<PAGE>
As filed with the Securities and Exchange Commission on April 4, 2000
REGISTRATION NO. 33-47703
811-6654
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 16 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 19
(CHECK APPROPRIATE BOX OR BOXES)
BNY HAMILTON FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
3435 Stelzer Road 43219-3035
Columbus, Ohio (Zip Code)
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (614) 470-8000
Copy to:
Nimish Bhatt John E. Baumgardner, Jr.
3435 Stelzer Road Sullivan & Cromwell
Columbus, Ohio 43219-3035 125 Broad Street
(Name and Address of Agent for Service) New York, New York 10004
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the
effective date of this Registration Statement. It is proposed that this filing
will become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/X/ on April 25, 2000 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2), of Rule 485.
If appropriate, check the following box:
/X/ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933, pursuant to Rule 24f-2 of the Investment Company Act of
1940. Registrant's Rule 24f-2 Notice for the fiscal year ended December 31,
1999, was filed with the Commission on March 9, 2000.
Total Number of Pages
----------
Exhibit Number on Page
----------
<PAGE>
BNY
HAMILTON
[LOGO]
PROSPECTUS
MONEY MARKET FUNDS--
HAMILTON SHARES o MONEY FUND
o TREASURY MONEY FUND
April 25, 2000
BNY
HAMILTON
FUNDS
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or said whether the information in this
prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a crime.
<PAGE>
ABOUT THE FUNDS
4 BNY Hamilton Money Fund
8 BNY Hamilton Treasury Money Fund
ACCOUNTS POLICIES
12 Daily NAV Calculation
12 Distributions and Tax Considerations
14 Investment Adviser
14 Portfolio Manager
For More Information
Back Cover
<PAGE>
AN INTRODUCTION TO BNY HAMILTON FUNDS
The BNY Hamilton Funds aim for high returns with consistent performance over
many market cycles.
The BNY Hamilton Money Funds are designed for investors who seek stability of
principal. They are a valuable component of most portfolios and well-suited for
investing money that may be needed in the near future. The funds take extra
measures to provide for safety and liquidity, including:
o avoiding investing in split-rated securities--securities that are rated
higher by one rating agency than another
o limiting the average dollar-weighted maturity of their portfolios to 60 days
rather than the 90 days permitted.
RISKS OF MUTUAL FUND INVESTING
Investments in mutual funds are not bank deposits, nor are they guaranteed by
the Federal Deposit Insurance Corporation or any other government agency. It is
important to read all the disclosure information provided and to understand that
you could lose money by investing in any of these funds.
<PAGE>
MONEY FUND
CUSIP NUMBER: [LOGO]
HAMILTON SHARES
05561M101
INVESTMENT OBJECTIVE
The Fund seeks as high a level of current income as is consistent with
preservation of capital and maintenance of liquidity by investing principally in
high-quality money market instruments.
PORTFOLIO MANAGEMENT STRATEGY
The Fund seeks to maintain a stable $1 share price and invests exclusively in
debt securities within the highest short-term credit rating categories and their
unrated equivalents. The maximum allowable maturity for any individual holding
is 397 days, and the Fund maintains an average dollar-weighted maturity of 90
days or less. The Fund may invest in debt securities that meet these criteria
and are issued by U.S. and foreign issuers, including:
o corporations
o banks
o governments
o U.S. agencies, states, and municipalities
The Fund may also invest in money market securities issued by multinational
organizations such as the World Bank.
The Fund's investments are diversified through broad exposure to fixed- and
variable-rate securities across issuers and sectors. The Fund also invests in
repurchase agreements, which are contracts to sell and buy back a given security
at a specific time and price, to enhance yields.
4 BNY Hamilton Money Fund
<PAGE>
MAIN INVESTMENT RISKS
The value of money market securities is most affected by short-term interest
rates. An extreme rise in short-term interest rates could substantially decrease
the value of the Fund's investments and jeopardize its $1 share price.
The portfolio manager's investment strategies may not work out as planned, and
the Fund could underperform its peers. Any of the money market securities held
by the Fund could be downgraded in credit rating below minimum standards or go
into default.
An investment in the Fund is not insured or guaranteed by the FDIC or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
Fund.
Money Funds and the AAA/Aaa Rating
All money market funds that utilize amortized costs must comply with the SEC's
Rule 2a-7, which covers diversification standards, credit quality restrictions,
and maturity limits for individual securities and the portfolio as a whole.
In order to obtain the AAA/Aaa rating from Standard & Poor's and Moody's, money
market funds observe additional, more conservative investment guidelines. First,
the fund's weighted average maturity may not exceed 60 days. In addition --
To obtain Standard & Poor's AAA:
o Investments must have a minimum rating of A-1.
o Fifty percent of the fund's assets must be invested in securities with the
highest short-term credit rating--A-1+.
To obtain Moody's Aaa rating:
o Investments must have Moody's highest short-term credit rating--P-1.
BNY Hamilton Money Fund 5
<PAGE>
PAST PERFORMANCE
The following chart demonstrates the risk of investing in the Fund by showing
the year-to-year returns and pattern of price volatility. Returns for the Fund's
single best and single worst quarters suggest how widely performance has varied
over the short term. Past performance does not guarantee future performance.
Annual total returns (%) as of 12/31/99(1)
[BAR GRAPH]
3.03 4.02 5.84 5.30 5.47 5.41 5.03
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
93 94 95 96 97 98 99
Best quarter: Q2 '95 +1.46 Worst quarter: Q3 '93 +0.73
The table below presents the Fund's average annual returns over various periods.
Average annual total returns (%) as of 12/31/99(*)
Life
1 Year 5 Years of fund
- --------------------------------------------------------------------------------
Hamilton Shares(1) 5.03 5.41 4.77
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect as an investor
in the Fund. "Annual Operating Expenses" come out of fund assets, and are
reflected in the total return. Since these funds are "no-load", shareholders pay
no fees or out of pocket expenses.
Fee table (% of average net assets)
<TABLE>
<CAPTION>
Hamilton
Shares
- --------------------------------------------------------------------------------
<S> <C>
Shareholder Fees None
Annual Operating Expenses
- --------------------------------------------------------------------------------
Management fee 0.10
Servicing fee None
Other expenses 0.14
Total annual operating expenses 0.24
</TABLE>
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this information so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment*($)
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hamilton Shares 25 77 135 306
</TABLE>
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns and no change in operating expenses.
- --------------------------------------------------------------------------------
(1) Hamilton Shares commenced operations on 8/7/92.
6 BNY Hamilton Money Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance over the past five years (or since inception). Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended December 31, 1999 has been
audited by Ernst & Young LLP*, whose report, along with the Fund's financial
statement, is included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Per-Share Data ($)
- -------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00
Income from investment operations:
Net investment income 0.050 0.053 0.053 0.052 0.057
Less distributions:
Dividends from net investment income (0.050) (0.053) (0.053) (0.052) (0.057)
---------------------------------------------------------
Net asset value at end of period 1.00 1.00 1.00 1.00 1.00
---------------------------------------------------------
Total return 5.03 5.41 5.47 5.30 5.84
Ratios/Supplemental Data (%)
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 1,725,341 1,439,525 1,063,579 609,424 604,053
Ratio of expenses to average net assets 0.24 0.26 0.25 0.27 0.26
Ratio of net investment income to average net assets 4.92 5.25 5.34 5.17 5.67
</TABLE>
* KPMG LLP has audited the figures for 1997 and 1998.
Previous years' data were audited by Deloitte & Touche LLP.
BNY Hamilton Money Fund 7
<PAGE>
TREASURY MONEY FUND
CUSIP NUMBER: [LOGO]
HAMILTON SHARES
05561M705
INVESTMENT OBJECTIVE
The Fund seeks as high a level of current income as is consistent with
preservation of capital and maintenance of liquidity by investing solely in
short-term obligations of the U.S. Treasury and repurchase agreements fully
collateralized by obligations of the U.S. Treasury.
MANAGEMENT STRATEGY
The Fund seeks to maintain a stable $1 share price and invests exclusively in
securities backed by the full faith and credit of the U.S. government. These
securities include:
o Treasury bills
o Treasury notes
o Treasury bonds
o repurchase agreements fully collateralized by U.S. Treasury obligations
The maximum allowable maturity for any individual security is 397 days, and the
Fund maintains an average dollar-weighted maturity of 90 days or less.
In investing the Fund's assets, the portfolio manager seeks to take advantage of
the dynamics of short-term interest rates by actively managing the Fund's
average weighted maturity. The Fund may invest in repurchase agreements, which
are contracts to sell and buy back a given security at a specific time and
price, to enhance yields.
8 BNY Hamilton Treasury Money Fund
<PAGE>
MAIN INVESTMENT RISKS
The value of money market securities is most affected by short-term interest
rates. An extreme rise in short-term interest rates could substantially decrease
the value of the Fund's investments and jeopardize its $1 share price.
Since the fund invests only in U.S. Treasury obligations and repurchase
agreements based on them, its yield may lag other money market funds that invest
in higher-yielding securities with some credit risk. The portfolio manager's
investment strategies may not work out as planned, and the Fund could
underperform its peers.
An investment in the Fund is not insured or guaranteed by the FDIC or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
Fund.
Money Funds and the AAA/Aaa Rating
All money market funds that utilize amortized costs must comply with the SEC's
Rule 2a-7, which covers diversification standards, credit quality restrictions,
and maturity limits for individual securities and the portfolio as a whole.
In order to obtain the AAA/Aaa rating from Standard & Poor's and Moody's, money
market funds observe additional, more conservative investment guidelines. U.S.
Treasury obligations automatically meet the most stringent credit quality
requirements. In addition, the fund's weighted average maturity may not exceed
60 days.
BNY Hamilton TReasury Money Fund 9
<PAGE>
PAST PERFORMANCE
The following chart demonstrates the risk of investing in the Fund by showing
the year-to-year returns and pattern of price volatility. Returns for the Fund's
single best and single worst quarters suggest how widely performance has varied
over the short term. Past performance does not guarantee future performance.
Annual total returns (%) as of 12/31/99(1)
[BAR GRAPH]
5.25 4.79
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
98 99
Best quarter: Q3 '97 +1.34 Worst quarter: Q1 '99 +1.12
The table below presents the Fund's average annual returns over various periods.
<TABLE>
<CAPTION>
Average annual total returns (%) as of 12/31/99*
Life
1 Year of fund
- --------------------------------------------------------------------------------
<S> <C> <C>
Hamilton Shares(1) 4.79 5.11
</TABLE>
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect as an investor
in the Fund. "Annual Operating Expenses" come out of fund assets, and are
reflected in the total return. Since these funds are "no-load", shareholders pay
no fees or out of pocket expenses.
<TABLE>
<CAPTION>
Fee table (% of average net assets)
Hamilton
Shares
- --------------------------------------------------------------------------------
<S> <C>
Shareholder Fees None
Annual Operating Expenses
- --------------------------------------------------------------------------------
Management fee 0.10
Servicing fee None
Other expenses 0.18
Total annual operating expenses 0.28
</TABLE>
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this information so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment*($)
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Hamilton Shares 29 90 157 356
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns and no change in operating expenses.
- --------------------------------------------------------------------------------
1 Hamilton Shares commenced operations on 4/1/97.
10 BNY Hamilton Treasury Money Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance over the past five years (or since inception). Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended December 31, 1999 has been
audited by Ernst & Young LLP*, whose report, along with the Fund's financial
statement, is included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997(1)
<S> <C> <C> <C>
Per-Share Data ($)
- ----------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 1.00 1.00 1.00
- ----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.047 0.051 0.040
Less distributions:
Dividends from net investment income (0.047) (0.051) (0.040)
- ----------------------------------------------------------------------------------------------------------
Net asset value at end of period 1.00 1.00 1.00
- ----------------------------------------------------------------------------------------------------------
Total return (%) 4.79 5.25 4.02(2)
Ratios/Supplemental Data (%)
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 225,482 201,363 110,719
Ratio of expenses (after reduction) to average net assets 0.28 0.27 0.25(3)
Ratio of expenses (before reduction) to average net assets 0.28 0.28 0.33(3)
Ratio of net investment income (after reduction) to average net assets 4.69 5.09 5.29(3)
* Previous years' data were audited by KPMG LLP.
</TABLE>
- --------------------------------------------------------------------------------
(1) Hamilton Shares commenced operations on 4/1/97.
(2) Not annualized.
(3) Annualized.
BNY Hamilton Treasury Money Fund 11
<PAGE>
ACCOUNT POLICIES
DAILY NAV CALCULATION
Each fund calculates its net asset value per share (NAV) at 4:30 p.m eastern
time each business day (Monday through Friday), though they may not do so on a
day when no purchase or redemption orders are received. A business day is a day
on which the New York Stock Exchange is open and any other day during which
trading in the funds' portfolio securities could materially affect the fund's
NAV. The funds use the amortized cost method to value their securities.
Dividends and expenses accrue daily.
Purchase orders received before the regular close of the New York Stock Exchange
will be executed at the offering price calculated at that day's close.
WIRE ORDER PROCESSING
Wire order processing services for direct investors will be provided by the
transfer agent. Shareholder organizations will provide similar services for
their customers.
MONTHLY STATEMENTS
Shareholders receive monthly statements, reflecting all account activity,
including dividends reinvested in additional shares or credited as cash.
Shareholders will also receive confirmations of each purchase, exchange or
redemption.
DISTRIBUTIONS AND TAX CONSIDERATIONS
Net investment income for Hamilton Shares of each fund will be determined
immediately before calculation of NAV each business day. Hamilton Shares will
begin earning dividends on the first business day their purchase is effective.
Net investment income for Hamilton Shares of each fund will be declared as
dividends daily and paid monthly within five business days after the end of the
month. Dividends and distributions will be payable to shareholders of record at
the time of declaration. Each fund automatically pays distributions in the form
of additional fund shares. Notify the transfer agent in writing to:
o choose to receive distributions in cash
o change the way you currently receive
distributions
Type of Distribution Federal Tax Status
Dividends from net ordinary income
investment income
Short-term capital ordinary income
gains
Your taxable income is the same either way. If you choose to receive
distributions in cash, and the checks are either returned as undeliverable or
left uncashed for six months, your future distributions will be reinvested in
your fund, and uncashed checks will be cancelled and reinvested at the fund's
share price as of the day of cancellation.
The funds do not expect to realize long-term capital gains or losses.
Distributions from the funds are expected to be primarily ordinary income from
dividends.
The funds issue detailed annual tax information statements for each investor,
recording all distributions and redemptions for the preceding year. Any
investors who do not provide a valid Social Security or taxpayer identification
number to the funds may be subject to federal backup withholding tax and charges
against their accounts related to fines.
You should consult your tax adviser about your own particular tax situation.
12 Account Policies
<PAGE>
PURCHASING AND REDEEMING
HAMILTON SHARES
MINIMUM INVESTMENT REQUIREMENTS
Initial Investment
$1,000,000
Clients of the Bank of New York and other institutions that have entered into an
agreement with the adviser may purchase and redeem shares of these funds. You
should contact your financial institution for detailed instructions and
additional policies.
Fund shares are redeemed at the next NAV per share calculated after the transfer
agent receives the purchase order. The funds do not impose any fee for direct
purchase or redemption orders, but broker-dealers may charge a fee for these
services. Payments must be in U.S. dollars. Purchases made by check will not be
redeemed until the purchase check clears, which may take up to ten business
days.
Investors are entitled to purchase, exchange or redeem shares by telephone at no
charge. Telephone privileges are not available for ten days following a change
of address. You must notify the transfer agent in writing if you want to disable
telephone transactions.
The funds do not issue share certificates.
Redemption proceeds are normally wired to the redeeming shareholder on the same
business day, if the order is received before the close of business. In order
for the adviser to manage each fund most effectively, investors are urged to
initiate redemptions early in the day, if possible, and to notify the transfer
agent at least one day in advance for redemptions of more than $5 million.
Reserved rights The funds reserve the following rights:
o To suspend sale of shares to the public
o To reject any exchange request and to modify or terminate exchange privileges
o To delay wiring redemption proceeds for up to seven days, if the adviser
believes an earlier payment could adversely affect a fund
o To suspend the right of redemption
Exchange minimums You may exchange shares between the funds in this prospectus
and any other BNY Hamilton fund. An exchange for Investor Shares of any other
BNY Hamilton fund must have a value of at least $500. If you will be investing
in a new fund, you must also exchange enough shares to meet the minimum balance
requirement.
To make an exchange for Institutional Shares of any other BNY Hamilton fund,
contact your Bank of New York representative.
From the perspective of tax liability, an exchange is the same as a redemption
from one fund and purchase of another, meaning that you are likely to generate a
capital gain or loss when you make an exchange.
Signature guarantees You can get a signature guarantee from many brokers and
from some banks, savings institutions and credit unions. A notary public cannot
provide a signature guarantee.
Account Policies 13
<PAGE>
INVESTMENT ADVISER
The investment adviser of these funds is The Bank of New York, located at One
Wall Street, New York, NY 10286. Founded by Alexander Hamilton in 1784, it is
one of the largest commercial banks in the United States, with over $74 billion
in assets. The Bank of New York began offering investment services in the 1830s
and today manages more than $60 billion in investments for institutions and
individuals.
Adviser compensation The adviser is responsible for all business activities and
investment decisions for the funds. In return for these services, each fund pays
the adviser an annual fee. The adviser's fee accrues daily and is payable
monthly at an annual rate of 0.10% of average daily net assets.
PORTFOLIO MANAGER
BNY Hamilton Money Fund and BNY Hamilton Treasury Money Fund Richard Klingman is
a vice president of the adviser and has managed the funds since 1997. He joined
the adviser in 1996 and has been managing assets since 1990.
14 Account Policies
<PAGE>
NOTES
Notes 15
<PAGE>
FOR MORE INFORMATION
Annual and Semi-Annual Reports These include commentary from the fund manager on
the market conditions and investment strategies that significantly affected each
fund's performance, detailed performance data, a complete inventory of the
funds' securities and a report from the funds' auditor.
Statement of Additional Information (SAI) The SAI contains more detailed
disclosure on features and policies of the funds. A current SAI has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this document (that is, it is legally a part of this prospectus).
You can obtain these documents free of charge, make inquiries or request other
information about the funds by contacting your dealer or:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
800-426-9363
Information is also available from the SEC:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
www.sec.gov
E-mail: [email protected]
For information on the operation of the SEC's public reference room, where
documents may be viewed and copied, call:
1-202-942-8090
Note: The SEC requires a duplicating fee for
paper copies.
SEC File Number: 811-6654
BNY-0087 4/00 BNY
HAMILTON
FUNDS
<PAGE>
BNY
Hamilton
[LOGO]
[GRAPHIC OMITTED]
PROSPECTUS
Money Market Funds--
Hamilton Premier Shares
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or said whether the information in this
prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a crime.
/ / Money Fund
/ / Treasury Money Fund
April 25, 2000
BNY
HAMILTON
FUNDS
<PAGE>
ABOUT THE FUNDS
4 BNY Hamilton Money Fund
8 BNY Hamilton Treasury Money Fund
SERVICES PROVIDED
12 Services Provided
ACCOUNT POLICIES
13 Daily NAV Calculation
13 Distributions and Tax Considerations
15 Investment Adviser
15 Portfolio Manager
FOR MORE INFORMATION
Back Cover
<PAGE>
AN INTRODUCTION TO BNY HAMILTON FUNDS
The BNY Hamilton Funds aim for high returns with consistent performance over
many market cycles.
The BNY Hamilton Money Funds are designed for investors who seek stability of
principal. They are a valuable component of most portfolios and well-suited for
investing money that may be needed in the near future. The funds take extra
measures to provide for safety and liquidity, including:
o avoiding investing in split-rated securities--securities that are rated
higher by one rating agency than another
o limiting the average dollar-weighted maturity of their portfolios to 60
days rather than the 90 days permitted.
RISKS OF MUTUAL FUND INVESTING
Investments in mutual funds are not bank deposits, nor are they guaranteed by
the Federal Deposit Insurance Corporation or any other government agency. It is
important to read all the disclosure information provided and to understand that
you could lose money by investing in any of these funds.
<PAGE>
MONEY FUND
CUSIP Number: [LOGO]
Hamilton Premier Shares [GRAPHIC OMITTED]
05561M507
INVESTMENT OBJECTIVE
The Fund seeks as high a level of current income as is consistent with
preservation of capital and maintenance of liquidity by investing principally in
high-quality money market instruments.
PORTFOLIO MANAGEMENT STRATEGY
The Fund seeks to maintain a stable $1 share price and invests exclusively in
debt securities within the highest short-term credit rating categories and their
unrated equivalents. The maximum allowable maturity for any individual holding
is 397 days, and the Fund maintains an average dollar-weighted maturity of 90
days or less. The Fund may invest in debt securities that meet these criteria
and are issued by U.S. and foreign issuers, including:
o corporations
o banks
o governments
o U.S. agencies, states, and municipalities
The Fund may also invest in money market securities issued by multinational
organizations such as the World Bank.
The Fund's investments are diversified through broad exposure to fixed- and
variable-rate securities across issuers and sectors. The Fund also invests in
repurchase agreements, which are contracts to sell and buy back a given security
at a specific time and price, to enhance yields.
4 BNY Hamilton Money Fund
<PAGE>
MAIN INVESTMENT RISKS
The value of money market securities is most affected by short-term interest
rates. An extreme rise in short-term interest rates could substantially decrease
the value of the Fund's investments and jeopardize its $1 share price.
The portfolio manager's investment strategies may not work out as planned, and
the Fund could underperform its peers. Any of the money market securities held
by the Fund could be downgraded in credit rating below minimum standards or go
into default.
An investment in the Fund is not insured or guaranteed by the FDIC or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
Fund.
Money Funds and the AAA/Aaa Rating
All money market funds that utilize amortized costs must comply with the SEC's
Rule 2a-7, which covers diversification standards, credit quality restrictions,
and maturity limits for individual securities and the portfolio as a whole.
In order to obtain the AAA/Aaa rating from Standard & Poor's and Moody's, money
market funds observe additional, more conservative investment guidelines. First,
the fund's weighted average maturity may not exceed 60 days. In addition --
To obtain Standard & Poor's AAA:
o Investments must have a minimum rating of A-1.
o Fifty percent of the fund's assets must be invested in securities with the
highest short-term credit rating--A-1+.
To obtain Moody's Aaa rating:
o Investments must have Moody's highest short-term credit rating--P-1.
BNY Hamilton Money Fund 5
<PAGE>
PAST PERFORMANCE
The following chart demonstrates the risk of investing in the Fund by showing
the year-to-year returns and pattern of price volatility. Returns for the Fund's
single best and single worst quarters suggest how widely performance has varied
over the short term. Past performance does not guarantee future performance.
[BAR GRAPH]
Annual total returns (%) as of 12/31/991
5.54 5.03 5.19 5.14 4.72
- ----------------------------------------------
95 96 97 98 99
Best quarter: Q2 '95 +1.39 Worst quarter: Q1 '99 +1.11
The table below presents the Fund's average annual returns over various periods.
Average annual total returns (%) as of 12/31/99*
Life
1 Year 5 Years of fund
- --------------------------------------------------------
Hamilton Premier Shares(1) 4.77 5.13 5.09
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect as an investor
in the Fund. "Annual Operating Expenses" come out of Fund assets, and are
reflected in the total return. Since these funds are "no-load", shareholders pay
no fees or out of pocket expenses.
Fee table (% of average net assets)
Hamilton
Premier
Shares
- ---------------------------------------------------
Shareholder Fees None
Annual Operating Expenses
- ---------------------------------------------------
Management fee 0.10
Servicing fee 0.25
Other expenses 0.14
Total annual operating expenses 0.49
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this information so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment* ($)
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
Hamilton Premier
Shares 50 157 274 616
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns and no change in operating expenses.
- --------------------------------------------------------------------------------
(1) Hamilton Premier Shares commenced operations on 8/15/94.
6 BNY Hamilton Money Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance over the past five years (or since inception). Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended December 31, 1999 has been
audited by Ernst & Young LLP*, whose report, along with the Fund's financial
statement, is included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per-Share Data ($)
- ----------------------------------------------------------------------------------------------------------
Net asset valueat beginning of period 1.00 1.00 1.00 1.00 1.00
--------------------------------------------------
Income from investment operations:
Net investment income 0.047 0.050 0.051 0.049 0.054
Less dividends:
Dividends from net investment income (0.047) (0.050) (0.051) (0.049) (0.054)
--------------------------------------------------
Net asset value at end of period 1.00 1.00 1.00 1.00 1.00
--------------------------------------------------
Total return (%) 4.77 5.14 5.19 5.03 5.54
Ratios/Supplemental Data (%)
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 871,287 1,064,645 688,339 463,759 340,163
Ratio of expenses to average net assets 0.49 0.51 0.51 0.53 0.54
Ratio of net investment income to average net assets 4.70 5.01 5.09 4.91 5.40
</TABLE>
* KPMG LLP has audited the figures for 1997 and 1998.
Previous years' data were audited by Deloitte & Touche LLP.
BNY Hamilton Money Fund 7
<PAGE>
Treasury Money Fund
CUSIP Number:
Hamilton Premier Shares [LOGO]
05561M804 [GRAPHIC OMITTED]
INVESTMENT OBJECTIVE
The Fund seeks as high a level of current income as is consistent with
preservation of capital and maintenance of liquidity by investing solely in
short-term obligations of the U.S. Treasury and repurchase agreements fully
collateralized by obligations of the U.S. Treasury.
MANAGEMENT STRATEGY
The Fund seeks to maintain a stable $1 share price and invests exclusively in
securities backed by the full faith and credit of the U.S. government. These
securities include:
o Treasury bills
o Treasury notes
o Treasury bonds
o repurchase agreements fully collateralized by U.S. Treasury obligation.
The maximum allowable maturity for any individual security is 397 days, and the
Fund maintains an average dollar-weighted maturity of 90 days or less.
In investing the Fund's assets, the portfolio manager seeks to take advantage of
the dynamics of short-term interest rates by actively managing the Fund's
average weighted maturity. The Fund may invest in repurchase agreements, which
are contracts to sell and buy back a given security at a specific time and
price, to enhance yields.
8 BNY Hamilton Treasury Money Fund
<PAGE>
MAIN INVESTMENT RISKS
The value of money market securities is most affected by short-term interest
rates. An extreme rise in short-term interest rates could substantially decrease
the value of the Fund's investments and jeopardize its $1 share price.
Since the fund invests only in U.S. Treasury obligations and repurchase
agreements based on them, its yield may lag other money market funds that invest
in higher-yielding securities with some credit risk. The portfolio manager's
investment strategies may not work out as planned, and the Fund could
underperform its peers.
An investment in the Fund is not insured or guaranteed by the FDIC or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
Fund.
- --------------------------------------------------------------------------------
Money Funds and the AAA/Aaa Rating
All money market funds that utilize amortized costs must comply with the SEC's
Rule 2a-7, which covers diversification standards, credit quality restrictions,
and maturity limits for individual securities and the portfolio as a whole.
In order to obtain the AAA/Aaa rating from Standard & Poor's and Moody's, money
market funds observe additional, more conservative investment guidelines. U.S.
Treasury obligations automatically meet the most stringent credit quality
requirements. In addition, the fund's weighted average maturity may not exceed
60 days.
BNY Hamilton Treasury Money Fund 9
<PAGE>
PAST PERFORMANCE
The following chart demonstrates the risk of investing in the Fund by showing
the year-to-year returns and pattern of price volatility. Returns for the Fund's
single best and single worst quarters suggest how widely performance has varied
over the short term. Past performance does not guarantee future performance.
Annual total returns (%) as of 12/31/991
- -----------------------------------------
[BAR GRAPH]
4.99 4.54
- ------------------------------------
98 99
Best quarter: Q4 '97 +1.28 Worst quarter: Q1 '99 +1.07
The table below presents the Fund's average annual returns over various periods.
Average annual total returns (%) as of 12/31/99*
- --------------------------------------------------
Life
1 Year of fund
- --------------------------------------------------
Hamilton Premier Shares(1) 4.54 4.86
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect as an investor
in the Fund. "Annual Operating Expenses" come out of fund assets, and are
reflected in the total return. Since these funds are "no-load", shareholders pay
no fees or out of pocket expenses.
Fee table (% of average net assets)
- --------------------------------------------------
Hamilton
Premier
Shares
- --------------------------------------------------
Shareholder Fees None
Annual Operating Expenses
Management fee 0.10
Servicing fee 0.25
Other expenses 0.17
Total annual operating expenses 0.52
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this information so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment* ($)
- -----------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------
Hamilton Premier
Shares 53 167 291 653
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns and no change in operating expenses.
- --------------------------------------------------------------------------------
(1) Hamilton Premier Shares commenced operations on 4/1/97.
10 BNY Hamilton Treasury Money Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance over the past five years (or since inception). Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended December 31, 1999 has been
audited by Ernst & Young LLP*, whose report, along with the Fund's financial
statement, is included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997(1)
Per-Share Data ($)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period 1.00 1.00 1.00
- ----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.045 0.049 0.038
Less distributions:
Dividends from net investment income (0.045) (0.049) (0.038)
- ----------------------------------------------------------------------------------------
Net asset value at end of period 1.00 1.00 1.00
- ----------------------------------------------------------------------------------------
Total return (%) 4.54 4.99 3.832
Ratios/Supplemental Data (%)
- ----------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 429,461 520,492 183,895
Ratio of expenses (after reduction) to
average net assets 0.52 0.52 0.503
Ratio of expenses (before reduction) to
average net assets 0.52 0.53 0.563
Ratio of net investment income (after reduction)
to average net assets 4.41 4.82 5.063
</TABLE>
* Previous years' data were audited by KPMG LLP.
- --------------------------------------------------------------------------------
(1) Hamilton Premier Shares commenced operations on 4/1/97.
(2) Not annualized.
(3) Annualized.
BNY Hamilton Treasury Money Fund 11
<PAGE>
SERVICES PROVIDED
SHAREHOLDER SERVICING PLANS
The adviser has entered into servicing agreements with certain institutions
(shareholder organizations) that invest in Hamilton Premier Shares of these
funds for their customers. Under these agreements, the institutions provide
support services to their customers, and the funds, in turn, pay the
institutions 0.25% (annualized) of the average daily NAV of their customers'
Hamilton Premier Shares.
Services that the shareholder organizations are responsible for providing to
their customers include the following:
o aggregating and processing customer purchase and redemption orders, then
placing net purchase and redemption orders with the distributor
o providing automatic reinvestment of customers' cash balances in other
investment accounts in Hamilton Premier Shares, if requested
o processing customers' dividend payments
o providing periodic statements to their customers
o arranging for bank wires
o providing adequate customer support facilities
o performing all necessary sub-accounting
o forwarding shareholder communications from the funds
Some shareholder organizations may charge their customers additional fees for
their services connected with investments in these funds. If so, they are
required to disclose them. Their customers should read this prospectus along
with the terms governing their accounts.
Fee waivers The funds' service providers normally pay all expenses in connection
with the performance of their services, while each fund pays its own operating
expenses. During the course of the funds' fiscal year, the administrator and/or
adviser may voluntarily reduce their fees or pay certain fund expenses. This
will have the effect of increasing investors' yields. But the adviser and/or
administrator may still be reimbursed by the funds before the end of the fiscal
year. If so, investors' yields will then decrease correspondingly.
WIRE ORDER PROCESSING
Wire order processing services for direct investors will be provided by the
transfer agent. Shareholder organizations will provide similar services for
their customers.
MONTHLY STATEMENTS
Shareholders receive monthly statements, reflecting all account activity,
including dividends reinvested in additional shares or credited as cash.
Shareholders will also receive confirmations of each purchase, exchange or
redemption.
SWEEP FACILITY FOR AUTOMATIC REINVESTMENT
Accounts are automatically "swept" each day, and amounts above a pre-arranged
minimum balance are invested in Hamilton Premier Shares of the funds. Further
information on the sweep facility is available from the adviser or from your
shareholder organization.
12 Services Provided
<PAGE>
ACCOUNT POLICIES
DAILY NAV CALCULATION
Each fund calculates its net asset value per share (NAV) at 4:30 p.m eastern
time each business day (Monday through Friday), though they may not do so on a
day when no purchase or redemption orders are received. A business day is a day
on which the New York Stock Exchange is open and any other day during which
trading in the funds' portfolio securities could materially affect the funds'
NAV. The funds use the amortized cost method to value their securities.
Dividends and expenses accrue daily.
Purchase orders received before the regular close of the New York Stock Exchange
will be executed at the offering price calculated at that day's close.
DISTRIBUTIONS AND TAX CONSIDERATIONS
Net investment income for Hamilton Premier Shares of each fund will be
determined immediately before calculation of NAV each business day. Hamilton
Premier Shares will begin earning dividends on the first business day their
purchase is effective.
Net investment income for Hamilton Premier Shares of each fund will be declared
as dividends daily and paid monthly within five business days after the end of
the month. Dividends and distributions will be payable to shareholders of record
at the time of declaration. Each fund automatically pays distributions in the
form of additional fund shares. Notify the transfer agent in writing to:
o choose to receive distributions in cash
o change the way you currently receive distributions
Your taxable income is the same either way. If you choose to receive
distributions in cash, and the checks are either returned as undeliverable or
left uncashed for six months, your future distributions will be reinvested in
your fund, and uncashed checks will be cancelled and reinvested at the fund's
share price as of the day of cancellation.
Type of Distribution Federal Tax Status
- -------------------- ------------------
Dividends from net ordinary income
investment income
Short-term capital ordinary income
gains
The funds do not expect to realize long-term capital gains or losses.
Distributions from the funds are expected to be primarily ordinary income from
dividends.
The funds issue detailed annual tax information statements for each investor,
recording all distributions and redemptions for the preceding year. Any
investors who do not provide a valid Social Security or taxpayer identification
number to the funds may be subject to federal backup withholding tax and charges
against their accounts related to fines.
You should consult your tax adviser about your own particular tax situation.
Account Policies 13
<PAGE>
PURCHASING AND REDEEMING PREMIER SHARES
Minimum investment requirements
- -------------------------------
Initial investment
------------------
$500,000
Fund shares are redeemed at the next NAV per share calculated after the transfer
agent receives the purchase order. The funds do not impose any fee for direct
purchase or redemption orders, but broker-dealers may charge a fee for these
services. Payments must be in U.S. dollars. Purchases made by check will not be
redeemed until the purchase check clears, which may take up to ten business
days.
Investors are entitled to purchase, exchange or redeem shares by telephone at no
charge. Telephone privileges are not available for ten days following a change
of address. You must notify the transfer agent in writing if you want to disable
telephone transactions.
The funds do not issue share certificates.
Redemption proceeds are normally wired to the redeeming shareholder on the same
business day, if the order is received before the close of business. In order
for the adviser to manage each fund most effectively, investors are urged to
initiate redemptions early in the day, if possible, and to notify the transfer
agent at least one day in advance for redemptions of more than $5 million.
Reserved rights The funds reserve the following rights:
o To suspend sale of shares to the public
o To reject any exchange request and to modify or terminate exchange
privileges
o To delay wiring redemption proceeds for up to seven days, if the adviser
believes an earlier payment could adversely affect a fund
o To suspend the right of redemption
Exchange minimums You may exchange shares between the funds in this prospectus
and any other BNY Hamilton fund. An exchange for Investor Shares of any other
BNY Hamilton fund must have a value of at least $500. If you will be investing
in a new fund, you must also exchange enough shares to meet the minimum balance
requirement.
To make an exchange for Institutional Shares of any other BNY Hamilton fund,
contact your Bank of New York representative.
From the perspective of tax liability, an exchange is the same as a redemption
from one fund and purchase of another, meaning that you are likely to generate a
capital gain or loss when you make an exchange.
Signature guarantees You can get a signature guarantee from many brokers and
from some banks, savings institutions and credit unions. A notary public cannot
provide a signature guarantee.
14 Account Policies
<PAGE>
INVESTMENT ADVISER
The investment adviser of these funds is The Bank of New York, located at One
Wall Street, New York, NY 10286. Founded by Alexander Hamilton in 1784, it is
one of the largest commercial banks in the United States, with over $74 billion
in assets. The Bank of New York began offering investment services in the 1830s
and today manages more than $60 billion in investments for institutions and
individuals.
Adviser compensation The adviser is responsible for all business activities and
investment decisions for the funds. In return for these services, each fund pays
the adviser an annual fee. The adviser's fee accrues daily and is payable
monthly at an annual rate of 0.10% of average daily net assets.
PORTFOLIO MANAGER
BNY Hamilton Money Fund and BNY Hamilton Treasury Money Fund Richard Klingman is
a vice president of the adviser and has managed the funds since 1997. He joined
the adviser in 1996 and has been managing assets since 1990.
Account Policies 15
<PAGE>
FOR MORE INFORMATION
Annual and Semi-Annual Reports These include commentary from the fund manager on
the market conditions and investment strategies that significantly affected each
fund's performance, detailed performance data, a complete inventory of the
funds' securities and a report from the funds' auditor.
Statement of Additional Information (SAI) The SAI contains more detailed
disclosure on features and policies of the funds. A current SAI has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this document (that is, it is legally a part of this prospectus).
You can obtain these documents free of charge, make inquiries or request other
information about the funds by contacting your dealer or:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
800-426-9363
Information is also available from the SEC:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
www.sec.gov
E-mail: [email protected]
For information on the operation of the SEC's public reference room, where
documents may be viewed and copied, call:
1-202-942-8090
Note: The SEC requires a duplicating fee for
paper copies.
SEC File Number: 811-6654
BNY-0088 4/00
BNY
HAMILTON
FUNDS
<PAGE>
BNY
HAMILTON
[LOGO]
Prospectus
Money Market Funds--
Hamilton Classic Shares
/ / Money Fund
/ / TREASURY MONEY FUND
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or said whether the information in this
prospectus is adequate and accurate. Anyone who indicates otherwise is commiting
a crime.
April 25, 2000
BNY
HAMILTON
FUNDS
<PAGE>
ABOUT THE FUNDS
4 BNY Hamilton Money Fund
8 BNY Hamilton Treasury Money Fund
SERVICES PROVIDED
12 Services Provided
ACCOUNT POLICIES
13 Daily NAV Calculation
13 Distribution (12b-1) Plan
14 Opening an Account/Purchasing Shares
16 Making Exchanges/Redeeming Shares
17 Distributions and Tax Considerations
18 Investment Adviser
18 Portfolio Manager
For More Information
Back Cover
<PAGE>
AN INTRODUCTION TO BNY HAMILTON FUNDS
The BNY Hamilton Funds aim for high returns with consistent performance over
many market cycles.
The BNY Hamilton Money Funds are designed for investors who seek stability of
principal. They are a valuable component of most portfolios and well-suited for
investing money that may be needed in the near future. The funds take extra
measures to provide for safety and liquidity, including:
o avoiding investing in split-rated securities--securities that are rated
higher by one rating agency than another
o limiting the average dollar-weighted maturity of their portfolios to 60
days rather than the 90 days permitted.
RISKS OF MUTUAL FUND INVESTING
Investments in mutual funds are not bank deposits, nor are they guaranteed by
the Federal Deposit Insurance Corporation or any other government agency. It is
important to read all the disclosure information provided and to understand that
you could lose money by investing in any of these funds.
<PAGE>
BNY HAMILTON
MONEY FUND
CUISP Number: [LOGO]
Hamilton Classic Shares
05561M606
INVESTMENT OBJECTIVE
The Fund seeks as high a level of current income as is consistent with
preservation of capital and maintenance of liquidity by investing principally in
high-quality money market instruments.
PORTFOLIO MANAGEMENT STRATEGY
The Fund may also invest in money market securities issued by multinational
organizations such as the World Bank.
The Fund seeks to maintain a stable $1 share price and invests exclusively in
debt securities within the highest short-term credit rating categories and their
unrated equivalents. The maximum allowable maturity for any individual holding
is 397 days, and the Fund maintains an average dollar-weighted maturity of 90
days or less. The Fund may invest in debt securities that meet these criteria
and are issued by U.S. and foreign issuers, including:
o corporations
o banks
o governments
o U.S. agencies, states, and municipalities
The Fund's investments are diversified through broad exposure to fixed- and
variable-rate securities across issuers and sectors. The Fund also invests in
repurchase agreements, which are contracts to sell and buy back a given security
at a specific time and price, to enhance yields.
4 BNY Hamilton Money Fund
<PAGE>
MAIN INVESTMENT RISKS
The value of money market securities is most affected by short-term interest
rates. An extreme rise in short-term interest rates could substantially decrease
the value of the Fund's investments and jeopardize its $1 share price.
The portfolio manager's investment strategies may not work out as planned, and
the Fund could underperform its peers. Any of the money market securities held
by the Fund could be downgraded in credit rating below minimum standards or go
into default.
An investment in the Fund is not insured or guaranteed by the FDIC or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
Fund.
Money Funds and the AAA/Aaa Rating
All money market funds that utilize amortized costs must comply with the SEC's
Rule 2a-7, which covers diversification standards, credit quality restrictions,
and maturity limits for individual securities and the portfolio as a whole.
In order to obtain the AAA/Aaa rating from Standard & Poor's and Moody's, money
market funds observe additional, more conservative investment guidelines. First,
the fund's weighted average maturity may not exceed 60 days. In addition --
To obtain Standard & Poor's AAA:
o Investments must have a minimum rating of A-1.
o Fifty percent of the fund's assets must be invested in securities with the
highest short-term credit rating--A-1+.
To obtain Moody's Aaa rating:
o Investments must have Moody's highest short-term credit rating--P-1.
BNY Hamilton Money Fund 5
<PAGE>
PAST PERFORMANCE
The following chart demonstrates the risk of investing in the Fund by showing
the year-to-year returns and pattern of price volatility. Returns for the Fund's
single best and single worst quarters suggest how widely performance has varied
over the short term. Past performance does not guarantee future performance.
Annual total returns (%) as of 12/31/99(1)
[Bar Chart Appears Here]
4.73 4.80 4.81 4.51
- -----------------------
96 97 98 99
Best quarter: Q4 '99 +1.22 Worst quarter: Q2 '99 +1.04
The table below presents the Fund's average annual returns over various periods.
Average annual total returns (%) as of 12/31/99*
Life
1 Year of fund
- --------------------------------------------------
Hamilton Classic Shares(1) 4.51 4.72
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect as an investor
in the Fund. "Annual Operating Expenses" come out of fund assets, and are
reflected in the total return. Since these funds are "no-load", shareholders pay
no fees or out of pocket expenses.
Fee table (% of average net assets)
Hamilton
Classic
Shares
- --------------------------------------------------
Shareholder Fees None
Annual Operating Expenses
- --------------------------------------------------
Management fee 0.10
Distribution (12b-1) fees 0.25
Servicing fee 0.25
Other expenses 0.14
Total annual operating expenses 0.74
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this informaiton so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment*($)
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------
Hamilton Classic
Shares 76 237 411 918
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns and no change in operating expenses.
- --------------------------------------------------------------------------------
(1) Hamilton Classic Shares commenced operations on 12/4/95.
6 BNY Hamilton Money Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance over the past five years (or since inception). Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended December 31, 1999 has been
audited by Ernst & Young LLP*, whose report, along with the Fund's financial
statement, is included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
Year Ended December 31,
Per-Share Data ($) 1999 1998 1997 1996 1995(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00
--------------------------------------------------------------------
Income from investment operations:
Net investment income 0.044 0.047 0.047 0.046 0.004
Less distributions:
Dividends from net investment income (0.044) (0.047) (0.047) (0.046) (0.004)
--------------------------------------------------------------------
Net asset value at end of period 1.00 1.00 1.00 1.00 1.00
--------------------------------------------------------------------
Total return (%) 4.51 4.81 4.80 4.73 0.40(2)
Ratios/Supplemental Data (%)
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 892,560 19,995 16,725 13,478 3,098
Ratio of expenses to average net assets 0.74 0.83 0.88 0.82 0.76(3)
Ratio of net investment income to average net assets 4.46 4.70 4.71 4.67 5.18(3)
</TABLE>
* KPMG LLP has audited the figures for 1997 and 1998. Previous years' data
were audited by Deloitte & Touche LLP.
- --------------------------------------------------------------------------------
(1) Hamilton Classic Shares commenced operations on 12/4/95.
(2) Not annualized.
(3) Annualized.
BNY Hamilton Money Fund 7
<PAGE>
BNY HAMILTON
TREASURY MONEY FUND
CUSIP Number:
Hamilton Classic Shares
05561M747
INVESTMENT OBJECTIVE
The Fund seeks as high a level of current income as is consistent with
preservation of capital and maintenance of liquidity by investing solely in
short-term obligations of the U.S. Treasury and repurchase agreements fully
collateralized by obligations of the U.S. Treasury.
MANAGEMENT STRATEGY
The Fund seeks to maintain a stable $1 share price and invests exclusively in
securities backed by the full faith and credit of the U.S. government. These
securities include:
o Treasury bills
o Treasury notes
o Treasury bonds
o repurchase agreements fully collateralized by U.S. Treasury obligations.
The maximum allowable maturity for any individual security is 397 days, and the
Fund maintains an average dollar-weighted maturity of 90 days or less.
In investing the Fund's assets, the portfolio manager seeks to take advantage of
the dynamics of short-term interest rates by actively managing the Fund's
average weighted maturity. The Fund may invest in repurchase agreements, which
are contracts to sell and buy back a given security at a specific time and
price, to enhance yields.
8 BNY Hamilton Treasury Money Fund
<PAGE>
MAIN INVESTMENT RISKS
The value of money market securities is most affected by short-term interest
rates. An extreme rise in short-term interest rates could substantially decrease
the value of the Fund's investments and jeopardize its $1 share price.
Since the fund invests only in U.S. Treasury obligations or repurchase
agreements based on them, its yields may lag other money market funds that
invest in higher-yielding securities with some credit risk. The portfolio
manager's investment strategies may not work out as planned, and the Fund could
underperform its peers.
An investment in the Fund is not insured or guaranteed by the FDIC or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
Fund.
Money Funds and the AAA/Aaa Rating
All money market funds that utilize amortized costs must comply with the SEC's
Rule 2a-7, which covers diversification standards, credit quality restrictions,
and maturity limits for individual securities and the portfolio as a whole.
In order to obtain the AAA/Aaa rating from Standard & Poor's and Moody's, money
market funds observe additional, more conservative investment guidelines. U.S.
Treasury obligations automatically meet the most stringent credit quality
requirements. In addition, the fund's weighted average maturity may not exceed
60 days.
BNY Hamilton Treasury Money Fund 9
<PAGE>
Past Performance
The table below presents the Fund's average annual returns since inception.
Average annual total returns (%) as of 12/31/99*
Since
4/30/99
- --------------------------------------------------
Hamilton Classic Shares(1) 4.33
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
Since the Fund has less than a full year of operation as of December 31, 1999,
no historical performance information has been presented in the bar chart.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect as an investor
in the Fund. "Annual Operating Expenses" come out of fund assets, and are
reflected in the total return. Since these funds are "no-load", shareholders pay
no fees or out of pocket expenses.
Fee table (% of average net assets)
Hamilton
Classic
Shares
- --------------------------------------------------
Shareholder Fees None
Annual Operating Expenses
Management fee 0.10
Distribution (12b-1) fees 0.25
Servicing fee 0.25
Other expenses 0.18
Total annual operating expenses 0.78
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this information so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment*($)
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------
Hamilton Classic
Shares 80 249 433 966
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns and no change in operating expenses.
- --------------------------------------------------------------------------------
(1) Hamilton Classic Shares commenced operations on 4/30/99.
10 BNY Hamilton Treasury Money Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance over the past five years (or since inception). Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended December 31, 1999 has been
audited by Ernst & Young LLP, whose report, along with the Fund's financial
statement, is included in the annual report, which is available upon request.
Period Ended December 31, 1999(1)
-------
Per-Share Data ($)
Net asset value at beginning of period 1.00
------
Income from investment operations:
Net investment income 0.029
Less distributions:
Dividends from net investment income (0.029)
------
Net asset value at end of period 1.00
------
Total return (%) 2.90(2)
Ratios/Supplemental Data (%)
- --------------------------------------------------------------
Net assets, end of period ($ x 1,000) 227,117
Ratio of expenses to average net assets 0.783
Ratio of net investment income to average net assets 4.333
- --------------------------------------------------------------------------------
(1) Hamilton Classic Shares commenced operations on 4/30/99.
(2) Not annualized.
(3) Annualized.
BNY Hamilton Treasury Money Fund 11
<PAGE>
SERVICES PROVIDED
SHAREHOLDER SERVICING PLANS
The adviser has entered into servicing agreements with certain institutions
(shareholder organizations) that invest in Hamilton Classic Shares of these
funds for their customers. Under these agreements, the institutions provide
support services to their customers, and the funds, in turn, pay the
institutions 0.25% (annualized) of the average daily NAV of their customers'
Hamilton Classic Shares.
Services that the shareholder organizations are responsible for providing to
their customers include the following:
o aggregating and processing customer purchase and redemption orders, then
placing net purchase and redemption orders with the distributor
o providing automatic reinvestment of customers' other investment accounts in
Hamilton Classic Shares, if requested
o processing customers' dividend payments
o providing periodic statements to their customers
o arranging for bank wires
o providing adequate customer support facilities
o performing all necessary sub-accounting
o forwarding shareholder communications from the funds
Some shareholder organizations may charge their customers additional fees for
their services connected with investments in these funds. If so, they are
required to disclose them. Their customers should read this prospectus along
with the terms governing their accounts.
Fee waivers The funds' service providers normally pay all expenses in connection
with the performance of their services, while each fund pays its own operating
expenses. During the course of the funds' fiscal year, the administrator and/or
adviser may voluntarily reduce their fees or pay certain fund expenses. This
will have the effect of increasing investors' yields. But the adviser and/or
administrator may still be reimbursed by the funds before the end of the fiscal
year. If so, investors' yields will then decrease correspondingly.
WIRE ORDER PROCESSING
Wire order processing services for direct investors will be provided by the
transfer agent. Shareholder organizations will provide similar services for
their customers.
MONTHLY STATEMENTS
Shareholders receive monthly statements, reflecting all account activity,
including dividends reinvested in additional shares or credited as cash.
Shareholders will also receive confirmations of each purchase, exchange or
redemption.
SWEEP FACILITY FOR AUTOMATIC REINVESTMENT
Accounts are automatically OsweptO each day, and amounts above a pre-arranged
minimum balance are invested in Hamilton Classic Shares of the funds. Further
information on the sweep facility is available from the adviser or from your
shareholder organization.
12 Services Provided
<PAGE>
ACCOUNT POLICIES
DAILY NAV CALCULATION
Each fund calculates its net asset value per share (NAV) at 4:30 p.m eastern
time each business day (Monday through Friday), though they may not do so on a
day when no purchase or redemption orders are received. A business day is a day
on which the New York Stock Exchange is open and any other day during which
trading in the funds' portfolio securities could materially affect the funds'
NAV. The funds use the amortized cost method to value their securities.
Dividends and expenses accrue daily.
Purchase orders received before the regular close of the New York Stock Exchange
will be executed at the offering price calculated at that day's close.
The BNY Hamilton Money Fund may invest in securities that are traded on foreign
exchanges, which may be open when the New York Stock Exchange is closed. The
value of your investment in the fund may change on days when you will be unable
to purchase or redeem shares.
DISTRIBUTION (12B-1) PLAN
The directors have adopted 12b-1 distribution plans with respect to the Hamilton
Classic Shares of each of the funds in this prospectus. The plans permit the
funds to reimburse the Distributor for distribution expenses in an amount up to
0.25% of the annual average daily net assets of Hamilton Classic Shares.
These fees are paid out of fund assets on an ongoing basis, and over time, they
could cost you more than paying other types of sales charges.
- --------------------------------------------------------------------------------
Opening an Account
Mimimum investment requirements
<TABLE>
<CAPTION>
Minimum initial Minimum continuing
Account Type investment investments Minimum balance
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IRA $250 $25 N/A
Regular Account $2,000 $100 $500
Automatic Investment
Program $500 $50 N/A
Government Direct $250 minimum $100;
Deposit Program* maximum $50,000
</TABLE>
Note: Employees and retirees of The Bank of the New York and its affiliates, and
employees of the administrator, distributor and their affiliates may open a
regular account with $100 and make continuing investments of $25. Employees and
retirees of The Bank of New York and its affiliates may also invest through
payroll deduction. Call 800-4BNY-FND (800-426-9363) for details.
* For federal employees and investors who receive Social Security or certain
other payments from the federal government.
Account Policies 13
<PAGE>
OPENING AN ACCOUNT/PURCHASING SHARES
Open an account
- ---------------
Mail
- ----
Send completed new account application and a check payable directly to each
fund you want to invest in.
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
For all enrollment forms, call 800-426-9363.
Wire
- ----
The funds do not charge a fee for wire transactions, but your bank may.
Mail your completed new account application to the Ohio address above. Call the
transfer agent at 800-952-6276 for an account number.
Instruct your bank to wire funds to a new account at:
The Bank of New York
New York, NY 10286
ABA: 021000018
BNY Hamilton Funds
DDA 8900275847
Attn: [your fund]
Ref: [your name, account number and taxpayer ID]
Phone
- -----
- -------
Dealer
- ------
Note: a broker-dealer may charge a fee.
Add to your investment
- ----------------------
Mail
- ----
Send a check payable directly to your fund to:
BNY Hamilton Funds, Inc.
P.O. Box 806
Newark, NJ 07101-0806
If possible, include a tear-off payment stub from one of your transaction
confirmation statements.
Wire
- ----
Instruct your bank to wire funds to:
The Bank of New York
New York, NY 10286
ABA: 021000018
BNY Hamilton Funds
DDA 8900275847
Attn: [your fund]
Ref: [your name, account number and taxpayer ID]
Phone
- -----
Call 800-426-9363.
You must provide the required information about your bank on your new account
application, or in a signature guaranteed letter. Your bank must be a member of
the ACH (Automated Clearing House) system.
Dealer
- ------
Contact your broker-dealer.
14 Account Policies
<PAGE>
OPENING AN ACCOUNT/PURCHASING SHARES, continued
Open an account
- ---------------
Automatic Investment Program
- ----------------------------
Automatic investments are withdrawn from your bank account on a monthly or
biweekly basis.
Make an initial investment of at least $500 by whatever method you choose. Be
sure to fill in the information required in section 7 of your new account
application.
Your bank must be a member of the ACH (Automated Clearing House) system.
Government Direct Deposit Program
- ---------------------------------
For federal employees and investors who receive social security or certain other
payments from the federal government.
Call 800-426-9363 for instructions on how to enroll.
Add to your investment
- ----------------------
Once you specify a dollar amount (minimum $50), investments are automatic.
You can modify or terminate this service at any time by mailing a notice to:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
Government Direct Deposit Program
- ---------------------------------
Once you are enrolled, investments are automatic.
You can terminate the service at any time by contacting the appropriate federal
agency.
Purchases by personal check Checks or money orders should be in U.S.
dollars and payable to the specific fund you wish to invest in. The funds do not
accept third-party checks. In addition, you may not redeem shares purchased by
check until your original purchase clears, which may take up to ten business
days.
Wire transactions The adviser does not charge a fee for wire transfers from your
bank to the funds. However, your bank may charge a service fee for wiring funds.
Account Policies 15
<PAGE>
MAKING EXCHANGES/REDEEMING SHARES
To exchange shares between mutual funds (mimimun $500)
Phone
- -----
Call 800-426-9363.
Mail
- ----
The funds do not charge a fee for wire transactions, but your bank may.
Your instructions should include:
o your account number
o names of the funds and number of shares or dollar amount you want to
exchange.
Dealer
- ------
Contact your broker-dealer.
Systematic Withdrawal
- ---------------------
Requires $10,000 minimum fund balance
To redeem shares
Phone
- -----
Call 800-426-9363.
The proceeds can be wired to your bank account two business days after your
redemption request, or a check can be mailed to you at the address of record on
the following business day.
Mail
- ----
Your instructions should include:
o your account number
o names of the funds and number of shares or dollar amount you want to
exchange.
A signature guarantee is required whenever:
o you redeem more than $50,000
o you want to send proceeds to a different address
o you have changed your account address within the last 60 days
Dealer
- ------
Contact your broker-dealer.
Systematic Withdrawl
- --------------------
You can choose from several options for monthly, quarterly, semi-annual or
annual withdrawals:
o declining balance
o fixed dollar amount
o fixed share quantity
o fixed percentage of your account
Call 800-426-9363 for details.
16 Account Policies
<PAGE>
EXCHANGING AND REDEEMING SHARES
As with purchase orders, redemption requests received before the regular close
of the New York Stock Exchange will be executed at the NAV calculated at that
day's close.
Minimum account balances If your account balance falls below $500 due to
redemptions, rather than market movements, the fund may give you 60 days to
bring the balance back up. If you do not increase your balance, the fund may
close your account and send you the proceeds.
Exchange minimums You may exchange shares of the same class between funds. From
the perspective of tax liability, an exchange is the same as a redemption from
one fund and purchase of another, meaning that you are likely to generate a
capital gain or loss when you make an exchange. Shares to be exchanged must have
a value of at least $500. If you will be investing in a new fund, you must also
exchange enough shares to meet the minimum balance requirement.
Checkwriting privileges Checkwriting privileges are available by request to
shareholders of these funds. The minimum check amount is $500. There is no fee
for writing checks, but the funds will charge for stop payments or overdrafts.
You cannot close your account by writing a check.
The funds reserve the right to impose a fee or terminate this service upon
notice to shareholders.
Signature guarantees You can get a signature guarantee from many brokers and
from some banks, savings institutions and credit unions. A notary public cannot
provide a signature guarantee.
DISTRIBUTIONS AND TAX CONSIDERATIONS
Each fund pays dividends and distributions approximately 10 calendar days before
month end. Distributions are automatically paid in the form of additional fund
shares. Notify the transfer agent in writing to:
o choose to receive dividends or distributions (or both) in cash
o change the way you currently receive distributions
Your taxable income is the same either way. If you choose to receive
distributions in cash, and the checks are either returned as undeliverable or
left uncashed for six months, your future distributions will be reinvested in
your fund, and uncashed checks will be cancelled and reinvested at the fund's
share price as of the day of cancellation.
Type of Distribution Federal Tax Status
- -------------------- ------------------
Dividends from net ordinary income
investment income
Short-term capital gains ordinary income
The funds do not expect to realize long-term capital gains or losses.
Distributions from the funds are expected to be primarily ordinary income from
dividends.
The funds issue detailed annual tax information statements for each investor,
recording all distributions and redemptions for the preceding year. Any
investors who do not provide a valid Social Security or taxpayer identification
number to the funds may be subject to federal backup withholding tax and charges
against their accounts related to fines.
You should consult your tax adviser about your own particular tax situation.
Account Policies 17
<PAGE>
INVESTMENT ADVISER
The investment adviser of these funds is The Bank of New York, located at One
Wall Street, New York, NY 10286. Founded by Alexander Hamilton in 1784, it is
one of the largest commercial banks in the United States, with over $74 billion
in assets. The Bank of New York began offering investment services in the 1830s
and today manages more than $60 billion in investments for institutions and
individuals.
Adviser compensation The adviser is responsible for all business activities and
investment decisions for the funds. Each fund pays the adviser an annual fee.
The adviser's fee accrues daily and is payable monthly at an annual rate of
0.10% of average daily net assets.
PORTFOLIO MANAGER
BNY Hamilton Money Fund and BNY Hamilton Treasury Money Fund Richard Klingman is
a vice president of the adviser and has managed the funds since 1997. He joined
the adviser in 1996 and has been managing assets since 1990.
18 Account Policies
<PAGE>
NOTES
Notes 19
<PAGE>
FOR MORE INFORMATION
Annual and Semi-Annual Reports These include commentary from the fund manager on
the market conditions and investment strategies that significantly affected each
fund's performance, detailed performance data, a complete inventory of the
funds' securities and a report from the funds' auditor.
Statement of Additional Information (SAI) The SAI contains more detailed
disclosure on features and policies of the funds. A current SAI has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this document (that is, it is legally a part of this prospectus).
You can obtain these documents free of charge, make inquiries or request other
information about the funds by contacting your dealer or:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
800-426-9363
Information is also available from the SEC:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
www.sec.gov
E-mail: [email protected]
For information on the operation of the SEC's public reference room, where
documents may be viewed and copied, call:
1-202-942-8090
Note: The SEC requires a duplicating fee for
paper copies.
SEC File Number: 811-6654
BNY-0089 4/00
BNY
HAMILTON
FUNDS
<PAGE>
BNY
HAMILTON
[LOGO]
PROSPECTUS
EQUITY INCOME FUND
LARGE CAP GROWTH FUND
SMALL CAP GROWTH FUND
INTERNATIONAL
EQUITY FUND
INTERMEDIATE
GOVERNMENT FUND
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or said whether the information in this
prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a crime.
INTERMEDIATE INVESTMENT
GRADE FUND
INTERMEDIATE NEW YORK
TAX-EXEMPT FUND
INTERMEDIATE
TAX-EXEMPT FUND
APRIL 4, 2000
BNY
HAMILTON
FUNDS
<PAGE>
- --------------------------------------------------------------------------------
ABOUT THE FUNDS
- --------------------------------------------------------------------------------
4 BNY Hamilton Equity Income Fund
8 BNY Hamilton Large Cap Growth Fund
12 BNY Hamilton Small Cap Growth Fund
16 BNY Hamilton International Equity Fund
20 BNY Hamilton Intermediate
Government Fund
24 BNY Hamilton Intermediate Investment
Grade Fund
28 BNY Hamilton Intermediate New York
Tax-Exempt Fund
32 BNY Hamilton Intermediate
Tax-Exempt Fund
- --------------------------------------------------------------------------------
ACCOUNT POLICIES
- --------------------------------------------------------------------------------
36 Daily NAV Calculation
36 Distribution (12b-1) Plan
37 Opening an Account/Purchasing Shares
38 Making Exchanges/Redeeming Shares
39 Distributions and Tax Considerations
40 Investment Adviser
40 Portfolio Managers
FOR MORE INFORMATION
Back Cover
<PAGE>
AN INTRODUCTION TO BNY HAMILTON FUNDS
The BNY Hamilton Funds aim for high investment returns with consistent
performance over many market cycles.
The equity funds are presented in order from most conservative to most
aggressive and invest primarily in common stocks of companies. The BNY
International Equity Fund invests primarily in companies outside the U.S. These
funds are best suited for long-term investment.
The fixed-income funds, also presented in order from most conservative to most
aggressive, seek to provide current income and stability of principal to varying
degrees. The tax-exempt funds further aim to generate income that is free from
federal and/or state income tax.
Both types of funds are valuable components in most investors' overall
portfolios. The percentage of your portfolio you allocate to each would depend
on your time horizon, tax bracket, investment goals and tolerance for risk,
among other factors.
RISKS OF MUTUAL FUND INVESTING
Investments in mutual funds are not bank deposits, nor are they guaranteed by
the Federal Deposit Insurance Corporation or any other government agency. It is
important to read all the disclosure information provided and to understand that
you could lose money by investing in any of these funds.
<PAGE>
BNY HAMILTON
EQUITY INCOME FUND
[LOGO]
CUSIP Numbers:
Institutional Shares 05561M770
Investor Shares 05561M408
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation with a yield greater
than the yield of the Standard & Poor's 500 Index.
MANAGEMENT STRATEGY
The Fund pursues its objective by investing primarily in the common stock, and
securities convertible into common stock, of U.S. and foreign companies. At
least 65% of the Fund's assets will normally be invested in equity securities
that pay dividends or interest. The portfolio is diversified broadly across
market sectors, while focusing on interest rate-sensitive industries, such as
financial services, utilities and real estate investment trusts (REITs). The
Fund may emphasize different sectors in the future.
The portfolio manager evaluates current economic conditions and the relative
merits of growth and yield in deciding how to allocate the Fund's investments
between common stock and convertible securities. Convertible securities can
temper losses in a declining stock market by providing steady income while still
offering opportunities for capital growth.
Fundamental financial analysis is used to identify companies with reasonable
valuations that pay above-average dividends and have a history of consistent
growth with stable, predictable cash flows. While such companies are generally
large, the Fund may invest in companies of any size. Once these companies have
been identified, the Fund may invest in their common stocks or convertible
securities based on their relative attractiveness. The Fund's portfolio
generally includes holdings of 80 to 100 companies.
Under normal circumstances, the Fund intends to be fully invested in common
stock and convertible securities, although it is permitted to invest in
virtually any type of security. Most of the Fund's investments have been
domestic, but it may also invest without limit in foreign securities, including
those of emerging markets.
Within limits, the Fund may also use certain derivatives, which are investments
whose value is determined by underlying securities or indices. As a temporary
defensive measure, the Fund may invest more than 35% of its assets in cash or
cash equivalents. Under such circumstances, the Fund would not be pursuing its
investment objective.
4 BNY Hamilton Equity Income Fund
<PAGE>
MAIN INVESTMENT RISKS
The value of your investment in the Fund generally will fluctuate with stock
market movements. As a group, the large-capitalization stocks emphasized by the
Fund could fall out of favor with the market, particularly in comparison with
small- or medium-capitalization stocks.
In a strong market, convertible securities that pay above-average dividends
generally lag other types of equity securities. If stocks in the portfolio
reduce or eliminate their dividend payments, the fund will generate less income.
The portfolio manager's investment strategies may not work out as planned, and
the Fund's performance could suffer.
The value of debt securities, including convertible securities, is most affected
by interest rates. When interest rates rise, bond prices generally fall in
proportion to their maturity. Any debt securities held by the Fund could be
downgraded in credit rating or go into default.
Investments in foreign securities involve additional risks, including
potentially unfavorable currency exchange rates, limited or misleading financial
information, generally higher transaction costs and political and economic
disturbances ranging from tax legislation to military coups. These risks are
magnified in emerging markets.
Equity Investing and Convertibles
Convertibles are fixed-income corporate securities that pay regular interest and
may be converted into shares of a company's common stock. The number of shares a
convertible will turn into, its conversion ratio, is established when the
security is issued. Thus, a convertible security's value can rise along with the
company's common stock while providing the current income and lower volatility
of a bond investment.
At the same time, convertible securities are subject to many of the risks of
both stock and bond investing. Their value is influenced primarily by stock
market movements but also by changes in interest rates. Convertibles are usually
callable, meaning that the company can prepay its obligation, and the call terms
can affect the security's value significantly.
BNY Hamilton Equity Income Fund 5
<PAGE>
PAST PERFORMANCE
The following chart demonstrates the risk of investing in the Fund by showing
the year-to-year returns and pattern of price volatility. Returns for the Fund's
single best and single worst quarters suggest how widely performance has varied
over the short term. Past performance does not guarantee future performance.
Investor Shares annual total returns(1) (%) as of 12/31/99
[Bar Chart Appears Here]
11.94 -2.58 25.78 19.58 25.85 12.82 14.27
- --------------------------------------------------------------
93 94 95 96 97 98 99
Best quarter: Q4 '99 +13.70 Worst quarter: Q3 '98 -9.76
The table below presents the Fund's average annual returns over various periods
along with those of widely recognized indices.
Average annual total returns (%) as of 12/31/99*
Since
1 Year 5 Years 8/10/92
- ---------------------------------------------------------
Institutional Shares(2) 14.51 19.70 15.14
Investor Shares(1) 14.27 19.52 15.03
S&P 500(3) 20.98 28.56 20.85
Lipper Equity Income
Funds Index(4) 4.19 17.80 14.56
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect as an investor
in the Fund. "Annual Operating Expenses" come out of Fund assets, and are
reflected in the total return. Since these funds are "no-load", shareholders pay
no fees or out-of-pocket expenses.
Fee table (% of average net assets)
Institutional Investor
Shares Shares
- --------------------------------------------------------------
Shareholder Fees None None
Annual Operating Expenses
- --------------------------------------------------------------
Management fee 0.60 0.60
Distribution (12b-1) fees -- 0.25
Other expenses 0.27 0.27
Total annual operating expenses 0.87 1.12
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this information so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment* ($)
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------
Institutional Shares 89 278 482 1,073
Investor Shares 114 356 617 1,363
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns and no change in operating
expenses.
- --------------------------------------------------------------------------------
(1) Investor Shares commenced operations on 8/10/92.
(2) Before 4/1/97, performance figures are based on the performance of Investor
Shares of the Equity Income Fund.
(3) The S&P 500 is an unmanaged index of 500 large U.S. companies.
(4) The Lipper Equity Income Funds Index tracks the returns (after fees) of the
largest growth and income mutual funds. This index is included to show how
the fund's performance compares with its peers.
6 BNY Hamilton Equity Income Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance over the past five years (or since inception). Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended December 31, 1999 has been
audited by Ernst & Young LLP*, whose report, along with the Fund's financial
statement, is included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
Institutional Shares--Year Ended December 31, 1999 1998 1997(1)
Per-Share Data ($)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period 16.57 15.54 14.21
- --------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.28 0.28 0.25
Net realized and unrealized gain on investments 2.02 1.73 3.25
- --------------------------------------------------------------------------------------
Total income from investment operations 2.30 2.01 3.50
Less distributions:
Dividends from net investment income (0.29) (0.27) (0.24)
Distributions from capital gains (2.07) (0.71) (1.93)
- --------------------------------------------------------------------------------------
Total dividends and distributions 2.36 (0.98) (2.17)
Net asset value at end of period 16.51 16.57 15.54
- --------------------------------------------------------------------------------------
Total return (%) 14.51 13.18 24.73(2)
- --------------------------------------------------------------------------------------
Ratios/Supplemental Data (%)
- --------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 547,250 528,233 522,524
Ratio of expenses to average net assets 0.87 0.89 0.87(3)
Ratio of net investment income to average net assets 1.63 1.77 2.07(3)
Portfolio turnover rate 53 39 65
</TABLE>
<TABLE>
<CAPTION>
Investor Shares--Year Ended December 31, 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
Per-Share Data ($)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period 16.53 15.53 14.12 12.99 10.70
- -------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.24 0.25 0.35 0.30 0.32
Net realized and unrealized gain on investments 2.01 1.71 3.27 2.22 2.41
- -------------------------------------------------------------------------------------------------------
Total income from investment operations 2.25 1.96 3.62 2.52 2.73
Less distributions:
Dividends from net investment income (0.24) (0.25) (0.28) (0.29) (0.32)
Distributions from capital gains (2.07) (0.71) (1.93) (1.10) (0.12)
- --------------------------------------------------------------------------------------------------------
Total dividends and distributions (2.31) (0.96) (2.21) (1.39) (0.44)
Net asset value at end of period 16.47 16.53 15.53 14.12 12.99
- --------------------------------------------------------------------------------------------------------
Total return (%) 14.27 12.82 25.85 19.58 25.78
Ratios/Supplemental Data (%)
- --------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 37,994 37,212 34,213 216,363 169,841
Ratio of expenses to average net assets 1.12 1.17 1.01 0.97 1.00
Ratio of net investment income to average net assets 1.38 1.50 1.77 2.17 2.66
Portfolio turnover rate 53 39 65 58 58
</TABLE>
* KPMG LLP audited the figures for 1997 and 1998.
Previous years' data were audited by Deloitte & Touche LLP.
- --------------------------------------------------------------------------------
(1) Institutional shares commenced operations on 4/1/97.
(2) Not annualized.
(3) Annualized.
BNY Hamilton Equity Income Fund 7
<PAGE>
BNY HAMILTON
LARGE CAP GROWTH FUND
[LOGO]
CUSIP Numbers:
Institutional Shares 05561M887
Investor Shares 05561M879
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation by investing primarily
in common stocks and securities convertible into common stocks of domestic and
foreign companies; current income is a secondary consideration.
MANAGEMENT STRATEGY
Individual stock selection, rather than industry allocation, is the primary
focus in investing the Fund's assets. Fundamental financial analysis is used to
identify companies that appear to offer the following:
o potential for above-average, accelerating earnings or revenue growth
o dominant market positions
o improving operating efficiency
o increased earnings per share (EPS)
Companies that meet these criteria have tended to cluster in a few sectors --
healthcare, technology, telecommunications, financial services, and consumer
staples. The Fund's portfolio generally includes large-capitalization stocks of
40 to 60 companies whose market capitalizations are $3 billion or more.
Although most of the Fund's investments have been domestic, it may invest
without limit in foreign securities. Within limits, the Fund also uses certain
derivatives, which are investments whose value is determined by underlying
securities or indices.
Under normal circumstances, the Fund will invest at least 65% of its assets in
large-capitalization stocks. As a temporary defensive measure, the Fund may
invest more than 35% of its assets in cash or cash equivalents. Under such
circumstances, the Fund would not be pursuing its investment objective.
8 BNY Hamilton Large Cap Growth Fund
<PAGE>
MAIN INVESTMENT RISKS
The value of your investment in the Fund generally will fluctuate with stock
market movements. As a group, the large-capitalization stocks emphasized by the
Fund could fall out of favor with the market, particularly in comparison with
small- or medium-capitalization stocks.
The portfolio manager's investment strategies may not work out as planned, and
the Fund's performance could suffer.
Investments in derivatives could limit profits or increase losses in comparison
with the performance of the underlying securities.
Investments in foreign securities involve additional risks, including
potentially unfavorable currency exchange rates, limited or misleading financial
information, generally higher transaction costs and political and economic
disturbances ranging from tax legislation to military coups. These risks are
magnified in emerging markets.
Characteristics of Large-Cap Companies
The largest U.S. companies, those with market capitalizations over $3 billion,
are a relatively select group that nonetheless covers all industries and
geographies. These companies are typically well-established businesses with
broad product lines and customers in many markets. Their diversification and
usually substantial cash reserves enable them to weather economic downturns. The
dividends they pay can also cushion the effects of market volatility, since
their stocks generate steady income even while their price may be depressed.
The long-term capital appreciation of large-cap stocks has historically lagged
smaller companies.
BNY Hamilton Large Cap Growth Fund 9
<PAGE>
PAST PERFORMANCE
The following chart demonstrates the risk of investing in the Fund by showing
the year-to-year returns and pattern of price volatility. Returns for the Fund's
single best and single worst quarters suggest how widely performance has varied
over the short term. Past performance does not guarantee future performance.
Institutional Shares annual total returns(1)
(%) as of 12/31/99
- --------------------------------------------
[Bar Chart Appears Here]
<TABLE>
<CAPTION>
30.21 -2.91 30.97 4.76 10.30 -1.97 31.70 24.17 31.21 23.49 37.13
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
89 90 91 92 93 94 95 96 97 98 99
</TABLE>
Best quarter: Q4 '99 +24.40% Worst quarter: Q3 '90 -12.44%
The table below presents the Fund's average annual returns over various periods
along with those of widely recognized indices.
Average annual total returns (%) as of 12/31/99*
- ------------------------------------------------
1 Year 5 Years 10 Years
- ----------------------------------------------------
Institutional Shares(1) 37.13 29.46 18.01
Investor Shares(1) 36.83 29.30 17.93
S&P 500(2) 20.98 28.56 18.21
Lipper Growth and
Income Funds Index(3) 11.86 20.60 14.38
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect as an investor
in the Fund. "Annual Operating Expenses" come out of Fund assets, and are
reflected in the total return. Since these funds are "no-load", shareholders pay
no fees or out-of-pocket expenses.
Fee table (% of average net assets)
Institutional Investor
Shares Shares
- --------------------------------------------------------
Shareholder Fees None None
Annual Operating Expenses
- --------------------------------------------------------
Management fee 0.60 0.60
Distribution (12b-1) fees None 0.25
Other expenses 0.26 0.29
Total annual operating expenses* 0.86 1.14
* This year, the adviser voluntarily reduced the Fund's operating expenses
for Institutional Shares by 0.01% and for Investor Shares by 0.03%,
resulting in net operating expenses of 0.85% and 1.11%, respectively, based
on average daily net assets.
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this information so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment* ($)
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------
Institutional Shares 87 273 476 1,060
Investor Shares 113 359 625 1,383
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns and no change in operating expenses.
- --------------------------------------------------------------------------------
(1) For Institutional Shares before 4/1/97 and for Investor Shares before
5/1/97, performance figures are based on the performance of an unregistered
Bank of New York common trust fund that had objectives and policies
materially equivalent to those of the current mutual fund. Although the
figures have been adjusted to attempt to reflect expenses associated with
the mutual fund, they are only approximations. Many other factors also
reduce their reliability. For example, the common trust fund performance
might have been lower if it had been subject to the extra restrictions
imposed on mutual funds.
(2) The S&P 500 is an unmanaged index of 500 large U.S. companies.
(3) The Lipper Growth and Income Funds Index tracks the returns (after fees) of
the largest growth and income mutual funds. This index is included to show
how the fund's performance compares with its peers.
10 BNY Hamilton Large Cap Growth Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance over the past five years (or since inception). Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended December 31, 1999 has been
audited by Ernst & Young LLP*, whose report, along with the Fund's financial
statement, is included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
Institutional Shares--Year Ended December 31, 1999 1998 1997(1)
Per-Share Data ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period 12.71 10.94 10.00
- --------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.05 0.11 0.08
Net realized and unrealized gain on investments 4.59 2.46 2.83
- --------------------------------------------------------------------------------------------
Total income from investment operations 4.64 2.57 2.91
Less distributions:
Dividends from net investment income (0.05) (0.11) (0.08)
Distributions from capital gains (1.15) (0.69) (1.89)
- --------------------------------------------------------------------------------------------
Total dividends and distributions (1.20) (0.80) (1.97)
Net asset value at end of period 16.15 12.71 10.94
Total return 37.13 23.49 29.11(3)
Ratios/Supplemental Data (%)
- --------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 589,285 443,997 373,326
Ratio of expenses (after reduction) to average net assets 0.85 0.82 0.82(4)
Ratio of expenses (before reduction) to average net assets 0.86 0.91 0.88(4)
Ratio of net investment income (after reduction) to average
net assets 0.36 0.73 0.89(4)
Portfolio turnover rate 18 26 37(3)
</TABLE>
<TABLE>
<CAPTION>
Investor Shares--Year Ended December 31, 1999 1998 1997(2)
Per-Share Data ($)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period 12.65 10.92 10.70
- --------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.01 0.11 0.06
Net realized and unrealized gain on investments 4.57 2.42 2.12
- --------------------------------------------------------------------------------------
Total income from investment operations 4.58 2.53 2.18
Less distributions:
Dividends from net investment income (0.03) (0.11) (0.07
Distributions from capital gains (1.15) (0.69) (1.89
- --------------------------------------------------------------------------------------
Total dividends and distributions (1.18) (0.80) (1.96
Net asset value at end of period 16.05 12.65 10.92
- --------------------------------------------------------------------------------------
Total return (%) 36.83 23.26 20.37(3)
Ratios/Supplemental Data (%)
- --------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 18,642 11,047 6,464
Ratio of expenses (after reduction) to average net
assets 1.11 1.07 1.07(4)
Ratio of expenses (before reduction) to average net
assets 1.14 1.21 1.16(4)
Ratio of net investment income (after reduction) to
average net assets 0.10 0.50 0.54(4)
Portfolio turnover rate 18 26 373
</TABLE>
- --------------------------------------------------------------------------------
(1) Institutional Shares commenced operations on 4/1/97.
(2) Investor Shares commenced operations on 5/1/97.
(3) Not annualized.
(4) Annualized.
* Previous years' data were audited by KPMG LLP.
BNY Hamilton Large Cap Growth Fund 11
<PAGE>
BNY HAMILTON
SMALL CAP GROWTH FUND
[LOGO]
CUSIP Numbers:
Institutional Shares 05561M861
Investor Shares 05561M853
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation by investing primarily
in equity securities of small domestic and foreign companies.
MANAGEMENT STRATEGY
Individual security selection is the primary investment focus, rather than
industry allocation. Within the universe of small-capitalization companies whose
market capitalizations are between $100 million and $1.5 billion, the Fund
targets those with above-average earnings growth that have exceeded market
expectations. Among this group, the Fund emphasizes companies that dominate
niche markets, and thus exert more control over the pricing and supply in their
markets. The Fund expects the companies it invests in to achieve sustained
growth in earnings or revenues over the next two to three years. Specific
factors that may suggest growth include:
o expanded operations
o new products or technologies
o new distribution channels
o generally favorable industry conditions
o revitalized company management
To complement these core investments, the portfolio manager looks for
opportunities to take advantage of industry cycles, and thus may overweight
different sectors as economic conditions change. The Fund may continue to invest
in companies in its portfolio even after their market capitalizations exceed
$1.5 billion.
Although most of the Fund's investments have been domestic, it may invest
without limit in foreign securities. Under normal circumstances, the Fund will
invest at least 65% of its assets in small-capitalization stocks. As a
temporary defensive measure, the Fund may invest more than 35% of its assets in
cash or cash equivalents. Under such circumstances, the Fund would not be
pursuing its investment objective.
12 BNY Hamilton Small Cap Growth Fund
<PAGE>
MAIN INVESTMENT RISKS
The value of your investment in the Fund generally will fluctuate with stock
market movements. Since the prices of the small-capitalization stocks emphasized
by the Fund have historically been more volatile than those of larger companies,
the ups and downs of your investment in the Fund may be more extreme than the
market as a whole.
As a group, small companies are usually relatively young, and their short track
records make it difficult to build a case for sustainable long-term growth.
Limited product lines, niche markets, and small capital reserves may not allow
small companies to survive temporary setbacks. In a declining market, these
stocks can also be hard to sell at a price that is beneficial to the Fund.
The portfolio manager's investment strategies may not work out as planned, and
the Fund's performance could suffer.
Investments in foreign securities involve additional risks, including
potentially unfavorable currency exchange rates, limited or misleading financial
information, generally higher transaction costs and political and economic
disturbances ranging from tax legislation to military coups. These risks are
magnified in emerging markets.
Small-Cap Companies and Growth Investing
Small companies tend to grow or fade quickly by their nature. Their market
valuations are often based more on investors' belief in their future potential
than on their current balance sheets. Since market sentiment can change from one
day or week to the next, small-cap stock prices have historically been more
volatile than those of large-cap stocks. Growth investors are often attracted to
small companies for their specialization and innovation.
Specialization: Small companies often occupy niche markets, catering to a
specific geography or industry. They can grow to dominate such markets rapidly,
but are also threatened by even temporary downturns.
13 BNY Hamilton Small Cap Growth Fund
<PAGE>
PAST PERFORMANCE
The following chart demonstrates the risk of investing in the Fund by showing
the year-to-year returns and pattern of price volatility. Returns for the Fund's
single best and single worst quarters suggest how widely performance has varied
over the short term. Past performance does not guarantee future performance.
Institutional Shares annual total returns(1)
(%) as of 12/31/99
- ----------------------------------------------------------------
52.45 5.88 19.12 -0.33 20.92 29.97 9.39 7.89 97.22
- ----------------------------------------------------------------
91 92 93 94 95 96 97 98 99
Best quarter: Q4 '99 +54.82% Worst quarter: Q3 '98 -16.98%
The table below presents the Fund's average annual returns over various periods
along with those of widely recognized indices.
Average annual total returns (%) as of 12/31/99*
Since
1 Year 5 years 12/31/90
- ----------------------------------------------------------------
Institutional Shares(1) 97.22 29.59 24.14
Investor Shares(1) 96.65 29.48 24.08
Russell 2000(2) 21.26 16.69 21.43
Lipper Small Cap Funds Index(3) 41.54 19.43 18.67
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect as an investor
in the Fund. "Annual Operating Expenses" come out of Fund assets, and are
reflected in the total return. Since these funds are "no-load", shareholders pay
no fees or out-of-pocket expenses.
Fee table (% of average net assets)
Institutional Investor
Shares Shares
- ---------------------------------------------------
Shareholder Fees None None
Annual Operating Expenses
- ---------------------------------------------------
Management fee 0.75 0.75
Distribution (12b-1) fees None 0.25
Other expenses 0.31 0.37
Total annual operating expenses* 1.06 1.37
* This year, the adviser voluntarily reduced the Fund's operating expenses
for Institutional Shares by 0.02% and for Investor Shares by 0.08%,
resulting in net operating expenses of 1.04% and 1.33% respectively based
on average daily net assets. Management reserves the right to implement and
discontinue expense limitations at any time.
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this information so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment* ($)
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------
Institutional Shares 106 335 583 1,292
Investor Shares 135 430 746 1,643
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns, no voluntary expense reductions and no
change in operating expenses.
- --------------------------------------------------------------------------------
(1) For Institutional Shares before 4/1/97 and for Investor Shares before
5/1/97, performance figures are based on the performance of an unregistered
Bank of New York common trust fund that had objectives and policies
materially equivalent to those of the current mutual fund. Although the
figures have been adjusted to attempt to reflect expenses associated with
the mutual fund, they are only approximations. Many other factors also
reduce their reliability. For example, the common trust fund performance
might have been lower if it had been subject to the extra restrictions
imposed on mutual funds.
(2) The Russell 2000 is an unmanaged index of small U.S. companies.
(3) The Lipper Small Cap Funds Index tracks the returns (after fees) of the
largest small-cap equity mutual funds. This index is included to show how
the fund's performance compares with its peers.
14 BNY Hamilton Small Cap Growth Fund
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance over the past five years (or since inception). Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended December 31, 1999 has been
audited by Ernst & Young LLP*, whose report, along with the Fund's financial
statement, is included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
Institutional Shares--Year Ended December 31, 1999 1998 1997(1)
- ----------------------------------------------------------------------------------------------------------
Per-Share Data ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period 12.46 11.93 10.00
----------------------------------------------
Income from investment operations:
Net investment income (loss) (0.11)(5) (0.02)(5) (0.02)
Net realized and unrealized gain on investments 12.08 0.91 2.80
----------------------------------------------
Total income from investment operations 11.97 0.89 2.78
Less distributions:
Distributions from capital gains (1.65) (0.36) (0.85)
----------------------------------------------
Net asset value at end of period 22.78 12.46 11.93
----------------------------------------------
Total return (%) 97.22 7.89 27.80(3)
Ratios/Supplemental Data (%)
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 389,553 188,402 133,741
Ratio of expenses (after reduction) to average net assets 1.04 0.97 0.97(4)
Ratio of expenses (before reduction) to average net assets 1.06 1.13 1.10(4)
Ratio of net investment income (loss)(after reduction)
to average net assets (0.73) (0.19) (0.26)(4)
Portfolio turnover rate 86 84 68(3)
<CAPTION>
Investor Shares--Year Ended December 31, 1999 1998 1997(2)
- ----------------------------------------------------------------------------------------------------------
Per-Share Data ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period 12.44 11.94 10.03
----------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13)(5) (0.04)(5) (0.02)
Net realized and unrealized gain on investments 12.01 0.90 2.78
----------------------------------------------
Total income from investment operations 11.88 0.86 2.76
Less distributions:
Distributions from capital gains (1.65) (0.36) (0.85)
----------------------------------------------
Net asset value at end of period 22.67 12.44 11.94
----------------------------------------------
Total return 96.65 7.55 27.52(3)
Ratios/Supplemental Data (%)
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 15,062 6,763 1,162
Ratio of expenses (after reduction) to average net assets 1.33 1.22 1.22(4)
Ratio of expenses (before reduction) to average net assets 1.37 1.46 1.40(4)
Ratio of net investment income (loss)(after reduction)
to average net assets (0.96) (0.43) (0.54)(4)
Portfolio turnover rate 86 84 68(3)
</TABLE>
- --------------------------------------------------------------------------------
(1) Institutional Shares commenced operations on 4/1/97.
(2) Investor Shares commenced operations on 5/1/97.
(3) Not annualized.
(4) Annualized.
(5) Based on average shares outstanding.
* Previous years' data were audited by KPMG LLP.
BNY Hamilton Small Cap Growth Fund 15
<PAGE>
BNY HAMILTON
INTERNATIONAL
EQUITY FUND
[LOGO]
CUSIP Numbers:
Institutional Shares 05561M846
Investor Shares 05561M838
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation by investing primarily
in equity securities of non-U.S. issuers.
MANAGEMENT STRATEGY
The Fund's country allocation normally reflects, within a range of 5%, that of
the Morgan Stanley Capital International Europe, Australia and Far East (MSCI
EAFE) Index. Economic conditions within regions may determine the types of
industries and securities the fund will favor. In a recovering economy, for
instance, the Fund might emphasize exporters over financial services companies.
The Fund emphasizes investments in dynamic industries that are experiencing
changes, whether through growth or restructuring.
In selecting individual stocks, the Fund emphasizes large companies but
considers companies of all sizes with the following characteristics:
o high-quality earnings
o significant long-term growth
o strong management
o reasonable valuation
Investment research includes fundamental financial analysis and on-site visits.
The Fund generally diversifies its investments across many countries, but it may
concentrate up to 50% of its assets in a single country. The Fund may not invest
in certain developing countries, including Russia, but it may invest in other
more stable emerging markets.
Under normal circumstances, the Fund intends to be fully invested in common
stocks. As a temporary defensive measure, the Fund may invest more than 35% of
its assets in U.S. cash or cash equivalents. Under such circumstances, the Fund
would not be pursuing its investment objective.
16 BNY Hamilton International Equity Fund
<PAGE>
MAIN INVESTMENT RISKS
The value of your investment in the Fund will generally fluctuate with stock
market movements in the countries in which the Fund is invested. Since the
prices of many non-U.S. stocks emphasized by the Fund have historically been
more volatile than those of U.S. stocks, the ups and downs of your investment in
this Fund may be more extreme.
As a group, the large-capitalization stocks emphasized by this Fund could fall
out of favor with the market, particularly in comparison with small- or
medium-capitalization stocks.
Investments in smaller companies, on the other hand, have historically been more
volatile than those of larger companies. And to the extent that the Fund invests
in them, the volatility of your investment may increase.
Investments in foreign securities involve additional risks. Unfavorable currency
exchange rates could decrease the value of your investment in terms of U.S.
dollars. Transaction expenses are generally higher on foreign exchanges than in
the U.S., which could affect performance. Furthermore, foreign taxes could also
detract from performance. Some foreign companies do not adhere to uniform
accounting principles, so publicly available financial information may be
limited or misleading. Political and social unrest could also affect the
performance of this fund. These risks are magnified in emerging markets.
The portfolio manager's asset allocation strategy or choice of specific
securities may not work out as planned, and the Fund could underperform its
peers or lose money.
In periods of market uncertainty, some of the portfolio's securities could prove
difficult to sell at a price that is beneficial to the Fund.
Globalization and International Investing
With more than half of the world's market opportunities outside the U.S.,
international funds offer investors greater diversification than a purely
domestic portfolio. International markets are experiencing many of the same
dynamics that drove U.S. stock growth in the 1990s:
o corporate restructuring
o increased emphasis on shareholder value
o growing pool of investors through retirement and other savings plans
Meanwhile, global competition is spurring companies worldwide, and particularly
in developed economies, to increase their efficiency by cutting costs,
relocating production facilities, outsourcing non-essential processes and
focusing on their core businesses.
Businesses in emerging markets may benefit substantially from free-market
reforms, reduced barriers to trade and rising standards of living.
BNY Hamilton International Equity Fund 17
<PAGE>
PAST PERFORMANCE
The following chart demonstrates the risk of investing in the Fund by showing
the year-to-year returns and pattern of price volatility. Returns for the Fund's
single best and single worst quarters suggest how widely performance has varied
over the short term. Past performance does not guarantee future performance.
Institutional Shares annual total returns(1)(%) as of 12/31/99
[Bar Chart Appears Here]
20.84 43.45
- -------------------------------------------------------
98 99
Best quarter: Q4 '99 +29.58% Worst quarter: Q3 '98 -13.40%
The table below presents the Fund's average annual returns over various periods
along with those of widely recognized indices.
Average annual total returns (%) as of 12/31/99*
Life
1 Year of fund
------------------------------------------------------
Institutional Shares(1) 43.45 25.11
Investor Shares(2) 43.00 24.76
MSCI EAFE(3) 27.31 18.28
Lipper International Funds Index(4) 37.83 19.31
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect as an investor
in the Fund. "Annual Operating Expenses" come out of Fund assets, and are
reflected in the total return. Since these funds are "no-load", shareholders pay
no fees or out-of-pocket expenses.
Fee table (% of average net assets)
Institutional Investor
Shares Shares
- ---------------------------------------------------
Shareholder Fees None None
Annual Operating Expenses
- ---------------------------------------------------
Management fee 0.85 0.85
Distribution (12b-1) fees -- 0.25
Other expenses 0.39 0.45
Total annual operating expenses* 1.24 1.55
* This year, the adviser voluntarily reduced the Fund's operating expenses
for Investor Shares by 0.03%, resulting in net operating expenses of 1.52%
based on average daily net assets. Management reserves the right to
implement and discontinue expense limitations at any time.
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this information so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment* ($)
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------
Institutional Shares 126 393 681 1,500
Investor Shares 155 487 842 1,843
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns and no change in operating expenses.
- --------------------------------------------------------------------------------
(1) Institutional Shares commenced operations on 4/1/97.
(2) Investor Shares commenced operations on 5/1/97.
(3) The MSCI EAFE is an unmanaged index of stocks of companies in Europe,
Australia, Asia and the Far East.
(4) The Lipper International Funds Index tracks the returns (after fees) of the
largest international equity mutual funds. This index is included to show
how the fund's performance compares with its peers.
18 BNY Hamilton International Equity Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance over the past five years (or since inception). Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended December 31, 1999 has been
audited by Ernst & Young LLP* whose report, along with the Fund's financial
statement, is included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
Institutional Shares--Year Ended December 31, 1999 1998 1997(1)
- ----------------------------------------------------------------------------------------------------------
Per-Share Data ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period 12.90 10.69 10.00
----------------------------------------------
Income from investment operations:
Net investment income -- 0.03 0.02
Net realized and unrealized gain on investments 5.55 2.20 0.67
----------------------------------------------
Total income from investment operations 5.55 2.23 0.69
Less distributions:
Dividends from net investment income (0.03) (0.02) --
Distributions from capital gains (0.72) -- --
----------------------------------------------
Total dividends and distributions (0.75) (0.02) --
----------------------------------------------
Net asset value at end of period 17.70 12.90 10.69
----------------------------------------------
Total return (%) 43.45 20.84 6.90(3)
Ratios/Supplemental Data (%)
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 273,597 177,363 94,806
Ratio of expenses (after reduction) to average net assets 1.24 1.27 1.26(4)
Ratio of expenses (before reduction) to average net assets 1.24 1.32 1.49(4)
Ratio of net investment income (after reduction)
to average net assets 0.01 0.54 0.26(4)
Portfolio turnover rate 84 75 36(3)
<CAPTION>
Investor Shares--Year Ended December 31, 1999 1998 1997(2)
- ----------------------------------------------------------------------------------------------------------
Per-Share Data ($)
- ----------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 12.84 10.66 10.19
----------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) 0.03 0.02
Net realized and unrealized gain on investments 5.51 2.17 0.45
----------------------------------------------
Total income from investment operations 5.47 2.20 0.47
Less distributions:
Dividends from net investment income -- (0.02) --
Distributions from capital gains (0.72) -- --
----------------------------------------------
Total dividends and distributions (0.72) (0.02) --
----------------------------------------------
Net asset value at end of period 17.59 12.84 10.66
----------------------------------------------
Total return (%) 43.00 20.61 4.61(3)
Ratios/Supplemental Data (%)
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 12,010 5,391 2,560
Ratio of expenses (after reduction) to average net assets 1.52 1.52 1.52(4)
Ratio of expenses (before reduction) to average net assets 1.55 1.65 1.75(4)
Ratio of net investment income (loss)(after reduction)
to average net assets (0.27) 0.32 0.33(4)
Portfolio turnover rate 84 75 36(3)
</TABLE>
- --------------------------------------------------------------------------------
(1) Institutional Shares commenced operations on 4/1/97.
(2) Investor Shares commenced operations on 5/1/97.
(3) Not annualized.
(4) Annualized.
* Previous years' data were audited by KPMG LLP.
BNY Hamilton International Equity Fund 19
<PAGE>
BNY HAMILTON
INTERMEDIATE
GOVERNMENT FUND
[LOGO]
CUSIP Numbers:
Institutional Shares 05561M762
Investor Shares 05561M200
INVESTMENT OBJECTIVE
The Fund seeks to provide as high a level of current income as is consistent
with preservation of capital, moderate stability in net asset value and minimal
credit risk.
MANAGEMENT STRATEGY
The Fund pursues its objective by investing primarily in debt obligations issued
or guaranteed by the U.S. government or its agencies. Under normal market
conditions, the Fund maintains a dollar-weighted average maturity between three
years and ten years.
In investing the Fund's assets, an analysis of economic trends, particularly
interest rate movements and yield spreads, is used to determine which types of
securities offer the best investment opportunities. This analysis takes place on
several levels. First, the Fund allocates broadly between direct agency debt
obligations, agency mortgage-backed securities, and U.S. Treasuries.
The Fund invests in the various types of mortgage-backed securities based on an
evaluation of relative yields and prepayment risk, among other factors. In a
period of declining interest rates, for example, the Fund might favor discount
mortgage securities over higher-yielding premium mortgage securities because of
their lower prepayment risk.
The Fund also invests in collateralized mortgage obligations, or CMOs, which are
backed by pools of mortgages and are organized so that different classes of
securities with different maturities and coupons are available.
In selecting individual securities, the portfolio manager uses models to
evaluate probable yields over time and prepayment risk, among other factors. The
Fund attempts to manage interest rate risk by adjusting its duration. Duration
is measured in years, like maturity, and it is a more accurate gauge of a bond's
sensitivity to interest rate change because it takes additional significant
factors, including prepayment risk, into account.
Under normal circumstances, the Fund intends to be fully invested in government
and agency securities. As a temporary defensive measure, the Fund may invest
more than 35% of its assets in cash or cash equivalents. Under such
circumstances, the Fund would not be pursuing its investment objective.
20 BNY Hamilton Intermediate Government Fund
<PAGE>
MAIN INVESTMENT RISKS
The value of your investment in the Fund generally will fluctuate with interest
rate movements. As interest rates rise, bond prices go down. The longer the
duration of a bond, the more sharply its value will rise or fall in response to
an interest rate change.
When interest rates drop, holders of the mortgages represented by CMOs and other
mortgage-backed securities are more likely to refinance, thus forcing the Fund
to find new investments, which could have lower yields.
When interest rates rise, on the other hand, mortgage holders tend not to
prepay, and then the Fund can miss opportunities to reinvest in more profitable
securities.
In periods of market uncertainty, some of the portfolio's securities could be
difficult to sell at a price that is beneficial to the Fund.
The portfolio manager's asset allocation strategy or choice of specific
securities may not work out as planned, and the Fund could underperform its
peers or lose money.
The Fund has low exposure to credit risk because all of its securities are
backed by the full faith and credit of the U.S. government or guaranteed by one
of its agencies. These guarantees, however, do not prevent shares of the Fund
from falling in value.
Though not likely, it is possible that issuers of bonds in the Fund's portfolio
could be downgraded in credit rating or default on their
payments.
Mortgage-backed Securities and CMOs
Pass-through mortgage-backed backed securities represent a direct ownership
interest in a pool mortgage loans.
Collateralized mortgage obligations (CMOs) are backed by pools of pass-throughs
or mortgage loans. CMO issuers organize the cash flow from the underlying
securities into classes, or tranches, with widely different maturities and
payment schedules. These securities are often fully collateralized by U.S.
government agency securities such as Fannie Mae (FNMA) and GinnieMae (GNMA),
though they may be issued by private firms.
BNY Hamilton Intermediate Government Fund 21
<PAGE>
PAST PERFORMANCE
The following chart demonstrates the risk of investing in the Fund by showing
the year-to-year returns and pattern of price volatility. Returns for the Fund's
single best and single worst quarters suggest how widely performance has varied
over the short term. Past performance does not guarantee future performance.
Investor Shares annual total returns(1) (%) as of 12/31/99
[BAR CHART]
8.03 -517 15.40 3.16 7.54 7.33 -.98
- --------------------------------------------------------------------------------
93 94 95 96 97 98 99
Best quarter: Q2 '95 +5.48 Worst quarter: Q1 '94 -3.54
The table below presents the Fund's average annual returns over various periods
along with those of widely recognized indices.
Average annual total returns (%) as of 12/31/99*
Since
1 Year 5 Years 8/10/92
- ------------------------------------------------------
Institutional Shares(2) -0.73 6.50 4.76
Investor Shares(1) -0.98 6.35 4.66
Lehman Intermediate
Government Index(3) 0.50 6.93 5.78
Lipper Intermediate
U.S. Gov't Funds Index(4) -1.39 6.63 5.25
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect as an investor
in the Fund. "Annual Operating Expenses" come out of Fund assets, and are
reflected in the total return. Since these funds are "no-load", shareholders pay
no fees or out-of-pocket expenses.
Fee table (% of average net assets)
Institutional Investor
Shares Shares
- --------------------------------------------------
Shareholder Fees None None
Annual Operating Expenses
- --------------------------------------------------
Management fee 0.50 0.50
Distribution (12b-1) fees -- 0.25
Other expenses 0.42 0.45
Total annual operating expenses* 0.92 1.20
* This year, the adviser voluntarily reduced the Fund's operating expenses for
Institutional Shares by 0.10% and for Investor Shares by 0.13%, resulting in
net operating expenses of 0.82% and 1.07% respectively based on average daily
net assets. Management reserves the right to implement and discontinue
expense limitations at any time.
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this information so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment* ($)
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------
Institutional Shares 84 283 500 1,122
Investor Shares 109 368 647 1,443
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns, no voluntary expense reductions and no change
in operating expenses.
- --------------------------------------------------------------------------------
(1) Investor Shares commenced operations on 8/10/92.
(2) Before 4/1/97, performance figures are based on the performance of Investor
Shares of the Intermediate Government Fund.
(3) The Lehman Brothers Intermediate Government Index is an unmanaged index of
intermediate-term government bonds.
(4) The Lipper Intermediate U.S. Government Funds Index tracks the returns
(after fees) of the largest intermediate U.S. government mutual funds. This
index is included to show how the fund's performance compares with its
peers.
22 BNY Hamilton Intermediate Government Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance over the past five years (or since inception). Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended December 31, 1999 has been
audited by Ernst & Young LLP*, whose report, along with the Fund's financial
statement, is included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
Institutional Shares--Year Ended December 31, 1999 1998 1997(1)
Per-Share Data ($)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset valueat beginning of period 10.04 9.88 9.53
- ---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.56 0.56 0.42
Net realized and unrealized gain on investments (0.64) 0.16 0.35
- ---------------------------------------------------------------------------------------------
Total income from investment operations (0.08) 0.72 0.77
Less distributions:
Dividends from net investment income (0.55) (0.56) (0.42)
- ---------------------------------------------------------------------------------------------
Net asset value at end of period 9.41 10.04 9.88
Total return (%) (0.73) 7.49 8.27(2)
Ratios/Supplemental Data (%)
- ---------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 12,507 64,944 64,128
Ratio of expenses (after reduction) to average net assets 0.82 0.90 0.90(3)
Ratio of expenses (before reduction) to average net assets 0.92 0.96 0.99(3)
Ratio of net investment income (after reduction) to average
net assets 5.76 5.63 5.79(3)
Portfolio turnover rate 16 61 41(2)
</TABLE>
<TABLE>
<CAPTION>
Investor Shares--Year Ended December 31, 1999 1998 1997 1996 1995
Per-Share Data ($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset valueat beginning of period 10.04 9.87 9.70 9.94 9.10
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.53 0.54 0.54 0.54 0.53
Net realized and unrealized gain on investments (0.63) 0.17 0.17 (0.24) 0.84
- --------------------------------------------------------------------------------------------------------------
Total income from investment operations (0.10) 0.71 0.71 0.30 1.37
Less distributions:
Dividends from net investment income (0.53) (0.54) (0.54) (0.54) (0.53)
- --------------------------------------------------------------------------------------------------------------
Net asset value at end of period 9.41 10.04 9.87 9.70 9.94
- --------------------------------------------------------------------------------------------------------------
Total return (%) (0.98) 7.33 7.54 3.16 15.40
Ratios/Supplemental Data (%)
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 68,762 12,525 10,458 64,117 60,659
Ratio of expenses (after reduction) to average net assets 1.07 1.15 1.08 1.02 1.06
Ratio of expenses (before reduction) to average net assets 1.20 1.26 1.11 1.02 1.06
Ratio of net investment income (after reduction) to average
net assets 5.50 5.38 5.57 5.54 5.52
Portfolio turnover rate 16 61 41 57 48
</TABLE>
*KPMG LLP audited the figures for 1997 and 1998.
Previous years' data were audited by Deloitte & Touche LLP.
- --------------------------------------------------------------------------------
1 Institutional shares commenced operations on 4/1/97.
2 Not annualized.
3 Annualized.
BNY Hamilton Intermediate Government Fund 23
<PAGE>
BNY HAMILTON
INTERMEDIATE INVESTMENT
GRADE FUND
[LOGO]
CUSIP Numbers:
Institutional Shares 05561M796
Investor Shares 05561M788
INVESTMENT OBJECTIVE
The Fund seeks to provide as high a level of current income as is consistent
with preservation of capital, moderate stability in net asset value and
maintenance of liquidity.
MANAGEMENT STRATEGY
The Fund pursues its objective by investing primarily in investment-grade debt
obligations, which are securities rated Baa/BBB and above, as well as their
unrated equivalents. The Fund may invest in securities issued or guaranteed by:
o U.S. and foreign corporations
o the U.S. government or its agencies
Under normal market conditions, the Fund maintains an average maturity between
three years and ten years. The remaining maturity of any single security in the
Fund's portfolio cannot exceed 15 years.
In investing the Fund's assets, an analysis of economic trends -- including rate
projections, inflation trends, and corporate profit outlook -- is used to
determine how the Fund should allocate its investments among the sectors above.
The Fund has tended to emphasize corporate bonds.
In the corporate bond portion of the portfolio, the Fund is diversified across
market sectors but may emphasize different sectors. In selecting individual
corporate bonds, the portfolio manager considers the bond's structure, maturity
and yield in light of the company's current financial health, competitive
position and future prospects. The Fund may achieve its average maturity by
investing primarily in intermediate-term bonds, or it may use a "barbell"
strategy and invest in short-term and longer-term bonds.
In the U.S. government portion of the portfolio, the Fund allocates broadly
between U.S. Treasury obligations and agency issuers based on an evaluation of
relative yields.
The Fund attempts to manage interest rate risk by adjusting its duration.
Duration is measured in years, like maturity, and it is a more accurate gauge of
a bond's sensitivity to interest rate change because it takes additional
significant factors, including prepayment risk, into account. As a temporary
defensive measure, the Fund may invest more than 35% of its assets in cash or
cash equivalents. Under such circumstances, the Fund would not be pursuing its
investment objective.
24 BNY Hamilton Intermediate Investment Grade Fund
<PAGE>
MAIN INVESTMENT RISKS
Issuers of corporate bonds in the Fund's portfolio could be downgraded in credit
rating or default on their payments. This risk is magnified with lower-rated
bonds.
When interest rates drop, holders of the mortgages represented by CMOs and other
mortgage-backed securities are more likely to refinance, thus forcing the Fund
to find new investments, which could have lower yields.
When interest rates rise, on the other hand, mortgage holders tend not to
prepay, and then the Fund can miss opportunities to reinvest in more profitable
securities.
Investments in foreign securities involve additional risks, including
potentially unfavorable currency exchange rates, limited or misleading financial
information, generally higher transaction costs and political and economic
disturbances ranging from tax legislation to military coups. These risks are
magnified in emerging markets.
The portfolio manager's asset allocation strategy or choice of specific
securities may not work out as planned, and the Fund could underperform its
peers or lose money.
In periods of market uncertainty, some of the portfolio's securities could prove
difficult to sell for a price that is beneficial to the Fund.
Understanding Intermediate-Term Bonds
The market value of a bond is influenced by two variables: maturity and interest
rates. The relationship between these variables can be described as a risk
curve.
The risk curve for bonds typically has a positive slope, meaning that short
maturities provide the greatest price stability and longer maturities carry
increasingly higher risks of price volatility in response to interest rate
changes.
The Fund invests in intermediate-term bonds with maturities between 3 and 10
years, which occupy a middle ground, offering moderate price stability and
current income.
BNY Hamilton Intermediate Investment Grade Fund 25
<PAGE>
PAST PERFORMANCE
The following chart demonstrates the risk of investing in the Fund by showing
the year-to-year returns and pattern of price volatility. Returns for the Fund's
single best and single worst quarters suggest how widely performance has varied
over the short term. Past performance does not guarantee future performance.
Institutional Shares annual total returns(1)
(%) as of 12/31/99
[BAR CHART]
<TABLE>
13.74 3.97 14.88 6.21 9.62 -5.06 18.69 1.82 8.18 8.56 -1.47
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
89 90 91 92 93 94 95 96 97 98 99
</TABLE>
Best quarter: Q4 '89 +6.86% Worst quarter: Q1 '94 -3.82%
The table below presents the Fund's average annual returns over various periods
along with those of widely recognized indices.
Average annual total returns (%) as of 12/31/99*
1 Year 5 years 10 years
- -------------------------------------------------------------------
Institutional Shares(1) -1.47 6.93 6.32
Investor Shares(1) -1.73 6.77 6.24
Lehman Intermediate Gov't/
Corporate Index(2) 0.39 7.10 7.26
Lipper Intermediate Investment
Grade Funds Index(3) -0.98 7.08 7.06
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
FEES AND EXPENSES
The table below outlines the fees and expenses
you could expect as an investor in the Fund. "Annual Operating Expenses" come
out of Fund assets, and are reflected in the total return. Since these funds are
"no-load", shareholders pay no fees or out-of-pocket expenses.
Fee table (% of average net assets)
Institutional Investor
Shares Shares
- --------------------------------------------------------
Shareholder Fees None None
Annual Operating Expenses
- --------------------------------------------------------
Management fee 0.50 0.50
Distribution (12b-1) fees -- 0.25
Other expenses 0.28 0.34
Total annual operating expenses* 0.78 1.09
* This year, the adviser voluntarily reduced the Fund's operating expenses for
Investor Shares by 0.04%, resulting in net operating expenses of 1.05% based
on average daily net assets. Manage-ment reserves the right to implement and
discontinue expense limitations at any time.
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this information so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment* ($)
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------
Institutional Shares 80 249 433 966
Investor Shares 107 343 597 1,325
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns, no voluntary expense reductions and no change
in operating expenses.
- -------------------------------------------------------------------------------
(1) For Institutional Shares before 4/1/97 and for Investor Shares before
5/1/97, performance figures are based on the performance of an unregistered
Bank of New York common trust fund that had objectives and policies
materially equivalent to those of the current mutual fund. Although the
figures have been adjusted to attempt to reflect expenses associated with
the mutual fund, they are only approximations. Many other factors also
reduce their reliability.
For example, the common trust fund performance might have been lower if it
had been subject to the extra restrictions imposed on mutual funds.
(2) The Lehman Brothers Intermediate Government/Corporate Index is an unmanaged
index of intermediate-term U.S. government and corporate bonds.
(3) The Lipper Intermediate Investment Grade Funds Index tracks the returns
(after fees) of the largest intermediate-term, investment-grade bond mutual
funds. This index is included to show how the fund's performance compares
with its peers.
26 BNY Hamilton Intermediate Investment Grade Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand
the Fund's financial performance over the past five years (or since
inception). Certain information reflects financial results for a single fund
share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). The information for the year
ended December 31, 1999 has been audited by Ernst & Young LLP*, whose report,
along with the Fund's financial statement, is included in the annual report,
which is available upon request.
<TABLE>
<CAPTION>
Institutional Shares--Year Ended December 31, 1999 1998 1997(1)
Per-Share Data ($)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period 10.61 10.45 10.00
- ----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.60 0.61 0.47
Net realized and unrealized gain on investments (0.76) 0.26 0.45
- ----------------------------------------------------------------------------------------------
Total income from investment operations (0.16) 0.87 0.92
Dividends and distributions:
Dividends from net investment income (0.59) (0.61) (0.47)
Distributions from capital gains (0.02) (0.10) --
- ----------------------------------------------------------------------------------------------
Total dividends and distributions (0.61) (0.71) (0.47)
Net asset value at end of period 9.84 10.61 10.45
- ----------------------------------------------------------------------------------------------
Total return (%) (1.47) 8.56 9.34(3)
Ratios/Supplemental Data (%)
- ----------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 393,680 392,522 350,330
Ratio of expenses (after reduction) to average net assets 0.78 0.81 0.80(4)
Ratio of expenses (before reduction) to average net assets 0.78 0.81 0.80(4)
Ratio of net investment income (after reduction) to average
net assets 5.89 5.79 6.14(4)
Portfolio turnover rate 57 53 81(3)
</TABLE>
<TABLE>
<CAPTION>
Investor Shares--Year Ended December 31, 1999 1998 1997(2)
Per-Share Data ($)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset valueat beginning of period 10.61 10.45 10.08
- ---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.57 0.58 0.40
Net realized and unrealized gain on investments (0.76) 0.26 0.37
- ---------------------------------------------------------------------------------------------
Total income from investment operations (0.19) 0.84 0.77
Less distributions:
Dividends from net investment income (0.56) (0.58) (0.40)
Distributions from capital gains (0.02) (0.10) --
- ---------------------------------------------------------------------------------------------
Total dividends and distribution (0.58) (0.68) (0.40)
- ---------------------------------------------------------------------------------------------
Net asset value at end of period 9.84 10.61 10.45
- ---------------------------------------------------------------------------------------------
Total return (%) (1.73) 8.22 7.76(3)
Ratios/Supplemental Data (%)
- ---------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 4,607 3,981 1,891
Ratio of expenses (after reduction) to average net assets 1.05 1.13 1.06(4)
Ratio of expenses (before reduction) to average net assets 1.09 1.13 1.06(4)
Ratio of net investment income (after reduction) to average
net assets 5.62 5.51 5.74(4)
Portfolio turnover rate 57 53 81(3)
</TABLE>
- --------------------------------------------------------------------------------
(1) Institutional Shares commenced operations on 4/1/97.
(2) Investor Shares commenced operations on 5/1/97.
(3) Not annualized.
(4) Annualized.
* Previous years' data were audited by KPMG LLP.
BNY Hamilton Intermediate Investment Grade Fund 27
<PAGE>
BNY HAMILTON
INTERMEDIATE NEW YORK
TAX-EXEMPT FUND
[LOGO]
CUSIP Numbers:
Institutional Shares 05561M754
Investor Shares 05561M309
INVESTMENT OBJECTIVE
The Fund seeks to provide income that is exempt from federal, New York State and
New York City income taxes while maintaining relative stability of principal.
MANAGEMENT STRATEGY
In pursuing its objective, the Fund normally invests at least 80% of its net
assets in investment-grade municipal debt obligations, which are securities
rated Baa/BBB and above, as well as their unrated equivalents. The Fund may
invest in securities issued by New York State and the Commonwealth of Puerto
Rico, including all of their municipalities and agencies. Under normal market
conditions, the Fund maintains a dollar-weighted average maturity between three
years and eight years.
The Fund invests in a diversified portfolio of investment-grade municipal
obligations. Before any security is added to the fund, it is thoroughly
evaluated for both quality and potential return. The portfolio manager relies on
internal credit research to evaluate specific municipal issuers' ability and
willingness to pay principal and interest to bondholders. Bonds are chosen based
on this analysis rather than on any private insurance features. The Fund invests
in general obligation bonds, which are secured by their issuers' full faith and
credit, and revenue bonds, which are secured by specific revenue streams such as
toll collections or proceeds of a special tax.
The Fund may invest in bonds of any maturity. Within the intermediate-term
range, the maturity length of the portfolio and structure of the individual
bonds held are based on the adviser's views on the direction of interest rates.
The Fund normally expects to be fully invested in tax-exempt securities, but it
is permitted to invest up to 20% of its net assets in fixed-income securities
that are subject to federal, state and local taxes. In abnormal market
conditions, the Fund may temporarily invest more than 20% of its net assets in
taxable investment-grade short-term securities such as U.S. Treasury
obligations. In these cases, the Fund would not be pursuing its investment
objective.
28 BNY Hamilton Intermediate New York Tax-Exempt Fund
<PAGE>
MAIN INVESTMENT RISKS
The value of your investment in the Fund generally will fluctuate with interest
rate movements. As interest rates rise, bond prices go down. The longer the
maturity of a bond, the more sharply its value is likely to rise or fall in
response to an interest rate change.
Because the Fund invests primarily in New York issuers, its performance is
affected by local, state and regional factors. These may include economic or
policy changes, erosion of the tax base, the legacy of the grave financial
difficulties experienced by New York City and the state as a whole in the 1970s.
State legislative changes, especially those regarding taxes, could also affect
performance.
Any debt securities held by the Fund could be downgraded in credit rating or go
into default. A revenue bond in the Fund's portfolio could default if its
underlying revenue stream fails. This could happen even while the issuer remains
solvent.
The Fund is non-diversified and may invest more than 5% of its assets in
securities of a single issuer. If the Fund invests heavily in a single issuer,
its overall performance could be linked more closely to the performance of that
issuer than to the municipal bond market as a whole.
The portfolio manager's strategies may not work out as planned, and the Fund's
performance could suffer.
In periods of market uncertainty, some of the portfolio's securities could prove
difficult to sell at a price that is beneficial to the Fund.
BNY Hamilton Intermediate New York Tax-Exempt Fund 29
<PAGE>
PAST PERFORMANCE
The following chart demonstrates the risk of investing in the Fund by showing
the year-to-year returns and pattern of price volatility. Returns for the Fund's
single best and single worst quarters suggest how widely performance has varied
over the short term. Past performance does not guarantee future performance.
Investor Share annual total returns(1) (%) as of 12/31/99
[BAR CHART]
7.99 -3.81 12.08 3.47 6.19 5.04 -1.60
- ------------------------------------------------------------------------
93 94 95 96 97 98 99
Best quarter: Q1 '95 +5.00 Worst quarter: Q1 '94 -3.24
The table below presents the Fund's average annual returns over various periods
along with those of widely recognized indices.
Average annual total returns (%) as of 12/31/99*
Since
1 Year 5 Years 8/10/92
- ------------------------------------------------------------
Institutional Shares(2) -1.35 5.09 4.11
Investor Shares(1) -1.60 4.93 4.01
Lehman 5 Year G.O.
Municipal Bond Index(3) 0.72 5.80 5.04
Lipper New York Intermediate
Municipal Debt Funds Average(4) -1.59 5.36 4.66
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect as an investor
in the Fund. "Annual Operating Expenses" come out of Fund assets, and are
reflected in the total return. Since these funds are "no-load", shareholders pay
no fees or out-of-pocket expenses.
Fee table (% of average net assets)
Institutional Investor
Shares Shares
- --------------------------------------------------
Shareholder Fees None None
Annual Operating Expenses
- --------------------------------------------------
Management fee 0.50 0.50
Distribution (12b-1) fees -- 0.25
Other expenses 0.57 0.55
Total annual operating expenses* 1.07 1.30
* This year, the adviser voluntarily reduced the Fund's operating expenses for
Institutional Shares by 0.25% and for Investor Shares by 0.23%, resulting in
net operating expenses of 0.82% and 1.07% respectively based on average daily
net assets. Management reserves the right to implement and discontinue
expense limitations at any time.
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this information so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment* ($)
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------
Institutional Shares 84 316 566 1,283
Investor Shares 109 389 691 1,548
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns, no voluntary expense reductions and no change
in operating expenses.
- --------------------------------------------------------------------------------
(1) Investor Shares commenced operations on 8/10/92.
(2) Before 4/1/97, performance figures are based on the performance of Investor
Shares of the Intermediate New York Tax-Exempt Fund.
(3) The Lehman Brothers 5 Year General Obligation Municipal Bond Index is an
unmanaged index of intermediate-term general obligation municipal bonds.
(4) The Lipper New York Intermediate Municipal Debt Funds Average tracks the
returns (after fees) of New York intermediate-term municipal bond mutual
funds. This index is included to show how the fund's performance compares
with its peers.
30 BNY Hamilton Intermediate New York Tax-Exempt Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance over the past five years (or since inception). Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended December 31, 1999 has been
audited by Ernst & Young LLP*, whose report, along with the Fund's financial
statement, is included in the annual report, which is available upon
request.
<TABLE>
<CAPTION>
Institutional Shares--Year Ended December 31, 1999 1998 1997(1)
Per-Share Data ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period 10.65 10.52 10.16
- ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.41 0.41 0.31
Net realized and unrealized gain on investments (0.55) 0.14 0.36
- ----------------------------------------------------------------------------------------------------
Total income from investment operations (0.14) 0.55 0.67
Dividends and distributions:
Dividends from net investment income (0.41) (0.41) (0.31)
Distributions from capital gains -- (0.01) --
- ----------------------------------------------------------------------------------------------------
Total dividends and distributions (0.41) (0.42) (0.31)
- ----------------------------------------------------------------------------------------------------
Net asset value at end of period 10.10 10.65 10.52
- ----------------------------------------------------------------------------------------------------
Total return (%) (1.35) 5.30 6.69(2)
Ratios/Supplemental Data (%)
- ----------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 31.446 31,519 30,915
Ratio of expenses (after reduction) to average net assets .082 0.90 0.90(3)
Ratio of expenses (before reduction) to average net assets 1.07 1.07 1.15(3)
Ratio of net investment income (after reduction) to average net assets 3.93 3.85 3.98(3)
Portfolio turnover rate 32 24 21(2)
</TABLE>
<TABLE>
<CAPTION>
Investor Shares--Year Ended December 31, 1999 1998 1997 1996 1995
Per-Share Data ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset valueat beginning of period 10.65 10.52 10.29 10.34 9.59
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.38 0.38 0.39 0.40 0.39
Net realized and unrealized gain on investments (0.55) 0.14 0.23 (0.05) 0.75
- --------------------------------------------------------------------------------------------------------------------------
Total income from investment operations (0.17) 0.52 0.62 0.35 1.14
Dividends and distribution:
Dividends from net investment income (0.38) (0.38) (0.39) (0.40) (0.39)
- --------------------------------------------------------------------------------------------------------------------------
Distributions from capital gains -- (0.01) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total dividends and distribution (0.38) (0.39) (0.39) (0.40) (0.39)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period 10.10 10.65 10.52 10.29 10.34
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (1.60) 5.04 6.19 3.47 12.08
Ratios/Supplemental Data (%)
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 8.032 11,580 10,368 36,737 40,931
Ratio of expenses (after reduction) to average net assets 1.07 1.15 1.02 0.90 0.90
Ratio of expenses (before reduction) to average net assets 1.30 1.32 1.32 1.18 1.20
Ratio of net investment income (after reduction) to average net assets 3.65 3.61 3.88 3.91 3.89
Portfolio turnover rate 32 24 21 22 4
</TABLE>
- --------------------------------------------------------------------------------
* KPMG LLP audited the figures for 1997 and 1998.
Previous years' data were audited by Deloitte & Touche LLP.
(1) Institutional shares commenced operations on 4/1/97.
(2) Not annualized.
(3) Annualized.
BNY Hamilton Intermediate New York Tax-Exempt Fund 31
<PAGE>
BNY HAMILTON
INTERMEDIATE
TAX-EXEMPT FUND
[LOGO]
CUSIP Numbers:
Institutional Shares 05561M820
Investor Shares 05561M812
INVESTMENT OBJECTIVE
The Fund seeks to provide income that is exempt from federal income taxes while
maintaining relative stability of principal.
MANAGEMENT STRATEGY
In pursuing its objective, the Fund normally invests at least 80% of its net
assets in investment-grade municipal debt obligations issued by U.S. states,
territories and municipalities. Under normal market conditions, the Fund
maintains a dollar-weighted average maturity between three years and ten years.
The Fund invests in a diversified portfolio of investment-grade municipal
obligations. Before any security is added to the fund, it is thoroughly
evaluated for both quality and potential return. The portfolio manager relies on
internal credit research to evaluate specific municipal issuers' ability and
willingness to pay principal and interest to bondholders. Bonds are chosen based
on this analysis rather than on any private insurance features. The Fund invests
in general obligation bonds, which are secured by their issuers' full faith and
credit, and revenue bonds, which are secured by specific revenue streams such as
toll collections or proceeds of a special tax.
The Fund may invest in bonds of any maturity. Within the intermediate-term
range, the maturity length of the portfolio and structure of the individual
bonds held are based on the adviser's views on the direction of interest rates.
The Fund normally expects to be fully invested in tax-exempt securities, but it
is permitted to invest up to 20% of its net assets in fixed-income securities
that are subject to federal, state and local taxes. In abnormal market
conditions, the Fund may temporarily invest more than 20% of its net assets in
taxable investment-grade short-term securities such as U.S. Treasury
obligations. In these cases, the Fund would not be pursuing its investment
objective.
32 BNY Hamilton Intermediate Tax-Exempt Fund
<PAGE>
MAIN INVESTMENT RISKS
The value of your investment in the Fund generally will fluctuate with interest
rate movements. As interest rates rise, bond prices go down. The longer the
maturity of a bond, the more sharply its value is likely to rise or fall in
response to interest rate change.
This Fund's performance is affected by a variety of factors in the cities,
states and regions in which it invests. These may include economic or policy
changes, erosion of the tax base, state legislative changes, especially those
regarding taxes.
The portfolio manager's investment strategies may not work out as planned, and
the Fund's performance could suffer. Any debt securities held by the Fund could
be downgraded in credit rating or go into default.
A revenue bond in the Fund's portfolio could default if its underlying revenue
stream fails. This could happen even while the bond issuer remains solvent.
In periods of market uncertainty, some of the portfolio's securities could prove
difficult to sell for a price that is beneficial to the Fund.
About Municipal Securities
The Fund invests in state and local governments and their agencies,
which have collectively issued $1.3 trillion worth of bonds for schools, roads,
hospitals, utilities and major public works such as airports. New York is the
largest state issuer with approximately 10% of the outstanding debt.
Interest on municipal bonds was exempted from federal income tax when the code
was first adopted in 1913.
BNY Hamilton Intermediate Tax-Exempt Fund 33
<PAGE>
PAST PERFORMANCE
The following chart demonstrates the risk of investing in the Fund by showing
the year-to-year returns and pattern of price volatility. Returns for the Fund's
single best and single worst quarters suggest how widely performance has varied
over the short term. Past performance does not guarantee future performance.
Institutional Shares annual total returns(1)
(%) as of 12/31/99
9.78 6.02 9.73 7.03 8.46 -3.62 11.45 3.69 6.09 5.37 -2.06
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98 99
Best quarter: Q2 '89 +5.40 Worst quarter: Q1 '94 -3.78
The table below presents the Fund's average annual returns over various periods
along with those of widely recognized indices.
Average annual total returns (%) as of 12/31/99*
1 Year 5 Years 10 Years
- ------------------------------------------------------------
Institutional Shares(1) -2.06 4.81 5.11
Investor Shares(1) -2.22 4.67 5.04
Lehman 5 Year G.O.
Municipal Bond Index(2) 0.72 5.80 7.26
Lipper Intermediate Municipal
Debt Funds Index(3) -1.37 5.59 5.90
* Assumptions: $1,000 initial investment with all dividends and distributions
reinvested.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect as an investor
in the Fund. "Annual Operating Expenses" come out of fund assets, and are
reflected in the total return. Since these funds are "no-load", shareholders pay
no fees or out-of-pocket expenses.
Fee table (% of average net assets)
Institutional Investor
Shares Shares
- -------------------------------------------------
Shareholder Fees None None
Annual Operating Expenses
- -------------------------------------------------
Management fee 0.50 0.50
Distribution (12b-1) fees -- 0.25
Other expenses 0.30 0.32
Total annual operating expenses* 0.80 1.07
* This year, the adviser voluntarily reduced the Fund's operating expenses for
Institutional Shares by 0.01% and for Investor Shares by 0.03%, resulting in
net operating expenses of 0.79% and 1.04% respectively based on average daily
net assets. Management reserves the right to implement and discontinue expense
limitations at any time.
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over various periods. All mutual funds present this information so that you
can make comparisons. Your actual costs could be higher or lower than this
example.
Expenses on a $10,000 investment* ($)
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------
Institutional Shares 81 254 443 989
Investor Shares 106 337 587 1,303
* Assumptions: $10,000 original investment, all dividends and distributions
reinvested, 5% annual returns, no voluntary expense reductions and no change
in operating expenses.
- --------------------------------------------------------------------------------
(1) For Institutional Shares before 4/1/97 and for Investor Shares before
5/1/97, performance figures are based on the performance of an unregistered
Bank of New York common trust fund that had objectives and policies
materially equivalent to those of the current mutual fund. Although the
figures have been adjusted to attempt to reflect expenses associated with
the mutual fund, they are only approximations. Many other factors also
reduce their reliability. For example, the common trust fund performance
might have been lower if it had been subject to the extra restrictions
imposed on mutual funds.
(2) The Lehman Brothers 5 Year General Obligation Municipal Bond Index is an
unmanaged-index of intermediate-term general obligation municipal bonds.
(3) The Lipper Intermediate Municipal Debt Funds Index tracks the returns (after
fees) of the largest tax-free intermediate municipal bond mutual funds. This
index is included to show how the fund's performance compares with its
peers.
34 BNY Hamilton Intermediate Tax-Exempt Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance over the past five years (or since inception). Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended Decmber 31, 1999 has been
audited by Ernest & Young LLP*, whose report, along with the Fund's financial
statement, is included in the annual report, which is available upon
request.
<TABLE>
<CAPTION>
Institutional Shares--Year Ended December 31, 1999 1998 1997(1)
Per-Share Data ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period 10.19 10.27 10.00
- ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.39 0.41 0.33
Net realized and unrealized gain on investments (0.60) 0.13 0.31
- ----------------------------------------------------------------------------------------------------
Total income from investment operations (0.21) 0.54 0.64
Less distributions:
Dividends from net investment income (0.39) (0.41) (0.33)
Distributions from capital gains (0.05) (0.21) (0.04)
- ----------------------------------------------------------------------------------------------------
Total dividends and distributions (0.44) (0.62) (0.37)
- ----------------------------------------------------------------------------------------------------
Net asset value at end of period (9.54) 10.19 10.27
- ----------------------------------------------------------------------------------------------------
Total return (%) (2.06) 5.37 6.50(3)
Ratios/Supplemental Data (%)
- ----------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 251,777 270,065 269,085
Ratio of expenses (after reduction) to average net assets 0.79 0.83 0.81(4)
Ratio of expenses (before reduction) to average net assets 0.80 0.83 0.81(4)
Ratio of net investment income (after reduction) to average net assets 3.96 4.03 4.36(4)
Portfolio turnover rate 34 37 30(3)
</TABLE>
<TABLE>
<CAPTION>
Investor Shares--Year Ended December 31, 1999 1998 1997(2)
Per-Share Data ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period 10.19 10.28 9.99
- ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.23 0.38 0.27
Net realized and unrealized gain on investments (0.45) 0.12 0.33
- ----------------------------------------------------------------------------------------------------
Total income from investment operations (0.22) 0.50 0.60
Less distributions:
Dividends from net investment income (0.37) (0.38) (0.27)
Distributions from capital gains (0.05) (0.21) (0.04)
- ----------------------------------------------------------------------------------------------------
Total dividends and distribution (0.42) (0.59) (0.31)
- ----------------------------------------------------------------------------------------------------
Net asset value at end of period 9.55 10.19 10.28
- ----------------------------------------------------------------------------------------------------
Total return (%) (2.22) 4.95 6.08(3)
Ratios/Supplemental Data (%)
- ----------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 441 473 194
Ratio of expenses (after reduction) to average net assets 1.04 1.13 1.15(4)
Ratio of expenses (before reduction) to average net assets 1.07 1.13 1.15(4)
Ratio of net investment income (after reduction) to average net assets 3.72 3.74 3.98(4)
Portfolio turnover rate 34 37 30(3)
</TABLE>
- --------------------------------------------------------------------------------
(1) Institutional shares commenced operations on 4/1/97.
(2) Investor shares commenced operations on 5/1/97.
(3) Not annualized.
(4) Annualized.
* Previous years' data were audited by KPMG LLP.
BNY Hamilton Intermediate Tax-Exempt Fund 35
<PAGE>
ACCOUNT POLICIES
The funds in this prospectus are offered in two share classes -- Institutional
and Investor. Institutional Shares do not have 12b-1 fees and have generally
lower operating expenses, which improves investment performance. Institutional
Shares are available only to direct investments over $100,000 or to investors
who have specific asset management relationships with the adviser.
All other investors may purchase Investor Shares. The information below on Daily
NAV Calculation and Distributions and Tax Considerations applies to both share
classes. The other account policies apply to Investor Shares only. If you want
to purchase, exchange or redeem Institutional Shares, contact your Bank of New
York representative.
DAILY NAV CALCULATION
Each fund calculates its net asset value per share (NAV) at the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. eastern time) each
day that the exchange is open. When market prices are not available, the funds
will use fair value prices as determined by the board of directors.
Purchase orders received before the regular close of the New York Stock Exchange
will be executed at the NAV calculated at that day's close.
Certain funds invest in securities that are traded on foreign exchanges, which
may be open when the New York Stock Exchange is closed. The value of your
investment in these funds may change on days when you will be unable to purchase
or redeem shares.
DISTRIBUTION (12B-1) PLAN
The directors have adopted 12b-1 distribution plans with respect to the Investor
Shares of each of the funds in this prospectus. The plans permit the funds to
reimburse the Distributor for distribution expenses in an amount up to 0.25% of
the annual average daily net assets of Investor Shares. These fees are paid out
of fund assets on an ongoing basis, and over time, they could cost you more than
paying other types of sales charges.
OPENING AN ACCOUNT
Minimum investment requirements
<TABLE>
<CAPTION>
Minimum initial Minimum continuing
Account Type investment investments Minimum balance
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
IRA $250 $25 N/A
Regular Account $2,000* $100* $500
Automatic Investment Program $500 $50 N/A
</TABLE>
- --------------------------------------------------------------------------------
* Employees and retirees of The Bank of New York and its affiliates, and
employees of the administrator, distributor and their affiliates may open a
regular account with $100 and make continuing investments of $25. Employees
and retirees of The Bank of New York and its affiliates may also invest
through payroll deduction. Call 800-4BNY-FND (800-426-9363) for details.
36 Account Policies
<PAGE>
OPENING AN ACCOUNT/PURCHASING SHARES
<TABLE>
<CAPTION>
Open an account Add to your investment
- --------------- ----------------------
<S> <C>
Mail
- ----
Send completed new account application and a Send a check payable directly to your fund to:
check payable directly to each fund you want
to invest in to: BNY Hamilton Funds, Inc.
P.O. Box 806
BNY Hamilton Funds Newark, NJ 07101-0806
P.O. Box 163310
Columbus, OH 43216-3310 If possible, include a tear-off payment stub
from one of your transaction confirmation
For all enrollment forms, call 800-426-9363. statements.
Wire
- ----
The funds do not charge a fee for wire
transactions, but your bank may.
Mail your completed new account application
to the Ohio address above. Call the transfer
agent at 800-426-9363 for an account number.
Instruct your bank to wire funds to a new Instruct your bank to wire funds to:
account at:
The Bank of New York
The Bank of New York New York, NY 10286
New York, NY 10286 ABA: 021000018
ABA: 021000018 BNY Hamilton Funds
BNY Hamilton Funds DDA 8900275847
DDA 8900275847 Attn: [your fund]
Attn: [your fund] Ref: [your name, account number and taxpayer ID]
Ref: [your name, account number and taxpayer ID]
Dealer
- ------
Note: a broker-dealer may charge a fee. Contact your broker-dealer.
Contact your broker-dealer.
Automatic Investment Program
- ----------------------------
Automatic investments are withdrawn from Once you specify a dollar amount (minimum
your bank account on a monthly or biweekly $50), investments are automatic.
basis.
You can modify or terminate this service at
Make an initial investment of at least $500 any time by mailing a notice to:
by whatever method you choose. Be sure to
fill in the information required in section BNY Hamilton Funds
7 of your new account application. P.O. Box 163310
Columbus, OH 43216-3310
Your bank must be a member of the ACH
(Automated Clearing House) system.
Purchases by personal check Checks or money Wire transactions The adviser does not
orders should be in U.S. dollars and payable charge a fee for wire transfers from your
to the specific fund you wish to invest in. bank to the funds. However, your bank may
The funds do not accept third-party checks. charge a service fee for wiring funds.
In addition, you may not redeem shares
purchased by check until your original
purchase clears, which may take up to ten
business days.
</TABLE>
Account Policies 37
<PAGE>
MAKING EXCHANGES/REDEEMING SHARES
To exchange shares between mutual funds (minimum $500) To redeem shares
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Phone
- -----
<S> <C>
Call 800-426-9363. Call 800-426-9363.
The proceeds can be wired to your bank
account two business days after your
redemption request or a check can be mailed
to you at the address of record on the
following business day.
Mail
- ----
Your instructions should include: Your instructions should include:
o your account number o your account number
o names of the funds and number of shares
o names of the funds and number of shares or dollar amount you want to exchange.
or dollar amount you want to exchange.
A signature guarantee is required whenever:
o you redeem more than $50,000
o you want to send the proceeds to a different
address
o you have changed your account address within
the last 60 days
Dealer
- ------
Contact your broker-dealer. Contact your broker-dealer.
Systematic Withdrawal
- ---------------------
Requires $10,000 minimum fund balance You can choose from several options for
monthly, quarterly, semi-annual or annual
withdrawals:
o declining balance
o fixed dollar amount
o fixed share quantity
o fixed percentage of your account
Call 800-426-9363 for details.
</TABLE>
38 Account Policies
<PAGE>
MAKING EXCHANGES/REDEEMING SHARES
As with purchase orders, redemption requests received before the regular close
of the New York Stock Exchange will be executed at the offering price calculated
at that day's close.
Minimum account balances If your account balance falls below $500 due to
redemptions, rather than market movements, the fund may give you 60 days to
bring the balance back up. If you do not increase your balance, the fund may
close your account and send you the proceeds.
Exchange minimums You may exchange shares of the same class between funds. From
the perspective of tax liability, an exchange is the same as a redemption from
one fund and purchase of another, meaning that you are likely to generate a
capital gain or loss when you make an exchange. Shares to be exchanged must have
a value of at least $500. If you will be investing in a new fund, you must also
exchange enough shares to meet the minimum balance requirement.
Signature guarantees You can get a signature guarantee from many brokers and
from some banks, savings institutions and credit unions. A notary public cannot
provide a signature guarantee.
DISTRIBUTIONS AND TAX CONSIDERATIONS
Each fund pays dividends, if any, and capital gains distribution, if any,
approximately 10 calendar days before month end. Distributions are automatically
paid in the form of additional fund shares. Notify the transfer agent in writing
to:
o choose to receive dividends or distributions (or both) in cash
o change the way you currently receive distributions
Your taxable income is the same regardless of which option you choose.
Type of Distribution Federal Tax Status
- -------------------- ------------------
Dividends from net ordinary income
investment income
Short-term capital gains ordinary income
Long-term capital gains capital gain
Tax-free dividends tax-free
None of the tax-exempt funds in this prospectus intends to invest in securities
whose income is subject to the alternative minimum tax. These dividends may,
however, be subject to state or local income taxes.
Distributions from the fixed-income funds are expected to be primarily ordinary
income from dividends, while distributions from the equity funds are expected to
be primarily capital gains.
The funds issue detailed annual tax information statements for each investor,
recording all distributions and redemptions for the preceding year. Any investor
who does not provide a valid Social Security or taxpayer identification number
to the funds may be subject to federal backup withholding tax.
Whenever you redeem or exchange shares, you are likely to generate a capital
gain or loss, which will be short- or long-term depending on how long you held
the shares.
If you invest in a fund shortly before an expected taxable dividend or capital
gain distribution, you may end up getting part of your investment back right
away in the form of taxable income.
You should consult your tax adviser about your own particular tax situation.
Account Policies 39
<PAGE>
INVESTMENT ADVISER
The investment adviser of these funds is The Bank of New York, located at One
Wall Street, New York, NY 10286. Founded by Alexander Hamilton in 1784, it is
one of the largest commercial banks in the United States, with over $74 billion
in assets. The Bank of New York began offering investment services in the 1830s
and today manages more than $60 billion in investments for institutions and
individuals.
Indocam, located at 90, boulevard Pasteur- 75730 Paris Cedex 15- France, is the
subadviser for the BNY Hamilton International Equity Fund. Indocam, the asset
management arm of Credit Agricole, manages $145 billion of non-U.S. assets.
Adviser compensation The adviser is responsible for all business activities and
investment decisions for the funds. In return for these services, each fund pays
the adviser an annual fee.
Fund Fee
- ---------------------------------------------------------------------
as a % of
average daily
net assets
- ---------------------------------------------------------------------
BNY Hamilton Equity Income Fund 0.60
BNY Hamilton Large Cap Growth Fund 0.60
BNY Hamilton Small Cap Growth Fund 0.75
BNY Hamilton International Equity Fund 0.85*
BNY Hamilton Intermediate Government Fund 0.50
BNY Hamilton Intermediate Investment Grade Fund 0.50
BNY Hamilton Intermediate New York Tax-Exempt Fund 0.50
BNY Hamilton Intermediate Tax-Exempt Fund 0.50
* The adviser pays Indocam, the subadviser of the BNY Hamilton International
Equity Fund, a fee equal to 0.425% of the Funds average daily net assets.
PORTFOLIO MANAGERS
The day-to-day management of the funds is handled by teams of investment
professionals under the leadership of the portfolio managers, who are described
below.
BNY Hamilton Equity Income Fund is managed by Robert G. Knott, Jr. and Charles
D. Ryan. Mr. Knott is senior portfolio manager of the Fund and a vice president
of the adviser. He has managed the Fund since its inception in 1992. He joined
the adviser in 1966 and has been managing assets since 1969. Mr. Ryan is a vice
president of the adviser. He has been a portfolio manager of the Fund since 1999
and a member of the management team since 1994. Before joining the adviser in
1994, he was a portfolio manager and mutual fund manager at First Fidelity Bank.
BNY Hamilton Large Cap Growth Fund is managed by Charles Goodfellow. Mr.
Goodfellow is senior portfolio manager of the Fund and a vice president of the
adviser. He has managed the Fund since its inception in 1997 and has been
managing common trust funds since he joined the adviser in 1989.
BNY Hamilton Small Cap Growth Fund John C. Lui is a vice president of the
adviser and has managed the Fund since its inception in 1997. He joined the
adviser in 1995 and has been managing assets since 1987. Before joining the
adviser, Mr. Lui managed global equity and bond portfolios for Barclays Global
Asset Management.
40 Account Policies
<PAGE>
BNY Hamilton International Equity Fund
Indocam, a subsidiary of Credit Agricole, is the subadviser for this Fund. Mary
Clare Bland is a vice president of the sub-adviser and has managed the Fund
since 1998, when she joined the adviser. Before that, Ms. Bland was a loan
markets analyst for Loan Pricing Corporation, taught economics at the University
of Gdansk in Poland and completed her doctorate in economics at Indiana
University.
BNY Hamilton Intermediate Government Fund
William D. Baird is a vice president of the adviser, specializing in government,
mortgage-backed and asset-backed security analysis. He has managed the Fund
since 1997. He joined the adviser in 1993 and has been managing assets since
1981.
BNY Hamilton Intermediate Investment Grade Fund
The Fund is co-managed by Terence M. McCormick and Paul J. Pertusi. Mr.
McCormick is a vice president of the adviser and has managed the Fund since
1999. He joined the adviser in 1985 and has worked in the fixed income
management division since 1992. Mr. Pertusi is an Assistant Vice President of
the adviser and has managed the Fund since 1999. Before joining the adviser in
1997, he was an assistant portfolio manager at Merrill Lynch and managed
portfolios for high net worth individuals at Citibank.
BNY Hamilton Intermediate New York Tax-Exempt Fund
Colleen M. Frey is a vice president of the adviser and group head of the
tax-exempt bond management division. She has managed the Fund since its
inception in 1992 and joined the adviser in 1967.
BNY Hamilton Intermediate Tax-Exempt Fund
Jeffrey B. Noss is a vice president of the adviser and has managed the Fund
since its inception in 1997. He has managed other tax-exempt portfolios for the
advisers tax-exempt bond management division since 1987.
Account Policies 41
<PAGE>
NOTES
42 Notes
<PAGE>
BNY
HAMILTON
FUNDS
<PAGE>
FOR MORE INFORMATION
Annual and Semi-Annual Reports These include commentary from the fund managers
on the market conditions and investment strategies that significantly affected
the fund's performance, detailed performance data, a complete inventory of the
funds' securities and a report from the funds' auditor.
Statement of Additional Information (SAI) The SAI contains more detailed
disclosure on features and policies of the funds. A current SAI has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this document (that is, it is legally a part of this prospectus).
You can obtain these documents free of charge, make inquiries or request other
information about the funds by contacting your dealer or:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
800-426-9363
Information is also available from the SEC:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
www.sec.gov
E-mail: [email protected]
For information on the operation of the SEC's public reference room, where
documents may be viewed and copied, call:
1-202-942-8090
Note: The SEC requires a duplicating fee for
paper copies.
SEC File Number: 811-6654
BNY-0090 4/00
BNY
HAMILTON
FUNDS
<PAGE>
BNY
HAMILTON
PROSPECTUS
[LOGO]
PROSPECTUS
U.S. Bond Market
Index Fund
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or said whether the information in this
prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a crime.
April 25, 2000
BNY
HAMILTON
FUNDS
<PAGE>
ABOUT THE FUND
3 BNY Hamilton U.S. Bond Market Index Fund
ACCOUNT POLICIES
6 Daily NAV Calculation
6 Distribution (12b-1) Plan
7 Opening an Account/Purchasing Shares
8 Making Exchanges/Redeeming Shares
9 Distributions and Tax Considerations
10 Investment Adviser
10 Portfolio Manager
FOR MORE INFORMATION
Back Cover
<PAGE>
BNY Hamilton
U.S. Bond Market
Index Fund
CUSIP Numbers:
Institutional Shares 05561M663
Investor Shares 05561M671
INVESTMENT OBJECTIVE
The Fund seeks to track the total rate of return of the Lehman Brothers
Aggregate Bond Index (the "Lehman Bond Index").
MANAGEMENT STRATEGY
The Fund pursues its objective by employing a passive management strategy
designed to match the performance of the Lehman Bond Index as closely as
possible before the deduction of Fund expenses. The Fund will be substantially
invested in bonds that comprise the Lehman Bond Index and will invest at least
80% of its assets in bonds or other financial instruments comprising the index
in a manner which mirrors the weightings of the index.
The Lehman Bond Index is a broad-based, unmanaged index that covers the U.S.
investment grade fixed-rate bond market and is comprised of investment-grade
government, corporate and mortgage-and asset-backed bonds that are denominated
in U.S. dollars, all with maturities longer than one year. Investment-grade
securities are rated in the four highest rating categories by a
nationally-recognized statistical rating organization ("rating agency"). Bonds
are represented in the Lehman Bond Index in proportion to their market value.
Lehman Brothers is not affiliated with this Fund and it does not sell or endorse
the Fund, nor does it guarantee the performance of the Fund or the Lehman Bond
Index.
BNY Hamilton U.S. Bond Market Index Fund 3
<PAGE>
MAIN INVESTMENT RISKS
Because the Fund uses an indexing strategy, it does not attempt to manage market
volatility, use defensive strategies or reduce the effects of any long-term
periods of poor performance. You may, therefore, lose money.
The Fund's investment is also subject to interest rate and credit risks.
Interest rate risk is the risk that when interest rates rise, the value of debt
instruments generally falls. In general, changes in interest rates cause greater
fluctuations in the market value of longer-term securities than of shorter-term
securities. Credit risk is the risk that the issuer will be unable to pay the
interest or principal when due. The degree of credit risk depends on both the
financial condition of the issuer and the terms of the obligation.
[Many debt securities are subject to prepayment risk, i.e., the risk that an
issuer of a security can repay principal prior to the security's maturity. Such
securities generally offer less potential for gains during a declining interest
rate environment and similar or greater potential for loss in a rising interest
rate environment.]
4 BNY Hamilton U.S. Bond Market Index Fund
<PAGE>
PAST PERFORMANCE
Because the Fund had not commenced operations as of the date of this Prospectus,
it has no prior history to report.
Past performance of Lehman Brothers Aggregate
Bond Index (%) as of 12/31/99*
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------
(0.83) 5.74 7.73 7.70
* Returns are annualized and do not incorporate any fees which would be
charged by the Fund. This table is not intended to indicate how the Fund
will perform in the future.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect to pay as an
investor in the Fund. "Annual Operating Expenses" are deducted from Fund assets
and are reflected in the total return. Since the Fund is "no-load", shareholders
pay no fees or out-of-pocket expenses.
Fee table (% of average net assets)
Institutional Investor
Shares Shares
- --------------------------------------------------
Shareholder Fees None None
Annual Operating Expenses
- --------------------------------------------------
Management fee 0.25 0.25
Distribution (12b-1) fees None 0.25
Other expenses (a) 0.31 0.31
Total annual operating expenses* 0.56 0.81
(a) This is an estimate because the Fund has no prior operating history.
* The adviser and sub-administrator have agreed to limit the expenses of the
Fund to 0.35% and 0.60%, for the Institutional Shares and the Investor
Shares, respectively, of its average daily net assets. The adviser and
sub-administrator have agreed to waive a portion of their fees and, if
necessary, reimburse expenses of the Fund, to the extent that total
operating expenses are greater than 0.35% and 0.60% of its average daily
net assets. Management reserves the right to implement and discontinue
expense limitations at any time.
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over the indicated periods. All mutual funds present this information so
that you can make comparisons. Your actual costs could be higher or lower than
this example.
Expenses on a $10,000 investment* ($)
1 Year 3 Years
- --------------------------------------------------
Institutional Shares 57 179
Investor Shares 83 259
* Assumptions: $10,000 original investment, full redemption at end of
period, all dividends and distributions reinvested, 5% annual returns and no
changes in the Fund's operating expenses from those indicated for Year 1.
BNY Hamilton U.S. Bond Market Index Fund 5
<PAGE>
ACCOUNT POLICIES
The Fund in this prospectus is offered in two share classes--Institutional and
Investor. Institutional Shares do not have 12b-1 fees and have generally lower
operating expenses, which improves investment performance. Institutional Shares
are available only to direct investments over $100,000 or to investors who have
specific asset management relationships with the Adviser.
All other investors may purchase Investor Shares. The information below on Daily
NAV Calculation and Distributions and Tax Considerations applies to both share
classes. The other account policies apply to Investor Shares only. If you want
to purchase, exchange or redeem Institutional Shares, contact your Bank of New
York representative.
DAILY NAV CALCULATION
The Fund calculates its net asset value per share (NAV) at the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. eastern time) each
day that the exchange is open. When market prices are not available, the Fund
will use fair value prices as determined by the board of directors.
Purchase orders received before the regular close of the New York Stock Exchange
will be executed at the NAV calculated at that day's close.
DISTRIBUTION (12B-1) PLAN
The directors have adopted a 12b-1 distribution plan with respect to the
Investor Shares of the Fund in this prospectus. The plan permits the Fund to
reimburse the Distributor for distribution expenses in an amount up to 0.25% of
the annual average daily net assets of Investor Shares. These fees are paid out
of Fund assets on an ongoing basis, and over time, they could cost you more than
paying other types of sales charges.
OPENING AN ACCOUNT
Minimum investment requirements
<TABLE>
<CAPTION>
Minimum initial Minimum continuing
Account Type investment investments Minimum balance
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IRA $250 $25 N/A
Regular Account $2,000* $100* $500
Automatic Investment
Program $500 $50 N/A
</TABLE>
* Employees and retirees of The Bank of New York and its affiliates, and
employees of the administrator, distributor and their affiliates may open a
regular account with $100 and make continuing investments of $25. Employees
and retirees of The Bank of New York and its affiliates may also invest
through payroll deduction. Call 800-4BNY-FND (800-426-9363) for details.
6 Account Policies
<PAGE>
OPENING AN ACCOUNT/PURCHASING SHARES
Open an account
- ---------------
Mail
- ----
Send completed new account application and a check payable directly to the Fund
to:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
For all enrollment forms, call 800-426-9363.
Wire
- ----
The funds do not charge a fee for wire transactions, but your bank may.
Mail your completed new account application to the Ohio address above. Call the
transfer agent at 800-426-9363 for an account number.
Instruct your bank to wire funds to a new account at:
The Bank of New York
New York, NY 10286
ABA: 021000018
BNY Hamilton Funds
DDA 8900275847
Attn: BNY Hamilton U.S. Bond Market Index Fund
Ref: [your name, account number and taxpayer ID]
Dealer
- ------
Note: a broker-dealer may charge a fee.
Contact your broker-dealer.
Automatic Investment Program
- ----------------------------
Automatic investments are withdrawn from your bank account on a monthly or
biweekly basis.
Make an initial investment of at least $500 by whatever method you choose. Be
sure to fill in the information required in section 7 of your new account
application.
Your bank must be a member of the ACH (Automated Clearing House) system.
Add to your investment
- ----------------------
Mail
- ----
Send a check payable directly to the Fund to:
BNY Hamilton Funds, Inc.
P.O. Box 806
Newark, NJ 07101-0806
If possible, include a tear-off payment stub from one of your transaction
confirmation statements.
Wire
- ----
Instruct your bank to wire funds to:
The Bank of New York
New York, NY 10286
ABA: 021000018
BNY Hamilton Funds
DDA 8900275847
Attn: BNY Hamilton U.S. Bond Market Index Fund
Ref: [your name, account number and taxpayer ID]
Dealer
- ------
Contact your broker-dealer.
Automatic Investment Program
- ----------------------------
Once you specify a dollar amount (minimum $50), investments are automatic.
You can modify or terminate this service at any time by mailing a notice to:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
Purchases by personal checks Checks or money orders should be in U.S. dollars
and payable to the Fund. Third-party checks are not accepted. In addition, you
may not receive the proceeds of shares purchased by check until your original
purchase clears, which may take up to ten business days.
Wire transactions The Adviser does not charge a fee for wire transfers from
your bank to the Fund. However, your bank may charge a service fee for wiring
funds.
Account Policies 7
<PAGE>
MAKING EXCHANGES/REDEEMING SHARES
To exchange shares between mutual funds (minimum $500)
- ------------------------------------------------------
Phone
- -----
Call 800-426-9363.
Mail
- ----
Your instructions should include:
o your account number
o names of the funds and number of shares or dollar amount you want to
exchange.
Dealer
- ------
Contact your broker-dealer.
Systematic Withdrawal
- ---------------------
Requires $10,000 minimum fund balance
To redeem shares
- ----------------
Phone
- -----
Call 800-426-9363.
The proceeds can be wired to your bank account two business days after your
redemption request or a check can be mailed to you at the address of record on
the following business day.
Mail
- ----
Your instructions should include:
o your account number
o names of the funds and number of shares or dollar amount you want to
redeem.
A signature guarantee is required whenever:
o you redeem more than $50,000
o you want to send the proceeds to a different address
o you have changed your account address within the last 60 days
Dealer
- ------
Contact your broker-dealer.
Systematic Withdrawal
- ---------------------
You can choose from several options for monthly, quarterly, semi-annual or
annual withdrawals:
o declining balance
o fixed dollar amount
o fixed share quantity
o fixed percentage of your account
Call 800-426-9363 for details.
8 Account Policies
<PAGE>
MAKING EXCHANGES/ REDEEMING SHARES
As with purchase orders, redemption requests received before the regular close
of the New York Stock Exchange will be executed at the offering price calculated
at that day's close.
Minimum account balances If your account balance falls below $500 due to
redemptions, rather than market movements, the Fund may give you 60 days to
bring the balance back up. If you do not increase your balance, the Fund may
close your account and send you the proceeds.
Exchange minimums You may exchange shares of the same class between funds. From
the perspective of tax liability, an exchange is the same as a redemption from
one fund and purchase of another, meaning that you are likely to generate a
capital gain or loss when you make an exchange. Shares to be exchanged must have
a value of at least $500. If you will be investing in a new fund, you must also
exchange enough shares to meet the minimum balance requirement.
Signature guarantees You can get a signature guarantee from many brokers and
from some banks, savings institutions and credit unions. A notary public cannot
provide a signature guarantee.
DISTRIBUTIONS AND TAX CONSIDERATIONS
The Fund pays monthly dividends, if any, and an annual capital gains
distribution, if any, approximately 10 calendar days before the end of the month
or the year, as the case may be. Distributions are automatically paid in the
form of additional Fund shares. Notify the transfer agent in writing to:
o choose to receive dividends or distributions (or both) in cash
o change the way you currently receive distributions
Your taxable income is the same regardless of which option you choose.
Type of Distribution Federal Tax Status
- -------------------- ------------------
Dividends from net ordinary income
investment income
Short-term capital gains ordinary income
Long-term capital gains capital gain
Distributions from the Fund are expected to be primarily ordinary income and
capital gains which may be taxable at different rates depending on how long the
Fund has held the asset.
The Fund issues detailed annual tax information statements for each investor,
recording all distributions and redemptions for the preceding year. Any
investor who does not provide a valid Social Security or taxpayer
identification number to the Fund may be subject to federal backup withholding
tax.
Whenever you redeem or exchange shares, you are likely to generate a capital
gain or loss, which will be short- or long-term depending on how long you held
the shares.
If you invest in the Fund shortly before an expected taxable dividend or capital
gain distribution, you may end up getting part of your investment back right
away in the form of taxable income.
You should consult your tax adviser about your own particular tax situation.
Account Policies 9
<PAGE>
INVESTMENT ADVISER
The Bank of New York, located at One Wall Street, New York, NY 10286 is the
Adviser of the Fund. Founded by Alexander Hamilton in 1784, it is one of the
largest commercial banks in the United States, with over $74 billion in assets.
The Bank of New York began offering investment services in the 1830s and today
manages more than $60 billion in investments for institutions and individuals.
Adviser compensation The Adviser is responsible for all business activities and
investment decisions for the Fund. In return for these services, the Fund pays
the Adviser an annual fee.
Fund Fee
as a % of
average daily
net assets
- ------------------------------------------------------
BNY Hamilton U.S. Bond
Market Index Fund 0.25%
PORTFOLIO MANAGER
The day-to-day management of the Fund is handled by a team of investment
professionals under the leadership of a portfolio manager, who is described
below.
BNY Hamilton U.S. Bond Market Index Fund
William D. Baird is a vice president of the adviser specializing in government,
mortgage backed and asset backed security analysis. He joined the adviser in
1993 and has been managing assets since 1981. Mr. Baird has also managed the BNY
Hamilton Intermediate Government Fund since 1997.
10 Account Policies
<PAGE>
NOTES
Notes 11
<PAGE>
BNY
HAMILTON
FUNDS
<PAGE>
FOR MORE INFORMATION
Statement of Additional Information (SAI)
The SAI contains more detailed disclosure on features and policies of the Fund.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference into this document (that is, it is legally a part of
this prospectus).
You can obtain the SAI free of charge, make inquiries or request other
information about the Fund by contacting your dealer or:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
800-426-9363
Information is also available from the SEC:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
www.sec.gov
E-mail: [email protected]
For information on the operation of the SEC's public reference room, where
documents may be viewed and copied, call:
1-202-942-8090
Note: The SEC requires a duplicating fee for paper copies.
SEC File Number: 811-6654
BNY-0090 4/00 BNY Hamilton Funds
<PAGE>
BNY
HAMILTON
[LOGO]
PROSPECTUS
PROSPECTUS
S&P 500 INDEX FUND
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or said whether the information in this
prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a crime.
April 25, 2000
BNY
HAMILTON
FUNDS
<PAGE>
ABOUT THE FUND
3 BNY Hamilton S&P 500 Index Fund
ACCOUNT POLICIES
6 Daily NAV Calculation
6 Distribution (12b-1) Plan
7 Opening an Account/Purchasing Shares
8 Making Exchanges/Redeeming Shares
9 Distributions and Tax Considerations
10 Investment Adviser
10 Portfolio Managers
FOR MORE INFORMATION
Back Cover
<PAGE>
S&P 500 Index Fund
CUSIP Numbers:
Institutional Shares 05561M648 [LOGO]
Investor Shares 05561M655
INVESTMENT OBJECTIVE
The Fund seeks to match the performance of the Standard & Poor's 500 Composite
Stock Index (the "S&P 500O").
MANAGEMENT STRATEGY
The Fund pursues its objective by employing a passive management strategy
designed to track the performance of the S&P 500. The Fund invests substantially
all of its assets in stocks that comprise the S&P 500. The Adviser uses a full
replication approach, in which all stocks in the S&P 500 are held by the Fund in
proportion to their index weights.
The S&P 500 is a market-weighted index composed of approximately 500 large cap
common stocks chosen by Standard & Poor's based on a number of factors including
industry group representation, market value, economic sector and
operating/financial condition.
BNY Hamilton S&P 500 Index Fund 3
<PAGE>
MAIN INVESTMENT RISKS
Because the Fund uses an indexing strategy, it does not attempt to manage market
volatility, use defensive strategies or reduce the effects of any long-term
periods of poor performance. You may, therefore, lose money.
The value of your investment in the Fund generally will fluctuate with stock
market movements. As a group, the large-capitalization stocks included in the
S&P 500 could fall out of favor with the market, particularly in comparison with
small- or medium-capitalization stocks.
If stocks in the portfolio reduce or eliminate their dividend payments, the Fund
will generate less income.
4 BNY Hamilton S&P 500 Index Fund
<PAGE>
PAST PERFORMANCE
Because the Fund had not commenced operations as of the date of this Prospectus,
it has no prior history to report.
Past performance of the S&P Composite Index (%) as of 12/31/99*
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------
20.98 27.57 28.56 18.21
* Returns are annualized and do not incorporate any fees which would be
charged by the Fund. This table is not intended to indicate how the Fund
will perform in the future.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect to pay as an
investor in the Fund. "Annual Operating Expenses" are deducted from Fund assets,
and are reflected in the total return. Since the Fund is "no-load", shareholders
pay no fees or out-of-pocket expenses.
Fee table (% of average net assets)
Institutional Investor
Shares Shares
- -----------------------------------------------------
Shareholder Fees None None
Annual Operating Expenses
- -----------------------------------------------------
Management fee 0.25% 0.25%
Distribution (12b-1) fees None 0.25%
Other expenses (a) 0.31% 0.31%
Total annual operating expenses* 0.56% 0.81%
(a) This is an estimate because the Fund has no prior operating history.
* The adviser and sub-administrator have agreed to limit the expenses of the
Fund to 0.35% and 0.60%, for the Institutional Shares and the Investor
Shares, respectively, of its average daily net assets. The adviser and
sub-administrator have agreed to waive fees and if necessary, reimburse
expenses of the Fund, to the extent that total operating expenses are
greater than 0.35% and 0.60% of its average daily net assets. Management
reserves the right to implement and discontinue expense limitations at any
time.
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over the indicated periods. All mutual funds present this information so
that you can make comparisons. Your actual costs could be higher or lower than
this example.
Expense on a $10,000 investment*($)
1 Year 3 Years
- ----------------------------------------------------
Institutional Shares 57 179
Investor Shares 83 259
* Assumptions: $10,000 original investment, full redemption at end of period,
all dividends and distributions reinvested, 5% annual returns and no
changes in the Fund's operating expenses from those indicated for Year 1.
BNY Hamilton S&P 500 Index Fund 5
<PAGE>
ACCOUNT POLICIES
The Fund in this prospectus is offered in two share classes - Institutional and
Investor. Institutional Shares do not have 12b-1 fees and have generally lower
operating expenses, which improves investment performance. Institutional Shares
are available only to direct investments over $100,000 or to investors who have
specific asset management relationships with the Adviser.
All other investors may purchase Investor Shares. The information below on Daily
NAV Calculation and Distributions and Tax Considerations applies to both share
classes. The other account policies apply to Investor Shares only. If you want
to purchase, exchange or redeem Institutional Shares, contact your Bank of New
York representative.
DAILY NAV CALCULATION
The Fund calculates its net asset value per share (NAV) at the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. eastern time) each
day that the exchange is open. When market prices are not available, the Fund
will use fair value prices as determined by the board of directors.
Purchase orders received before the regular close of the New York Stock Exchange
will be executed at the NAV calculated at that day's close.
DISTRIBUTION (12B-1) PLAN
The directors have adopted a 12b-1 distribution plan with respect to the
Investor Shares of the Fund in this prospectus. The plan permits the Fund to
reimburse the Distributor for distribution expenses in an amount up to 0.25% of
the annual average daily net assets of Investor Shares. These fees are paid out
of Fund assets on an ongoing basis, and over time, they could cost you more than
paying other types of sales charges.
OPENING AN ACCOUNT
<TABLE>
<CAPTION>
Minimum investment requirements
Minimum initial Minimum continuing
Account Type investment investments Minimum balance
------------ ---------- ----------- ---------------
<S> <C> <C> <C>
IRA $250 $25 N/A
Regular Account $2,000* $100* $500
Automatic Investment
Program $500 $50 N/A
</TABLE>
* Employees and retirees of The Bank of New York and its affiliates, and
employees of the administrator, distributor and their affiliates may open a
regular account with $100 and make continuing investments of $25. Employees
and retirees of The Bank of New York and its affiliates may also invest
through payroll deduction. Call 800-4BNY-FND (800-426-9363) for details.
6 Account Policies
<PAGE>
OPENING AN ACCOUNT/PURCHASING SHARES
Open an account
- ---------------
Mail
- ----
Send completed new account application and a check payable directly to
the Fund to:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
For all enrollment forms, call 800-426-9363.
Wire
- ----
The Fund does not charge a fee for wire transactions, but your bank may.
Mail your completed new account application to the Ohio address above. Call the
transfer agent at (800) 426-9363 for an account number.
Intruct your bank to wire funds to a new account at:
Instruct your bank to wire funds to:
The Bank of New York
New York, NY 10286
ABA: 021000018
BNY Hamilton Funds
DDA 8900275847
Attn: BNY Hamilton S & P 500 Index Fund
Ref: [your name, account number and taxpayer ID]
Dealer
- ------
Note: a broker-dealer may charge a fee.
Contact your broker-dealer.
Automatic Investment Program
- ----------------------------
Automatic investments are withdrawn from your bank account on a monthly or
biweekly basis.
Make an initial investment of at least $500 by whatever method you choose. Be
sure to fill in the information required in section 7 of your new account
application.
Your bank must be a member of the ACH (Automated Clearing House) system.
Add to your investment
- ----------------------
Mail
- ----
Send a check payable directly to the Fund to:
BNY Hamilton Funds, Inc.
P.O. Box 806
Newark, NJ 07101-0806
If possible, include a tear-off payment stub from one of your transaction
confirmation statements.
Wire
- ----
Instruct your bank to wire funds to:
The Bank of New York
New York, NY 10286
ABA: 021000018
BNY Hamilton Funds
DDA 8900275847
Attn: BNY Hamilton S & P 500 Index Fund
Ref: [your name, account number and taxpayer ID]
Dealer
- ------
Contact your broker-dealer.
Automatic Investment Program
- ----------------------------
Once you specify a dollar amount (minimum $50), investments are automatic.
You can modify or terminate this service at any time by mailing a notice to:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
Purchases by personal check Checks or money orders should be in U.S. dollars and
payable to the Fund. Third-party checks are not accepted. In addition, you may
not receive the proceeds of shares purchased by check until your original
purchase clears, which may take up to ten business days.
Wire transactions The Adviser does not charge a fee for wire transfers from your
bank to the Fund. However, your bank may charge a service fee for wiring funds.
Account Policies 7
<PAGE>
MAKING EXCHANGES/REDEEMING SHARES
To exchange shares between mutual funds (minimum $500)
Phone
- -----
Call 800-426-9363.
Mail
- ----
Your instructions should include:
o your account number
o names of the funds and number of shares or dollar amount you want to
exchange.
Dealer
- ------
Contact your broker-dealer.
Systematic Withdrawal
- ---------------------
Requires $10,000 minimum fund balance
To redeem shares
- ----------------
Phone
- -----
Call 800-426-9363
The proceeds can be wired to your bank account two business days after your
redemption request or a check can be mailed to you at the address of record on
the following business day.
Mail
- ----
Your instructions should include:
o your account number
o names of the funds and number of shares or dollar amount you want to
redeem.
A signature guarantee is required whenever:
o you redeem more than $50,000
o you want to send proceeds to a different address
o you have changed your account address within the last 60 days
Dealer
- ------
Contact your broker-dealer.
Systematic Withdrawal
- ---------------------
You can choose from several options for monthly, quarterly, semi-annual or
annual withdrawals:
o declining balance
o fixed dollar amount
o fixed share quantity
o fixed percentage of your account
Call 800-426-9363 for details.
8 Account Policies
<PAGE>
MAKING EXCHANGES/ REDEEMING SHARES
As with purchase orders, redemption requests received before the regular close
of the New York Stock Exchange will be executed at the offering price calculated
at that day's close.
Minimum account balances If your account balance falls below $500 due to
redemptions, rather than market movements, the Fund may give you 60 days to
bring the balance back up. If you do not increase your balance, the Fund may
close your account and send you the proceeds.
Exchange minimums You may exchange shares of the same class between funds. From
the perspective of tax liability, an exchange is the same as a redemption from
one fund and purchase of another, meaning that you are likely to generate a
capital gain or loss when you make an exchange. Shares to be exchanged must have
a value of at least $500. If you will be investing in a new fund, you must also
exchange enough shares to meet the minimum balance requirement.
Signature guarantees You can get a signature guarantee from many brokers and
from some banks, savings institutions and credit unions. A notary public cannot
provide a signature guarantee.
DISTRIBUTIONS AND TAX CONSIDERATIONS
The Fund pays quarterly dividends, if any, and an annual capital gains
distribution, if any, approximately 10 calendar days before the end of the
quarter or the year, as the case may be. Distributions are automatically paid in
the form of additional Fund shares. Notify the transfer agent in writing to:
o choose to receive dividends or distributions (or both) in cash
o change the way you currently receive distributions
Your taxable income is the same regardless of which option you choose.
Type of Distribution Federal Tax Status
- -------------------- ------------------
Dividends from net ordinary income
investment income
Short-term capital gains ordinary income
Long-term capital gains capital gain
Distributions from the Fund are expected to be primarily ordinary income and
capital gains which may be taxable at different rates depending on how long the
Fund has held the asset.
The Fund issues detailed annual tax information statements for each investor,
recording all distributions and redemptions for the preceding year. Any investor
who does not provide a valid Social Security or taxpayer identification number
to the Fund may be subject to federal backup withholding tax.
Whenever you redeem or exchange shares, you are likely to generate a capital
gain or loss, which will be short- or long-term depending on how long you held
the shares.
If you invest in the Fund shortly before an expected taxable dividend or capital
gain distribution, you may end up getting part of your investment back right
away in the form of taxable income.
You should consult your tax adviser about your own particular tax situation.
Account Policies 9
<PAGE>
INVESTMENT ADVISER
The Bank of New York, located at One Wall Street, New York, NY 10286 is the
Adviser of the Fund. Founded by Alexander Hamilton in 1784, it is one of the
largest commercial banks in the United States, with over $74 billion in assets.
The Bank of New York began offering investment services in the 1830s and today
manages more than $60 billion in investments for institutions and individuals.
Adviser compensation The Adviser is responsible for all business activities and
investment decisions for the Fund. In return for these services, the Fund pays
the Adviser an annual fee.
Fund Fee
as a % of
average daily
net assets
- -------------------------------------------------------
BNY Hamilton S&P 500 Index Fund 0.25%
PORTFOLIO MANAGERS
The day-to-day management of the Fund is handled by a team of investment
professionals under the leadership of the portfolio managers, who are described
below.
BNY Hamilton S&P 500 Index Fund is managed by Kurt Zyla and Tracy Hemmi.
Mr. Zyla is a portfolio manager and Vice-President of the Adviser. He has
managed the Passive Investment Management Group of the Adviser since 1996, and
currently manages $6.5 billion in assets. He joined the Adviser in 1989. Prior
to his current position, he was employed by the Adviser in a number of
capacities.
Ms. Hemmi is a portfolio manager and Assistant Vice President of the Adviser.
Prior to joining the Adviser in 1999, Ms. Hemmi worked as an index portfolio
manager at Key Asset Management and as financial analyst and funds management
trader for KeyCorp since 1994.
10 Account Policies
<PAGE>
NOTES
Note 11
<PAGE>
BNY
HAMILTON
FUNDS
<PAGE>
FOR MORE INFORMATION
Statement of Additional Information (SAI) The SAI contains more detailed
disclosure on features and policies of the Fund. A current SAI has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this document (that is, it is legally a part of this prospectus).
You can obtain the SAI free of charge, make inquiries or request other
information about the Fund by contacting your dealer or:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
800-426-9363
Information is also available from the SEC:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
www.sec.gov
E-mail: [email protected]
For information on the operation of the SEC's public reference room, where
documents may be viewed and copied, call:
1-202-942-8090
Note: The SEC requires a duplicating fee for paper copies.
SEC File Number: 811-6654
BNY-0090 4/00 BNY HAMILTON FUNDS
<PAGE>
BNY
HAMILTON
[LOGO]
PROSPECTUS
LARGE CAP VALUE FUND
April 25, 2000
BNY
HAMILTON
FUNDS
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or said whether the information in this
prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a crime.
<PAGE>
ABOUT THE FUNDS
3 BNY Hamilton Large Cap Value Fund
ACCOUNT POLICIES
6 Daily NAV Calculation
6 Distribution (12b-1) Plan
7 Opening an Account/Purchasing Shares
8 Making Exchanges/Redeeming Shares
9 Distributions and Tax Considerations
10 Investment Adviser
10 Portfolio Managers
For More Information
Back Cover
<PAGE>
Large Cap Value Fund
[LOGO]
CUSIP NUMBERS:
INSTITUTIONAL SHARES 05561M689
INVESTOR SHARES 05561M975
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation; current income is a
secondary consideration.
MANAGEMENT STRATEGY
The Fund's Adviser's strategy is to use a bottom-up value-oriented approach to
choosing stocks. The Adviser identifies large capitalization stocks that are
undervalued in terms of price or other financial measurements with above-average
growth potential. The bottom-up approach looks primarily at individual issuers
against the context of broader market factors. Some of the factors which the
Adviser uses when analyzing individual issuers include:
o relative earnings growth
o profitability trends
o relatively low price-to-earnings and price-to-book ratios
o issuers' financial strength
o valuation analysis and strength of management
o risk-adjusted growth combined with dividend yield
The Adviser uses this selection analysis to identify those issuers that exhibit
one or more of the following criteria: below-average valuation multiples;
improving financial strength; and a catalyst which will allow the stock to reach
what the Adviser believes to be the stock's intrinsic value, generally within a
year.
Catalysts considered by the Adviser in selecting securities include:
o near-term catalysts, such as product introductions, cost-cutting initiatives,
a cyclical surge in profits or a change in management
o a management team committed to its shareholders' interests
The Fund's portfolio generally includes large-capitalization stocks of companies
whose market capitalization is $3 billion or more. The Fund may also invest up
to 35% of its overall portfolio in companies with a market capitalization of
less than $3 billion. However, such companies will have a market capitalization
of at least $100 million at the time of purchase.
Although the Fund intends to invest primarily in equity securities of U.S.
issuers, it may invest without limit in equity securities of foreign issuers,
including those in emerging markets. Within limits, the Fund also may use
certain derivatives (i.e. options, futures), which are investments whose value
is determined by underlying securities or indices.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in equity securities of large-capitalization issuers and will maintain a
weighted market capitalization of $3 billion. As a temporary defensive measure,
the Fund may invest more than 35% of its assets in cash or cash equivalents.
Under such circumstances, the Fund may not achieve its investment objective.
BNY HAMILTON LARGE CAP VALUE FUND 3
<PAGE>
MAIN INVESTMENT RISKS
The value of your investment in the Fund generally will fluctuate with stock
market movements. Large-capitalization stocks could fall out of favor with the
market, particularly in comparison with small- or medium-capitalization stocks.
Investments in value stocks are subject to the risk that their intrinsic values
may never be realized by the market, that stocks judged to be undervalued may
actually be appropriately priced, or that their prices may go down. While the
Fund's investments in value stocks may limit downside risk over time, the Fund
may, as a trade-off, produce more modest gains than riskier stock funds.
Small companies tend to grow or fade quickly by their nature. Their market
valuations are often based more on investors' belief in their future potential
than on their current balance sheets. Since market sentiment can change from one
day to the next, small-cap stock prices have historically been more volatile
than those of large-cap stocks.
Investors are often attracted to small companies for their specialization and
innovation.
The portfolio manager's investment strategies may not work out as planned, and
the Fund's performance could suffer. You may, therefore, lose money.
Investments in derivatives may be a surrogate to the performance of their
related underlying securities. However, because derivatives may not perfectly
represent the value of the related underlying securities, and because
derivatives depend on the performance of other parties to the derivatives, using
derivatives could limit profits or increase losses in comparison with investment
in underlying securities without using derivatives.
Investments in foreign securities involve additional risks, including
potentially unfavorable currency exchange rates, limited or misleading financial
information, generally higher transaction costs and political and economic
disturbances ranging from tax legislation to military coups. These risks are
magnified in emerging markets.
CHARACTERISTICS OF LARGE-CAP COMPANIES
The largest U.S. companies, those with market capitalization over $3 billion,
are a relatively select group that nonetheless covers all industries and
geographies. These companies are typically well-established businesses with
broad product lines and customers in many markets. Their diversification and
usually substantial cash reserves enable them to weather economic downturns. The
dividends they pay can also cushion the effects of market volatility, since
their stocks generate steady income even while their price may be depressed.
The long-term capital appreciation of large-cap stocks has historically lagged
smaller companies.
4 BNY HAMILTON LARGE CAP VALUE FUND
<PAGE>
PAST PERFORMANCE
Because the Fund had not commenced operations as of the date of this Prospectus,
it has no prior performance history to report.
FEES AND EXPENSES
The table below outlines the fees and expenses you could expect to pay as an
investor in the Fund. "Annual Operating Expenses" are deducted from Fund assets
and are reflected in the total return. Since the Fund is "no-load", shareholders
pay no fees or out-of-pocket expenses.
Fee table (% of average net assets)
- --------------------------------------------------------------------------------
Institutional Investor
Shares Shares
- --------------------------------------------------------------------------------
Shareholder Fees None None
Annual Operating Expenses
- --------------------------------------------------------------------------------
Management fee 0.60 0.60
Distribution (12b-1) fees None 0.25
Other expenses (a) 0.31 0.31
Total annual operating expenses* 0.91 1.16
(a) This is an estimate because the Fund has no prior operating history.
* The adviser has agreed to limit the expenses of the Fund to 0.80% and 1.05%,
for the Institutional Shares and the Investor Shares, respectively, of its
average daily net assets. The adviser will waive management fees and, if
necessary, reimburse expenses of the Fund, to the extent that total annual
operating expenses are greater than 0.80% and 1.05% of its average daily net
assets. Management reserves the right to implement and discontinue expense
limitations at any time.
The table below shows the anticipated expenses on a $10,000 investment in the
Fund over the indicated periods. All mutual funds present this information so
that you can make comparisons. Your actual costs could be higher or lower than
this example.
Expenses on a $10,000 investment* ($)
- --------------------------------------------------------------------------------
1 Year 3 Years
- --------------------------------------------------------------------------------
Institutional Shares 93 290
Investor Shares 118 368
* Assumptions: $10,000 original investment, full redemption at end of
period, all dividends and distributions reinvested, 5% annual returns and no
changes in the Fund's operating expenses from those indicated for Year 1.
BNY Hamilton Large Cap Value Fund 5
<PAGE>
ACCOUNT POLICIES
The Fund is offered in two share classes --
Institutional and Investor. Institutional Shares do not have 12b-1 fees and have
generally lower operating expenses, which improves investment performance.
Institutional Shares are available only to direct investments over $100,000 or
to investors who have specific asset management relationships with the Adviser.
All other investors may purchase Investor Shares. The information below on Daily
NAV Calculation and Distributions and Tax Considerations applies to both share
classes. The other account policies apply to Investor Shares only. If you want
to purchase, exchange or redeem Institutional Shares, contact your Bank of New
York representative.
DAILY NAV CALCULATION
The Fund calculates its net asset value per share (NAV) at the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. eastern time) each
day that the exchange is open. When market prices are not available, the Fund
will use fair value prices as determined by the board of directors.
Purchase orders received before the regular close of the New York Stock Exchange
will be executed at the NAV calculated at that day's close.
The Fund invests, or may invest, in securities that are traded on foreign
exchanges, which may be open when the New York Stock Exchange is closed. The
value of your investment in the Fund may change on days when you will be unable
to purchase or redeem shares.
DISTRIBUTION (12B-1) PLAN
The directors have adopted 12b-1 distribution plans with respect to the Investor
Shares of the Fund in this prospectus. The plans permit the Fund to reimburse
the Distributor for distribution expenses in an amount up to 0.25% of the annual
average daily net assets of Investor Shares. These fees are paid out of Fund
assets on an ongoing basis, and over time, they could cost you more than paying
other types of sales charges.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
OPENING AN ACCOUNT
Minimum investment requirements
Minimum initial Minimum continuing
Account Type investment investments Minimum balance
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IRA $250 $25 N/A
Regular Account $2,000* $100* $500
Automatic Investment Program $500 $50 N/A
</TABLE>
* Employees and retirees of The Bank of New York and its affiliates, and
employees of the administrator, distributor and their affiliates may open a
regular account with $100 and make continuing investments of $25. Employees
and retirees of The Bank of New York and its affiliates may also invest
through payroll deduction. Call 800-4BNY-FND (800-426-9363) for details.
6 Account Policies
<PAGE>
OPENING AN ACCOUNT/PURCHASING SHARES
Open an account
MAIL
- --------------------------------------------------------------------------------
Send completed new account application and a check payable directly to the Fund
to:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
For all enrollment forms, call 800-426-9363.
Add to your investment
Send a check payable directly to the Fund to:
BNY Hamilton Funds, Inc.
P.O. Box 806
Newark, NJ 07101-0806
If possible, include a tear-off payment stub from one of your transaction
confirmation statements.
Open an account
WIRE
- --------------------------------------------------------------------------------
The Fund does not charge a fee for wire transactions, but your bank may.
Mail your completed new account application to the Ohio address above. Call the
transfer agent at 800-426-9363 for an account number.
Add to your investment
Instruct your bank to wire funds to a new account at:
The Bank of New York
New York, NY 10286
ABA: 021000018
BNY Hamilton Funds
DDA 8900275847
Attn: BNY Hamilton Large Cap Value Fund
Ref: [your name, account number and taxpayer ID]
Add to your investment
Instruct your bank to wire funds to:
The Bank of New York
New York, NY 10286
ABA: 021000018
BNY Hamilton Funds
DDA 8900275847
Attn: BNY Hamilton Large Cap Value Fund
Ref: [your name, account number and taxpayer ID]
Open an account
DEALER
- --------------------------------------------------------------------------------
Note: a broker-dealer may charge a fee.
Contact your broker-dealer.
Add to your investment
Contact your broker-dealer.
AUTOMATIC INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
Automatic investments are withdrawn from your bank account on a monthly or
biweekly basis.
Make an initial investment of at least $500 by whatever method you choose. Be
sure to fill in the information required in section 7 of your new account
application.
Your bank must be a member of the ACH (Automated Clearing House) system.
Purchases by personal check Checks or money orders should be in U.S. dollars and
payable to the Fund. The Fund does not accept third-party checks. In addition,
you may not receive the proceeds of shares purchased by check until your
original purchase clears, which may take up to ten business days.
Once you specify a dollar amount (minimum $50), investments are automatic.
You can modify or terminate this service at any time by mailing a notice to:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
Wire transactions The Adviser does not charge a fee for wire transfers from your
bank to the Fund. However, your bank may charge a service fee for wiring funds.
Account Policies 7
<PAGE>
MAKING EXCHANGES/REDEEMING SHARES
To exchange shares between mutual funds (minimum $500)
Phone
- --------------------------------------------------------------------------------
Call 800-426-9363.
To redeem shares
Call 800-426-9363.
The proceeds can be wired to your bank account two business days after your
redemption request or a check can be mailed to you at the address of record on
the following business day.
To exchange shares between mutual funds (minimum $500)
Mail
- --------------------------------------------------------------------------------
Your instructions should include:
o your account number
o names of the funds and number of shares or dollar amount you want to exchange.
To redeem shares
Your instructions should include:
o your account number
o names of the funds and number of shares or dollar amount you want to redeem.
A signature guarantee is required whenever:
o you redeem more than $50,000
o you want to send the proceeds to a different address
o you have changed your account address within the last 60 days
To exchange shares between mutual funds (minimum $500)
Dealer
- --------------------------------------------------------------------------------
Contact your broker-dealer.
To redeem shares
Contact your broker-dealer.
To exchange shares between mutual funds (minimum $500)
Systematic Withdrawal
- --------------------------------------------------------------------------------
Requires $10,000 minimum fund balance
To redeem shares
You can choose from several options for monthly, quarterly, semi-annual or
annual withdrawals:
o declining balance
o fixed dollar amount
o fixed share quantity
o fixed percentage of your account
Call 800-426-9363 for details.
8 Account Policies
<PAGE>
MAKING EXCHANGES/ REDEEMING SHARES
As with purchase orders, redemption requests received before the regular close
of the New York Stock Exchange will be executed at the offering price calculated
at that day's close.
Minimum account balances If your account balance falls below $500 due to
redemptions, rather than market movements, the Fund may give you 60 days to
bring the balance back up. If you do not increase your balance, the Fund may
close your account and send you the proceeds.
Exchange minimums You may exchange shares of the same class between funds. From
the perspective of tax liability, an exchange is the same as a redemption from
one fund and purchase of another, meaning that you are likely to generate a
capital gain or loss when you make an exchange. Shares to be exchanged must have
a value of at least $500. If you will be investing in a new fund, you must also
exchange enough shares to meet the minimum balance requirement.
Signature guarantees You can get a signature guarantee from many brokers and
from some banks, savings institutions and credit unions. A notary public cannot
provide a signature guarantee.
DISTRIBUTIONS AND TAX CONSIDERATIONS
The Fund pays quarterly dividends, if any, and an annual capital gains
distribution, if any, approximately 10 calendar days before the end of the
quarter or the year, as the case may be. Distributions are automatically paid in
the form of additional Fund shares. Notify the transfer agent in writing to:
o choose to receive dividends or distributions (or both) in cash
o change the way you currently receive distributions Your taxable income is the
same regardless of which option you choose.
Type of Distribution Federal Tax Status
- --------------------------------------------------------------------------------
Dividends from net ordinary income
investment income
Short-term capital gains ordinary income
Long-term capital gains capital gain
The Fund issues detailed annual tax information statements for each investor,
recording all distributions and redemptions for the preceding year. Any investor
who does not provide a valid Social Security or taxpayer identification number
to the Fund may be subject to federal backup withholding tax.
Whenever you redeem or exchange shares, you are likely to generate a capital
gain or loss, which will be short- or long-term depending on how long you held
the shares.
If you invest in the Fund shortly before an expected taxable dividend or capital
gain distribution, you may end up getting part of your investment back right
away in the form of taxable income.
You should consult your tax adviser about your own particular tax situation.
9 Account Policies
<PAGE>
Investment Adviser
The Bank of New York, located at One Wall Street, New York, NY 10286 is the
Adviser of the Fund. Founded by Alexander Hamilton in 1784, it is one of the
largest commercial banks in the United States, with over $74 billion in assets.
The Bank of New York began offering investment services in the 1830s and today
manages more than $60 billion in investments for institutions and individuals.
Estabrook Capital Management, LLC, located at 430 Park Avenue, New York, NY
10022, has been a wholly-owned subsidiary of The Bank of New York since 1999.
Estabrook Capital Management, LLC, and predecessor companies, have been managing
individual portfolios for over sixty years and currently has assets under
management exceeding $2 billion.
Adviser compensation The Adviser is responsible for all business activities and
investment decisions for the Fund. In return for these services, the Fund pays
the Adviser an annual fee.
Fund Fee
- --------------------------------------------------------------------------------
as a % of
average daily
net assets
- --------------------------------------------------------------------------------
BNY Hamilton Large Cap Value Fund 0.60%
PORTFOLIO MANAGERS
Day-to-day management of the Fund is handled by a team of investment
professionals under the leadership of the portfolio managers, who are described
below.
BNY HAMILTON LARGE CAP VALUE FUND
The Fund is advised by The Bank of New York and sub-advised by Estabrook Capital
Management, LLC, a wholly-owned subsidiary of The Bank of New York.
The Fund is managed by Charles T. Foley, and George D. Baker.
Mr. Foley is a portfolio manager of the Sub-Adviser and Managing Director. He
has been with the Sub-Adviser since 1970 and currently manages over 100
relationships totaling over $380 million in assets.
Mr. Baker is a portfolio manager of the Sub-Adviser since 1996 where he is also
the Director of Research. He currently manages over $200 million in assets.
Prior to joining the Sub-Adviser, Mr. Baker was employed by Merrill Lynch since
1989 where he served as a Managing Director and Senior Energy Industry
Specialist.
10 Account Policies
<PAGE>
NOTES
N
11
<PAGE>
BNY
HAMILTON
FUNDS
<PAGE>
FOR MORE INFORMATION
Statement of Additional Information (SAI) The SAI contains more detailed
disclosure on features and policies of the Fund. A current SAI has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this document (that is, it is legally a part of this prospectus).
You can obtain the SAI free of charge, make inquiries or request other
information about the Fund by contacting your dealer or:
BNY Hamilton Funds
P.O. Box 163310
Columbus, OH 43216-3310
800-426-9363
Information is also available from the SEC:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
www.sec.gov
E-mail: [email protected]
For information on the operation of the SEC's public reference room, where
documents may be viewed and copied, call:
1-202-942-8090
Note: The SEC requires a duplicating fee for
paper copies.
SEC File Number: 811-6654
BNY
HAMILTON
FUNDS
BNY-0090 4/00
<PAGE>
BNY HAMILTON FUNDS, INC.
Statement of Additional Information
BNY Hamilton Money Fund
BNY Hamilton Treasury Money Fund
BNY Hamilton Equity Income Fund
BNY Hamilton Large Cap Growth Fund
BNY Hamilton Small Cap Growth Fund
BNY Hamilton International Equity Fund
BNY Hamilton Intermediate Government Fund
BNY Hamilton Intermediate Investment Grade Fund
BNY Hamilton Intermediate New York Tax-Exempt Fund
BNY Hamilton Intermediate Tax-Exempt Fund
BNY Hamilton S&P 500 Index Fund
BNY Hamilton U.S. Bond Market Index Fund
BNY Hamilton Large Cap Value Fund
April 4, 2000
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, BUT CONTAINS
ADDITIONAL INFORMATION ABOUT THE FUNDS LISTED ABOVE WHICH SHOULD BE READ IN
CONJUNCTION WITH THE RELEVANT PROSPECTUS, EACH DATED APRIL 4, 2000, AS
SUPPLEMENTED FROM TIME TO TIME, WHICH MAY BE OBTAINED UPON REQUEST FROM BNY
HAMILTON DISTRIBUTORS, INC., 90 PARK AVENUE, NEW YORK, NEW YORK 10956 ATTENTION:
BNY HAMILTON FUNDS, INC., 1-800-426-9363.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
General............................................................................................ 3
Investment Objectives and Policies................................................................. 3
Investment Restrictions............................................................................ 28
Directors and Officers............................................................................. 36
Investment Adviser................................................................................. 39
Administrator...................................................................................... 42
Distributor........................................................................................ 43
Fund, Shareholder and Other Services............................................................... 45
Purchase of Shares................................................................................. 45
Redemption of Shares............................................................................... 46
Exchange of Shares................................................................................. 47
Dividends and Distributions........................................................................ 47
Net Asset Value.................................................................................... 48
Performance Data................................................................................... 50
Portfolio Transactions and Brokerage............................................................... 54
Description of Shares.............................................................................. 58
Taxes.............................................................................................. 60
Special Considerations Relating to Investments in New York Municipal Obligations................... 65
Additional Information............................................................................. 80
Financial Statements............................................................................... 80
Appendix A - Description of Securities Ratings..................................................... 82
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
GENERAL
BNY Hamilton Funds, Inc. ("BNY Hamilton") is an open-end investment company,
currently consisting of sixteen series: BNY Hamilton Money Fund, BNY Hamilton
Treasury Money Fund, BNY Hamilton Equity Income Fund, BNY Hamilton Large Cap
Growth Fund, BNY Hamilton Small Cap Growth Fund, BNY Hamilton International
Equity Fund, BNY Hamilton Intermediate Government Fund, BNY Hamilton
Intermediate Investment Grade Fund, BNY Hamilton Intermediate New York
Tax-Exempt Fund ("BNY Hamilton"), BNY Hamilton Tax-Exempt Fund, BNY Hamilton
Large Cap CRT Fund, BNY Hamilton Small Cap CRT Fund, BNY Hamilton International
Equity CRT Fund, BNY Hamilton S&P 500 Index Fund, BNY Hamilton U.S. Bond Market
Index Fund and BNY Hamilton Large Cap Value Fund. Each of the BNY Hamilton Large
Cap CRT Fund, BNY Hamilton Small Cap CRT Fund and BNY Hamilton International
Equity CRT Fund is referred to as an "CRT Fund" and each of the other series of
BNY Hamilton is referred to as a "Fund" and collectively as the "Funds". The
Bank of New York (the "Adviser") will serve as investment adviser to each of the
Funds and Indocam (the "Sub-Adviser") is the sub-adviser for the BNY Hamilton
International Equity Fund. This Statement of Additional Information provides
additional information only with respect to the Funds and should be read in
conjunction with the current Prospectus relating to each Fund. For additional
information with respect to the CRT Funds, please read the prospectus, and the
Statement of Additional Information dated April 4, 2000, relating to the CRT
Funds. BNY Hamilton's executive offices are located at 3435 Stelzer Road,
Columbus, Ohio 43219-3035.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
BNY Hamilton Money Fund (the "Money Fund") is designed to be an economical and
convenient means of making substantial investments in money market instruments.
The Fund's investment objective is to earn as high a level of current income as
is consistent with preservation of capital and maintenance of liquidity by
investing in high quality money market instruments. The Fund will attempt to
accomplish this objective by maintaining a dollar-weighted average portfolio
maturity of not more than 90 days and by investing in United States
dollar-denominated securities described in each Prospectus for each class of
shares of BNY Hamilton Money Fund and in this Statement of Additional
Information that meet certain rating criteria, present minimal credit risks and
have remaining maturities of 397 days or less. See "Quality and Diversification
Requirements".
BNY Hamilton Treasury Money Fund (the "Treasury Money Fund") is designed to be
an economical and convenient means of investing in securities issued or
guaranteed by the United States Government and in securities fully
collateralized by issues of the United States Government. The Fund's investment
objective is to earn as high a level of current income as is consistent with
preservation of capital and maintenance of liquidity by investing solely in
short-term obligations of the United States Treasury and repurchase agreements
fully collateralized by obligations of the United States Treasury. The Fund will
only invest in money market securities issued or guaranteed by the U.S.
Government, including but not limited to securities subject to repurchase
agreements secured by U.S. Government obligations. Securities issued or
guaranteed by the U.S. Government include U.S. Treasury securities which differ
in their interest rates, maturities, and times of issuance.
3
<PAGE>
In accordance with Rule 2a-7 under the Investment Company Act of 1940, the Fund
will maintain a dollar-weighted average maturity of 90 days or less and will
only purchase securities having remaining maturity of 397 days or less. See
"Quality and Diversification Requirements".
BNY Hamilton Equity Income Fund (the "Equity Income Fund") is designed for
conservative investors who are interested in participating in the equity markets
while receiving current income greater than the yield of the Standard & Poor's
500 Index. The Fund's investment objective is to provide long-term capital
appreciation with a yield greater than the yield of the Standard & Poor's 500
Index. The Fund will invest primarily in common stock and convertible securities
of domestic and foreign corporations. In connection with its investment
objectives, the 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 Fund's dual investment
objectives will likely be that the net asset value of the Fund will not rise as
rapidly as the market generally. Conversely, during periods of rapid market
depreciation, the Fund's net asset value would not be expected to decline as
rapidly as the market.
BNY Hamilton Large Cap Growth Fund (the "Large Cap Growth Fund") is designed as
an economical and convenient means of investing primarily in the stocks of
domestic and foreign institutions. The Fund's investment objective is to provide
long-term capital appreciation by investing primarily in common stocks and
securities convertible to common stocks; current income is a secondary
objective. During times of adverse market and/or economic conditions the Fund
may invest in securities with a high enough yield to offer possible resistance
to downward market and/or economic pressure. In selecting securities for the
Fund, a focus will be given to securities of corporations perceived to have a
relatively high potential for growth of earnings and/or revenues. The Fund
currently considers large cap corporations to be those with market
capitalization of $3 billion or greater. In normal circumstances the Fund will
invest at least 65% of its assets in such equity securities.
BNY Hamilton Small Cap Growth Fund (the "Small Cap Growth Fund") is designed for
investors who are interested in obtaining capital growth by investing in stocks
of smaller corporations. The Small Cap Growth Fund's investment objective is to
provide long-term capital appreciation by investing primarily in equity
securities of small domestic and foreign corporations. In selecting securities
for the Small Cap Growth Fund a focus will be given to securities of
corporations perceived as having potential for rapid growth in earnings or
revenues due to expanded operations, new products, new technologies, new
channels of distribution, revitalized management, general industry condition or
other similar advantageous circumstances. Current income will not be a
consideration. The Fund currently considers small corporations to be those with
market capitalization of $1.5 billion or less. In normal circumstances the Small
Cap Growth Fund will invest at least 65% of the value of its total assets in
such equity securities.
BNY Hamilton International Equity Fund (the "International Equity Fund") is
designed for more aggressive investors who wish to participate in foreign
markets. The Fund's investment objective is to provide long-term capital
appreciation through investing primarily in equity securities of non-U.S.
issuers. In normal circumstances, the Fund will invest in securities principally
traded in countries outside the United States. The Fund may at any time include
American Depository
4
<PAGE>
Receipts which are United States securities representing foreign securities that
are deposited with foreign custodians or foreign branches of U.S. commercial
banks; American Depository Receipts are traded in U.S. dollars on national
exchanges and in over-the-counter markets. At any given time the Fund may invest
50% of its assets in the securities principally traded in any one country,
although the Fund will ordinarily invest at least 65% of its total assets in at
least three (3) countries.
BNY Hamilton Intermediate Government Fund (the "Intermediate Government Fund")
is designed for conservative bond investors looking for a relatively stable,
high quality investment. See "Quality and Diversification Requirements". The
Fund's investment objective is to earn as high a level of current income as is
consistent with the preservation of capital, moderate stability in net asset
value and minimal credit risk. The Fund will invest in obligations issued or
guaranteed by the United States Government and backed by the full faith and
credit of the United States. The Fund may also invest in obligations issued or
guaranteed by United States Government agencies or instrumentalities, where the
Fund must look principally to the issuing or guaranteeing agency for ultimate
repayment. The Fund may purchase or sell financial futures contracts and options
in an effort to reduce the volatility of its portfolio, moderate market risk and
minimize fluctuations in net asset value. For a discussion of these investments,
see "Hedging Activities".
BNY Hamilton Intermediate Investment Grade Fund (the "Intermediate Investment
Grade Fund") is designed for bond investors who wish to invest in debt
obligations of both domestic and foreign corporations and governments. The
Intermediate Investment Grade Fund's investment objective is to earn as high a
level of current income as is consistent with preservation of capital, moderate
stability in net asset value and maintenance of liquidity. In an effort to
attain its investment objective, the Fund will invest primarily in debt
obligations of domestic corporations, foreign corporations and foreign
governments, as well as obligations issued or guaranteed by the United States
Government and its agencies and instrumentalities. The Fund will invest at least
65% of the value of its total assets in securities rated investment grade. The
average maturity of the Fund will range between three and ten years. The maximum
average maturity of any individual security at the time of purchase will be 15
years. As a temporary defensive measure, the Fund may invest more than 35% of
its assets in cash or cash equivalents.
BNY Hamilton Intermediate New York Tax-Exempt Fund (the "Intermediate New York
Tax-Exempt Fund") is designed to be an economical and convenient means of making
substantial investments in debt obligations that are exempt from federal, New
York State and New York City income tax. The 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 Fund will invest primarily in bonds issued by the State of New York and its
political subdivisions and by Puerto Rico and its political subdivisions. During
normal market conditions, the Adviser will attempt to invest 100%, and as a
fundamental policy at least 80%, of the Fund's total assets in bonds and notes
that are exempt from federal, New York State and New York City income taxes.
There may be occasions, due to market conditions or supply limitations, when
such securities are not available. In these situations, the Adviser may invest
in other fixed income securities that may be subject to federal, New York State
or New York City income taxes. Such investments would be considered temporary.
The Adviser will invest a portion of the Fund's assets in short-term investments
to provide liquidity. Investments in short-term investments may be increased for
5
<PAGE>
defensive purposes if, in the opinion of the Adviser, market conditions so
warrant. The Fund seeks to maintain a current yield that is greater than that
obtainable from a portfolio of short-term tax-exempt obligations, subject to
certain quality restrictions. See "Quality and Diversification Requirementsopt
The Fund may seek to moderate market risk and minimize fluctuations in its net
asset value per share through the use of financial futures contracts and
options. See "Hedging Activities".
BNY Hamilton Intermediate Tax-Exempt Fund (the "Intermediate Tax-Exempt Fund")
is designed to be an economical and convenient means of making substantial
investments in debt obligations that are exempt from federal income tax. A
portion of the income recognized by the Intermediate Tax-Exempt Fund may be
exempt from state or local income tax as well; consult with your tax adviser for
details. The Intermediate Tax-Exempt Fund's investment objective is to provide
income that is exempt from federal income taxes while maintaining relative
stability of principal. The Fund will attempt to invest 100%, and as a
fundamental policy will invest at least 80%, of its net assets in such
investments. The securities purchased by the Fund will be limited to be
investment grade, which means that investments cannot be rated lower than BBB by
S&P and Baa by Moody's. If the securities are not rated, the investment adviser
is to determine whether they are equivalent to investment grade securities at
the time of purchase. At any time, as deemed appropriate by the Adviser, the
Fund may hold a substantial portion of its net assets in cash. The Fund may seek
to moderate market risk and minimize fluctuations in its net asset value per
share through the use of financial futures and options. See "Hedging
Activities".
BNY Hamilton S&P 500 Index Fund (the "S&P 500 Index Fund") is designed to match
the performance of the Standard & Poor's 500 Composite Index (the "S&P 500").
The S&P 500 is a market-weighted index composed of approximately 500 common
stocks chosen by Standard & Poor's based on a number of factors including
industry group representation, market value, economic sector and
operating/financial condition.
BNY Hamilton U.S. Bond Market Index Fund (the "Bond Index Fund") is designed to
track the total rate of return of the Lehman Brothers Aggregate Bond Index (the
"Lehman Bond Index"). The Lehman Bond Index is a broad-based, unmanaged index
that covers the U.S. investment-grade, fixed-rate bond market and is comprised
of investment-grade government, corporate, mortgage- and asset-backed bonds that
are denominated in U.S. dollars, all with maturities longer than one year.
Investment-grade securities are rated in the four highest rating categories by a
nationally-recognized rating agency. Bonds are represented in the Lehman Bond
Index in proportion to their market value.
BNY Hamilton Large Cap Value Fund (the "Large Cap Value Fund") is designed for
conservative investors who are interested in participating in the equity
markets. The Fund's investment objective is to provide long-term capital
appreciation; current income is a secondary objective. The Fund will invest
primarily in common stock and convertible securities of large-capitalization
companies (i.e., companies whose market capitalization is $3 billion or more)
and will seek to maintain a weighted market capitalization of $3 billion. The
Fund may also invest up to 30% of its overall portfolio in companies with a
market capitalization of less than $3 billion.
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Throughout this Statement of Additional Information, the Money Fund and the
Treasury Money Fund are collectively referred to as the "Money Market Funds";
the Equity Income Fund, the Large Cap Growth Fund, the Small Cap Growth Fund,
the International Equity Fund, the S&P 500 Index Fund and the Large Cap Value
Fund are collectively referred to as the "Equity Funds"; the Intermediate
Government Fund, the Intermediate Investment Grade Fund and the Bond Index Fund
are collectively referred to as the "Taxable Fixed Income Funds"; and the
Intermediate New York Tax-Exempt Fund and the Intermediate Tax-Exempt Fund are
collectively referred to as the "Tax-Exempt Fixed Income Funds".
The following discussion supplements the information regarding investment
objectives and policies of the respective Funds as set forth above and in their
respective prospectuses.
Government and Money Market Instruments
As discussed in the Prospectuses, each Fund may invest in cash equivalents to
the extent consistent with its investment objectives and policies. A description
of the various types of cash equivalents that may be purchased by the Funds
appears below. See "Quality and Diversification Requirements".
United States Government Obligations. Each of the Funds, subject to its
applicable investment policies, may invest in obligations issued or guaranteed
by the United States Government or by its agencies or instrumentalities.
Obligations issued or guaranteed by federal agencies or instrumentalities may or
may not be backed by the "full faith and credit" of the United States.
Securities that are backed by the full faith and credit of the United States
include Treasury bills, Treasury notes, Treasury bonds, and obligations of the
Government National Mortgage Association, the Farmers Home Administration, and
the Export-Import Bank. In the case of securities not backed by the full faith
and credit of the United States, each Fund must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments. Securities in which each Fund
may invest that are not backed by the full faith and credit of the United States
include, but are not limited to, obligations of the Tennessee Valley Authority,
the Federal National Mortgage Association and the United States Postal Service,
each of which has the right to borrow from the United States Treasury to meet
its obligations, and obligations of the Federal Farm Credit System and the
Federal Home Loan Banks, both of whose obligations may be satisfied only by the
individual credits of each issuing agency.
Foreign Government Obligations. Except for the Treasury Money Fund, each of the
Funds, subject to its applicable investment policies, may also invest in
short-term obligations of foreign sovereign governments or of their agencies,
instrumentalities, authorities or political subdivisions. These securities may
be denominated in United States dollars or, in the case of the Equity Funds and
Intermediate Investment Grade Fund, in another currency. See "Foreign
Investments".
Bank Obligations. Except for the Treasury Money Fund, each of the Funds, unless
otherwise noted in its relevant Prospectus or below, may invest in negotiable
certificates of deposit, bank notes, time deposits and bankers' acceptances of
(i) banks, savings and loan associations and savings banks that have more than
$2 billion in total assets and are organized under the laws of the United States
or any
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state, (ii) foreign branches of these banks or of foreign banks of equivalent
size ("Euros") and (iii) United States branches of foreign banks of equivalent
size ("Yankees"). The Funds will not invest in obligations for which the
Adviser, or any of its affiliated persons, is the ultimate obligor or accepting
bank. Each of the Funds, other than the Tax-Exempt Fixed Income Funds, may also
invest in obligations of international banking institutions designated or
supported by national governments to promote economic reconstruction,
development or trade between nations (e.g., the European Investment Bank, the
Inter-American Development Bank, or the World Bank).
Commercial Paper. Except for the Treasury Money Fund, each of the Funds may
invest in commercial paper, including Master Notes. Master Notes are obligations
that provide for a periodic adjustment in the interest rate paid and permit
periodic changes in the amount borrowed. Master Notes are governed by agreements
between the issuer and the Adviser acting as agent, for no additional fee, in
its capacity as investment adviser to the Funds and as fiduciary for other
clients for whom it exercises investment discretion. The monies loaned to the
borrower come from accounts maintained with or managed by the Adviser or its
affiliates pursuant to arrangements with such accounts. Interest and principal
payments are credited to such accounts. The Adviser, acting as a fiduciary on
behalf of its clients, has the right to increase or decrease the amount provided
to the borrower under such Master Notes. The borrower has the right to pay
without penalty all or any part of the principal amount then outstanding on an
obligation together with interest to the date of payment.
Since these obligations typically provide that the interest rate is tied to the
Treasury bill auction rate, the rate on Master Notes is subject to change.
Repayment of Master Notes to participating accounts depends on the ability of
the borrower to pay the accrued interest and principal of the obligation on
demand which is continuously monitored by the Adviser. Since Master Notes
typically are not rated by credit rating agencies, the Funds may invest in such
unrated obligations only if at the time of an investment the obligation is
determined by the Adviser to have a credit quality that satisfies such Fund's
quality restrictions. See "Quality and Diversification Requirements". Although
there is no secondary market for Master Notes, such obligations are considered
by the Funds to be liquid because they are payable within seven days of demand.
The Funds do not have any specific percentage limitation on investments in
Master Notes.
Repurchase Agreements. Each of the Funds may enter into repurchase agreements
with brokers, dealers or banks that meet the credit guidelines approved by the
Board of Directors of BNY Hamilton (the "Directors"). In a repurchase agreement,
a Fund buys a security from a seller that has agreed to repurchase the same
security at a mutually agreed upon date and price. The resale price is normally
in excess of the purchase price, reflecting an agreed upon interest rate. This
interest rate is effective for the duration of the agreement and is not related
to the coupon rate on the underlying security. A repurchase agreement may also
be viewed as a fully collateralized loan of money by a Fund to the seller. The
duration of these repurchase agreements will usually be short, from overnight to
one week, and at no time will the Funds invest in repurchase agreements for more
than one year. The securities that are subject to repurchase agreements,
however, may have durations in excess of one year from the effective date of the
repurchase agreement. The Fund will always receive securities as collateral
securities whose market value is, and during the entire term of the agreement
remains, at least equal to 100% of the dollar amount invested by the Fund in
each agreement plus
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accrued interest, and the Fund will make payment for such securities only upon
physical delivery or upon evidence of book entry transfer to the account of the
Fund's custodian. If the seller defaults, a Fund might incur a loss if the value
of the collateral securing the repurchase agreement declines, and might incur
disposition costs in connection with liquidating the collateral. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the security,
liquidation of the collateral by the Fund may be delayed or limited. See
"Investment Restrictions".
Corporate Bonds and Other Debt Securities
As discussed in the Prospectus for the Money Market Funds, Fixed Income Funds,
the Intermediate Government Fund and Intermediate Investment Grade Fund may
invest in bonds and other debt securities of domestic and foreign issuers to the
extent consistent with their investment objectives and policies. A description
of these investments appears in the Prospectus for the Fixed Income Funds and
below. See "Quality and Diversification Requirements". For information on
short-term investments in these securities, see "Money Market Instruments".
Asset-Backed Securities. Asset-backed securities directly or indirectly
represent a participation interest in, or are secured by and payable from, a
stream of payments generated by particular assets such as motor vehicle or
credit card receivables. Payments of principal and interest may be guaranteed up
to certain amounts and for a certain time period by a letter of credit issued by
a financial institution unaffiliated with the entities issuing the securities.
The asset-backed securities in which a Fund may invest are subject to the 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 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 give such debtors the
right to set off certain amounts on credit card debt, thereby reducing the
balance due. Additionally, if 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 underlying sales contracts are not realized.
Mortgage-Backed Securities. Mortgage-backed securities are often subject to more
rapid repayment than their stated maturity date would indicate as a result of
the pass-through of prepayments of principal on the underlying mortgage
obligations. During periods of declining interest rates, prepayment of mortgages
underlying mortgage-backed securities can be expected to accelerate.
Accordingly, a Fund's ability to maintain positions in mortgage-backed
securities will be affected by reductions in the principal amount of such
securities resulting from such prepayments, and its ability to reinvest the
returns of principal at comparable yields is subject to generally prevailing
interest rates at that time. A Fund's net asset value per share for each class
will vary with changes in the values of its portfolio securities. To the extent
that a Fund invests in mortgage-backed securities, such values will vary with
changes in market interest rates generally and the differentials in yields among
various kinds of mortgage-backed securities.
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Tax-Exempt Obligations
As discussed in the Prospectus for the Tax-Exempt Fixed Income Funds, the
Intermediate New York Tax-Exempt Fund and the Intermediate Tax-Exempt Fund may
invest in tax-exempt obligations to the extent consistent with the Fund's
investment objective and policies. A description of the various types of
tax-exempt obligations that the Tax-Exempt Fixed Income Funds may purchase
appears below. See "Quality and Diversification Requirements".
Municipal Bonds. Municipal bonds are debt obligations issued by the states,
territories and possessions of the United States and the District of Columbia,
by their political subdivisions and by duly constituted authorities and
corporations. For example, states, territories, possessions and municipalities
may issue municipal bonds to raise funds for various public purposes such as
airports, housing, hospitals, mass transportation, schools, water and sewer
works. They may also issue municipal bonds to refund outstanding obligations and
to meet general operating expenses. Public authorities issue municipal bonds to
obtain funding for privately operated facilities, such as housing and pollution
control facilities, for industrial facilities and for water supply, gas,
electricity and waste disposal facilities.
Municipal bonds may be general obligation or revenue bonds. 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 from
revenues derived from particular facilities, from the proceeds of a special
excise tax or from other specific revenue sources. They are not usually payable
from the general taxing power of a municipality.
Municipal Notes. Municipal notes are subdivided into three categories of
short-term obligations: municipal notes, municipal commercial paper and
municipal demand obligations.
Municipal notes are short-term obligations with a maturity at the time of
issuance normally ranging up to one year. The principal types of municipal notes
include tax anticipation notes, bond anticipation notes, revenue anticipation
notes, grant anticipation notes and project notes. Notes sold in anticipation of
collection of taxes, a bond sale, or receipt of other revenues are usually
general obligations of the issuing municipality or agency.
Municipal commercial paper typically consists of very short-term, unsecured,
negotiable promissory notes that are sold to meet the seasonal working capital
or interim construction financing needs of a municipality or agency. While these
obligations are intended to be paid from general revenues or refinanced with
long-term debt, they frequently are backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or institutions.
Municipal demand obligations are subdivided into two types: Variable Rate Demand
Notes and Master Notes.
Variable Rate Demand Notes are tax-exempt municipal obligations or participation
interests that provide for a periodic adjustment in the interest rate paid on
the notes. They permit the holder to demand payment of the notes, or to demand
purchase of the notes at a purchase price equal to the
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unpaid principal balance plus accrued interest, either directly by the issuer or
by drawing on a bank letter of credit or guaranty issued with respect to such
note. The issuer of the Variable Rate Demand Note may have a corresponding right
to prepay at its discretion the outstanding principal of the note plus accrued
interest upon notice comparable to that required for the holder to demand
payment. The Variable Rate Demand Notes in which each Fund may invest are
payable, or are subject to purchase, on demand usually on notice of seven
calendar days or less. The terms of the notes will provide that interest rates
are adjustable at intervals ranging from daily to six months, and the
adjustments are usually based upon the prime rate of a bank or other appropriate
interest rate index specified in the respective notes.
Master Notes are tax-exempt municipal obligations that provide for a periodic
adjustment in the interest rate paid and permit daily changes in the amount
borrowed. The interest on such obligations is, in the opinion of counsel for the
borrower, exempt from federal income tax. For a description of the attributes of
Master Notes, see "Money Market Instruments" above. Although there is no
secondary market for Master Notes, such obligations are considered by each Fund
to be liquid because they are payable immediately upon demand. The Funds have no
specific percentage limitations on investments in Master Notes.
Puts. The Tax-Exempt Fixed Income Funds may purchase, without limit, municipal
bonds or notes together with the right to resell the bonds or notes to the
seller at an agreed price or yield within a specified period prior to the
maturity date of the bonds or notes. In addition, the Taxable Fixed Income Funds
may purchase notes together with the rights described above. Such a right to
resell is commonly known as a "put". The aggregate price for bonds or notes with
puts may be higher than the price for bonds or notes without puts. Consistent
with a Fund's investment objective and subject to the supervision of the
Directors, the purpose of this practice is to permit a Fund to be fully invested
in securities (tax-exempt securities in the case of the Tax-Exempt Fixed Income
Funds) while preserving the necessary liquidity to purchase securities on a
when-issued basis, to meet unusually large redemptions, and to purchase at a
later date securities other than those subject to the put. The principal risk of
puts is that the writer of the put may default on its obligation to repurchase.
The Adviser will monitor each writer's ability to meet its obligations under
puts.
Puts may be purchased as a feature of the underlying bond or note, or as an
independent security. When a Tax-Exempt Fixed Income Fund or a Taxable Fixed
Income Fund purchases puts as independent securities, it may exercise the puts
prior to their expiration date in order to fund obligations to purchase other
securities or to meet redemption requests. These obligations may arise during
periods in which proceeds from sales of Fund shares and from recent sales of
portfolio securities are insufficient to meet obligations or when the funds
available are otherwise allocated for investment. In addition, puts may be
exercised prior to the expiration date in order to take advantage of alternative
investment opportunities or in the event the Adviser revises its evaluation of
the creditworthiness of the issuer of the underlying security. In determining
whether to exercise puts prior to their expiration date and in selecting which
puts to exercise, the Adviser will consider the amount of cash available to the
Fund, the expiration dates of the available puts, any future commitments for
securities purchases, alternative investment opportunities, the desirability of
retaining the underlying securities in the Fund's portfolio and the yield,
quality and maturity dates of the underlying securities.
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The Tax-Exempt Fixed Income Funds and the Taxable Fixed Income Funds will value
any securities subject to puts with remaining maturities of less than 60 days by
the amortized cost method. If the Intermediate New York Tax-Exempt Fund invests
in municipal bonds and notes with maturities of 60 days or more that are subject
to puts separate from the underlying securities, the puts and the underlying
securities will be valued at fair value as determined in accordance with
procedures established by the Directors. The Directors will, in connection with
the determination of the value of a put, consider, among other factors, the
creditworthiness of the writer of the put, the duration of the put, the dates on
which or the periods during which the put may be exercised and the applicable
rules and regulations of the Securities and Exchange Commission. Prior to
investing in such securities, a Fund, if deemed necessary based upon the advice
of counsel, will apply to the Securities and Exchange Commission for an
exemptive order, which may not be granted, relating to the valuation of such
securities.
Since the value of a put is partly dependent on the ability of the put writer to
meet its obligation to repurchase, the policy of the Tax-Exempt Fixed Income
Funds and the Taxable Fixed Income Funds is to enter into put transactions only
with securities dealers or issuers who are approved by the Adviser. Each dealer
will be approved on its own merits, and it is a Fund's general policy to enter
into put transactions only with those dealers that are determined to present
minimal credit risks. In connection with such determination, the Directors will
review regularly the Adviser's list of approved dealers, taking into
consideration, among other things, the ratings, if available, of their equity
and debt securities, their reputation in the securities markets, their net
worth, their efficiency in consummating transactions and any collateral
arrangements, such as letters of credit, securing the puts written by them.
Commercial bank dealers normally will be members of the Federal Reserve System,
and other dealers will be members of the National Association of Securities
Dealers, Inc. or members of a national securities exchange. Other put writers
will have outstanding debt rated in the highest rating categories as determined
by a Nationally Recognized Statistical Rating Organization ("NRSRO"). Currently,
there are six NRSROs: Moody's, S&P, Fitch Investors Services, L.P., Duff and
Phelps/MCM, IBCA Limited and its affiliate, IBCA, Inc. and Thomson Bankwatch. If
a put writer is not rated by an NRSRO, it must be of comparable quality in the
Adviser's opinion or such put writers' obligations will be collateralized and of
comparable quality in the Adviser's opinion. The Directors have directed the
Adviser not to enter into put transactions with any dealer that in the judgment
of the Adviser present more than a minimal credit risk. In the event that a
dealer should default on its obligation to repurchase an underlying security, a
Fund is unable to predict whether all or any portion of any loss sustained could
subsequently be recovered from such dealer.
BNY Hamilton has been advised by counsel that the Funds should be considered the
owner of the securities subject to the puts so that the interest on the
securities is tax-exempt income to the Tax-Exempt Fixed Income Funds. Such
advice of counsel is based on certain assumptions concerning the terms of the
puts and the attendant circumstances.
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Equity Investments
As discussed in their Prospectuses, each of the Equity Funds may invest in
equity securities to the extent consistent with its investment objective and
policies. The securities in which the Equity Funds may invest include those
listed on any domestic or foreign securities exchange or traded in the
over-the-counter market. A discussion of the various types of equity investments
which may be purchased by the Equity Funds appears in the Prospectuses for the
Equity Funds and below. See "Quality and Diversification Requirements".
Equity Securities. The common stocks in which the Equity Funds may invest
includes the common stock of any class or series of domestic or foreign
corporations or any similar equity interest, such as a trust or partnership
interest. These investments may or may not pay dividends or carry voting rights.
Common stock occupies the most junior position in a company's capital structure.
Convertible Securities. The convertible securities in which the Equity Funds may
invest 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 a convertible security determine its ranking in a company's capital
structure. In the case of subordinated convertible debentures, the holders'
claims on assets and earnings are subordinated to the claims of other creditors
and are senior to the claims of preferred and common shareholders. In the case
of convertible preferred stock, the holders' claims on assets and earnings are
subordinated to the claims of all creditors and are senior to the claims of
common shareholders.
Foreign Investments
The Money Fund, the Equity Income Fund, the Large Cap Growth Fund, the Small Cap
Growth Fund, the International Equity Fund, the Intermediate Investment Grade
Fund and the Large Cap Value Fund may invest in certain foreign securities. The
Money Fund does not expect to invest more than 65% of its total assets at the
time of purchase in securities of foreign issuers. The Equity Income Fund, the
Large Cap Growth Fund, the Small Cap Growth Fund, the Intermediate Investment
Grade Fund and the Large Cap Value Fund do not expect to invest more than 20% of
their respective total assets at the time of purchase in securities of foreign
issuers. All investments of the Money Fund must be United States
dollar-denominated. The Equity Income Fund, the Large Cap Growth Fund, the Small
Cap Growth Fund, the Intermediate Investment Grade Fund and the Large Cap Value
Fund do not expect more than 15% of their respective foreign investments to be
in securities that are not either listed on a securities exchange or United
States dollar-denominated. In the case of the Money Fund, any foreign commercial
paper must not be subject to foreign withholding tax at the time of purchase.
Foreign investments may be made directly in securities of foreign issuers or in
the form of American Depository Receipts ("ADRs"), European Depositary Receipts
("EDRs") and Global Depository Receipts ("GDRs"). Generally, ADRs, EDRs and GDRs
are receipts issued by a bank or trust company that evidence ownership of
underlying securities issued by a foreign
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corporation and that are designed for use in the domestic, in the case of ADRs,
or global, in the case of EDRs and GDRs, securities markets.
Since investments in foreign securities may involve foreign currencies, the
value of a Fund's assets as measured in United States dollars may be affected by
changes in currency rates and in exchange control regulations, including
currency blockage. The Equity Funds 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 they will not enter into such commitments
for speculative purposes.
To the extent that the Tax-Exempt Fixed Income Funds invest in municipal bonds
and notes backed by credit support arrangements with foreign financial
institutions, the risks associated with investing in foreign securities may be
relevant.
Additional Investments
When-Issued and Delayed Delivery Securities. Each of the Funds may purchase
securities on a when-issued or delayed delivery basis. For example, delivery of
and payment for these securities can take place a month or more after the date
of the purchase commitment. The purchase price and the interest rate payable, if
any, on the securities are fixed on the purchase commitment date or at the time
the settlement date is fixed. The value of such securities is subject to market
fluctuation and no interest accrues to a Fund until settlement takes place. At
the time a Fund makes the commitment to purchase securities on a when-issued or
delayed delivery basis, it will record the transaction, reflect the value each
day of such securities in determining its net asset value and, if applicable,
calculate the maturity for the purposes of average maturity from that date. At
the time of its acquisition, a when-issued security may be valued at less than
the purchase price. A Fund will make commitments for such when-issued
transactions only when it has the intention of actually acquiring the
securities. To facilitate such acquisitions, each Fund will maintain with the
custodian a segregated account with liquid assets, consisting of cash, U.S.
Government securities or other appropriate securities, in an amount at least
equal to such commitments. On delivery dates for such transactions, each Fund
will meet its obligations from maturities or sales of the securities held in the
segregated account and/or from cash flow. If a Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition, it could, as
with the disposition of any other portfolio obligation, incur a gain or loss due
to market fluctuation. It is the current policy of each Fund not to enter into
when-issued commitments exceeding in the aggregate 25% of the market value of
the Fund's total assets, less liabilities other than the obligations created by
when-issued commitments.
Investment Company Securities. The Equity Funds, the Taxable Fixed Income Funds
and the Tax-Exempt Fixed Income Funds may invest in the securities of other
investment companies within the limits set by the Investment Company Act of 1940
(the "1940 Act"). These limits require that, as determined immediately after a
purchase is made, (i) not more than 5% of the value of the Fund's total assets
will be invested in the securities of any one investment company, (ii) not more
than 10% of the value of the Fund's total assets will be invested in the
aggregate 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 the Fund. As a shareholder of another investment company,
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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 a Fund bears
directly in connection with its own operations.
Reverse Repurchase Agreements. Except for the Treasury Money Fund, each of the
Funds may enter into reverse repurchase agreements. In a reverse repurchase
agreement, a Fund sells a security and agrees to repurchase the same security at
a mutually agreed upon date and price. This may also be viewed as the borrowing
of money by a Fund. The Funds will invest the proceeds of borrowings under
reverse repurchase agreements. In addition, a Fund will enter into a reverse
repurchase agreement only when the interest income to be earned from the
investment of the proceeds is greater than the interest expense of the
transaction. 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 the Custodian a separate account with
a segregated portfolio of securities in an amount at least equal to its purchase
obligations under its reverse repurchase agreements. If interest rates rise
during the term of a reverse repurchase agreement, entering into the reverse
repurchase agreement may have a negative impact on the Money Fund's ability to
maintain a net asset value of $1.00 per share. See "Investment Restrictions".
Loans of Portfolio Securities. The Equity Funds, the Taxable Fixed Income Funds
and the Tax-Exempt Fixed Income Funds may lend securities if such loans are
secured continuously by liquid assets consisting of cash, U.S. Government
securities or other appropriate securities or by a letter of credit in favor of
the Fund at least equal at all times to 100% of the market value of the
securities loaned, plus accrued interest. While such securities are on loan, the
borrower will pay the Fund any income accruing thereon. Loans will be subject to
termination by the Fund in the normal settlement time, currently three Business
Days after notice, or by the borrower on one day's notice (as used herein,
"Business Day" shall denote any day on which the New York Stock Exchange and the
custodian are both open for business). Borrowed securities must be returned when
the loan is terminated. Any gain or loss in the market price of the borrowed
securities that occurs during the term of the loan inures to the lending Fund
and its shareholders. The Funds may pay reasonable finders' and custodial fees
in connection with loans. In addition, the Funds will consider all facts and
circumstances including the creditworthiness of the borrowing financial
institution, and the Funds will not make any loans for terms in excess of one
year. The Funds will not lend their securities to any director, officer,
employee, or affiliate of BNY Hamilton, the Adviser, the Administrator or the
Distributor, unless permitted by applicable law.
Privately Placed and Certain Unregistered Securities. All Funds except the
Treasury Money Fund, [the S&P 500 Fund and the Bond Index Fund] may invest in
privately placed, restricted, Rule 144A and other unregistered securities as
described in their respective Prospectuses.
Quality and Diversification Requirements
Each of the Funds except the Intermediate New York Tax-Exempt Fund is classified
as a "diversified" series of a registered investment company under the 1940 Act.
This means that with
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respect to 75% of its total assets (1) the Fund may not invest more than 5% of
its total assets in the securities of any one issuer, except obligations of the
United States Government, its agencies and instrumentalities, and (2) the Fund
may not own more than 10% of the outstanding voting securities of any one
issuer. As for the remaining 25% of each Fund's total assets, there is no such
limitation on investment of these assets under the 1940 Act, so that all of such
assets may be invested in the securities of any one issuer, subject to the
limitation of any applicable state securities laws, or, with respect to the
Money Market Funds, as described below. Investments not subject to the
limitations described above could involve an increased risk to a Fund should an
issuer, or a state or its related entities, be unable to make interest or
principal payments or should the market value of such securities decline.
The Intermediate New York Tax-Exempt Fund is classified as a non-diversified
series of a registered investment company so that it 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. However, the Fund will comply with the diversification
requirements of the Internal Revenue Code of 1986, as amended (the "Tax Code"),
and has therefore adopted an investment restriction, which applies to 50% of the
value of the assets of the Fund and which may not be changed without shareholder
vote, prohibiting the Fund from purchasing securities of any issuer if, as a
result, more than 5% of the assets of the Fund would be invested in the
securities of a single issuer. See "Investment Restrictions". The Fund also
intends to comply with the diversification requirements of the Tax Code, for
qualification thereunder as a regulated investment company. See "Taxes". As a
nondiversified series of an investment company, 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 the
Fund were a diversified company.
With respect to the Intermediate New York Tax-Exempt Fund, for purposes of
diversification and concentration under the 1940 Act, identification of the
issuer of municipal bonds or notes depends on the terms and conditions of the
obligation. If the assets and revenues of an agency, authority, instrumentality
or other political subdivision are separate from those of the government
creating the subdivision and the obligation is backed only by the assets and
revenues of the subdivision, such subdivision is regarded as the sole issuer.
Similarly, in the case of an industrial development revenue bond or pollution
control revenue bond, if the bond is backed only by the assets and revenues of
the non-governmental user, the non-governmental user is regarded as the sole
issuer. If in either case the creating government or another entity guarantees
an obligation, the guaranty is regarded as a separate security and treated as an
issue of such guarantee. Since securities issued or guaranteed by states or
municipalities are not voting securities, there is no limitation on the
percentage of a single issuer's securities that a Fund may own so long as it
does not invest more than 5% of its total assets that are subject to the
diversification limitation in the securities of such issuer, except obligations
issued or guaranteed by the United States Government. Consequently, the Fund may
invest in a greater percentage of the outstanding securities of a single issuer
than would an investment company that invests in voting securities. See
"Investment Restrictions".
Money Market Funds. In order to attain its objective of maintaining a stable net
asset value of $1.00 per share for each of its respective classes, each of the
Money Market Funds will (i) limit its investment in the securities (other than
U.S. Government securities) of any one issuer to no more
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than 5% of the Fund's assets, measured at the time of purchase, except for
investments held for not more than three Business Days (subject, however, to
each Fund's investment restriction No. 4 set forth under "Investment
Restrictions" below); and (ii) limit investments to securities that present
minimal credit risks.
In order to limit the credit risk of the Money Fund's investments, it will not
purchase any security (other than a United States Government security) unless it
is rated in the highest rating category assigned to short-term debt securities
(so-called "first tier" securities) by at least two NRSROs such as Moody's
(i.e., P-1 rating) and S&P (i.e., A-1 rating) or, if not so rated, it is
determined to be of comparable quality. Determinations of comparable quality
will be made in accordance with procedures established by the Directors. These
standards must be satisfied at the time an investment is made. If the quality of
the investment later declines, the Money Fund may continue to hold the
investment, subject in certain circumstances to a finding by the Directors that
disposing of the investment would not be in the Money Fund's best interest.
In addition, the Directors have adopted procedures that (i) require each Money
Market Fund to maintain a dollar-weighted average portfolio maturity of not more
than 90 days and to invest only in securities with a remaining maturity of 397
days or less, and (ii) require each Money Market Fund, in the event of certain
downgradings of or defaults on portfolio holdings, to reassess promptly whether
the security presents minimal credit risks and, in certain circumstances, to
determine whether continuing to hold the security is in the best interests of
each Money Market Fund.
Equity Funds. The Equity Funds, except for the S&P 500 Index Fund, may invest in
convertible debt securities, for which there are no specific quality
requirements. In addition, at the time the Equity Funds invest in any commercial
paper, bank obligation or repurchase agreement, the issuer must have outstanding
debt rated A (or its equivalent) or higher by an NRSRO; the issuer's parent
corporation, if any, must have outstanding commercial paper rated Prime-2 (or
its equivalent) or better by an NRSRO; or if no such ratings are available, the
investment must be of comparable quality in the Adviser's opinion. At the time
an Equity Fund invests in any other short-term debt securities, they must be
rated A (or its equivalent) or higher by an NRSRO, or if unrated, the investment
must be of comparable quality in the Adviser's opinion.
Taxable Fixed Income Funds. During normal market conditions, each of the Taxable
Fixed Income Funds' portfolios will have a dollar weighted average maturity of
not less than three nor more than ten years. In addition, the Intermediate
Investment Grade Fund will not purchase a security with a maturity date of
greater than fifteen years at the time of purchase. The Intermediate Government
Fund's portfolio will, and the Intermediate Investment Grade Fund's portfolio
may, include a variety of securities that are issued or guaranteed by the United
States Treasury, by various agencies of the United States Government or by
various instrumentalities that have been established or sponsored by the United
States Government. Under normal market conditions, the Intermediate Government
Fund will invest at least 65% of the value of its total assets in Government
securities.
Tax-Exempt Fixed Income Funds. The Intermediate New York Tax-Exempt Fund invests
principally in a portfolio of "high quality" and "investment grade" New York
municipal bonds. The Intermediate Tax-Exempt Fund invests principally in such
municipal bonds from throughout the
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United States. For purposes of the Intermediate New York Tax-Exempt Fund, on the
date of investment (i) New York municipal bonds must be rated within the four
highest ratings of Moody's, currently Aaa, Aa, A and Baa, or of S&P, currently
AAA, AA, A and BBB, (ii) New York short-term municipal obligations must be rated
MIG-2 or higher by Moody's or SP-1 or higher by S&P and (iii) New York
tax-exempt commercial paper must be rated Prime-1 or higher by Moody's or A-1 or
higher by S&P or, if not rated by either Moody's or S&P, issued by an issuer
either (a) having an outstanding debt issue rated A or higher by Moody's or S&P
or (b) having comparable quality in the opinion of the Adviser. Each Fund may
invest in other tax-exempt securities that are not rated if, in the opinion of
the Adviser, such securities are of comparable quality to securities in the
rating categories discussed above. In addition, at the time a Fund invests in
any commercial paper, bank obligation or repurchase agreement, the issuer must
have outstanding debt rated A or higher by Moody's or S&P, the issuer's parent
corporation, if any, must have outstanding commercial paper rated Prime-1 by
Moody's or A-1 by S&P, or if no such ratings are available, the investment must
be of comparable quality in the Adviser's opinion.
In determining suitability of investment in a particular unrated security, the
Adviser takes into consideration asset and debt service coverage, the purpose of
the financing, history of the issuer, existence of other rated securities of the
issuer, and other relevant conditions, such as comparability to other issuers.
Hedging Activities
Hedging is a means of transferring risk that an investor does not desire to
assume during an uncertain market environment. In the case of the income funds,
interest rates have become increasingly volatile in recent years, and with the
advent of financial futures contracts, options on financial instruments and
indexes of debt securities, the Adviser believes it is now possible to reduce
the effects of market fluctuations.
Taxable Fixed Income Funds and Tax-Exempt Fixed Income Funds. The Taxable Fixed
Income Funds and the Tax-Exempt Fixed Income Funds may (i) sell futures
contracts on debt securities and indexes of debt securities and (ii) purchase or
write (sell) options on such futures and options on debt securities and on
indexes of debt securities. The Tax-Exempt Fixed Income Funds may also enter
into the above-described transactions with respect to municipal debt securities
and on indexes of municipal debt securities. The purpose of any such transaction
is to hedge against changes in the market value of securities in the Fund's
portfolio caused by fluctuating interest rates, and to close out or offset
existing positions in such futures contracts or options. The Taxable Fixed
Income Funds and the Tax-Exempt Fixed Income Funds will not engage in financial
futures or options transactions for speculation, but only as a hedge against
changes in the market values of securities held by the Funds and where the
transactions are appropriate to reduction of risk. The Taxable Fixed Income
Funds and Tax-Exempt Fixed Income Funds may not enter into futures contracts or
related options if, immediately thereafter, the sum of the amount of initial and
variation margin deposits on outstanding futures contracts and premiums paid for
related options would exceed 20% of the market value of their respective total
assets. In addition, the Taxable Fixed Income Funds and the Tax-Exempt Fixed
Income Funds may not enter into futures contracts or purchase or sell related
options (other than offsetting existing positions) if immediately thereafter the
sum of the amount of initial
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margin deposits on outstanding futures contracts and premiums paid for related
options would exceed 5% of the market value of their respective total assets.
Special Considerations Relating to Hedging Activities. Each of the Taxable Fixed
Income Funds and the Tax-Exempt Fixed Income Funds may take positions in
financial futures contracts and options traded on registered securities
exchanges and contract markets solely as a hedge. However, for a hedge to be
completely successful, the price changes of the hedging instruments should equal
the price changes of the securities being hedged. To the extent the hedging
instrument utilized does not involve specific securities in the portfolio, such
equal price changes will not always be possible. Thus, hedging activities may
not be completely successful in eliminating market value fluctuations of the
portfolios. When using hedging instruments that do not specifically correlate
with securities in a Fund's portfolio, the Adviser will attempt to create a very
closely correlated hedge. In particular, hedging activities of the Tax-Exempt
Fixed Income Funds based upon non-municipal debt securities or indexes may not
correlate as closely to a Tax-Exempt Fixed Income Fund's portfolio as hedging
activities based upon municipal debt securities or indexes. Nevertheless,
hedging activities may be useful to the Tax-Exempt Fixed Income Funds,
especially where closely correlated hedging activities based upon municipal
securities or indexes are not available. See "Risks Associated with Futures
Contracts" below. Further, the use of options rather than financial futures
contracts to hedge portfolio securities may result in partial hedges because of
the limits inherent in the exercise prices.
Risks in the use of futures contracts result from the possibility that changes
in market interest rates may differ substantially from the changes anticipated
when hedge positions were established. For example, if any of the Funds has
hedged against the possibility of an increase in interest rates and instead
interest rates decline, the value of the Fund's portfolio will increase, but the
Fund will lose at least part of the benefit of that increased value because it
will have losses in its futures positions. In addition, in such situations, if
the Fund has insufficient cash, it may have to sell securities to meet daily
maintenance margin requirements resulting from losses in its futures positions.
While the Funds will not ordinarily incur brokerage commissions on the portfolio
securities that they purchase, each Fund will pay brokerage commissions on its
financial futures and options transactions. The Funds will also incur premium
costs for purchasing put and call options. Brokerage commissions and premium
costs may tend to reduce the yield of the Funds.
Each Fund's ability to engage in hedging activities and certain portfolio
transactions may be further limited by various investment restrictions of a
specific Fund and certain income tax considerations. For example, the amount of
assets that a specific Fund is permitted to invest in option and futures
contracts is limited as described above; furthermore, the limitations on the
percentage of gross income that a specific Fund may realize from transactions in
these securities may restrict its ability to effect transactions in these
securities. See "Taxes".
Financial Futures Contracts. Financial futures obligate the seller to deliver a
specific type of security called for in the contract, at a specified future
time, and for a specified price. Financial futures may be satisfied by actual
delivery of the securities or by entering into an offsetting transaction. In
offsetting or closing out an existing futures position, the seller of the
original contract
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enters into a futures contract to take delivery of the same security at the same
time as specified in the original futures contract.
Although financial futures contracts, by their terms, call for actual delivery
or acceptance of securities, in most cases the contracts are closed out before
the settlement date without making or taking delivery of the securities. Closing
out is accomplished by an offsetting transaction as described above. If the
price in the offsetting transaction (purchase) varies from the price in the
original futures contract (sale), the seller will realize a gain or loss on the
transaction. That gain or loss will tend to offset in whole or in part the
unrealized loss or gain that the securities held in the Funds' portfolio have
experienced, but may not always do so.
A public market exists in financial futures covering a number of debt
securities, including long-term United States Treasury bonds, ten-year United
States Treasury notes, Government National Mortgage Association modified
pass-through mortgage-backed certificates, three-month United States Treasury
bills, three-month domestic bank certificates of deposit and three-month
Eurodollar certificates of deposit. A public market also exists for futures
contracts on The Bond Buyer Index of forty long-term municipal bonds. In
addition, other financial futures contracts may be developed and traded. The
Funds may utilize any such contracts and associated put and call options for
which there is an active trading market. Financial futures are traded on
contract markets such as the Chicago Board of Trade and the New York Futures
Exchange, which are regulated by the Commodity Futures Trading Commission, a
federal agency.
When futures contracts are entered into, both buyer and seller are required,
under regulations of the applicable contract market, to post good faith deposits
with the brokers handling the trades or with a third party custodian as security
for the performance of their promise to buy or sell securities. This deposit,
the amount of which is determined by the contract market on which the futures
contract is traded, is called "initial margin". Each day, the investor's account
will be credited with any net gains due to favorable price movements during the
day's trading of contracts. Similarly, net losses, due to unfavorable price
movements during the day, will require the investor to make additional deposits
to the account. These daily settlement payments are called "variation margin".
Initial margin requirements are established by the contract markets and may be
changed, but brokers may require their customers to maintain margins higher than
those established by the contract markets.
In financial futures trading, margin does not involve any loan or borrowing.
Instead, it is a good faith deposit in the case of initial margin and a daily
settlement of gains and losses in the case of variation margin. Initial margin
deposits are held by the broker or a third party custodian in a segregated
customer account in the name of the investor, with the investor retaining all
rights and claims of ownership pursuant to federal regulation. The initial
margin deposits may be in the form of liquid securities such as Treasury bills
or bonds, the interest on which accrues to the investor, and which are returned
to the investor when it closes out a financial futures position. Variation
margin calls and payments must be made in cash.
The sale of futures contracts is for the purpose of hedging a Fund's securities
portfolio. For example, if interest rates were expected to increase, a Fund
might sell futures contracts. If interest rates did increase, the value of the
securities in the portfolio would decline. The value of a Fund's hedging
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instruments would increase at approximately the same rate (depending on the
correlation between value in the futures markets and the prices of the Fund's
portfolio securities and limits, under regulations of the applicable contract
market, on the price movements per day of the hedging instrument), thereby
offsetting all or part of such decline in the value of the underlying portfolio
securities. A Fund could accomplish similar results by selling securities with
long maturities and investing in securities with short maturities when interest
rates are expected to increase or by buying securities with long maturities and
selling securities with short maturities when interest rates are expected to
decline, but might sacrifice some yield by so doing.
Options on Futures Contracts. The Taxable Fixed Income Funds and the Tax-Exempt
Fixed Income Funds may also purchase put options and write call options on
futures contracts that are traded on a United States exchange or board of trade
and enter into closing transactions with respect to such options to terminate an
existing position. The Funds may use their options on futures contracts in
connection with hedging strategies. Generally, these strategies would be
employed under the same market and market sector conditions in which the Funds
use put and call options on debt securities. See "Options" below. The purchase
of put options on futures contracts is analogous to the purchase of puts on debt
securities so as to hedge a Fund's portfolio of debt securities against the risk
of rising interest rates.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the debt securities that are deliverable upon
exercise of the futures contract. If the futures price at expiration is below
the exercise price, the Funds will retain the full amount of the option premium,
which provides a partial hedge against any decline that may have occurred in the
Funds' holdings of debt securities.
Risks Associated with Futures Contracts. There are risks associated with the use
of futures contracts for hedging purposes. The price of a futures contract will
vary from day to day and should parallel (but not necessarily equal) the changes
in price of the underlying deliverable securities. The difference between these
two price movements is called "basis". There are occasions when basis becomes
distorted. For instance, in a rising interest rate environment, the increase in
value of the hedging instruments may not completely offset the decline in value
of the securities in the portfolio. Conversely, when interest rates decline, the
loss in the hedged position may be greater than the capital appreciation that a
Fund experiences in its securities positions. Distortions in basis are more
likely to occur when the securities hedged are not the security subject to the
futures contract or part of the index covered by the futures contract. Further,
if market values do not fluctuate, a Fund will sustain a loss at least equal to
the commissions on the financial futures transactions.
All investors in the futures market are subject to initial margin and variation
margin requirements. Rather than providing additional variation margin, an
investor may close out a futures position. Changes in the initial and variation
margin requirements may influence an investor's decision to close out the
position. The normal relationship between the securities and futures markets may
become distorted if changing margin requirements do not reflect changes in value
of the securities. The liquidity of the futures market depends on participants
entering into offsetting transactions rather than making or taking delivery of
the underlying securities. In the event investors decide to make or take
delivery (which is unlikely), liquidity in the futures market could be reduced,
thus producing
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temporary basis distortion. Finally, the margin requirements in the futures
market are substantially lower than margin requirements in the securities
market. Therefore, increased participation by speculators in the futures market
may cause temporary basis distortion.
In the futures market, 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.
Each market establishes a limit on the amount by which the daily market price of
a futures contract may fluctuate. Once the market price of a futures contract
reaches its daily price fluctuation limit, positions in the commodity can be
neither taken nor liquidated unless traders are willing to effect trades at or
within the limit. The holder of a futures contract (including a Fund) may
therefore be locked into its position by an adverse price movement for several
days or more, which may be to its detriment. If a Fund could not close its open
position during this period it would continue to be required to make daily cash
payments of variation margin. The risk of loss to a Fund is theoretically
unlimited when the Fund writes (sells) an uncovered futures contract because the
Fund is obligated to make delivery unless the contract is closed out, regardless
of fluctuations in the price of the underlying security. When a Fund purchases a
put option or call option, however, the maximum risk of loss to the Fund is the
price of the put option or call option purchased. See "Options".
Options. In connection with their hedging activities, the Taxable Fixed Income
Funds and the Tax-Exempt Fixed Income Funds may purchase put options or write
(sell) call options on financial futures and debt securities.
The Taxable Fixed Income Funds and the Tax-Exempt Fixed Income Funds may
purchase put options as a defensive measure to minimize the impact of market
price declines on the value of certain of the securities in each Fund's
portfolio. Each Taxable Fixed Income Fund or Tax-Exempt Fixed Income Fund may,
in addition, write call options only to the extent necessary to neutralize a
Fund's position in portfolio securities, i.e., balance changes in the market
value of the portfolio securities and the changes in the market value of the
call options. The Taxable Fixed Income Funds or the Tax-Exempt Fixed Income
Funds may also purchase call options and sell put options to close out open
positions.
The premium that a Fund receives from writing a call option will reflect, among
other things, the current market price of the underlying security, the
relationship of the exercise price to such market price, the historical price
volatility of the underlying security, the option period, supply and demand, and
interest rates.
A put option gives the purchaser of the option the right to sell, and the writer
of the option the obligation to buy, the underlying security at the exercise
price at any time during the option period. The Taxable Fixed Income Funds or
the Tax-Exempt Fixed Income Funds will only purchase put options on securities
that, in the opinion of the Adviser, have investment characteristics similar to
those of securities in each Fund's portfolio. The purchase of a put option would
be intended to protect a Fund from the risk of a decline in the value of a
security below the exercise price of the option. A Fund may ultimately sell the
option in a closing sale transaction, exercise it or permit it
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to expire. Profit or loss from such a transaction will depend on whether the
sale price is more or less than the premium paid to purchase the put option plus
the related transaction costs.
A call option gives the purchaser of the option the right to buy, and the writer
of the option the obligation to sell, the underlying security at the exercise
price at any time during the option period, regardless of the market price of
the security. The premium paid to the writer is the consideration for
undertaking the obligations under the option contract. When a call option is
written by any of the Taxable Fixed Income Funds or the Tax Exempt Fixed Income
Funds, the Fund will make arrangements with its custodian to segregate the
related portfolio securities until either the option is exercised or the Fund
closes out the option as described below. A call option sold by a Fund exposes
the Fund during the term of the option to possible loss of opportunity to
realize appreciation in the market price of the related portfolio security or to
possible continued holding of a security which might otherwise have been sold to
protect against depreciation in the market price of the security.
The Taxable Fixed Income Funds and the Tax-Exempt Fixed Income Funds will
purchase call options to close out open positions. In order to close out a
position, the Taxable Fixed Income Funds and the Tax-Exempt Fixed Income Funds
may make a "closing purchase transaction" -- the purchase of a call option on
the same security with the same exercise price and expiration date as the option
which it has previously written on a particular security. The Taxable Fixed
Income Funds and the Tax-Exempt Fixed Income Funds may effect a closing purchase
transaction to realize a profit (or loss) if the amount paid to purchase a call
option is less (or more) than the amount received from the sale thereof, to
prevent an underlying security from being called or, in the case of a call
option, to permit the sale of the underlying security prior to the expiration
date of the option. Furthermore, effecting a closing purchase transaction in the
case of a call option will permit a Fund to write another call option with
either a different exercise price or expiration date or both. If a Fund desires
to sell a particular security from its portfolio on which it has written a call
option, it will effect a closing purchase transaction prior to or concurrently
with the sale of the security.
Because increases in the market price of a call option will generally reflect
increases in the market price of an underlying security, any loss resulting from
the repurchase of a call option is likely to be offset in whole or in part by
unrealized appreciation of the underlying security owned by a Fund. From time to
time, the Taxable Fixed Income Funds and the Tax-Exempt Fixed Income Funds may
purchase an underlying security in the cash market for delivery in accordance
with an exercise notice of a call option assigned to it, rather than delivering
such security from its portfolio, in which case additional transaction costs
will be incurred.
Options written by the Taxable Fixed Income Funds and the Tax-Exempt Fixed
Income Funds will normally have expiration dates between three and nine months
from the date written. The exercise price of the options may be below
("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the
current market values of the underlying securities at the time the options are
written. The Taxable Fixed Income Funds and the Tax-Exempt Fixed Income Funds
may engage in buy-and-write transactions in which a Fund simultaneously
purchases a security and writes a call option thereon. Where a call option is
written against a security subsequent to the purchase of that security, the
resulting combined position is also referred to as a buy-and-write. A
buy-and-write transaction
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using an in-the-money call option may be utilized when it is expected that the
price of the underlying security will remain flat or decline moderately during
the option period. In such a transaction, a Fund's maximum gain will be the
premium received from writing the option reduced by any excess of the price paid
by the Fund for the underlying security over the exercise price. Buy-and-write
transactions using at-the-money call options may be utilized when it is expected
that the price of the underlying security will remain at or advance moderately
during the option period. In such a transaction, a Fund's gain will be equal to
the premium received from writing the option. Buy-and-write transactions using
out-of-the-money call options may be utilized when it is expected that the
premiums received from writing the call option plus the appreciation in the
market price of the underlying security up to the exercise price will be greater
than the appreciation in the price of the underlying security alone. In any of
the foregoing situations, if the market price of the underlying security
declines, the Funds may or may not realize a loss, depending on the extent to
which such decline is offset by the premium received.
The Taxable Fixed Income Funds and the Tax-Exempt Fixed Income Funds may
purchase put options to protect holdings in an underlying security against a
substantial decline in market value. Such hedge protection is provided only
during the life of the put option when a Fund as the holder of the put option is
able to sell the underlying security at the put exercise price regardless of any
decline in the underlying security's market price. By using put options in this
manner, a Fund will reduce any profit it might otherwise have realized in its
underlying security by the premium paid for the put option and by transaction
costs.
The Taxable Fixed Income Funds and the Tax-Exempt Fixed Income Funds may also
create the effect of a futures contract position by simultaneous purchase of a
put and sale of a call option on the same security. For example, the
simultaneous purchase of a put option and the sale of a call option at the same
price and for the same exercise dates provide the Funds with the same hedged
position as is created by the sale of a futures contract. By varying the price
of the options the Funds are exposed to price changes within the range of the
different option prices.
The Taxable Fixed Income Funds and the Tax-Exempt Fixed Income Funds will not
invest more than 5% of their respective net assets in premiums on put options.
See "Portfolio Transactions and Brokerage".
Index Transactions. The Taxable Fixed Income Funds and the Tax-Exempt Fixed
Income Funds may utilize futures contracts on bond indexes (municipal bond
indexes in the case of the Tax-Exempt Fixed Income Funds), or related put and
call options on such index contracts, so long as there is an active trading
market for the contracts. These contracts would be utilized as a hedge against
changes in the market value of securities in a Fund's portfolio. Each Fund's
strategy in employing such contracts would be similar to the strategies
discussed above regarding transactions in futures and options contracts
generally.
A bond index or municipal bond index assigns relative values to the bonds
included in the index. The index fluctuates with changes in the market values of
those securities included. For example, the municipal bond index traded on the
Chicago Board of Trade is The Bond Buyer Index, which includes forty tax-exempt
long-term revenue and general obligation bonds.
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An index futures contract is an agreement pursuant to which two parties agree to
take or make delivery of an amount of cash equal to a specified dollar amount
times the difference between the index value at the close of the last trading
day of the contract and the price at which the index contract was originally
written. Thus, the index contract is similar to traditional futures contracts
except that settlement is made in cash. Initial and variation margins are
payable by the holders of both long and short positions in the index future. No
physical delivery of the underlying bonds in the index is made.
The Taxable Fixed Income Funds and the Tax-Exempt Fixed Income Funds may also
buy put options and sell call options on applicable bond, or municipal bond,
index futures or on applicable bond, or municipal bond indexes. Options on index
futures are similar to options on debt instruments except that an option on an
index future gives the purchaser the right, in return for the premium paid, to
assume a position in an index contract rather than to purchase or sell a debt
instrument at a specified exercise price at any time during the period of the
option. Upon exercise of the option, the delivery of the futures position by the
writer of the option to the holder of the option will be accompanied by delivery
of the accumulated balance of the writer's futures margin account which
represents the amount by which the market price of the index 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 index future.
Options on indexes are also similar to options on debt instruments, except that
rather than the right to take or make delivery of a debt instrument at a
specified price, an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based is greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the option. Unlike options on
debt instruments, gain or loss depends on the price movements in the securities
included in the index rather than price movements in individual debt
instruments.
Equity Funds
Stock Index Futures, Related Options and Options on Stock Indexes. Each of the
Equity Funds may attempt to reduce the risk of investment in equity securities
by hedging a portion of its portfolio securities through the use of stock index
futures, options on stock index futures traded on a national securities exchange
or board of trade and options on securities and on stock indexes traded on
national securities exchanges. The Equity Funds' policies with respect to
hedging activities are discussed at length in the Prospectuses for the Equity
Funds.
A stock index assigns relative weightings to the common stocks in the index, and
the index generally fluctuates with changes in the market values of these
stocks. 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. Initial and variation margins are payable by the holders of positions in
the stock index future. In the case of options on stock index futures, the
holder of the option pays a premium and receives the right, upon exercise
25
<PAGE>
of the option at a specified price during the option period, to assume the
option writer's position in a stock index futures contract. If the option is
exercised by the holder before the last trading day, the option writer delivers
to the option holder cash in an amount equal to the difference between the
option exercise price and the closing level of the relevant index on the date
the option expires. 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 multiple, called the "multiplier".
During a market decline or when the Adviser anticipates a decline, an Equity
Fund may hedge a portion of its portfolio by selling stock index futures
contracts, purchasing put options on such contracts or purchasing put options on
stock indexes in order to limit exposure to the decline. The Equity Funds may
ultimately sell a put option in a closing sale transaction, exercise it or
permit it to expire. Profit or loss from such a transaction will depend on
whether the sale price is more or less than the premium paid to purchase the put
option plus the related transaction costs. This strategy provides an alternative
to liquidation of securities positions and the corresponding costs of such
liquidation. Conversely, during a market advance or when the Adviser anticipates
an advance, a Fund may hedge a portion of its portfolio by purchasing stock
index futures contracts, purchasing call options on such contracts or purchasing
call options on stock indexes. This strategy affords a hedge against a Fund's
not participating in a market advance at a time when it is not fully invested
and serves as a temporary substitute for the purchase of individual securities
which may later be purchased in a more advantageous manner. A Fund will sell
options on stock index futures and on stock indexes only to close out existing
hedge positions.
The Equity Funds will not engage in transactions in stock index futures
contracts or related options for speculation. The Equity Funds will use these
instruments only as a hedge against changes resulting from market conditions in
the values of securities held in a Fund's portfolio or which it intends to
purchase and where the transaction is economically appropriate to the reduction
of risks inherent in the ongoing management of a Fund. In addition, a 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
and the number of futures contracts which would be outstanding do not exceed
one-third of the value of a Fund's net assets. A Fund also 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 a Fund's existing
futures positions and premiums paid for such options would exceed 5% of the
market value of a Fund's total assets. When a Fund purchases stock index futures
contracts, it will deposit an amount of cash and cash equivalents equal to the
market value of the futures contracts in a segregated account with the Fund's
custodian.
The Equity Funds' successful use of stock index futures contracts, options on
such contracts and options on indexes depends upon the Adviser's ability to
predict movements in the direction of the market and is subject to various
additional risks. The correlation between movements 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 Fund's
portfolio diverges from the composition of the relevant index. In addition, if
the specific Fund purchases futures to hedge against market advances before it
can invest in common stock in an advantageous manner and the
26
<PAGE>
market declines, it might create a loss on the futures contract. Particularly in
the case of options on stock index futures and on stock indexes, the Fund's
ability to establish and maintain positions will depend on market liquidity.
For a discussion of the risks associated with index futures contracts, see
"Hedging Activities -- Taxable Fixed Income Funds and Tax-Exempt Fixed Income
Funds". See also "Portfolio Transactions and Brokerage".
Options on Securities. The Equity Funds may purchase put options only on equity
securities held in its portfolio and write call options on stocks only if they
are covered, and such call options must remain covered so long as the relevant
Fund is obligated as a writer. The Equity Funds do 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(R)
("NASDAQ").
The Equity Funds may, from time to time, write call options on its portfolio
securities. The Equity Funds may write only call options that are "covered",
meaning that the writing Fund 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, a 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 a Fund writes a call option, the
purchaser of the option has the right to buy (and the Fund has the obligation to
sell) the underlying security at the exercise price throughout the term of the
option. The amount paid to a Fund by the purchaser of the option is the
"premium". A Fund's obligation to deliver the underlying security against
payment of the exercise price would terminate either upon expiration of the
option or earlier if a Fund were 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. The Equity Funds
are not able to effect closing purchase transactions after they receive notice
of exercise.
In order to write a call option, a Fund is required to comply with the rules of
The Options Clearing Corporation and the various exchanges with respect to
collateral requirements. A 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 a Fund for writing the option.
An Equity Fund may also purchase listed put options, but only if it owns the
underlying securities. If a 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 a Fund is holding
a stock that it feels has strong fundamentals, but for some reason may be weak
in the near term, it may
27
<PAGE>
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, a 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 a Fund
exercises the put, less transaction costs, will be the amount by which the Fund
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 Fund paid for the put, plus transaction costs. If the
price of the underlying security increases, the profit a Fund realizes on the
sale of the security will be reduced by the premium paid for the put option less
any amount for which the put may be sold.
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
Fundamental Policies
In addition to its investment objectives, each Fund is subject to certain
investment restrictions that are deemed fundamental policies, i.e., policies
that cannot be changed without the approval of the holders of a majority of the
outstanding voting securities of the Fund, as defined under "Additional
Information" below. See "Organization" and "Additional Information". The
investment restrictions of each Fund follow.
The Money Market Funds may not:
1. Acquire illiquid securities, including repurchase agreements with more
than seven days to maturity or fixed time deposits with a duration of
over seven calendar days, if as a result thereof, more than 10% of the
market value of a Fund's net assets would be in investments that are
illiquid (except that the Money Fund may enter into securities as
described in "Privately Placed and Certain Unregistered Securities");
2. Enter into reverse repurchase agreements (although the Money Fund may
enter into reverse repurchase agreements, provided such agreements do not
exceed in the aggregate one-third of the market value of the Money Fund's
total assets, less liabilities other than obligations created by reverse
repurchase agreements);
3. Borrow money, except from banks for extraordinary or emergency purposes
and then only in amounts not to exceed one-third of the value of the
relevant Fund's total assets, taken at cost, at the time of such
borrowing and except in connection with permitted reverse repurchase
agreements, or mortgage, pledge, or hypothecate any assets except in
connection with any such borrowing and in amounts not to exceed one-third
of the value of the Fund's total assets at the time of such borrowing.
Neither Fund will purchase securities while borrowings (including reverse
repurchase agreements) exceed 5% of its total assets. This borrowing
provision is included to facilitate the orderly sale of portfolio
securities, for example, in the event of abnormally heavy redemption
requests, and is not for investment purposes and, in the case of the
Money Fund, will not apply to reverse repurchase agreements;
28
<PAGE>
4. Purchase the securities or other obligations of any issuer if,
immediately after such purchase, more than 5% of the value of the
relevant Fund's total assets would be invested in securities or other
obligations of any one such issuer. This limitation does not apply to
issues of the United States Government, its agencies or instrumentalities
or to permitted investments of up to 25% of a Fund's total assets;
5. Purchase the securities or other obligations of issuers in the same
industry if, immediately after such purchase, the value of its investment
in such industry would exceed 25% of the value of the relevant Fund's
total assets, except that the Fund may invest more than 25% of its assets
in securities and other instruments issued by banks and bank holding
companies. For purposes of industry concentration, there is no percentage
limitation with respect to investments in securities issued or guaranteed
by the United States Government, its agencies or instrumentalities,
negotiable certificates of deposit, time deposits, and bankers'
acceptances of United States branches of United States banks;
6. Make loans, except through purchasing or holding debt obligations, or
entering into repurchase agreements, or loans of portfolio securities in
accordance with the relevant Fund's investment objective and policies
(see "Investment Objectives and Policies");
7. Purchase or sell puts, calls, straddles, spreads or any combination
thereof; real estate; commodities; or commodity contracts or interests in
oil, gas, or mineral exploration, development or lease programs. However,
the Money Fund may purchase bonds or commercial paper issued by companies
which invest in real estate or interest therein including real estate
investment trusts;
8. Purchase securities on margin, make short sales of securities or maintain
a short position, provided that this restriction shall not be deemed to
be applicable to the purchase or sale of when-issued securities or of
securities for delivery at a future date;
9. Acquire securities of other investment companies, except as permitted by
the 1940 Act or the rules thereunder;
10. Act as an underwriter of securities; or
11. Issue senior securities as defined in the 1940 Act, except insofar as a
Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase agreement or reverse repurchase agreement;
(b) permitted borrowings of money; or (c) purchasing securities on a
when-issued or delayed delivery basis.
In addition to the restrictions listed above, the Treasury Money Fund may not:
1. Invest in structured notes or other instruments commonly known as
derivatives;
2. Invest in any type of variable, adjustable or floating rate securities;
29
<PAGE>
3. Invest in securities issued by agencies or instrumentalities of the
United States Government, such as the Federal National Mortgage
Association, Government National Mortgage Association, Federal Home Loan
Mortgage Corp. or the Small Business Administration; or,
4. Invest in zero coupon bonds, except that the Treasury Money Fund may
invest in zero coupon bonds issued by the United States Government
provided that the bonds mature within 397 days from the date of purchase,
and that the Treasury Money Fund may include zero coupon bonds issued by
the United States Government as collateral for repurchase agreements.
The Equity Funds may not:
1. Acquire illiquid securities, including repurchase agreements with more
than seven days to maturity or fixed time deposits with a duration of
over seven calendar days, if as a result thereof, more than 15% of the
market value of a Fund's net assets would be in investments that are
illiquid;
2. Borrow money, except from banks for extraordinary or emergency purposes
and then only in amounts not to exceed one-third of the value of the
relevant Fund's total assets, taken at cost, at the time of such
borrowing and except in connection with reverse repurchase agreements
permitted by Investment Restriction 12, or mortgage, pledge, or
hypothecate any assets except in connection with any such borrowing in
amounts not to exceed one-third of the value of the Fund's net assets at
the time of such borrowing. A Fund will not purchase securities while
borrowings exceed 5% of the Fund's total assets. This borrowing provision
is included to facilitate the orderly sale of portfolio securities, for
example, in the event of abnormally heavy redemption requests, and is not
for investment purposes. Collateral arrangements for premium and margin
payments in connection with a Fund's hedging activities are not deemed to
be a pledge of assets;
3. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the
relevant Fund's total assets would be invested in securities or other
obligations of any one such issuer. This limitation shall not apply to
issues of the United States Government, its agencies or instrumentalities
and to permitted investments of up to 25% of a Fund's total assets;
4. Purchase the securities or other obligations of issuers in the same
industry if, immediately after such purchase, the value of its
investments in such industry would exceed 25% of the value of a Fund's
total assets. For purposes of industry concentration, there is no
percentage limitation with respect to investments in securities of the
United States Government, its agencies or instrumentalities;
5. Purchase the securities of an issuer if, immediately after such purchase,
the relevant Fund owns more than 10% of the outstanding voting securities
of such issuer;
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<PAGE>
6. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities), or the entering into of
repurchase agreements, or loans of portfolio securities in accordance
with a Fund's investment objectives and policies (see "Investment
Objectives and Policies");
7. Purchase or sell puts, calls, straddles, spreads or any combination
thereof; real estate; commodities or commodity contracts, except for a
Fund's interests in hedging activities as described under "Investment
Objectives and Policies"; or interests in oil, gas or mineral exploration
or development programs. However, a Fund may purchase securities or
commercial paper issued by companies which invest in real estate or
interests therein, including real estate investment trusts;
8. Purchase securities on margin, make short sales of securities, or
maintain a short position, except in the course of a Fund's hedging
activities, provided that this restriction shall not be deemed to be
applicable to the purchase or sale of when-issued securities or delayed
delivery securities;
9. Invest in fixed time deposits with a duration of from two Business Days
to seven calendar days if more than 10% of the Fund's total assets would
be invested in such deposits;
10. Acquire securities of other investment companies, except as permitted by
the 1940 Act or the rules thereunder;
11. Act as an underwriter of securities; or
12. Issue any senior security, except as appropriate to evidence indebtedness
which constitutes a senior security and which a Fund is permitted to
incur pursuant to Investment Restriction 2 and except that the Fund may
enter into reverse repurchase agreements, provided that the aggregate of
senior securities, including reverse repurchase agreements, shall not
exceed one-third of the market value of its total assets, less
liabilities other than obligations created by reverse repurchase
agreements. A Fund's arrangements in connection with its hedging
activities as described in "Investment Objectives and Policies" shall not
be considered senior securities for purposes hereof.
The Taxable Fixed Income Funds may not:
1. Acquire illiquid securities, including repurchase agreements with more
than seven days to maturity or fixed time deposits with a duration of
over seven calendar days, if as a result thereof, more than 15% of the
market value of the relevant Fund's net assets would be in investments
that are illiquid;
2. Borrow money, except from banks for extraordinary or emergency purposes
and then only in amounts up to one-third of the value of the relevant
Fund's total assets, taken at cost at the time of such borrowing and
except in connection with reverse repurchase agreements permitted by
Investment Restriction 10, or mortgage, pledge, or hypothecate any
assets, except in connection
31
<PAGE>
with any such borrowing in amounts up to one-third of the value of the
Fund's net assets at the time of such borrowing. A Fund will not purchase
securities while borrowings (including reverse repurchase agreements)
exceed 5% of its total assets. This borrowing provision facilitates the
orderly sale of portfolio securities, for example, in the event of
abnormally heavy redemption requests. This provision is not for
investment purposes. Collateral arrangements for premium and margin
payments in connection with a Fund's hedging activities are not deemed to
be a pledge of assets;
3. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the
relevant Fund's total assets would be invested in securities or other
obligations of any one such issuer. This limitation shall not apply to
securities issued or guaranteed by the United States Government, its
agencies or instrumentalities and to permitted investments of up to 25%
of a Fund's total assets;
4. Purchase the securities of an issuer if, immediately after such purchase,
the relevant Fund owns more than 10% of the outstanding voting securities
of such issuer. This limitation shall not apply to permitted investments
of up to 25% of a Fund's total assets;
5. Purchase the securities or other obligations of issuers in the same
industry if, immediately after such purchase, the value of its investment
in such industry would exceed 25% of the value of a Fund's total assets,
except that a Fund will invest more than 25% of its assets in securities
issued or guaranteed by the United States Government, its agencies or
instrumentalities;
6. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities) or the entering into of
repurchase agreements, or loans of portfolio securities in accordance
with the relevant Fund's investment objective and policies;
7. Purchase or sell puts, calls, straddles, spreads or any combination
thereof; real estate; commodities; commodity contracts, except for a
Fund's interest in hedging activities as described under "Investment
Objectives and Policies"; or interest in oil, gas, or mineral exploration
or development programs. However, a Fund may purchase debt obligations
secured by interests in real estate or issued by companies which invest
in real estate or interests therein including real estate investment
trusts;
8. Purchase securities on margin, make short sales of securities or maintain
a short position, except in the course of the relevant Fund's hedging
activities, unless at all times when a short position is open the Fund
owns an equal amount of such securities or securities convertible into
such securities or maintains in a segregated account liquid short-term
securities with a market value at all times equal to or greater than the
relevant Fund's purchase obligation or short position; provided that this
restriction shall not be deemed to be applicable to the purchase or sale
of when-issued or delayed delivery securities;
9. Invest in fixed time deposits with a duration of from two Business Days
to seven calendar days if more than 10% of a Fund's total assets would be
invested in such deposits;
32
<PAGE>
10. Issue any senior security, except as appropriate to evidence indebtedness
which constitutes a senior security and which a Fund is permitted to
incur pursuant to Investment Restriction 2 and except that a Fund may
enter into reverse repurchase agreements, provided that the aggregate of
senior securities, including reverse repurchase agreements, shall not
exceed one-third of the market value of the Fund's total assets, less
liabilities other than obligations created by reverse repurchase
agreements. A Fund's arrangements in connection with its hedging
activities as described in "Investment Objectives and Policies" shall not
be considered senior securities for purposes hereof;
11. Acquire securities of other investment companies, except as permitted by
the 1940 Act or the rules thereunder; or
12. Act as an underwriter of securities.
The Tax-Exempt Fixed Income Funds may not:
1. Acquire illiquid securities, including repurchase agreements with more
than seven days to maturity or fixed time deposits with a duration of
over seven calendar days, if as a result thereof, more than 15% of the
market value of the relevant Fund's net assets would be in investments
that are illiquid;
2 Borrow money, except from banks for extraordinary or emergency purposes
and then only in amounts up to one-third of the value of the relevant
Fund's total assets, taken at cost at the time of such borrowing and
except in connection with reverse repurchase agreements permitted by
Investment Restriction 10, or mortgage, pledge, or hypothecate any assets
except in connection with any such borrowing in amounts up to one-third
of the value of the Fund's net assets at the time of such borrowing. A
Fund will not purchase securities while borrowings (including reverse
repurchase agreements) exceed 5% of the Fund's total assets. This
borrowing provision facilitates the orderly sale of portfolio securities,
for example, in the event of abnormally heavy redemption requests. This
provision is not for investment purposes. Collateral arrangements for
premium and margin payments in connection with a Fund's hedging
activities are not deemed to be a pledge of assets;
3. Purchase securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the
relevant Fund's total assets would be invested in securities or other
obligations of any one such issuer. Each state and political subdivision,
agency or instrumentality of such state and each multi-state agency of
which such state is a member will be a separate issuer if the security is
backed only by the assets and revenue of that issuer. If the security is
guaranteed by another entity, the guarantor will be deemed to be the
issuer. This limitation shall not apply to securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities or to permitted investments of up to 50% of a Fund's
total assets;
4. Purchase the securities or other obligations of issuers in the same
industry if, immediately after such purchase, the value of the relevant
Fund's investment in such industry would exceed 25%
33
<PAGE>
of the value its total assets, except that a Fund will invest more than
25% of its assets in securities issued or guaranteed by the United States
Government, (and, in the case of the Intermediate New York Tax-Exempt
Fund, New York State, New York City and the Commonwealth of Puerto Rico)
and their respective authorities, agencies, instrumentalities and
political subdivisions;
5. Purchase industrial revenue bonds if, as a result of such purchase, more
than 5% of the relevant Fund's total assets would be invested in
industrial revenue bonds where payment of principal and interest are the
responsibility of companies with fewer than three years of operating
history (including predecessors);
6. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities) or the entering into of
repurchase agreements, or loans of portfolio securities in accordance
with the relevant Fund's investment objective and policies (see
"Investment Objectives and Policies");
7. Purchase or sell puts, calls, straddles, spreads or any combination
thereof except to the extent that securities subject to a demand
obligation, stand-by commitments and puts may be purchased (see
"Investment Objectives and Policies"); real estate; commodities;
commodity contracts, except for a Fund's interest in hedging activities
as described under "Investment Objectives and Policies"; or interests in
oil, gas, or mineral exploration or development programs. However, a Fund
may purchase municipal bonds, notes or commercial paper secured by
interest in real estate;
8. Purchase securities on margin, make short sales of securities or maintain
a short position, except in the course of the Fund's hedging activities,
unless at all times when a short position is open the Fund owns an equal
amount of such securities or owns securities which, without payment of
any further consideration, are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the securities
sold short; provided that this restriction shall not be deemed to be
applicable to the purchase or sale of when-issued or delayed delivery
securities;
9. Invest in fixed time deposits with a duration of from two Business Days
to seven calendar days if more than 5% of the relevant Fund's total
assets would be invested in such deposits;
10. Issue any senior security, except as appropriate to evidence indebtedness
which constitutes a senior security and which a Fund is permitted to
incur pursuant to Investment Restriction 2 and except that a Fund may
enter into reverse repurchase agreements, provided that the aggregate of
senior securities, including reverse repurchase agreements, shall not
exceed one-third of the market value of the relevant Fund's total assets,
less liabilities other than obligations created by reverse repurchase
agreements. A Fund's arrangements in connection with its hedging
activities as described in "Investment Objectives and Policies" shall not
be considered senior securities for purposes hereof;
34
<PAGE>
11. Acquire securities of other investment companies, except as permitted by
the 1940 Act or the rules thereunder; or
12. Act as an underwriter of securities.
Undertaking in Response to State Securities Regulations
In order to satisfy the requirements of certain state securities regulations,
the Equity Income Fund has undertaken not to invest more than 5% of its net
assets in warrants and to further restrict its investment in warrants so that
not more than 2% of net assets will be invested in warrants that are not listed
on the New York Stock Exchange or the American Stock Exchange. This is not,
however, a fundamental policy and may be changed by the Directors at any time
without the approval of the shareholders of the Equity Income Fund.
35
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
The directors and executive officers of BNY Hamilton Funds, Inc., their business
addresses and their principal occupations during the past five years are:
<TABLE>
<CAPTION>
Principal Occupations
Name and Address Position with Funds During Past Five Years
- ---------------- ------------------- ----------------------
<S> <C> <C>
Edward L. Gardner Director and Chairman of the Chairman of the Board, President and
411 Theodore Fremd Avenue Board Chief Executive Officer, Industrial
Rye, NY 10580 Solvents Corporation, 1981 to Present;
Age 65 Chairman of the Board, Blue Grass
Chemical Specialties Inc., 1982 to
Present; Chairman of the Board, Big
Brothers/Big Sisters of New York City,
1992 to Present; National Vice-Chairman,
Big Brothers/Big Sisters of America,
1993 to Present; President, Big
Brothers/Big Sisters of America
Foundation, 1994 to Present; Vice
President of the Board, The Sherry
Netherland Hotel, 1991 to Present;
Member, Points of Light Foundation, 1995
to Present; Member, The National
Assembly, 1992 to Present; Member, Alvin
Ailey Dance Theatre Foundation, Inc.,
1989 to Present; Member, The Institute
for Art and Urban Resources, Inc. 1985
to 1994; Member, Mercy College, 1989 to
Present; Member, Westchester/Putnam
Regional Board of Directors, The Bank of
New York, 1982 to Present; Member,
Westchester County Association, 1986 to
Present.
Mr. Stephen Stamas Director Chairman, New York Philharmonic, 1989 to
325 Evandale Road Present.
Scarsdale, NY 10583
Age 69
James E. Quinn Director Member, Board of Directors, Tiffany &
727 Fifth Avenue Co., January 1995 to Present; Vice
New York, NY 10022 Chairman, Retail and Corporate Sales,
Age 48 Tiffany & Co., 1999 to Present; Executive
Vice President of Sales, Tiffany & Co.,
March 1992 to 1999.
</TABLE>
36
<PAGE>
<TABLE>
<S> <C> <C>
Karen Osar Director Senior Vice President and Chief Financial
1725 King Street Officer, Westvaco Corp., 1999 to
Greenwich, CT 06831 President; Vice President & Treasurer,
Age 51 Tenneco Inc., January 1994 to 1999;
Managing Director of Corporate Finance
Group, J.P. Morgan & Co., Inc.; held
various other positions at J.P. Morgan &
Co., Inc. from 1975-1994.
Kim Kelly Director Executive Vice President and Chief
Insight Communications Financial Officer, Insight Communication
126 East 56 Street since 1990 to Present; Chief Operating
New York, NY 10022 Officer, Insight Communications, January
Age 42 1998 to Present; Marine Midland Bank from
1982 to 1990. Senior Vice President with
primary responsibility for media lending
activities, Marine Midland Bank 1988.
Held various other positions at marine
Midland Bank from 1982 to 1988. Member
of the National Cable Televisions
Association Subcommittee for
Telecommunications Policy and national
Cable Television Association
Subcommittee for Accounting. Board
member of Community Antenna Television
Association, Cable in the Classroom and
Cable Advertising Bureau.
J. David Huber Chief Executive Officer Employee, BISYS Fund Services, Inc., June
3435 Stelzer Road 1987 to Present
Columbus, OH 43219
Age 53
William J. Tomko President President, BISYS Fund Services, Inc.,
3435 Stelzer Road 1999 to Present
Columbus, OH 43219
Age 41
Richard Baxt Vice President Senior Vice President, Client Services,
90 Park Avenue, Tenth Floor BISYS Fund Services, Inc., 1997 to
New York, NY 10956 Present; General Manager of Investment
Age 46 and Insurance, First Fidelity Bank;
President, First Fidelity Brokers;
President, Citicorp Investment Services.
</TABLE>
37
<PAGE>
<TABLE>
<S> <C> <C>
Michael A. Grunewald Vice President Manager, Client Services, BISYS Fund
3435 Stelzer Road Services, Inc., 1993 to Present.
Columbus, OH 43219
Age 30
Nimish Bhatt Treasurer Vice President, Tax and Financial
3435 Stelzer Road Services, BISYS Fund Services, Inc., June
Columbus, OH 43219 1996-Present; Assistant Vice President,
Age 37 Evergreen Funds/First Union Bank, 1995 to
July 1996; Senior Tax Consultant,
Price Waterhouse LLP, 1990 to December
1994.
Lisa Hurley Secretary Vice President, Legal Services, BISYS
90 Park Avenue, Tenth Floor Fund Services, Inc., 1995-Present;
New York, NY 10956 Attorney, private practice, 1990 to 1995.
Age 30
Alaina V. Metz Assistant Secretary Chief Administrator, Administration
3435 Stelzer Road Services of BISYS Fund Services, Inc.,
Columbus, OH 43219 June 1995 to Present; Supervisor of
Age 32 Mutual Fund Legal Department, Alliance
Capital Management, May 1989 to June 1995.
</TABLE>
- --------------------------------------------------------------------------------
*Interested person
In 2000, the Directors will be paid an annual fee of $15,000 and an additional
$1,200 for each meeting of the Board of Directors that they attend, plus
out-of-pocket expenses. The Directors are not paid any pension or retirement
benefits. The Directors may hold various other directorships unrelated to the
Funds.
The following chart describes the compensation paid to Directors by BNY Hamilton
Funds, Inc. for the fiscal year ended December 31, 1999:
38
<PAGE>
<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Estimated Total
Compensation Benefits Accrued Annual Compensation Paid
Name of Person, Paid by the as Part of Fund Benefits Upon by the Funds
Position Funds Expenses Retirement to Directors
- ---------------------------------- --------------- ----------------- --------------- -------------------
<S> <C> <C> <C> <C>
Edward L. Gardner $21,000 $0 $0 $21,000
Director and Chairman of the
Board
Peter Herrick $21,000 $0 $0 $21,000
Director
Leif H. Olsen $4,950 $0 $0 $4,950
Director
Stephen Stamas $21,000 $0 $0 $21,000
Director
James E. Quinn $21,000 $0 $0 $21,000
Director
Karen Osar $21,000 $0 $0 $21,000
Director
Kim Kelly $16,050 $0 $0 $16,050
Director
</TABLE>
The above compensation, which is expected to total approximately $99,000 plus
out-of-pocket costs for 2000, will be allocated to all series of BNY Hamilton
Funds, Inc.
By virtue of the responsibilities assumed by the Adviser and the Administrator
(see "Investment Adviser", "Administrator" and "Distributor") and the services
provided by BNY Hamilton, the Funds have no employees; their officers are
provided and compensated by BNY Hamilton Distributors, Inc. BNY Hamilton's
officers conduct and supervise the business operations of the Funds.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
The investment adviser to the Funds is The Bank of New York, a bank organized
under the laws of the State of New York with its principal offices at One Wall
Street, New York, New York 10286. The Bank of New York is subject to regulation
by the New York State Banking Department and is a member bank of the Federal
Reserve System. Through offices in New York City and abroad, The Bank of New
York offers a wide range of services, primarily to governmental, institutional,
corporate and individual customers in the United States and throughout the
world.
The International Equity Fund is sub-advised by Indocam, a subsidiary of Credit
Agricole. The Bank of New York pays Indocam a fee equal to .425% of the average
daily net assets of the International Equity Fund.
Under the terms of the Advisory Agreements, the investment advisory services The
Bank of New York provides to BNY Hamilton Funds, Inc. are not exclusive. The
Bank of New York is free to and does render similar investment advisory services
to others. The Bank of New York serves as investment adviser to personal
investors and acts as fiduciary for trusts, estates and employee benefit plans.
Certain of the assets of trusts and estates under management are invested in
common trust funds for which The Bank of New York serves as trustee. The
accounts managed or advised by The
39
<PAGE>
Bank of New York have varying investment objectives and The Bank of New York
invests assets of such accounts in investments substantially similar to, or the
same as, those that are expected to constitute the principal investments of the
Funds. Such accounts are supervised by officers and employees of The Bank of New
York who may also be acting in similar capacities for the Funds. See "Portfolio
Transactions and Brokerage".
Because the S&P 500 Index Fund, the Bond Index Fund and the Large Cap Value Fund
commenced operations on the date hereof, they have no prior advisory fees to
report. The Adviser's fee will accrue daily and be payable at the annual rate of
0.25% of average daily net assets for the S&P 500 Index Fund, 0.25% of daily
average net assets for the Bond Index Fund and 0.60% of average daily net assets
for the Large Cap Value Fund.
The Large Cap Value Fund is sub-advised by Estabrook Capital Management. The
Bank of New York pays Estabrook 0.30% of the average net assets of the Large Cap
Value Fund.
As of April 1, 1999, the Bank of New York has voluntarily agreed to limit the
expenses of the Funds listed in the chart below. The limitation will be
accomplished by waiving all or a portion of its advisory, accounting, custodial
and certain other service fees and, if necessary, reimbursing expenses. This
voluntary limitation of expenses may be modified or terminated at any time.
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTOR
SHARES SHARES
----------------------- ----------------------
<S> <C> <C>
Small Cap Growth Fund 1.11% 1.36%
Intermediate Government Fund .79% 1.04%
Intermediate Investment Grade Fund .79% 1.04%
Intermediate New York Tax-Exempt Fund .79% 1.04%
Intermediate Tax-Exempt Fund .79% 1.04%
S&P 500 Index Fund .35% .60%
U.S. Bond Market Fund .35% .60%
</TABLE>
For the fiscal years ended December 31, 1997, 1998, and 1999, The Bank of New
York received advisory fees from the Funds as follows:
40
<PAGE>
<TABLE>
<CAPTION>
1997 1998 1999
--------------- --------------- ---------------
<S> <C> <C> <C>
Money Fund $1,364,166 $2,007,951 $3,014,970
Treasury Money Fund $28,637 $460,338 $723,256
Intermediate Government Fund $290,842 $329,433 $406,845
Intermediate Investment Grade Fund $1,326,324 $1,873,230 $1,992,534
Intermediate New York Tax-Exempt Fund $117,747 $140,654 $212,671
Intermediate Tax-Exempt Fund $1,013,662 $1,359,116 $1,318,587
Equity Income Fund $2,765,841 $3,339,410 $3,393,456
Large Cap Growth Fund $1,419,944 $2,096,762 $3,028,895
Small Cap Growth Fund $547,464 $948,526 $1,815,543
International Equity Fund $329,170 $537,436 $1,736,934
</TABLE>
The above chart reflects advisory fee waivers by The Bank of New York as
follows:
<TABLE>
<CAPTION>
1997 1998 1999
--------------- --------------- ---------------
<S> <C> <C> <C>
Treasury Money Fund $61,996 $48,202 N/A
Intermediate Government Fund $47,715 $47,060 $89,191
Intermediate Investment Grade Fund N/A N/A $1,463
Intermediate New York Tax-Exempt Fund $75,480 $72,704 $103,730
Intermediate Tax-Exempt Fund N/A N/A $5,034
Large Cap Growth Fund $177,856 $383,778 $97,961
Small Cap Growth Fund $116,936 $249,498 $60,219
International Equity Fund $116,797 $79,747 $8,267
</TABLE>
The Advisory Agreement for each Fund must be specifically approved at least
annually (i) by a vote of the holders of a majority of the Fund's outstanding
shares or by its Directors and (ii) by a vote of a majority of the Directors of
the Fund who are not "interested persons" as defined by the 1940 Act cast in
person at a meeting called for the purpose of voting on such approval. See
"Directors and Officers". Each of the Advisory Agreements will terminate
automatically if assigned and is terminable at any time without penalty by a
vote of a majority of the Directors or by a vote of the holders of a majority of
a Fund's outstanding shares on 60 days' written notice to the Adviser and by the
Adviser on 90 days' written notice to BNY Hamilton Funds, Inc. See "Additional
Information".
The Bank Holding Company Act of 1956 and the Glass-Steagall Act, as interpreted
by the Board of Governors of the Federal Reserve System, generally prohibit The
Bank of New York Company, Inc. and its subsidiaries, including The Bank of New
York, from sponsoring, organizing or controlling a registered open-end
investment company continuously engaged in the issuance of its shares, such as
BNY Hamilton. This prohibition does not extend to providing investment advice,
custodial and certain other services. The Bank of New York believes that it may
perform the services for the Funds contemplated by the Advisory Agreement
without violating the Glass-Steagall Act or other applicable banking laws or
regulations. It is, however, possible that future changes in either federal or
state statutes and regulations concerning the permissible activities of banks or
trust companies, as well as further judicial or administrative decisions and
interpretations of present and future
41
<PAGE>
statutes and regulations, might prevent The Bank of New York from continuing to
perform such services for the Funds.
If The Bank of New York were prohibited from acting as investment adviser to the
Funds, it is expected that the Directors would recommend to the Funds'
shareholders that they approve the Funds' entering into new investment advisory
agreements with another qualified adviser selected by the Directors.
- --------------------------------------------------------------------------------
ADMINISTRATOR
BNY Hamilton Distributors, Inc. serves as the Funds' administrator (the
"Administrator") and will assist generally in supervising the operations of the
Funds. The Administrator is a Delaware corporation organized to administer and
distribute mutual funds; its offices are located at 90 Park Avenue, New York New
York 10956.
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 and directors
of BNY Hamilton Funds, Inc., overseeing the performance of the transfer agent
for each Fund, supervising purchase and redemption orders (made via telephone
and mail) and monitoring the Distributor's compliance with the National
Association of Securities Dealers, 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
the Funds are series of a Maryland corporation. See "Description of Shares". The
Administrator is also responsible for updating and printing the Funds'
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 ensuring that custodian, Fund accounting, transfer
agency, administration, distribution, advisory and legal services are provided
to the Funds in accordance with the respective agreements governing each
relationship.
The Administration Agreement permits the Administrator to delegate certain of
its responsibilities to other service providers. Pursuant to this authority, The
Bank of New York will perform certain administrative functions for the
Administrator. The Bank of New York is not an otherwise affiliated person of the
Administrator.
The Money Market Funds will pay the Administrator an annual fee, accrued daily
and payable monthly, of .10% of their respective average daily net assets. All
other Funds will each pay the Administrator an annual fee, accrued daily and
payable monthly, of .20% of their respective average daily net assets.
As discussed above under "Investment Adviser", the S&P 500 Index Fund, the Bond
Index Fund and the Large Cap Value Fund commenced operations on the date hereof
and thus have no administration fees to report. For the fiscal years ended
December 31, 1997, 1998, and 1999, the other Funds paid administration fees as
follows:
42
<PAGE>
<TABLE>
<CAPTION>
1997 1998 1999
--------------- --------------- ---------------
<S> <C> <C> <C>
Money Fund $1,364,166 $2,007,951 $3,014,970
Treasury Money Fund $90,633 $508,540 $723,256
Intermediate Government Fund $135,423 $150,597 $162,738
Intermediate Investment Grade Fund $530,532 $749,295 $797,014
Intermediate New York Tax-Exempt Fund $64,296 $85,343 $85,068
Intermediate Tax-Exempt Fund $405,467 $543,649 $527,436
Equity Income Fund $871,405 $1,084,161 $1,131,152
Large Cap Growth Fund $532,600 $826,841 $1,009,632
Small Cap Growth Fund $177,174 $319,474 $474,603
International Equity Fund $104,935 $290,440 $408,689
</TABLE>
The above chart reflects administration fee waivers from the Intermediate New
York Tax-Exempt Fund of $12,990 for the fiscal year ended December 31, 1997.
There were no waivers of administration fees from this Fund during fiscal years
1998 and 1999, nor were there any waivers of administration fees from any other
Fund during the last three fiscal years.
The Administration Agreement between BNY Hamilton Funds, Inc. and the
Administrator may be renewed or amended by the Directors without a shareholder
vote.
- --------------------------------------------------------------------------------
DISTRIBUTOR
In addition to acting as the Administrator, BNY Hamilton Distributors, Inc. acts
as each Fund's exclusive Distributor and will hold itself available to receive
purchase orders for Fund shares. The Distribution Agreements for each Fund must
be approved in the same manner as the Advisory Agreements described above under
"Investment Adviser". Each Distribution Agreement will terminate automatically
if assigned by either party thereto and is terminable at any time without
penalty by a vote of a majority of the Directors or by a vote of the holders of
a majority of a Fund's outstanding shares as defined under "Additional
Information".
The Directors have adopted distribution plans ("12b-1 Plans") with respect to
Hamilton Classic Shares of the Money Fund, and the Investor Shares of each of
the Equity Funds, the Taxable Fixed Income Funds, and the Tax-Exempt Fixed
Income Funds, which will permit the respective Funds to reimburse the
Distributor for distribution expenses in an amount up to .25% per annum of
average daily net assets of Hamilton Classic Shares or Investor Shares, as
applicable. These expenses include, but are not limited to, fees paid to
broker-dealers, telemarketing expenses, advertising costs, printing costs, and
the cost of distributing materials borne by the Distributor in connection with
sales or selling efforts on behalf of Hamilton Classic Shares or Investor
Shares, as applicable. The Hamilton Classic Shares or Investor Shares of each
Fund also bear the costs associated with implementing and operating the related
12b-1 Plan (such as costs of printing and mailing service agreements). Each item
for which a payment may be made under the 12b-1 Plan may constitute an expense
of distributing Hamilton Classic Shares or Investor Shares of the related Fund
as the Securities and Exchange Commission construes such term under Rule 12b-1
of the 1940 Act. If
43
<PAGE>
expenses reimbursable under the 12b-1 Plan exceed .25% per annum of average
daily net assets, they will be carried forward from month to month to the extent
they remain unpaid. All or a part of any such amount carried forward will be
paid at such time, if ever, as the Directors determine. The Hamilton Classic
Shares or Investor Shares of each Fund will not be charged for interest,
carrying or other finance charges on any reimbursed distribution or other
expense incurred and not paid, nor will any expense be carried forward past the
fiscal year in which it is incurred.
As discussed above under "Investment Adviser", the S&P 500 Index Fund, the Bond
Index Fund and the Large Cap Value Fund commenced operations on the date hereof
and thus have no administration fees to report. For the fiscal year ended
December 31, 1999, the other Funds paid the following amounts for services
related to their respective 12b-1 Plans. In each Fund, approximately 10% of the
amount shown represents compensation to broker-dealers and 90% represents
payments to banks, in each case for customer support services that include (i)
placing and processing customer transactions through the Distributor on an
aggregated or net basis, (ii) arranging for electronic transfers of funds, (iii)
fielding customer inquiries, (iv) forwarding shareholder communications from the
Fund to customers, and (v) such similar or related services as the Distributor
may request.
Money Fund 1,597,213
Treasury Money Fund 723,256
Intermediate Government Fund 30,930
Intermediate Investment Grade Fund 10,894
Intermediate New York Tax-Exempt Fund 26,333
Intermediate Tax-Exempt Fund 1,075
Equity Income Fund 93,733
Large Cap Growth Fund 35,311
Small Cap Growth Fund 23,021
International Equity Fund 18,372
Payments for distribution expenses under the 12b-1 Plans are subject to Rule
12b-1 (the "Rule") under the 1940 Act. Payments under the 12b-1 Plans are also
subject to the conditions imposed by Rule 18f-3 under the 1940 Act and a Rule
18f-3 Multiple Class Plan which has been adopted by the Directors for the
benefit of the Funds. The Rule defines distribution expenses to include the cost
of "any activity which is primarily intended to result in the sales of shares".
The Rule provides, among other things, that a Fund may bear such expenses only
pursuant to a plan adopted in accordance with the Rule. In accordance with the
Rule, each 12b-1 Plan provides that a report of the amounts expensed under the
Plan, and the purposes for which such expenditures were incurred, will be made
to the Directors for their review at least quarterly. Each 12b-1 Plan provides
that it may not be amended to increase materially the costs which the related
Fund may bear for distribution pursuant to the 12b-1 Plan without shareholder
approval, and each 12b-1 Plan provides that any other type of material amendment
must be approved by a majority of the Directors, and by a majority of the
Directors who are neither "interested persons" (as defined in the 1940 Act) of
BNY Hamilton Funds, Inc. nor have any direct or indirect financial interest in
the operation of the 12b-1 Plan being amended or in any related agreements, by
vote cast in person at a meeting called for the purpose of considering such
amendments. In addition, as long as the 12b-1 Plans are in effect, the
nomination
44
<PAGE>
of the Directors who are not interested persons of BNY Hamilton Funds, Inc. (as
defined in the 1940 Act) must be committed to the non-interested Directors.
- --------------------------------------------------------------------------------
FUND, SHAREHOLDER AND OTHER SERVICES
BISYS Fund Services, Inc. ("BISYS"), P.O. Box 163310, Columbus, Ohio,
43216-3310, serves as the transfer agent for the Funds. As transfer agent, BISYS
is responsible for maintaining account records detailing the ownership of Fund
shares and for crediting income, capital gains and other changes in share
ownership to investors' accounts. BISYS is also the dividend disbursing agent
for all Funds.
The Directors, in addition to reviewing actions of the Funds' investment
adviser, administrator and distributor, as set forth below, decide upon matters
of general policy. The Money Fund and Treasury Money Fund have entered into
Shareholder Servicing Agreements with respect to Hamilton Premier Shares and
Hamilton Classic Shares of each Fund with The Bank of New York. The Bank of New
York (as a "Shareholder Servicing Agent") will perform certain shareholder
support services to include: (i) aggregating and processing purchase and
redemption orders; (ii) placing purchase and redemption orders with the
Distributor; (iii) providing necessary personnel and facilities to establish and
maintain customer accounts and records; (iv) processing dividend payments; and
(v) providing periodic information to beneficial owners showing their positions
in Hamilton Premier Shares of each Fund. Pursuant to the Shareholder Servicing
Agreement, the Hamilton Premier Shares of each Money Market Fund and the
Hamilton Classic Shares of the Money Fund will pay The Bank of New York (and any
other Shareholder Servicing Agent) an annual shareholder servicing fee of .25%,
to be accrued daily and payable monthly, of the average net assets of each such
class represented by such Shareholder Servicing Agent's participation in each
Fund.
The Bank of New York, 100 Church Street, New York, New York 10286, serves as the
custodian and fund accounting agent for each Fund.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019 are the
independent auditors of the Funds and must be approved at least annually by the
Directors to continue in such capacity. They will perform audit services for the
Funds including the examination of financial statements included in the annual
report to shareholders.
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
Investors may open Fund accounts and purchase shares as described in each
Prospectus under "Purchase of Shares".
Each Fund may accept securities in payment for Fund shares sold at the
applicable public offering price (net asset value) at the discretion of the
Fund, although the Fund would expect to accept securities in payment for Fund
shares only infrequently. Generally, a Fund will only consider accepting
securities (i) to increase its holdings in one or more portfolio securities or
(ii) if the
45
<PAGE>
Adviser determines that the offered securities are a suitable investment for the
Fund and in a sufficient amount for efficient management. Although no minimum
has been established, it is expected that a Fund would not accept securities
with a value of less than $100,000 per issue in payment for shares. A Fund may
reject in whole or in part offers to pay for Fund shares with securities and may
discontinue its practice of accepting securities as payment for Fund shares at
any time without notice. An Equity Fund will not accept restricted securities in
payment for shares. The Fund will value accepted securities in the manner
provided for valuing portfolio securities of the Fund. See "Net Asset
Value-Equity Funds".
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES
Investors may redeem shares as described in each Prospectus under "Redemption of
Shares". Shareholders redeeming shares of either Money Market Fund should be
aware that both Funds attempt to maintain a stable net asset value of $1.00 per
share for each class; however, there can be no assurance that either Fund will
be able to continue to do so and, in that case, the net asset value of either
Fund's shares might deviate from $1.00 per share. Accordingly, a redemption
request might result in payment of a dollar amount that differs from the number
of shares redeemed. In the case of the other Funds, the principal value
fluctuates so that the proceeds of an investor's shares when redeemed may be
more or less than their original cost. See "Net Asset Value" in the Money Market
Fund Prospectus and below.
Shareholders redeeming their shares by telephone should be aware that neither
the Funds nor any of their service contractors will be liable for any loss or
expense for acting upon any telephone instructions that are reasonably believed
to be genuine. In attempting to confirm that telephone instructions are genuine,
the Funds will use such procedures as are considered reasonable, including
recording those instructions and requesting information as to account
registration (such as the name in which an account is registered, the account
number, recent transactions in the account, and the account holder's social
security or taxpayer's identification number, address and/or bank). To the
extent a Fund fails to use reasonable procedures as a basis for its belief, it
and/or its service contractors may be liable for instructions that prove to be
fraudulent or unauthorized.
If a Fund determines that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment wholly or partly in cash, the
Fund may pay the redemption price, in lieu of cash, in whole or in part by a
distribution in kind of securities from the portfolio of the Fund in conformity
with the applicable rules of the Securities and Exchange Commission. If shares
are redeemed in kind, the redeeming shareholder may incur transaction costs in
converting the assets into cash. The method of valuing portfolio securities is
described under "Net Asset Value", and such valuation will be made as of the
same time the redemption price is determined.
Further Redemption Information. The Funds reserve the right to suspend the right
of redemption and to postpone the date of payment upon redemption as follows:
(i) during periods when the New York Stock Exchange is closed for other than
weekends and holidays or when trading on such Exchange is restricted, (ii)
during periods in which, as a result of an emergency, disposal, or
46
<PAGE>
evaluation of the net asset value, of the portfolio securities is not reasonably
practicable or (iii) for such other periods as the Securities and Exchange
Commission may permit.
- --------------------------------------------------------------------------------
EXCHANGE OF SHARES
Shareholders purchasing shares directly from a Fund may exchange those shares at
the current net asset value per share for other BNY Hamilton Funds which have a
similar class of shares, in accordance with the terms of the current prospectus
of the Fund being acquired. Requests for exchange are made in the same manner as
requests for redemptions. See "Redemption of Shares". Shares of the Fund to be
acquired are purchased for settlement when the proceeds from redemption become
available. In the case of investors in certain states, state securities laws may
restrict the availability of the exchange privilege.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares and pays dividends and distributions as described under
"Dividends and Distributions" in such Fund's Prospectus.
Net investment income of each class of shares in the Money Fund and the Treasury
Money Fund consists of accrued interest or discount and amortized premium
applicable to the specific class, less the accrued expenses of the relevant Fund
applicable to the specific class during that dividend period, including the fees
payable to the Administrator, allocated to each class of shares. See "Net Asset
Value". Determination of the net investment income for each class of shares for
each Money Market Fund will be made immediately prior to the determination of
net asset value at 4:30 P.M., Eastern time, on each Business Day.
Dividends on each Hamilton Share and Hamilton Premier Share of the Money Fund
and the Treasury Money Fund and Hamilton Classic Share of the Money Fund are
determined in the same manner and are paid in the same amount regardless of
class, except that Hamilton Premier Shares and Hamilton Classic Shares bear the
fees paid to Shareholder Organizations on their behalf for those general
services described under "Fund and Other Shareholder Services-Shareholder
Servicing Plan" in the Prospectus for the Money Market Funds, and Hamilton
Classic Shares bear 12b-1 fees. In addition, each class of shares of the Money
Fund and the Treasury Money Fund bears certain other miscellaneous expenses
specific to that class (i.e., certain cash management, registration and transfer
agency expenses).
Determination of the net investment income for the Taxable Fixed Income Funds
and the Tax-Exempt Fixed Income Funds will be made immediately prior to the
determination of net asset value at 4:00 P.M., Eastern time, on each Business
Day. Net investment income for days other than Business Days is determined as of
4:00 P.M., Eastern time, on the preceding Business Day. See "Purchase of Shares"
in the relevant Prospectus and this Statement of Additional Information. Shares
redeemed earn a dividend on the Business Day that the redemption becomes
effective. See "Redemption of Shares" in each Prospectus.
47
<PAGE>
- --------------------------------------------------------------------------------
NET ASSET VALUE
Each of the Funds will compute its net asset value per share for each of its
classes once daily on Monday through Friday as described under "Net Asset Value"
in the relevant Prospectus, except that net asset value of any class need not be
computed on a day in which no orders to purchase or redeem shares of such class
have been received or on the following holidays: New Year's Day, Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day
(observed), Labor Day, Thanksgiving Day and Christmas Day. In addition, net
asset value need not be computed on any other day that the New York Stock
Exchange is closed for business.
Money Market Funds. In the case of the Money Market Funds, all portfolio
securities for each Fund will be valued by the amortized cost method. The
purpose of this method of calculation is to attempt to maintain a constant net
asset value of $1.00 per share for each class of shares. No assurances can be
given that this goal will be attained. The amortized cost method of valuation
values a security at its cost at the time of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument. If a
difference of more than .5% occurs between valuation based on the amortized cost
method and valuation based on market value, the Directors will take steps
necessary to reduce such deviation, such as changing dividend policy, shortening
the average portfolio maturity or realizing gains or losses. See "Taxes".
Valuing the Money Fund's and the Treasury Money Fund's instruments on the basis
of amortized cost and use of the term "money market fund" are permitted by Rule
2a-7 of the 1940 Act. Rule 2a-7 prohibits money market funds that use the
amortized cost method to value assets from investing more than 5% of their total
assets in the securities of any single issuer, except obligations of the United
States government and its agencies and instrumentalities. Each of the Money
Market Funds intend to conduct their investment activities in a manner
consistent with the requirements of Rule 2a-7. This is not, however, a
fundamental policy and may be changed by the Directors at any time without the
approval of the shareholders of either of the Money Market Funds.
The Directors oversee the Adviser's adherence to the Securities and Exchange
Commission's rules, and have established procedures designed to stabilize net
asset value of each class of shares of the Money Fund and the Treasury Money
Fund at $1.00. Each day net asset value is computed, each class of shares of the
Money Fund and the Treasury Money Fund will calculate the net asset value of
each class of their respective shares by using both the amortized cost method
and market valuations. At such intervals as they deem appropriate, the Directors
consider the extent to which net asset value as calculated by using market
valuations would deviate from $1.00 per share. Immediate action will be taken by
the Directors if the variance between market value and amortized cost exceeds
.5%.
If the Directors believe that a deviation from the Money Fund's or Treasury
Money Fund's amortized cost per share may result in material dilution or other
unfair results to shareholders, the Directors have agreed to take such
corrective action, if any, as they deem appropriate to eliminate or reduce,
48
<PAGE>
to the extent reasonably practicable, the dilution or unfair results. Such
corrective action could include selling portfolio instruments before maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends; redeeming shares in kind; establishing net asset value by
using available market quotations; and such other measures as the Directors may
deem appropriate.
During periods of declining interest rates, the Money Fund's and the Treasury
Money Fund's yield based on amortized cost may be higher than the corresponding
yields based on market valuations. Under these circumstances, a shareholder of
any class of shares of the Money Fund or the Treasury Money Fund would be able
to obtain a somewhat higher yield than would result if that Fund used market
valuations to determine its net asset value. The converse would apply in a
period of rising interest rates.
Taxable Fixed Income and Tax-Exempt Fixed Income Funds. In the case of the
Taxable Fixed Income Funds and the Tax-Exempt Fixed Income Funds, portfolio
securities with a maturity of 60 days or more, including securities listed on an
exchange or traded over the counter, will be valued using prices supplied daily
by an independent pricing service or services that (i) are based on the last
sale price on a national securities exchange, or in the absence of recorded
sales, at the readily available closing bid price on such exchange or at the
quoted bid price in the over-the-counter market, if such exchange or market
constitutes the broadest and most representative market for the security, and
(ii) in other cases, take into account various factors affecting market value,
including yields and prices of comparable securities, indication as to value
from dealers and general market conditions. If such prices are not supplied by
the Funds' independent pricing service, such securities will be priced in
accordance with procedures adopted by the Directors. All portfolio securities
with a remaining maturity of less than 60 days are valued by the amortized cost
method, because the Directors have determined that this method will approximate
market value. Because of the large number of municipal bond issues outstanding
and the varying maturity dates, coupons and risk factors applicable to each
issuer's books, no readily available market quotations exist for most municipal
securities.
Equity Funds. In the case of the Equity Funds, the value of investments listed
on a domestic securities exchange, other than options on stock indexes, is based
on the last sale price as of the close of regular trading hours on the New York
Stock Exchange or, in the absence of recorded sales, at the average of readily
available closing bid and asked prices on such exchange. Securities listed on a
foreign exchange are valued at the last quoted sale price available before the
time when net assets are valued. Unlisted securities are valued at the average
of the quoted bid and asked prices in the over-the-counter market. The value of
each security for which readily available market quotations exist is based on a
decision as to the broadest and most representative market for such security.
Equity Funds and Intermediate Investment Grade Fund. For purposes of calculating
net asset value per share for each class of shares in each of the Equity Funds
and the Intermediate Investment Grade Fund, all assets and liabilities initially
expressed in foreign currencies will be converted into United States dollars at
the prevailing market rates available at the time of valuation.
49
<PAGE>
All Funds (except Money Market Funds). Options on stock indexes traded on
national securities exchanges are valued at the close of options trading on such
exchanges, which is currently 4:10 P.M., New York City time. Stock index futures
and related options, which are traded on commodities exchanges, are valued at
their last sales price as of the close of such commodities exchanges, which is
currently 4:15 P.M., New York City time. Securities or other assets for which
market quotations are not readily available are valued at fair value in
accordance with procedures established by and under the general supervision and
responsibility of the Fund's Directors. Such procedures include the use of
independent pricing services which use prices based upon yields or prices of
securities of comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. Short-term investments,
which mature in 60 days or less, are valued at amortized cost if their original
maturity was 60 days or less, or by amortizing their value on the 61st day prior
to maturity, if their original maturity when acquired by a Fund was more than 60
days, unless this is determined not to represent fair value by the Directors.
Trading in securities on most foreign exchanges and over-the-counter markets is
normally completed before the close of the New York Stock Exchange and may also
take place on days on which the New York Stock Exchange is closed. If events
materially affecting the value of foreign securities occur between the time when
the exchange on which they are traded closes and the time when a Fund's net
asset value is calculated, such securities will be valued at fair value in
accordance with procedures established by and under the general supervision of
the Funds' Directors.
- --------------------------------------------------------------------------------
PERFORMANCE DATA
From time to time, the Funds may quote performance in terms of yield, actual
distributions, total return, or capital appreciation in reports, sales
literature, and advertisements published by the Funds. Current performance
information for the Funds may be obtained by calling the number provided on the
cover page of this Statement of Additional Information.
Yield Quotations. As required by regulations of the Securities and Exchange
Commission, current yield for each class of shares of the Money Fund and the
Treasury Money Fund is computed by determining the net change exclusive of
capital changes in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of a seven-day calendar period, dividing
the net change in account by the value of the account at the beginning of the
period, and multiplying the return over the seven-day period by 365/7. For
purposes of the calculation, net change in account value reflects the value of
additional shares purchased with dividends from the original share and dividends
declared on both the original share and any such additional shares, but does not
reflect realized gains or losses or unrealized appreciation or depreciation.
Effective yield for each class of shares of the Money Fund and the Treasury
Money Fund is computed by annualizing the seven-day return with all dividends
reinvested in additional Fund shares.
The current and effective seven-day yields for the Money Market Funds as of
December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Current 7 Effective 7
---------------- -----------------
<S> <C> <C>
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Day Yield Day Yield
---------------- -----------------
<S> <C> <C>
Money Fund - Hamilton Shares 5.45% 5.60%
Money Fund - Hamilton Premier Shares 5.20% 5.34%
Money Fund - Hamilton Classic Shares 4.95% 5.07%
Treasury Money Fund - Hamilton Shares 4.51% 4.61%
Treasury Money Fund - Hamilton Premier Shares 4.26% 4.35%
Treasury Money Fund - Hamilton Classic Shares 4.01% 4.09%
</TABLE>
As required by regulations of the Securities and Exchange Commission, the
annualized yield for each of the Taxable Fixed Income Funds, the Tax-Exempt
Fixed Income Funds and the Equity Income Fund is computed by dividing the Fund's
net investment income per share for each class earned during a 30-day period by
the net asset value on the last day of the period. The average daily number of
shares outstanding during the period that are eligible to receive dividends will
be used in determining the net investment income per share. Income will be
computed by totaling the interest earned on all debt obligations, and in the
case of the Equity Income Fund, dividends earned on all equity securities,
during the period and subtracting from that amount the total of all recurring
expenses incurred during the period. The 30-day yield will then be annualized on
a bond-equivalent basis assuming semi-annual reinvestment and compounding of net
investment income, as described under "Additional Information" in the
Prospectuses for the Equity Funds, the Taxable Fixed Income Funds and the
Tax-Exempt Fixed Income Funds.
As discussed above, the Bond Index Fund commenced operations on the date hereof
and thus has no performance history to report. The 30-day yields for the other
Taxable Fixed Income Funds and the Tax-Exempt Fixed Income Funds are as follows:
<TABLE>
<CAPTION>
With Without
Reimbursement Reimbursement
------------------ -----------------
<S> <C> <C>
Intermediate Government Fund - Institutional Shares 5.73% 5.61%
Intermediate Government Fund - Investor Shares 5.48% 5.35%
Intermediate Investment Grade Fund - Institutional Shares 6.27% 6.27%
Intermediate Investment Grade Fund - Investor Shares 4.74% 4.74%
Intermediate New York Tax-Exempt Fund - Institutional Shares 4.19% 3.85%
Intermediate New York Tax-Exempt Fund - Investor Shares 3.94% 3.60%
Intermediate Tax-Exempt Fund - Institutional Shares 3.39% 3.39%
Intermediate Tax-Exempt Fund - Investor Shares 3.10% 3.10%
</TABLE>
Total Return Quotations. As required by regulations of the Securities and
Exchange Commission, the annualized total return of each of the Equity Funds,
the Taxable Fixed Income Funds and the Tax-Exempt Fixed Income Funds for a
period will be computed by assuming a hypothetical initial payment of $10,000.
It will then be assumed that all of the dividends and distributions over the
period are reinvested and that the entire amount will be redeemed at the end of
the period. The annualized total return will then be calculated by determining
the annual rate required for the initial payment to grow to the amount which
would have been received upon redemption. Aggregate total
51
<PAGE>
returns, reflecting the cumulative percentage change over a measuring period,
may also be calculated.
As discussed above, the S&P 500 Index Fund, the Bond Index Fund and the Large
Cap Value Fund commenced operations on the date hereof and thus have no
performance history to report. The total returns for the other Funds are as
follows:
52
<PAGE>
<TABLE>
<CAPTION>
Average Average
Annual Annual
for the For the
One-Year Five-Year
Period Period
Aggregate Ended Ended
Inception Since December 31, December 31,
Date Inception 1999 1999
----------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Intermediate Government Fund - Institutional
Shares 04/01/97 15.56% (0.73%) N/A
Intermediate Government Fund - Investor
Shares 08/10/92 40.10% (0.98%) 6.35%
Intermediate Investment Grade Fund -
Institutional Shares 04/01/97 16.96% (1.47%) N/A
Intermediate Investment Grade Fund -
Investor Shares 05/01/97 14.60% (1.73%) N/A
Intermediate New York Tax-Exempt Fund -
Institutional Shares 04/01/97 10.82% (1.35%) N/A
Intermediate New York Tax-Exempt Fund -
Investor Shares 08/10/92 33.78% (1.60%) 4.93%
Intermediate Tax-Exempt Fund - Institutional
Shares 04/01/97 9.91% (2.06%) N/A
Intermediate Tax-Exempt Fund - Investor
Shares 05/01/97 8.87% (2.22%) N/A
Equity Income Fund - Institutional Shares 04/01/97 61.66% 14.51% N/A
Equity Income Fund - Investor Shares 08/10/92 181.75% 14.27% 19.52%
Large Cap Growth Fund - Institutional Shares 04/01/97 118.99% 37.13% N/A
Large Cap Growth Fund - Investor Shares 05/01/97 103.17% 36.83% N/A
Small Cap Growth Fund - Institutional Shares 04/01/97 171.93% 97.22% N/A
Small Cap Growth Fund - Investor Shares 05/01/97 169.91% 96.65% N/A
International Equity Fund - Institutional 04/01/97 85.30% 43.45% N/A
Shares
International Equity Fund - Investor Shares 05/01/97 83.86% 43.00% N/A
</TABLE>
General. A Fund's performance will vary from time to time depending upon market
conditions, the composition of its portfolio, and its operating expenses.
Consequently, any given performance quotation should not be considered
representative of a Fund's performance for any specified period in the future.
In addition, because performance will fluctuate, it may not provide a basis for
comparing an investment in a Fund with certain bank deposits or other
investments that pay a fixed yield or return for a stated period of time.
From time to time, the yields and the total returns of each class of shares of
the Funds may be quoted in and compared to other mutual funds with similar
investment objectives in advertisements, shareholder reports or other
communications to shareholders. The Funds may also include calculations in such
communications that describe hypothetical investment results. (Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of any Fund.) Such calculations may from time to time include
discussions or illustrations of the effects of compounding in advertisements.
"Compounding" refers to the fact that, if dividends or other distributions on a
Fund investment are reinvested by being paid in additional Fund shares, any
future income or capital appreciation of a Fund would increase the value, not
only of the original Fund investment, but also of the additional Fund shares
received through
53
<PAGE>
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distributions had been paid in cash. The
Funds may also include discussions or illustrations of the potential investment
goals of a prospective investor (including but not limited to tax and/or
retirement planning), investment management techniques, policies or investment
suitability of a Fund, economic conditions, legislative developments (including
pending legislation), the effects of inflation and historical performance of
various asset classes, including but not limited to stocks, bonds and Treasury
bills. From time to time, advertisements or communications to shareholders may
summarize the substance of information contained in shareholder reports
(including the investment composition of a Fund), as well as, the views of the
investment adviser as to current market, economic trade and interest rate
trends, legislative, regulatory and monetary developments, investments
strategies and related matters believed to be of relevance to a Fund. The Funds
may also include in advertisements charts, graphs or drawings which illustrate
the potential risks and rewards of investment in various investment vehicles,
including but not limited to stocks, bonds, Treasury bills and shares of a Fund.
In addition, advertisements or shareholder communications may include a
discussion of certain attributes or benefits to be derived by an investment in a
Fund. Such advertisements or communications may include symbols, headlines or
other material which highlight or summarize the information discussed in more
detail therein. With proper authorization, a Fund may reprint articles (or
excerpts) written regarding the Fund and provide them to prospective
shareholders. Performance information with respect to the Funds is generally
available by calling 1-800-4BNY-FND (1-800-426-9363).
Comparative performance information may be used from time to time in advertising
the Funds' shares, including, but not limited to, data from Lipper Analytical
Services, Inc., the S&P 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Lehman Brothers indexes, the Frank Russell Indexes and
other industry publications. Each of the Money Market Funds may compare the
performance of each class of shares to Money Fund Report, a service of IBC
Financial Data, Inc. as well as yield data reported in other national financial
publications.
From time to time, the Funds may include in advertisements, sales literature and
reports to shareholders general comparative information such as statistical data
regarding inflation, securities indices or the features of performance of
alternative investments. The Funds may also include calculations, such as
hypothetical compounding examples, which describe hypothetical investment
results in such communications. Such performance examples will be based on an
express set of assumptions and are not indicative of the performance of any
Fund. In addition, in such communications, the Adviser may offer opinions on
current economic conditions.
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS AND BROKERAGE
Securities of a Fund typically are purchased via a domestic or foreign
securities exchange, in the over-the-counter market or pursuant to an
underwritten offering. In underwritten offerings, securities are purchased at a
fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. On occasion,
certain securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
54
<PAGE>
Portfolio Turnover. A Fund's investment policies may lead to frequent changes in
investments, particularly in periods of rapidly fluctuating interest rates. A
change in securities held by a Fund is known as "portfolio turnover" and may
involve the payment by the Fund of dealer spreads or underwriting commissions,
and other transaction costs, on the sale of securities, as well as on the
reinvestment of the proceeds in other securities. A Fund's portfolio turnover
rate is calculated by dividing the lesser of purchases or sales of portfolio
securities for the fiscal year by the monthly average of the value of the
portfolio securities owned during the year. Securities whose maturity or
expiration date at the time of acquisition were one year or less are excluded
from the calculation. For the fiscal years ended December 31, 1997, 1998, and
1999, the portfolio turnover rates for the Intermediate New York Tax-Exempt Fund
and the Equity Income Fund were 21%, 24% and 32%; 65%, 39% and 53%,
respectively. It is anticipated that the Intermediate New York Tax-Exempt Fund
and the Equity Income Fund will continue to have a portfolio turnover rate of
less than 100%.
For the period April 1, 1997 (commencement of operations) to December 31, 1997,
and for the fiscal years ended December 31, 1998 and 1999, the portfolio
turnover rates for the Intermediate Investment Grade Fund, Intermediate
Tax-Exempt Fund, Large Cap Growth Fund, Small Cap Growth Fund and International
Equity Fund were 81%, 53% and 57%; 30%, 37% and 34%; 37%, 26% and 18%; 84% and
86%; and 36%, 75% and 84%, respectively. It is anticipated that the Intermediate
Investment Grade Fund, Intermediate Tax-Exempt Fund, Large Cap Growth Fund,
Small Cap Growth Fund and International Equity Fund will continue to have a
portfolio turnover rate of less than 100%.
For the fiscal years ended December 31, 1997, 1998, and 1999, the portfolio
turnover rates for the Intermediate Government Fund were 41%, 61% and 16%,
respectively. It is anticipated that the Intermediate Government Fund will
continue to have a portfolio turnover rate of not greater than 200%. The fixed
income securities in which the Fund will invest are generally traded at a net
price with dealers acting as principal for their own accounts and without
brokerage commissions. However, other expenses, such as custodial fees and wire
charges may be higher during periods of higher turnover.
Money Market Funds, Taxable Fixed Income Funds and Tax-Exempt Fixed Income
Funds. Portfolio transactions for each of the Money Market Funds, the Taxable
Fixed Income Funds and the Tax-Exempt Fixed Income Funds will be undertaken
principally to accomplish a Fund's objective in relation to expected movements
in the general level of interest rates. Each of the Money Market Funds, the
Taxable Fixed Income Funds and the Tax-Exempt Fixed Income Funds may engage in
short-term trading consistent with their objectives.
Each of the Money Market Funds' policy of investing only in securities with
maturities of less than 397 days will result in high portfolio turnover. Since
brokerage commissions are not normally paid on investments that the Money Market
Funds make, turnover resulting from such investments should not adversely affect
the net asset value or net income of the Fund.
Equity Funds. In connection with portfolio transactions for the Equity Funds,
the overriding objective is to obtain the best possible execution of purchase
and sale orders. In selecting a broker,
55
<PAGE>
the Adviser (and, in the case of the International Equity Fund, the Sub-Adviser)
considers a number of factors including: the price per unit of the security; the
broker's reliability for prompt, accurate confirmations and on-time delivery of
securities; the firm's financial condition; as well as the commissions charged.
A broker may be paid a brokerage commission in excess of that which another
broker might have charged for effecting the same transaction if, after
considering the foregoing factors, the Adviser or the Sub-Adviser decides that
the broker chosen will provide the best possible execution. The Adviser or the
Sub-Adviser will monitor the reasonableness of the brokerage commissions paid in
light of the execution received. The Directors will review regularly the
reasonableness of commissions and other transaction costs incurred by the Equity
Funds in light of facts and circumstances deemed relevant from time to time,
and, in that connection, receive reports from the Adviser or the Sub-Adviser and
published data concerning transaction costs incurred by institutional investors
generally. Research services provided by brokers to which the Adviser or the
Sub-Adviser has allocated brokerage business in the past include economic
statistics and forecasting services, industry and company analyses, portfolio
strategy services, quantitative data, and consulting services from economists
and political analysts. Research services furnished by brokers are used for the
benefit of all the Adviser's or the Sub-Adviser's clients and not solely or
necessarily for the benefit of an individual Fund. The Adviser and the
Sub-Adviser believe that the value of research services received is not
determinable and does not significantly reduce their respective expenses. The
Equity Funds will not reduce their respective fees paid to the Adviser or the
Sub-Adviser by any amount that might be attributable to the value of such
services.
For the fiscal years ended December 31, 1997, 1998, and 1999, the Equity Income
Fund paid aggregate broker commissions of $481,922, $500,347 and $583,849,
respectively.
For the period April 1, 1997 (commencement of operations) to December 31, 1997,
and for the fiscal years ended December 31, 1998 and 1999, the Large Cap Growth
Fund paid aggregate broker commissions of $177,684, $226,702 and $225,943,
respectively. Of the aggregate commissions paid during the fiscal year ended
December 31, 1999, the Large Cap Growth Fund paid broker commissions of $1,050
to BNY ESI & Co., Inc., a wholly owned non-bank subsidiary of The Bank of New
York Company, Inc. a separate brokerage affiliate of The Bank of New York, and a
member of the New York Stock Exchange and other principal exchanges, and SIPC.
This amounted to 0.5% of the aggregate commissions paid by the Fund and 1.7% of
the aggregate dollar amount of principal transactions.
For the period April 1, 1997 (commencement of operations) to December 31, 1997,
and for the fiscal years ended December 31, 1998 and 1999, the Small Cap Growth
Fund paid aggregate broker commissions of $120,938, $279,344 and $184,972,
respectively.
For the period April 1, 1997 (commencement of operations) to December 31, 1997,
and for the fiscal years ended December 31, 1998 and 1999, the International
Equity Fund paid aggregate broker commissions of $530,331, $876,134 and
$1,049,235, respectively.
Subject to the overriding objective of obtaining the best possible execution of
orders, the Adviser or the Sub-Adviser may allocate a portion of any or all of
the Equity Funds' portfolio brokerage transactions to affiliates of the Adviser
or the Sub-Adviser. In order for affiliates of the Adviser or
56
<PAGE>
the Sub-Adviser to effect any portfolio transactions for the Equity Funds, the
commissions, fees or other remuneration received by such affiliates must be
reasonable and fair compared to the commissions, fees, or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period of time. Furthermore, the Directors, including a majority of
the Directors who are not "interested persons", have adopted procedures which
are reasonably designed to provide that any commissions, fees, or other
remuneration paid to such affiliates are consistent with the foregoing standard.
Portfolio securities will not be purchased from or through or sold to or through
the Funds' Administrator, Distributor, Adviser (or the Sub-Adviser) or any
"affiliated person", as defined in the 1940 Act, of the Co-Administrators,
Distributor or Adviser (or the Sub-Adviser) when such entities are acting as
principals, except to the extent permitted by law. In addition, the Funds will
not purchase securities during the existence of any underwriting group (or the
Sub-Advisers) relating thereto of which the Adviser, the Sub-Adviser or any of
their respective affiliates of the Adviser is a member, except to the extent
permitted by law.
On those occasions when the Adviser (or the Sub-Adviser) deems the purchase or
sale of a security to be in the best interests of a Fund as well as other
customers, including the other Funds, to the extent permitted by applicable laws
and regulations, the Adviser (or the Sub-Adviser) may, but is not obligated to,
aggregate the securities to be sold or purchased for the Fund with those to be
sold or purchased for other customers in order to obtain best execution,
including lower brokerage commissions if appropriate. In such event, allocation
of the securities so purchased or sold as well as any expenses incurred in the
transaction will be made by the Adviser (or the Sub-Adviser), in the manner it
considers to be most equitable and consistent with the Adviser's (or the
Sub-Adviser's) fiduciary obligations to the Fund. In some instances, this
procedure might adversely affect a Fund.
If a Fund effects a closing purchase transaction with respect to an option
written by it, normally such transaction will be executed by the same
broker-dealer who executed the sale of the option. The writing of options by a
Fund will be subject to limitations established by each of the exchanges
governing the maximum number of options in each class which may be written by a
single investor or group of investors acting in concert, regardless of whether
the options are written on the same or different exchanges or are held or
written in one or more accounts or through one or more brokers. The number of
options which a Fund may write may be affected by options written by the Adviser
(or the Sub-Adviser) for other investment advisory clients. An exchange may
order the liquidation of positions found to be in excess of these limits, and it
may impose certain other sanctions.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES
BNY Hamilton is a registered, open-end investment company organized under the
laws of the State of Maryland. The Articles of Incorporation of currently permit
the Corporation to issue 20,000,000,000 shares of common stock, par value $.001
per share, of which shares have been classified as follows:
57
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of
Name of Series and Classes Thereof Common Allocated
--------------------------------------------------------- -----------------------
<S> <C>
BNY Hamilton Money Fund
Hamilton Shares 3,000,000,000
Hamilton Premier Shares 3,000,000,000
Hamilton Classic Shares 3,000,000,000
BNY Hamilton Treasury Money Fund
Hamilton Shares 2,000,000,000
Hamilton Premier Shares 2,000,000,000
Hamilton Classic Shares 2,000,000,000
BNY Hamilton Equity Income Fund
Institutional Shares 200,000,000
Investor Shares 200,000,000
BNY Hamilton Large Cap Growth Fund
Institutional Shares 200,000,000
Investor Shares 200,000,000
BNY Hamilton Small Cap Growth Fund
Institutional Shares 200,000,000
Investor Shares 200,000,000
BNY Hamilton International Equity Fund
Institutional Shares 200,000,000
Investor Shares 200,000,000
BNY Hamilton Intermediate Government Fund
Institutional Shares 200,000,000
Investor Shares 200,000,000
BNY Hamilton Intermediate Investment Grade Fund
Institutional Shares 200,000,000
Investor Shares 200,000,000
BNY Hamilton Intermediate New York Tax-Exempt Fund
Institutional Shares 200,000,000
Investor Shares 200,000,000
BNY Hamilton Intermediate Tax-Exempt Fund
Institutional Shares 200,000,000
Investor Shares 200,000,000
BNY Hamilton Large Cap CRT Fund 200,000,000
BNY Hamilton International Equity CRT Fund 200,000,000
BNY Hamilton Small Cap CRT Fund 200,000,000
BNY Hamilton Large Cap Value Fund
Institutional Class 200,000,000
Investor Class 200,000,000
BNY Hamilton S&P 500 Fund
Institutional Class 200,000,000
Investor Class 200,000,000
BNY Hamilton U.S. Bond Market Index Fund
Institutional Class 200,000,000
</TABLE>
58
<PAGE>
<TABLE>
<S> <C>
Investor Class 200,000,000
Undesignated Common Stock 0
</TABLE>
Shares of BNY Hamilton do not have preemptive or conversion rights and are fully
paid and nonassessable by BNY Hamilton. The rights of redemption and exchange
are described in the appropriate Prospectus and elsewhere in this Statement of
Additional Information.
The shareholders of each Fund are entitled to a full vote for each full share
held and to a fractional vote for each fractional share. Subject to the 1940 Act
and Maryland law, the Directors themselves have the power to alter the number
and the terms of office of the Directors, to lengthen their own terms, or to
make their terms of unlimited duration subject to certain removal procedures,
and appoint their own successor; provided, however, that immediately after such
appointment the requisite majority of the Directors have been elected by the
shareholders of the Funds. The voting rights of shareholders are not cumulative
so that holders of more than 50% of the shares voting can, if they choose, elect
all Directors being selected while the holders of the remaining shares would be
unable to elect any Directors. It is the intention of BNY Hamilton not to hold
annual shareholder meetings. The Directors may call shareholder meetings for
action by shareholder vote as may be required by either the 1940 Act or the
Articles of Incorporation.
BNY Hamilton, if requested to do so by the holders of at least 10% of
shareholders 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.
The Articles of Incorporation contain a provision permitted under the Maryland
General Corporation Law that under certain circumstances eliminates the personal
liability of the Directors to BNY Hamilton or its shareholders. The Articles of
Incorporation and the Bylaws of BNY Hamilton provide that BNY Hamilton will
indemnify the Directors, officers and employees of the Funds to the full extent
permitted by the Maryland General Corporation Law, which permits indemnification
of such persons against liabilities and expenses incurred in connection with
proceedings in which they may be involved because of their offices or employment
with BNY Hamilton. However, nothing in the Articles of Incorporation or the
Bylaws of BNY Hamilton protects or indemnifies a Director, officer or employee
against any liability to BNY Hamilton or its shareholders to which he or she
would otherwise be subject by reason of willful malfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
For information relating to mandatory redemption of Fund shares or, under
certain circumstances, their redemption at the option of the Funds, see
"Redemption of Shares" in the Prospectuses.
No single person beneficially owns 25% or more of the Corporation's voting
securities. BNY Hamilton expects that immediately prior to the commencement of
the public offering of shares of the S&P 500 Fund, the Bond Index Fund and the
Large Cap Value Fund, each such Fund will have one stockholder, BNY Hamilton
Distributors, Inc., who will hold more than 5% of the outstanding shares of such
Fund. BNY Hamilton cannot predict the length of time that such person will
remain a control person of such Funds. The following table sets forth the name,
address and percentage of
59
<PAGE>
ownership of each person who is known by the Registrant to own, of record or
beneficially, 5% or more of any class of BNY Hamilton's outstanding equity
securities as of April 1, 1999 [update?]:
<TABLE>
<CAPTION>
Fund Of Record % Beneficial Owner %
- ---- --------- - ---------------- -
<S> <C> <C> <C> <C>
Equity Income Various Retirement 25.1% The Bank of New York 25.1%
Plans One Wall Street
New York, NY 10286
Small Cap Growth Various Retirement 5.5% The Bank of New York 5.5%
Plans One Wall Street
New York, NY 10286
Intermediate VariousRetirement 33.2% The Bank of New York 33.2%
Government Plans 48 Wall Street
New York, NY 10286
The Bank of New York 5.4% The Bank of New York 5.4%
LTD Plan 48 Wall Street
New York, NY 10286
Money 13.54% KPMG Peat Marwick - Rabbi Tr Disb. 13.54%
Three Chestnut Ridge Road
Montvale, NJ 07645-1834
Treasury Money 18.21% Palm Beach Cops 2000A P/F Acquisition 18.21%
3322 Forest Hill Boulevard
West Palm Beach, FL 33406-5813
</TABLE>
BNY Hamilton's officers and directors, taken as a group, own less than 1% of the
shares of each of the Funds.
- --------------------------------------------------------------------------------
TAXES
Each Fund generally will be treated as a separate corporation for federal income
tax purposes, and thus the provisions of the Internal Revenue Code of 1986, as
amended (the "Tax Code") generally will be applied to each Fund separately,
rather than BNY Hamilton as a whole. Net long-term and short-term capital gains,
net income, and operating expenses therefore will be determined separately for
each Fund.
Each Fund intends to qualify as a regulated investment company under Subchapter
M of the Tax Code. Accordingly, each Fund must, among other things, (a) derive
at least 90% of its gross income from dividends, interest, payments with respect
to loans of stock and securities, gains from the sale or other disposition of
stock, securities or foreign currency and other income (including but not
limited to gains from options, futures, and forward contracts) derived with
respect to its business of investing in such stock, securities or foreign
currency; and (b) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the value of the Fund's assets is represented by
cash, United States Government securities and other securities, with such other
securities limited, in respect of any one issuer, to an amount not greater than
5% of the Fund's assets, and 10% of the outstanding voting securities of such
issuer and (ii) not more than 25% of the value of its assets is
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invested in the securities of any one issuer (other than United States
Government securities). As a regulated investment company, a Fund (as opposed to
its shareholders) will not be subject to federal income taxes on the net
investment income and capital gains that it distributes to its shareholders,
provided that at least 90% of its net investment income and realized net
short-term capital gains in excess of net long-term capital losses for the
taxable year is distributed at least annually.
Under the Tax Code, a Fund will be subject to a 4% excise tax on a portion of
its undistributed income if it fails to meet certain distribution requirements
by the end of the calendar year. Each Fund intends to make distributions in a
timely manner and accordingly does not expect to be subject to the excise tax.
For federal income tax purposes, dividends that are declared by a Fund in
October, November or December as of a record date in such month and actually
paid in January of the following year will be treated as if they were paid on
December 31 of the year declared. Therefore, such dividends will generally be
taxable to a shareholder in the year declared rather than the year paid.
Distributions of net investment income and realized net short-term capital gains
in excess of net long-term capital losses (other than exempt-interest dividends
distributed by either of the Tax-Exempt Fixed Income Funds, as described below)
are generally taxable to shareholders of the Funds as ordinary income whether
such distributions are taken in cash or reinvested in additional shares. Each of
the Equity Funds (other than the International Equity Fund) expects that a
portion of these distributions to their respective corporate shareholders will
be eligible for the 70% dividends-received deduction. These distributions from
all other Funds will not be eligible for the dividends-received deduction.
Distributions of net long-term capital gains (i.e., net long-term capital gains
in excess of net short-term capital losses) are taxable to shareholders of a
Fund as long-term capital gains, regardless of whether such distributions are
taken in cash or reinvested in additional shares and regardless of how long a
shareholder has held shares in the Fund, and are not eligible for the
dividends-received deduction. Individual shareholders will be subject to federal
income tax on distributions of net long-term capital gains at a maximum rate of
20% if designated as derived from a Fund's capital gains from property held for
more than one year.
A gain or loss realized by a shareholder on the redemption, sale or exchange of
shares held as a capital asset will be capital gain or loss and such gain or
loss will be long-term if the holding period for the shares exceeds one year,
and otherwise will be short-term. Individual shareholders will be subject to
federal income tax on long-term capital gain at a maximum rate of 20% in respect
of shares held for more than one year. Capital gain of a corporate shareholder
is taxed at the same rate as ordinary income. Any loss realized by a shareholder
on the disposition of shares held six months or less will be treated as a
long-term capital loss to the extent of any distributions of net long-term
capital gains received by the shareholder with respect to such shares. Any such
loss may be disallowed in the case of either of the Tax-Exempt Fixed Income
Funds. See "Tax-Exempt Fixed Income Funds" below. Additionally, any loss
realized on a redemption or exchange of shares of a Fund will be disallowed to
the extent the shares disposed of are replaced within a period of 61 days
beginning 30 days before such disposition, such as pursuant to reinvestment of a
dividend in shares of the Fund.
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Prospective investors in any of the Equity Funds, the Taxable Fixed Income Funds
and the Tax-Exempt Fixed Income Funds should be aware that distributions of net
investment income or net long-term capital gains from these Funds will have the
effect of reducing the net asset value of each class of each Funds' shares by
the amount of the distribution. If the net asset value is reduced below a
shareholder's cost, the distribution will nonetheless be taxable as described
above, even if the distribution represents a return of invested capital.
Investors should consider the tax implications of buying shares in these Funds
just prior to a distribution, when the price of shares may reflect the amount of
the forthcoming distribution.
Gains or losses on sales of securities by a Fund will be treated as long-term
capital gains or losses if the securities have been held by it for more than one
year except in certain cases where, if applicable, a Fund acquires a put or
writes a call thereon. Other gains or losses on the sale of securities will be
short-term capital gains or losses. Gains and losses on the sale, lapse or other
termination of options on securities will be treated as gains and losses from
the sale of securities. If an option written by a Fund lapses or is terminated
through a closing transaction, such as a repurchase by the Fund of the option
from its holder, the Fund will realize a short-term capital gain or loss,
depending on whether the premium income is greater or less than the amount paid
by the Fund in the closing transaction. If securities are purchased by the Fund
pursuant to the exercise of a put option written by it, the Fund will subtract
the premium received from its cost basis in the securities purchased. If
securities are sold by the Fund pursuant to the exercise of a call option
written by it, the Fund will include the premium received in the sale price for
the securities sold.
Under the Tax Code, gains or losses attributable to dispositions of foreign
currency or to foreign currency contracts, or to fluctuations in exchange rates
between the time a Fund accrues income or receivables or expenses or other
liabilities denominated in a foreign currency and the time a Fund actually
collects such income or pays such liabilities, are treated as ordinary income or
ordinary loss. Similarly, gains or losses on the disposition of debt securities
held by a Fund, if any, denominated in foreign currency, to the extent
attributable to fluctuations in exchange rates between the acquisition and
disposition dates, are also treated as ordinary income or loss.
Forward currency contracts, options and futures contracts entered into by a Fund
may create "straddles" for federal income tax purposes and this may affect the
character and timing of gains or losses realized by a Fund on forward currency
contracts, options and futures contracts or on the underlying securities.
Certain options, futures and foreign currency contracts held by a Fund at the
end of each fiscal year will be required to be "marked-to-market" for federal
income tax purposes -- i.e., treated as having been sold at market value. For
options and futures contracts, sixty percent of any gain or loss recognized on
these deemed sales and on actual dispositions will be treated as long-term
capital gain or loss, and the remainder will be treated as short-term capital
gain or loss, regardless of how long the Fund has held such options or futures.
Any gain or loss recognized on foreign currency contracts will be treated as
ordinary income, unless an election under Section 988 (a) (1) (B) of the Tax
Code is made, in which case the rule for options and futures contracts will
apply.
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The International Equity Fund will, and the Equity Income Fund, the Large Cap
Growth Fund, the Small Cap Growth Fund and the Large Cap Value Fund may, invest
in equity securities of foreign issuers. If these Funds purchase shares in
certain foreign investment companies, known as "passive foreign investment
companies", they may be subject to federal income tax on a portion of an "excess
distribution" from such passive foreign investment companies or gain from the
disposition of such shares, even though such income may have to be distributed
as a taxable dividend by a Fund to its respective shareholders. In addition,
certain interest charges may be imposed on the Equity Funds or its respective
shareholders in respect of unpaid taxes arising from such distributions or
gains. Alternatively, the Equity Funds would be required each year to include in
its income and distribute to shareholders a pro rata portion of the foreign
investment company's income, whether or not distributed to the Fund. For each
taxable year, the Equity Funds will be permitted to "mark-to-market" any
marketable stock held by a Fund in a passive foreign investment company. If a
Fund made such an election, each investor in the Fund would include in income in
each year an amount equal to its share of the excess, if any, of the fair market
value of the stock in such passive foreign investment company as of the close of
the taxable year over the adjusted basis of such stock. The investor would be
allowed a deduction for its share of the excess, if any, of the adjusted basis
of the stock in such passive foreign investment company over the fair market
value of such stock as of the close of the taxable year, but only to the extent
of any net mark-to-market gains with respect to the stock included by the
investor for prior taxable years.
It is expected that the Money Fund, the Equity Income Fund, the Large Cap Growth
Fund, the Small Cap Growth Fund, the International Equity Fund, the Intermediate
Investment Grade Fund and the Large Cap Value Fund may be subject to foreign
withholding taxes with respect to income received from sources within foreign
countries. The International Equity Fund intends to elect to "pass through" to
its investors the amount of foreign income taxes paid by the Fund, with the
result that each shareholder will (i) include in gross income, even though not
actually received, the pro rata share of the Fund's foreign income taxes, and
(ii) either deduct (in calculating U.S. taxable income) or credit (in
calculating U.S. federal income tax) the pro rata share of the Fund's foreign
income taxes. A foreign tax credit may not exceed the U.S. federal income tax
otherwise payable with respect to the foreign source income. For this purpose,
each shareholder must treat as foreign source gross income (i) his proportionate
share of foreign taxes paid by the Fund and (ii) the portion of any dividend
paid by the Fund which represents income derived from foreign sources; the gain
from the sale of securities will generally be treated as U.S. source income.
This foreign tax credit limitation is, with certain exceptions, applied
separately to separate categories of income; dividends from the will be treated
as "passive" or "financial services" income for this purpose. The effect of this
limitation may be to prevent from claiming as a credit the full amount of their
pro rate share of the Fund's foreign income taxes. In addition, shareholders
will not be eligible to claim a foreign tax credit with respect to foreign
income taxes paid by the Fund unless certain holding period requirements are
met.
Each Fund may be subject to state or local taxes in jurisdictions in which the
Fund is deemed to be doing business. In addition, the treatment of a Fund and
its shareholders in those states that have income tax laws might differ from
treatment under the federal income tax laws. Shareholders should consult their
own tax advisors with respect to any state or local taxes.
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Foreign Shareholders. Dividends of net investment income and distributions of
realized net short-term gains in excess of net long-term losses to a shareholder
who, as to the United States, is a non-resident alien individual, fiduciary of a
foreign trust or estate, foreign corporation or foreign partnership (a "foreign
shareholder") will be subject to United States withholding tax at the rate of
30% (or lower treaty rate) unless the dividends are effectively connected with a
United States trade or business of the shareholder, in which case the dividends
will be subject to tax on a net income basis at the graduated rates applicable
to United States individuals or domestic corporations. Distributions of net
long-term capital gains to foreign shareholders will not be subject to United
States tax unless the distributions are effectively connected with the
shareholder's trade or business in the United States or, in the case of a
foreign shareholder who is a non-resident alien individual, the shareholder was
present in the United States for more than 182 days during the taxable year and
certain other conditions are met.
In the case of a foreign shareholder who is a non-resident alien individual and
who is not otherwise subject to withholding as described above, a Fund may be
required to withhold United States federal income tax at the rate of 31% unless
IRS Form W-8 is provided.
Transfers by gift of shares of a Fund by a foreign shareholder who is a
non-resident alien individual will not be subject to United States federal gift
tax, but the value of shares of the Fund held by such a shareholder at his or
her death will be includible in his or her gross estate for United States
federal estate tax purposes.
Tax-Exempt Fixed Income Funds. Both of the Tax-Exempt Fixed Income Funds intend
to qualify to pay exempt-interest dividends to its respective shareholders by
having, at the close of each quarter of its taxable year, at least 50% of the
value of its total assets consist of tax-exempt securities. An exempt-interest
dividend is that part of dividend distributions made by such Tax-Exempt Fixed
Income Fund that consists of interest received by the Fund on tax-exempt
securities. Shareholders will not incur any federal income tax on the amount of
exempt-interest dividends received by them from such Tax-Exempt Fixed Income
Fund. In view of each Tax-Exempt Fixed Income Fund's investment policies, it is
expected that substantially all dividends will be exempt-interest dividends,
although each Tax-Exempt Fixed Income Fund may from time to time realize and
distribute net short-term capital gains or other minor amounts of taxable
income.
Interest on indebtedness incurred or continued by a shareholder, whether a
corporation or an individual, to purchase or carry shares of either Tax-Exempt
Fixed Income Fund is not deductible to the extent it relates to exempt-interest
dividends received by the shareholder. Any loss incurred on the sale or
redemption of either Fund's shares held six months or less will be disallowed to
the extent of exempt-interest dividends received with respect to such shares.
Interest on certain tax-exempt bonds that are private activity bonds within the
meaning of the Tax Code is treated as a tax preference item for purposes of the
alternative minimum tax, and any such interest received by a Tax-Exempt Fixed
Income Fund and distributed to shareholders will be so treated for purposes of
any alternative minimum tax liability of shareholders. The Tax-Exempt Fixed
Income Funds are permitted to invest up to 20% of their respective assets in
private activity bonds the interest from which is a preference item for purposes
of alternative minimum tax.
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Moreover, exempt-interest dividends paid to a corporate shareholder by a
Tax-Exempt Fixed Income Fund (whether or not from interest on private activity
bonds) will be taken into account (i) in determining the alternative minimum tax
imposed on 75% of the excess of adjusted current earnings over alternative
minimum taxable income, (ii) in calculating the environmental tax equal to .12%
of a corporation's modified alternative taxable income in excess of $2 million,
and (iii) in determining the foreign branch profits tax imposed on effectively
connected earnings and profits (with adjustments) of United States branches of
foreign corporations.
Holders of shares of either class of either Tax-Exempt Fixed Income Fund who are
subject to New York State and New York City personal income taxes on dividends
will not be subject to such tax on distributions from the respective Tax-Exempt
Fixed Income Fund to the extent that the distributions qualify as
exempt-interest dividends and represent income attributable to federally
tax-exempt obligations of the State of New York and its subdivisions, agencies
and instrumentalities (as well as certain other federally tax-exempt obligations
the interest on which is exempt from New York State and New York City personal
income taxes, such as, for example, certain obligations of Puerto Rico). To the
extent that distributions from either class of either Tax-Exempt Fixed Income
Fund are derived from other income, including long- and short-term capital gains
and income from securities lending, such distributions will not be exempt from
New York State or New York City personal income taxes.
Distributions from either Tax-Exempt Fixed Income Fund are not excluded in
determining New York State or City franchise taxes on corporations and financial
institutions.
Annual statements as to the portion of distributions of both Tax-Exempt Fixed
Income Funds that is attributable to interest that is exempt from federal income
tax and, in the case of the Intermediate New York Tax-Exempt Fund, New York
State and City personal income tax will be provided to shareholders shortly
after the end of the taxable year.
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SPECIAL CONSIDERATIONS RELATING TO INVESTMENTS IN NEW YORK MUNICIPAL OBLIGATIONS
The following information is a summary of special factors affecting the
Intermediate New York Tax-Exempt Fund. Such information is derived from public
official documents relating to securities offerings of New York issuers which
are generally available to investors. The Fund has no reason to believe that any
of the statements in such public official documents are untrue but has not
independently verified such statements. The following information constitutes
only a brief summary of the information in such public official documents and
does not purport to be a complete description of all considerations regarding
investment in New York municipal securities.
Economic Outlook
New York (the State) is the third most populous state in the nation and has a
relatively high level of personal wealth. The State's economy is diverse with a
comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a very small share
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of the nation's farming and mining activity. The State's location, air transport
facilities and natural harbors have made it an important link in international
commerce. Travel and tourism constitute an important part of the economy. Like
the rest of the nation, New York has a declining proportion of its workforce
engaged in manufacturing, and an increasing proportion engaged in service
industries.
The forecast of the State's economy shows continued growth in 2000 and 2001 for
employment, wages, and personal income, although growth in employment is
expected to moderate from the 1999 pace. Personal income is estimated to have
grown by 4.7 percent in 1999, fueled in part by a large increase in financial
sector bonus payments at the year's end. Personal income is projected to grow
5.5 percent in 2000 and 4.8 percent in 2001. Total bonus payments are projected
to increase by 11 percent in 2000 and 10.5 percent in 2001. Overall employment
growth is expected to continue at a more modest pace than in 1999, reflecting
the slowing growth of the national economy, continued spending restraint in
government, and continued restructuring in the manufacturing, health care,
social service, and banking sectors.
At the national level, economic growth during both 2000 and 2001 is expected to
be slower than it was during 1999. Growth in domestic consumption, which has
been a major driving force behind the nation's strong economic performance in
recent years, is expected to slow in 2000 as consumer confidence retreats from
historic highs and the stock market ceases to provide large amounts of extra
discretionary income. The forecast projects real Gross Domestic Product (GDP)
growth of 3.5 percent in 2000, slightly below the 1999 growth rate. In 2001 the
rate of growth in real GDP growth is expected to fall further, to 2.9 percent.
The growth of nominal GDP is projected to decline from 5.5 percent in 1999 to
5.1 percent in 2000 and fall to 4.5 percent in 2001 The inflation rate as
measured by the Consumer Price Index is expected to remain relatively stable at
2.4 percent in 2000 and 2.5 percent in 2001. The annual rate of job growth is
expected to decrease from 2.2 percent in 1999 to 1.7 percent in 2000 and 1.5
percent in 2001. Growth in personal income and wages is expected to slow
somewhat in 2000 and again in 2001.
Many uncertainties exist in any forecast of the national and State economies,
particularly in light of the recent volatility in the international economy and
domestic financial markets. The timing an impact of changes in economic
conditions are difficult to estimate with a high degree of accuracy.
Unforeseeable events may occur. The actual rate of change in any, or all, of the
concepts that are forecasted may differ substantially and adversely from the
outlook described herein.
1999-2000 Fiscal Year (Executive Budget Forecast)
The State's current fiscal year began on April 1, 1999 and ends on March 31,
2000. On March 31, 1999, the State adopted the debt service portion of the State
budget for the 1999-2000 fiscal year; four months later, on August 4, l999, it
enacted the remainder of the budget. The Governor approved the budget as passed
by the Legislature. Prior to passing the budget in its entirety for the current
fiscal year, the State enacted appropriations that permitted the State to
continue its operations.
Following enactment of the budget, the State prepared a Financial Plan for the
1999-2000 fiscal year (the 1999-2000 Financial Plan) that sets forth projected
receipts and disbursements based on the
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actions taken by the Legislature. This section provides a summary of the
Financial Plan which was released on August 20, 1999.
In 1999-2000, General Fund disbursements, including transfers to support capital
projects, debt service and other funds, are estimated at $37.35 billion, an
increase of $858 million or 2.4 percent over 1998-99. Projected spending under
the 1999-2000 enacted budget is $215 million above the Governor's Executive
Budget recommendations, including 30-day amendments. This change is the net
result of spending actions that occurred during negotiations on the Budget. The
increase in General Fund spending is comprised of $1.1 billion in legislative
additions to the Executive Budget (primarily in education), offset by various
actions, including reestimates of required spending based on year-to-date
results and the identification of certain other resources that offset spending,
such as $250 million from commencing the process of privatizing the Medical
Malpractice Insurance Association (MMIA), $250 million from the retention of the
Debt Reduction Reserve Fund within the General Fund and about $100 million in
excess fund balances. The MMIA was established in 1983 to provide excess
liability insurance to doctors and medical providers. Legislation enacted with
the 1999-2000 budget initiates the process of MMIA privatization and transfers
excess fund balances to the State.
The 1999-2000 enacted budget provides for $831 million in new funding for public
schools, the largest year-to-year increase in State history. The budget also
enacts several new tax cuts valued at $375 million when fully phased in by
2003-04. None of the $1.82 billion cash surplus from 1998-99 is assumed to
support spending in 1999-2000, but instead is reserved to help offset the costs
of previously enacted tax cuts that take effect after 1999-2000.
The 1999-2000 Financial Plan projects a closing balance of $2.87 billion in the
General Fund. The balance is comprised of the $1.82 billion surplus from 1998-99
that has been set aside to finance already-enacted tax cuts, $473 million in the
Tax Stabilization Reserve Fund (TSRF), $250 million in the Debt Reduction
Reserve Fund (DRRF), $132 million in the Contingency Reserve Fund (CRF), and
$200 million in the Community Projects Fund (CPF), which finances legislative
initiatives. The State expects to close 1999-2000 with cash balances in these
funds at their highest level ever.
Many complex political, social and economic forces influence the State's economy
and finances, which may in turn affect the State Financial Plan. These forces
may affect the State unpredictably from fiscal year to fiscal year and are
influenced by governments, institutions, and organizations that are not subject
to the State's control. The State Financial Plan is also necessarily based upon
forecasts of national and State economic activity. Economic forecasts have
frequently failed to predict accurately the timing and magnitude of changes in
the national and State economies. The Division of Budget believes that its
projections of receipts and disbursements relating to the current State
Financial Plan, and the assumptions on which they are based, are reasonable.
Actual results, however, could differ materially and adversely from the
projections set forth here and those projections may be changed materially and
adversely from time to time.
The State Financial Plan is based upon forecasts of national and State economic
activity developed through both internal analysis and review of national and
State economic forecasts prepared by commercial forecasting services and other
public and private forecasters. Economic forecasts have
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frequently failed to predict accurately the timing and magnitude of changes in
the national and State economies. Many uncertainties exist in forecasts of both
the national and State economies, including consumer attitudes toward spending,
the extent of corporate and governmental restructuring, the condition of the
financial sector, federal fiscal and monetary policies, the level of interest
rates, and the condition of the world economy, which could have an adverse
effect on the State. There can be no assurance that the State economy will not
experience results in the current fiscal year that are worse than predicted,
with corresponding material and adverse effects on the State's projections of
receipts and disbursements.
Four governmental fund types comprise the State Financial Plan: the General
Fund, the Special Revenue Funds, the Capital Projects Funds, and the Debt
Service Funds. The State's fund structure adheres to the accounting standards of
the Governmental Accounting Standards Board. The General Fund is the principal
operating fund of the State and is used to account for all financial
transactions except those required to be accounted for in another fund. It is
the State's largest fund and receives almost all State taxes and other resources
not dedicated to particular purposes. General Fund moneys are also transferred
to other funds, primarily to support certain capital projects and debt service
payments in other fund types.
Projected General Fund Receipts
Total General Fund receipts in 1999-2000 and transfers from other funds are
projected to reach $39.32 billion, an increase of $2.58 billion over the
estimated 1998-99 level. The transfer of the $1.82 billion surplus recorded in
1998-99 to the 1999-2000 fiscal period has the effect of exaggerating the growth
in State receipts from year to year be depressing reported 1998-99 figures and
inflating 1999-2000 projections.
Net General Fund personal income tax collections for 1999-2000 are projected to
reach $23 billion, an increase of $2.9 billion over 1998-99. This increase is
due in part to refund reserve transactions which serve to increase reported
1999-2000 personal income tax receipts by $1.77 billion. While gross collections
of the personal income tax are expected to grow 8.7 percent from 1998-99, the
exceptional year-to-year change in the estimate of receipts from this source is
still significantly attributable to the movement into the current fiscal year of
the General Fund surplus available at the end of 1998-99 (through a tax refund
reserve transaction). The approximately $1.7 billion impact on the
year-over-year change that results from the movement of the surplus is only
partially offset by the planned diversion of almost $700 million in additional
receipts to the School Tax Relief (STAR) Fund in the current year. In its second
year, STAR now provides statewide school property tax relief to all homeowners
for their primary residence.
User tax and fees are projected at $7.35 billion in 1999-2000, an increase of
$105 million from 1998-99. The sales tax component of this category accounts for
virtually all of the 1999-2000 growth.
Business tax receipts are expected to total $4.60 billion in 1999-2000, $260
million below 1998-99 fiscal year results. The year-over-year decline in
projected receipts is largely due to statutory changes.
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Receipts from other taxes, which are comprised primarily of receipts from estate
and gift taxes, real property gains tax and pari-mutuel taxes on wagering, are
projected to total $1 billion, $1.14 billion below last year's amount. The
primary factors accounting for most of the expected decline include: an adverse
tax tribunal decision, pari-mutuel tax reductions and reductions in estate and
gift taxes.
Miscellaneous receipts includes license revenues, income from fees and fines,
abandoned property receipts, investment income, and a portion of the assessments
levied on medical providers. Miscellaneous receipts are expected to total $1.36
billion in 1999-2000, a decline of $142 million from 1998-99. This reflects the
loss of non-recurring receipts received in 1998-99 and the growing effects of
the phase-out of the medical provider assessments scheduled to be eliminated in
January 2000.
Transfers from other funds to the General Fund consist primarily of tax revenues
in excess of debt service requirements. Transfers to the General Fund are
expected to total $2.02 billion, or $99 million more than last year.
General Fund Disbursements
The 1999-2000 Financial Plan projects General Fund disbursements and transfers
to capital, debt service and other funds of $37.36 billion, an increase of $868
million or 2.38 percent over 1998-99. Following the pattern of the last two
fiscal years, education programs receive the largest share of new funding
contained in the 1999-2000 Financial Plan. School aid is expected to grow by
$831 million or 8.58 percent over 1998-99 levels (on a State fiscal year basis).
Outside of education, the largest growth in spending is for State Operations
($207 million, including $100 million reserved for possible collective
bargaining costs); Debt Service ($183 million), and mental hygiene programs,
including funding for a cost of living increase for care providers ($114
million). These increases were offset, in part, by spending reductions or
actions in health and social welfare ($280 million), and in general State
charges ($222 million).
Grants to Local Governments is the largest category of General Fund
disbursements and includes financial assistance to local governments and
not-for-profit corporations, as well as entitlement benefits to individuals.
Grants to Local Governments are projected at $25.68 billion in 1999-2000, an
increase of $926 million over 1998-99.
General Fund spending for school aid is projected at $10.52 billion on a State
fiscal year basis, an increase of $831 million from 1998-99. The Executive
Budget provides additional funding for operating aid, building aid, and textbook
and computer aids. It also funds the remainder of aid payable for the 1998-99
school year. For all other educational programs, disbursements are projected to
grow by $78 million to $2.99 billion.
Medicaid costs are estimated at $5.53 billion in 1999-2000, essentially
unchanged from 1998-99. Spending on welfare is projected at $2.70 billion, a
decline of $252 million. Revenue sharing and other general purpose aid to local
governments in projected at $825 million.
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State Operations spending reflects the costs of operating State agencies. The
State estimates that disbursements for State Operations in 1999-2000 will total
$6.85 billion. Compared to 1998-99, spending for State Operations is projected
to increase by $181 million. The year-to-year growth reflects $100 million
reserved to fund new collective bargaining agreements, including the recent
contract ratified by the United University Professionals. Costs for the State's
Year 2000 compliance programs and growth in the Legislative and Judiciary
budgets also contribute to the increase.
General State Charges spending in this category, which accounts primarily for
fringe benefits for State employees and retirees, is projected to total $2.04
billion in 1999-2000. Disbursements for General State Charges are projected to
decrease by $222 million from the prior year, with growth of $28 million in a
variety of areas offset by the use of $250 million in proceeds from the
privatization of the Medical Malpractice Insurance Association.
Short and long-term Debt Service is projected at $2.28 billion in 1999-2000, an
increase of $185 million over 1998-99. The growth reflects debt service costs
from bond sales in prior years and certain sales planned for 1999-2000.
Capital Projects and all other transfers spending is estimated at $553 million
in 1999-2000, a decrease of $212 million from 1998-99. The decline primarily
reflects the impact of certain non-recurring transfers.
General Fund Balance
The State is projected to close the 1999-2000 fiscal year with a General Fund
balance of $2.87 billion. The balance is comprised of the $1.82 billion tax
reduction reserve for future needs, $473 million in the Tax Stabilization
Reserve Fund, $250 million in the Debt Reduction Reserve Fund, $132 million in
the Contingency Reserve Fund and $200 million in the Community Projects Fund.
Special Revenue Funds
Special Revenue Funds are used to account for the proceeds of specific revenue
sources such as federal grants that are legally restricted, either by the
Legislature or outside parties, to expenditures for specified purposes. For
1999-2000 projected disbursements in this fund type total $30.94 billion, an
increase of $1.29 billion (4.35 percent) over 1998-99 levels. Disbursements from
federal funds, primarily the federal share of Medicaid and other social services
programs, are projected to total $22.17 billion in the 1999-2000 fiscal year.
Remaining growth in federal funds is primarily for the Child Health Plus program
($117 million), offset by decreased spending in certain social service programs.
State special revenue spending is projected to be $8.77 billion, an increase of
$550 million from last year.
Capital Project Funds
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Capital Projects Funds spending in 1999-2000 is projected at $4.18 billion, an
increase of $114 million or 2.80 percent from last year. Transportation,
environmental, education and mental hygiene programs are the major sources of
year-to-year spending growth in this category.
Debt Service Funds
Debt Service Funds spending are estimated at $3.64 billion in 1999-2000, up $370
million or 11.31 percent from 1998-99. Transportation purposes, including debt
service on bonds issued for State and local highway and bridge programs financed
through the New York State Thruway Authority and supported by the Dedicated
Highway and Bridge Trust Fund, account for $124 million of the year-to-year
growth. Debt service for educational purposes, including State and City
University programs financed through the Dormitory Authority, will increase by
$80 million. The remaining growth is for a variety of programs in mental health
and corrections, and for general obligation financings.
Out-Year Projections of Receipts and Disbursements
State law requires the Governor to propose a balanced budget each year.
Preliminary analysis by the Division of the Budget (DOB) indicates that the
State will have a 2000-01 budget gap of approximately $1.9 billion, or about
$300 million above the 1999-2000 Executive Budget estimate (after adjusting for
the projected costs of collective bargaining). This estimate includes an
assumption for the projected costs of new collective bargaining agreements, $500
million in assumed operating efficiencies, as well as the planned application of
approximately $615 million of the $1.82 billion tax reduction reserve. In recent
years, the State has closed projected budget gaps which DOB estimates at $5.0
billion (1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than
$1 billion (1998-99). DOB will formally update its projections of receipts and
disbursements for future years as part of the Governor's 2000-01 Executive
Budget submission. The revised expectations for these years will reflect the
cumulative impact of tax reductions and spending commitments enacted over the
last several years as well as new 2000-01 Executive Budget recommendations.
The State and the United University Professionals (UUP) union have reached a
tentative agreement on a new four-year labor contract. The State is continuing
negotiations with other unions representing State employees, the largest of
which is the Civil Service Employees Association (CSEA). CSEA previously failed
to ratify a tentative agreement on a new four-year contract earlier in 1999. The
1999-2000 Financial Plan has reserved $100 million for possible collective
bargaining agreements, and reserves are contained in the preliminary outyear
projection for 2000-01 to cover the recurring costs of any new agreements. To
the extent these reserves are inadequate to finance such agreements, the costs
of new labor contracts could increase the size of future budget gaps.
Sustained growth in the State's economy could contribute to closing projected
budget gaps over the next several years, both in terms of higher-than-projected
tax receipts and in lower-than-expected entitlement spending. The State assumes
that the 2000-01 Financial Plan will achieve $500 million in savings from
initiatives by State agencies to deliver services more efficiently, workforce
management efforts, maximization of federal and non-General Fund spending
offsets, and other actions necessary to help bring projected disbursements and
receipts into balance. The projections
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do not assume any gap-closing benefit from the potential settlement of State
claims against the tobacco industry.
Prior Fiscal Years
New York State's financial operations have improved during recent fiscal years.
During its last seven fiscal years, the State has recorded balanced budgets on a
cash basis, with positive year-end fund balances.
1998-99 Fiscal Year
The State ended its 1998-99 fiscal year on March 31, 1999 in balance on a cash
basis, with a General Fund cash surplus as reported by the DOB of $1.82 billion.
The cash surplus was derived primarily from higher-than-projected tax
collections as a result of continued economic growth, particularly in the
financial markets and the securities industries.
The State reported a General Fund closing cash balance of $892 million, an
increase of $254 million from the prior fiscal year. The balance is held in
three accounts within the General Fund: the Tax Stabilization Reserve Fund
(TSRF), the Contingency Reserve Fund (CRY) and the Community Projects Fund
(CPF). The TSRF closing balance was $473 million, following an additional
deposit of $73 million in 1998-99. The CRF closing balance was $107 million,
following a deposit of $39 million in 1998-99. The CPF, which finances
legislative initiatives, closed the fiscal year with a balance of $312 million.
The closing fund balance excludes $2.31 billion that the State deposited into
the tax refund reserve account at the close of 1998-99 to pay for tax refunds in
1999-2000 of which $521 million was made available as a result of the Local
Government Assistance Corporation (LGAC) financing program and was required to
be on deposit as of March 31, 1999. The tax refund reserve account transaction
has the effect of decreasing reported personal income tax receipts in 1998-99,
while increasing reported receipts in 1999-2000.
General Fund receipts and transfers from other funds (net of tax refund
reserve-account activity for the 1998-99 fiscal year totaled $36.74 billion, an
increase of 6.34 percent from 1997-98 levels. General Fund disbursements and
transfers to other funds totaled $36.19 billion for the 1998-99 fiscal year, an
increase of 6.23 percent from 1997-98 levels.
1997-98 Fiscal Year
The State ended its 1997-98 fiscal year in balance on a cash basis, with a
General Fund cash surplus as reported by DOB of approximately $2.04 billion. The
cash surplus was derived primarily from-higher-than-anticipated receipts and
lower spending on welfare, Medicaid, and other entitlement programs.
The General Fund had a closing balance of $638 million, an increase of $205
million from the prior fiscal year. The TSRF closing balance was $400 million,
following a required deposit of $15 million
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(repaying a transfer made in 1991-92) and an additional deposit of $68 million
made from the 1997-98 surplus. The CRF closing balance was $68 million,
following a $27 million deposit from the surplus. The CPF closed the fiscal year
with a balance of $170 million. The General Fund closing balance did not include
$2.39 billion in the tax refund reserve account, of which $521 million was made
available as a result of the LGAC financing program and was required to be on
deposit on March 31, 1998.
General Fund receipts and transfers from other funds (net of tax refund reserve
account activity) for the 1997-98 fiscal year totaled $34.55 billion, an annual
increase of 4.57 percent over 1996-97. General Fund disbursements and transfers
to other funds were $34.35 billion, an annual increase of 4.41 percent.
1996-97 Fiscal Year
The State ended its 1996-97 fiscal year on March 31, 1997 in balance on a cash
basis, with a General Fund cash surplus as reported by DOB of approximately
$1.42 billion. The cash surplus was derived primarily from higher than expected
receipts and lower-than-expected spending for social services programs.
The General Fund closing balance was $433 million, an increase of $146 million
from the 1995-96 fiscal year. The balance included $317 million in the TSRF,
after a required deposit of $15 million (repaying a transfer made in 1991-92)
and an additional deposit of $65 million in 1996-97. In addition, $41 million
remained on deposit in the CRF. The remaining $75 million reflected amounts then
on deposit in the CPF. The General Fund closing balance did not include $1.86
billion in the tax refund reserve account, of which $521 million was made
available as a result of the LGAC financing program and was required to be on
deposit as of March 31, 1997.
General Fund receipts and transfers from other funds (net of tax refund reserve
account activity) for the 1996-97 fiscal year totaled $33.04 billion, an
increase of 0.7 percent from the previous fiscal year. General Fund
disbursements and transfers to other funds totaled $32.90 billion for the
1996-97 fiscal year, an increase of 0.7 percent from the 1995-96 fiscal year.
Debt and Other Financing Activities
1999-2000 Borrowing Plan
The State's 1999-2000 borrowing plan projects issuances of $390 million in
general obligation bonds (including $140 million for purposes of redeeming
outstanding Bond Anticipation Notes (BANs). The State issued $107 million in
Certificates of Participation to finance equipment purchases (including costs of
issuance, reserve funds, and other costs) during the 1999-2000 fiscal year.
Borrowings by public authorities pursuant to lease-purchase and
contractual-obligation financings for capital programs of the State are
projected to total approximately $2.61 billion, including costs of issuance,
reserve funds, and other costs, net of anticipated refundings and other
adjustments in 1999-2000. Included therein are borrowings by: (i) the Dormitory
Authority of the State of New
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York (DASNY) for the State University of New York (SUNY); the City University of
New York (CUNY); other educational purposes; and mental health facilities; (ii)
the Thruway Authority for the Dedicated Highway and Bridge Trust Fund and
Consolidated Highway Improvement Program; (iii) the Urban Development
Corporation (UDC) (doing business as the Empire State Development Corporation)
for prisons, youth facilities and economic development purposes; (iv) the
Environmental Facilities Corporation (EFC) for environmental projects; and (v)
the Housing Finance Agency (HFA) for housing programs. These borrowings include
an estimated $98 million to be issued for the Community Enhancement Facilities
Assistance Program (CEFAP) for economic development purposes. In 1997-98, four
public authorities (Thruway Authority, DASNY, UDC and HFA) were authorized to
issue bonds to finance a total of $25 million of CEFAP projects under this
program.
Outstanding Debt of the State and Certain Authorities
For purposes of analyzing the financial condition of the State, debt of the
State and of certain public authorities may be classified as State-supported
debt, which includes general obligation debt of the State and lease-purchase and
contractual obligations of public authorities (and municipalities) where debt
service is paid from State appropriations (including dedicated tax sources, and
other revenues such as patient charges and dormitory facilities rentals). In
addition, a broader classification, referred to as State-related debt, includes
State-supported debt, as well as certain types of contingent obligations,
including moral obligation financings, certain contingent contractual-obligation
financing arrangements, and State-guaranteed debt where debt service is expected
to be paid from other sources and State appropriations in that they may be made
and used only under certain circumstances.
State-Supported and State-Related Debt Outstanding
The first type of State-supported debt, general obligation debt, is currently
authorized for three programmatic categories: transportation, environmental and
housing. As of March 31, 1999, the total amount of outstanding general
obligation debt was $4.8 billion, including $185 million in BANs.
The second type of State-supported debt, lease-purchase and
contractual-obligation financing arrangements with public authorities and
municipalities, has been used primarily by the State to finance the State's
highway and bridge program, SUNY and CUNY buildings, health and mental hygiene
facilities, prison construction and rehabilitation, and various other State
capital projects.
The State has utilized and expects to continue to utilize lease-purchase and
contractual-obligation financing arrangements to finance its capital programs,
in addition to authorized general obligation bonds. Total outstanding
State-supported debt as of March 31, 1999 was $35.8 million.
The category of State-related debt includes the State-supported debt described
above, moral obligation and certain other financings and State-guaranteed debt.
Total outstanding State-related debt as of March 31, 1999 was $37.7 million.
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Year 2000 Compliance
As of February 2000, New York State has experienced no significant Year 2000
computer disruptions. Monitoring will continue over the first few months of 2000
to identify and correct any problems that may arise. However, there can be no
assurance that outside parties who provide goods and services to the State will
not experience computer problems related to Year 2000 programming in the future,
or that such disruptions, if they occur, will not have an adverse impact on
State operations or finances.
Certain Litigation
The legal proceedings noted below involve State finances and programs and
miscellaneous civil rights, real property, contract and other tort claims in
which the State is a defendant and the potential monetary claims sought against
the State are substantial, generally in excess of $100 million. These
proceedings could adversely affect the financial condition of the State in the
1999-2000 fiscal year or thereafter.
Among the more significant of these cases are those that involve: (i) the
validity of agreements and treaties by which various Indian tribes transferred
to New York title to certain land in New York; (ii) a challenge to the State's
reimbursement rates for dental care provided under Medicaid; (iii) challenges to
the constitutionality of certain sections of the Public Health Law, which impose
a tax on the gross receipts hospitals and residential health care facilities
receive from all patient care services; (iv) alleged responsibility of New York
officials to assist in remedying racial segregation in the City of Yonkers; (v)
a challenge to the funding for New York City public schools; (vi) a challenge to
the Governor of New York regarding the application of his constitutional line
item veto authority to certain portions of budget bills; and (vii) a case
calling for the enforcement of sales and excise taxes imposed on motor fuel and
tobacco products sold to non-Indian consumers on Indian reservations.
The City of New York
The fiscal health of the State may be affected by the fiscal health of New York
City (the City), which continues to receive significant financial assistance
from the State. The City depends on State aid both to enable the City to balance
its budget and to meet its cash requirements. The State may also be affected by
the ability of the City and certain entities issuing debt for the benefit of the
City to market their securities successfully in the public credit markets.
The City has achieved balanced operating results for each of its fiscal years
since 1981 as measured by the GAAP standards in force at that time. The City
prepares a four-year financial plan (Financial Plan) annually and updates it
periodically, and prepares a comprehensive annual financial report each October
describing its most recent fiscal year.
In response to the City's fiscal crisis in 1975, the State took action to assist
the City in returning to fiscal stability. Among those actions, the State
established the Municipal Assistance Corporation for the City of New York (NYC
MAC) to provide financing assistance to the City; the New York
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State Financial Control Board (the Control Board) to oversee the City's
financial affairs; and the Office of the State Deputy Comptroller for the City
of New York (OSDC) to assist the Control Board in exercising its powers and
responsibilities. A "control period" existed from 1975 to 1986 during which the
City was subject to certain statutorily-prescribed fiscal controls. The Control
Board terminated the control period in 1986 when certain statutory conditions
were met. State law requires the Control Board to reimpose a control period upon
the occurrence or "substantial likelihood and imminence" of the occurrence of
certain events, including (but not limited to) a City operating budget deficit
of more than $100 million or impaired access to the public credit markets.
Currently, the City and its Covered Organizations (i.e., those organizations
which receive or may receive moneys from the City directly, indirectly or
contingently) operate under the Financial Plan. The City's Financial Plan
summarizes its capital, revenue and expense projections and outlines proposed
gap-closing programs for years with projected budget gaps. The City's
projections set forth in the Financial Plan are based on various assumptions and
contingencies, some of which are uncertain and may not materialize. Unforeseen
developments and changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements.
To successfully implement its Financial Plan, the city and certain entities
issuing debt for the benefit of the City must market their securities
successfully. The City issues securities to finance, refinance and rehabilitate
infrastructure and other capital needs, as well as for seasonal financing needs.
In 1997, the State created the New York City Transitional Finance Authority
(TFA) to finance a portion of the City's capital program. Despite this
additional financing mechanism, the City currently projects that, if no further
action is taken, it will reach its debt limit in City fiscal year 1999-2000. To
continue its capital plan without interruption, the City is proposing an
amendment to the State Constitution to change the methodology used to calculate
the debt limit. Since an amendment to the Constitution to raise the debt limit
could not take effect until City fiscal year 2001-02 at the earliest, the City
has decided to securitize a portion of its share of the proceeds from the
settlement with the nation's tobacco companies. However, a number of potential
developments may affect both the availability and level of funding that the City
will receive from the tobacco settlement. City officials have indicated that,
should their efforts to securitize a portion of City tobacco settlement proceeds
fail or not be accomplished in a timely manner, the City will request that the
State increase the borrowing authority of the TFA.
Other Localities
Certain localities outside New York City have experienced financial problems and
have requested and received additional State assistance during the last several
State fiscal years. The potential impact on the State of any future requests by
localities for additional oversight or financial assistance is not included in
the projections of the State's receipts and disbursements for the State's
1999-2000 fiscal year.
The State has provided extraordinary financial assistance to select
municipalities, primarily cities, since the 1996-97 fiscal year. Funding has
essentially been continued or increased in each subsequent fiscal year. Such
funding in 1999-2000 totals $113.9 million. In 1997-98, the State
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increased General Purpose State Aid for local governments by $27 million to $550
million, and has continued funding at this new level since that date.
The 1998-99 budget included an additional $29.4 million in unrestricted aid
targeted to 57 municipalities across the State. Other assistance for
municipalities with special needs totals more than $25.6 million. Twelve upstate
cities will receive $24.2 million in one-time assistance from a cash flow
acceleration of State aid.
While the distribution of General Purpose State Aid for local governments was
originally based on a statutory formula, in recent years both the total amount
appropriated and the shares appropriated to specific localities have been
determined by the Legislature. A State commission established to study the
distribution and amounts of general purpose local government aid failed to agree
on any recommendations for a new formula.
Counties, cities, towns, villages and school districts have engaged in
substantial short-term and long-term borrowings. In 1997, the total indebtedness
of all localities in the State other than New York City was approximately $21.0
billion. A small portion (approximately $80.2 million) of that indebtedness
represented borrowing to finance budgetary deficits and was issued pursuant to
State enabling legislation. State law requires the Comptroller to review and
make recommendations concerning the budgets of those local government units
(other than New York City) authorized by State law to issue debt to finance
deficits during the period that such deficit financing is outstanding.
Twenty-one localities had outstanding indebtedness for deficit financing at the
close of their fiscal year ending in 1997.
Like the State, local governments must respond to changing political, economic
and financial influences over which they have little or no control. Such changes
may adversely affect the financial condition of certain local governments. For
example, the federal government may reduce (or in some cases eliminate) federal
funding of some local programs which, in turn, may require local governments to
fund these expenditures from their own resources. It is also possible that the
State, New York City, or any of their respective public authorities may suffer
serious financial difficulties that could jeopardize local access to the public
credit markets, which may adversely affect the marketability of notes and bonds
issued by localities within the State. Localities may also face unanticipated
problems resulting from certain pending litigation, judicial decisions and
long-range economic trends. Other large-scale potential problems, such as
declining urban populations, increasing expenditures, and the loss of skilled
manufacturing jobs, may also adversely affect localities and necessitate State
assistance.
Authorities
The fiscal stability of the State is related in part to the fiscal stability of
its public authorities. Public authorities are not subject to the constitutional
restrictions on the incurrence of debt that apply to the State itself and may
issue bonds and notes within the amounts and restrictions set forth in
legislative authorization. The State's access to the public credit markets could
be impaired and the market price of its outstanding debt may be materially and
adversely affected if any of its public authorities default on their respective
obligations, particularly those using the financing techniques referred to
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as State-supported or State-related debt. As of December 31, 1998, there were 17
public authorities that had outstanding debt of $100 million or more, and the
aggregate outstanding debt, including refunding bonds, of all State Public
Authorities was $94 billion, only a portion of which constitutes State-supported
or State-related debt.
Beginning in 1998, the Long Island Power Authority (the LIPA) assumed
responsibility for the provision of electric utility services previously
provided by Long Island Lighting Company for Nassau, Suffolk and a portion of
Queen Counties, as part of an estimated $7 billion financing plan. As of the
date of August 1998, LIPA has issued over $5 billion in bonds secured solely by
ratepayer charges. LIPA's debt is not considered either State-supported or
State-related debt.
The Metropolitan Transit Authority (the MTA) oversees the operation of subway
and bus lines in New York City by its affiliates, the New York City Transit
Authority and Manhattan and Bronx Surface Transit Operating Authority
(collectively, the TA). The MTA operates certain commuter rail and bus services
in the New York Metropolitan area through MTA's subsidiaries, the Long Island
Rail Road Company, the Metro-North Commuter Railroad Company and the
Metropolitan Suburban Bus Authority. In addition, the Staten Island Rapid
Transit Operating Authority, an MTA subsidiary, operates a rapid transit line on
Staten Island. Through its affiliated agency, the Triborough Bridge and Tunnel
Authority (the TBTA), the MTA operates certain intrastate toll bridges and
tunnels. Because fare revenues are not sufficient to finance the mass transit
portion of these operations, the MTA has depended on, and will continue to
depend on, operating support from the State, local governments and TBTA,
including loans, grants and subsidies. If current revenue projections are not
realized and/or operating expenses exceed current projections, the TA or
commuter railroads may be required to seek additional State assistance, raise
fares or take other actions.
Since 1980, the State has enacted several taxes, including a surcharge on the
profits of banks, insurance corporations and general business corporations doing
business in the 12-county Metropolitan Transportation Region served by the MTA
and a special one-quarter of 1 percent regional sales and use tax, that provide
revenue for mass transit purposes, including assistance to the MTA. Since 1987,
State law has required that the proceeds of a one-quarter of 1 percent mortgage
recording tax paid on certain mortgages in the Metropolitan Transportation
Region be deposited in a special MTA fund for operating or capital expenses. In
1993, the State dedicated a portion of certain additional State petroleum
business tax receipts to fund operating or capital assistance to the MTA. For
the 1999-2000 State fiscal year, total State assistance to the MTA is projected
to total approximately $1.4 billion, an increase of $55 million over the 1998-99
fiscal year.
State legislation accompanying the 1996-97 State budget authorized the MTA, TBTA
and TA to issue an aggregate of $6.5 billion in bonds to finance a portion of a
new $12.17 billion MTA capital plan for the 1995 through 1999 calendar years
(the 1995-99 Capital Program). In July 1997, the Capital Program Review Board
(the CPRB) approved the 1995-99 Capital Program and subsequently amended it in
August 1997 and March 1999. The MTA plan now totals $12.55 billion. This is the
fourth capital plan since the Legislature authorized procedures for the
adoption, approval and amendment of MTA capital programs, and is designed to
upgrade the performance of the MTA's transportation systems by investing in new
rolling stock, maintaining replacement schedules for existing assets and
bringing the MTA system into a state of good repair. The 1995-99 Capital
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Program assumes the issuance of an estimated $5.2 billion in bonds under this
$6.5 billion aggregate bonding authority. The remainder of the plan is projected
to be financed through assistance from the State, the federal government and the
City of New York, and from various other revenues generated from actions taken
by the MTA.
The MTA has proposed a $17.5 billion Capital Program for 2000 through 2004.
There can be no assurance that the proposed capital plan will be approved by the
CPRB without significant modifications, that the plan as adopted will be
adequate to finance the MTA's capital needs over the plan period, or that
funding sources identified in the approved plan will not be reduced or
eliminated.
There can be no assurance that all the necessary governmental actions for future
capital programs will be taken, that funding sources currently identified will
not be decreased or eliminated, or that the 1995-99 and 2000-04 Capital
Programs, or parts thereof, will not be delayed or reduced. Should funding
levels fall below current projections, the MTA would have to revise its 1995-99
and 2000-04 Capital Programs accordingly. If the 1995-99 and 2000-04 Capital
Programs are delayed or reduced ridership causes fare revenues to decline, the
MTA's ability to meet its operating expenses without additional assistance could
be impaired.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
As used in this Statement of Additional Information and the Prospectuses, the
term "majority of a Fund's outstanding shares" (of a series, if applicable)
means the vote of (i) 67% or more of the Fund's shares (of the series, if
applicable) present at a meeting, if the holders of more than 50% of the Fund's
outstanding shares (of the series, if applicable) are present or represented by
proxy, or (ii) more than 50% of the Fund's outstanding shares (of the series, if
applicable), whichever is less.
Telephone calls to the Funds and The Bank of New York as shareholder servicing
agent may be tape recorded.
With respect to the securities offered hereby, this Statement of Additional
Information and the Prospectuses do not contain all the information included in
the Funds' Registration Statement filed with the Securities and Exchange
Commission under the Securities Act. Pursuant to the rules and regulations of
the Securities and Exchange Commission, certain portions have been omitted. The
Registration Statement, including the exhibits filed therewith, may be examined
at the office of the Securities and Exchange Commission in Washington, D.C.
Statements contained in this Statement of Additional Information and the
Prospectuses concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statements. Each such statement is qualified in all respects by such reference.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in the
Prospectuses and this Statement of Additional Information, in connection with
the offer contained in the Prospectuses and this Statement of
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Additional Information and, if given or made, such other information or
representations must not be relied upon as having been authorized by any of the
Funds or the Distributor. The Prospectuses and this Statement of Additional
Information do not constitute an offer by any Fund or by the Distributor to sell
or solicitation of any offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful for the Funds or the
Distributor to make such offer in such jurisdictions.
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FINANCIAL STATEMENTS
The following financial information is hereby incorporated by reference to the
indicated pages of the Funds' Annual Report to shareholders dated December 31,
1999.
<TABLE>
<CAPTION>
Page Page
<S> <C> <C> <C>
QUESTIONS & ANSWERS 1 BNY HAMILTON INTERMEDIATE
INVESTMENT GRADE FUND
BNY HAMILTON EQUITY INCOME FUND Schedule of Investments 61
Schedule of Investments 21 Statement of Assets and Liabilities 66
Statement of Assets and Liabilities 25 Statement of Operations 66
Statement of Operations 25 Statement of Changes in Net Assets 67
Statements of Changes in Net Assets 26 Financial Highlights 68
Financial Highlights 27
BNY HAMILTON INTERMEDIATE NEW
BNY HAMILTON LARGE CAP GROWTH FUND YORK TAX-EXEMPT FUND
Schedule of Investments 29 Schedule of Investments 69
Statement of Assets and Liabilities 33 Statement of Assets and Liabilities 74
Statement of Operations 33 Statement of Operations 74
Statement of Changes in Net Assets 34 Statements of Changes in Net Assets 75
Financial Highlights 35 Financial Highlights 76
BNY HAMILTON INTERMEDIATE TAX-
BNY HAMILTON SMALL CAP GROWTH FUND EXEMPT FUND
Schedule of Investments 36 Schedule of Investments 78
Statement of Assets and Liabilities 40 Diversification by State 88
Statement of Operations 40 Statement of Assets and Liabilities 89
Statement of Changes in Net Assets 41 Statement of Operations 89
Financial Highlights 42 Statement of Changes in Net Assets 90
Financial Highlights 91
BNY HAMILTON INTERNATIONAL EQUITY FUND BNY HAMILTON MONEY FUND
Schedule of Investments 43 Schedule of Investments 92
Industry Diversification 48 Statement of Assets and Liabilities 101
Statement of Assets and Liabilities 50 Statement of Operations 101
Statement of Operations 50 Statements of Changes in Net Assets 102
Statement of Changes in Net Assets 51 Financial Highlights 103
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Financial Highlights 52
BNY HAMILTON TREASURY MONEY FUND
Schedule of Investments 106
BNY HAMILTON INTERMEDIATE GOVERNMENT FUND Statement of Assets and Liabilities 108
Schedule of Investments 53 Statement of Operations 108
Statement of Assets and Liabilities 57 Statement of Changes in Net Assets 109
Statement of Operations 57 Financial Highlights 110
Statements of Changes in Net Assets 58
Financial Highlights 59 NOTES TO FINANCIAL STATEMENTS 111
REPORT OF INDEPENDENT AUDITORS 119
DIRECTORS AND OFFICERS 120
</TABLE>
APPENDIX A
Description of Security Ratings
S&P
Corporate and Municipal Bonds
AAA Debt obligations rated AAA have the highest ratings assigned by
S&P to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA Debt obligations rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated
issues only in a small degree.
A Debt obligations rated A have a strong capacity to pay interest
and repay principal although they are somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions than debts in higher rated categories.
BBB Debt obligations rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for debts in this category than for debts in higher rated
categories.
BB Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments.
B Debt rated B has greater vulnerability to default but currently
has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions
will likely impair capacity or willingness to pay interest and
repay principal.
CCC Debt rated CCC has a currently indefinable vulnerability to
default, and is dependent upon favorable business, financial and
economic conditions to meet timely payment of interest and
repayment of principal. In the event of adverse business,
financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC The rating CC is typically applied to debt subordinated to
senior debt that is assigned an
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actual or implied CCC rating.
C The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC-debt rating.
NR No public rating has been requested, there may be insufficient
information on which to base a rating, or that S&P does not rate
a particular type of obligation as a matter of policy.
82
<PAGE>
Commercial Paper, Including Tax-Exempt Commercial Paper
A Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category
are further refined with the designations 1, 2, and 3 to
indicate the relative degree of safety.
A-1 This designation indicates that the degree of safety regarding
timely payment is very strong.
MOODY'S
Corporate and Municipal Bonds
Aaa Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge". Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in
Aaa securities.
A Bonds that are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa Bonds that are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be presented elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds and
issue so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
83
<PAGE>
NR No public rating has been requested, there may be insufficient
information on which to base a rating, or that Moody's does not
rate a particular type of obligation as a matter of policy.
Commercial Paper, Including Tax-Exempt Commercial Paper
Prime-1 Issuers rated Prime-1 (or related supporting institutions)
have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will
normally be evidenced by the following characteristics:
- Leading market positions in well established
industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well established access to a range of financial
markets and assured sources of alternate liquidity.
Short-Term Tax-Exempt Notes
MIG-1 The short-term tax-exempt note rating MIG-1 is the highest
rating assigned by Moody's for notes judged to be the best
quality. Notes with this rating enjoy strong protection from
established cash flows of funds for their servicing or from
established and broad-based access to the market for
refinancing, or both.
MIG-2 MIG-2 rated notes are of high quality but with margins of
protection not as large as MIG-1.
84
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits.
Exhibit Number Description
-------------- -----------
(1) (a) Articles of Incorporation of Registrant.*
(b) Articles of Amendment, dated June 29, 1992.*
(c) Articles of Supplementary, dated June 29, 1994.*
(d) Articles of Supplementary, dated August 15, 1995.*
(e) Articles of Amendment, dated January 22, 1997*
(f) Articles Supplementary, dated January 22, 1997.*
(g) Articles Supplementary, dated April 28, 1999.*
(h) Form of Articles Supplementary, dated September 17,
1999*
(2) Bylaws of Registrant.*
(3) Not Applicable.
(4) (a) Form of Specimen stock certificate of common stock of
BNY Hamilton Money Fund.*
(b) Form of Specimen stock certificate of common stock of
BNY Hamilton Intermediate Government Fund.*
(c) Form of specimen stock certificate of common stock of
BNY Hamilton Intermediate New York Tax-Exempt Fund.*
(d) Form of specimen stock certificate of common stock of
BNY Hamilton Equity Income Fund.*
(5) (a) Investment Advisory Agreement between BNY Hamilton
Money Fund and The Bank of New York.*
(b) Investment Advisory Agreement between BNY Hamilton
Intermediate Government Fund and The Bank of New
York.*
(c) Investment Advisory Agreement between BNY Hamilton
Intermediate New York Tax-Exempt Fund and The Bank of
New York.*
(d) Investment Advisory Agreement between BNY Hamilton
Equity Income Fund and The Bank of New York.*
(e) Investment Advisory Agreement between BNY Hamilton
Treasury Money Fund and The Bank of New York.*
(f) Investment Advisory Agreement between BNY Hamilton
Large Cap Growth Fund and The Bank of New York.*
<PAGE>
(g) Investment Advisory Agreement between BNY Hamilton
Small Cap Growth Fund and The Bank of New York.*
(h) Investment Advisory Agreement between BNY Hamilton
International Equity Fund and The Bank of New York.*
(i) Investment Advisory Agreement between BNY Hamilton
Intermediate Investment Grade Fund and The Bank of
New York.*
(j) Investment Advisory Agreement between BNY Hamilton
Intermediate Tax-Exempt Fund and The Bank of New
York.*
(k) Sub-advisory agreement between BNY Hamilton
International Equity Fund and Indosuez Asset
Management.*
(l) Investment Advisory Agreement between BNY Hamilton
Large Cap Growth CRT Fund and The Bank of New York.*
(m) Investment Advisory Agreement between BNY Hamilton
Small Cap Growth CRT Fund and The Bank of New York.*
(n) Investment Advisory Agreement between BNY Hamilton
International Equity CRT Fund and The Bank of New
York.*
(o) Sub-advisory agreement between BNY Hamilton
International Equity Fund and Indocam, a subsidiary
of Credit Agricole.*
(p) Investment Advisory Agreement between BNY Hamilton
U.S. Bond Market Index Fund and The Bank of New York.
(q) Investment Advisory Agreement between BNY Hamilton
S&P 500 Index Fund and The Bank of New York.
(r) Investment Advisory Agreement between BNY Hamilton
Large Cap Value Fund and The Bank of New York.
(s) Sub-advisory Agreement between BNY Hamilton Large Cap
Value Fund and Estabrook Capital Management, Inc.
(6) (a) Distribution Agreements between Registrant and BNY
Hamilton Distributors, Inc.*
(b) Supplement to Distribution Agreements between
Registrant and BNY Hamilton Distributors, Inc.*
(7) Not Applicable.
(8) (a) Custody Agreement between Registrant and The Bank of
New York.*
(b) Cash Management and Related Services Agreement
between each series of Registrant and The Bank of New
York.*
(c) Supplement to Custody Agreement between Registrant
and The Bank of New York.*
(d) Supplement to Cash Management and Related Services
Agreement between Registrant and The Bank of New
York.*
(e) Additional Supplement to Custody Agreement between
Registrant and The Bank of New York.*
(f) Additional Supplement to Cash Management and
Related Services Agreement between Registrant and
The Bank of New York.*
(g) Additional Supplement to Custody Agreement between
Registrant and The Bank of New York.
(h) Additional Supplement to Cash Management and
Related Services Agreement between Registrant and
The Bank of New York.
(9) (a) Administration Agreement between Registrant and BNY
Hamilton Distributors, Inc.*
(b) Fund Accounting Services Agreement between Registrant
and The Bank of New York.*
<PAGE>
(c) Form of Transfer Agency Agreement between Registrant
and BISYS Fund Services, Inc.*
(d) Form of Shareholder Servicing Agreement.*
(e) Form of Sub-Administration Agreement between BNY
Hamilton Distributors, Inc. and The Bank of New
York.*
(f) Shareholder Servicing Plan of BNY Hamilton Money Fund
(Hamilton Premier Shares).*
(g) No longer applicable.
(h) Shareholder Servicing Plan of BNY Hamilton Money Fund
(Hamilton Classic Shares).*
(i) Rule 18f-3 Plan of BNY Hamilton Money Fund.*
(j) Supplement to Administration Agreement between
Registrant and BNY Hamilton Distributors, Inc.*
(k) Supplement to Fund Accounting Services Agreement
between Registrant and The Bank of New York.*
(l) Updated Transfer Agency Agreement between Registrant
and BISYS Fund Services, Inc.*
(m) Shareholder Servicing Plan of BNY Hamilton Treasury
Money Fund (Hamilton Premier Shares).*
(n) Revised Rule 18f-3 Plan of BNY Hamilton Funds, Inc.*
(o) Supplement to Form of Sub-Administration Agreement
between BNY Hamilton Distributors, Inc. and The Bank
of New York.*
(p) Revised Fund Accounting Services Agreement between
BNY Hamilton International Equity Fund and The Bank
of New York.*
(q) Form of Shareholder Servicing Plan of BNY Hamilton
Treasury Money Fund - Hamilton Classic Shares.*
(r) Form of Revised Rule 18f-3 Plan of BNY Hamilton
Treasury Money Fund - Hamilton Classic Shares.*
(s) Supplement to Administration Agreement between
Registrant and BNY Hamilton Distributors, Inc.
(t) Supplement to Fund Accounting Services Agreement
between Registrant and The Bank of New York.
(u) Supplement to Transfer Agency Agreement between
Registrant and BISYS Fund Services, Inc.
(v) Supplement to Sub-Administration Agreement between
BNY Hamilton Distributors, Inc. and The Bank of New
York.
(10) Not Applicable.
(11) Consent of Ernst & Young LLP.
(12) Not Applicable.
(13) Form of Seed Capital Agreement between Registrant and
BNY Hamilton Distributors, Inc.*
(14) Not Applicable.
(15) (a) Rule 12b-1 Plan of BNY Hamilton Intermediate
Government Fund.*
(b) Rule 12b-1 Plan of BNY Hamilton Intermediate New York
<PAGE>
Tax-Exempt Fund.*
(c) Rule 12b-1 Plan of BNY Hamilton Equity Income Fund.*
(d) Rule 12b-1 Plan of BNY Hamilton Money Fund - Hamilton
Classic Shares.*
(e) Rule 12b-1 Plan of BNY Hamilton Large Cap Growth Fund
- Investor Shares.*
(f) Rule 12b-1 Plan of BNY Hamilton Small Cap Growth Fund
- Investor Shares.*
(g) Rule 12b-1 Plan of BNY Hamilton International Equity
Fund - Investor Shares.*
(h) Rule 12b-1 Plan of BNY Hamilton Intermediate
Investment Grade Fund - Investor Shares.*
(i) Rule 12b-1 Plan of BNY Hamilton Intermediate
Tax-Exempt Fund - Investor Shares.*
(j) Rule 12b-1 Plan of BNY Hamilton Intermediate Treasury
Money Fund - Hamilton Classic Shares.*
(k) Rule 12b-1 Plan of BNY Hamilton U.S. Bond Market
Index Fund - Investor Shares.
(l) Rule 12b-1 Plan of BNY Hamilton S&P 500 Index
Fund - Investor Shares.
(m) Rule 12b-1 Plan of BNY Hamilton Large Cap Value
Fund - Investor Shares.
(16) (a) Financial Data Schedules - BNY Hamilton Money
Fund - Hamilton Shares
(b) Financial Data Schedules - BNY Hamilton Money
Fund - Hamilton Premier Shares
(c) Financial Data Schedules - BNY Hamilton Money
Fund - Hamilton Classic Shares
(d) Financial Data Schedules - BNY Hamilton Intermediate
Government Fund - Investor Shares
(e) Financial Data Schedules - BNY Hamilton Intermediate
Government Fund - Institutional Shares
(f) Financial Data Schedules - BNY Hamilton Intermediate
New York Tax-Exempt Fund - Investor Shares
(g) Financial Data Schedules - BNY Hamilton Intermediate
New York Tax-Exempt Fund - Institutional Shares
(h) Financial Data Schedules - BNY Hamilton Equity Income
Fund - Investor Shares
(i) Financial Data Schedules - BNY Hamilton Equity Income
Fund - Institutional Shares
(j) Financial Data Schedules - BNY Hamilton Intermediate
Investment Grade Fund - Investor Shares
(k) Financial Data Schedules - BNY Hamilton Intermediate
Investment Grade Fund - Institutional Shares
(l) Financial Data Schedules - BNY Hamilton Intermediate
Tax-Exempt Fund - Investor Shares
(m) Financial Data Schedules - BNY Hamilton Intermediate
Tax-Exempt Fund - Institutional Shares
(n) Financial Data Schedules - BNY Hamilton International
Equity Fund - Investor Shares
(o) Financial Data Schedules - BNY Hamilton International
Equity Fund - Institutional Shares
(p) Financial Data Schedules - BNY Hamilton Large Cap
Growth Fund - Investor Shares
(q) Financial Data Schedules - BNY Hamilton Large Cap
Growth Fund - Institutional Shares
(r) Financial Data Schedules - BNY Hamilton Small Cap
Growth Fund - Investor Shares
(s) Financial Data Schedules - BNY Hamilton Small Cap
Growth Fund - Institutional Shares
(t) Financial Data Schedules - BNY Hamilton Treasury
Money Fund - Hamilton Shares
(u) Financial Data Schedules - BNY Hamilton Treasury
Money Fund - Hamilton Premier Shares
(v) Financial Data Schedules - BNY Hamilton Treasury
Money Fund - Hamilton Classic Shares
(17) Not Applicable.
- ------------------------------------------
* Previously filed.
Item 24. Persons Controlled by or under Common Control with Registrant.
No person is controlled by or under common control with the Registrant.
Item 25. Indemnification.
Reference is made to Article VI of Registrant's Bylaws and the
Distribution Agreement each filed as exhibits hereto.
Registrant, its Directors and officers, the other investment companies
administered by the Administrator, and persons affiliated with them are
insured against certain expenses in connection with the defense of
actions, suits, or proceedings, and certain liabilities that might be
imposed as a result of such actions, suits or proceedings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Directors, officers and controlling
persons of the Registrant and the principal underwriter pursuant to the
foregoing provisions or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer, or
controlling person of the Registrant and the principal underwriter in
<PAGE>
connection with the successful defense of any action, suit or
proceeding) is asserted against the Registrant by such Director,
officers or controlling person or principal underwriter in connection
with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
Item 26. Business and Other Connections of Investment Adviser.
The Registrant's investment adviser, The Bank of New York, is a New
York trust company. The Bank of New York conducts a general banking and
trust business. The Bank of New York is not affiliated with BNY
Hamilton Distributors, Inc.
To the knowledge of the Registrant, none of the directors or officers
of The Bank of New York, except those set forth below, is engaged in
any other business, profession, vocation or employment of a substantial
nature. Set forth below are the names and principal businesses of each
director of The Bank of New York who is engaged in another business,
profession, vocation or employment of a substantial nature:
<TABLE>
<CAPTION>
Name Title/Company
---- -------------
<S> <C>
Richard Barth..................................... Retired; Formerly Chairman and Chief Executive
Officer of Ciba-Geigy Corporation (diversified
chemical products)
Frank J. Biondi, Jr............................... Chairman, Biondi, Reiss Capital Mangement LLC
William R. Chaney................................. Chairman of Tiffany & Co., (international
designers, manufacturers and distributors of
jewelry and fine goods)
Richard J. Kogan.................................. Chairman and Chief Executive Officer of
Schering-Plough Corporation (manufacturer
of pharmaceutical and consumer products)
William C. Richardson............................. President and Chief Executive Officer of
W.K. Kellog Foundation (a private foundation)
Brian L. Roberts.................................. President of Comcast Corp. (broad-band cable
networks)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
John A. Luke, Jr.................................. Chairman, President and Chief Executive Officer of
Westvaco Corporation (manufacturer of paper,
packaging, and specialty chemicals)
John C. Malone.................................... Chairman of Liberty Media Group (producer and distributor
of entertainment, sports, informational programming and
retailing services)
Donald L. Miller.................................. Chief Executive Officer and Publisher of Our World
News, LLC (media)
Catherine A. Rein................................. Senior Executive Vice President of Metropolitan Property
and Casualty Insurance Company (insurance and financial
services)
</TABLE>
Item 27. Principal Underwriters.
(a) BNY Hamilton Distributors, Inc., which is located at 125 West
55th Street, New York, New York 10019, will act as exclusive
distributor for the Registrant. The distributor is registered
with the Securities and Exchange Commission as a broker-dealer
and is a member of the National Association of Securities
Dealers.
(b) The information required by this Item 29 with respect to each
director, officer or partner of the Distributor is
incorporated by reference to Schedule A of Form BD filed by
the Distributor pursuant to the Securities Exchange Act of
1934.
(c) Not Applicable.
Item 28. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder will be maintained at the offices of BISYS Fund Services,
Inc., 3435 Stelzer Road, Columbus, Ohio 43219-3035.
Item 29. Management Services.
<PAGE>
Not Applicable.
Item 30. Undertakings.
The Registrant undertakes that, if requested to do so by 10% of its
outstanding shares, the Registrant will promptly call a meeting of
shareholders for the purpose of voting on the removal of a director or
directors and Registrant will assist with shareholder communications as
required by Section 16(c) of the Investment Company Act of 1940.
The Registrant hereby also undertakes that so long as the information
required by Item 5 of Form N-1A is contained in the latest annual
report to shareholders and not in the prospectuses of each Fund (other
than BNY Hamilton Money Fund and BNY Hamilton Treasury Money Fund), the
Registrant will furnish each person to whom a prospectus is delivered
with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the registrant certifies that it meets all of the
requirements for effectiveness of this registration statement pursuant to Rule
485(B) under the Securities Act of 1933 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly authorized
in the City of New York, and the State of New York on the 30th day of December,
1999.
BNY HAMILTON FUNDS, INC.
By /s/ William J. Tomko
----------------------
William J. Tomko
President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
indicated on the 4th day of April, 2000.
<TABLE>
<CAPTION>
Name Title
- ---- -----
<S> <C>
/s/ Edward L. Gardner Director and Chairman of the Board of Directors
- ----------------------------------------------
(Edward L. Gardner)
/s/ Stephen Stamas Director
- ----------------------------------------------
(Stephen Stamas)
/s/ James E. Quinn Director
- ----------------------------------------------
(James E. Quinn)
/s/ Karen Osar Director
- ----------------------------------------------
(Karen Osar)
/s/ Kim Kelly Director
- ----------------------------------------------
(Kim Kelly)
/s/ J. David Huber Chief Executive Officer
- ----------------------------------------------
(J. David Huber)
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Page
- -------------- ----------- ----
<S> <C>
(1) (a) Articles of Incorporation of Registrant.*
(b) Articles of Amendment, dated June 29, 1992.*
(c) Articles of Supplementary, dated June 29, 1994.*
(d) Articles of Supplementary, dated August 15, 1995.*
(e) Articles of Amendment, dated January 22, 1997*
(f) Articles Supplementary, dated January 22, 1997.*
(g) Articles Supplementary, dated April 28, 1999.*
(h) Form of Articles Supplementary, dated September 17,
1999.*
(2) Bylaws of Registrant.*
(3) Not Applicable.
(4) (a) Form of Specimen stock certificate of common stock of
BNY Hamilton Money Fund.*
(b) Form of Specimen stock certificate of common stock of
BNY Hamilton Intermediate Government Fund.*
(c) Form of specimen stock certificate of common stock of
BNY Hamilton Intermediate New York Tax-Exempt Fund.*
(d) Form of specimen stock certificate of common stock of
BNY Hamilton Equity Income Fund.*
(5) (a) Investment Advisory Agreement between BNY Hamilton
Money Fund and The Bank of New York.*
(b) Investment Advisory Agreement between BNY Hamilton
Intermediate Government Fund and The Bank of New
York.*
(c) Investment Advisory Agreement between BNY Hamilton
Intermediate New York Tax-Exempt Fund and The Bank of
New York.*
(d) Investment Advisory Agreement between BNY Hamilton
Equity Income Fund and The Bank of New York.*
(e) Investment Advisory Agreement between BNY Hamilton
Treasury Money Fund and The Bank of New York.*
(f) Investment Advisory Agreement between BNY Hamilton
Large Cap Growth Fund and The Bank of New York.*
(g) Investment Advisory Agreement between BNY Hamilton
Small Cap Growth Fund and The Bank of New York.*
(h) Investment Advisory Agreement between BNY Hamilton
International Equity Fund and The Bank of New York.*
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(i) Investment Advisory Agreement between BNY Hamilton
Intermediate Investment Grade Fund and The Bank of
New York.*
(j) Investment Advisory Agreement between BNY Hamilton
Intermediate Tax-Exempt Fund and The Bank of New
York.*
(k) Sub-advisory agreement between BNY Hamilton
International Equity Fund and Indosuez Asset
Management.*
(l) Investment Advisory Agreement between BNY Hamilton
Large Cap Growth CRT Fund and The Bank of New York.*
(m) Investment Advisory Agreement between BNY Hamilton
Small Cap Growth CRT Fund and The Bank of New York.*
(n) Investment Advisory Agreement between BNY Hamilton
International Equity CRT Fund and The Bank of New
York.*
(o) Sub-advisory agreement between BNY Hamilton
International Equity Fund and Indocam, a subsidiary
of Credit Agricole.*
(p) Investment Advisory Agreement between BNY Hamilton
U.S. Bond Market Index Fund and The Bank of New York.
(q) Investment Advisory Agreement between BNY Hamilton
S&P 500 Index Fund and The Bank of New York.
(r) Investment Advisory Agreement between BNY Hamilton
Large Cap Value Fund and The Bank of New York.
(s) Sub-advisory Agreement between BNY Hamilton Large Cap
Value Fund and Estabrook Capital Management, Inc.
(6) (a) Distribution Agreements between Registrant and BNY
Hamilton Distributors, Inc.*
(b) Supplement to Distribution Agreements between
Registrant and BNY Hamilton Distributors, Inc.*
(7) Not Applicable.
(8) (a) Custody Agreement between Registrant and The Bank of
New York.*
(b) Cash Management and Related Services Agreement
between each series of Registrant and The Bank of New
York.*
(c) Supplement to Custody Agreement between Registrant
and The Bank of New York.*
(d) Supplement to Cash Management and Related Services
Agreement between Registrant and The Bank of New
York.*
(e) Additional Supplement to Custody Agreement between
Registrant and The Bank of New York.*
(f) Additional Supplement to Cash Management and
Related Services Agreement between Registrant and
The Bank of New York.*
(g) Additional Supplement to Custody Agreement between
Registrant and The Bank of New York.
(h) Additional Supplement to Cash Management and
Related Services Agreement between Registrant and
The Bank of New York.
(9) (a) Administration Agreement between Registrant and BNY
Hamilton Distributors, Inc.*
(b) Fund Accounting Services Agreement between Registrant
and The Bank of New York.*
(c) Form of Transfer Agency Agreement between Registrant
and BISYS Fund Services, Inc.*
(d) Form of Shareholder Servicing Agreement.*
(e) Form of Sub-Administration Agreement between BNY
Hamilton Distributors, Inc. and The Bank of New
York.*
(f) Shareholder Servicing Plan of BNY Hamilton Money Fund
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(Hamilton Premier Shares).*
(g) No longer applicable.
(h) Shareholder Servicing Plan of BNY Hamilton Money Fund
(Hamilton Classic Shares).*
(i) Rule 18f-3 Plan of BNY Hamilton Money Fund.*
(j) Supplement to Administration Agreement between
Registrant and BNY Hamilton Distributors, Inc.*
(k) Supplement to Fund Accounting Services Agreement
between Registrant and The Bank of New York.*
(l) Updated Transfer Agency Agreement between Registrant
and BISYS Fund Services, Inc.*
(m) Shareholder Servicing Plan of BNY Hamilton Treasury
Money Fund (Hamilton Premier Shares).*
(n) Revised Rule 18f-3 Plan of BNY Hamilton Funds, Inc.*
(o) Supplement to Form of Sub-Administration Agreement
between BNY Hamilton Distributors, Inc. and The Bank
of New York.*
(p) Revised Fund Accounting Services Agreement between
BNY Hamilton International Equity Fund and The Bank
of New York.*
(q) Form of Shareholder Servicing Plan of BNY Hamilton
Treasury Money Fund - Hamilton Classic Shares.*
(r) Form of Revised Rule 18f-3 Plan of BNY Hamilton
Treasury Money Fund - Hamilton Classic Shares.*
(s) Supplement to Administration Agreement between
Registrant and BNY Hamilton Distributors, Inc.
(t) Supplement to Fund Accounting Services Agreement
between Registrant and The Bank of New York.
(u) Supplement to Transfer Agency Agreement between
Registrant and BISYS Fund Services, Inc.
(v) Supplement to Sub-Administration Agreement between
BNY Hamilton Distributors, Inc. and The Bank of New
York.
(10) Not Applicable.
(11) Consent of Ernst & Young LLP.
(12) Not Applicable.
(13) Form of Seed Capital Agreement between Registrant and
BNY Hamilton Distributors, Inc.*
(14) Not Applicable.
(15) (a) Rule 12b-1 Plan of BNY Hamilton Intermediate
Government Fund.*
(b) Rule 12b-1 Plan of BNY Hamilton Intermediate New York
Tax-Exempt Fund.*
(c) Rule 12b-1 Plan of BNY Hamilton Equity Income Fund.*
(d) Rule 12b-1 Plan of BNY Hamilton Money Fund - Hamilton
Classic Shares.*
(e) Rule 12b-1 Plan of BNY Hamilton Large Cap Growth Fund
- Investor Shares.*
(f) Rule 12b-1 Plan of BNY Hamilton Small Cap Growth Fund
- Investor Shares.*
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(g) Rule 12b-1 Plan of BNY Hamilton International Equity
Fund - Investor Shares.*
(h) Rule 12b-1 Plan of BNY Hamilton Intermediate
Investment Grade Fund - Investor Shares.*
(i) Rule 12b-1 Plan of BNY Hamilton Intermediate
Tax-Exempt Fund - Investor Shares.*
(j) Rule 12b-1 Plan of BNY Hamilton Treasury Money Fund -
Hamilton Shares.*
(k) Rule 12b-1 Plan of BNY Hamilton U.S. Bond Market
Index Fund - Investor Shares.
(l) Rule 12b-1 Plan of BNY Hamilton S&P 500 Index
Fund - Investor Shares.
(m) Rule 12b-1 Plan of BNY Hamilton Large Cap Value
Fund - Investor Shares.
(16) (a) Financial Data Schedules - BNY Hamilton Money
Fund - Hamilton Shares
(b) Financial Data Schedules - BNY Hamilton Money
Fund - Hamilton Premier Shares
(c) Financial Data Schedules - BNY Hamilton Money
Fund - Hamilton Classic Shares
(d) Financial Data Schedules - BNY Hamilton Intermediate
Government Fund - Investor Shares
(e) Financial Data Schedules - BNY Hamilton Intermediate
Government Fund - Institutional Shares
(f) Financial Data Schedules - BNY Hamilton Intermediate
New York Tax-Exempt Fund - Investor Shares
(g) Financial Data Schedules - BNY Hamilton Intermediate
New York Tax-Exempt Fund - Institutional Shares
(h) Financial Data Schedules - BNY Hamilton Equity Income
Fund - Investor Shares
(i) Financial Data Schedules - BNY Hamilton Equity Income
Fund - Institutional Shares
(j) Financial Data Schedules - BNY Hamilton Intermediate
Investment Grade Fund - Investor Shares
(k) Financial Data Schedules - BNY Hamilton Intermediate
Investment Grade Fund - Institutional Shares
(l) Financial Data Schedules - BNY Hamilton Intermediate
Tax-Exempt Fund - Investor Shares
(m) Financial Data Schedules - BNY Hamilton Intermediate
Tax-Exempt Fund - Institutional Shares
(n) Financial Data Schedules - BNY Hamilton International
Equity Fund - Investor Shares
(o) Financial Data Schedules - BNY Hamilton International
Equity Fund - Institutional Shares
(p) Financial Data Schedules - BNY Hamilton Large Cap
Growth Fund - Investor Shares
(q) Financial Data Schedules - BNY Hamilton Large Cap
Growth Fund - Institutional Shares
(r) Financial Data Schedules - BNY Hamilton Small Cap
Growth Fund - Investor Shares
(s) Financial Data Schedules - BNY Hamilton Small Cap
Growth Fund - Institutional Shares
(t) Financial Data Schedules - BNY Hamilton Treasury
Money Fund - Hamilton Shares
(u) Financial Data Schedules - BNY Hamilton Treasury
Money Fund - Hamilton Premier Shares
(v) Financial Data Schedules - BNY Hamilton Treasury
Money Fund - Hamilton Classic Shares
(17) Not Applicable.
</TABLE>
- --------------------------
* Previously filed.
<PAGE>
INVESTMENT ADVISORY AGREEMENT
-----------------------------
AGREEMENT made this 4th day of April, 2000 by and between BNY Hamilton
U.S. Bond Market Index Fund (the "Series"), a series of BNY Hamilton Funds,
Inc., a Maryland corporation, (the "Corporation") and The Bank of New York, a
New York bank (the "Adviser").
1. Duties of Adviser. The Series hereby appoints the Adviser to act as
investment adviser to the Series for the period and on such terms as are set
forth in this Agreement. The Series employs the Adviser to manage the investment
and reinvestment of the assets of the Series, to continuously review, supervise
and administer the investment program of the Series, to determine in its
discretion the securities to be purchased or sold and the portion of the Series'
assets to be held uninvested, to provide the Corporation with records concerning
the Adviser's activities which the Corporation is required to maintain, and to
render regular reports to the Corporation's officers and Board of Directors
concerning the Adviser's discharge of the foregoing responsibilities. The
Adviser shall discharge the foregoing responsibilities subject to the control of
the officers and the Board of Directors of the Corporation, and in compliance
with the objectives, policies and limitations set forth in the Corporation's
Registration Statement (No. 811-6654), including the Series' prospectus and
statement of
<PAGE>
additional information, applicable laws and regulations. The Adviser accepts
such employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings and equipment and the personnel required
by it to perform the services on the terms and for the compensation provided
therein.
2. Portfolio Transactions. The Adviser is authorized to select the
brokers or dealers that will execute the purchases and sales of securities for
the Series and is directed to use its best efforts to obtain the best available
price and most favorable execution, except as prescribed herein. Unless and
until otherwise directed by the Board of Directors of the Corporation, the
Adviser may also effect individual securities transactions at commission rates
in excess of the minimum commission rates available, if the Adviser determines
in good faith that such amount of commission is reasonable in relation to the
value of the brokerage or research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Corporation. The execution of such
transactions shall not be deemed to represent an unlawful act or breach of any
duty created by this Agreement or otherwise. The Adviser will promptly
communicate to the officers and Directors of the Corporation such information
relating to Series transactions as they may reasonably request.
<PAGE>
3. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Section 1 of this Agreement, the Corporation shall pay to
the Adviser at the and of each month an advisory fee accrued daily and payble
monthly based on an annual percentage rate of 0.25% of the Series' average daily
net assets.
In the event of termination of this Agreement, the fee provided in this
Section shall be computed on the basis of the period ending on the last
business day on which this Agreement is in effect, subject to a pro rata
adjustment based on the number of days elapsed in the month as a percentage of
the total number of days in such month.
4. Reports. The Series and the Adviser agree to furnish to each other
current prospectuses, proxy sttements, reports to shareholders certified copies
of their financial statements, and such other information with regard to their
affairs as each may reasonably request.
5. Status of Adviser. The services of the Adviser to the Series are not
be deemed exclusive, and the Adviser shall be free to render similar services to
others.
6. Liability of Adviser. In the absence of (i) wilful misfeasance, bad
faith or gross negligence on the part of the Adviser in performance of its
obligations and duties hereunder, (ii) reckless disregard by the Adviser of its
obligations and duties hereunder, or (iii) a loss resulting from a breach of
fiduciary duty with respect to
<PAGE>
the receipt of compensation for services (in which case any award of damages
shall be limited to the period and the amount set forth in Section 36(b)(3) of
the Investment Company Act of 1940 ("1940 Act"), the Adviser shall not be
subject to any liability whatsoever to the Series, or to any shareholder of the
Series, for any error of judgment, mistake of law or any other act or omission
in the course of, or connection with, rendering services hereunder including,
without limitation, for any losses that may be sustained in connection with the
purchase, holding, redemption or sale of any security on behalf of the Series.
7. Permissible Interests. Subject to and in accordance with the Articles
of Incorporation of the Corporation and applicable law and regulation,
Directors, officers, agents and shareholders of the Corporation are or may be
interested in the Adviser (or any successor thereof) as Directors, officers,
agents, shareholders or otherwise; Directors, officers, agents and shareholders
of the Adviser are or may be interested in the Corporation as Directors,
officers, shareholders or otherwise; and the Adviser (or any successor) is or
may be interested in the Corporation as a shareholder or otherwise; and the
effect of any such interrelationships shall be governed by said Articles of
Incorporation and the provisions of the 1940 Act.
8. Duration and Termination. This Agreement, unless sooner terminated as
provided herein, shall continue
<PAGE>
until June 30, 2001 and thereafter shall continue for periods of one year so
long as such continuance is specifically approved at least annually (a) by
the vote of a majority of those members of the Board of Directors of the
Corporation who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Series. This Agreement may
be terminated by the Series at any time, without the payment of any penalty, by
vote of a majority of the entire Board of Directors of the Corporation or by
vote of a majority of the outstanding voting securities of the Series on 60
days' written notice to the Adviser. This Agreement may be terminated by the
Adviser at any time, without the payment of any penalty, upon 60 days' written
notice to the Series. This Agreement will automatically and immediately
terminate in the event of its assignment. Any notice under this Agreement shall
be given in writing, addressed and delivered or mailed postpaid, to the other
party at any office of such party and shall be deemed given when received by the
addressee.
As used in this Section 9, the terms "assignment", "interested persons",
and "a vote of a majority of the outstanding voting securities" shall have the
respective
<PAGE>
meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of
the 1940 Act.
9. Amendment of Agreement. This Agreement may be amended by mutual consent,
but the consent of the Series must be approved (a) by vote of majority of those
members of the Board of Directors of the Corporation who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such amendment, and (b) by vote of a
majority of the outstanding voting securities of the Series.
10. Use of Name. The Series agrees that if this Agreement is terminated and
the Adviser shall no longer be the adviser to the Series, the Series will within
a reasonable periods of time, change its name to delete reference to "BNY
Hamilton".
11. Severability. If any provisions of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
12. Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of New York, provided, however, that nothing herein shall
be
<PAGE>
construed as being inconsistent with the 1940 Act.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their officers thereunto duly authorized as of the day and year first written
above.
THE BANK OF NEW YORK BNY HAMILTON FUNDS, INC.
for BNY HAMILTON U.S. BOND MARKET
INDEX FUND
By By
------------------------------ -------------------------------------
Name: Name:
Title: Title:
<PAGE>
INVESTMENT ADVISORY AGREEMENT
-----------------------------
AGREEMENT made this 4th day of April, 2000 by and between BNY Hamilton
S&P 500 Index Fund (the "Series"), a series of BNY Hamilton Funds, Inc., a
Maryland corporation, (the "Corporation") and The Bank of New York, a New York
bank (the "Adviser").
1. Duties of Adviser. The Series hereby appoints the Adviser to act as
investment adviser to the Series for the period and on such terms as are set
forth in this Agreement. The Series employs the Adviser to manage the investment
and reinvestment of the assets of the Series, to continuously review, supervise
and administer the investment program of the Series, to determine in its
discretion the securities to be purchased or sold and the portion of the Series'
assets to be held uninvested, to provide the Corporation with records concerning
the Adviser's activities which the Corporation is required to maintain, and to
render regular reports to the Corporation's officers and Board of Directors
concerning the Adviser's discharge of the foregoing responsibilities. The
Adviser shall discharge the foregoing responsibilities subject to the control of
the officers and the Board of Directors of the Corporation, and in compliance
with the objectives, policies and limitations set forth in the Corporation's
Registration Statement (No. 811-6654), including the Series' prospectus and
statement of
<PAGE>
additional information, applicable laws and regulations. The Adviser accepts
such employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings and equipment and the personnel required
by it to perform the services on the terms and for the compensation provided
therein.
2. Portfolio Transactions. The Adviser is authorized to select the
brokers or dealers that will execute the purchases and sales of securities for
the Series and is directed to use its best efforts to obtain the best available
price and most favorable execution, except as prescribed herein. Unless and
until otherwise directed by the Board of Directors of the Corporation, the
Adviser may also effect individual securities transactions at commission rates
in excess of the minimum commission rates available, if the Adviser determines
in good faith that such amount of commission is reasonable in relation to the
value of the brokerage or research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Corporation. The execution of such
transactions shall not be deemed to represent an unlawful act or breach of any
duty created by this Agreement or otherwise. The Adviser will promptly
communicate to the officers and Directors of the Corporation such information
relating to Series transactions as they may reasonably request.
<PAGE>
3. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Section 1 of this Agreement, the Corporation shall pay to
the Adviser at the and of each month an advisory fee accrued daily and payble
monthly based on an annual percentage rate of 0.25% of the Series' average daily
net assets.
In the event of termination of this Agreement, the fee provided in this
Section shall be computed on the basis of the period ending on the last
business day on which this Agreement is in effect, subject to a pro rata
adjustment based on the number of days elapsed in the month as a percentage of
the total number of days in such month.
4. Reports. The Series and the Adviser agree to furnish to each other
current prospectuses, proxy sttements, reports to shareholders certified copies
of their financial statements, and such other information with regard to their
affairs as each may reasonably request.
5. Status of Adviser. The services of the Adviser to the Series are not
be deemed exclusive, and the Adviser shall be free to render similar services to
others.
6. Liability of Adviser. In the absence of (i) wilful misfeasance, bad
faith or gross negligence on the part of the Adviser in performance of its
obligations and duties hereunder, (ii) reckless disregard by the Adviser of its
obligations and duties hereunder, or (iii) a loss resulting from a breach of
fiduciary duty with respect to
<PAGE>
the receipt of compensation for services (in which case any award of damages
shall be limited to the period and the amount set forth in Section 36(b)(3) of
the Investment Company Act of 1940 ("1940 Act"), the Adviser shall not be
subject to any liability whatsoever to the Series, or to any shareholder of the
Series, for any error of judgment, mistake of law or any other act or omission
in the course of, or connection with, rendering services hereunder including,
without limitation, for any losses that may be sustained in connection with the
purchase, holding, redemption or sale of any security on behalf of the Series.
7. Permissible Interests. Subject to and in accordance with the Articles
of Incorporation of the Corporation and applicable law and regulation,
Directors, officers, agents and shareholders of the Corporation are or may be
interested in the Adviser (or any successor thereof) as Directors, officers,
agents, shareholders or otherwise; Directors, officers, agents and shareholders
of the Adviser are or may be interested in the Corporation as Directors,
officers, shareholders or otherwise; and the Adviser (or any successor) is or
may be interested in the Corporation as a shareholder or otherwise; and the
effect of any such interrelationships shall be governed by said Articles of
Incorporation and the provisions of the 1940 Act.
8. Duration and Termination. This Agreement, unless sooner terminated as
provided herein, shall continue
<PAGE>
until June 30, 2001 and thereafter shall continue for periods of one year so
long as such continuance is specifically approved at least annually (a) by
the vote of a majority of those members of the Board of Directors of the
Corporation who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Series. This Agreement may
be terminated by the Series at any time, without the payment of any penalty, by
vote of a majority of the entire Board of Directors of the Corporation or by
vote of a majority of the outstanding voting securities of the Series on 60
days' written notice to the Adviser. This Agreement may be terminated by the
Adviser at any time, without the payment of any penalty, upon 60 days' written
notice to the Series. This Agreement will automatically and immediately
terminate in the event of its assignment. Any notice under this Agreement shall
be given in writing, addressed and delivered or mailed postpaid, to the other
party at any office of such party and shall be deemed given when received by the
addressee.
As used in this Section 9, the terms "assignment", "interested persons",
and "a vote of a majority of the outstanding voting securities" shall have the
respective
<PAGE>
meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of
the 1940 Act.
9. Amendment of Agreement. This Agreement may be amended by mutual consent,
but the consent of the Series must be approved (a) by vote of majority of those
members of the Board of Directors of the Corporation who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such amendment, and (b) by vote of a
majority of the outstanding voting securities of the Series.
10. Use of Name. The Series agrees that if this Agreement is terminated and
the Adviser shall no longer be the adviser to the Series, the Series will within
a reasonable periods of time, change its name to delete reference to "BNY
Hamilton".
11. Severability. If any provisions of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
12. Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of New York, provided, however, that nothing herein shall
be
<PAGE>
construed as being inconsistent with the 1940 Act.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their officers thereunto duly authorized as of the day and year first written
above.
THE BANK OF NEW YORK BNY HAMILTON FUNDS, INC.
for BNY HAMILTON S&P 500 INDEX FUND
By By
------------------------------ -------------------------------------
Name: Name:
Title: Title:
<PAGE>
INVESTMENT ADVISORY AGREEMENT
-----------------------------
AGREEMENT made this 4th day of April, 2000 by and between BNY Hamilton
Large Cap Value Fund (the "Series"), a series of BNY Hamilton Funds, Inc., a
Maryland corporation, (the "Corporation") and The Bank of New York, a New York
bank (the "Adviser").
1. Duties of Adviser. The Series hereby appoints the Adviser to act as
investment adviser to the Series for the period and on such terms as are set
forth in this Agreement. The Series employs the Adviser to manage the investment
and reinvestment of the assets of the Series, to continuously review, supervise
and administer the investment program of the Series, to determine in its
discretion the securities to be purchased or sold and the portion of the Series'
assets to be held uninvested, to provide the Corporation with records concerning
the Adviser's activities which the Corporation is required to maintain, and to
render regular reports to the Corporation's officers and Board of Directors
concerning the Adviser's discharge of the foregoing responsibilities. The
Adviser shall discharge the foregoing responsibilities subject to the control of
the officers and the Board of Directors of the Corporation, and in compliance
with the objectives, policies and limitations set forth in the Corporation's
Registration Statement (No. 811-6654), including the Series' prospectus and
statement of
<PAGE>
additional information, applicable laws and regulations. The Adviser accepts
such employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings and equipment and the personnel required
by it to perform the services on the terms and for the compensation provided
therein.
2. Portfolio Transactions. The Adviser is authorized to select the
brokers or dealers that will execute the purchases and sales of securities for
the Series and is directed to use its best efforts to obtain the best available
price and most favorable execution, except as prescribed herein. Unless and
until otherwise directed by the Board of Directors of the Corporation, the
Adviser may also effect individual securities transactions at commission rates
in excess of the minimum commission rates available, if the Adviser determines
in good faith that such amount of commission is reasonable in relation to the
value of the brokerage or research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Corporation. The execution of such
transactions shall not be deemed to represent an unlawful act or breach of any
duty created by this Agreement or otherwise. The Adviser will promptly
communicate to the officers and Directors of the Corporation such information
relating to Series transactions as they may reasonably request.
<PAGE>
3. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Section 1 of this Agreement, the Corporation shall pay to
the Adviser at the and of each month an advisory fee accrued daily and payble
monthly based on an annual percentage rate of 0.60% of the Series' average daily
net assets.
In the event of termination of this Agreement, the fee provided in this
Section shall be computed on the basis of the period ending on the last
business day on which this Agreement is in effect, subject to a pro rata
adjustment based on the number of days elapsed in the month as a percentage of
the total number of days in such month.
4. Reports. The Series and the Adviser agree to furnish to each other
current prospectuses, proxy sttements, reports to shareholders certified copies
of their financial statements, and such other information with regard to their
affairs as each may reasonably request.
5. Status of Adviser. The services of the Adviser to the Series are not
be deemed exclusive, and the Adviser shall be free to render similar services to
others.
6. Liability of Adviser. In the absence of (i) wilful misfeasance, bad
faith or gross negligence on the part of the Adviser in performance of its
obligations and duties hereunder, (ii) reckless disregard by the Adviser of its
obligations and duties hereunder, or (iii) a loss resulting from a breach of
fiduciary duty with respect to
<PAGE>
the receipt of compensation for services (in which case any award of damages
shall be limited to the period and the amount set forth in Section 36(b)(3) of
the Investment Company Act of 1940 ("1940 Act"), the Adviser shall not be
subject to any liability whatsoever to the Series, or to any shareholder of the
Series, for any error of judgment, mistake of law or any other act or omission
in the course of, or connection with, rendering services hereunder including,
without limitation, for any losses that may be sustained in connection with the
purchase, holding, redemption or sale of any security on behalf of the Series.
7. Permissible Interests. Subject to and in accordance with the Articles
of Incorporation of the Corporation and applicable law and regulation,
Directors, officers, agents and shareholders of the Corporation are or may be
interested in the Adviser (or any successor thereof) as Directors, officers,
agents, shareholders or otherwise; Directors, officers, agents and shareholders
of the Adviser are or may be interested in the Corporation as Directors,
officers, shareholders or otherwise; and the Adviser (or any successor) is or
may be interested in the Corporation as a shareholder or otherwise; and the
effect of any such interrelationships shall be governed by said Articles of
Incorporation and the provisions of the 1940 Act.
8. Duration and Termination. This Agreement, unless sooner terminated as
provided herein, shall continue
<PAGE>
until June 30, 2001 and thereafter shall continue for periods of one year so
long as such continuance is specifically approved at least annually (a) by
the vote of a majority of those members of the Board of Directors of the
Corporation who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Series. This Agreement may
be terminated by the Series at any time, without the payment of any penalty, by
vote of a majority of the entire Board of Directors of the Corporation or by
vote of a majority of the outstanding voting securities of the Series on 60
days' written notice to the Adviser. This Agreement may be terminated by the
Adviser at any time, without the payment of any penalty, upon 60 days' written
notice to the Series. This Agreement will automatically and immediately
terminate in the event of its assignment. Any notice under this Agreement shall
be given in writing, addressed and delivered or mailed postpaid, to the other
party at any office of such party and shall be deemed given when received by the
addressee.
As used in this Section 9, the terms "assignment", "interested persons",
and "a vote of a majority of the outstanding voting securities" shall have the
respective
<PAGE>
meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of
the 1940 Act.
9. Amendment of Agreement. This Agreement may be amended by mutual consent,
but the consent of the Series must be approved (a) by vote of majority of those
members of the Board of Directors of the Corporation who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such amendment, and (b) by vote of a
majority of the outstanding voting securities of the Series.
10. Use of Name. The Series agrees that if this Agreement is terminated and
the Adviser shall no longer be the adviser to the Series, the Series will within
a reasonable periods of time, change its name to delete reference to "BNY
Hamilton".
11. Severability. If any provisions of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
12. Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of New York, provided, however, that nothing herein shall
be
<PAGE>
construed as being inconsistent with the 1940 Act.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their officers thereunto duly authorized as of the day and year first written
above.
THE BANK OF NEW YORK BNY HAMILTON FUNDS, INC.
for BNY HAMILTON LARGE CAP VALUE FUND
By By
------------------------------ -------------------------------------
Name: Name:
Title: Title:
<PAGE>
SUBADVISORY AGREEMENT
AGREEMENT made this fourth day of April, 2000 by and between The
Bank of New York, a New York bank (the "Adviser"), and Estabrook Capital
Management Inc., a corporation organized under the laws of Delaware (the
"Subadviser").
1. Duties of Subadviser. The Adviser hereby appoints the
Subadviser to act as investment adviser to BNY Hamilton Large Cap Value Fund
(the "Series"), a series of BNY Hamilton Funds, Inc., a Maryland corporation
(the "Corporation"), for the period and on such terms as are set forth in this
Agreement. The Adviser employs the Subadviser to manage the investment and
reinvestment of the assets of the Series, to continuously review, supervise and
administer the investment program of the Series, to determine in its discretion
the securities to be purchased or sold and the portion of the Series' assets to
be held uninvested, to provide the Adviser and the Corporation with records
concerning the Subadviser's activities which the Corporation is required to
maintain, and to render regular reports to the Adviser, the Corporation's
officers and Board of Directors concerning the Subadviser's discharge of the
foregoing responsibilities. The Subadviser shall discharge the foregoing
responsibilities subject to the control of the Adviser and the officers and the
Board of Directors of the Corporation, and in compliance with the objectives,
policies and limitations set forth in the Corporation's Registration Statement
(Nos. 811-6654; 33-47703), including the Series' prospectus and statement of
additional information, applicable laws and regulations. In
<PAGE>
carrying out its responsibilities hereunder, the Subadviser will consult with
the Adviser on a continuous basis regarding the management of the Series. The
Subadviser accepts such employment and agrees to render the services and to
provide, at its own expense, the office space, furnishings and equipment and the
personnel required by it to perform the services on the terms and for the
compensation provided therein.
2. Portfolio Transactions. The Subadviser is authorized to select
the brokers or dealers that will execute the purchases and sales of securities
for the Series and is directed to use its best efforts to obtain the best
available price and most favorable execution, except as prescribed herein. It is
also understood that it is desirable for the Series that the Subadviser have
access to supplemental investment and market research and security and economic
analyses provided by brokers who may execute brokerage transactions at a higher
cost to the Series than may result when allocating brokerage to other brokers on
the basis of seeking the most favorable price and efficient execution.
Therefore, the Subadviser is authorized to place orders for the purchase and
sale of securities for the Series with such brokers, subject to review by the
Directors of the Corporation from time to time with respect to the extent and
continuation of this practice. It is understood that the services provided by
such brokers may be useful to the Subadviser in connection with its services to
other clients. The Subadviser may, on occasions when it deems the purchase or
sale of a security to be in the best interests of the Series as well as its
other customers aggregate, to the extent permitted by applicable laws and
regulations, the securities to be sold or purchased in order to obtain the best
net price
-2-
<PAGE>
and the most favorable execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will be
made by the Subadviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations. The execution of such transactions
shall not be deemed to represent an unlawful act or breach of any duty created
by this Agreement or otherwise. The Subadviser will promptly communicate to the
Adviser and the officers and Directors of the Corporation such information
relating to Series transactions as they may reasonably request.
3. Compensation of the Subadviser. For the services to be rendered
by the Subadviser as provided in Section 1 of this Agreement, the Adviser shall
pay to the Subadviser at the end of each month an advisory fee accrued daily and
payable monthly based on an annual percentage rate of 0.30% of the Series'
average daily net assets. Neither the Corporation nor the Series shall be
responsible for any portion of the compensation payable to the Subadviser
hereunder.
In the event of termination of this Agreement, the fee provided in
this Section shall be computed on the basis of the period ending on the last
business day on which this Agreement is in effect, subject to a pro rata
adjustment based on the number of days elapsed in the month as a percentage of
the total number of days in such month.
4. Reports. The Adviser agrees to furnish to the Subadviser
current prospectuses, proxy statements, reports to shareholders, financial
statements and such other information relating to the Series as the Subadviser
may reasonably request. The
-3-
<PAGE>
Subadviser agree to furnish to the Adviser and to the Corporation such
information concerning its own affairs as the Adviser or the Corporation may
reasonably request, including copies of its Form ADV and any other filings of
the Subadviser with the U.S. Securities and Exchange Commission and certified
copies of its financial statements.
5. Status of Subadviser. The services of the Subadviser to the
Adviser and the Series are not be deemed exclusive, and the Subadviser shall be
free to render similar services to others.
6. Liability of Subadviser. In the absence of (i) willful
misfeasance, bad faith or gross negligence on the part of the Subadviser in
performance of its obligations and duties hereunder, (ii) reckless disregard by
the Subadviser of its obligations and duties hereunder or (iii) a loss resulting
from a breach of fiduciary duty by the Subadviser with respect to the receipt of
compensation for its services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the
Investment Company Act of 1940 (the "1940 Act"), the Subadviser shall not be
subject to any liability whatsoever to the Adviser or the Series, or to any
shareholder of the Series, for any error of judgment, mistake of law or any
other act or omission in the course of, or connected with, rendering services
hereunder including, without limitation, for any losses that may be sustained in
connection with the purchase, holding, redemption or sale of any security on
behalf of the Series.
7. Permissible Interests. Subject to and in accordance with the
Articles of Incorporation of the Corporation and applicable law and regulation,
Directors, officers,
-4-
<PAGE>
agents and shareholders of the Corporation and/or the Adviser are or may be
interested in the Subadviser (or any successor thereof) as Directors, officers,
agents, shareholders or otherwise; Directors, officers, agents and shareholders
of the Subadviser are or may be interested in the Corporation and/or the Adviser
as Directors, officers, shareholders or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation and/or the Adviser as a
shareholder or otherwise; and the effect of any such interrelationships shall be
governed by said Articles of Incorporation and the provisions of the 1940 Act.
8. Duration and Termination. This Agreement, unless sooner
terminated as provided herein, shall continue until [June 30, 2001] and
thereafter shall continue for periods of one year so long as such continuance is
specifically approved at least annually (a) by the Adviser and (b) (1) by the
vote of a majority of those members of the Board of Directors of the Corporation
who are not parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval,
and (2) by the Board of Directors of the Corporation or by vote of a majority of
the outstanding voting securities of the Series. This Agreement may be
terminated by the Adviser or by the Series at any time, without the payment of
any penalty (in the case of termination by the Series, by vote of a majority of
the entire Board of Directors of the Corporation or by vote of a majority of the
outstanding voting securities of the Series), on 60 days' written notice to the
Subadviser and, in the case of termination by the Adviser, to the Corporation.
This Agreement may be terminated by
-5-
<PAGE>
the Subadviser at any time, without the payment of any penalty, upon 60 days'
written notice to the Adviser and the Series. This Agreement will automatically
and immediately terminate in the event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and delivered or mailed postpaid,
to the other party at any office of such party and shall be deemed given when
received by the addressee.
As used in this Section 9, the terms "assignment", "interested
persons", and "a vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and
Section 2(a)(42) of the 1940 Act.
9. Amendment of Agreement. This Agreement may be amended by mutual
consent of the parties, but the consent of the Corporation must also be
obtained, which consent must be approved (a) by vote of majority of those
members of the Board of Directors of the Corporation who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such amendment, and (b) by vote of a
majority of the outstanding voting securities of the Series.
10. Severability. If any provisions of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
-6-
<PAGE>
11. Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of New York, provided, however, that
nothing herein shall be construed as being inconsistent with the 1940 Act.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their officers thereunto duly authorized as of the day and year
first written above.
THE BANK OF NEW YORK ESTABROOK CAPITAL MANAGEMENT INC.
By By
------------------------------- ------------------------------
Name: Kevin J. Bannon Name: Charles Foley
Title: Executive Vice President Title: President
-7-
<PAGE>
BNY HAMILTON CUSTODY AGREEMENT
Form of Custody Agreement as previously filed is amended to include each of
the following portfolios:
PORTFOLIO
- ---------
BNY Hamilton Equity Income Fund
BNY Hamilton Large Cap Growth Fund
BNY Hamilton Small Cap Growth Fund
BNY Hamilton International Equity Fund
BNY Hamilton Intermediate Government Fund
BNY Hamilton Intermediate Investment Grade Fund
BNY Hamilton Intermediate Tax-Exempt Fund
BNY Hamilton Intermediate New York Tax-Exempt Fund
BNY Hamilton Money Fund
BNY Hamilton Treasury Money Fund
BNY Hamilton Large Cap Value Fund
BNY Hamilton Small Cap Value Fund
BNY Hamilton Large Cap Growth CRT Fund
BNY Hamilton Small Cap Growth CRT Fund
BNY Hamilton International Equity CRT Fund
BNY Hamilton U.S. Bond Market Index Fund
BNY Hamilton S&P 500 Index Fund
BNY Hamilton Large Cap Value Fund
<PAGE>
BNY HAMILTON CASH MANAGEMENT AND RELATED SERVICES AGREEMENT
Form of Cash Management and Related Services Agreement as previously filed is
amended to include each of the following portfolios:
PORTFOLIO
- ---------
BNY Hamilton Equity Income Fund
BNY Hamilton Large Cap Growth Fund
BNY Hamilton Small Cap Growth Fund
BNY Hamilton International Equity Fund
BNY Hamilton Intermediate Government Fund
BNY Hamilton Intermediate Investment Grade Fund
BNY Hamilton Intermediate Tax-Exempt Fund
BNY Hamilton Intermediate New York Tax-Exempt Fund
BNY Hamilton Money Fund
BNY Hamilton Treasury Money Fund
BNY Hamilton Large Cap Value Fund
BNY Hamilton Small Cap Value Fund
BNY Hamilton Large Cap Growth CRT Fund
BNY Hamilton Small Cap Growth CRT Fund
BNY Hamilton International Equity CRT Fund
BNY Hamilton U.S. Bond Market Index Fund
BNY Hamilton S&P 500 Index Fund
BNY Hamilton Large Cap Value Fund
<PAGE>
BNY HAMILTON ADMINISTRATION AGREEMENT
Form of Administration Agreement as previously filed is amended to include each
of the following portfolios:
PORTFOLIO
- ---------
BNY Hamilton Equity Income Fund
BNY Hamilton Large Cap Growth Fund
BNY Hamilton Small Cap Growth Fund
BNY Hamilton International Equity Fund
BNY Hamilton Intermediate Government Fund
BNY Hamilton Intermediate Investment Grade Fund
BNY Hamilton Intermediate Tax-Exempt Fund
BNY Hamilton Intermediate New York Tax-Exempt Fund
BNY Hamilton Money Fund
BNY Hamilton Treasury Money Fund
BNY Hamilton Large Cap Value Fund
BNY Hamilton Small Cap Value Fund
BNY Hamilton Large Cap Growth CRT Fund
BNY Hamilton Small Cap Growth CRT Fund
BNY Hamilton International Equity CRT Fund
BNY Hamilton U.S. Bond Market Index Fund
BNY Hamilton S&P 500 Index Fund
BNY Hamilton Large Cap Value Fund
<PAGE>
BNY HAMILTON FUND ACCOUNTING SERVICES AGREEMENT
Form of Fund Accounting Services Agreement as previously filed is amended to
include each of the following portfolios:
PORTFOLIO
- ---------
BNY Hamilton Equity Income Fund
BNY Hamilton Large Cap Growth Fund
BNY Hamilton Small Cap Growth Fund
BNY Hamilton International Equity Fund
BNY Hamilton Intermediate Government Fund
BNY Hamilton Intermediate Investment Grade Fund
BNY Hamilton Intermediate Tax-Exempt Fund
BNY Hamilton Intermediate New York Tax-Exempt Fund
BNY Hamilton Money Fund
BNY Hamilton Treasury Money Fund
BNY Hamilton Large Cap Value Fund
BNY Hamilton Small Cap Value Fund
BNY Hamilton Large Cap Growth CRT Fund
BNY Hamilton Small Cap Growth CRT Fund
BNY Hamilton International Equity CRT Fund
BNY Hamilton U.S. Bond Market Index Fund
BNY Hamilton S&P 500 Index Fund
BNY Hamilton Large Cap Value Fund
<PAGE>
BNY HAMILTON TRANSFER AGENCY AGREEMENT
Form of Transfer Agency Agreement as previously filed is amended to include
each of the following portfolios:
PORTFOLIO
- ---------
BNY Hamilton Equity Income Fund
BNY Hamilton Large Cap Growth Fund
BNY Hamilton Small Cap Growth Fund
BNY Hamilton International Equity Fund
BNY Hamilton Intermediate Government Fund
BNY Hamilton Intermediate Investment Grade Fund
BNY Hamilton Intermediate Tax-Exempt Fund
BNY Hamilton Intermediate New York Tax-Exempt Fund
BNY Hamilton Money Fund
BNY Hamilton Treasury Money Fund
BNY Hamilton Large Cap Value Fund
BNY Hamilton Small Cap Value Fund
BNY Hamilton Large Cap Growth CRT Fund
BNY Hamilton Small Cap Growth CRT Fund
BNY Hamilton International Equity CRT Fund
BNY Hamilton U.S. Bond Market Index Fund
BNY Hamilton S&P 500 Index Fund
BNY Hamilton Large Cap Value Fund
<PAGE>
BNY HAMILTON SUB-ADMINISTRATION AGREEMENT
Form of Sub-Administration Agreement as previously filed is amended to include
each of the following portfolios:
PORTFOLIO
- ---------
BNY Hamilton Equity Income Fund
BNY Hamilton Large Cap Growth Fund
BNY Hamilton Small Cap Growth Fund
BNY Hamilton International Equity Fund
BNY Hamilton Intermediate Government Fund
BNY Hamilton Intermediate Investment Grade Fund
BNY Hamilton Intermediate Tax-Exempt Fund
BNY Hamilton Intermediate New York Tax-Exempt Fund
BNY Hamilton Money Fund
BNY Hamilton Treasury Money Fund
BNY Hamilton Large Cap Value Fund
BNY Hamilton Small Cap Value Fund
BNY Hamilton Large Cap Growth CRT Fund
BNY Hamilton Small Cap Growth CRT Fund
BNY Hamilton International Equity CRT Fund
BNY Hamilton U.S. Bond Market Index Fund
BNY Hamilton S&P 500 Index Fund
BNY Hamilton Large Cap Value Fund
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Auditors" in the Statement of Additional
Information and to the use of our report on the BNY Hamilton Funds, Inc.
(consisting of the Equity Income Fund, Large Cap Growth Fund, Small Cap Growth
Fund, International Equity Fund, Intermediate Government Fund, Intermediate
Investment Grade Fund, Intermediate New York Tax Exempt Fund, Intermediate Tax
Exempt Fund, Money Fund and Treasury Money Fund) dated February 11, 2000,
incorporated by reference in this Registration Statement (Form N-1A
No.33-47703).
ERNST & YOUNG LLP
New York, New York
April 4, 2000
<PAGE>
Approval of Proposed Plan of Distribution for Investor Class of BNY Hamilton
U.S. Bond Market Index Fund
RESOLVED, that the Plan of Distribution Pursuant to Rule 12b-1
(the "Plan") for the Investor class of shares of the BNY Hamilton U.S. Bond
Market Index Fund (the "Fund") be, and the same hereby is, approved in
substantially the form presented and discussed at this meeting with such other
changes as counsel to BNY Hamilton Funds, Inc. (the "Corporation") may deem
necessary or advisable, after consideration of all factors deemed relevant by
the Board in the exercise of its reasonable business judgment and in light of
its fiduciary duties under state law and Section 36(a) and (b) of the Investment
Company Act of 1940 (the "1940 Act" including, but not limited to:
(1) the information provided to the Board by BNY Hamilton
Distributors, Inc., the Fund's administrator and
distributor, at this meeting,
(2) the purposes for which the Plan was created and the degree
to which the Plan addresses these purposes;
(3) the nature, amount and purpose of the payments that are
proposed to be made under the Plan;
(4) the protection afforded by the Plan to the Fund and the
Investor class of Fund shareholders; and
(5) the requirements of Rule 12b-1 under the 1940 Act;
FURTHER RESOLVED, that the Board, including the Directors of the
Corporation who are not "interested persons" of the Corporation (as defined in
the 1940 Act) and who have no direct or indirect financial interest in the
operation of the Plan (the "Independent Directors"), hereby determines, in the
exercise of its reasonable business judgment and in light of its fiduciary
duties, that there is a reasonable likelihood that the Plan will benefit the
Fund and the Investor class of Fund shareholders;
FURTHER RESOLVED, that the distribution arrangements and
compensation payable under the Plan determined (i) in good faith, based on the
information provided, to be competitive with compensation offered in the
industry, and (ii) to be fair and reasonable in light of such matters as the
Directors have considered relevant in the exercise of their reasonable business
judgment;
FURTHER RESOLVED, that the Plan shall be submitted to BISYS Fund
Services (as sole shareholder of the Investor class of Fund shares), for
approval prior to the public offering of shares of the Investor class;
<PAGE>
FURTHER RESOLVED, that the form of Rule 12b-1 Related Agreement
presented and discussed at this meeting be, and the same hereby is, approved to
be used pursuant to the Plan, with such changes as counsel to the Corporation
may deem necessary or advisable;
FURTHER RESOLVED, that, upon recommendation of the Corporation's
administrator and distributor, BNY Hamilton Distributors, Inc., any officer of
the Fund's distributor be, and he or she hereby is, authorized to execute and
deliver Rule 12b-1 Related Agreements, in substantially the form presented to
this meeting, on behalf of the Fund, with securities dealers and other industry
professionals ("12b-1 Service Organizations") with respect to the provision of
distribution-related services to their customers who own of record of
beneficially shares of the Fund's Investor class in consideration for the Fund's
payment of a fee, computed daily and payable monthly, at an annual rate of up to
.25% of the daily net asset value of Investor shares owned of record or
beneficially by such customers;
FURTHER RESOLVED, that the Corporation be, and it hereby is,
authorized to enter into Rule 12b-1 Related Agreements with 12b-1 Service
Organizations that may be affiliated with the Corporation's investment adviser
or administrator and that the Board and Independent Directors hereby determine
that:
(1) such Agreements are in the best interest of the Fund and
its shareholders;
(2) the services to be performed pursuant to such Fund's
Agreements are required for the Fund's operations;
(3) such 12b-1 Service Organizations can provide services that
nature and quality of which are at least equal to those
provided by others offering the same or similar services;
and
(4) the fees for such services are fair and reasonable in light
of the usual and customary charges of others for services
of the same nature and quality; and
FURTHER RESOLVED, that the appropriate officers of the Corporation
be, and each of them hereby is, authorized and directed to make payments to the
Fund's distributor pursuant to the Plan and to take such other action as may be
necessary or desirable and proper to effectuate the provisions of the Plan and
the intent of the foregoing resolutions.
2
<PAGE>
Approval of Proposed Plan of Distribution for Investor Class
of BNY Hamilton S&P 500 Index Fund
RESOLVED, that the Plan of Distribution Pursuant to Rule 12b-1
(the "Plan") for the Investor class of shares of the BNY Hamilton S&P 500 Index
Fund (the "Fund") be, and the same hereby is, approved in substantially the form
presented and discussed at this meeting with such other changes as counsel to
BNY Hamilton Funds, Inc. (the "Corporation") may deem necessary or advisable,
after consideration of all factors deemed relevant by the Board in the exercise
of its reasonable business judgment and in light of its fiduciary duties under
state law and Section 36(a) and (b) of the Investment Company Act of 1940 (the
"1940 Act" including, but not limited to:
(1) the information provided to the Board by BNY Hamilton
Distributors, Inc., the Fund's administrator and
distributor, at this meeting,
(2) the purposes for which the Plan was created and the degree
to which the Plan addresses these purposes;
(3) the nature, amount and purpose of the payments that are
proposed to be made under the Plan;
(4) the protection afforded by the Plan to the Fund and the
Investor class of Fund shareholders; and
(5) the requirements of Rule 12b-1 under the 1940 Act;
FURTHER RESOLVED, that the Board, including the Directors of the
Corporation who are not "interested persons" of the Corporation (as defined in
the 1940 Act) and who have no direct or indirect financial interest in the
operation of the Plan (the "Independent Directors"), hereby determines, in the
exercise of its reasonable business judgment and in light of its fiduciary
duties, that there is a reasonable likelihood that the Plan will benefit the
Fund and the Investor class of Fund shareholders;
FURTHER RESOLVED, that the distribution arrangements and
compensation payable under the Plan determined (i) in good faith, based on the
information provided, to be competitive with compensation offered in the
industry, and (ii) to be fair and reasonable in light of such matters as the
Directors have considered relevant in the exercise of their reasonable business
judgment;
FURTHER RESOLVED, that the Plan shall be submitted to BISYS Fund
Services (as sole shareholder of the Investor class of Fund shares), for
approval prior to the public offering of shares of the Investor class;
<PAGE>
FURTHER RESOLVED, that the form of Rule 12b-1 Related Agreement
presented and discussed at this meeting be, and the same hereby is, approved to
be used pursuant to the Plan, with such changes as counsel to the Corporation
may deem necessary or advisable;
FURTHER RESOLVED, that, upon recommendation of the Corporation's
administrator and distributor, BNY Hamilton Distributors, Inc., any officer of
the Fund's distributor be, and he or she hereby is, authorized to execute and
deliver Rule 12b-1 Related Agreements, in substantially the form presented to
this meeting, on behalf of the Fund, with securities dealers and other industry
professionals ("12b-1 Service Organizations") with respect to the provision of
distribution-related services to their customers who own of record of
beneficially shares of the Fund's Investor class in consideration for the Fund's
payment of a fee, computed daily and payable monthly, at an annual rate of up to
.25% of the daily net asset value of Investor shares owned of record or
beneficially by such customers;
FURTHER RESOLVED, that the Corporation be, and it hereby is,
authorized to enter into Rule 12b-1 Related Agreements with 12b-1 Service
Organizations that may be affiliated with the Corporation's investment adviser
or administrator and that the Board and Independent Directors hereby determine
that:
(1) such Agreements are in the best interest of the Fund and its
shareholders;
(2) the services to be performed pursuant to such Fund's
Agreements are required for the Fund's operations;
(3) such 12b-1 Service Organizations can provide services that
nature and quality of which are at least equal to those
provided by others offering the same or similar services;
and
(4) the fees for such services are fair and reasonable in light
of the usual and customary charges of others for services of
the same nature and quality; and
FURTHER RESOLVED, that the appropriate officers of the Corporation
be, and each of them hereby is, authorized and directed to make payments to the
Fund's distributor pursuant to the Plan and to take such other action as may be
necessary or desirable and proper to effectuate the provisions of the Plan and
the intent of the foregoing resolutions.
2
<PAGE>
Approval of Proposed Plan of Distribution for Investor Class
of BNY Hamilton Large Cap Value Fund
RESOLVED, that the Plan of Distribution Pursuant to Rule 12b-1
(the "Plan") for the Investor class of shares of the BNY Hamilton Large Cap
Value Fund (the "Fund") be, and the same hereby is, approved in substantially
the form presented and discussed at this meeting with such other changes as
counsel to BNY Hamilton Funds, Inc. (the "Corporation") may deem necessary or
advisable, after consideration of all factors deemed relevant by the Board in
the exercise of its reasonable business judgment and in light of its fiduciary
duties under state law and Section 36(a) and (b) of the Investment Company Act
of 1940 (the "1940 Act" including, but not limited to:
(1) the information provided to the Board by BNY Hamilton
Distributors, Inc., the Fund's administrator and
distributor, at this meeting,
(2) the purposes for which the Plan was created and the degree
to which the Plan addresses these purposes;
(3) the nature, amount and purpose of the payments that are
proposed to be made under the Plan;
(4) the protection afforded by the Plan to the Fund and the
Investor class of Fund shareholders; and
(5) the requirements of Rule 12b-1 under the 1940 Act;
FURTHER RESOLVED, that the Board, including the Directors of the
Corporation who are not "interested persons" of the Corporation (as defined in
the 1940 Act) and who have no direct or indirect financial interest in the
operation of the Plan (the "Independent Directors"), hereby determines, in the
exercise of its reasonable business judgment and in light of its fiduciary
duties, that there is a reasonable likelihood that the Plan will benefit the
Fund and the Investor class of Fund shareholders;
FURTHER RESOLVED, that the distribution arrangements and
compensation payable under the Plan determined (i) in good faith, based on the
information provided, to be competitive with compensation offered in the
industry, and (ii) to be fair and reasonable in light of such matters as the
Directors have considered relevant in the exercise of their reasonable business
judgment;
FURTHER RESOLVED, that the Plan shall be submitted to BISYS Fund
Services (as sole shareholder of the Investor class of Fund shares), for
approval prior to the public offering of shares of the Investor class;
<PAGE>
FURTHER RESOLVED, that the form of Rule 12b-1 Related Agreement
presented and discussed at this meeting be, and the same hereby is, approved to
be used pursuant to the Plan, with such changes as counsel to the Corporation
may deem necessary or advisable;
FURTHER RESOLVED, that, upon recommendation of the Corporation's
administrator and distributor, BNY Hamilton Distributors, Inc., any officer of
the Fund's distributor be, and he or she hereby is, authorized to execute and
deliver Rule 12b-1 Related Agreements, in substantially the form presented to
this meeting, on behalf of the Fund, with securities dealers and other industry
professionals ("12b-1 Service Organizations") with respect to the provision of
distribution-related services to their customers who own of record of
beneficially shares of the Fund's Investor class in consideration for the Fund's
payment of a fee, computed daily and payable monthly, at an annual rate of up to
.25% of the daily net asset value of Investor shares owned of record or
beneficially by such customers;
FURTHER RESOLVED, that the Corporation be, and it hereby is,
authorized to enter into Rule 12b-1 Related Agreements with 12b-1 Service
Organizations that may be affiliated with the Corporation's investment adviser
or administrator and that the Board and Independent Directors hereby determine
that:
(1) such Agreements are in the best interest of the Fund and its
shareholders;
(2) the services to be performed pursuant to such Fund's
Agreements are required for the Fund's operations;
(3) such 12b-1 Service Organizations can provide services that
nature and quality of which are at least equal to those
provided by others offering the same or similar services;
and
(4) the fees for such services are fair and reasonable in light
of the usual and customary charges of others for services of
the same nature and quality; and
FURTHER RESOLVED, that the appropriate officers of the
Corporation be, and each of them hereby is, authorized and directed to make
payments to the Fund's distributor pursuant to the Plan and to take such other
action as may be necessary or desirable and proper to effectuate the provisions
of the Plan and the intent of the foregoing resolutions.
2
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000887318
<NAME> BNY HAMILTON MONEY FUND
<SERIES>
<NUMBER> 011
<NAME> HAMILTON SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 3,449,093,551
<INVESTMENTS-AT-VALUE> 3,449,093,551
<RECEIVABLES> 75,117,985
<ASSETS-OTHER> 96,580
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,524,308,116
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35,120,838
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<PAID-IN-CAPITAL-COMMON> 3,485,689,532
<SHARES-COMMON-STOCK> 1,725,342,085
<SHARES-COMMON-PRIOR> 1,439,526,110
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,563
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,725,340,682
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 156,019,505
<OTHER-INCOME> 0
<EXPENSES-NET> 12,507,761
<NET-INVESTMENT-INCOME> 143,536,762
<REALIZED-GAINS-CURRENT> 8,555
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 143,545,317
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (76,653,154)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,967,303,526
<NUMBER-OF-SHARES-REDEEMED> (5,697,902,968)
<SHARES-REINVESTED> 16,415,417
<NET-CHANGE-IN-ASSETS> 965,022,525
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1,568)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,014,970
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,507,761
<AVERAGE-NET-ASSETS> 1,558,098,928
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.050)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .24
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000887318
<NAME> BNY HAMILTON MONEY FUND
<SERIES>
<NUMBER> 012
<NAME> HAMILTON PREMIER SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 3,449,093,551
<INVESTMENTS-AT-VALUE> 3,449,093,551
<RECEIVABLES> 75,117,985
<ASSETS-OTHER> 96,580
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,524,308,116
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35,120,838
<TOTAL-LIABILITIES> 35,120,838
<SENIOR-EQUITY> 3,489,183
<PAID-IN-CAPITAL-COMMON> 3,485,689,532
<SHARES-COMMON-STOCK> 871,281,962
<SHARES-COMMON-PRIOR> 1,439,526,110
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,563
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 871,286,561
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 156,019,505
<OTHER-INCOME> 0
<EXPENSES-NET> 12,507,761
<NET-INVESTMENT-INCOME> 143,536,762
<REALIZED-GAINS-CURRENT> 8,555
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 143,545,317
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (38,415,385)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,643,411,324
<NUMBER-OF-SHARES-REDEEMED> (7,855,882,869)
<SHARES-REINVESTED> 19,107,816
<NET-CHANGE-IN-ASSETS> 965,022,525
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1,568)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,014,970
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,507,761
<AVERAGE-NET-ASSETS> 817,986,672
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .047
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.047)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .49
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000887318
<NAME> BNY HAMILTON MONEY FUND
<SERIES>
<NUMBER> 013
<NAME> HAMILTON CLASSIC SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 3,449,093,551
<INVESTMENTS-AT-VALUE> 3,449,093,551
<RECEIVABLES> 75,117,985
<ASSETS-OTHER> 96,580
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,524,308,116
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35,120,838
<TOTAL-LIABILITIES> 35,120,838
<SENIOR-EQUITY> 3,489,183
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