<PAGE>
As filed with the SEC on July 15, 1997
Excelsior Funds, Inc. - Registration Nos. 2-92665; 811-4088
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Excelsior Funds, Inc.: Post-Effective Amendment No. 28 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY [x]
ACT OF 1940
Excelsior Funds, Inc.: Amendment No. 30 [x]
(Exact Name of Registrant as Specified in Charter)
73 Tremont Street
Boston, Massachusetts 02108-3913
(Address of Principal Executive Offices)
Registrant's Telephone Number: (800) 446-1012
W. Bruce McConnel, III
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)
It is proposed that this post-effective amendment will become effective (check
appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[X] 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:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
--------------------------
The Registrant has registered an indefinite number of securities under the
Securities Act of 1933 pursuant to Rule 24f-2. The Rule 24f-2 Notice for the
Registrant's fiscal year ended March 31, 1997 was filed on May 29, 1997.
<PAGE>
CROSS-REFERENCE SHEET
---------------------
EXCELSIOR FUNDS, INC.
(Energy and Natural Resources Fund)
Form N-1A, Part A, Item Prospectus Caption
- ----------------------- ------------------
1. Cover Page.................................. Cover Page
2. Synopsis.................................... Prospectus Summary;
Expense Summary
3. Condensed Financial Information............. Financial Highlights;
Performance
Information
4. General Description of Registrant........... Prospectus Summary;
Investment Objective and
Policies; Portfolio
Instruments and Other
Investment Information;
Investment Limitations
5. Management of the Fund...................... Management of the
Fund; Custodian and
Transfer Agent
5A. Management's Discussion of Fund
Performance............................... Not Applicable
6. Capital Stock and
Other Securities.......................... How to Purchase and
Redeem Shares; Dividends
and Distributions;
Taxes; Description of
Capital Stock;
Miscellaneous
7. Purchase of Securities
Being Offered............................. Pricing of Shares;
How to Purchase and
Redeem Shares;
Investor Programs
8. Redemption or Repurchase.................... How to Purchase and
Redeem Shares
9. Pending Legal Proceedings................... Inapplicable
<PAGE>
[LOGO] EXCELSIOR
A Management Investment Company FUNDS INC.
- --------------------------------------------------------------------------------
Energy and Natural Resources Fund
For initial purchase information, current
prices, performance information and ex-
isting account information, call (800)
73 Tremont Street 446-1012. (From overseas, call (617) 557-
Boston, MA 02108-3913 8280.)
- --------------------------------------------------------------------------------
This Prospectus describes the Energy and Natural Resources (formerly, the Long-
Term Supply of Energy) Fund (the "Fund"), a non-diversified portfolio offered
to investors by Excelsior Funds, Inc. ("Excelsior Fund") (formerly UST Master
Funds, Inc.), an open-end, management investment company. The investment objec-
tive of the Fund is as follows:
ENERGY AND NATURAL RESOURCES FUND seeks long-term capital appreciation by in-
vesting primarily in companies that are in the energy and other natural re-
sources groups of industries. The Fund may also invest to a more limited extent
in gold and other precious metal bullion and coins.
The Fund is sponsored and distributed by Edgewood Services, Inc. and advised
by United States Trust Company of New York and U.S. Trust Company of Connecti-
cut (collectively, the "Investment Adviser" or "U.S. Trust").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should consider before investing. Investors should read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated September , 1997 and containing additional information about
the Fund has been filed with the Securities and Exchange Commission. The cur-
rent Statement of Additional Information is available to investors without
charge by writing to Excelsior Fund at its address shown above or by calling
(800) 446-1012. The Statement of Additional Information, as it may be supple-
mented from time to time, is incorporated by reference in its entirety into
this Prospectus.
SHARES IN THE FUND ("SHARES") ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, U.S. TRUST, ITS PARENT OR AFFILIATES AND THE SHARES ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RE-
SERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
September , 1997
<PAGE>
PROSPECTUS SUMMARY
EXCELSIOR FUNDS, INC. is an investment company offering various diversified
and non-diversified investment portfolios with differing objectives and poli-
cies. Founded in 1984, Excelsior Fund currently offers 15 Funds with combined
assets of approximately $3 billion. See "Description of Capital Stock."
INVESTMENT ADVISER: United States Trust Company of New York and U.S. Trust
Company of Connecticut (collectively, "U.S. Trust" or the "Investment Advis-
er") serve as the Fund's investment adviser. U.S. Trust offers a variety of
specialized financial and fiduciary services to high-net worth individuals,
institutions and corporations. Excelsior Fund offers investors access to U.S.
Trust's services. See "Management of the Fund--Investment Adviser."
INVESTMENT OBJECTIVE AND POLICIES: Generally, the Fund is a non-diversified
investment portfolio which invests primarily in equity securities. The Fund's
investment objective and policies are summarized on the cover and explained in
greater detail later in this Prospectus. See "Investment Objective and Poli-
cies," "Portfolio Instruments and Other Investment Information" and "Invest-
ment Limitations."
HOW TO INVEST: The Fund's Shares are offered at their net asset value. Ex-
celsior Fund does not impose a sales load on purchases of Shares. See "How to
Purchase and Redeem Shares."
The minimum to start an account is $500 with a minimum of $50 for subsequent
investments. The easiest way to invest is to complete the account application
which accompanies this Prospectus and to send it with a check to the address
noted on the application. Investors may also invest by wire and through in-
vestment dealers or institutional investors with appropriate sales agreements
with Excelsior Fund. See "How to Purchase and Redeem Shares."
HOW TO REDEEM: Redemptions may be requested directly from Excelsior Fund by
mail, wire or telephone. Investors investing through another institution
should request redemptions through their Shareholder Organization. See "How to
Purchase and Redeem Shares."
INVESTMENT RISKS AND CHARACTERISTICS: The Fund is non-diversified; there-
fore, its investment return may at times be dependent upon the performances of
a smaller number of securities relative to the number of securities held in a
diversified portfolio. Generally, the Fund is subject to market and industry
risk. Market risk is the possibility that stock prices will decline over short
or even extended periods. The stock markets tend to be cyclical, with periods
of generally rising prices and periods of generally declining prices. These
cycles will affect the values of the Fund. Furthermore, the Fund will normally
concentrate its investments in the crude oil, petroleum and natural gas indus-
try. Accordingly, the Fund will be susceptible to industry risk-- the possi-
bility that a particular group of stocks will decline in price due to indus-
try-specific developments. Because the Fund may invest in precious metals, it
will be subject to the highly volatile and often erratic markets for precious
metals. Because the Fund may invest in securities of foreign issuers, it is
also subject to the risks of fluctuations of the value of foreign currency
relative to the U.S. dollar and other risks associated with such investments.
Although the Fund generally seeks to invest for the long term, the Fund may
engage in short-term trading of portfolio securities. A high rate of portfolio
turnover may involve correspondingly greater transaction costs which must be
borne directly by the Fund and ultimately by its shareholders. The share price
of the Fund is expected to be volatile and investment in the Fund should not
be considered a complete investment program. See "Investment Objective and
Policies."
2
<PAGE>
EXPENSE SUMMARY
The following table summarizes the expenses borne by the Shares offered under
this Prospectus.
<TABLE>
<CAPTION>
ENERGY AND
NATURAL
RESOURCES
FUND
----------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load (as a percentage of offering price)............. None
Sales Load on Reinvested Dividends................................. None
Deferred Sales Load................................................ None
Redemption Fees/1/................................................. None
Exchange Fees...................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Advisory Fees (after fee waivers)/2/............................... .55%
12b-1 Fees......................................................... None
Other Operating Expenses
Administrative Servicing Fee/2/................................... .05%
Other Expenses ................................................... .33%
----
Total Operating Expenses (after fee waivers)/2/ ................... .93%
====
</TABLE>
- -------
1. The Fund's transfer agent imposes a direct $8.00 charge on each wire redemp-
tion by noninstitutional (i.e. individual) investors which is not reflected
in the expense ratios presented herein. Shareholder organizations may charge
their customers transaction fees in connection with redemptions. See "Re-
demption Procedures."
2. The Investment Adviser and Administrators may, from time to time, voluntar-
ily waive part of their respective fees, which waivers may be terminated at
any time. Until further notice, the Investment Adviser and/or Administrators
intend to voluntarily waive fees in an amount equal to the Administrative
Servicing Fee; and to further waive fees and reimburse expenses to the ex-
tent necessary for the Fund to maintain an annual expense ratio of not more
than .99%. Without such fee waivers, "Advisory Fees" would be .60% and "To-
tal Operating Expenses" would be .98%.
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual returns and (2) redemption of your investment at the end of the
following periods:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Energy and Natural Resources Fund............... $9 $30 $51 $114
</TABLE>
The foregoing expense summary and example are intended to assist investors in
understanding the costs and expenses that an investor in Shares of the Fund
will bear directly or indirectly. The expense summary sets forth advisory and
other expenses payable with respect to Shares of the Fund for the fiscal year
ended March 31, 1997. For more complete descriptions of the Fund's operating
expenses, see "Management of the Fund" and "Description of Capital Stock" in
this Prospectus and the financial statements and notes incorporated by refer-
ence in the Statement of Additional Information.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE
GREATER OR LOWER THAN THOSE SHOWN IN THE EXPENSE SUMMARY AND EXAMPLE.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a Share outstanding throughout
each period and other performance information derived from the financial
statements included in Excelsior Fund's Annual Report to Shareholders for
the year ended March 31, 1997 (the "Financial Statements"). The information
contained in the Financial Highlights for each period has been audited by Ernst
& Young LLP, Excelsior Fund's independent auditors. The following tables should
be read in conjunction with the Financial Statements and notes thereto. More
information about the performance of the Fund is also contained in the Annual
Report to Shareholders which may be obtained from Excelsior Fund without charge
by calling the number on the front cover of this Prospectus.
ENERGY AND NATURAL RESOURCES FUND
(FORMERLY, THE LONG-TERM SUPPLY OF ENERGY FUND)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------- PERIOD ENDED
1997 1996 1995 1994 MARCH 31, 1993/1/
------- ------ ------ ------- -----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $ 9.55 $ 7.92 $ 7.70 $ 7.81 $ 7.00
------- ------ ------ ------- ------
Income From Investment
Operations
Net Investment Income.... 0.09 0.07 0.09 0.08 0.01
Net Gains or (Losses) on
Securities (both
realized and
unrealized)............. 2.60 1.63 0.24 (0.12) 0.80
------- ------ ------ ------- ------
Total From Investment
Operations.............. 2.69 1.70 0.33 (0.04) 0.81
------- ------ ------ ------- ------
Less Distributions
Dividends From Net
Investment Income....... (0.09) (0.07) (0.10) (0.07) 0.00
Dividends in Excess of
Net Investment Income... 0.00 0.00 0.00 0.00 0.00
Distributions From Net
Realized Gain on
Investments and Options. (1.03) 0.00 (0.01) 0.00 0.00
Distributions in Excess
of Net Realized Gain on
Investments and Options. 0.00 0.00 0.00 0.00 0.00
------- ------ ------ ------- ------
Total Distributions...... (1.12) (0.07) (0.11) (0.07) 0.00
------- ------ ------ ------- ------
Net Asset Value, End of
Period.................... $ 11.12 $ 9.55 $ 7.92 $ 7.70 $ 7.81
======= ====== ====== ======= ======
Total Return/2/............ 28.28% 21.60% 4.28% (0.57)% 11.57%/6/
Ratios/Supplemental Data
Net Assets, End of Period
(in millions)........... $ 33.39 $23.29 $15.81 $ 6.83 $ 1.46
Ratio of Net Operating
Expenses to Average Net
Assets.................. 0.93% 0.96% 0.98% 0.99% 0.99%/3/
Ratio of Gross Operating
Expenses to Average Net
Assets/4/............... 0.98% 1.09% 1.35% 2.03% 7.03%/3/
Ratio of Net Investment
Income to Average Net
Assets.................. 0.84% 0.88% 1.18% 1.21% 1.69%/3/
Portfolio Turnover Rate.. 87.0% 43.0% 31.0% 6.0% 0%
Average Commission Rate
Paid/5/................. $0.0809 N/A N/A N/A N/A
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares prior to February 14, 1997.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
5. Only required for fiscal years beginning on or after September 1, 1995.
6. Not annualized.
4
<PAGE>
U.S. TRUST'S INVESTMENT PHILOSOPHY AND STRATEGIES
U.S. Trust offers a variety of specialized fiduciary and financial services
to high-net worth individuals, institutions and corporations. As one of the
largest institutions of its type, U.S. Trust prides itself in offering an at-
tentive and high level of service to each of its clients. The Excelsior Funds
offer individual investors access to U.S. Trust's services.
Philosophy. In managing investments for the Fund, U.S. Trust follows a long-
term investment philosophy which generally does not change with the short-term
variability of financial markets or fundamental conditions. U.S. Trust's ap-
proach begins with the conviction that all worthwhile investments are grounded
in value. The Investment Adviser believes that an investor can identify funda-
mental values that eventually should be reflected in market prices. U.S. Trust
believes that over time, a disciplined search for fundamental value will
achieve better results than attempting to take advantage of short-term price
movements.
Implementation of this long-term value philosophy consists of searching for,
identifying and obtaining the benefits of present or future investment values.
For example, such values may be found in a company's future earnings potential
or in its existing resources and assets. Accordingly, U.S. Trust in managing
investments for the Fund is constantly engaged in assessing, comparing and
judging the worth of companies, particularly in comparison to the price the
markets place on such companies' shares.
Strategies. In order to translate its investment philosophy into more spe-
cific guidance for selection of investments, the Investment Adviser uses three
specific strategies. These strategies, while identified separately, may over-
lap so that more than one may be applied in an investment decision.
U.S. Trust's "PROBLEM/OPPORTUNITY STRATEGY" seeks to identify industries and
companies with the capabilities to provide solutions to or benefit from com-
plex problems such as the changing demographics and aging of the U.S. popula-
tion or the need to enhance industrial productivity. U.S. Trust's second
strategy is a "TRANSACTION VALUE" comparison of a company's real underlying
asset value with the market price of its shares and with the sale prices for
similar assets changing ownership in public market transactions. Differences
between a company's real asset value and the price of its shares often are
corrected over time by restructuring of the assets or by market recognition of
their value. U.S. Trust's third strategy involves identifying "EARLY LIFE CY-
CLE" companies whose products are in their earlier stages of development or
that seek to exploit new markets. Frequently such companies are smaller compa-
nies, but early life cycle companies may also include larger established com-
panies with new products or markets for existing products. The Investment Ad-
viser believes that over time the value of such companies should be recognized
in the market.
INVESTMENT OBJECTIVE AND POLICIES
The Investment Adviser will use its best efforts to achieve the Fund's in-
vestment objective, although its achievement cannot be assured. The Fund's in-
vestment objective is "fundamental," meaning that it may not be changed with-
out a vote of the holders of a majority of the Fund's outstanding shares (as
defined under "Miscellaneous"). Except as noted below in "Investment Limita-
tions," the Fund's investment policies may be changed without a vote of the
holders of a majority of the Fund's outstanding shares.
GENERAL
The Fund's investment objective is to provide long-term capital appreciation.
The Fund seeks to achieve this objective by investing primarily in domestic
and foreign companies that are in the energy and other natural resources
groups of industries. These companies include those that the Investment Ad-
viser considers to be principally engaged in the discovery, development, pro-
duction or distribution of energy or other natural resources, the development
of technologies for the production or efficient use of energy and
5
<PAGE>
other natural resources, or the furnishing of related supplies or services.
Energy and natural resources encompass a number of traditional industry clas-
sifications, including among others: mining of metals, coal and other miner-
als; oil and gas extraction; production of petroleum, coal and newer resources
such as geothermal and solar energy; pipeline companies; and agricultural in-
dustries including crops, livestock, and forestry and timberland. In managing
the Fund, the Investment Adviser seeks to purchase securities having value
currently not recognized in their market prices, consistent with the strate-
gies discussed above. The Fund may also invest directly in gold and other pre-
cious metal bullion and coins ("precious metals"). The Fund is a non-diversi-
fied investment portfolio under the Investment Company Act of 1940, as amended
(the "1940 Act").
Under normal market conditions, at least 65% of the Fund's total assets will
be invested in the securities of companies that are in the energy and other
natural resources groups of industries. Normally, investments in energy compa-
nies will constitute a substantial portion of these investments, and at least
25% of the Fund's total assets will be invested in crude oil, petroleum and
natural gas companies. This policy reflects the Investment Adviser's belief
that these hydrocarbon resources represent the primary component of world en-
ergy needs. However, the amount may be reduced if there are changes in govern-
mental regulations, world economic and political events, exploration or pro-
duction spending; supply, demand or prices of crude oil, petroleum, natural
gas or other energy sources, and in the Investment Adviser's opinion, such
changes would have an adverse affect on the securities of such companies.
The Fund may invest up to 35% of its total assets in precious metals. Pre-
cious metals will only be bought from and sold to banks (both U.S. and for-
eign), and dealers who are members of, or affiliated with members of, a regu-
lated U.S. commodities exchange, in accordance with applicable investment
laws. Precious metal bullion will not be purchased in any form that is not
readily marketable. Coins will not be purchased for
their numismatic value and will not be considered for the Fund if they cannot
be bought or sold in an active market. Any bullion or coins purchased by the
Fund will be delivered to and stored with a qualified custodian bank in the
U.S. Investors should be aware that precious metals do not generate income,
offering only the potential for capital appreciation and depreciation, and may
subject the Fund to higher custody and transaction costs than those normally
associated with the ownership of securities. Investments relating to precious
metals are considered speculative. (See "Risk Factors" below.)
Under normal market and economic conditions, the Fund will invest at least
65% of its total assets in common stock, preferred stock and securities con-
vertible into common stock. The Fund may also hold other types of securities
and instruments including, e.g., non-convertible debt securities, warrants,
options, and futures instruments as described in more detail below. During
temporary defensive periods or when the Investment Adviser believes that suit-
able investments are unavailable, the Fund may hold cash or invest some or all
of its assets in U.S. Government securities, high-quality money market instru-
ments and repurchase agreements collateralized by the foregoing obligations.
Portfolio holdings will include common stocks of companies having capitaliza-
tions of varying amounts, and the Fund will invest in the securities of high
growth, small companies where the Investment Adviser expects earnings and the
price of the securities to grow at an above-average rate. Certain securities
owned by the Fund may be traded only in the over-the-counter market or on a
regional securities exchange, may be listed only in the quotation service com-
monly known as the "pink sheets," and may not be traded every day or in the
volume typical of trading on a national securities exchange. As a result,
there may be a greater fluctuation in the value of the Fund's Shares, and the
Fund may be required, in order to meet redemptions or for other reasons, to
sell these securities at a discount from market prices, to sell during periods
when
6
<PAGE>
such disposition is not desirable, or to make many small sales over a period
of time.
The Fund may invest in the securities of foreign issuers directly or indi-
rectly through sponsored and unsponsored American Depository Receipts
("ADRs"), European Depository Receipts ("EDRs") and Global Depository Receipts
("GDRs"). ADRs represent receipts typically issued by a U.S. bank or trust
company which evidence ownership of underlying securities of foreign issuers.
EDRs are receipts issued in Europe typically by non-U.S. banks or trust compa-
nies and foreign branches of U.S. banks which evidence ownership of foreign or
U.S. securities. GDRs are receipts structured similarly to EDRs and are mar-
keted globally. ADRs may be listed on a national securities exchange or may be
traded in the over-the-counter market. EDRs are designed for use in European
exchange and over-the-counter markets. GDRs are designed for trading in non-
U.S. securities markets. ADRs, EDRs and GDRs traded in the over-the-counter
market which do not have an active or substantial secondary market will be
considered illiquid and therefore will be subject to the Fund's limitation
with respect to such securities. ADR prices are denominated in U.S. dollars
although the underlying securities are denominated in a foreign currency. In-
vestments in ADRs, EDRs and GDRs involve risks similar to those accompanying
direct investments in foreign securities. (See "Risk Factors" below.)
Convertible and non-convertible debt securities purchased by the Fund will be
rated "investment grade" (i.e., debt obligations classified within the four
highest ratings assigned by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Ratings Group ("S&P")) or, if unrated, determined by the In-
vestment Adviser to be of comparable quality. Debt obligations rated in the
lowest of the top four investment grade ratings ("Baa" by Moody's and "BBB" by
S&P) are considered to have some speculative characteristics and may be more
sensitive to adverse economic change than higher rated securities. The Fund
will sell in an orderly fashion as soon as possible any convertible and non-
convertible debt securities it holds if they
are downgraded below "Baa" by Moody's or below "BBB" by S&P. Foreign securi-
ties are generally unrated.
RISK FACTORS
As the Fund is non-diversified, the only limitations on the percentage of its
assets that may be invested in the securities of any one issuer are its own
investment restrictions and the diversification requirements of the Internal
Revenue Code of 1986, as amended (the "Code"). (See "Taxes--Federal" below.)
The investment return on a non-diversified portfolio typically is dependent
upon the performance of a smaller number of securities relative to the number
of securities held in a diversified portfolio of comparable size. If the Fund
assumes large positions in the obligations of a small number of issuers, then
changes in the financial condition or in the market's assessment of those is-
suers may affect the overall value of the Fund's portfolio to a greater extent
than that of a diversified portfolio.
The Fund is subject to market risk, interest rate risk, industry risk and the
risk of investing in foreign securities. Market risk is the possibility that
stock prices will decline over short or even extended periods. The stock mar-
kets tend to be cyclical, with periods of generally rising prices and periods
of generally declining prices. These cycles will affect the values of the
Fund. In addition, to the extent that the Fund invests in fixed-income securi-
ties, its holdings of debt securities are sensitive to changes in interest
rates and the interest rate environment. Generally, the prices of bonds and
debt securities fluctuate inversely with interest rate changes. Factors af-
fecting debt securities will affect all of the Fund's debt holdings.
The Fund's concentration in companies that are in the energy and other natu-
ral resources groups of industries subjects it to certain risks. The value of
equity securities of such companies will fluctuate pursuant to market condi-
tions generally, as well as the market for the particular natural resource in
which the
7
<PAGE>
issuer is involved. Furthermore, the values of natural resources are affected
by numerous factors including events occurring in nature and international
politics. For instance, events in nature (such as earthquakes or fires in
prime natural resources areas) and political events (such as coups or military
confrontations) can affect the overall supply of a natural resource and
thereby the value of companies involved in such natural resource. In addition,
inflationary pressures and rising interest rates may affect the demand for
certain natural resources such as timber. Accordingly, the Fund may shift its
emphasis from one natural resources industry to another depending on prevail-
ing trends or developments.
As noted above, the Fund expects to invest a substantial portion of its as-
sets in energy companies. Energy-related investments are affected generally by
supply, demand, and other competitive factors for the companies' specific
products and services. They are also affected by unpredictable factors such as
the supply and demand for oil, gas, electricity and other energy sources,
prices of such energy sources, exploration and production spending, governmen-
tal regulation, and world economic and political events. In addition, utili-
ties firms in the energy field are subject to a variety of factors affecting
the public utilities industries, including: difficulty obtaining adequate re-
turns on invested capital which are typically subject to the control and scru-
tiny of public service commissions; restrictions on operations and increased
costs and delays as a result of environmental considerations; costs of and
ability to secure financing for large construction and development projects;
difficulties in obtaining secure energy resources; the uncertain effects of
conservation efforts; and a variety of issues concerning financing, governmen-
tal approval and environmental aspects of nuclear power facilities.
In addition to its authority to purchase precious metals, the Fund may invest
to a significant degree in companies in the precious metals industry. Invest-
ments related to precious metals are consid ered speculative and are af-
fected by a variety of worldwide eco-
nomic, financial and political factors. Prices of precious metals may fluctu-
ate sharply over short periods due to several factors: changes in inflation or
expectations regarding inflation in various countries; currency fluctuations;
metal sales by governments, central banks or international agencies; invest-
ment speculation; changes in industrial and commercial demand; and governmen-
tal prohibitions or restrictions on the private ownership of certain precious
metals. Under current Federal tax law, the Fund would fail to qualify as a
regulated investment company if its gains from the sale or other disposition
of precious metals were to exceed 10% of the Fund's annual gross income.
Therefore, this limitation may cause the Fund to hold or sell precious metals
or securities when it would not otherwise be advantageous to do so. (See "Tax-
es--Federal" below.)
At present, South Africa, the United States, Australia, Canada and the Com-
monwealth of Independent States (which includes Russia and certain other coun-
tries that were part of the former Soviet Union) are the five major producers
of gold bullion. Therefore, political and economic conditions in these and
other gold-producing countries may pose certain risks to the Fund's invest-
ments in gold and gold-related companies. These include the effect of social
and political unrest on mining production and gold prices, as well as the
threat of nationalization or expropriation by the various governments in-
volved.
Many companies in the energy and other natural resources groups of industries
are located outside of the United States. As such, a significant portion of
the Fund's assets may be invested in securities of foreign issuers. Invest-
ments in foreign securities involve certain risks not ordinarily associated
with investments in domestic securities. Such risks include fluctuations in
foreign exchange rates, future political and economic developments, and the
possible imposition of exchange controls or other foreign governmental laws or
restrictions. In addition, with respect to certain countries, there is the
possibility of expropriation of assets, confiscatory taxation, political or
social instability or diplomatic developments which could adversely affect
8
<PAGE>
investments in those countries. There may be less publicly available informa-
tion about a foreign company than about a U.S. company, and foreign companies
may not be subject to accounting, auditing and financial reporting standards
and requirements comparable to or as uniform as those of U.S.-based companies.
Foreign securities markets, while growing in volume, have, for the most part,
substantially less volume than U.S. markets, and securities of many foreign
companies are less liquid and their prices more volatile than securities of
comparable U.S.-based companies. Transaction costs on foreign securities mar-
kets are generally higher than in the United States. There is generally less
government supervision and regulation of foreign exchanges, brokers and is-
suers than there is in the United States and the Fund might have greater dif-
ficulty taking appropriate legal action in a foreign court. Dividends and in-
terest payable on the Fund's foreign portfolio securities may be subject to
foreign withholding taxes. To the extent such taxes are not offset by credits
or deductions allowed to investors under the Federal income tax provisions,
they may reduce the net return to the shareholders.
The Fund should not be considered a complete investment program. In view of
the specialized nature of its investment activities, investment in the Fund's
Shares may be suitable only for those investors who can invest without concern
for current income and are financially able to assume risk in search of long-
term capital gains. The Share price of the Fund is expected to be volatile.
PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION
MONEY MARKET INSTRUMENTS
The Fund may invest in "money market instruments," which include, among other
things, bank obligations, commercial paper and corporate bonds with remaining
maturities of 13 months or less.
Bank obligations include bankers' acceptances, negotiable certificates of de-
posit, and non-negotiable time deposits earning a specified return and issued
by a U.S. bank which is a member of the Federal Reserve System or insured by
the Bank Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"),
or by a savings and loan association or savings bank which is insured by the
Savings Association Insurance Fund of the FDIC. Bank obligations also include
U.S. dollar-denominated obligations of foreign branches of U.S. banks and ob-
ligations of domestic branches of foreign banks. Investments in bank obliga-
tions of foreign branches of domestic financial institutions or of domestic
branches of foreign banks are limited so that no more than 5% of the value of
the Fund's total assets may be invested in any one branch, and no more than
20% of the Fund's total assets at the time of purchase may be invested in the
aggregate in such obligations (see investment limitation No. 5 below under
"Investment Limitations"). Investments in time deposits are limited to no more
than 5% of the value of the Fund's total assets at the time of purchase.
Investments by the Fund in commercial paper will consist of issues that are
rated "A-2" or better by S&P or "Prime-2" or better by Moody's. In addition,
the Fund may acquire unrated commercial paper that is determined by the In-
vestment Adviser at the time of purchase to be of comparable quality to rated
instruments that may be acquired by the Fund.
Commercial paper may include variable and floating rate instruments. While
there may be no active secondary market with respect to a particular instru-
ment purchased by the Fund, the Fund may, from time to time as specified in
the instrument, demand payment of the principal of the instrument or may re-
sell the instrument to a third party. The absence of an active secondary mar-
ket, however, could make it difficult for the Fund to dispose of the instru-
ment if the issuer defaulted on its payment obligation or during periods that
the Fund is not entitled to exercise its demand rights, and the Fund could,
for this or other reasons, suffer a loss with respect to such instrument.
Any secu-
9
<PAGE>
rity which cannot be disposed of within seven days without taking a reduced
price will be considered an illiquid security subject to the 15% limitation
discussed below under "Illiquid Securities."
GOVERNMENT OBLIGATIONS
The Fund may invest in U.S. Government obligations, including U.S. Treasury
Bills and the obligations of Federal Home Loan Banks, Federal Farm Credit
Banks, Federal Land Banks, the Federal Housing Administration, the Farmers Home
Administration, the Export-Import Bank of the United States, the Small Business
Administration, the Government National Mortgage Association, the Federal Na-
tional Mortgage Association, the General Services Administration, the Student
Loan Marketing Association, the Central Bank for Cooperatives, the Federal Home
Loan Mortgage Corporation, the Federal Intermediate Credit Banks and the Mari-
time Administration.
REPURCHASE AGREEMENTS
In order to effectively manage its cash holdings, the Fund may enter into re-
purchase agreements. The Fund will enter into repurchase agreements only with
financial institutions that are deemed to be creditworthy by the Investment Ad-
viser, pursuant to guidelines established by Excelsior Fund's Board of Direc-
tors. The Fund will not enter into repurchase agreements with the Investment
Adviser or any of its affiliates. Repurchase agreements with remaining maturi-
ties in excess of seven days will be considered illiquid securities and will be
subject to the 15% limit described below under "Illiquid Securities."
The seller under a repurchase agreement will be required to maintain the value
of the securities which are subject to the agreement and held by the Fund at
not less than the repurchase price. Default or bankruptcy of the seller would,
however, expose the Fund to possible delay in connection with the disposition
of the underlying securities or loss to the extent that proceeds from a sale of
the underlying securities were less than the repurchase price under the agree-
ment.
SECURITIES LENDING
To increase return on its portfolio securities, the Fund may lend its portfo-
lio securities to broker/dealers pursuant to agreements requiring the loans to
be continuously secured by collateral equal at all times in value to at least
the market value of the securities loaned. Collateral for such loans may in-
clude cash, securities of the U.S. Government, its agencies or instrumentali-
ties, or an irrevocable letter of credit issued by a bank, or any combination
thereof. Such loans will not be made if, as a result, the aggregate of all out-
standing loans of the Fund exceeds 30% of the value of its total assets. There
may be risks of delay in receiving additional collateral or in recovering the
securities loaned or even a loss of rights in the collateral should the bor-
rower of the securities fail financially. However, loans are made only to bor-
rowers deemed by the Investment Adviser to be of good standing and when, in the
Investment Adviser's judgment, the income to be earned from the loan justifies
the attendant risks.
OPTIONS
To further increase return on its portfolio securities in accordance with its
investment objectives and policies, the Fund may enter into option transactions
as described below.
The Fund may purchase put and call options listed on a national securities ex-
change and issued by the Options Clearing Corporation in an amount not exceed-
ing 5% of the Fund's net assets, as described further in the Statement of Addi-
tional Information. Such options may relate to particular securities or to var-
ious stock or bond indices. Purchasing options is a specialized investment
technique which entails a substantial risk of a complete loss of the amounts
paid as premiums to the writer of the options.
The Fund may engage in writing covered call options (options on securities
owned by the Fund) and enter into closing purchase transactions with respect to
such options. Such options must be listed on a national securities exchange and
issued by the Options
10
<PAGE>
Clearing Corporation. The aggregate value of the securities subject to options
written by the Fund may not exceed 25% of the value of its net assets. By
writing a covered call option, the Fund forgoes the opportunity to profit from
an increase in the market price of the underlying security above the exercise
price except insofar as the premium represents such a profit, and it will not
be able to sell the underlying security until the option expires or is exer-
cised or the Fund effects a closing purchase transaction by purchasing an op-
tion of the same series. The use of covered call options is not a primary in-
vestment technique of the Fund and such options will normally be written on
underlying securities as to which the Investment Adviser does not anticipate
significant short-term capital appreciation. Additional information on option
practices, including particular risks thereof, is provided in the Fund's
Statement of Additional Information.
FUTURES CONTRACTS
The Fund may also enter into interest rate futures contracts, precious metals
futures contracts, other types of financial futures contracts and related
futures options, as well as any index or foreign market futures which are
available on recognized exchanges or in other established financial markets.
The Fund will not engage in futures transactions for speculation, but only as
a hedge against changes in market values of securities or precious metals
which the Fund holds or intends to purchase. The Fund will engage in futures
transactions only to the extent permitted by the Commodity Futures Trading
Commission ("CFTC") and the Securities and Exchange Commission ("SEC"). When
investing in futures contracts, the Fund must satisfy certain asset segrega-
tion requirements to ensure that the use of futures is unleveraged. When the
Fund takes a long position in a futures contract, it must maintain a segre-
gated account containing cash and/or certain liquid assets equal to the pur-
chase price of the contract, less any margin or deposit. When the Fund takes a
short position in a futures contract, the Fund must maintain a segregated ac-
count containing cash and/or certain liquid assets in an
amount equal to the market value of the securities or precious metals under-
lying such contract (less any margin or deposit), which amount must be at
least equal to the market price at which the short position was established.
Asset segregation requirements are not applicable when the Fund "covers" an
options or futures position generally by entering into an offsetting position.
The Fund will limit its hedging transactions in futures contracts and related
options so that, immediately after any such transaction, the aggregate initial
margin that is required to be posted by the Fund under the rules of the ex-
change on which the futures contract (or future option) is traded, plus any
premiums paid by the Fund on its open futures options positions, does not ex-
ceed 5% of the Fund's total assets, after taking into account any unrealized
profits and unrealized losses on the Fund's open contracts (and excluding the
amount that a futures option is "in-the-money" at the time of purchase). An
option to buy a futures contract is "in-the-money" if the then-current pur-
chase price of the underlying futures contract exceeds the exercise or strike
price; an option to sell a futures contract is "in-the-money" if the exercise
or strike price exceeds the then-current purchase price of the contract that
is the subject of the option. In addition, the use of futures contracts is
further restricted to the extent that no more than 10% of the Fund's total as-
sets may be hedged.
Transactions in futures as a hedging device may subject the Fund to a number
of risks. Successful use of futures by the Fund is subject to the ability of
the Investment Adviser to correctly anticipate movements in the direction of
the market. In addition, there may be an imperfect correlation, or no correla-
tion at all, between movements in the price of the futures contracts (or op-
tions) and movements in the price of the instruments being hedged. Further,
there is no assurance that a liquid market will exist for any particular
futures contract (or option) at any particular time. Consequently, the Fund
may realize a loss on a futures transaction that is not offset by a favorable
movement in the price of securities or precious metals which it holds or in-
tends to purchase or may be unable to close
11
<PAGE>
a futures position in the event of adverse price movements.
INVESTMENT COMPANY SECURITIES
In connection with the management of its daily cash positions, the Fund may
invest in securities issued by other investment companies which invest in
high-quality, short-term debt securities and which determine their net asset
value per share based on the amortized cost or penny-rounding method. In addi-
tion to the advisory fees and other expenses the Fund bears directly in con-
nection with its own operations, as a shareholder of another investment compa-
ny, the Fund would bear its pro rata portion of the other investment company's
advisory fees and other expenses. As such, the Fund's shareholders would indi-
rectly bear the expenses of the Fund and the other investment company, some or
all of which would be duplicative. Such securities will be acquired by the
Fund within the limits prescribed by the 1940 Act which include, subject to
certain exceptions, a prohibition against the Fund investing more than 10% of
the value of its total assets in such securities.
WHEN-ISSUED AND FORWARD TRANSACTIONS
The Fund may purchase eligible securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. These transac-
tions involve a commitment by the Fund to purchase or sell particular securi-
ties with payment and delivery taking place in the future, beyond the normal
settlement date, at a stated price and yield. Securities purchased on a "for-
ward commitment" or "when-issued" basis are recorded as an asset and are sub-
ject to changes in value based upon changes in the general level of interest
rates. It is expected that forward commitments and "when-issued" purchases
will not exceed 25% of the value of the Fund's total assets absent unusual
market conditions, and that the length of such commitments will not exceed 45
days. The Fund does not intend to engage in "when-issued" purchases and for-
ward commitments for speculative purposes, but only in furtherance of its in-
vestment objective.
FORWARD CONTRACTS ON FOREIGN CURRENCY AND PRECIOUS METALS
The Fund may enter into contracts for the purchase or sale of precious metals
or specific currencies at a future date, at a price set at the time of the
contract. The Fund will only enter into forward contracts for hedging purpos-
es. For example, the Fund may enter into a contract for the forward purchase
or sale of a foreign currency to protect the dollar value of securities (or
precious metals) denominated in such foreign currency or to protect the dollar
equivalent of interest or dividends to be paid on such securities. Or, the
Fund may enter into forward contracts on precious metals to hedge against the
adverse effects of a decline in the prices of the precious metals held by the
Fund or the effects of a rise in prices on precious metals to be acquired by
the Fund. The Fund may also enter into forward contracts for "cross hedging"
purposes (e.g., the purchase or sale of a forward contract on one type of cur-
rency or precious metal as a hedge against adverse fluctuations in the value
of a second type of currency or precious metal). By entering into such trans-
actions, however, the Fund may be required to forego the benefits of advanta-
geous changes in exchange rates or prices of precious metals.
Forward contracts are traded over-the-counter, and not on organized commodi-
ties or securities exchanges. As a result, such contracts operate in a manner
distinct from exchange-traded instruments, and their use involves certain
risks beyond those associated with transactions in the futures and options
contracts described above. The Fund may also trade other types of over-the-
counter instruments based on precious metals which are or may become available
for trading.
ILLIQUID SECURITIES
The Fund will not knowingly invest more than 15% of the value of its net as-
sets in securities that are illiquid. The Fund may purchase securities which
are not registered under the Securities Act of 1933 (the "Act") but which can
be sold to "qualified institutional buyers" in accordance with Rule 144A under
12
<PAGE>
the Act. Any such security will not be considered illiquid so long as it is de-
termined by the Investment Adviser, acting under guidelines approved and moni-
tored by the Board, that an adequate trading market exists for that security.
This investment practice could have the effect of increasing the level of illi-
quidity in the Fund during any period that qualified institutional buyers be-
come uninterested in purchasing these restricted securities.
PORTFOLIO TURNOVER
The Fund may sell a portfolio investment immediately after its acquisition if
the Investment Adviser believes that such a disposition is consistent with the
Fund's investment objective. Portfolio investments may be sold for a variety of
reasons, such as a more favorable investment opportunity or other circumstances
bearing on the desirability of continuing to hold such investments. A high rate
of portfolio turnover may involve correspondingly greater brokerage commission
expenses and other transaction costs, which must be borne directly by the Fund
and ultimately by its shareholders. High portfolio turnover may result in the
realization of substantial net capital gains. To the extent net short-term cap-
ital gains are realized, any distributions resulting from such gains are con-
sidered ordinary income for Federal income tax purposes. (See "Financial High-
lights" and "Taxes--Federal.")
INVESTMENT LIMITATIONS
The investment limitations enumerated below are matters of fundamental policy
and may not be changed with respect to the Fund without the vote of the holders
of a majority of the Fund's outstanding shares (as defined under "Miscellane-
ous").
The Fund may not:
1. Borrow money except from banks for temporary purposes, and then in
amounts not in excess of 10% of the value of its total assets at the time of
such borrowing; or mortgage, pledge, or hypothecate any assets except in con-
nection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts borrowed and
10% of the value of its total assets at the time of such borrowing. (This
borrowing provision is included solely to facilitate the orderly sale of
portfolio securities to accommodate abnormally heavy redemption requests and
is not for leverage purposes.) The Fund will not purchase portfolio securi-
ties while borrowings in excess of 5% of its total assets are outstanding.
Optioned stock held in escrow is not deemed to be a pledge; and
2. Make loans, except that (i) the Fund may purchase or hold debt securities
in accordance with its investment objective and policies, and may enter into
repurchase agreements with respect to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, and (ii) the Fund may
lend portfolio securities in an amount not exceeding 30% of its total assets.
3. Purchase any securities which would cause more than 25% of the value of
its total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the
same industry, provided, however, that there is no limitation with respect to
securities of companies in the energy and other natural resources groups of
industries or securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
* * *
The Fund may not invest in obligations of foreign branches of financial insti-
tutions or in domestic branches of foreign banks if immediately after such pur-
chase (i) more than 5% of the value of its total assets would be invested in
obligations of any one foreign branch of the financial institution or domestic
13
<PAGE>
branch of a foreign bank; or (ii) more than 20% of its total assets would be
invested in foreign branches of financial institutions or in domestic branches
of foreign banks. The Fund may not knowingly invest more than 15% of the value
of its net assets in illiquid securities, including repurchase agreements with
remain
ing maturities in excess of seven days, restricted securities and other secu-
rities for which market quotations are not readily available. These investment
policies may be changed by Excelsior Fund's Board of Directors upon reasonable
notice to shareholders.
With respect to all investment policies, if a percentage limitation is satis-
fied at the time of investment, a later increase or decrease in such percent-
age resulting from a change in value of the Fund's portfolio securities will
not constitute a violation of such limitation.
PRICING OF SHARES
The net asset value of the Fund is determined and the Shares of the Fund are
priced at the close of regular trading hours on the New York Stock Exchange
(the "Exchange"), currently 4:00 p.m. (Eastern Time). Net asset value and
pricing for the Fund are determined on each day the Exchange and the Invest
ment Adviser are open for trading ("Business Day"). Currently, the holidays
which the Fund observes are New Year's Day, Martin Luther King, Jr. Day, Pres-
idents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus
Day, Veterans Day, Thanksgiving Day and Christmas. The Fund's net asset value
per Share for purposes of pricing sales and redemptions is calculated by di-
viding the value of all securities and other assets allocable to its Shares,
less the liabilities allocable to its Shares, by the number of its outstanding
Shares.
Assets in the Fund which are traded on a recognized domestic stock exchange
are valued at the last sale price on the securities exchange on which such se-
curities are primarily traded or at the last sale price on the national secu-
rities market. Securities traded only on over-the-counter markets are valued
on the basis of closing over-the-counter bid prices. Securities for which
there were no transactions are valued at the average of the most recent bid
and asked prices. An option or futures contract is valued at the last sales
price quoted on the principal exchange or board of trade on which such option
or contract is traded, or in the absence of a sale, the mean between the last
bid and asked prices. Restricted securities, securities for which market quo-
tations are not readily available, and other assets are valued at fair value,
pursuant to guidelines adopted by Excelsior Fund's Board of Directors.
Portfolio securities which are primarily traded on foreign securities ex-
changes are generally valued at the preceding closing values of such securi-
ties on their respective exchanges, except that when an event subsequent to
the time where value was so established is likely to have changed such value,
then the fair value of those securities will be determined by consideration of
other factors under the direction of the Board of Directors. A security which
is listed or traded on more than one exchange is valued at the quotation on
the exchange determined to be the primary market for such security. Invest-
ments in debt securities having a maturity of 60 days or less are valued based
upon the amortized cost method. All other foreign securities are valued at the
last current bid quotation if market quotations are available, or at fair
value as determined in accordance with guidelines adopted by the Board of Di-
rectors. For valuation purposes, quotations of foreign securities in foreign
currency are converted to U.S. dollars equivalent at the prevailing market
rate on the day of conversion. Some of the securities acquired by the Fund may
be traded on foreign exchanges or over-the-counter markets on days which are
not Business Days. In such cases, the net asset value of the Shares may be
significantly affected on days when investors can neither purchase nor redeem
the Fund's Shares. Excelsior Fund's administrators have undertaken to price
the securities in the Fund's portfolio, and may use one or more independent
pricing services in connection with this service.
14
<PAGE>
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Fund are continuously offered for sale by Excelsior Fund's
sponsor and distributor, Edgewood Services, Inc. (the "Distributor"), a whol-
ly-owned subsidiary of Federated Investors. The Distributor is a registered
broker/dealer. Its principal business address is Clearing Operations, P.O. Box
897, Pittsburgh, PA 15230-0897.
At various times the Distributor may implement programs under which a deal-
er's sales force may be eligible to win nominal awards for certain sales ef-
forts or under which the Distributor will make payments to any dealer that
sponsors sales contests or recognition programs conforming to criteria estab-
lished by the Distributor, or that participates in sales programs sponsored by
the Distributor. The Distributor in its discretion may also from time to time,
pursuant to objective criteria established by the Distributor, pay fees to
qualifying dealers for certain services or activities which are primarily in-
tended to result in sales of Shares of the Fund. If any such program is made
available to any dealer, it will be made available to all dealers on the same
terms and conditions. Payments made under such programs will be made by the
Distributor out of its own assets and not out of the assets of the Fund.
In addition, the Distributor may offer to pay a fee from its own assets to
financial institutions as financial assistance for the continuing investment
of customers' assets in the Fund or for providing substantial marketing, sales
and operational support. The support may include initiating customer accounts,
participating in sales, educational and training seminars, providing sales
literature, and engineering computer software programs that emphasize the at-
tributes of the Fund. Such assistance will be predicated upon the amount of
Shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution.
PURCHASE OF SHARES
Shares of the Fund are sold at their net asset value per Share next computed
after a purchase order is received by Excelsior Fund's sub-transfer agent. The
Distributor has established several procedures for purchasing Shares in order
to accommodate different types of investors.
Shares may be purchased directly by individuals ("Direct Investors") or by
institutions ("Institutional Investors" and, collectively with Direct Invest-
ors, "Investors"). Shares may also be purchased by customers ("Customers") of
the Investment Adviser, its affiliates and correspondent banks, and other in-
stitutions ("Shareholder Organizations") that have entered into shareholder
servicing agreements with Excelsior Fund. A Shareholder Organization may elect
to hold of record Shares for its Customers and to record beneficial ownership
of Shares on the account statements provided by it to its Customers. If it
does so, it is the Shareholder Organization's responsibility to transmit to
the Distributor all purchase orders for its Customers and to transmit, on a
timely basis, payment for such orders to Chase Global Funds Services Company
("CGFSC"), the Fund's sub-transfer agent, in accordance with the procedures
agreed to by the Shareholder Organization and the Distributor. Confirmations
of all such Customer purchases and redemptions will be sent by CGFSC to the
particular Shareholder Organization. As an alternative, a Shareholder Organi-
zation may elect to establish its Customers' accounts of record with CGFSC. In
this event, even if the Shareholder Organization continues to place its Cus-
tomers' purchase and redemption orders with the Fund, CGFSC will send confir-
mations of such transactions and periodic account statements directly to Cus-
tomers. A Shareholder Organization may also elect to establish its Customers
as record holders.
Excelsior Fund enters into shareholder servicing agreements with Shareholder
Organizations which agree to provide their Customers various shareholder ad-
ministrative services with respect to their Shares (hereinafter referred to as
"Service Organizations").
15
<PAGE>
Shares in the Fund bear the expense of fees payable to Service Organizations
for such services. See "Management of the Funds--Service Organizations."
Customers wishing to purchase Shares through their Shareholder Organization
should contact such entity directly for appropriate instructions. (For a list
of Shareholder Organizations in your area, call (800) 446-1012.) An investor
purchasing Shares through a registered investment adviser or certified
financial planner may incur transaction charges in connection with such pur-
chases. Such investors should contact their registered investment adviser or
certified financial planner for further information on transaction fees. In-
vestors may also purchase Shares directly from the Distributor in accordance
with procedures described below under "Purchase Procedures."
PURCHASE PROCEDURES
General
Direct Investors may purchase Shares by completing the Application for pur-
chase of Shares accompanying this Prospectus and mailing it, together with a
check payable to Excelsior Funds, to:
Excelsior Funds
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Subsequent investments in an existing account in the Fund may be made at any
time by sending to the above address a check payable to Excelsior Funds along
with: (a) the detachable form that regularly accompanies the confirmation of a
prior transaction; (b) a subsequent order form which may be obtained from
CGFSC; or (c) a letter stating the amount of the investment, the name of the
Fund and the account number in which the investment is to be made. Institu-
tional Investors may purchase Shares by transmitting their purchase orders to
CGFSC by telephone at (800) 446-1012 or by terminal access. Institutional In-
vestors must pay for Shares with Federal funds or funds immediately available
to CGFSC.
Purchases by Wire
Investors may also purchase Shares by wiring Federal funds to CGFSC. Prior to
making an initial investment by wire, an Investor must telephone CGFSC at
(800) 446-1012 (from overseas, call (617) 557-8280) for instructions. Federal
funds and registration instructions should be wired through the Federal Re-
serve System to:
The Chase Manhattan Bank, N.A.
ABA #021000021
Excelsior Funds, Account No. 9102732915
For further credit to:
Excelsior Funds
Wire Control Number
Account Registration (including account number)
Investors making initial investments by wire must promptly complete the Ap-
plication accompanying this Prospectus and forward it to CGFSC. Redemptions by
Investors will not be processed until the completed Application for purchase
of Shares has been received by CGFSC and accepted by the Distributor. Invest-
ors making subsequent investments by wire should follow the above instruc-
tions.
OTHER PURCHASE INFORMATION
Except as provided in "Investor Programs" below, the minimum initial invest-
ment by an Investor or initial aggregate investment by a Shareholder Organiza-
tion investing on behalf of its Customers is $500. The minimum subsequent in-
vestment for both types of investors is $50. Customers may agree with a par-
ticular Shareholder Organization to make a minimum purchase with respect to
their accounts. Depending upon the terms of the particular account, Share-
holder Organizations may charge a Customer's account fees for automatic in-
vestment and other cash management services provided. Excelsior Fund reserves
the right to reject any purchase order, in whole or in part, or to waive any
minimum investment requirements.
16
<PAGE>
REDEMPTION PROCEDURES
Customers of Shareholder Organizations holding Shares of record may redeem all
or part of their investments in the Fund in accordance with procedures gov-
erning their accounts at the Shareholder Organizations. It is the responsibil-
ity of the Shareholder Organizations to transmit redemption orders to CGFSC and
credit such Customer accounts with the redemption proceeds on a timely basis.
Redemption orders for Institutional Investors must be transmitted to CGFSC by
telephone at (800) 446-1012 or by terminal access. No charge for wiring redemp-
tion payments to Shareholder Organizations or Institutional Investors is im-
posed by Excelsior Fund, although Shareholder Organizations may charge a Cus-
tomer's account for wiring redemption proceeds. Information relating to such
redemption services and charges, if any, is available from the Shareholder Or-
ganizations. An investor redeeming Shares through a registered investment ad-
viser or certified financial planner may incur transaction charges in connec-
tion with such redemptions. Such investors should contact their registered in-
vestment adviser or certified financial planner for further information on
transaction fees. Investors may redeem all or part of their Shares in accor-
dance with any of the procedures described below (these procedures also apply
to Customers of Shareholder Organizations for whom individual accounts have
been established with CGFSC).
REDEMPTION BY MAIL
Shares may be redeemed by a Direct Investor by submitting a written request
for redemption to:
Excelsior Funds
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
A written redemption request to CGFSC must (i) state the number of Shares to
be redeemed, (ii) identify the shareholder account number and tax identifica-
tion number, and (iii) be signed by each registered owner exactly as the Shares
are registered. If the Shares to be redeemed were issued in certificate form,
the certificates must be endorsed for transfer (or accompanied by a duly exe-
cuted stock power) and must be submitted to CGFSC together with the redemption
request. A redemption request for an amount in excess of $50,000 per account,
or for any amount if the proceeds are to be sent elsewhere than the address of
record, must be accompanied by signature guarantees from any eligible guarantor
institution approved by CGFSC in accordance with its Standards, Procedures and
Guidelines for the Acceptance of Signature Guarantees ("Signature Guarantee
Guidelines"). Eligible guarantor institutions generally include banks,
broker/dealers, credit unions, national securities exchanges, registered secu-
rities associations, clearing agencies and savings associations. All eligible
guarantor institutions must participate in the Securities Transfer Agents Me-
dallion Program ("STAMP") in order to be approved by CGFSC pursuant to the Sig-
nature Guarantee Guidelines. Copies of the Signature Guarantee Guidelines and
information on STAMP can be obtained from CGFSC at (800) 446-1012 or at the ad-
dress given above. CGFSC may require additional supporting documents for re-
demptions made by corporations, executors, administrators, trustees and guardi-
ans. A redemption request will not be deemed to be properly received until
CGFSC receives all required documents in proper form. Payment for Shares re-
deemed will ordinarily be made by mail within five Business Days after proper
receipt by CGFSC of the redemption request. Questions with respect to the
proper form for redemption requests should be directed to CGFSC at (800) 446-
1012 (from overseas, call (617) 557-8280).
REDEMPTION BY WIRE OR TELEPHONE
Direct Investors who have so indicated on the Application, or have subse-
quently arranged in writing to do so, may redeem Shares by instructing CGFSC by
wire or telephone to wire the redemption proceeds directly to the Direct In-
vestor's account at any commercial bank in the United States. Direct Investors
who are shareholders of record may also redeem Shares by in-
17
<PAGE>
structing CGFSC by telephone to mail a check for redemption proceeds of $500
or more to the shareholder of record at his or her address of record. Institu-
tional Investors may also redeem Shares by instructing CGFSC by telephone at
(800) 446-1012 or by terminal access. Only redemptions of $500 or more will be
wired to a Direct Investor's account. An $8.00 fee for each wire redemption by
a Direct Investor is deducted by CGFSC from the proceeds of the redemption.
The redemption proceeds for Direct Investors must be paid to the same bank and
account as designated on the Application or in written instructions subse-
quently received by CGFSC.
In order to arrange for redemption by wire or telephone after an account has
been opened or to change the bank or account designated to receive redemption
proceeds, a Direct Investor must send a written request to Excelsior Fund, c/o
CGFSC, at the address listed above under "Redemption by Mail." Such requests
must be signed by the Direct Investor, with signatures guaranteed (see "Re-
demption by Mail" above, for details regarding signature guarantees). Further
documentation may be requested.
CGFSC and the Distributor reserve the right to re- fuse a wire or telephone
redemption if it is believed advisable to do so. Procedures for redeeming
Shares by wire or telephone may be modified or terminated at any time by Ex-
celsior Fund, CGFSC or the Distributor. EXCELSIOR FUND, CGFSC, AND THE DIS-
TRIBUTOR WILL NOT BE LIABLE FOR ANY LOSS, LIABILITY, COST OR EXPENSE FOR ACT-
ING UPON TELEPHONE INSTRUCTIONS THAT ARE REASONABLY BELIEVED TO BE GENUINE. IN
ATTEMPTING TO CONFIRM THAT TELEPHONE INSTRUCTIONS ARE GENUINE, EXCELSIOR FUND
WILL USE SUCH PROCEDURES AS ARE CONSIDERED REASONABLE, INCLUDING RECORDING
THOSE INSTRUCTIONS AND REQUESTING INFORMATION AS TO ACCOUNT REGISTRATION.
If any portion of the Shares to be redeemed represents an investment made by
personal check, Excelsior Fund and CGFSC reserve the right not to honor the
redemption until CGFSC is reasonably satisfied that the check has been col-
lected in accordance with the applicable banking regulations which may take up
to 15 days. A Direct Investor who anticipates the need for more immediate ac-
cess to his or her investment should purchase Shares by Federal funds or bank
wire or by certified or cashier's check. Banks normally impose a charge in
connection with the use of bank wires, as well as certified checks, cashier's
checks and Federal funds. If a Direct Investor's purchase check is not col-
lected, the purchase will be cancelled and CGFSC will charge a fee of $25.00
to the Direct Investor's account.
During periods of substantial economic or market change, telephone redemp-
tions may be difficult to complete. If an Investor is unable to contact CGFSC
by telephone, the Investor may also deliver the redemption request to CGFSC in
writing at the address noted above under "How to Purchase and Redeem Shares--
Redemption by Mail."
OTHER REDEMPTION INFORMATION
Except as described in "Investor Programs" below, Investors may be required
to redeem Shares in the Fund after 60 days' written notice if due to investor
redemptions the balance in the particular account with respect to the Fund re-
mains below $500. If a Customer has agreed with a particular Shareholder Or-
ganization to maintain a minimum balance in his or her account at the institu-
tion with respect to Shares of the Fund, and the balance in such account falls
below that minimum, the Customer may be obliged by the Shareholder Organiza-
tion to redeem all or part of his or her Shares to the extent necessary to
maintain the required minimum balance.
GENERAL
Purchase and redemption orders for Shares which are received and accepted
prior to the close of regular trading hours on the Exchange (currently 4:00
p.m., Eastern Time) on any Business Day are priced according to the net asset
value determined on that day. Purchase orders received and accepted after the
close of regular trading hours on the Exchange are priced at the net asset
value per Share determined on the next Business Day.
18
<PAGE>
INVESTOR PROGRAMS
EXCHANGE PRIVILEGE
Investors and Customers of Shareholder Organizations may, after appropriate
prior authorization and without an exchange fee imposed by Excelsior Fund, ex-
change Shares in the Fund having a value of at least $500 for shares of the
same series of any other portfolio offered by Excelsior Fund or Excelsior Tax-
Exempt Funds, Inc. ("Excelsior Tax-Exempt Fund"), or for Trust Shares of Excel-
sior Institutional Trust, provided that such other shares may legally be sold
in the state of the Investor's residence.
Excelsior Fund currently offers 14 additional portfolios as follows:
Money Fund, a money market fund seeking as high a level of current income as
is consistent with liquidity and stability of principal through investments
in high-quality money market investments maturing within 13 months;
Government Money Fund, a money market fund seeking as high a level of cur-
rent income as is consistent with liquidity and stability of principal
through investments in obligations issued or guaranteed by the U.S. Govern-
ment, its agencies or instrumentalities and repurchase agreements collateral-
ized by such obligations;
Treasury Money Fund, a money market fund seeking current income generally
exempt from state and local income taxes through investments in direct short-
term obligations issued by the U.S. Treasury and certain agencies or instru-
mentalities of the U.S. Government;
Short-Term Government Securities Fund, a fund seeking a high level of cur-
rent income by investing principally in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and repurchase agree-
ments collateralized by such obligations, and having a dollar-weighted aver-
age portfolio maturity of 1 to 3 years;
Intermediate-Term Managed Income Fund, a fund seeking a high level of cur-
rent interest income by investing principally in investment grade or better
debt obligations and money market instruments, and having a dollar-weighted
average portfolio maturity of 3 to 10 years;
Managed Income Fund, a fund seeking higher current income through invest-
ments in investment grade debt obligations, U.S. Government obligations and
money market instruments;
Blended Equity Fund, a fund seeking primarily long-term capital appreciation
through investments in a diversified portfolio of primarily equity securi-
ties;
Income and Growth Fund, a fund investing substantially in equity securities
in seeking to provide moderate current income and to achieve capital appreci-
ation as a secondary objective;
Value and Restructuring Fund, a fund seeking long-term capital appreciation
by investing in companies benefitting from their restructuring or redeploy-
ment of assets and operations in order to become more competitive or profit-
able;
Small Cap Fund, a fund seeking long-term capital appreciation by investing
in smaller companies in the earlier stages of their development;
International Fund, a fund seeking total return derived primarily from in-
vestments in foreign equity securities;
Latin America Fund, a fund seeking long-term capital appreciation through
investments in companies and securities of governments based in Latin Ameri-
ca;
Pacific/Asia Fund, a fund seeking long-term capital appreciation through in-
vestments in companies and securities of governments based in Asia and on the
Asian side of the Pacific Ocean; and
Pan European Fund, a fund seeking long-term capital appreciation through in-
vestments in companies and securities of governments located in Europe.
19
<PAGE>
Excelsior Tax-Exempt Fund currently offers six portfolios as follows:
Tax-Exempt Money Fund, a diversified tax-exempt money market fund seeking a
moderate level of current interest income exempt from Federal income taxes
through investing primarily in high-quality municipal obligations maturing
within 13 months;
Short-Term Tax-Exempt Securities Fund, a diversified fund seeking a high
level of current interest income exempt from Federal income taxes through in-
vestments in municipal obligations and having a dollar-weighted average port-
folio maturity of 1 to 3 years;
Intermediate-Term Tax-Exempt Fund, a diversified fund seeking a high level
of current income exempt from Federal income taxes through investments in mu-
nicipal obligations and having a dollar-weighted average portfolio maturity
of 3 to 10 years;
Long-Term Tax-Exempt Fund, a diversified fund seeking to maximize over time
current income exempt from Federal income taxes, investing primarily in mu-
nicipal obligations and having a dollar-weighted average maturity of 10 to 30
years;
New York Intermediate-Term Tax-Exempt Fund, a non- diversified fund designed
to provide New York investors with a high level of current income exempt from
Federal and, to the extent possible, New York state and New York City income
taxes; this fund invests primarily in New York municipal obligations and has
a dollar-weighted average portfolio maturity of three to ten years; and
California Tax-Exempt Income Fund, a non-diversified fund designed to pro-
vide California investors with as high a level of current interest income ex-
empt from Federal and, to the extent possible, California state personal in-
come taxes as is consistent with relative stability of principal; this fund
invests primarily in California municipal obligations and has a dollar-
weighted average portfolio maturity of three to ten years.
Excelsior Institutional Trust currently offers Trust Shares in two investment
portfolios as follows:
Optimum Growth Fund, a fund seeking superior, risk-adjusted total return
through investments in a diversified portfolio of equity securities whose
growth prospects, in the opinion of its investment adviser, appear to exceed
that of the overall market; and
Value Equity Fund, a fund seeking long-term capital appreciation through in-
vestments in a diversified portfolio of equity securities whose market value,
in the opinion of its investment adviser, appears to be undervalued relative
to the marketplace.
An exchange involves a redemption of all or a portion of the Shares in the
Fund and the investment of the redemption proceeds in shares of another port-
folio of Excelsior Fund, Excelsior Tax-Exempt Fund or Excelsior Institutional
Trust. The redemption will be made at the per Share net asset value of the
Shares being redeemed next determined after the exchange request is received.
The shares of the portfolio to be acquired will be purchased at the per share
net asset value of those shares next determined after receipt of the exchange
request in good order.
Investors may find the exchange privilege useful if their investment objec-
tives or market outlook should change after they invest in the Fund. For fur-
ther information regarding exchange privileges, shareholders should call (800)
446-1012 (from overseas, call (617) 557-8280). Investors exercising the ex-
change privilege with the other portfolios of Excelsior Fund, Excelsior Tax-
Exempt Fund or Excelsior Institutional Trust should request and review the
prospectuses of such funds. Such prospectuses may be obtained by calling the
numbers listed above. In order to prevent abuse of this privilege to the
disadvantage of other shareholders, Excelsior Fund, Excelsior Tax-Exempt Fund
and Excelsior Institutional Trust reserve the right to limit the number of ex-
change requests of Investors and Customers of Shareholder Organizations to no
more than six per year. Excelsior Fund may modify or terminate the exchange
program at any time upon 60 days' written notice to shareholders, and may re-
ject any exchange request. EXCELSIOR FUND, EXCELSIOR TAX-EXEMPT
20
<PAGE>
FUND, EXCELSIOR INSTITUTIONAL TRUST, CGFSC AND THE DISTRIBUTOR ARE NOT RESPON-
SIBLE FOR THE AUTHENTICITY OF EXCHANGE REQUESTS RECEIVED BY TELEPHONE THAT ARE
REASONABLY BELIEVED TO BE GENUINE. IN ATTEMPTING TO CONFIRM THAT TELEPHONE IN-
STRUCTIONS ARE GENUINE, EXCELSIOR FUND, EXCELSIOR TAX-EXEMPT FUND AND EXCEL-
SIOR INSTITUTIONAL TRUST WILL USE SUCH PROCEDURES AS ARE CONSIDERED REASON-
ABLE, INCLUDING RECORDING THOSE INSTRUCTIONS AND REQUESTING INFORMATION AS TO
ACCOUNT REGISTRATION.
For Federal income tax purposes, an exchange of Shares is a taxable event
and, accordingly, a capital gain or loss may be realized by an investor. Be-
fore making an exchange, an investor should consult a tax or other financial
adviser to determine tax consequences.
SYSTEMATIC WITHDRAWAL PLAN
An Investor who owns Shares of the Fund with a value of $10,000 or more may
establish a Systematic Withdrawal Plan. The Investor may request a declining-
balance withdrawal, a fixed-dollar withdrawal, a fixed-share withdrawal, or a
fixed-percentage withdrawal (based on the current value of Shares in the ac-
count) on a monthly, quarterly, semi-annual or annual basis. To initiate the
Systematic Withdrawal Plan, an investor must complete the Supplemental Appli-
cation contained in this Prospectus and mail it to CGFSC at the address given
above. Further information on establishing a Systematic Withdrawal Plan may be
obtained by calling (800) 446-1012 (from overseas, call (617) 557-8280.)
Shareholder Organizations may, at their discretion, establish similar system-
atic withdrawal plans with respect to the Shares held by their Customers. In-
formation about such plans and the applicable procedures may be obtained by
Customers directly from their institutions.
RETIREMENT PLANS
Shares are available for purchase by Investors in connection with the follow-
ing tax-deferred prototype retirement plans offered by United States Trust
Company of New York:
IRAs (including "rollovers" from existing retirement plans) for individuals
and their spouses;
Profit Sharing and Money-Purchase Plans for corporations and self-employed
individuals and their partners to benefit themselves and their employees; and
Keogh Plans for self-employed individuals.
Investors investing in the Fund pursuant to Profit Sharing and Money-Purchase
Plans and Keogh Plans are not subject to the minimum investment and forced re-
demption provisions described above. The minimum initial investment for IRAs
is $250 and the minimum subsequent investment is $50. Detailed information
concerning eligibility, service fees and other matters related to these plans
can be obtained by calling (800) 446-1012 (from overseas, call (617) 557-
8280). Customers of Shareholder Organizations may purchase Shares of the Fund
pursuant to retirement plans if such plans are offered by their Shareholder
Organizations.
AUTOMATIC INVESTMENT PROGRAM
The Automatic Investment Program permits Investors to purchase Shares (mini-
mum of $50 per transaction) at regular intervals selected by the Investor. The
minimum initial investment for an Automatic Investment Program account is $50.
Provided the Investor's financial institution allows automatic withdrawals,
Shares are purchased by transferring funds from an Investor's checking, bank
money market or NOW account designated by the Investor. At the Investor's op-
tion, the account designated will be debited in the specified amount, and
Shares will be purchased, once a month, on either the first or fifteenth day,
or twice a month, on both days.
The Automatic Investment Program is one means by which an Investor may use
"Dollar Cost Averaging" in making investments. Instead of trying to time mar-
ket performance, a fixed dollar amount is invested in
21
<PAGE>
Shares at predetermined intervals. This may help Investors to reduce their av-
erage cost per share because the agreed upon fixed investment amount allows
more Shares to be purchased during periods of lower share prices and fewer
Shares during periods of higher prices. In order to be effective, Dollar Cost
Averaging should usually be followed on a sustained, consistent basis. Invest-
ors should be aware, however, that Shares bought using Dollar Cost Averaging
are purchased without regard to their price on the day of investment or to
market trends. In addition, while Investors may find Dollar Cost Averaging to
be beneficial, it will not prevent a loss if an Investor ultimately redeems
his Shares at a price which is lower than their purchase price.
To establish an Automatic Investment account permitting Investors to use the
Dollar Cost Averaging investment method described above, an Investor must com-
plete the Supplemental Application contained in this Prospectus and mail it to
CGFSC. An Investor may cancel his participation in this Program or change the
amount of purchase at any time by mailing written notification to CGFSC, P.O.
Box 2798, Boston, MA 02208-2798 and notification will be effective three Busi-
ness Days following receipt. Excelsior Fund may modify or terminate this priv-
ilege at any time or charge a service fee, although no such fee currently is
contemplated. An Investor may also implement the Dollar Cost Averaging method
on his own initiative or through other entities.
DIVIDENDS AND DISTRIBUTIONS
Dividends from the net investment income of the Fund are declared and paid
quarterly. For dividend purposes, the Fund's investment income is reduced by
accrued expenses directly attributable to the Fund and the general expenses of
Excelsior Fund prorated to the Fund on the basis of its relative net assets.
The Fund's net investment income available for distribution to the holders of
Shares will be reduced by the amount of other expenses allocated to such se-
ries. Net realized capital gains are distributed at least annually. Dividends
and distributions will reduce the net asset value of the Fund by the amount of
the dividend or distribution. All dividends and distributions paid on Shares
held of record by the Investment Adviser and its affiliates or correspondent
banks will be paid in cash. Direct and Institutional Investors and Customers
of other Shareholder Organizations will receive dividends and distributions in
additional Shares of the Fund (as determined on the payable date), unless they
have requested in writing (received by CGFSC at Excelsior Fund's address prior
to the payment date) to receive dividends and distributions in cash. Rein-
vested dividends and distributions receive the same tax treatment as those
paid in cash.
TAXES
FEDERAL
The Fund qualified for its last taxable year as a "regulated investment com-
pany" under the Internal Revenue Code of 1986, as amended (the "Code"). The
Fund expects to so qualify in future years. Such qualification generally re-
lieves the Fund of liability for Federal income taxes to the extent its earn-
ings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code requires,
among other things, that the Fund distribute to its shareholders an amount
equal to at least 90% of its investment company taxable income for each tax-
able year. In general, the Fund's investment company taxable income will be
its income (including dividends and interest), subject to certain adjustments
and excluding the excess of any net long-term capital gain for the taxable
year over the net short-term capital loss, if any, for such year. The Fund in-
tends to distribute substantially all of its investment company taxable income
each year. Such dividends will be taxable as ordinary income to Fund share-
holders who are not currently exempt from Federal income taxes, whether such
income is received in cash or reinvested in additional Shares. (Federal income
taxes for
22
<PAGE>
distributions to IRAs and qualified pension plans are deferred under the
Code.) The dividends received deduction for corporations will apply to such
ordinary income distributions to the extent of the total qualifying dividends
received by the Fund from domestic corporations for the taxable year.
Distribution by the Fund of the excess of its net long-term capital gain over
its net short-term capital loss is taxable to shareholders as long-term capi-
tal gain, regardless of how long the shareholders have held their Shares and
whether such gains are received in cash or reinvested in additional Shares.
Such distributions are not eligible for the dividends received deduction.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to
have been received by shareholders and paid by the Fund on December 31 of such
year in the event such dividends are actually paid during January of the fol-
lowing year.
An investor considering buying Shares of the Fund on or just before the rec-
ord date of a dividend should be aware that the amount of the forthcoming div-
idend payment, although in effect a return of capital, will be taxable to him.
A taxable gain or loss may be realized by a shareholder upon his redemption,
transfer or exchange of Shares depending upon the tax basis of such Shares and
their price at the time of redemption, transfer or exchange. If a shareholder
holds Shares for six months or less and during that time receives a capital
gain dividend on those Shares, any loss recognized on the sale or exchange of
those Shares will be treated as a long-term capital loss to the extent of the
capital gain dividend. Generally, a shareholder may include sales charges in-
curred upon the purchase of Shares in his tax basis for such Shares for the
purpose of determining gain or loss on a redemption, transfer or exchange of
such Shares. However, if the shareholder effected an exchange of such Shares
for shares of another fund within 90 days of the purchase and was able to re-
duce the sales charges previously applicable to the new shares (by virtue of
the exchange privilege), the amount equal to such reduction may not be in-
cluded in the tax basis of the shareholder's exchanged Shares for the purpose
of determining gain or loss, but may be included (subject to the same limita-
tion) in the tax basis of the new shares.
Qualification as a regulated investment company under the Code also requires
that the Fund satisfy certain requirements with respect to the source of its
income for a taxable year. At least 90% of the gross income of the Fund must
be derived from qualifying income; i.e., dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of
stock, securities or foreign currencies, and other income (including, but not
limited to, gains from options, futures, or forward contracts) derived with
respect to the Fund's business of investing in such stock, securities or cur-
rencies. Since qualifying income does not include income derived from the sale
or other disposition of precious metals, the extent to which the Fund invests
in precious metals may be limited. The Treasury Department may by regulation
exclude from qualifying income foreign currency gains which are not directly
related to the Fund's principal business of investing in stock or securities,
or options and futures with respect to stock or securities. Any income derived
by the Fund from a partnership or trust is treated for this purpose as derived
with respect to the Fund's business of investing in stock, securities or cur-
rencies only to the extent that such income is attributable to items of income
which would have been qualifying income if realized by the Fund in the same
manner as by the partnership or trust.
The foregoing summarizes some of the important tax considerations generally
affecting the Fund and its shareholders and is not intended as a substitute
for careful tax planning. Accordingly, potential investors in the Fund should
consult their tax advisers with specific reference to their own tax situa-
tions. Sharehold-
23
<PAGE>
ers will be advised annually as to the Federal income tax consequences of dis-
tributions made each year.
STATE AND LOCAL
Purchasers are advised to consult their tax advisers concerning the applica-
tion of state and local taxes, which may have different consequences from
those of the Federal income tax law described above.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of Ex-
celsior Fund's Board of Directors. The Statement of Additional Information
contains the names of and general background information concerning Excelsior
Fund's directors.
INVESTMENT ADVISER
United States Trust Company of New York ("U.S. Trust New York") and U.S.
Trust Company of Connecticut ("U.S. Trust Connecticut" and, collectively with
U.S. Trust New York, "U.S. Trust" or the "Investment Adviser") serve as the
Investment Adviser to the Fund. U.S. Trust New York is a state-chartered bank
and trust company and a member bank of the Federal Reserve System and is one
of the twelve members of the New York Clearing House Association. U.S. Trust
Connecticut is a Connecticut state-chartered limited purpose trust company.
U.S. Trust New York and U.S. Trust Connecticut are wholly-owned subsidiaries
of U.S. Trust Corporation, a registered bank holding company.
The Investment Adviser provides trust and banking services to individuals,
corporations, and institutions both nationally and internationally, including
investment management, estate and trust administration, financial planning,
corporate trust and agency banking, and personal and corporate banking. On De-
cember 31, 1996, the Asset Management Groups of U.S. Trust New York and U.S.
Trust Connecticut had approximately $53 billion in aggregate assets under man-
agement. U.S. Trust New York has its principal offices at 114 W. 47th Street,
New York, New York 10036. U.S. Trust Connecticut has its principal offices at
225 High Ridge Road, East Tower, Stamford, CT 06905.
The Investment Adviser manages the Fund, makes decisions with respect to and
places orders for all purchases and sales of its portfolio securities, and
maintains records relating to such purchases and sales.
The Fund's portfolio manager, Michael E. Hoover, is the person primarily re-
sponsible for the day-to-day management of the Fund's investment portfolio.
Mr. Hoover, Vice President and Senior Analyst, has been with U.S. Trust since
1989 and has been the Fund's Portfolio Manager since December 1995.
For the services provided and expenses assumed pursuant to its Investment Ad-
visory Agreement, the Investment Adviser is entitled to be paid a fee, com-
puted daily and paid monthly, at the annual rate of .60% of the average daily
net assets of the Fund.
Prior to May 16, 1997, U.S. Trust New York served as investment adviser to
the Fund pursuant to an advisory agreement substantially similar to the In-
vestment Advisory Agreement currently in effect for the Fund. For the fiscal
year ended March 31, 1997, U.S. Trust New York received an advisory fee at the
effective annual rate of .55% of the average daily net assets of the Fund. For
the same period, U.S. Trust New York waived advisory fees at the effective an-
nual rate of .05% of the average daily net assets of the Fund.
From time to time, the Investment Adviser may voluntarily waive all or a por-
tion of the advisory fees payable to it by the Fund, which waiver may be ter-
minated at any time. See "Management of the Fund--Service Organizations" for
additional information on fee waivers.
In executing portfolio transactions for the Fund, the Investment Adviser may
use affiliated brokers in accordance with the requirements of the 1940 Act.
The Investment Adviser may also take into account the sale of Excelsior Fund's
Shares in allocating brokerage transactions.
24
<PAGE>
ADMINISTRATORS
CGFSC, Federated Administrative Services and U.S. Trust Connecticut serve as
the Fund's administrators (the "Administrators") and provide it with general
administrative and operational assistance. The Administrators also serve as
administrators of the other portfolios of Excelsior Fund and of all the port-
folios of Excelsior Tax-Exempt Fund and Excelsior Institutional Trust, which
are also advised by the Investment Adviser and its affiliates and distributed
by the Distributor. For the services provided to all portfolios of Excelsior
Fund, Excelsior Tax-Exempt Fund and Excelsior Institutional Trust (except the
international portfolios of Excelsior Fund and Excelsior Institutional Trust),
the Administrators are entitled jointly to annual fees, computed daily and
paid monthly, based on the combined aggregate average daily net assets of the
three companies (excluding the international portfolios of Excelsior Fund and
Excelsior Institutional Trust) as follows:
<TABLE>
<CAPTION>
COMBINED AGGREGATE AVERAGE DAILY NET ASSETS
OF EXCELSIOR FUND, EXCELSIOR TAX-EXEMPT FUND AND EXCELSIOR
INSTITUTIONAL TRUST (EXCLUDING THE INTERNATIONAL ANNUAL
PORTFOLIOS OF EXCELSIOR FUND AND EXCELSIOR INSTITUTIONAL TRUST) FEE
--------------------------------------------------------------- ------
<S> <C>
first $200 million..................................................... .200%
next $200 million...................................................... .175%
over $400 million...................................................... .150%
</TABLE>
Administration fees payable to the Administrators by each portfolio of Excel-
sior Fund, Excelsior Tax-Exempt Fund and Excelsior Institutional Trust are al-
located in proportion to their relative average daily net assets at the time
of determination. From time to time, the Administrators may voluntarily waive
all or a portion of the administration fee payable to them by the Fund, which
waivers may be terminated at any time. See "Management of the Fund--Service
Organizations" for additional information on fee waivers.
Prior to May 16, 1997, CGFSC, Federated Administrative Services and U.S.
Trust New York served as the Fund's administrators pursuant to an administra-
tion agreement substantially similar to the administration agreement currently
in effect for the Fund. For the fiscal year ended March 31, 1997, CGFSC, Fed-
erated Administrative Services and U.S. Trust New York received an aggregate
administration fee at the effective annual rate of .154% of the average daily
net assets of the Fund.
SERVICE ORGANIZATIONS
Excelsior Fund will enter into an agreement ("Servicing Agreement") with each
Service Organization requiring it to provide administrative support services
to its Customers beneficially owning Shares. As a consideration for the admin-
istrative services provided to Customers, the Fund will pay the Service Organ-
ization an administrative service fee at the annual rate of up to .40% of the
average daily net asset value of its Shares held by the Service Organization's
Customers. Such services, which are described more fully in the Statement of
Additional Information under "Management of the Funds--Service Organizations,"
may include assisting in processing purchase, exchange and redemption re-
quests; transmitting and receiving funds in connection with Customer orders to
purchase, exchange or redeem Shares; and providing periodic statements. Under
the terms of the Servicing Agreement, Service Organizations will be required
to provide to Customers a schedule of any fees that they may charge in connec-
tion with a Customer's investment. Until further notice, the Investment Ad-
viser and Administrators have voluntarily agreed to waive fees payable by the
Fund in an amount equal to administrative service fees payable by the Fund.
BANKING LAWS
Banking laws and regulations currently prohibit a bank holding company regis-
tered under the Federal Bank Holding Company Act of 1956 or any bank or non-
bank affiliate thereof from sponsoring, organizing or controlling a regis-
tered, open-end investment company continuously engaged in the issuance of its
shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Shares of the Fund, but such banking laws and
regulations do not prohibit such a holding company or affili-
25
<PAGE>
ate or banks generally from acting as investment adviser, transfer agent, or
custodian to such an investment company, or from purchasing shares of such
company for and upon the order of customers. The Investment Adviser, CGFSC and
certain Shareholder Organizations may be subject to such banking laws and reg-
ulations. State securities laws may differ from the interpretations of Federal
law discussed in this paragraph and banks and financial institutions may be
required to register as dealers pursuant to state law.
Should legislative, judicial, or administrative action prohibit or restrict
the activities of the Investment Adviser or other Shareholder Organizations in
connection with purchases of Fund Shares, the Investment Adviser and such
Shareholder Organizations might be required to alter materially or discontinue
the investment services offered by them to Customers. It is not anticipated,
however, that any resulting change in the Fund's method of operations would
affect its net asset values per Share or result in financial loss to any
shareholder.
DESCRIPTION OF CAPITAL STOCK
Excelsior Funds, Inc. (formerly UST Master Funds, Inc.) was organized as a
Maryland corporation on August 2, 1984. Currently, Excelsior Fund has autho-
rized capital of 35 billion shares of Common Stock, $.001 par value per share,
classified into 40 series of shares representing interests in 20 investment
portfolios. This Prospectus describes the Energy and Natural Resources Fund.
Each share in the Fund represents an equal proportionate interest in the Fund
with other shares of the same class, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the Fund as
are declared in the discretion of Excelsior Fund's Board of Directors. Excel-
sior Fund's Charter authorizes the Board of Directors to classify or reclas-
sify any class of shares into one or more additional classes or series.
Excelsior Fund's shareholders are entitled to one vote for each full share
held and fractional votes for fractional shares held and will vote in the ag-
gregate and not by class, except as otherwise expressly required by law.
Certificates for Shares will not be issued unless expressly requested in
writing to CGFSC and will not be issued for fractional Shares.
As of July , 1997, U.S. Trust and its affiliates held of record substan-
tially all of Excelsior Fund's outstanding shares as agent or custodian for
their customers, but did not own such shares beneficially because they did not
have voting or investment discretion with respect to such shares.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank ("Chase"), a wholly-owned subsidiary of The Chase
Manhattan Corporation, serves as the custodian of the Fund's assets. Communi-
cations to the custodian should be directed to Chase, Mutual Funds Service Di-
vision, 3 Chase MetroTech Center, 8th Floor, Brooklyn, NY 11245.
Chase may enter into an international sub-custodian agreement with a third
party providing for the custody of foreign securities held by the Fund.
U.S. Trust New York serves as the Fund's transfer and dividend disbursing
agent. U.S. Trust New York has entered into a sub-transfer agency arrangement
with CGFSC, 73 Tremont Street, Boston, Massachusetts 02108-3913, pursuant to
which CGFSC provides certain transfer agent, dividend disbursement and regis-
trar services to the Fund.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders, the per-
formance of the Shares of the Fund may be quoted and compared to that of other
mutual funds with similar investment objectives and to
26
<PAGE>
stock or other relevant indices or to rankings prepared by independent serv-
ices or other financial or industry publications that monitor the performance
of mutual funds. For example, the performance of the Fund may be compared to
data prepared by Lipper Analytical Services, Inc., a widely recognized inde-
pendent service which monitors the performance of mutual funds. The perfor-
mance of the Fund may be also compared to the Standard & Poor's 500 Stock In-
dex ("S&P 500"), an index of unmanaged groups of common stocks, the Consumer
Price Index, or the Dow Jones Industrial Average, a recognized unmanaged index
of common stocks of 30 industrial companies listed on the New York Stock Ex-
change.
Performance data as reported in national financial publications, including
but not limited to Money Magazine, Forbes, Barron's, The Wall Street Journal
and The New York Times, or in publications of a local or regional nature, may
also be used in comparing the performance of the Fund.
From time to time, the Fund may advertise its performance by using "average
annual total return" over various periods of time. Such total return figure
reflects the average percentage change in the value of an investment in the
Fund from the beginning date of the measuring period to the end of the measur-
ing period. Average total return figures will be given for the most recent
one-year period, and may be given for other periods as well (such as from the
commencement of the Fund's operations, or on a year-by-year basis). The Fund
may also use aggregate total return figures for various periods, representing
the cumulative change in the value of an investment in the Fund for the spe-
cific period. Both methods of calculating total return assume that dividends
and capital gain distributions made by the Fund during the period are rein-
vested in Fund Shares.
Performance will fluctuate and any quotation of performance should not be
considered as representative of the Fund's future performance. Shareholders
should remember that performance is generally a function of the kind and qual-
ity of the instruments held in a portfolio, operating expenses, and market
conditions. Any fees charged by Shareholder Organizations with respect to ac-
counts of Customers that have invested in Shares will not be included in cal-
culations of performance.
MISCELLANEOUS
Shareholders will receive unaudited semiannual reports describing the Fund's
investment operations and annual financial statements audited by the Fund's
independent auditors.
As used in this Prospectus, a "vote of the holders of a majority of the out-
standing shares" of Excelsior Fund or the Fund means, with respect to the ap-
proval of an investment advisory agreement or a change in a fundamental in-
vestment policy, the affirmative vote of the lesser of (a) more than 50% of
the outstanding shares of Excelsior Fund or the Fund, or (b) 67% or more of
the shares of Excelsior Fund or the Fund present at a meeting if more than 50%
of the outstanding shares of Excelsior Fund or the Fund are represented at the
meeting in person or by proxy.
Inquiries regarding the Fund may be directed to the Distributor at the ad-
dress listed under "Distributor."
27
<PAGE>
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION
OPENING YOUR ACCOUNT:
Complete the Application(s) FOR OVERNIGHT DELIVERY: send to:
and mail to:
Excelsior Funds Excelsior Funds
c/o Chase Global Funds c/o Chase Global Funds Services
Services Company Company --
P.O. Box 2798 Sub-Transfer Agent
Boston, MA 02208-2798 73 Tremont Street
Boston, MA 02108-3913
Please enclose with the Application(s) your check made payable to the "Ex-
celsior Funds" in the amount of your investment.
For direct wire purchases please refer to the section of the Prospectus en-
titled "How to Purchase and Redeem Shares--Purchase Procedures."
MINIMUM INVESTMENTS:
Except as provided in the Prospectus, the minimum initial investment is
$500; subsequent investments must be in the minimum amount of $50. Investments
may be made in excess of these minimums.
REDEMPTIONS:
Shares can be redeemed in any amount and at any time in accordance with pro-
cedures described in the Prospectus. In the case of shares recently purchased
by check, redemption proceeds will not be made available until the transfer
agent is reasonably assured that the check has been collected in accordance
with applicable banking regulations.
Certain legal documents will be required from corporations or other organi-
zations, executors and trustees, or if redemption is requested by anyone other
than the shareholder of record. Written redemption requests in excess of
$50,000 per account must be accompanied by signature guarantees.
SIGNATURES: Please be sure to sign the Application(s).
If the shares are registered in the name of:
- an individual, the individual should sign.
- joint tenants, both tenants should sign.
- a custodian for a minor, the custodian should sign.
- a corporation or other organization, an authorized officer should sign
(please indicate corporate office or title).*
- a trustee or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity).*
* A corporate resolution or appropriate certificate may be required.
QUESTIONS:
If you have any questions regarding the Application or redemption require-
ments, please contact the sub-transfer agent at (800) 446-1012 between 9:00
a.m. and 5:00 p.m. (Eastern Time).
28
<PAGE>
[LOGO] EXCELSIOR CHASE GLOBAL FUNDS SERVICES COMPANY NEW
FUNDS INC. CLIENT SERVICES ACCOUNT
P.O. Box 2798 APPLICATION
Boston, MA 02208-2798
(800) 446-1012
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
ACCOUNT REGISTRATION
-----------------------------------------------------------------------------
[_] Individual [_] Joint Tenants [_] Trust [_] Gift/Transfer to Minor
[_] Other
----------------------------------
Note: Joint tenant registration will be as "joint tenants
with right of survivorship" unless otherwise specified. Trust
registrations should specify name of the trust, trustee(s),
beneficiary(ies), and the date of the trust instrument.
Registration for Uniform Gifts/Transfers to Minors should be
in the name of one custodian and one minor and include the
state under which the custodianship is created (using the
minor's Social Security Number ("SSN")). For IRA accounts a
different application is required.
------------------------------ -----------------------------
Name(s) (please print) Social Security # or Taxpayer
------------------------------ Identification #
Name ( )
------------------------------ -----------------------------
Address Telephone #
------------------------------
City/State/Zip Code [_] U.S. Citizen [_] Other (specify) _____
-----------------------------------------------------------------------------
FUND SELECTION (THE MINIMUM INITIAL AND SUBSEQUENT INVESTMENT IS $500
AND $50, RESPECTIVELY. MAKE CHECKS PAYABLE TO "EXCELSIOR FUNDS.")
-----------------------------------------------------------------------------
FUND INITIAL INVESTMENT
[_] Energy and Natural Resource Fund $ ____________ 813
NOTE: If investing A. BY MAIL: Enclosed is a check in the
by wire, you must amount of $ _____ payable to "Excelsior
obtain a Bank Wire Funds."
Control Number. To B. BY WIRE: A bank wire in the amount
do so, please call of $ has been sent to the Fund
(800) 446-1012 and ---------------
ask for the Wire from
Desk. ------------------ ---------------------
Name of Bank Wire Control Number
CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS: All capital gain and
dividend distributions will be reinvested in additional
shares unless appropriate boxes below are checked:
All dividends are to be [_] reinvested [_] paid in cash
All capital gains are to be [_] reinvested [_] paid in cash
-----------------------------------------------------------------------------
ACCOUNT PRIVILEGES
-----------------------------------------------------------------------------
TELEPHONE EXCHANGE AND AUTHORITY TO TRANSMIT
REDEMPTION REDEMPTION PROCEEDS TO PRE-
DESIGNATED ACCOUNT.
I/We hereby authorize CGFSC to
act upon instructions received
by telephone to withdraw $500
[_] I/We appoint CGFSC as or more from my/our account in
my/our agent to act upon the Excelsior Funds and to
instructions received by wire the amount withdrawn to
telephone in order to effect the following commercial bank
the telephone exchange and account. I/We understand that
redemption privileges. I/We CGFSC charges an $8.00 fee for
hereby ratify any each wire redemption, which
instructions given pursuant will be deducted from the
to this authorization and proceeds of the redemption.
agree that Excelsior Fund,
Excelsior Tax-Exempt Fund, Title on Bank Account*_________
Excelsior Institutional
Trust, CGFSC and their Name of Bank __________________
directors, trustees,
officers and employees will Bank A.B.A. Number Account
not be liable for any loss, Number ________________________
liability, cost or expense
for acting upon instructions Bank Address __________________
believed to be genuine and
in accordance with the City/State/Zip Code ___________
procedures described in the (attach voided check here)
then current Prospectus. To
the extent that Excelsior A corporation, trust or
Fund, Excelsior Tax-Exempt partnership must also submit a
Fund and Excelsior "Corporate Resolution" (or
Institutional Trust fail to "Certificate of Partnership")
use reasonable procedures as indicating the names and
a basis for their belief, titles of officers authorized
they or their service to act on its behalf.
contractors may be liable * TITLE ON BANK AND FUND
for instructions that prove ACCOUNT MUST BE IDENTICAL.
to be fraudulent or
unauthorized.
I/We further acknowledge
that it is my/our
responsibility to read the
Prospectus of any Fund into
which I/we exchange.
[_] I/We do not wish to have
the ability to exercise
telephone redemption and
exchange privileges. I/We
further understand that all
exchange and redemption
requests must be in writing.
SPECIAL PURCHASE AND
REDEMPTION PLANS
I/We have completed and attached the
Supplemental Application for:
[_] Automatic Investment Plan
[_] Systematic Withdrawal Plan
<PAGE>
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
- -----------------------------------------------------------------
AGREEMENT AND SIGNATURES
- -----------------------------------------------------------------
By signing this application, I/we hereby certify under
penalty of perjury that the information on this application
is complete and correct and that as required by Federal law:
[_] I/WE CERTIFY THAT (1) THE NUMBER(S) SHOWN ON THIS FORM
IS/ARE THE CORRECT TAXPAYER IDENTIFICATION NUMBER(S) AND (2)
I/WE ARE NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE
I/WE HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE
THAT I/WE ARE SUBJECT TO BACKUP WITHHOLDING, OR THE IRS HAS
NOTIFIED ME/US THAT I AM/WE ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING. (NOTE: IF ANY OR ALL OF PART 2 IS NOT TRUE,
PLEASE STRIKE OUT THAT PART BEFORE SIGNING.)
[_] IF NO TAXPAYER IDENTIFICATION NUMBER ("TIN") OR SSN HAS
BEEN PROVIDED ABOVE, I/WE HAVE APPLIED, OR INTEND TO APPLY,
TO THE IRS OR THE SOCIAL SECURITY ADMINISTRATION FOR A TIN OR
A SSN, AND I/WE UNDERSTAND THAT IF I/WE DO NOT PROVIDE THIS
NUMBER TO CGFSC WITHIN 60 DAYS OF THE DATE OF THIS
APPLICATION, OR IF I/WE FAIL TO FURNISH MY/OUR CORRECT SSN OR
TIN, I/WE MAY BE SUBJECT TO A PENALTY AND A 31% BACKUP
WITHHOLDING ON DISTRIBUTIONS AND REDEMPTION PROCEEDS. (PLEASE
PROVIDE THIS NUMBER ON FORM W-9. YOU MAY REQUEST THE FORM BY
CALLING CGFSC AT THE NUMBER LISTED ABOVE).
I/We represent that I am/we are of legal age and capacity to
purchase shares of the Excelsior Funds. I/We have received,
read and carefully reviewed a copy of the Fund's current
Prospectus and agree to its terms and by signing below I/we
acknowledge that neither the Fund nor the Distributor is a
bank and that Fund Shares are not deposits or obligations of,
or guaranteed or endorsed by, U.S. Trust, its parent and
affiliates and the Shares are not federally insured by,
guaranteed by, obligations of or otherwise supported by the
U.S. Government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other governmental agency;
and that an investment in the Fund involves investment risks,
including possible loss of principal amount invested.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO
ANY PROVISIONS OF THIS FORM OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
X ___________________________ Date __________________________
Owner Signature
X ___________________________ Date __________________________
Co-Owner Signature
Sign exactly as name(s) of registered owner(s) appear(s) above
(including legal title if signing for a corporation, trust
custodial account, etc.).
- -----------------------------------------------------------------
FOR USE BY AUTHORIZED AGENT (BROKER/DEALER) ONLY
- -----------------------------------------------------------------
We hereby submit this application for the purchase of shares
in accordance with the terms of our selling agreement with
Edgewood Services, Inc., and with the Prospectus and
Statement of Additional Information of each Fund purchased.
----------------------------- -------------------------------
Investment Dealer's Name Source of Business Code
----------------------------- -------------------------------
Main Office Address Branch Number
----------------------------- -------------------------------
Representative's Number Representative's Name
----------------------------- -------------------------------
Branch Address Telephone
----------------------------- -------------------------------
Investment Dealer's Title
Authorized Signature
<PAGE>
[LOGO OF EXCELSIOR CHASE GLOBAL FUNDS SERVICES COMPANY SUPPLEMENTAL
FUND INC.] CLIENT SERVICES APPLICATION
P.O. Box 2798
Boston, MA 02208-2798
(800) 446-1012 SPECIAL INVESTMENT AND
WITHDRAWAL OPTIONS
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
ACCOUNT REGISTRATION PLEASE SUPPLY THE FOLLOWING INFORMATION EXACTLY AS IT
APPEARS ON THE FUND'S RECORD.
-----------------------------------------------------------------------------
Fund Name __________________ Account Number _________________
Owner Name _________________ Social Security or Taxpayer ID
Street Address _____________ Number _________________________
Resident City, State, Zip Code __________
of [_] U.S. [_] Other ____ [_] Check here if this is a
change of address
-----------------------------------------------------------------------------
DISTRIBUTION OPTIONS (DIVIDENDS AND CAPITAL GAINS WILL BE REINVESTED
UNLESS OTHERWISE INDICATED)
-----------------------------------------------------------------------------
A. CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS: All capital gain and dividend
distributions will be reinvested in additional shares unless appropriate
boxes below are checked:
All dividends are to be [_] reinvested [_] paid in cash
All capital gains are to be[_] reinvested [_] paid in cash
B. PAYMENT ORDER: Complete only if distribution checks are to be payable
to another party. Make distribution checks payable to:
Name of Your Bank ______________
Name _______________________ Bank Account Number ____________
Address ____________________ Address of Bank ________________
City, State, Zip Code ________________________________________
C. DISTRIBUTIONS REINVESTED-CROSS FUNDS: Permits all distributions from
one Fund to be automatically reinvested into another identically-
registered Excelsior Fund. (NOTE: You may NOT open a new Fund account with
this option.) Transfer all distributions earned:
From: ______________________ Account No. ____________________
(Fund)
To: ________________________ Account No. ____________________
(Fund)
-----------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN[_] YES[_] NO
-----------------------------------------------------------------------------
I/We hereby authorize CGFSC to debit my/our personal checking account on
the designated dates in order to purchase shares in the Fund indicated at
the top of this application at the applicable public offering price
determined on that day.
[_] Monthly on the 1st day[_] Monthly on the 15th day[_] Monthly on both
the 1st and 15th days
Amount of each debit (minimum $50
per Fund) $ ________________________
NOTE: A Bank Authorization Form (below) and a voided personal check must
accompany the Automatic Investment Plan application.
-----------------------------------------------------------------------------
EXCELSIOR FUNDS CLIENT SERVICES AUTOMATIC INVESTMENT PLAN
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
BANK AUTHORIZATION
-----------------------------------------------------------------------------
-------------------- ----------------------------------------
Bank Name Bank Address Bank Account Number
I/We authorize you, the above named bank, to debit my/our
account for amounts drawn by CGFSC, acting as my agent for
the purchase of Fund shares. I/We agree that your rights in
respect to each withdrawal shall be the same as if it were a
check drawn upon you and signed by me/us. This authority
shall remain in effect until revoked in writing and received
by you. I/We agree that you shall incur no liability when
honoring debits, except a loss due to payments drawn against
insufficient funds. I/We further agree that you will incur no
liability to me if you dishonor any such withdrawal. This
will be so even though such dishonor results in the
cancellation of that purchase.
---------------------------- --------------------------------
Account Holder's Name Joint Account Holder's Name
X ________________ _________ X __________________ ___________
Signature Date Signature Date
<PAGE>
- -----------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN[_] YES[_] NO NOT AVAILABLE FOR IRA'S
- -----------------------------------------------------------------
AVAILABLE TO SHAREHOLDERS WITH ACCOUNT BALANCES OF $10,000 OR
MORE.
I/We hereby authorize CGFSC to redeem the necessary number of
shares from my/our Excelsior Fund Account on the designated
dates in order to make the following periodic payments:
[_] Monthly on the 24th day [_] Quarterly on the 24th day of
January, April, July and October
[_] Other_____________________
(This request for participation in the Plan must be received
by the 18th day of the month in which you wish withdrawals to
begin.)
Amount of each check ($100 minimum) $______________
Please make check payable to: Recipient ________________________________
(To be completed Street Address ___________________________
only if redemption City, State, Zip Code ____________________
proceeds to be
paid to other
than account
holder of record
or mailed to
address other
than address of
record)
NOTE: If recipient of checks is not the registered
shareholder, signature(s) below must be guaranteed. A
corporation, trust or partnership must also submit a
"Corporate Resolution" (or "Certification of Partnership")
indicating the names and titles of officers authorized to act
on its behalf.
- -----------------------------------------------------------------
AGREEMENT AND SIGNATURES
- -----------------------------------------------------------------
The investor(s) certifies and agrees that the certifications,
authorizations, directions and restrictions contained herein
will continue until CGFSC receives written notice of any
change or revocation. Any change in these instructions must
be in writing with all signatures guaranteed (if applicable).
Date ______________________
X X
------------------------------- -----------------------------
Signature Signature
------------------------------- -----------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
X X
------------------------------- -----------------------------
Signature Signature
------------------------------- -----------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
*ELIGIBLE GUARANTORS: An Eligible Guarantor institution is a
bank, trust company, broker, dealer, municipal or government
securities broker or dealer, credit union, national
securities exchange, registered securities association,
clearing agency or savings association, provided that such
institution is a participant in STAMP, the Securities
Transfer Agents Medallion Program.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY......................................................... 2
EXPENSE SUMMARY............................................................ 3
FINANCIAL HIGHLIGHTS....................................................... 4
U.S. TRUST'S INVESTMENT PHILOSOPHY AND STRATEGIES.......................... 5
INVESTMENT OBJECTIVE AND
POLICIES.................................................................. 5
PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION..................... 9
INVESTMENT LIMITATIONS..................................................... 13
PRICING OF SHARES.......................................................... 14
HOW TO PURCHASE AND REDEEM SHARES.......................................... 15
INVESTOR PROGRAMS.......................................................... 19
DIVIDENDS AND DISTRIBUTIONS................................................ 22
TAXES...................................................................... 22
MANAGEMENT OF THE FUND..................................................... 24
DESCRIPTION OF CAPITAL STOCK............................................... 26
CUSTODIAN AND TRANSFER AGENT............................................... 26
PERFORMANCE INFORMATION.................................................... 26
MISCELLANEOUS.............................................................. 27
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION................................... 28
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF ADDI-
TIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OF-
FERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY EXCELSIOR
FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
EXCELSIOR FUND OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
[LOGO] EXCELSIOR
FUNDS INC.
ENERGY AND NATURAL RESOURCES FUND
Prospectus
September , 1997
<PAGE>
EXCELSIOR FUNDS, INC.
Energy and Natural Resources Fund
STATEMENT OF ADDITIONAL INFORMATION
September ___, 1997
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current prospectus for the Energy and Natural Resources
Fund (the "Fund") of Excelsior Funds, Inc. ("Excelsior Fund") dated September
___, 1997 (the "Prospectus"). Much of the information contained in this
Statement of Additional Information expands upon the subjects discussed in the
Prospectus. No investment in shares of the Fund described herein (the "Shares")
should be made without reading the Prospectus. A copy of the Prospectus may be
obtained by writing Excelsior Fund c/o Chase Global Funds Services Company, 73
Tremont Street, Boston, MA 02108-3913 or by calling (800) 446-1012.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
INVESTMENT OBJECTIVE AND POLICIES.................................. 1
Other Investment Considerations.................................. 1
Additional Information on Portfolio Instruments.................. 3
Additional Investment Limitations................................ 11
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..................... 13
INVESTOR PROGRAMS.................................................. 15
Systematic Withdrawal Plan....................................... 15
Exchange Privilege............................................... 15
Other Investor Programs.......................................... 16
DESCRIPTION OF CAPITAL STOCK....................................... 16
MANAGEMENT OF THE FUND............................................. 18
Directors and Officers........................................... 18
Investment Advisory and Administration Agreements................ 24
Service Organizations............................................ 26
Expenses......................................................... 27
Custodian and Transfer Agent..................................... 27
PORTFOLIO TRANSACTIONS............................................. 28
INDEPENDENT AUDITORS............................................... 31
COUNSEL............................................................ 31
ADDITIONAL INFORMATION CONCERNING TAXES............................ 31
PERFORMANCE INFORMATION............................................ 33
MISCELLANEOUS...................................................... 36
FINANCIAL STATEMENTS............................................... 36
APPENDIX........................................................... A-1
i
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
---------------------------------
The investment objective and policies of the Energy and Natural
Resources Fund (formerly, the Long-Term Supply of Energy Fund) are described in
the Prospectus. The following information supplements the description of the
Fund's investment objective and policies as set forth in the Prospectus.
Other Investment Considerations
- -------------------------------
The Fund invests primarily in common stocks, but may also purchase
both preferred stocks and securities convertible into common stock at the
discretion of United States Trust Company of New York ("U.S. Trust New York")
and U.S. Trust Company of Connecticut ("U.S. Trust Connecticut" and,
collectively, with U.S. Trust New York, the "Investment Adviser" or "U.S.
Trust"). While current income is secondary to the objective of long-term
capital appreciation, the Investment Adviser expects that the broad and varied
strategies utilized by it will result in somewhat more current income than would
be generated if the Investment Adviser utilized a single strategy more narrowly
focused on rapid growth of principal and involving exposure to higher levels of
risk.
The Investment Adviser's investment philosophy is to identify
investment values available in the market at attractive prices. Investment
value arises from the ability to generate earnings or from the ownership of
assets or resources. Underlying earnings potential and asset values are
frequently demonstrable but not recognized in the market prices of the
securities representing their ownership. The Investment Adviser employs the
following three different but closely interrelated portfolio strategies to focus
and organize its search for investment values.
1. Problem/Opportunity Companies. Important investment
-----------------------------
opportunities often occur where companies develop solutions to large, complex,
fundamental problems, such as declining industrial productivity; rising costs
and declining sources of energy; the economic imbalances and value erosion
caused by years of high inflation and interest rates; the soaring costs and
competing priorities of providing health care; and the accelerating
interdependence and "shrinking size" of the world.
Solutions or parts of solutions to large problems may be generated by
established companies or comparatively new companies of all sizes through the
development of new products, technologies or services, or through new
applications of older ones.
1
<PAGE>
Investment in such companies represents a very wide range of
investment potential, current income return rates, and exposure to fundamental
and market risks. Income generated by the Fund's investments in these companies
would be expected to be moderate, characterized by lesser rates than those of a
fund whose sole objective is current income, and somewhat higher rates than
those of a higher-risk growth fund.
2. Transaction Value Companies. In the opinion of the Investment
---------------------------
Adviser, the stock market frequently values the aggregate ownership of a company
at a substantially lower figure than its component assets would be worth if they
were sold off separately over time. Such assets may include intangible assets
such as product and market franchises, operating know-how, or distribution
systems, as well as such tangible properties as oil reserves, timber, real
estate, or production facilities. Investment opportunities in these companies
are determined by the magnitude of difference between economic worth and current
market price.
Market undervaluations are very often corrected by purchase and sale,
restructuring of the company, or market appreciation to recognize the actual
worth. The recognition process may well occur over time, however, incurring a
form of time-exposure risk. Success from investing in these companies is often
great, but may well be achieved only after a waiting period of inactivity.
Income derived from investing in undervalued companies is expected to
be moderately greater than that derived from investments in either the
Problem/Opportunity or Early Life Cycle companies.
3. Early Life Cycle Companies. Investments in Early Life Cycle
--------------------------
companies tend to be narrowly focused on an objective of higher rates of capital
appreciation. They correspondingly will involve a significantly greater degree
of risk and the reduction of current income to a negligible level. Such
investments will not be limited to new, small companies engaged only in frontier
technology, but will seek opportunities for maximum appreciation through the
full spectrum of business operations, products, services, and asset values.
Consequently, the Fund's investments in Early Life Cycle companies are primarily
in younger, small- to medium- sized companies in the early stages of their
development. Such companies are usually more flexible in trying new approaches
to problem-solving and in making new or different employment of assets. Because
of the high risk level involved, the ratio of success among such companies is
lower than the average, but for those companies which succeed, the magnitude of
investment reward is potentially higher.
-2-
<PAGE>
Additional Information on Portfolio Instruments
-----------------------------------------------
Options
-------
As stated in the Prospectus, the Fund may purchase put and call
options listed on a national securities exchange and issued by the Options
Clearing Corporation. Such purchases would be in an amount not exceeding 5% of
the Fund's net assets. Purchase of options is a highly specialized activity
which entails greater than ordinary investment risks. Regardless of how much
the market price of the underlying security increases or decreases, the option
buyer's risk is limited to the amount of the original investment for the
purchase of the option. However, options may be more volatile than the
underlying securities, and therefore, on a percentage basis, an investment in
options may be subject to greater fluctuation than an investment in the
underlying securities. A listed call option gives the purchaser of the option
the right to buy from a clearing corporation, and the writer has the obligation
to sell to the clearing corporation, the underlying security at the stated
exercise price at any time prior to the expiration of the option, regardless of
the market price of the security. The premium paid to the writer is in
consideration for undertaking the obligations under the option contract. A
listed put option gives the purchaser the right to sell to a clearing
corporation the underlying security at the stated exercise price at any time
prior to the expiration date of the option, regardless of the market price of
the security. Put and call options purchased by the Fund will be valued at the
last sale price or, in the absence of such a price, at the mean between bid and
asked prices.
Also as stated in the Prospectus, the Fund may engage in writing
covered call options and enter into closing purchase transactions with respect
to such options. When the Fund writes a covered call option, it may terminate
its obligation to sell the underlying security prior to the expiration date of
the option by executing a closing purchase transaction, which is effected by
purchasing on an exchange an option of the same series (i.e., same underlying
security, exercise price and expiration date) as the option previously written.
Such a purchase does not result in the ownership of an option. A closing
purchase transaction will ordinarily be effected to realize a profit on an
outstanding call option, to prevent an underlying security from being called, to
permit the sale of the underlying security or to permit the writing of a new
call option containing different terms on such underlying security. The cost of
such a liquidation purchase plus transaction costs may be greater than the
premium received upon the original option, in which event the writer will have
incurred a loss on the transaction. An option position may be closed out only
on an exchange which provides a secondary market for an option of the same
series. There is no assurance that a liquid secondary
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<PAGE>
market on an exchange will exist for any particular option. A covered option
writer, unable to effect a closing purchase transaction, will not be able to
sell the underlying security until the option expires or the underlying security
is delivered upon exercise, with the result that the writer in such
circumstances will be subject to the risk of market decline in the underlying
security during such period. The Fund will write an option on a particular
security only if the Investment Adviser believes that a liquid secondary market
will exist on an exchange for options of the same series, which will permit the
Fund to make a closing purchase transaction in order to close out its position.
When the Fund writes an option, an amount equal to the net premium
(the premium less the commission) received by the Fund is included in the
liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of the deferred credit will be subsequently marked
to market to reflect the current value of the option written. The current value
of the traded option is the last sale price or, in the absence of a sale, the
average of the closing bid and asked prices. If an option expires on the
stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund will realize a gain (or loss if the cost of a closing
purchase transaction exceeds the net premium received when the option is sold),
and the deferred credit related to such option will be eliminated. If an option
is exercised, the Fund may deliver the underlying security from its portfolio or
purchase the underlying security in the open market. In either event, the
proceeds of the sale will be increased by the net premium originally received,
and the Fund will realize a gain or loss. Premiums from expired call options
written by the Fund and net gains from closing purchase transactions are treated
as short-term capital gains for Federal income tax purposes, and losses on
closing purchase transactions are short-term capital losses.
Repurchase Agreements
---------------------
The repurchase price under the repurchase agreements described in the
Prospectus generally equals the price paid by the Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement). Securities subject
to repurchase agreements are held by the Fund's custodian (or sub-custodian) or
in the Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered loans by the Fund under the Investment Company Act of 1940, as
amended (the "1940 Act").
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<PAGE>
Futures Contracts and Related Options
-------------------------------------
The Fund may invest in futures contracts and options thereon. The
Fund may enter into interest rate futures contracts, precious metals futures
contracts and other types of financial futures contracts, including foreign
currency futures contracts, as well as any index or foreign market futures which
are available on recognized exchanges or in other established financial markets.
A futures contract on foreign currency creates a binding obligation on one party
to deliver, and a corresponding obligation on another party to accept delivery
of, a stated quantity of a foreign currency for an amount fixed in U.S. dollars.
Foreign currency futures, which operate in a manner similar to interest rate
futures contracts, may be used by the Fund to hedge against exposure to
fluctuations in exchange rates between the U.S. dollar and other currencies
arising from multinational transactions.
Futures contracts will not be entered into for speculative purposes,
but to hedge risks associated with the Fund's investments. Positions in futures
contracts may be closed out only on an exchange which provides a secondary
market for such futures. However, there can be no assurance that a liquid
secondary market will exist for any particular futures contract at any specific
time. Thus, it may not be possible to close a futures position. In the event
of adverse price movements, the Fund would continue to be required to make daily
cash payments to maintain its required margin. In such situations, if the Fund
has insufficient cash, it may have to sell portfolio holdings to meet daily
margin requirements at a time when it may be disadvantageous to do so. In
addition, the Fund may be required to make delivery of the instruments
underlying futures contracts it holds. The inability to close options and
futures positions also could have an adverse impact on the Fund's ability to
effectively hedge.
Successful use of futures by the Fund is also subject to the
Investment Adviser's ability to correctly predict movements in the direction of
the market. For example, if the Fund has hedged against the possibility of a
decline in the market adversely affecting securities or precious metals held by
it and securities or precious metals prices increase instead, the Fund will lose
part or all of the benefit to the increased value of its securities or precious
metals which it has hedged because it will have approximately equal offsetting
losses in its futures positions. In addition, in some situations, if the Fund
has insufficient cash, it may have to sell securities or precious metals to meet
daily variation margin requirements. Such sales of securities or precious
metals may be, but will not necessarily be, at increased prices which reflect
the rising market. The Fund may have to sell securities or precious metals at a
time when it may be disadvantageous to do so.
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<PAGE>
The risk of loss in trading futures contracts in some strategies can
be substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit, before any deduction for the
transaction costs, if the contract were closed out. Thus, a purchase or sale of
a futures contract may result in losses in excess of the amount invested in the
contract.
Utilization of futures transactions by the Fund involves the risk of
loss by the Fund of margin deposits in the event of bankruptcy of a broker with
whom the Fund has an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses.
The trading of futures contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal trading activity, which could at times make it
difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
Options on Futures Contracts
----------------------------
The Fund may purchase options on the futures contracts described
above. A futures option gives the holder, in return for the premium paid, the
right to buy (call) from or sell (put)
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to the writer of the option a futures contract at a specified price at any time
during the period of the option. Upon exercise, the writer of the option is
obligated to pay the difference between the cash value of the futures contract
and the exercise price. Like the buyer or seller of a futures contract, the
holder, or writer, of an option has the right to terminate its position prior to
the scheduled expiration of the option by selling, or purchasing, an option of
the same series, at which time the person entering into the closing transaction
will realize a gain or loss.
Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the purchase
of an option also entails the risk that changes in the value of the underlying
futures contract will not be fully reflected in the value of the option
purchased. Depending on the pricing of the option compared to either the
futures contract upon which it is based, or upon the price of the instruments
being hedged, an option may or may not be less risky than ownership of the
futures contract or such instruments. In general, the market prices of options
can be expected to be more volatile than the market prices on the underlying
futures contract. Compared to the purchase or sale of futures contracts,
however, the purchase of call or put options on futures contracts may frequently
involve less potential risk to the Fund because the maximum amount at risk is
the premium paid for the options (plus transaction costs). Although permitted
by its fundamental investment policies, the Fund does not currently intend to
write futures options, and will not do so in the future absent any necessary
regulatory approvals.
When-Issued and Forward Transactions
------------------------------------
When the Fund agrees to purchase securities on a "when-issued" or
forward commitment basis, the custodian will set aside liquid assets equal to
the amount of the commitment in a separate account. Normally, the custodian will
set aside portfolio securities to satisfy a purchase commitment and, in such
case, the Fund may be required subsequently to place additional liquid assets in
the separate account in order to ensure that the value of the account remains
equal to the amount of the Fund's commitment. It may be expected that the Fund's
net assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash.
Because the Fund will set aside liquid assets to satisfy its purchase
commitments in the manner described above, its liquidity and ability to manage
its portfolio might be affected in the event its forward commitments or
commitments to purchase "when-issued" securities ever exceed 25% of the value of
its assets.
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<PAGE>
The Fund will purchase securities on a "when-issued" or forward
commitment basis only with the intention of completing the transaction. If
deemed advisable as a matter of investment strategy, however, the Fund may
dispose of or renegotiate a commitment after it is entered into, and may sell
securities it has committed to purchase before those securities are delivered to
the Fund on the settlement date. In these cases, the Fund may realize a taxable
capital gain or loss.
When the Fund engages in "when-issued" or forward commitment
transactions, it relies on the other party to consummate the trade. Failure of
such other party to do so may result in the Fund incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a "when-issued" purchase
or a forward commitment to purchase securities and any subsequent fluctuations
in their market value are taken into account when determining the market value
of the Fund starting on the day the Fund agrees to purchase the securities. The
Fund does not earn interest on the securities it has committed to purchase until
they are paid for and delivered on the settlement date.
Forward Contracts on Foreign Currency and Precious Metals
---------------------------------------------------------
As noted in the Prospectus, the Fund may enter into forward foreign
currency exchange contracts for hedging purposes. The Fund may also enter into
forward contracts on precious metals in order to protect against adverse
fluctuations in the prices of such precious metals. Forward contracts may be
used for hedging to attempt to minimize the risk to the Fund from adverse
changes in the relationship between the U.S. dollar and foreign currencies. The
Fund intends to enter into forward foreign currency exchange contracts for
hedging purposes similar to those described above in connection with foreign
currency futures contracts. The Fund will enter into forward contracts on
precious metals in order to protect against a decline in the value of precious
metals held by the Fund or increases in the cost of precious metals to be
acquired, in a manner similar to its use of precious metals futures contracts.
A forward contract to sell a currency may be entered into in lieu of
the sale of a foreign currency futures contract where the Fund seeks to protect
against an anticipated increase in the exchange rate for a specific currency
which could reduce the dollar value of portfolio securities denominated in such
currency. Conversely, the Fund may enter into a forward contract to purchase a
given currency to protect against a projected increase in the dollar value of
securities denominated in such currency which the Fund intends to acquire. The
Fund may also
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<PAGE>
enter into a forward contract in order to assure itself of a predetermined
exchange rate in connection with a security denominated in a foreign currency.
In addition, the Fund may enter into forward contracts for "cross-hedging"
purposes (e.g., the purchase or sale of a forward contract on one type of
currency or precious metal as a hedge against adverse fluctuations in the value
of a second type of currency or precious metal).
If a hedging transaction in a forward contract is successful, the
decline in the value of portfolio securities or other assets or the increase in
the cost of securities or other assets to be acquired may be offset, at least in
part, by profits on the forward contract. Nevertheless, by entering into such a
forward contract, the Fund may be required to forego all or a portion of the
benefits which otherwise could have been obtained from favorable movements in
exchange rates or precious metals prices. The Fund does not intend, in most
instances, to hold forward contracts entered into until maturity, at which time
it would be required to deliver or accept delivery of the underlying currency or
precious metals, but will usually seek to close out positions in such contracts
by entering into offsetting transactions, which will serve to fix the Fund's
profit or loss based upon the value of the contracts at the time the offsetting
transaction is executed.
Hedging will not be limited to an overall percentage of the Fund's
assets, but will be employed as necessary to correspond to particular
transactions or positions. The Fund may not hedge its portfolio positions to an
extent greater than the aggregate market value (at the time of entering into the
forward contract) (i) of the securities held in its portfolio denominated,
quoted in, or currently convertible into that particular currency, or (ii) of
the precious metals held in its portfolio. When the Fund engages in forward
transactions, certain asset segregation requirements must be satisfied to ensure
that the use of such transactions is unleveraged. When the Fund takes a long
position in a forward contract, it must maintain a segregated account containing
liquid assets equal to the purchase price of the contract, less any margin or
deposit. When the Fund takes a short position in a forward contract, the Fund
must maintain a segregated account containing liquid assets in an amount equal
to the market value of the currency or precious metals underlying such contract
(less any margin or deposit), which amount must be at least equal to the market
price at which the short position was established. Asset segregation
requirements are not applicable when the Fund "covers" a forward position
generally by entering into an offsetting position.
The transaction costs to the Fund of engaging in forward transactions
vary with factors such as the currency or precious metals involved, the length
of the contract period and
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<PAGE>
prevailing currency or precious metals market conditions. Because forward
transactions are usually conducted on a principal basis, no fees or commissions
are involved. The use of forward contracts does not eliminate fluctuations in
the underlying prices of the securities or precious metals being hedged, but it
does establish a rate of exchange that can be achieved in the future. Thus,
although forward contracts used for hedging purposes may limit the risk of loss
due to an increase in the value of the hedged currency or precious metal, at the
same time they limit potential gain that might result were the contracts not
entered into. Further, the Investment Adviser may be incorrect in its
expectations as to currency or precious metal price fluctuations, and the Fund
may incur losses in connection with its forward transactions that it would not
otherwise incur. If a price movement in a particular currency or precious metal
is generally anticipated, the Fund may not be able to contract to sell or
purchase that currency or precious metal at an advantageous price.
At or before the maturity of a forward sale contract, the Fund may
make delivery of the currency (after selling a portfolio security) or precious
metals, or retain the security or precious metals and offset its contractual
obligation to deliver the currency or precious metals by purchasing a second
contract pursuant to which the Fund will obtain, on the same maturity date, the
same amount of the currency or precious metals which it is obligated to deliver.
If the Fund retains the security or precious metals and engages in an offsetting
transaction, the Fund, at the time of execution of the offsetting transaction,
will incur a gain or a loss to the extent that movement has occurred in forward
contract prices. Should forward prices decline during the period between the
Fund's entering into a forward contract for the sale of a currency or precious
metals and the date it enters into an offsetting contract for the purchase of
the currency or precious metals, the Fund will realize a gain to the extent the
price of the currency or precious metals it has agreed to sell exceeds the price
of the currency or precious metals it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent the price of the
currency or precious metals it has agreed to sell is less than the price of the
currency or precious metals it has agreed to purchase in the offsetting
contract. The foregoing principles generally apply also to forward purchase
contracts.
Real Estate Investment Trusts
-----------------------------
The Fund may invest in equity real estate investment trusts ("REITs").
REITs pool investors' funds for investment primarily in commercial real estate
properties. Investments in REITs may subject the Fund to certain risks. REITs
may be affected by changes in the value of the underlying property owned
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by the trust. REITs are dependent upon specialized management skill, may not be
diversified and are subject to the risks of financing projects. REITs are also
subject to heavy cash flow dependency, defaults by borrowers, self liquidation
and the possibility of failing to qualify for the beneficial tax treatment
available to REITs under the Internal Revenue Code of 1986, as amended, and to
maintain exemption from the 1940 Act. As a shareholder in a REIT, the Fund
would bear, along with other shareholders, its pro rata portion of the REIT's
operating expenses. These expenses would be in addition to the advisory and
other expenses the Fund bears directly in connection with its own operations.
Securities Lending
------------------
When the Fund lends its securities, it continues to receive interest
or dividends on the securities lent and may simultaneously earn interest on the
investment of the cash loan collateral, which will be invested in readily
marketable, high-quality, short-term obligations. Although voting rights, or
rights to consent, attendant to lent securities pass to the borrower, such loans
may be called at any time and will be called so that the securities may be voted
by the Fund if a material event affecting the investment is to occur.
Additional Investment Limitations
- ---------------------------------
In addition to the investment limitations disclosed in the Prospectus,
the Fund is subject to the investment limitations enumerated below. Fundamental
investment limitations may be changed with respect to the Fund only by a vote of
a majority of the holders of the Fund's outstanding Shares (as defined under
"Miscellaneous" in the Prospectus). However, investment limitations which are
"operating policies" with respect to the Fund may be changed by Excelsior Fund's
Board of Directors upon reasonable notice to investors.
The following investment limitations are fundamental with respect to
the Fund. The Fund may not:
1. Act as an underwriter of securities within the meaning of the
Securities Act of 1933, except insofar as it might be deemed to be an
underwriter upon disposition of certain portfolio securities acquired within the
limitation on purchases of restricted securities;
2. Purchase or sell real estate, except that the Fund may purchase
securities of issuers which deal in real estate and may purchase securities
which are secured by interests in real estate;
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<PAGE>
3. Issue any senior securities, except insofar as any borrowing in
accordance with the Fund's investment limitation contained in the Prospectus
might be considered to be the issuance of a senior security; and
4. Purchase or sell commodities or invest in oil, gas, or other
mineral exploration or development programs; provided, however, that the Fund
may, in accordance with its investment objective and policies, (i) purchase
publicly traded securities of companies engaging in whole or in part in such
activities or invest in liquidating trust receipts, certificates of beneficial
ownership or other instruments, (ii) enter into commodity futures contracts and
other futures contracts, (iii) enter into options on commodities and futures
contracts, (iv) invest in gold and other precious metal bullion and coins, and
(v) enter into forward contracts on foreign currencies and precious metals.
The following investment limitations are operating policies with
respect to the Fund. The Fund may not:
5. Purchase securities on margin, make short sales of securities, or
maintain a short position;
6. Invest in or sell put options, call options, straddles, spreads,
or any combination thereof; provided, however, that the Fund may write covered
call options with respect to its portfolio securities that are traded on a
national securities exchange, and may enter into closing purchase transactions
with respect to such options if, at the time of the writing of such option, the
aggregate value of the securities subject to the options written by the Fund
does not exceed 25% of the value of its total assets; and provided that the Fund
may purchase options and other rights in accordance with its investment
objective and policies;
7. Invest in companies for the purpose of exercising management or
control;
8. Invest more than 5% of its total assets in securities issued by
companies which, together with any predecessor, have been in continuous
operation for fewer than three years; and
9. Acquire any other investment company or investment company
security, except in connection with a merger, consolidation, reorganization, or
acquisition of assets or where otherwise permitted by the 1940 Act.
* * *
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<PAGE>
For the purpose of Investment Limitation No. 2, the prohibition of
purchases of real estate includes acquisition of limited partnership interests
in partnerships formed with a view toward investing in real estate, but does not
prohibit purchases of shares in real estate investment trusts.
In addition to the above investment limitations, Excelsior Fund
currently intends to limit the Fund's investments in warrants so that, valued at
the lower of cost or market value, they do not exceed 5% of the net assets of
the Fund. Included within that amount, but not to exceed 2% of the value of the
Fund's net assets, may be warrants which are not listed on the New York or
American Stock Exchanges. For the purpose of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to be without
value. The Fund also intends to refrain from entering into arbitrage
transactions.
If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in value
of the Fund's investments will not constitute a violation of such limitation.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
----------------------------------------------
Shares are continuously offered for sale by Edgewood Services, Inc.
(the "Distributor"), a wholly-owned subsidiary of Federated Investors, and the
Distributor has agreed to use appropriate efforts to solicit all purchase
orders. As described in the Prospectus, Shares may be sold to customers
("Customers") of financial institutions ("Shareholder Organizations"). Shares
are also offered for sale directly to institutional investors and to members of
the general public. Different types of Customer accounts at the Shareholder
Organizations may be used to purchase Shares, including eligible agency and
trust accounts. In addition, Shareholder Organizations may automatically
"sweep" a Customer's account not less frequently than weekly and invest amounts
in excess of a minimum balance agreed to by the Shareholder Organization and its
Customer. Investors purchasing Shares may include officers, directors, or
employees of the particular Shareholder Organization.
Shares of the Fund are offered for sale at their net asset value per
Share next computed after a purchase order is received by Excelsior Fund's sub-
transfer agent.
Prior to March 1, 1997, Shares of the Fund were offered for sale with
a maximum sales charge of 4.50%. For the fiscal years ended March 31, 1997,
1996 and 1995, total sales charges paid by shareholders of the Fund were $1,141,
$0, and $84, respectively. The Distributor retained $696 and $0 of the
foregoing sales charges with respect to the Fund for the fiscal
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year ended March 31, 1997 and for the period August 1, 1995 through March 31,
1996, respectively. UST Distributors, Inc., Excelsior Fund's former
distributor, retained $0 and $84 of the sales charges with respect to the Fund
for the period April 1, 1995 through July 31, 1995 and for the fiscal year ended
March 31, 1995, respectively. The balance was paid to selling dealers.
Excelsior Fund may suspend the right of redemption or postpone the
date of payment for Shares for more than 7 days during any period when (a)
trading on the New York Stock Exchange (the "Exchange") is restricted by
applicable rules and regulations of the Securities and Exchange Commission
("SEC"); (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC.
In the event that Shares are redeemed in cash at their net asset
value, a shareholder may receive in payment for such Shares an amount that is
more or less than his original investment due to changes in the market prices of
the Fund's portfolio securities.
Excelsior Fund reserves the right to honor any request for redemption
or repurchase of the Fund's Shares by making payment in whole or in part in
securities chosen by Excelsior Fund and valued in the same way as they would be
valued for purposes of computing the Fund's net asset value. If payment is made
in securities, a shareholder may incur transaction costs in converting these
securities into cash. Such redemptions in kind will be governed by Rule 18f-1
under the 1940 Act so that the Fund is obligated to redeem its Shares solely in
cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day
period for any one shareholder of the Fund.
Under limited circumstances, Excelsior Fund may accept securities as
payment for Shares. Securities acquired in this manner will be limited to
securities issued in transactions involving a bona fide reorganization or
---------
statutory merger, or will be limited to other securities (except for municipal
debt securities issued by state political subdivisions or their agencies or
instrumentalities) that: (a) meet the investment objective and policies of the
Fund; (b) are acquired for investment and not for resale; (c) are liquid
securities that are not restricted as to transfer either by law or liquidity of
market; and (d) have a value that is readily ascertainable (and not established
only by evaluation procedures) as evidenced by a listing on the American Stock
Exchange, New York Stock Exchange or NASDAQ, or as evidenced by their status as
U.S. Government securities, bank certificates of deposit, banker's acceptances,
corporate and other debt securities that are actively traded, money market
securities and other similar securities with a readily ascertainable value.
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INVESTOR PROGRAMS
-----------------
Systematic Withdrawal Plan
- --------------------------
An investor who owns Shares with a value of $10,000 or more may begin
a Systematic Withdrawal Plan. The withdrawal can be on a monthly, quarterly,
semiannual or annual basis. There are four options for such systematic
withdrawals. The investor may request:
(1) A fixed-dollar withdrawal;
(2) A fixed-share withdrawal;
(3) A fixed-percentage withdrawal (based on the current value of the
account); or
(4) A declining-balance withdrawal.
Prior to participating in a Systematic Withdrawal Plan, the investor must
deposit any outstanding certificates for Shares with Chase Global Funds Services
Company, the Fund's sub-transfer agent. Under this Plan, dividends and
distributions are automatically reinvested in additional Shares of the Fund.
Amounts paid to investors under this Plan should not be considered as income.
Withdrawal payments represent proceeds from the sale of Shares, and there will
be a reduction of the shareholder's equity in the Fund if the amount of the
withdrawal payments exceeds the dividends and distributions paid on the Shares
and the appreciation of the investor's investment in the Fund. This in turn may
result in a complete depletion of the shareholder's investment. An investor may
not participate in a program of systematic investing in the Fund while at the
same time participating in the Systematic Withdrawal Plan with respect to an
account in the Fund. Customers of Shareholder Organizations may obtain
information on the availability of, and the procedures and fees relating to, the
Systematic Withdrawal Plan directly from their Shareholder Organizations.
Exchange Privilege
- ------------------
Investors and Customers of Shareholder Organizations may exchange
Shares having a value of at least $500 for shares of the same series of any
other portfolio of Excelsior Fund or Excelsior Tax-Exempt Funds, Inc.
("Excelsior Tax-Exempt Fund" and, collectively with Excelsior Fund, the
"Companies") or for Trust Shares of certain portfolios of Excelsior
Institutional Trust. Shares may be exchanged by wire, telephone or mail and must
be made to accounts of identical registration. There is no exchange fee imposed
by the Companies or Excelsior Institutional Trust. Excelsior Institutional Trust
currently offers Trust Shares
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<PAGE>
in its Value Equity and Optimum Growth Funds. In order to prevent abuse of
this privilege to the disadvantage of other shareholders, the Companies and
Excelsior Institutional Trust reserve the right to limit the number of exchange
requests of investors to no more than six per year. The Companies and Excelsior
Institutional Trust may modify or terminate the exchange program at any time
upon 60 days' written notice to shareholders, and may reject any exchange
request. Customers of Shareholder Organizations may obtain information on the
availability of, and the procedures relating to, such programs directly from
their Shareholder Organizations.
For Federal income tax purposes, exchanges are treated as sales on
which the shareholder will realize a gain or loss, depending upon whether the
value of the Shares to be given up in exchange is more or less than the basis in
such Shares at the time of the exchange. Generally, a shareholder may include
sales loads incurred upon the purchase of Shares in his or her tax basis for
such Shares for the purpose of determining gain or loss on a redemption,
transfer or exchange of such Shares. However, if the shareholder effected an
exchange of Shares for shares of another portfolio of the Companies within 90
days of the purchase and was able to reduce the sales load previously applicable
to the new shares (by virtue of the Companies' exchange privilege), the amount
equal to such reduction may not be included in the tax basis of the
shareholder's exchanged Shares but may be included (subject to the limitation)
in the tax basis of the new shares.
Other Investor Programs
- -----------------------
As described in the Prospectus, Shares of the Fund may be purchased in
connection with the Automatic Investment Program, and certain Retirement
Programs. Customers of Shareholder Organizations may obtain information on the
availability of, and the fees and procedures relating to, such programs directly
from their Shareholder Organizations.
DESCRIPTION OF CAPITAL STOCK
----------------------------
Excelsior Fund's Charter authorizes its Board of Directors to issue up
to thirty-five billion full and fractional shares of capital stock, and to
classify or reclassify any unissued shares of Excelsior Fund into one or more
classes or series by setting or changing in any one or more respects their
respective preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption. Excelsior Fund's prospectuses describe the classes of shares into
which Excelsior Fund's authorized capital is currently classified.
-16-
<PAGE>
Shares have no preemptive rights and only such conversion or exchange
rights as the Board of Directors may grant in its discretion. When issued for
payment as described in the Prospectus, Shares will be fully paid and non-
assessable. In the event of a liquidation or dissolution of the Fund,
shareholders of the Fund are entitled to receive the assets available for
distribution belonging to the Fund and a proportionate distribution, based upon
the relative asset values of Excelsior Fund's portfolios, of any general assets
of Excelsior Fund not belonging to any particular portfolio of Excelsior Fund
which are available for distribution. In the event of a liquidation or
dissolution of Excelsior Fund, its shareholders will be entitled to the same
distribution process.
Shareholders of Excelsior Fund are entitled to one vote for each full
share held, and fractional votes for fractional shares held, and will vote in
the aggregate and not by class, except as otherwise required by the 1940 Act or
other applicable law or when the matter to be voted upon affects only the
interests of the shareholders of a particular class. Voting rights are not
cumulative and, accordingly, the holders of more than 50% of the aggregate of
Excelsior Fund's shares may elect all of Excelsior Fund's directors, regardless
of votes of other shareholders.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as Excelsior Fund shall not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
shares of each portfolio affected by the matter. A portfolio is affected by a
matter unless it is clear that the interests of each portfolio in the matter are
substantially identical or that the matter does not affect any interest of the
portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to a portfolio only if approved by a majority of the outstanding
shares of such portfolio. However, the Rule also provides that the ratification
of the appointment of independent public accountants, the approval of principal
underwriting contracts, and the election of directors may be effectively acted
upon by shareholders of Excelsior Fund voting without regard to class.
Excelsior Fund's Charter authorizes its Board of Directors, without
shareholder approval (unless otherwise required by applicable law), to (a) sell
and convey the assets of the Fund to another management investment company for
consideration which may include securities issued by the purchaser and, in
connection therewith, to cause all outstanding Shares of the Fund to be redeemed
at a price which is equal to their net asset value and which may be paid in cash
or by
-17-
<PAGE>
distribution of the securities or other consideration received from the sale and
conveyance; (b) sell and convert the Fund's assets into money and, in connection
therewith, to cause all outstanding Shares of the Fund to be redeemed at their
net asset value; or (c) combine the assets belonging to the Fund with the assets
belonging to another portfolio of Excelsior Fund, if the Board of Directors
reasonably determines that such combination will not have a material adverse
effect on shareholders of any portfolio participating in such combination, and,
in connection therewith, to cause all outstanding Shares of the Fund to be
redeemed at their net asset value or converted into shares of another class of
Excelsior Fund's capital stock at net asset value. The exercise of such
authority by the Board of Directors will be subject to the provisions of the
1940 Act, and the Board of Directors will not take any action described in this
paragraph unless the proposed action has been disclosed in writing to the Fund's
shareholders at least 30 days prior thereto.
Notwithstanding any provision of Maryland law requiring a greater vote
of Excelsior Fund's Common Stock (or of the Shares of a fund voting separately
as a class) in connection with any corporate action, unless otherwise provided
by law (for example, by Rule 18f-2, discussed above) or by Excelsior Fund's
Charter, Excelsior Fund may take or authorize such action upon the favorable
vote of the holders of more than 50% of the outstanding Common Stock of
Excelsior Fund voting without regard to class or series.
MANAGEMENT OF THE FUND
----------------------
Directors and Officers
- ----------------------
The directors and executive officers of Excelsior Fund, their
addresses, ages, principal occupations during the past five years, and other
affiliations are as follows:
<TABLE>
<CAPTION>
Position Principal Occupation
with During Past 5 Years and
Name and Address Excelsior Fund Other Affiliations
- ---------------- -------------------------- ----------------------------
<S> <C> <C>
Frederick S. Wonham/1/ Chairman of the Retired; Director of Excelsior
238 June Road Board, President Fund and Excelsior Tax-Exempt
Stamford, CT 06903 and Treasurer (since 1995); Trustee of
Age: 66 Excelsior Funds and Excelsior
Institutional Trust (since 1995);
Vice Chairman of U.S. Trust
Corporation and U.S. Trust
</TABLE>
/1/ This director is considered to be an "interested person" of Excelsior Fund
as defined in the 1940 Act.
-18-
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupation
with During Past 5 Years and
Name and Address Excelsior Fund Other Affiliations
- ---------------- -------------------------- ----------------------------
<S> <C> <C>
Company of New York (from February
1990 until September 1995); Chairman,
U.S. Trust Company of Connecticut
(from March 1993 to May 1997).
Donald L. Campbell Director Retired; Director of Excelsior Fund and
333 East 69th Street Excelsior Tax-Exempt (since 1984);
New York, NY 10021 Director of UST Master Variable Series,
Apt. 10-H Inc. (from 1994 to June 1997); Trustee
Age: 71 of Excelsior Institutional Trust (since
1995); Director, Royal Life Insurance
Co. of New York (since 1991).
Rodman L. Drake Director Director, Excelsior Fund and
c/o KMR Power Corp. Excelsior Tax-Exempt Fund (since
30 Rockfeller Plaza 1996); Trustee, Excelsior Institutional
Suite 5425 Trust and Excelsior Funds (since
New York, NY 10112 1994); Director, Parsons Brinkerhoff,
Age: 54 Inc. (engineering firm) (since 1995);
President, Mandrake Group (investment
and consulting firm) (since 1994);
Director, Hyperion Total Return Fund,
Inc. and four other funds for which
Hyperion Capital Management, Inc.
serves as investment adviser (since
1991); Co-Chairman, KMR Power
Corporation (power plants) (since
1993); Director, The Latin American
Growth Fund (since 1993); Member of
Advisory Board, Argentina Private
Equity Fund L.P. (from 1992 to 1996)
and Garantia L.P. (Brazil) (from 1993
to 1996); and Director, Mueller
Industries, Inc. (from 1992 to 1994).
Joseph H. Dugan Director Retired; Director of Excelsior Fund
913 Franklin Lakes Road and Excelsior Tax-Exempt (since 1984);
Franklin Lakes, NJ 07417 Director of UST Master Variable Series,
Age: 72 Inc. (from 1994 to June 1997); Trustee
of Excelsior Institutional Trust (since
1995).
Wolfe J. Frankl Director Retired; Director of Excelsior Fund and
2320 Cumberland Road Excelsior Tax-Exempt (since 1986);
Charlottesville, VA 22901 Director of UST Master
Age: 76
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupation
with During Past 5 Years and
Name and Address Excelsior Fund Other Affiliations
- ---------------- -------------------------- ----------------------------
<S> <C> <C>
Variable Series, Inc. (from 1994
to June 1997); Trustee of Excelsior
Institutional Trust (since 1995);
Director, Deutsche Bank Financial,
Inc. (since 1989); Director, The
Harbus Corporation (since 1951);
Trustee, HSBC Funds Trust and
HSBC Mutual Funds Trust (since 1988).
W. Wallace McDowell, Jr. Director Director, Excelsior Fund and Excelsior
c/o Prospect Capital Tax-Exempt Fund (since 1996); Trustee,
Corp. Excelsior Institutional Trust
43 Arch Street and Excelsior Funds (since 1994); Private
Greenwich, CT 06830 Investor (since 1994); Managing Director,
Age: 60 Morgan Lewis Githens & Ahn (from 1991
to 1994); and Director, U.S. Homecare
Corporation (since 1992), Grossmans,
Inc. (from 1993 to 1996), Children's
Discovery Centers (since 1984), ITI
Technologies, Inc. (since 1992) and
Jack Morton Productions (since 1987).
Jonathan Piel Director Director, Excelsior Fund and Excelsior
558 E. 87th Street Tax-Exempt Fund (since 1996); Trustee,
New York, NY 10128 Excelsior Institutional Trust and
Age: 58 Excelsior Funds (since 1994);
President of Scientific American, Inc.
(from 1984 to 1986) and Vice President
and Editor, Scientific American (1986-
1994); Director, Group for The South
Fork, Bridgehampton, New York (since
1993); and Member, Advisory Committee,
Knight Journalism Fellowships,
Massachusetts Institute of Technology
(since 1984).
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupation
with During Past 5 Years and
Name and Address Excelsior Fund Other Affiliations
- ---------------- -------------------------- ----------------------------
<S> <C> <C>
Robert A. Robinson Director Director of Excelsior Fund
Church Pension Fund and Excelsior Tax-Exempt
800 Second Avenue (since 1997); Director of UST
New York, NY 10017 Master Variable Series, Inc.
Age: 72 (from 1994 to June 1997);
Trustee of Excelsior Institutional
Trust (since 1995); President Emeritus,
The Church Pension Fund and its
affiliated companies (since 1966);
Trustee, H.B. and F.H. Bugher
Foundation and Director of its wholly
owned subsidiaries --Rosiclear Lead and
Flourspar Mining Co. and The Pigmy
Corporation (since 1984); Director,
Morehouse Publishing Co. (since 1974);
Trustee, HSBC Funds Trust and HSBC
Mutual Funds Trust (since 1982);
Director, Infinity Funds, Inc. (since
1995).
Alfred C. Tannachion/1/ Director Retired; Director of Excelsior Fund and
6549 Pine Meadows Drive Excelsior Tax-Exempt (since 1985);
Spring Hill, FL 34606 Chairman of the Board, President and
Age: 71 Treasurer of UST Master Variable Series,
Inc. (from 1994 to June 1997); Trustee of
Excelsior Institutional Trust (since
1995).
W. Bruce McConnel, III Secretary Partner of the law firm of Drinker
Philadelphia National Biddle & Reath LLP.
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Age: 54
Gregory Sackos Assistant Second Vice President, Senior
Chase Global Funds Secretary Manager of Blue Sky Compliance
Services Company and Financial Reporting, Chase
73 Tremont Street Global Funds Services Company
Boston, MA 02108-3913 (March 1997 to present); Second
Age: 32 Vice President, Senior Manager of
Financial Reporting, Chase Global
Funds Services Company (September 1996
to March 1997); Assistant Vice
President, Assistant Manager of
Financial Reporting, Scudder, Stevens &
Clark Inc. (October 1992 to September
1996).
</TABLE>
- ----------
/1/ This director is considered to be an "interested person" of Excelsior Fund
as defined in the 1940 Act.
-21-
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupation
with During Past 5 Years and
Name and Address Excelsior Fund Other Affiliations
- ---------------- -------------------------- ----------------------------
<S> <C> <C>
John M. Corcoran Assistant Vice President, Director of
Chase Global Funds Treasurer Administration, Client Group,
Services Company Chase Global Funds Services
73 Tremont Street Company (since July 1996);
Boston, MA 02108-3913 Second Vice President, Manager
Age: 32 of Administration, Chase Global
Funds Services Company (from October
1993 to July 1996); Audit Manager,
Ernst & Young LLP (from August 1987 to
September 1993).
</TABLE>
Each director of Excelsior Fund receives an annual fee of $9,000 plus
a meeting fee of $1,500 for each meeting attended and is reimbursed for expenses
incurred in attending meetings. The Chairman of the Board is entitled to
receive an additional $5,000 per annum for services in such capacity. Drinker
Biddle & Reath LLP, of which Mr. McConnel is a partner, receives legal fees as
counsel to Excelsior Fund. The employees of Chase Global Funds Services Company
do not receive any compensation from Excelsior Fund for acting as officers of
Excelsior Fund. No person who is currently an officer, director or employee of
the Investment Adviser serves as an officer, director or employee of Excelsior
Fund. As of July 14, 1997, the directors and officers of Excelsior Fund as a
group owned beneficially less than 1% of the outstanding Shares of each fund of
Excelsior Fund, and less than 1% of the outstanding Shares of all funds of
Excelsior Fund in the aggregate.
The following chart provides certain information about the fees
received by Excelsior Fund's directors in the most recently completed fiscal
year.
-22-
<PAGE>
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Compensation
Accrued as from Excelsior Fund
Aggregate Part of and Fund
Name of Compensation from Fund Complex* Paid
Person/Position Excelsior Fund Expenses to Directors
--------------- ----------------- -------- --------------
<S> <C> <C> <C>
Donald L. Campbell $13,500 None $31,750 (4)**
Director
Rodman L. Drake*** $ 3,750 None $12,250 (4)**
Director
Joseph H. Dugan $15,000 None $35,000 (4)**
Director
Wolfe J. Frankl $15,000 None $35,000 (4)**
Director
W. Wallace McDowell, Jr.*** $ 2,250 None $ 9,250 (4)**
Director
Jonathan Piel*** $ 3,750 None $12,500 (4)**
Director
Robert A. Robinson $15,000 None $35,000 (4)**
Director
Alfred C. Tannachion**** $20,000 None $45,000 (4)**
Director
Frederick S. Wonham**** $15,000 None $35,000 (4)**
Chairman of the Board,
President and Treasurer
</TABLE>
- ---------------------------
/*/ The "Fund Complex" consists of Excelsior Fund, Excelsior Tax-Exempt
Fund, UST Master Variable Series, Inc., Excelsior Funds and Excelsior
Institutional Trust. UST Master Variable Series, Inc. has ceased
investment operations and was deregistered as an investment company
in October 1996.
/**/ Number of investment companies in the Fund Complex for which director
serves as director or trustee.
/***/ Messrs. Drake, McDowell and Piel were elected to the Board of
Excelsior Fund and Excelsior Tax-Exempt Fund on December 9, 1996.
/****/ Mr. Tannachion served as Excelsior Fund's Chairman of the Board,
President and Treasurer until February 13, 1997. On that date, Mr.
Wonham was elected to serve as Excelsior Fund's Chairman of the Board,
President and Treasurer.
-23-
<PAGE>
Investment Advisory and Administration Agreements
- -------------------------------------------------
United States Trust Company of New York ("U.S. Trust New York") and
U.S. Trust Company of Connecticut ("U.S. Trust Connecticut" and, collectively
with U.S. Trust New York, "U.S. Trust" or the "Investment Adviser") serve as
Investment Adviser to the Fund. In the Investment Advisory Agreement, the
Investment Adviser has agreed to provide the services described in the
Prospectus. The Investment Adviser has also agreed to pay all expenses incurred
by it in connection with its activities under such agreement other than the cost
of securities, including brokerage commissions, purchased for the Fund.
Prior to May 16, 1997, U.S. Trust New York served as investment
adviser to the Fund pursuant to an advisory agreement substantially similar to
the Investment Advisory Agreement currently in effect for the Fund.
For the fiscal year ended March 31, 1995, Excelsior Fund paid U.S.
Trust New York advisory fees of $48,882 with respect to the Fund. For the same
period, U.S. Trust New York waived advisory fees totalling $20,193 with respect
to the Fund.
For the fiscal year ended March 31, 1996, Excelsior Fund paid U.S.
Trust New York advisory fees of $114,497 with respect to the Fund. For the same
period, U.S. Trust New York waived advisory fees totalling $10,935 with respect
to the Fund.
For the fiscal year ended March 31, 1997, Excelsior Fund paid U.S.
Trust New York advisory fees of $165,176 with respect to the Fund. For the same
period, U.S. Trust New York waived advisory fees totalling $12,264 with respect
to the Fund.
The Investment Advisory Agreement provides that the Investment Adviser
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the performance of such agreement,
except the Investment Adviser shall be jointly, but not severally, liable for a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser in the
performance of its duties or from reckless disregard by it of its duties and
obligations thereunder. In addition, the Investment Adviser has undertaken in
the Investment Advisory Agreement to maintain its policy and practice of
conducting its asset management activities independently of its banking
activities.
Chase Global Funds Services Company ("CGFSC"), Federated
Administrative Services, an affiliate of the Distributor, and U.S. Trust
Connecticut (the "Administrators")
-24-
<PAGE>
serve as the Fund's administrators. Under the Administration Agreement, the
Administrators have agreed to maintain office facilities for the Fund, furnish
the Fund with statistical and research data, clerical, accounting and
bookkeeping services, and certain other services required by the Fund, and to
compute the net asset value, net income and realized capital gains or losses, if
any, of the Fund. The Administrators prepare semiannual reports to the SEC,
prepare Federal and state tax returns, prepare filings with state securities
commissions, arrange for and bear the cost of processing Share purchase and
redemption orders, maintain the Fund's financial accounts and records, and
generally assist in the Fund's operations.
Prior to May 16, 1997, CGFSC, Federated Administrative Services and
U.S. Trust New York served as the Fund's administrators pursuant to an
administrative agreement substantially similar to the Administration Agreement
currently in effect for the Fund. Prior to August 1, 1995, administrative
services were provided to the Fund by CGFSC and Concord Holding Corporation
(collectively, the "former administrators") under an administration agreement
having substantially the same terms as the Administration Agreement currently in
effect.
For the fiscal year ended March 31, 1995, Excelsior Fund paid the
former administrators $19,660 in the aggregate with respect to the Fund. For
the same period, the former administrators waived administration fees totalling
$22,090 with respect to the Fund.
For the period April 1, 1995 through July 31, 1995, Excelsior Fund
paid the former administrators $9,318, in the aggregate with respect to the
Fund. For the same period, the former administrators waived administration fees
totalling $9 with respect to the Fund.
For the period August 1, 1995 through March 31, 1996, Excelsior Fund
paid CGFSC, Federated Administrative Services and U.S. Trust New York $22,976 in
the aggregate with respect to the Fund. For the same period, CGFSC, Federated
Administrative Services and U.S. Trust New York waived administration fees
totalling $17,697 with respect to the Fund.
For the fiscal year ended March 31, 1997, Excelsior Fund paid CGFSC,
Federated Administrative Services and U.S. Trust New York $45,467 in the
aggregate with respect to the Fund. For the same period, CGFSC, Federated
Administrative Services and U.S. Trust New York waived administration fees
totalling $6 with respect to the Fund.
-25-
<PAGE>
Service Organizations
---------------------
As stated in the Prospectus, Excelsior Fund will enter into agreements
with Service Organizations. Such shareholder servicing agreements will require
the Service Organizations to provide shareholder administrative services to
their Customers who beneficially own Shares in consideration for the Fund's
payment (on an annualized basis) of up to .40% of the average daily net assets
of the Fund's Shares beneficially owned by Customers of the Service
Organization. Such services may include: (a) assisting Customers in designating
and changing dividend options, account designations and addresses; (b) providing
necessary personnel and facilities to establish and maintain certain shareholder
accounts and records, as may reasonably be requested from time to time by
Excelsior Fund; (c) assisting in processing purchases, exchange and redemption
transactions; (d) arranging for the wiring of funds; (e) transmitting and
receiving funds in connection with Customer orders to purchase, exchange or
redeem Shares; (f) verifying and guaranteeing Customer signatures in connection
with redemption orders, transfers among and changes in Customer-designated
accounts; (g) providing periodic statements showing a Customer's account
balances and, to the extent practicable, integrating such information with
information concerning other client transactions otherwise effected with or
through the Service Organization; (h) furnishing on behalf of Excelsior Fund's
distributor (either separately or on an integrated basis with other reports sent
to a Customer by the Service Organization) periodic statements and confirmations
of all purchases, exchanges and redemptions of Shares in a Customer's account
required by applicable federal or state law; (i) transmitting proxy statements,
annual reports, updating prospectuses and other communications from Excelsior
Fund to Customers; (j) receiving, tabulating and transmitting to Excelsior Fund
proxies executed by Customers with respect to annual and special meetings of
shareholders of Excelsior Fund; (k) providing reports (at least monthly, but
more frequently if so requested by Excelsior Fund's distributor) containing
state-by-state listings of the principal residences of the beneficial owners of
the Shares; and (l) providing or arranging for the provision of such other
related services as Excelsior Fund or a Customer may reasonably request.
Excelsior Fund's agreements with Service Organizations are governed by
an Administrative Services Plan (the "Plan") adopted by Excelsior Fund.
Pursuant to the Plan, Excelsior Fund's Board of Directors will review, at least
quarterly, a written report of the amounts expended under Excelsior Fund's
agreements with Service Organizations and the purposes for which the
expenditures were made. In addition, the arrangements with Service
Organizations will be approved annually by a majority of Excelsior Fund's
directors, including a majority of the directors who are not "interested
persons" of Excelsior Fund as defined in
-26-
<PAGE>
the 1940 Act and have no direct or indirect financial interest in such
arrangements (the "Disinterested Directors").
Any material amendment to Excelsior Fund's arrangements with Service
Organizations must be approved by a majority of Excelsior Fund's Board of
Directors (including a majority of the Disinterested Directors). So long as
Excelsior Fund's arrangements with Service Organizations are in effect, the
selection and nomination of the members of Excelsior Fund's Board of Directors
who are not "interested persons" (as defined in the 1940 Act) of Excelsior Fund
will be committed to the discretion of such non-interested Directors.
For the fiscal years ended March 31, 1997, 1996 and 1995, payments to
Service Organizations totalled $12,270, $10,946 and $3,576 with respect to the
Fund. Of these amounts, $12,270, $10,945, and $3,525 were paid to affiliates of
U.S. Trust with respect to the Fund.
Expenses
- --------
Except as otherwise noted, the Investment Adviser and the
Administrators bear all expenses in connection with the performance of their
services. The Fund bears the expenses incurred in its operations. Expenses of
the Fund include taxes; interest; fees (including fees paid to Excelsior Fund's
Directors and officers who are not affiliated with the Distributor or the
Administrators); SEC fees; state securities qualifications fees; costs of
preparing and printing prospectuses for regulatory purposes and for distribution
to shareholders; advisory, administration and administrative servicing fees;
charges of the custodian, transfer agent, and dividend disbursing agent; certain
insurance premiums; outside auditing and legal expenses; costs of shareholder
reports and shareholder meetings; and any extraordinary expenses. The Fund also
pays for brokerage fees and commissions in connection with the purchase of
portfolio securities.
Custodian and Transfer Agent
- ----------------------------
The Chase Manhattan Bank ("Chase") serves as custodian of the
Fund's assets. Under the custodian agreement, Chase has agreed to (i) maintain a
separate account or accounts in the name of the Fund; (ii) make receipts and
disbursements of money on behalf of the Fund; (iii) collect and receive all
income and other payments and distributions on account of the Fund's portfolio
securities; (iv) respond to correspondence from securities brokers and others
relating to its duties; (v) maintain certain financial accounts and records; and
(vi) make periodic reports to Excelsior Fund's Board of Directors concerning the
Fund's operations. Chase may, at its own expense, open and maintain custody
accounts with respect to the Fund with
-27-
<PAGE>
other banks or trust companies, provided that Chase shall remain liable for the
performance of all its custodial duties under the Custodian Agreement,
notwithstanding any delegation.
U.S. Trust New York serves as the Fund's transfer agent and dividend
disbursing agent. In such capacity, U.S. Trust New York has agreed to (i) issue
and redeem Shares; (ii) address and mail all communications by the Fund to its
shareholders, including reports to shareholders, dividend and distribution
notices, and proxy materials for its meetings of shareholders; (iii) respond to
correspondence by shareholders and others relating to its duties; (iv) maintain
shareholder accounts; and (v) make periodic reports to Excelsior Fund concerning
the Fund's operations. For its transfer agency, dividend disbursing, and
subaccounting services, U.S. Trust New York is entitled to receive $15.00 per
annum per account and subaccount. In addition, U.S. Trust New York is entitled
to be reimbursed for its out-of-pocket expenses for the cost of forms, postage,
processing purchase and redemption orders, handling of proxies, and other
similar expenses in connection with the above services.
U.S. Trust New York may, at its own expense, delegate its transfer
agency obligations to another transfer agent registered or qualified under
applicable law, provided that U.S. Trust New York shall remain liable for the
performance of all of its transfer agency duties under the Transfer Agency
Agreement, notwithstanding any delegation. Pursuant to this provision in the
agreement, U.S. Trust New York has entered into a sub-transfer agency
arrangement with CGFSC, an affiliate of Chase, with respect to accounts of
shareholders who are not Customers of U.S. Trust New York. For the services
provided by CGFSC, U.S. Trust New York has agreed to pay CGFSC $15.00 per annum
per account or subaccount plus out-of-pocket expenses. CGFSC receives no fee
directly from Excelsior Fund for any of its sub-transfer agency services. U.S.
Trust New York may, from time to time, enter into sub-transfer agency
arrangements with third party providers of transfer agency services.
PORTFOLIO TRANSACTIONS
----------------------
Subject to the general control of Excelsior Fund's Board of Directors,
the Investment Adviser is responsible for, makes decisions with respect to, and
places orders for all purchases and sales of all portfolio securities of the
Fund.
The Fund may engage in short-term trading to achieve its investment
objectives. Portfolio turnover may vary greatly from year to year as well as
within a particular year. The Fund's portfolio turnover rate may also be
affected by cash requirements for redemptions of Shares and by regulatory
provisions which enable the Fund to receive certain favorable tax
-28-
<PAGE>
treatment. Portfolio turnover will not be a limiting factor in making portfolio
decisions. See "Financial Highlights" in the Fund's Prospectus for the Fund's
historical portfolio turnover rates.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. For the fiscal years
ended March 31, 1995, March 31, 1996, and March 31, 1997, the Fund paid
brokerage commissions aggregating $36,759, $46,678 and $108,284, respectively.
Transactions in domestic over-the-counter markets are generally
principal transactions with dealers, and the costs of such transactions involve
dealer spreads rather than brokerage commissions. With respect to over-the-
counter transactions, the Fund, where possible, will deal directly with the
dealers who make a market in the securities involved, except in those
circumstances where better prices and execution are available elsewhere.
The Investment Advisory Agreement between Excelsior Fund and the
Investment Adviser provides that, in executing portfolio transactions and
selecting brokers or dealers, the Investment Adviser will seek to obtain the
best net price and the most favorable execution. The Investment Adviser shall
consider factors it deems relevant, including the breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer and whether such broker or dealer is selling
shares of Excelsior Fund, and the reasonableness of the commission, if any, for
the specific transaction and on a continuing basis.
In addition, the Investment Advisory Agreement authorizes the
Investment Adviser, to the extent permitted by law and subject to the review of
Excelsior Fund's Board of Directors from time to time with respect to the extent
and continuation of the policy, to cause the Fund to pay a broker which
furnishes brokerage and research services a higher commission than that which
might be charged by another broker for effecting the same transaction, provided
that the Investment Adviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker, viewed in terms of either that particular transaction
or the overall responsibilities of the Investment Adviser to the accounts as to
which it exercises investment discretion. Such brokerage and research services
might consist of reports and statistics on specific companies or industries,
general summaries of groups of stocks and their comparative earnings, or broad
overviews of the stock market and the economy.
-29-
<PAGE>
Supplementary research information so received is in addition to and
not in lieu of services required to be performed by the Investment Adviser and
does not reduce the investment advisory fees payable by the Fund. Such
information may be useful to the Investment Adviser in serving the Fund and
other clients and, conversely, supplemental information obtained by the
placement of business of other clients may be useful to the Investment Adviser
in carrying out its obligations to the Fund.
Portfolio securities will not be purchased from or sold to the
Investment Adviser, Distributor, or any affiliated person of either of them (as
such term is defined in the 1940 Act) acting as principal, except to the extent
permitted by the SEC.
Investment decisions for the Fund are made independently from those
for other investment companies, common trust funds and other types of funds
managed by the Investment Adviser. Such other investment companies and funds
may also invest in the same securities as the Fund. When a purchase or sale of
the same security is made at substantially the same time on behalf of the Fund
and another investment company or common trust fund, the transaction will be
averaged as to price, and available investments allocated as to amount, in a
manner which the Investment Adviser believes to be equitable to the Fund and
such other investment company or common trust fund. In some instances, this
investment procedure may adversely affect the price paid or received by the Fund
or the size of the position obtained by the Fund. To the extent permitted by
law, the Investment Adviser may aggregate the securities to be sold or purchased
for the Fund with those to be sold or purchased for other investment companies
or common trust funds in order to obtain best execution.
To the extent that the Fund effects brokerage transactions with any
broker-dealer affiliated directly or indirectly with U.S. Trust, such
transactions, including the frequency thereof, the receipt of any commissions
payable in connection therewith, and the selection of the affiliated broker-
dealer effecting such transactions, will be fair and reasonable to the
shareholders of the Fund.
Excelsior Fund is required to identify any securities of its regular
brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or their
parents held by Excelsior Fund as of the close of its most recent fiscal year.
As of March 31, 1997, the Fund did not hold any securities issued by Excelsior
Fund's regular brokers or dealers or their parents.
-30-
<PAGE>
INDEPENDENT AUDITORS
--------------------
Ernst & Young LLP, independent auditors, 200 Clarendon Street, Boston,
MA 02116, serve as auditors of Excelsior Fund. The Fund's Financial Highlights
included in the Prospectus and the financial statements for the period ended
March 31, 1997 incorporated by reference in this Statement of Additional
Information have been audited by Ernst & Young LLP for the periods included in
their reports thereon which appear therein.
COUNSEL
-------
Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary of
Excelsior Fund, is a partner), Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107, is counsel to Excelsior Fund
and will pass upon the legality of the Shares offered by the Prospectus.
ADDITIONAL INFORMATION CONCERNING TAXES
---------------------------------------
The following supplements the tax information
contained in the Prospectus.
The Fund is treated as a separate corporate entity under the Internal
Revenue Code of 1986, as amended (the "Code"), and intends to qualify as a
regulated investment company. If, for any reason, the Fund does not qualify for
a taxable year for the special Federal tax treatment afforded regulated
investment companies, the Fund would be subject to Federal tax on all of its
taxable income at regular corporate rates, without any deduction for
distributions to shareholders. In such event, dividend distributions (whether
or not derived from interest on municipal securities) would be taxable as
ordinary income to shareholders to the extent of the Fund's current and
accumulated earnings and profits and would be eligible for the dividends
received deduction in the case of corporate shareholders.
The Fund will designate any distribution of the excess of net long-
term capital gain over net short-term capital loss as a capital gain dividend in
a written notice mailed to shareholders within 60 days after the close of the
Fund's taxable year. Upon the sale or exchange of Shares, if the shareholder
has not held such Shares for more than six months, any loss on the sale or
exchange of those Shares will be treated as long-term capital loss to the extent
of the capital gain dividends received with respect to the Shares.
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to currently distribute an amount equal to specified
percentages of their ordinary taxable income
-31-
<PAGE>
and capital gain net income (excess of capital gains over capital losses). The
Fund intends to make sufficient distributions or deemed distributions of its
ordinary taxable income and any capital gain net income prior to the end of each
calendar year to avoid liability for this excise tax.
The Fund will not be treated as a regulated investment company under
the Code if 30% or more of the Fund's gross income for a taxable year is derived
from gains realized on the sale or other disposition of the following
investments held for less than three months (the "Short-Short Gain Test"): (1)
stock and securities (as defined in section 2(a)(36) of the 1940 Act); (2)
options, futures and forward contracts other than those on foreign currencies;
and (3) foreign currencies (and options, futures and forward contracts on
foreign currencies) that are not directly related to the Fund's principal
business of investing in stock and securities (and options and futures with
respect to stocks and securities). Interest (including original issue discount
and accrued market discount) received by the Fund upon maturity or disposition
of a security held for less than three months will not be treated as gross
income derived from the sale or other disposition of such security within the
meaning of this requirement. However, any other income which is attributable to
realized market appreciation will be treated as gross income from the sale or
other disposition of securities for this purpose. With respect to covered call
options, if the call is exercised by the holder, the premium and the price
received on exercise constitute the proceeds of sale, and the difference between
the proceeds and the cost of the securities subject to the call is capital gain
or loss. Premiums from expired call options written by the Fund and net gains
from closing purchase transactions are treated as short-term capital gains for
Federal income tax purposes, and losses on closing purchase transactions are
short-term capital losses. With respect to forward contracts, futures
contracts, options on futures contracts, and other financial instruments subject
to the "mark-to-market" rules, the Internal Revenue Service has ruled in private
letter rulings that a gain realized from such a contract, option or financial
instrument will be treated as being derived from a security held for three
months or more (regardless of the actual period for which the contract, option
or instrument is held) if the gain arises as a result of a constructive sale
under the mark-to-market rules, and will be treated as being derived from a
security held for less than three months only if the contract, option or
instrument is terminated (or transferred) during the taxable year (other than by
reason of mark-to-market) and less than three months has elapsed between the
date the contract, option or instrument was acquired and the termination date.
Increases and decreases in the value of the forward contracts, futures
contracts, options on futures contracts and other investments that qualify as
part of a "designated hedge," as defined in Section 851(g) of the Code, may
-32-
<PAGE>
be netted for purposes of determining whether the Short-Short Gain Test is met.
The Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends or gross proceeds realized upon sale
paid to shareholders who have failed to provide a correct tax identification
number in the manner required, who are subject to withholding by the Internal
Revenue Service for failure properly to include on their return payments of
taxable interest or dividends, or who have failed to certify to the Fund when
required to do so either that they are not subject to backup withholding or that
they are "exempt recipients."
The foregoing discussion is based on Federal tax laws and regulations
which are in effect on the date of this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action. Shareholders are advised to consult their tax advisers concerning their
specific situations and the application of state and local taxes.
PERFORMANCE INFORMATION
-----------------------
The Fund may advertise the "average annual total return" for its
Shares. Such return is computed by determining the average annual compounded
rate of return during specified periods that equates the initial amount invested
to the ending redeemable value of such investment according to the following
formula:
ERV (to the 1 divided by nth power)
T = [(-----) - 1]
P
Where: T = average annual total return.
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year
(or other) periods at the end of the applicable period
(or a fractional portion thereof).
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in years.
-33-
<PAGE>
The Fund may also advertise the "aggregate total return" for its Shares,
which is computed by determining the aggregate compounded rates of return during
specified periods that likewise equate the initial amount invested to the ending
redeemable value of such investment. The formula for calculating aggregate
total return is as follows:
ERV
Aggregate Total Return = [(------)] - 1
P
The above calculations are made assuming that (1) all dividends and
capital gain distributions are reinvested on the reinvestment dates at the price
per Share existing on the reinvestment date, (2) all recurring fees charged to
all shareholder accounts are included, and (3) for any account fees that vary
with the size of the account, a mean (or median) account size in the Fund during
the periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.
Based on the foregoing calculations, the total return for the Shares
of the Fund for the one year period ended March 31, 1997 was 28.28%. The
average annual total return for the Shares of the Fund for the period from
December 31, 1992 (commencement of operations) to March 31, 1997 was 14.89%.
The Fund may also from time to time include in advertisements, sales
literature and communications to shareholders a total return figure that is not
calculated according to the formula set forth above in order to compare more
accurately the Fund's performance with other measures of investment return. For
example, in comparing the Fund's total return with data published by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger
Investment Company Service, or with the performance of an index, the Fund may
calculate its aggregate total return for the period of time specified in the
advertisement or communication by assuming the investment of $10,000 in Shares
and assuming the reinvestment of each dividend or other distribution at net
asset value on the reinvestment date. Percentage increases are determined by
subtracting the initial value of the investment from the ending value and by
dividing the remainder by the beginning value.
The total return of Shares of the Fund may be compared to that of
other mutual funds with similar investment objectives and to other relevant
indices or to ratings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For
example, the
-34-
<PAGE>
total return of the Fund may be compared to data prepared by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc. and Weisenberger Investment
Company Service. Total return and yield data as reported in national financial
publications such as Money Magazine, Forbes, Barron's, The Wall Street Journal
----- -------- ------ -------- --- ---- ------ -------
and The New York Times, or in publications of a local or regional nature, may
--- --- ---- -----
also be used in comparing the performance of the Fund. Advertisements, sales
literature or reports to shareholders may from time to time also include a
discussion and analysis of the Fund's performance, including, without
limitation, those factors, strategies and techniques that, together with market
conditions and events, materially affected the Fund's performance.
The Fund may also 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 the Fund
investment are reinvested by being paid in additional Fund Shares, any future
income or capital appreciation of the Fund would increase the value, not only of
the original Fund investment, but also of the additional Fund Shares received
through reinvestment. As a result, the value of the Fund investment would
increase more quickly than if dividends or other distributions had been paid in
cash. The Fund may also include discussions or illustrations of the potential
investment goals of a prospective investor, investment management techniques,
policies or investment suitability of the Fund, economic conditions, 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, sales literature or communications to shareholders may summarize
the substance of information contained in shareholder reports (including the
investment composition of the Fund), as well as the views of the Investment
Adviser as to current market, economy, trade and interest rate trends,
legislative, regulatory and monetary developments, investment strategies and
related matters believed to be of relevance to the Fund. The Fund 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 the
Fund. In addition, advertisements, sales literature or shareholder
communications may include a discussion of certain attributes or benefits to be
derived by an investment in the Fund. Such advertisements or communicators may
include symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein.
-35-
<PAGE>
MISCELLANEOUS
-------------
As used in the Prospectus, "assets belonging to the Fund" means the
consideration received upon the issuance of Shares in the Fund, together with
all income, earnings, profits, and proceeds derived from the investment thereof,
including any proceeds from the sale of such investments, any funds or payments
derived from any reinvestment of such proceeds, and a portion of any general
assets of Excelsior Fund not belonging to a particular portfolio of Excelsior
Fund. In determining the Fund's net asset value, assets belonging to the Fund
are charged with the direct liabilities in respect of the Fund and with a share
of the general liabilities of Excelsior Fund which are normally allocated in
proportion to the relative asset values of Excelsior Fund's portfolios at the
time of allocation. Subject to the provisions of Excelsior Fund's Charter,
determinations by the Board of Directors as to the direct and allocable
liabilities, and the allocable portion of any general assets with respect to a
particular Fund, are conclusive.
As of July 14, 1997, U.S. Trust and its affiliates held of record
substantially all of Excelsior Fund's outstanding shares as agent or custodian
for its customers, but did not own such shares beneficially because they did not
have voting or investment discretion with respect to such shares.
As of July 11, 1997, no person beneficially owned 5% or more of the
outstanding shares of the Fund.
FINANCIAL STATEMENTS
--------------------
The audited financial statements and notes thereto in Excelsior Fund's
Annual Report to Shareholders for the fiscal year ended March 31, 1997 (the
"1997 Annual Report") for the domestic equity portfolios are incorporated in
this Statement of Additional Information by reference. No other parts of the
1997 Annual Report are incorporated by reference herein. The financial
statements included in the 1997 Annual Report for the Fund have been audited by
Excelsior Fund's independent auditors, Ernst & Young LLP, whose reports
thereon also appear in the 1997 Annual Report and are incorporated herein by
reference. Such financial statements have been incorporated herein in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing. Additional copies of the 1997 Annual Report may be obtained at no
charge by telephoning CGFSC at the telephone number appearing on the front page
of this Statement of Additional Information.
-36-
<PAGE>
APPENDIX A
----------
COMMERCIAL PAPER RATINGS
- ------------------------
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt considered short-term in the relevant
market. The following summarizes the rating categories used by Standard and
Poor's for commercial paper:
"A-1" - The highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
"A-2" - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
"A-3" - Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the adverse effects of
changes and circumstances than obligations carrying the higher designations.
"B" - Issues are regarded as having only a
speculative capacity for timely payment.
"C" - This rating is assigned to short-term
debt obligations with a doubtful capacity for payment.
"D" - Issues are in payment default.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:
"Prime-1" - Issuers 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 earning coverage of fixed financial
charges and high internal cash generation; and well established access to a
range of financial markets and assured sources of alternate liquidity.
A-1
<PAGE>
"Prime-2" - Issuers or related supporting institutions have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
"Prime-3" - Issuers or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment. Short-
term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issue as investment grade. Risk
A-2
<PAGE>
factors are larger and subject to more variation. Nevertheless, timely payment
is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years. The
following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit quality.
Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as the "F-1+" and "F-1" ratings.
"F-3" - Securities possess fair credit quality. Issues assigned this
rating have characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues assigned this
rating have characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near-term adverse changes in financial and
economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term ratings to
indicate that the rating is based upon a letter of credit issued by a commercial
bank.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one
A-3
<PAGE>
year or less which is issued by United States commercial banks, thrifts and non-
bank banks; non-United States banks; and broker-dealers. The following
summarizes the ratings used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest
rating category and indicates a very high degree of likelihood that principal
and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment grade
category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is regarded as non-
investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations which possess a particularly strong credit feature
are supported by the highest capacity for timely repayment.
"A1" - Obligations are supported by the highest capacity for timely
repayment.
"A2" - Obligations are supported by a good capacity for timely
repayment.
"A3" - Obligations are supported by a satisfactory capacity for timely
repayment.
"B" - Obligations for which there is an uncertainty as to the capacity
to ensure timely repayment.
"C" - Obligations for which there is a high risk of default or which
are currently in default.
A-4
<PAGE>
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
- ----------------------------------------------
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - This designation represents the highest rating assigned by
Standard & Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small degree.
"A" - Debt is considered to have a strong capacity to pay interest and
repay principal although such issues are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues 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 debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt 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. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
"B" - Debt has a 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. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
A-5
<PAGE>
"CCC" - Debt has a currently identifiable 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. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no interest
is being paid.
"D" - Debt is in payment default. This rating is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes such payments
will be made during such grace period. "D" rating is also used upon the filing
of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience high volatility or
high variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities. The absence of an "r" symbol
should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are
A-6
<PAGE>
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A" - Bonds 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 considered 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," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing; "Ca"
represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in
default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
(P) ... - When applied to forward delivery bonds, indicates that the
rating is provisional pending delivery of the bonds. The rating may be revised
prior to delivery if changes occur in the legal documents or the underlying
credit quality of the bonds.
A-7
<PAGE>
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1, Ba1 and B1.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt
rated "B" possesses the risk that obligations will not be met when due. Debt
rated "CCC" is well below investment grade and has considerable uncertainty as
to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds rated
in the "AAA" and "AA"
A-8
<PAGE>
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F-1+."
"A" - Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "BBB" may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major rating
categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions may increase investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic or financial conditions may lead
to increased investment risk.
"BBB" - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in
A-9
<PAGE>
business, economic or financial conditions are more likely to lead to increased
investment risk than for obligations in higher categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of
these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree of
speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating below
"AAA" to denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes
the rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC" and "CC" - These designations are assigned by Thomson
BankWatch to non-investment grade long-term debt. Such issues are regarded as
having speculative characteristics regarding the likelihood of timely payment of
principal and interest. "BB" indicates the lowest degree of speculation and
"CC" the highest degree of speculation.
A-10
<PAGE>
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
MUNICIPAL NOTE RATINGS
- ----------------------
A Standard and Poor's rating reflects the liquidity concerns and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - Loans bearing this designation are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2"/"VMIG-2" - Loans bearing this designation are of high quality,
with margins of protection ample although not so large as in the preceding
group.
"MIG-3"/"VMIG-3" - Loans bearing this designation are of favorable
quality, with all security elements accounted for but lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are of adequate
quality, carrying specific risk but having protection
A-11
<PAGE>
commonly regarded as required of an investment security and not distinctly or
predominantly speculative.
"SG" - Loans bearing this designation are of speculative quality and
lack margins of protection.
Fitch and Duff & Phelps use the short-term
ratings described under Commercial Paper Ratings for municipal notes.
A-12
<PAGE>
EXCELSIOR FUNDS, INC.
FORM N-1A
---------
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
(1) Included in Part A:
Financial Highlights for the Registrant's Energy and
Natural Resources Fund (formerly, the Long-Term Supply
of Energy Fund) for the period from December 31, 1992
(commencement of operations) to March 31, 1993 and for
the fiscal years ended March 31, 1994 through March 31,
1997.
(2) Incorporated by reference into Part B:
With respect to the Energy and Natural Resources Fund
(formerly, the Long-Term Supply of Energy Fund):
o Statements of Assets and Liabilities as of March 31,
1997;
o Statements of Operations for the year ended March
31, 1997;
o Statements of Changes in Net Assets for the year
ended March 31, 1997;
o Portfolio of Investments as of March 31, 1997;
o Notes to Financial Statements; and
o Report of Independent Auditors for the fiscal year
ended March 31, 1997.
(b) Exhibits:
--------
(1) (a) Articles of Incorporation of Registrant dated
August 1, 1984 (1).
(b) Articles Supplementary of Registrant dated October
30, 1985 (3).
(c) Articles Supplementary of Registrant dated
September 30, 1986 (4).
(d) Articles Supplementary of Registrant dated April
10, 1987 (6).
(e) Articles Supplementary of Registrant dated April
27, 1990 (12).
(f) Articles Supplementary of Registrant dated October
26, 1990 (13).
(g) Articles Supplementary of Registrant dated January
29, 1991 (13).
(h) Articles Supplementary of Registrant dated December
24, 1992 (16).
(i) Articles Supplementary of Registrant dated August
31, 1995 (20).
<PAGE>
(j) Articles Supplementary of Registrant dated December
28, 1995 (20).
(2) (a) Bylaws of Registrant (1).
(b) Amendment No. 1 to By-laws of Registrant (3).
(c) Amendment No. 2 to By-Laws of Registrant (22).
(d) Amendment No. 3 to By-Laws of Registrant (22).
(3) None.
(4) (a) Articles VI, VII, VIII and X of Registrant's
Articles of Incorporation dated August 7, 1984 are incorporated
herein by reference to Exhibit 1(a) of Registrant's Registration
Statement on Form N-1A filed on August 8, 1984;
(b) Articles I, II, IV and VI of Registrant's By-Laws
are incorporated herein by reference to Exhibit 2(a) of
Registrant's Registration Statement on Form N-1A filed on August
8, 1984.
(5)
<PAGE>
(a) Form of Investment Advisory Agreement among
Registrant, U.S. Trust Company of Connecticut and United States
Trust Company of New York dated May 16, 1997 with respect to the
Money Fund, Government Money Fund, Equity Fund, Early Life Cycle
Fund, Long-Term Supply of Energy Fund, Productivity Enhancers
Fund, Environmentally-Related Products and Services Fund, Aging
of America Fund, Communication and Entertainment Fund, Business
and Industrial Restructuring Fund, Global Competitors Fund,
Emerging Americas Fund, Pacific/Asia Fund, Pan European Fund,
Short-Term Government Securities Fund and Intermediate-Term
Managed Income Fund (22).
(b) Form of Investment Advisory Agreement among
Registrant, U.S. Trust Company of Connecticut and United States
Trust Company of New York dated May 16, 1997 with respect to the
Managed Income Fund (22).
(c) Form of Investment Advisory Agreement among
Registrant, U.S. Trust Company of Connecticut and United States
Trust Company of New York dated May 16, 1997 with respect to the
Income and Growth Fund (22).
(d) Form of Investment Advisory Agreement among
Registrant, U.S. Trust Company of Connecticut and United States
Trust Company of New York dated May 16, 1997 with respect to the
International Fund (22).
(e) Form of Investment Advisory Agreement among
Registrant, U.S. Trust Company of Connecticut and United States
Trust Company of New York dated May 16, 1997 with respect to the
Treasury Money Fund (22).
(6) Distribution Contract dated August 1, 1995 between
Registrant and Edgewood Services, Inc. (20).
(7) None.
(8) Form of Custody Agreement between Registrant and The
Chase Manhattan Bank, N.A. dated September 1, 1995 (20).
(9) (a) Amended and Restated Administrative Services Plan
and Related Form of Shareholder Servicing Agreement (20).
(b) Form of Administration Agreement dated May 16, 1997
among Registrant, Chase Global Funds Services Company, Federated
Administrative Services and U.S. Trust Company of Connecticut
(22).
(c) Mutual Funds Transfer Agency Agreement dated
September 1, 1995 between Registrant and United States Trust
Company of New York (22).
-3-
<PAGE>
(10) Opinion of counsel/1/.
(11) (a) Consent of Drinker Biddle & Reath LLP.
(23).
(b) Consent of Ernst & Young LLP (23).
(12) None.
(13) (a) Purchase Agreement between Registrant and Shearson
Lehman Brothers Inc. dated February 6, 1985 (2).
(b) Purchase Agreement between Registrant and UST
Distributors, Inc. dated December 29, 1992 (17).
(c) Purchase Agreement between Registrant and Edgewood
Services, Inc. dated November 17, 1995 (20).
(14) None.
(15) Amended and Restated Distribution Plan and Related Form
of Distribution Agreement (21).
(16) (a) Schedule for computation of performance quotation
(14).
(b) Schedule for computation of performance quotation
(17).
(17) Financial Data Schedule as of March 31, 1997 for the
Long-Term Supply of Energy Fund.
(18) Amended and Restated Plan Pursuant to Rule 18f-3 for
Operation of a Multi-Class System (22).
Notes:
- -----
(1) Incorporated herein by reference to Registrant's Registration Statement on
Form N-1A filed August 8, 1984.
(2) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 1 to its Registration Statement on Form N-1A filed October 30, 1985.
(3) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 2 to its Registration Statement on Form N-1A filed June 6, 1986.
(4) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 3 to its Registration Statement on Form N-1A filed October 17, 1986.
(5) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 4 to its Registration Statement on Form N-1A filed March 19, 1987.
(6) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 5 to its Registration Statement on Form N-1A filed July 23, 1987.
- ----------
/1/ Filed with the SEC as part of Registrant's Rule 24f-2 Notice.
-4-
<PAGE>
(7) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 6 to its Registration Statement on Form N-1A filed July 29, 1988.
(8) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 7 to its Registration Statement on Form N-1A filed November 1, 1988.
(9) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 8 to its Registration Statement on Form N-1A filed June 2, 1989.
(10) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 9 to its Registration Statements on Form N-1A filed March 12, 1990.
(11) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 10 to its Registration Statement on Form N-1A filed July 27, 1990.
(12) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 11 to its Registration Statement on Form N-1A filed December 7, 1990.
(13) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 12 to its Registration Statement on Form N-1A filed May 31, 1991.
(14) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 13 to its Registrant Statement on Form N-1A filed August 1, 1991.
(15) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 15 to its Registration Statement on Form N-1A filed October 29, 1992.
(16) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 16 to its Registration Statement on Form N-1A filed December 24, 1992.
(17) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 17 to its Registration Statement on Form N-1A filed August 2, 1993.
(18) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 18 to its Registration Statement on Form N-1A filed December 27, 1993.
(19) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 21 to its Registration Statement on Form N-1A filed August 1, 1995.
(20) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 23 to its Registration Statement on Form N-1A filed July 31, 1996.
(21) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 24 to its Registration Statement on Form N-1A filed May 15, 1997.
(22) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 26 to its Registration Statement on Form N-1A filed July 3, 1997.
(23) Filed herewith.
-5-
<PAGE>
Item 25. Persons Controlled By or Under
Common Control with Registrant
------------------------------
Registrant is controlled by its Board of Directors.
Item 26. Number of Holders of Securities
-------------------------------
The following information is as of April 24, 1997:
Title of Class Number of Record Holders
-------------- ------------------------
Class A Common Stock 3,810
Class B Common Stock 1,108
Class C Common Stock 1,480
Class C Common Stock -
Special Series 1 0
Class D Common Stock 751
Class E Common Stock 1,114
Class F Common Stock 1,924
Class G Common Stock 1,062
Class H Common Stock 1,423
Class H Common Stock -
Special Series 1 0
Class I Common Stock 1,151
Class J Common Stock 802
Class K Common Stock 653
Class L Common Stock 1,156
Class L Common Stock -
Special Series 1 0
Class M Common Stock 1,016
Class M Common Stock -
Special Series 1 0
Class N Common Stock 1,709
Class N Common Stock -
Special Series 1 0
Class O Common Stock 1,379
Class O Common Stock -
Special Series 1 0
Class P Common Stock 2,386
Class Q Common Stock 2,628
Class R Common Stock 2,572
Class S Common Stock 359
Class T Common Stock 679
Item 27. Indemnification
---------------
Article VII, Section 3 of Registrant's Articles of Incorporation,
incorporated by reference as Exhibit (1)(a) hereto, and Article VI, Section 2 of
Registrant's Bylaws, incorporated by reference as Exhibit (2)(a) hereto,
provide for the indemnification of Registrant's directors and officers.
Indemnification of Registrant's principal underwriter, custodian, transfer agent
and co-administrators is provided for, respectively, in Section 1.12 of the
Distribution Contract incorporated by reference as Exhibit (6) hereto, Section
12 of the Custody Agreement incorporated by reference as Exhibit (8) hereto,
Section 7 of the Mutual Funds Transfer Agency Agreement incorporated by
reference as Exhibit 9(c), and Section 6 of the Administration Agreement
incorporated by reference as Exhibit 9(b) hereto. Registrant has obtained from
a major insurance carrier a directors' and officers' liability policy covering
certain types of errors and omissions. In no event will Registrant indemnify
any of its directors, officers, employees, or agents against any liability to
which such person would otherwise be subject by reason of his willful
misfeasance, bad faith, gross negligence in the performance of his duties, or by
reason of his reckless disregard of the duties involved in the
-6-
<PAGE>
conduct of his office or arising under his agreement with Registrant.
Registrant will comply with Rule 484 under the Securities Act of 1933 and
Release No. 11330 under the Investment Company Act of 1940 in connection with
any indemnification.
Insofar as indemnification for liability arising under the Secu rities
Act of 1933 may be permitted to directors, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
(a) United States Trust Company of New York.
United States Trust Company of New York ("U.S. Trust") is a full-
service state-chartered bank located in New York, New York. Set forth below are
the names and principal businesses of the trustees and certain senior executive
officers of U.S. Trust, including those who are engaged in any other business,
profession, vocation, or employment of a substantial nature.
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust Name Occupation Business
- --------------- ------------------------- ---------------------- ---------------
<S> <C> <C> <C>
Director Eleanor Baum Dean of School Academic
Cooper Union for the of Engineering
Advancement of Science
and Art
51 Astor Place
New York, NY 10003
Director Samuel C. Butler Partner in Cravath, Law Firm
Cravath, Swaine Swaine & Moore
& Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Director Peter O. Crisp Chairman Venture
Venrock Inc. Capital
Room 5600
30 Rockefeller Plaza
New York, NY 10112
Director Antonia M. Grumbach Partner in Patter- Law Firm
Patterson, Belknap, son, Belknap, Webb
Webb & Tyler & Tyler
1133 Avenue of the
Americas
New York, NY 10036
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust Name Occupation Business
- --------------- ------------------------- ---------------------- ---------------
<S> <C> <C> <C>
Director, H. Marshall Schwarz Chairman of the Bank
Chairman of United States Trust Board & Chief Exe-
the Board Company of New York cutive Officer of
and Chief 114 West 47th Street U.S. Trust Corp. and
Executive New York, NY 10036 U.S. Trust Company of
Officer N.Y.
Director Philippe de Montebello Director of the Art Museum
Metropolitan Museum of Metropolitan
Art Museum of Art
1000 Fifth Avenue
New York, NY 10028-0198
Director Paul W. Douglas Retired Executive Coal Mining,
250 Park Avenue Transportation
Room 1900 and Security
New York, NY 10177 Services
Director Frederic C. Hamilton Chairman of the Investment and
The Hamilton Companies Board Venture Capital
1560 Broadway
Suite 2000
Denver, CO 80202
Director John H. Stookey
Landmark Volunteers
749 A Main Street
Route 7, Box 455
Sheffield, MA 01257
Director Robert N. Wilson Vice Chairman of Health Care
Johnson & Johnson the Board of Johnson Products
One Johnson & & Johnson
Johnson Plaza
New Brunswick, NJ 08933
Director Peter L. Malkin Chairman of Wein, Law Firm
Wein, Malkin & Bettex Malkin & Bettex
Lincoln Building
60 East 42nd Street
New York, NY 10165
Director Richard F. Tucker Retired-Mobil Petroleum and
11 Over Rock Lane Oil Corporation Chemicals
Westport, CT 06880
Director Carroll L. Wainright, Consulting Partner Law Firm
Jr. of Milbank, Tweed,
Milbank, Tweed, Hadley Hadley & McCloy
& McCloy
One Chase Manhattan Plaza
New York, NY 10005
Director Ruth A. Wooden President & CEO Not for
The Advertising Profit Public
Council, Inc. Service
261 Madison Avenue Advertising
11th Floor
New York, NY 10016
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust Name Occupation Business
- --------------- ------------------------- ---------------------- ---------------
<S> <C> <C> <C>
Trustee/ Frederick B. Taylor Vice Chairman and Bank
Director, United States Trust Chief Investment Of-
Vice Chair- Company of New York ficer of U.S. Trust
man and 114 West 47th Street Corporation and United
Chief Invest- New York, NY 10036 States Trust Company
ment Officer of New York
Trustee/ Jeffrey S. Maurer President of U.S. Bank
Director and United States Trust Trust Corporation and
President Company of New York United States Trust
114 West 47th Street Company of New York
New York, NY 10036
Trustee/ Daniel P. Davison Chairman, Christie, Fine Art
Director Christie, Manson Manson & Woods Auctioneer
& Woods International, International, Inc.
Inc.
502 Park Avenue
New York, NY 10021
Trustee/ Orson D. Munn Chairman and Investment
Director Munn, Bernhard & Director of Munn, Advisory
Associates, Inc. Bernhard & Asso- Firm
6 East 43rd Street ciates, Inc.
28th Floor
New York, NY 10017
Trustee/ Philip L. Smith Corporate Director and
Director P.O. Box 386 Trustee
Ponte Verde Beach, FL 32004
</TABLE>
Item 29. Principal Underwriter
---------------------
(a) Edgewood Services, Inc., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following open-end
investment companies: BT Advisor Funds, BT Pyramid Mutual Funds, BT Investment
Funds, BT Institutional Funds, Excelsior Tax-Exempt Funds, Inc., Excelsior
Institutional Trust, Excelsior Funds, FTI Funds, Fund Manager Portfolios,
Marketvest Funds, Marketvest Funds, Inc., and Old Westbury Funds, Inc.
<TABLE>
<CAPTION>
(b) Names and Principal Positions and Offices with Offices with
Business Addresses the Distributor Registrant
--------------------- -------------------------- ------------
<S> <C> <C> <C>
Lawrence Caracciolo Director and President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
J. Christopher Donahue Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Sholes Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
</TABLE>
-9-
<PAGE>
Ronald M. Petnuch Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Schmitt Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3770
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Assistant
Federated Investors Tower Edgewood Services, Inc. Secretary
Pittsburgh, PA 15222-3779
Thomas J. Ward Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Kenneth W. Pegher, Jr. Treasurer, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
(c) Not Applicable.
Item 30. Location of Accounts and Records
--------------------------------
1. United States Trust Company of New York, 114 W. 47th Street, New
York, NY 10036 (records relating to its functions as investment adviser and
transfer agent).
2. U.S. Trust Company of Connecticut, 225 High Ridge Road, East
Tower, Stamford, Connecticut 06905 (records relating to its function as
investment adviser and co-administrator).
3. Edgewood Services, Inc., Clearing Operations, P.O. Box 897,
Pittsburgh, PA 15230-0897 (records relating to its function as distributor).
4. Chase Global Funds Services Company, 73 Tremont Street, Boston,
Massachusetts 02108-3913 (records relating to its function as co-administrator
and sub-transfer agent).
5. Federated Administrative Services, Federated Investors Tower,
Pittsburgh, PA 15222-3799 (records relating to its function as co-
administrator).
6. Drinker Biddle & Reath LLP, Philadelphia National Bank Building,
1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496 (Registrant's
Articles of Incorporation, Bylaws, and Minute Books).
Item 31. Management Services
-------------------
Inapplicable.
Item 32. Undertakings
------------
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest available Annual Report to
Shareholders upon request and without charge.
-10-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Excelsior Funds, Inc. has duly caused this Post-
Effective Amendment No. 28 to its Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Philadelphia and the Commonwealth of Pennsylvania on the 15th day of July,
1997.
EXCELSIOR FUNDS, INC.
Registrant
* Frederick S. Wonham
---------------------
Frederick S. Wonham, President
(Signature and Title)
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 28 to Excelsior Funds, Inc.'s Registration Statement on
Form N-1A has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
- ----------------------- ----------------------- -------------
* Frederick S. Wonham
- -----------------------
Frederick S. Wonham Chairman of the Board, July 15, 1997
President and Treasurer
* Joseph H. Dugan
- -----------------------
Joseph H. Dugan Director July 15, 1997
* Donald L. Campbell
- --------------------
Donald L. Campbell Director July 15, 1997
* Wolfe J. Frankl
- -----------------
Wolfe J. Frankl Director July 15, 1997
* Robert A. Robinson
- --------------------
Robert A. Robinson Director July 15, 1997
* Alfred Tannachion Director July 15, 1997
- -------------------
Alfred Tannachion
* W. Wallace McDowell, Jr. Director July 15, 1997
- -------------------------
W. Wallace McDowell, Jr.
* Jonathan Piel Director July 15, 1997
- ---------------
Jonathan Piel
* Rodman L. Drake Director July 15, 1997
- -----------------
Rodman L. Drake
*By: /s/ W. Bruce McConnel, III
----------------------------
W. Bruce McConnel, III, Attorney-in-Fact
-11-
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's, and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and said attorney shall have full power and authority, to
do and perform in the name and on behalf of the undersigned in any and all
capacities, every act whatsoever requisite or necessary to be done, as fully and
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney may lawfully do or cause to be done by
virtue hereof.
Dated: May 16, 1997 /s/ Alfred C. Tannachion
-------------------------
Alfred C. Tannachion
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Donald L. Campbell
-----------------------
Donald L. Campbell
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Joseph H. Dugan
--------------------
Joseph H. Dugan
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Robert A. Robinson
-----------------------
Robert A. Robinson
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Wolfe J. Frankl
--------------------
Wolfe J. Frankl
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints W.
Bruce McConnel, III his true and lawful attorney-in-fact and agent with full
power of substitution and resubstitution, for him and in his name, place and
stead, in his capacity as director/trustee or officer, or both, to execute
amendments to Excelsior Funds, Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s,
Excelsior Institutional Trust's and Excelsior Funds' (collectively, the
"Companies") respective Registration Statements on Form N-1A pursuant to the
Investment Company Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "Acts") and all instruments necessary or incidental in connection
therewith pursuant to said Acts and any rules, regulations, or requirements of
the Securities and Exchange Commission in respect thereof, and to file the same
with the Securities and Exchange Commission, and said attorney shall have full
power and authority, to do and perform in the name and on behalf of the
undersigned in any and all capacities, every act whatsoever requisite or
necessary to be done, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorney may
lawfully do or cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Frederick S. Wonham
------------------------
Frederick S. Wonham
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, to execute amendments to Excelsior Funds, Inc.'s,
Excelsior Tax-Exempt Fund's, Excelsior Institutional Trust's and Excelsior
Funds' (collectively, the "Companies") respective Registration Statements on
Form N-1A pursuant to the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended (the "Acts") and all instruments necessary or
incidental in connection therewith pursuant to said Acts and any rules,
regulations, or requirements of the Securities and Exchange Commission in
respect thereof, and to file the same with the Securities and Exchange
Commission, and either of said attorneys shall have full power and authority, to
do and perform in the name and on behalf of the undersigned in any and all
capacities, every act whatsoever requisite or necessary to be done, as fully and
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that either of said attorneys may lawfully do or cause to be
done by virtue hereof.
Dated: May 16, 1997 /s/ Rodman L. Drake
---------------------
Rodman L. Drake
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, to execute amendments to Excelsior Funds, Inc,'s,
Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ W. Wallace McDowell
------------------------
W. Wallace McDowell
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, to execute amendments to Excelsior Funds, Inc.'s,
Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 17, 1997 /s/ Jonathan Piel
-------------------
Jonathan Piel
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT DESCRIPTION
------- -----------
11(a) Consent of Drinker Biddle & Reath LLP.
11(b) Consent of Ernst & Young LLP.
<PAGE>
EXHIBIT 99.11(a)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our Firm
under the caption "Counsel" in the Statement of Additional Information that is
included in Post-Effective Amendment Nos. 28 and 30 to the Registration
Statement (Nos. 2-92665; 811-4088) on Form N-1A of Excelsior Funds, Inc. under
the Securities Act of 1933 and the Investment Company Act of 1940, respectively.
This consent does not constitute a consent under Section 7 of the Securities Act
of 1933, and in consenting to the use of our name and the references to our Firm
under such caption we have not certified any part of the Registration Statement
and do not otherwise come within the categories of persons whose consent is
required under Section 7 or the rules and regulations of the Securities and
Exchange Commission thereunder.
/s/ DRINKER BIDDLE & REATH LLP
------------------------------
DRINKER BIDDLE & REATH LLP
Philadelphia, Pennsylvania
July 15, 1997
<PAGE>
EXHIBIT 99.11(b)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospects and "Financial Statements" and "Independent
Auditors" in the Statement of Additional Information and to the incorporation
by reference in Post-Effective Amendment Number 28 to the Registration Statement
(Form N-1A No. 2-92665) of Excelsior Funds, Inc. of our report dated May 9, 1997
on the financial statements and financial highlights of the Long-Term Supply of
Energy Fund (one of the portfolios constituting the Excelsior Funds, Inc.)
included in the 1997 Annual Report to Shareholders.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
July 14, 1997
