advertise yield and effective yield as those
terms are defined in the Statement of Additional Information
under Performance Data. All performance figures will be based on
historical earnings and are not intended to indicate future
performance. Performance information may be obtained by calling
the Distributor at 1-800-426-9363.
44
<PAGE>
APPENDIX
TAX-FREE VS. TAXABLE INCOME
A COMPARISON OF TAXABLE AND TAX-FREE YIELDS
FOR NEW YORK STATE RESIDENTS
NEW YORK STATE RESIDENT
<TABLE>
<CAPTION>
TAX-FREE YIELDS
SINGLE JOINT COMBINED -------------------------------------------------
RETURN RETURN EFFECTIVE 4% 4.5% 5% 5.5% 6% 6.5% 7%
---------------- ----------------- --------- ---- ---- ---- ---- ----- ----- -----
TAXABLE EQUIVALENT YIELDS
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 40,100 21.06 5.07 5.70 6.33 6.97 7.60 8.23 8.87
$ 0- 24,000 21.06 5.07 5.70 6.33 6.97 7.60 8.23 8.87
$ 40,101- 96,900 33.13 5.98 6.73 7.48 8.22 8.97 9.72 10.47
$ 24,001- 58,150 33.13 5.98 6.73 7.48 8.22 8.97 9.72 10.47
$ 96,901-147,700 35.92 6.24 7.02 7.80 8.58 9.36 10.14 10.92
$ 58,151-121,300 35.92 6.24 7.02 7.80 8.58 9.36 10.14 10.92
$147,701-263,750 40.56 6.73 7.57 8.41 9.23 10.09 10.94 11.78
$121,301-263,750 40.56 6.73 7.57 8.41 9.23 10.09 10.94 11.78
$263,751- 43.90 7.13 8.02 8.91 9.80 10.70 11.59 12.48
$263,751- 43.90 7.13 8.02 8.91 9.80 10.70 11.59 12.48
</TABLE>
To compare the yield of a taxable security with the yield of a
tax-free security, find your taxable income and read across. These
tables incorporate current federal and applicable New York State
income tax rates for 1996 and assume that all income would
otherwise be taxable at the investor's highest tax rates. Yield
figures are only provided as examples.
Based upon net amount subject to federal income tax after itemized
deductions and exemptions. These tables do not reflect other
possible tax factors such as the alternative minimum tax,
additional itemized deductions other than the New York State
income tax, personal exemptions, the phase out of exemptions
and/or itemized deductions and the possible partial disallowance
of deductions. Consequently, investors are urged to consult their
own tax advisers in this regard.
45
<PAGE>
BNY HAMILTON
FUNDS
Prospectus
April 29, 1996
(As revised
July 15, 1996)
o EQUITY INCOME FUND
o INTERMEDIATE
GOVERNMENT FUND
o INTERMEDIATE NEW
YORK TAX-EXEMPT
FUND
[LOGO]
BNY HAMILTON
FUNDS
PLEASE DO NOT REMOVE THE MAILING LABEL.
We need this information to make certain that your name is correctly
maintained in all our files--and in order not to send you
inappropriate mail. If there is an error in your name and address, please
correct the label and return in the enclosed courtesy envelope. Thank
you.
BNY-0037
