<PAGE>
As filed with the Securities and Exchange Commission on May 14, 1997
Registration No.:
================================================================================
U.S. Securities and Exchange Commission
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___ Post-Effective Amendment No. ___
(Check appropriate box or boxes)
Exact Name of Registrant as Specified in Charter:
EXCELSIOR FUNDS, INC.
Area Code and Telephone Number:
(800) 446-1012
Address of Principal Executive Offices:
73 Tremont Street
Boston, MA 02108-3913
Name and Address of Agent for Service:
W. BRUCE McCONNEL, III
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on June 13, 1997 pursuant
to Rule 488 under the Securities Act of 1933.
Calculation of Registration Fee under the Securities Act of 1933: No filing fee
is required because an indefinite number of shares have previously been
registered on Form N-1A (Registration Nos. 2-92655; 811-4088) pursuant to Rule
24f-2 under the Investment Company Act of 1940. The Registrant is filing as an
exhibit to this Registration Statement a copy of its earlier declaration under
Rule 24f-2. Pursuant to Rule 429, this Registration Statement relates to the
aforesaid Registration Statement on Form N-1A.
<PAGE>
EXCELSIOR FUNDS, INC.
FORM N-14
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)
ITEM NO. HEADING
- -------- -------
Part A
- ------
1. Beginning of Registration Statement
and Outside Front Cover Page of
Prospectus.......................... Cover Page
2. Beginning and Outside
Back Cover Page of Prospectus....... Cover Page; Table of Contents
3. Synopsis and Risk Factors........... Summary; Comparative Fee Table;
Risk Factors
4. Information About the Transaction... Summary; Information Relating to
the Proposed Reorganization
5. Information About the Registrant.... Summary; Comparison of the Funds;
Additional Information About the
Funds
6. Information About the Company
Being Acquired...................... Summary; Information
Relating to the Proposed
Reorganization; Comparison
of the Funds; Additional
Information About the
Funds
7. Voting Information.................. Summary; Information
Relating to Voting Matters
8. Interest of Certain Persons
and Experts......................... Additional Information
About the Funds
9. Additional Information Required
for Reoffering by Persons Deemed
to be Underwriters.................. Inapplicable
Part B
- ------
10. Cover Page.......................... Statement of Additional
Information Cover Page
11. Table of Contents................... Table of Contents
12. Additional Information
About the Registrant............... Miscellaneous Information;
Statement of Additional
Information dated August 1,
1996*
13. Additional Information
About the Company Being
Acquired........................... Miscellaneous Information;
Statement of Additional
Information dated August 1,
1996*
14. Financial Statements................ Financial Statements; Pro
Forma Financial Statements
Part C
- ------
Items 15-17. Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of this Registration Statement.
* Incorporated herein by reference thereto.
<PAGE>
EXCELSIOR FUNDS, INC.
73 TREMONT STREET
BOSTON, MASSACHUSETTS 02108-3913
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE
PRODUCTIVITY ENHANCERS FUND,
ENVIRONMENTALLY-RELATED PRODUCTS AND
SERVICES FUND, AGING OF AMERICA FUND, COMMUNICATION
AND ENTERTAINMENT FUND AND GLOBAL COMPETITORS FUND
TO BE HELD ON AUGUST 18, 1997
To the Shareholders of the
Productivity Enhancers Fund, Environmentally-Related Products and Services
Fund, Aging of America Fund, Communication and Entertainment Fund and
Global Competitors Fund.
NOTICE IS HEREBY GIVEN THAT a Special Meeting of Shareholders of the
Productivity Enhancers Fund, Environmentally-Related Products and Services Fund,
Aging of America Fund, Communication and Entertainment Fund and Global
Competitors Fund, five investment portfolios offered by Excelsior Funds, Inc.
(the "Company"), will be held at the offices of United States Trust Company of
New York at 114 West 47th Street, New York, New York on August 18, 1997 at 10:00
a.m. (Eastern time), for the following purposes:
ITEM 1. To approve or disapprove a Plan of Reorganization and the
transactions contemplated thereby, including the transfer of
all of the assets and liabilities of the Company's
Productivity Enhancers Fund, Environmentally-Related
Products and Services Fund, Aging of America Fund,
Communication and Entertainment Fund and Global Competitors
Fund, (the "Transferor Funds") to the Company's Equity Fund
(the "Surviving Fund"), in exchange for retail shares and
trust shares of the Surviving Fund, and a liquidating
distribution of such retail shares and trust shares to
holders of retail shares and trust shares, respectively, of
the Transferor Funds.
ITEM 2. To transact such other business as may properly come before
the Special Meeting or any adjournment(s) thereof.
YOUR DIRECTORS RECOMMEND THAT YOU VOTE IN FAVOR OF ITEMS 1 AND 2.
The proposed reorganization and related matters are described in the
attached Combined Proxy Statement/Prospectus. Appendix A to the Combined Proxy
Statement/Prospectus is a copy of the Plan of Reorganization.
Shareholders of record as of the close of business on June 2, 1997 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment
thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY THE BOARD OF
DIRECTORS OF THE COMPANY. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING.
PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
SUBMITTING TO THE COMPANY A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY
EXECUTED PROXY OR BY ATTENDING THE MEETING AND ELECTING TO VOTE IN PERSON.
By the Order of the
Board of Directors
W. BRUCE McCONNEL, III
Secretary
June 13, 1997
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY COPY DATED MAY 14, 1997
COMBINED PROXY STATEMENT/PROSPECTUS
DATED JUNE 13, 1997
EXCELSIOR FUNDS, INC.
73 TREMONT STREET
BOSTON, MASSACHUSETTS 02108-3913
PHONE (800) 446-1012
This Combined Proxy Statement/Prospectus is furnished in connection with
the solicitation of proxies by the Board of Directors of Excelsior Funds, Inc.
(the "Company") for use at a Special Meeting of Shareholders of the Company's
Productivity Enhancers Fund, Environmentally-Related Products and Services Fund,
Aging of America Fund, Communication and Entertainment Fund and Global
Competitors Fund, (each, a "Transferor Fund" and collectively, the "Transferor
Funds") to be held at 10:00 a.m. (Eastern time), on August 18, 1997 at the
offices of United States Trust Company of New York at 114 West 47th Street, New
York, New York, or any adjournment thereof (the "Meeting"). At the Meeting
shareholders of the Transferor Funds will be asked to consider and approve a
proposed Plan of Reorganization dated as of May 16, 1997 and the transactions
contemplated thereby. A copy of the Plan of Reorganization is attached as
Appendix A.
The Company is registered as an open-end management investment company
under the Investment Company Act of 1940 (the "1940 Act") and currently offers
shares in twenty investment portfolios. The Transferor Funds and the Company's
Equity Fund (the "Surviving Fund") are separate investment portfolios of the
Company. The Aging of America Fund, Communication and Entertainment Fund, Global
Competitors Fund and Equity Fund each offer two classes of shares, shares and
trust shares ("Retail Shares and Trust Shares"). The Productivity Enhancers Fund
and Environmentally-Related Products and Services Fund offer only Retail Shares.
The investment objective, policies and fundamental limitations of each
Transferor Fund are similar to those of the Surviving Fund, and the Surviving
Fund's investment advisers have utilized the investment strategies, policies and
themes of the Transferor Funds in managing the Surviving Fund. In addition, the
purchase and redemption policies and the service providers of each Transferor
Fund and the Surviving Fund are the same.
The Plan of Reorganization provides that each Transferor Fund will transfer
all of its assets and liabilities to the Surviving Fund. In exchange for the
transfers of these assets and liabilities, the Company will simultaneously issue
Retail Shares and Trust Shares in the Surviving Fund to the Aging of America
Fund, Communications and Entertainment Fund and Global Competitors Fund and
Retail Shares of the Surviving Fund to the Productivity Enhancers Fund and
Environmentally-Related Products
<PAGE>
and Services Fund. Retail and Trust Shares issued by the Surviving Fund to the
corresponding holders of Retail and/or Trust Shares of the Transferor Funds are
hereinafter referred to as "Corresponding Shares."
The Transferor Funds will then make liquidating distributions of the
Surviving Fund's Corresponding Shares to the shareholders of Retail Shares and
Trust Shares of the Transferor Funds, such that each holder of Retail and/or
Trust Shares of a Transferor Fund will hold, immediately after the effective
time of the reorganization, full and fractional Corresponding Shares in the
Surviving Fund with the same aggregate net asset value as the shareholder had in
the respective Transferor Fund immediately before the transaction.
This Combined Proxy Statement/Prospectus sets forth the information that a
shareholder of each Transferor Fund should know before voting on the Plan of
Reorganization and should be retained for future reference. Additional
information is set forth in the Prospectuses relating to Retail Shares and Trust
Shares of the Transferor Funds and the Surviving Fund (collectively, the
"Funds") dated August 31, 1996, the Statement of Additional Information dated
August 31, 1996 relating to the Funds and the Statement of Additional
Information dated June 13, 1997 relating to this Combined Proxy
Statement/Prospectus. Each of these documents is on file with the Securities
and Exchange Commission (the "SEC") and is available without charge upon oral or
written request by writing or calling the Company at the address or telephone
number indicated above. The information contained in the aforesaid Prospectus
and Statements of Additional Information is incorporated herein by reference.
This Combined Proxy Statement/Prospectus constitutes the Transferor Funds'
Proxy Statement for the Meeting, and the Prospectus for the Corresponding Shares
of the Surviving Fund that have been registered with the SEC and are to be
issued in connection with the reorganization.
This Combined Proxy Statement/Prospectus is expected to be sent to
shareholders of the Transferor Funds on or about June 19, 1997.
SHARES OF THE TRANSFEROR FUNDS AND THE SURVIVING FUND ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW
YORK, U.S TRUST COMPANY OF CONNECTICUT, 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 RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL AMOUNT INVESTED.
-2-
<PAGE>
THE SECURITIES OF THE SURVIVING FUND HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS COMBINED PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
-3-
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY............................................................... 1
Proposed Reorganization.......................................... 1
Reasons for Reorganization....................................... 1
Federal Income Tax Consequences............................. 2
Comparison of the Investment Objectives and
Policies of the Funds...........................................
Comparative Fee Table............................................ 4
Expense Ratios................................................... 5
The Investment Advisers.......................................... 6
The Administrators............................................... 7
The Distributor.................................................. 9
Administrative Servicing Fee..................................... 9
The Transfer Agent............................................... 10
The Custodian.................................................... 10
Fee Waivers and Expense Ratios................................... 10
Purchase and Redemption Procedures; Exchange
Procedures; Dividends, Distributions and Pricing...............
Voting Information............................................... 11
Risk Factors..................................................... 11
INFORMATION RELATING TO THE PROPOSED REORGANIZATION................... 13
Description of the Plan of Reorganization........................ 13
Board Consideration.............................................. 14
Capitalization.............................................. 15
Federal Income Tax Consequences.................................. 16
COMPARISON OF THE FUNDS............................................... 17
Investment Objectives and Policies.......................... 17
Fundamental Investment Limitations............................... 18
Performance...................................................... 21
Other Information................................................ 21
INFORMATION RELATING TO VOTING MATTERS................................ 22
General Information.............................................. 22
Shareholder and Board Approval................................... 23
Quorum 24
Annual Meetings.................................................. 25
ADDITIONAL INFORMATION ABOUT THE FUNDS................................ 25
FINANCIAL HIGHLIGHTS.................................................. 25
FINANCIAL STATEMENTS.................................................. 34
OTHER BUSINESS........................................................ 34
LITIGATION............................................................ 34
SHAREHOLDER INQUIRIES................................................. 34
APPENDIX A............................................................ 1
APPENDIX A - PLAN OF REORGANIZATION................................... A-1
APPENDIX B - MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE.............. B-1
-i-
<PAGE>
SUMMARY
The following is a summary of certain information relating to the proposed
reorganization, the parties thereto and the related transactions, and is
qualified by reference to the more complete information contained elsewhere in
this Combined Proxy Statement/Prospectus, including the Plan of Reorganization
attached as Appendix A hereto, and in the Prospectuses and Statement of
Additional Information of the Funds. The Company's Semi-Annual Report to
Shareholders and its Annual Report to Shareholders may be obtained free of
charge by calling 1-800-446-1012 or by writing the Company at its address given
on the first page of this Combined Proxy Statement/Prospectus.
PROPOSED REORGANIZATION. Based upon their evaluation of the relevant
information presented to them, and in light of their fiduciary duties under
federal and state law, the Board of Directors, including the directors who are
not "interested persons" within the meaning of the 1940 Act, have determined
that the proposed Plan of Reorganization is in the best interests of each
Transferor Fund's shareholders.
THE COMPANY'S BOARD OF DIRECTOR RECOMMENDS THE APPROVAL OF THE PLAN OF
REORGANIZATION BY THE SHAREHOLDERS OF EACH TRANSFEROR FUND AT THE MEETING.
Subject to shareholder approval, the Plan of Reorganization provides for
the acquisition by the Surviving Fund of all of the assets and liabilities of
each Transferor Fund (such assets subject to such liabilities are called the
"Assets") in exchange for Corresponding Shares of the Surviving Fund and a
liquidating distribution of such Corresponding Shares.
As a result of the proposed reorganization, each shareholder of a
Transferor Fund will become a shareholder of the Surviving Fund and will hold,
immediately after the time the reorganization becomes effective (the "Effective
Time of the Reorganization"), the same aggregate dollar value of Corresponding
Shares of the Surviving Fund as the shareholder held in the particular
Transferor Fund immediately before the Effective Time of the Reorganization.
For further information, see "INFORMATION RELATING TO THE PROPOSED
REORGANIZATION - Description of the Plan of Reorganization."
REASONS FOR REORGANIZATION. The primary reason for the reorganization is to
streamline and simplify the Company's equity products. In connection with its
approval of the Plan of Reorganization, the Company's Board of Directors noted
that the investment objective and policies of each Transferor Fund were similar
to those of the Surviving Fund; that the combined total assets of the Surviving
Fund would be considerably greater than those of the Transferor Funds; that the
greater aggregate assets
<PAGE>
upon consummation of the reorganization of the respective Transferor Funds into
the Surviving Fund would potentially allow the Surviving Fund to take advantage
of the possible benefits of a larger asset base such as economies of scale,
lower fixed expense ratios and greater leverage in the market; and that the
service providers for each of the Transferor Funds and Surviving Fund were the
same. After consideration of the reasons for the proposed reorganization and
the proposed operations of the Surviving Fund after the reorganization, and in
consideration of the fact that the reorganization will be tax-free and will not
dilute the interests of the shareholders of the Transferor Funds or the
Surviving Fund, the Board of Directors has authorized the Plan of Reorganization
and recommended approval of the Plan of Reorganization by the shareholders of
each Transferor Fund. See "INFORMATION RELATING TO THE PROPOSED REORGANIZATION
- - Board Consideration."
FEDERAL INCOME TAX CONSEQUENCES. Consummation of the reorganization will
not give rise to tax liability for federal income tax purposes to any of the
Transferor Funds or the Surviving Fund or their respective shareholders. See
"INFORMATION RELATING TO THE PROPOSED REORGANIZATION - Federal Income Tax
Consequences."
COMPARISON OF THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS. The
investment objective of each Transferor Fund and the Surviving Fund is to seek
long-term capital appreciation. The Transferor Funds and the Surviving Fund
adhere to a long-term value-based investment philosophy. In order to translate
its investment philosophy into more specific guidance for selection of
investments, United States Trust Company of New York ("USTNY") and U.S. Trust
Company of Connecticut ("USTCT"), the Company's joint investment advisers
(collectively, "U.S. Trust" or the "Investment Advisers") uses three specific
strategies. These strategies, while identified separately, may overlap 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
complex problems such as the changing demographics and aging of the U.S.
population 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
CYCLE" companies whose products are in their earlier stages of development or
that seek to exploit new markets. Frequently such companies are smaller
companies, but early life cycle companies may also include larger established
companies with new products or markets for existing products. U.S. Trust
-2-
<PAGE>
believes that over time the value of such companies should be recognized in the
market. To complete U.S. Trust's investment philosophy, the three portfolio
strategies discussed above are applied in concert with several "longer-term
investment themes" to identify investment opportunities. U.S. Trust believes
these longer-term themes represent strong and inexorable trends. U.S. Trust
also believes that understanding the instigation, catalysts and effects of these
longer-term trends should help to identify companies that are beneficiaries of
these trends.
As discussed further below, the investment approach of the Surviving Fund
is slightly broader than each Transferor Fund which has its own narrow
investment theme. Each Transferor Fund, under normal market conditions, invests
at least 65% of its total assets in companies which U.S. Trust believes are
consistent with the theme of such Fund. The investment approach of the
Surviving Fund and the investment themes of the Transferor Funds are as follows:
The EQUITY FUND invests in companies which U.S.Trust believes have value
currently not recognized in the market price of the companies' securities. In
addition to the investment philosophy discussed above, U.S. Trust has utilized
the investment policies and themes of the Transferor Funds and other theme funds
of the Company in managing the Equity Fund. At the meeting of the Board of
Directors on May __, 1997, the Board approved the changing of the Equity Fund's
name to the Blended Equity Fund.
The PRODUCTIVITY ENHANCERS FUND invests in companies which the U.S. Trust
believes will benefit from their roles as innovators, developers and suppliers
of goods and services which enhance service and manufacturing productivity, or
companies that are most effective at obtaining and applying productivity
enhancement developments.
The ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND invests in companies
which U.S. Trust believes will benefit from their provision of products,
technologies and services related to conservation, protection and restoration of
the environment.
The AGING OF AMERICA FUND invests in companies which U.S. Trust believes
will benefit from the changes occurring in the demographic structure of the U.S.
population, particularly its growing proportion of individuals over the age of
40.
The COMMUNICATION AND ENTERTAINMENT FUND invests in companies which U.S.
Trust believes will benefit from the technological and international
transformation of the communications and entertainment industries, particularly
the convergence of information, communication and entertainment media.
-3-
<PAGE>
The GLOBAL COMPETITORS FUND invests primarily in U.S.-based companies which
U.S. Trust believes will benefit from their position as effective and strong
competitors on a global basis.
For further information, see "COMPARISON OF THE FUNDS-Investment Objectives
and Policies."
COMPARATIVE FEE TABLE. The following table sets forth: (1) the fees and
expenses of the Retail and Trust Shares of the Transferor Funds; (2) the fees
and expenses of the Retail and Trust Shares of the Surviving Fund; and (3) the
estimated fees and expenses on a pro forma basis giving effect to the proposed
reorganization. Hypothetical examples based on the table are shown following
the table.
<TABLE>
<CAPTION>
ENVIRONMENTALLY
PRODUCTIVITY RELATED
ENHANCERS PRODUCTS AND AGING OF AMERICA COMMUNICATION AND GLOBAL COMPETITORS
FUND SERVICES FUND FUND ENTERTAINMENT FUND FUND
SHAREHOLDER TRANSACTION RETAIL RETAIL TRUST RETAIL TRUST RETAIL TRUST
EXPENSES SHARES RETAIL SHARES SHARES SHARES SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Load (as a None None None None None None None None
percentage of offering
price)
Sales Load on Reinvested None None None None None None None None
Dividends
Deferred Sales Load None None None None None None None None
Redemption Fees/1/ None None None None None None None None
Exchange Fees None None None None None None None None
ANNUAL FUND OPERATING
EXPENSES
(AS A PERCENTAGE OF
AVERAGE
NET ASSETS)
Advisory Fees (after fee .50% .26% .55% .55% .55% .55% .56% .56%
waivers)/2,3/
12b-1 Fees (after fee None None None .35% None .35% None .35%
waivers)/4/
Other Operating Expenses .05% .05% .05% .05% .05% .05% .04% .04%
Administrative Servicing
Fee
(after fee waivers)/2/
Other Expenses/2/ (after .43% .68% .35% .35% .39% .39% .29% .29%
fee ------- ------- ------- ------- ------- ------- ------- -------
waivers)
Total Operating Expenses .98%/5/ .99%/5/ .95%/5/ 1.30%/6/ .99%/5/ 1.34%/6/ .89%/5/ 1.24%/6/
(after fee waivers)/2/ ======= ======= ======= ======= ======= ======= ======= =======
--------------------------------------------------------------------------------------------------
<CAPTION>
PRO FORMA COMBINED
EQUITY FUND EQUITY FUND
---------------- ------------------
SHAREHOLDER TRANSACTION RETAIL TRUST RETAIL TRUST
EXPENSES SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
Maximum Sales Load (as a None None None None
percentage of offering
price)
Sales Load on Reinvested None None None None
Dividends
Deferred Sales Load None None None None
Redemption Fees/1/ None None None None
Exchange Fees None None None None
ANNUAL FUND OPERATING
EXPENSES
(AS A PERCENTAGE OF
AVERAGE
NET ASSETS)
Advisory Fees (after fee .70% .70% .64% .64%
waivers)/2,3/
12b-1 Fees (after fee None .35% None .35%
waivers)/4/
Other Operating Expenses .05% .05% .05% .05%
Administrative Servicing
Fee
(after fee waivers)/2/
Other Expenses/2/ (after .26% .26% .28% .28%
fee -------- -------- ------- --------
waivers)
Total Operating Expenses 1.01%/5/ 1.36%/6/ .97%/5/ 1.32%/6/
(after fee waivers)/2/ ======== ======== ======= ========
-------------------------------------------
</TABLE>
______________________
1. The Company's transfer agent imposes a direct $8.00 charge on each wire
redemption 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.
2. The Investment Advisers and Administrators may, from time to time,
voluntarily waive part of their respective fees, which waivers may be
terminated at any time. Until further notice, the Investment Advisers
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 extent necessary for Retail Shares and/or Trust
Shares (net of 12b-1 fees) of the Productivity Enhancers, Environmentally-
Rated Products and Services, Aging of America, Communication and
Entertainment and Global Competitors Funds to maintain an annual expense
ratio of not more than .99%.
-4-
<PAGE>
3. Without such fee waivers, "Advisory Fees" would be .60% for Productivity
Enhancers, Environmentally-Related Products and Services, Aging of America,
Communication and Entertainment and Global Competitors Funds and .75% for
the Equity Fund and pro forma combined Equity Fund, respectively.
4. As a result of the payment of sales charges and distribution fees, long-
term shareholders may pay more than the economic equivalent of the maximum
front-end sales load permitted by the National Association of Securities
Dealers, Inc. ("NASD"). The NASD has adopted rules which generally limit
the aggregate sales charges and payments under the Company's Distribution
Plan to a certain percentage of total new gross share sales, plus interest.
The Company would stop accruing Distribution Plan fees if, to the extent,
and for as long as such limit would otherwise be exceeded.
5. Without fee waivers, "Total Operating Expenses" would be 1.08%, 1.33%,
1.00%, 1.04%, .94%, 1.06% and 1.09% for the Retail Shares of the
Productivity Enhancers, Environmentally-Related Products and Services,
Aging of America, Communication and Entertainment, Global Competitors,
Equity and pro forma combined Equity Funds, respectively.
6. Without fee waivers, "Total Operating Expenses" would be 1.35%, 1.39%,
1.29%, 1.41%, and 1.44% for the Trust Shares of the Aging of America,
Communication and Entertainment, Global Competitors, Equity and pro forma
combined Equity Funds, respectively.
Example: The following table illustrates the expenses on a $1,000
investment based on the fees and expenses stated in the above
Comparative Fee Table, assuming (1) a 5% annual return and (2)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Productivity Enhancers Fund
Retail Shares $10 $31 $54 $120
Environmentally-Related Products
and Services Funds
Retail Shares $10 $32 $55 $121
Aging of America Fund
Retail Shares $10 $30 $53 $117
Trust Shares $13 $41 $71 $157
Communication and Entertainment Fund
Retail Shares $10 $32 $55 $121
Trust Shares $14 $42 $73 $161
Global Competitors Fund
Retail Shares $ 9 $28 $49 $110
Trust Shares $13 $39 $68 $150
Equity Fund
Retail Shares $10 $32 $56 $124
Trust Shares $14 $43 $74 $164
Pro Forma Combined Equity Fund
Retail Shares $10 $31 $54 $119
Trust Shares $13 $42 $72 $159
</TABLE>
The purpose of the Example and the Table is to assist investors in
understanding the various costs and expenses of investing in shares of the
Funds. The example should not be considered a representation of past or future
expenses of the Funds. Actual expenses in the Example and Table may vary from
year to year and may be higher or lower than those shown above.
EXPENSE RATIOS. The following table sets forth the ratios of operating
expenses to average net assets of the Retail Shares
-5-
<PAGE>
of the Transferor Funds and Surviving Fund for the period ended March 31, 1997
(a) after fee waivers and (b) absent fee waivers:
<TABLE>
<CAPTION>
PERIOD ENDED MARCH 31, 1997
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
NET ASSETS AFTER NET ASSETS ABSENT
FEE WAIVERS FEE WAIVERS
------------------- ------------------
<S> <C> <C>
Equity Fund
Retail Shares 1.01% 1.06%
Trust Shares 1.36% 1.41%
Productivity Enhancers Fund .98% 1.08%
Environmentally-Related
Products and Services Fund .99% 1.33%
Aging of America Fund .95% 1.00%
Communication and Entertainment
Fund .99% 1.04%
Global Competitors Fund .89% .94%
</TABLE>
As of March 31, 1997, no Transferor Fund had issued any Trust Shares in a public
offering.
THE INVESTMENT ADVISERS. USTNY and USTCT serve as joint investment
advisers for each Fund and are entitled to receive advisory fees from them,
computed daily and paid monthly, at the annual rates set forth in the table
below.
The following table sets forth comparative data regarding the advisory fees paid
to USTNY by the Surviving Fund and the Transferor Funds for the fiscal year
ended March 31, 1997:/1/
-6-
<PAGE>
<TABLE>
<CAPTION>
Annual Advisory Fee Advisory Fees Paid
as a Percentage of as a Percentage of
Average Daily Average Daily Net
Fund Net Assets Advisory Fees Paid Assets
---- ---------- ------------------ ------
<S> <C> <C> <C>
Equity 0.75% $1,954,607 .70%
[$132,737 Waived] [.05% Waived]
Productivity Enhancers 0.60% $129,207 .50%
[$24,184 Waived] [.10% Waived]
Environmentally Related 0.60% $17,407 .26%
Products and Services
[$23,451 Waived] [.34% Waived]
Aging of America 0.60% $260,468 .55%
[$21,988 Waived] [.05% Waived]
Communication and 0.60% $265,750 .55%
Entertainment
[$24,461 Waived] [.05% Waived]
Global Competitors 0.60% $467,445 .56%
[$36,378 Waived] [.04% Waived]
</TABLE>
1. Effective May 16, 1997, USTCT became a joint investment adviser to
each Fund. Prior to May 16, 1997, USTNY was the sole investment adviser to each
Fund.
U.S. Trust manages each 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 ADMINISTRATORS. Administrative services are provided to each of
the Transferor Funds and to the Surviving Fund by Chase Global Funds Services
Company ("CGFSC"), Federated Administrative Services ("Federated") and USTCT
(collectively, the "Administrators"). The Administrators also provide
administrative services to the other investment portfolios of the Company and to
all of the investment portfolios of Excelsior Tax-Exempt Fund and Excelsior
Institutional Trust which are also advised by U.S. Trust and its affiliates and
distributed by the Distributor (as defined below). For services provided to all
of the investment portfolios of the Company, Excelsior Tax-Exempt Fund and
Excelsior Institutional Trust (except for the international portfolios of the
Company and Excelsior Institutional Trust), the Administrators are entitled
jointly to fees, computed daily and paid monthly, based on the combined
aggregate average daily net assets of the three companies (excluding the
international portfolios of the Company and Excelsior Institutional Trust) as
follows:
-7-
<PAGE>
COMBINED AGGREGATE AVERAGE DAILY NET ASSETS
OF THE COMPANY, EXCELSIOR TAX-EXEMPT FUND AND
EXCELSIOR INSTITUTIONAL TRUST (EXCLUDING
THE INTERNATIONAL PORTFOLIOS OF THE COMPANY
AND EXCELSIOR INSTITUTIONAL TRUST)
----------------------------------
ANNUAL FEE
----------
First $200 million................................. .200%
Next $200 million.................................. .175%
Over $400 million.................................. .150%
Administration fees payable to the Administrators by each portfolio of the
Company, Excelsior Tax-Exempt Fund and Excelsior Institutional Trust are
allocated in proportion to their relative average daily net assets at the time
of determination.
The following table sets forth comparative data regarding the
administration fees paid by the Surviving Fund and the Transferor Funds for the
fiscal year ended March 31, 1997:/1/
<TABLE>
<CAPTION>
Administration Fees Paid as a
Fund Administration Fees Paid Percentage of Average Daily Net Assets
---- ------------------------ --------------------------------------
<S> <C> <C>
Equity $422,505 .153%
[$5,344 Waived] [.001% Waived]
Productivity Enhancers $ 39,258 .153%
[$7 Waived] [0% Waived]
Environmentally Related Products and Services $ 12,255 .179%
[$2 Waived] [0% Waived]
Aging of America $ 72,337 .154%
[$43 Waived] [0% Waived]
Communication and Entertainment $ 74,244 .153%
[$43 Waived] [0% Waived]
Global Competitors $129,073 .154%
[$14 Waived] [0% Waived]
</TABLE>
1. Effective May 16, 1997, USTCT replaced USTNY as a co-administrator to
each Fund. Prior to May 16, 1997, USTNY served as a co-administrator to each
Fund.
-8-
<PAGE>
References to the Administrators for periods prior to May 16, 1997 shall mean
CGFSC, Federated and USTNY.
THE DISTRIBUTOR. Edgewood Services, Inc., (the "Distributor") an affiliate
of Federated Administrative Services, serves as sponsor and underwriter of each
of the Transferor Funds and of the Surviving Fund.
Under the Company's Distribution Agreement and Distribution Plan, adopted
pursuant to Rule 12b-1 under the 1940 Act, the Trust Shares of the Equity, Aging
of America, Communication and Entertainment, and Global Competitors Funds may
compensate the Distributor (or any other person) monthly for distribution
expenses in an amount not to exceed the annual rate of .75% of the average daily
net asset value of the Fund's outstanding Trust Shares. Trust Shares of such
Funds currently bear distribution fees at the annual rate of .35% of the average
daily net asset value of the Fund's outstanding Trust Shares. Distribution
expenses include (1) direct out-of-pocket promotional expenses incurred by the
Distributor in connection with the advertising and marketing of Shares including
but not limited to amounts spent by the Distributor in connection with
advertising via radio, television, newspapers, magazines and otherwise;
preparing, printing and mailing sales materials, brochures and prospectuses
(except for prospectuses used for regulatory purposes or for distribution to
existing shareholders); and other out-of-pocket expenses incurred in connection
with the promotion of the Shares; and (2) payments to one or more securities
dealers, financial institutions or other industry professionals and financial
intermediaries, such as but not limited to investment advisers, accountants and
estate planning firms, including affiliates of the Distributor (severally, a
"Distribution Organization") for distribution assistance.
ADMINISTRATIVE SERVICING FEE. Each of the Transferor Funds and the
Surviving Fund may enter into Servicing Agreements with Service Organizations
which agree to provide their customers with various administrative support
services. Service Organizations include customers of U.S. Trust, its affiliates
and correspondent banks, and other institutions. As consideration for the
administrative services provided, a Fund will pay each Service Organization an
administrative service fee at the annual rate of up to 0.40% of the average
daily net asset value of its shares held by the Service Organization's
customers. Administrative services may include but are not limited to assisting
in processing purchase, exchange and redemption requests; transmitting and
receiving funds in connection with customer orders to purchase, exchange or
redeem shares; and providing periodic statements. U.S. Trust and the
Administrators have voluntarily agreed to waive fees payable by a Fund in an
amount equal to administrative service fees payable by that Fund.
-9-
<PAGE>
The following table sets forth comparative information regarding the
sales charges, 12b-1 fees and administrative service fees paid by the Transferor
Funds and the Surviving Fund for the fiscal year ended March 31, 1997:
<TABLE>
<CAPTION>
12b-1 Fees Administrative Service Fees
Maximum Sales ----------------------- ---------------------------
Charge as a
Percentage Percentage of Percentage of Fees Paid to
of Public Total Sales Average Daily Average Daily Service
Fund and Class Offering Price Charges Paid Net Assets Fees Paid Net Assets Organizations
- -------------- -------------- ------------ ------------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Equity
Retail 4.5%+ $3,806 N/A N/A
[$ 823]++ .05%++++* $132,737*
[$118,778]++*
Trust 4.5%+ $ 0 .35%+++ $ 88
[$ 0]++ [$ 0]++
Productivity Enhancers
Retail 4.5%+ $ 495 N/A N/A .05%++++ $13,268
[$ 430]++ [$13,268]+
Environmentally Related
Products & Services
Retail 4.5%+ $ 71 N/A N/A .05%++++ $3,484
[$ 0]++ [$3,484]++
Aging of America
Retail 4.5%+ $ 715 N/A N/A .05%++++ $21,988
[$ 430]++ [$21,968]++
Communication and Entertainment
Retail
4.5%+ $ 587 N/A N/A .05%++++ $24,461
[$ 90]++ [$24,409]++
Global Competitors
Retail 4.5%+ $ 735 N/A N/A .04%++++ $36,378
[$ 400]++ [$36,376]++
</TABLE>
+ Effective February 14, 1997, Retail and Trust Shares are no longer subject
to a sales charge.
++ Represents portion of sales charge, 12b-1 fee or administrative service fee
paid to affiliates of U.S. Trust.
+++ Maximum annual rate is .75%.
++++ Maximum annual rate is .40%.
* Represents Administrative Service Fees charged to the Equity Fund and not a
particular class of such Fund.
As of March 31, 1997, no Transferor Fund has issued Trust Shares in a public
offering.
THE TRANSFER AGENT. USTNY serves as the transfer and dividend disbursing
agent for both the Transferor Funds and the Surviving Fund. USTNY has entered
into a sub-transfer agency arrangement with CGFSC pursuant to which CGFSC
provides certain transfer agent, dividend disbursement and registrar services to
both the Transferor Funds and the Surviving Fund.
THE CUSTODIAN. The Chase Manhattan Bank serves as custodian of the assets
of both the Transferor Funds and the Surviving Fund.
FEE WAIVERS AND EXPENSE RATIOS. Except as otherwise noted, the service
providers bear all expenses in connection with the
-10-
<PAGE>
performance of their services, and the Funds each bear the expenses incurred in
their operations. From time to time, U.S. Trust and the Administrators may
undertake to waive a portion or all of the fees payable to them and may also
reimburse the Funds for a portion of other expenses. In addition to the
administrative servicing fees waived by the Adviser and Administrators (as
described above under "SUMMARY -Administrative Servicing Fee"), U.S. Trust is
voluntarily waiving fees to the extent necessary for each Transferor Fund to
maintain an annual expense ratio of not more than 0.99%.
PURCHASE AND REDEMPTION PROCEDURES; EXCHANGE PROCEDURES; DIVIDENDS,
DISTRIBUTIONS AND PRICING. The procedures for purchasing, redeeming and
exchanging Retail and Trust Shares of the Transferor Funds are the same as those
of the Surviving Fund. Additionally, dividends from net investment income are
declared and paid quarterly for both the Transferor Funds and the Surviving
Fund, and net realized gains (if any) for these Funds are distributed at least
annually. The net asset value per share of each Fund is determined as of the
close of regular trading hours on the New York Stock Exchange. The procedures
for valuing the Assets of each Transferor Fund are the same as for those of the
Surviving Fund.
Additional information concerning each Fund's purchase, redemption,
exchange, dividends and distributions and pricing procedures is contained in the
Funds' Prospectuses accompanying this Combined Proxy Statement/Prospectus.
VOTING INFORMATION. This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of proxies by the Company's Board
of Directors in connection with a Special Meeting of Shareholders to be held at
the offices of U.S. Trust at 114 West 47th Street, New York, New York, on August
18, 1997 at 10:00 a.m. Eastern time. Only Shareholders of record at the close
of business on June 2, 1997 will be entitled to notice of and to vote at the
Meeting or any adjournment thereof. Each share or fraction thereof is entitled
to one vote or fraction thereof and all shares will vote separately by Fund.
Shares represented by a properly executed proxy will be voted in accordance with
the instructions thereon, or if no specification is made, the persons named as
proxies will vote in favor of each proposal set forth in the Notice of Meeting.
Proxies may be revoked at any time before they are exercised by submitting to
the Company a written notice of revocation or a subsequently executed proxy or
by attending the Meeting and voting in person. For additional information,
including a description of the shareholder vote required for approval of the
Plan of Reorganization and related transactions contemplated thereby, see
"INFORMATION RELATING TO VOTING MATTERS."
RISK FACTORS. The following discussion highlights the principal risk
factors associated with an investment in the Transferor Funds and the Surviving
Fund and is qualified in its
-11-
<PAGE>
entirety by the more extensive discussion in "COMPARISON OF THE FUNDS-
Investment Objectives and Policies and Fundamental Investment Limitations."
Because of the similarities of the investment objectives and policies of
the Transferor Funds and the Surviving Fund, U.S. Trust believes that an
investment in the Surviving Fund involves risks that are similar to those of the
Transferor Funds. These investment risks include those typically associated
with investing in a portfolio of common stocks and securities convertible into
common stock and to a lesser degree, debt securities. Generally, the Transferor
Funds and the Surviving Fund are subject to market risk, interest rate risk and
in some cases, industry risk. Market risk is the possibility that stock prices
will decline over short or even extended periods. 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 each Fund. The prices
of bonds and other debt instruments generally fluctuate inversely with interest
rate changes. Therefore, interest rate risk is the risk that the prices of debt
instruments held by a Fund will decrease as interest rates increase. Factors
affecting debt securities will affect all of the Funds' debt holdings.
Industry risk is the possibility that a particular group of stocks will
decline in price due to industry-specific developments. This risk may be more
pronounced for the Transferor Funds than the Surviving Fund because the
Transferor Funds, unlike the Surviving Fund, tend to invest their holdings in a
small number of industries.
The Transferor Funds and the Surviving Fund may invest in common stock;
securities convertible into common stock; investment grade debt securities;
warrants; U.S. government securities; high quality money market instruments;
repurchase agreements; and securities of foreign issuers, either directly or
indirectly through sponsored and unsponsored American Depository Receipts. In
addition, the Transferor Funds and the Surviving Fund may invest up to 10% of
the value of their respective total assets in money market fund securities; lend
their respective portfolio securities; purchase eligible securities on a "when-
issued" basis; purchase or sell securities on a "forward commitment" basis;
participate in forward currency contracts; invest in equity real estate
investment trusts; write covered call options and enter into closing purchase
transactions with respect to such options and invest up to 10% of their
respective net assets in illiquid securities. A description of the risks
associated with such securities is included in the Company's prospectuses dated
August 31, 1996 and is incorporated herein by reference.
-12-
<PAGE>
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
The terms and conditions under which the reorganization may be
consummated are set forth in the Plan of Reorganization. Significant provisions
of the Plan of Reorganization are summarized below; however, this summary is
qualified in its entirety by reference to the Plan of Reorganization, a copy of
which is attached as Appendix A to this Combined Proxy Statement/Prospectus.
DESCRIPTION OF THE PLAN OF REORGANIZATION. The Plan of Reorganization
provides that at the Effective Time of the Reorganization, all of the Assets of
each Transferor Fund will be transferred to the Surviving Fund, such that at and
after the Effective Time of the Reorganization, the Assets (and liabilities) of
the Transferor Fund will become and be the Assets (and liabilities) of the
Surviving Fund. In exchange for the transfer of Assets, the Company will assume
the liability of each Transferor Fund and issue to each Transferor Fund full and
fractional Corresponding Shares of the Surviving Fund. The number of
Corresponding Shares of the Surviving Fund so issued will have an aggregate net
asset value equal to the aggregate net asset value of the Retail and Trust
Shares of the particular Transferor Fund that are outstanding immediately prior
to the Effective Time of the Reorganization. Each Transferor Fund will make a
liquidating distribution of such shares to its shareholders. At and after the
Effective Time of the Reorganization, all debts, liabilities and obligations of
each Transferor Fund will attach to the Surviving Fund and may thereafter be
enforced against the Surviving Fund to the same extent as if they had been
incurred by it.
U.S. Trust may liquidate a limited number of holdings of certain of
the Transferor Funds in light of the investment policies of the Surviving Fund.
The transaction costs that will result from such sales are expected to be
minimal.
The Plan of Reorganization provides that the Board of Directors of the
Company will declare a dividend or dividends prior to the Effective Time of the
Reorganization which, together with all previous dividends, will have the effect
of distributing to the shareholders of each of the Transferor Funds all
undistributed ordinary income earned and net capital gains realized up to and
including the Effective Time of the Reorganization.
The stock transfer books of the Company for the Transferor Funds will
be permanently closed as of the close of business on the day immediately
preceding the Effective Time of the Reorganization. Redemption requests
received thereafter by the Company with respect to the Transferor Funds will be
deemed to be redemption requests for the Surviving Fund. If any Transferor Fund
shares held by a Transferor Fund shareholder are represented
-13-
<PAGE>
by a share certificate, the certificate must be surrendered to the Company's
transfer agent for cancellation before the Surviving Fund shares issued to the
shareholder in the reorganization will be redeemed.
The reorganization is subject to a number of conditions, including
approval of the Plan of Reorganization and the transactions contemplated therein
by the shareholders of the respective Transferor Funds, and the receipt of
certain legal opinions described in the Plan of Reorganization including a legal
opinion of Drinker Biddle & Reath that Corresponding Shares of the Surviving
Fund issued to shareholders of the Transferor Funds in accordance with the terms
of the Plan of Reorganization will be validly issued, fully paid and
nonassessable. The Company, by consent of its Board of Directors, may waive any
condition to the obligations of any Transferor Funds or Surviving Fund under the
Plan of Reorganization if, in its or such officer's judgment, such waiver will
not have a material adverse affect on the interests of the shareholders of the
Transferor Funds and Surviving Fund.
The expenses incurred in connection with the reorganization will be
borne by USTNY.
Assuming satisfaction of the conditions in the Plan of Reorganization,
the Effective Time of the Reorganization will be on September 15, 1997, or such
other date as is scheduled by the Company.
The Plan of Reorganization and the reorganization described therein
may be abandoned at any time for any reason prior to the Effective Time of the
Reorganization upon the vote of a majority of the Board of Directors of the
Company. The Plan of Reorganization provides further that at any time prior to
or (to the fullest extent permitted by law) after approval of the Plan of
Reorganization by the shareholders of the Transferor Funds the Company may, upon
authorization by the Board of Directors of the Company, and with or without the
approval of the shareholders, amend any of the provisions of the Plan of
Reorganization. The Plan of Reorganization provides that in the event the Plan
is approved with respect to some but not all of the Transferor Funds, the Board
of Directors may, in the exercise of its reasonable business judgment, either
abandon the reorganization with respect to some or all of the Transferor Funds
or direct that the reorganization be consummated to the extent it deems
advisable.
BOARD CONSIDERATION. The Board of Directors of the Company considered
the proposed reorganization at meetings held on February 12, 1997 and May __,
1997. In considering the Plan of Reorganization, the Company's Board of
Directors considered the terms of the Plan of Reorganization; a comparison of
each Transferor Fund's expense ratio with those of the Surviving Fund; the
recommendation of U.S. Trust with respect to the proposed
-14-
<PAGE>
reorganization; the fact that the proposed reorganization would be conducted on
a tax-free basis; and the fact that the interests of shareholders would not be
diluted as a result of the reorganization. In connection with its approval of
the Plan of Reorganization, the Company's directors noted that the investment
objectives and fundamental investment limitations of each Transferor Fund were
similar to those of the Surviving Fund. The Board noted the advantage of
simplifying and streamlining the equity products offered by the Company. The
directors considered the difficulties in classifying the Transferor Funds within
their industry peer groups, the related difficulties in marketing the Transferor
Funds, and the resultant investor confusion; and that the combination of the
Transferor Funds into the Surviving Fund would allow for the development of a
unified marketing strategy for equity products which could lead to greater asset
growth. The Board of Directors also reviewed the potential advantages of a
larger asset base such as economies of scale and lower expense ratios. The
Board of Directors reviewed the expected costs of the reorganization, and noted
U.S. Trust's commitment to pay all expenses in connection with the
reorganization.
Based upon their evaluation of the relevant information presented to
them, and in light of their fiduciary duties under federal and state law, the
Company's Board of Directors unanimously determined that (i) the proposed
reorganization was in the best interests of each of the Transferor Funds and the
Surviving Fund, (ii) that the interests of existing shareholders of the Funds
will not be diluted as a result of the transaction, and recommended the approval
of the Plan of Reorganization by shareholders of each Transferor Fund at the
Meeting. The Plan of Reorganization in the form attached hereto as Appendix A
was approved by the Board of Directors on May 16, 1997.
CAPITALIZATION. Because the Transferor Funds will be combined with
the Surviving Fund in the reorganization, the total capitalization of the
Surviving Fund after the reorganization is expected to be greater than the
current capitalization of each Transferor Fund. The following table sets forth
as of March 31, 1997 (i) the capitalization of each Transferor Fund; (ii) the
capitalization of the Surviving Fund; and (iii) the pro forma capitalization of
the Surviving Fund as adjusted to give effect to the proposed reorganization of
the Transferor Funds. As of March 31, 1997, the Transferor Funds had not issued
Trust Shares. There is, of course, no assurance that the reorganization will be
consummated. Moreover, if consummated, the capitalization of each Fund is
likely to be different at the Effective Time of the Reorganization as a result
of daily share purchase and redemption activity in the Funds.
-15-
<PAGE>
<TABLE>
<CAPTION>
Environ-
mentally- Communication
Productivity Related Aging of and Global Pro-Forma
Enhancers Products and America Entertainment Competitors Equity Combined Equity
Fund Services Fund Fund Fund Fund Fund Fund
------------ ------------- ---- ------------- ----------- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Net Assets
Retail Shares $18,057,247 $8,868,844 $45,057,554 $34,696,491 $81,921,799 $306,989,598 $495,591,533
Trust Shares -- -- -- -- -- $ 81,040 $ 81,040
Shares
Outstanding
Retail Shares 2,209,782 949,105 4,444,010 3,363,248 7,194,476 11,893,854 19,201,173
Trust Shares -- -- -- -- -- 3,144 3,144
Net Asset Value
Per Share
Retail Shares $ 8.17 $ 9.34 $ 10.14 $ 10.32 $ 11.39 $ 25.81 $ 25.81
Trust Shares -- -- -- -- -- $ 25.78 $ 25.78
</TABLE>
As of March 31, 1997, no Transferor Fund had issued Trust Shares in a public
offering.
FEDERAL INCOME TAX CONSEQUENCES. Consummation of the transaction is
subject to the condition that the Company receive an opinion from Drinker Biddle
& Reath, subject to appropriate factual assumptions, to the effect that for
federal income tax purposes: (i) the transfer of all of the Assets (subject to
all liabilities) of each of the Transferor Funds to the Surviving Fund in
exchange for shares of the Surviving Fund and the liquidating distributions to
shareholders of the Transferor Funds of the shares of the Surviving Fund so
received, as described in the Plan of Reorganization, will constitute
reorganizations within the meaning of Section 368(a)(1)(C) and Section
368(a)(1)(D) of the Internal Revenue Code of 1986, as amended, (the "Code") and
with respect to the reorganization, each Transferor Fund and the Surviving Fund
will be considered "a party to a reorganization" within the meaning of Section
368(b) of the Code; (ii) no gain or loss will be recognized by the Transferor
Funds as a result of such transactions; (iii) no gain or loss will be recognized
by the Surviving Fund as a result of such transactions; (iv) no gain or loss
will be recognized by the shareholders of any Transferor Fund on the
distribution to them by the Company of Corresponding Shares of the Surviving
Fund in exchange for their Retail and Trust Shares of any Transferor Fund; (v)
the basis of the Surviving Fund's Corresponding Shares received by a shareholder
of a Transferor Fund will be the same as the basis of the shareholder's Retail
and Trust Shares of a Transferor Fund immediately prior to the reorganization;
(vi) the basis of the Surviving Fund in the Assets of the corresponding
Transferor Fund received pursuant to the reorganization will be the same as the
basis of the Assets in the hands of the Transferor Fund immediately before the
reorganization; (vii) a shareholder's holding period for a Surviving Fund's
Corresponding Shares will be determined by including the period for which the
-16-
<PAGE>
shareholder held the Retail and Trust Shares of the Transferor Fund exchanged
therefor, provided that the shareholder held such Transferor Fund's Retail and
Trust shares as a capital asset; and (viii) the Surviving Fund's holding period
with respect to the Assets received in the reorganization will include the
period for which such Assets were held by each Transferor Fund.
The Company has not sought a tax ruling from the Internal Revenue
Service ("IRS"). The tax opinion described in the preceding paragraph will not
be binding on the IRS and will not preclude the IRS from adopting a contrary
position. Shareholders should consult their own advisors concerning the
potential tax consequences to them, including state and local income tax
consequences.
COMPARISON OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES. The investment objective of each
Transferor Fund and the Surviving Fund is to seek long-term capital
appreciation. As discussed in "SUMMARY-Comparison of the Investment Objectives
of the Funds," the investment approach of the Surviving Fund is slightly broader
than each Transferor Fund which has its own narrow investment theme. In managing
the Surviving Fund, U.S. Trust utilizes its three-pronged investment strategies,
the problem/opportunity strategy, transaction value strategy and early life
cycle strategy, as well as the investment policies and themes of the Transferor
Funds in managing the Surviving Fund.
Certain investments, however, are common to the Transferor Funds and
the Surviving Fund (collectively, the "Funds").
Under normal market and economic conditions, the Funds will invest at
least 65% of their total assets in common stock, preferred stock and securities
convertible into common stock. Normally, up to 35% of each Fund's total assets
may be invested in other securities and instruments including investment grade
debt securities and warrants. During temporary defensive periods, each Fund may
hold cash or invest some or all of its assets in U.S. Government securities,
high-quality money market instruments and repurchase agreements collateralized
by the foregoing obligations.
Each Fund may also invest in the securities of foreign issuers, either
directly or indirectly through sponsored and unsponsored American Depository
Receipts; invest up to 10% of the value of its total assets in money market fund
securities; lend its portfolio securities; purchase eligible securities on a
"when-issued" basis; purchase or sell securities on a "forward commitment"
basis; participate in forward currency contracts; invest in equity real estate
investment trusts; write covered call options and enter into closing purchase
transactions with respect to such options and invest up to 10% of its net assets
in illiquid securities.
-17-
<PAGE>
Certain investments of the Transferor Funds are not common to the
Surviving Fund.
Options. The Transferor Funds, unlike the Surviving Fund, may
--------
purchase put and call options listed on a national securities exchange and
issued by the Options Clearing Corporation in an amount not exceeding 5% of the
particular Fund's net assets. Such options may relate to particular securities
or to various stock or bond indices. Purchasing options is a specialized
investment technique which entails a substantial risk of complete loss of the
amounts paid as premiums to the writer of the options.
Futures. The Transferor Funds, unlike the Surviving Fund, for hedging
--------
purposes, may also enter into interest rate 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 use of futures contracts is restricted such
that no more than 10% of a Transferor Fund's total assets may be hedged.
Transactions in futures as a hedging device may subject a Fund to a
number of risks. Successful use of futures by a Fund is subject to the ability
of U.S. Trust to correctly anticipate movements in the direction of the market.
In addition, there may be an imperfect correlation, or no correlation at all,
between movements in the price of the futures contracts (or options) 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, a Transferor Fund may realize
a loss on a futures transaction that is not offset by a favorable movement in
the price of securities which it holds or intends to purchase or may be unable
to close a futures position in the event of adverse price movements.
FUNDAMENTAL INVESTMENT LIMITATIONS. The Transferor Funds and the
Surviving Fund are subject to a number of investment limitations which are
matters of fundamental policy and may not be changed with respect to a
particular Fund without the affirmative vote of the holders of a majority of a
Fund's outstanding shares (as defined in the 1940 Act). The following is a
comparison of certain fundamental investment limitations of the Transferor Funds
and the Surviving Fund.
The fundamental investment limitations of the Transferor Funds and the
Surviving Fund are generally identical except as follows:
Industry Diversification. The Transferor Funds and the Surviving Fund
-------------------------
may not purchase any securities which would cause more than 25% of the value of
their respective total assets at the time of purchase to be invested in the
securities of one or
-18-
<PAGE>
more issuers conducting their principal business activities in the same
industry. However, with respect to the Surviving Fund, this limitation on
industry concentration is not applicable to securities issued or guaranteed by
the U.S. Government or domestic bank obligations. With respect to each
Transferor Fund, this limitation on industry concentration is not applicable to
securities issued or guaranteed by the U.S. Government. For both the Transferor
Funds and the Surviving Fund, neither all finance companies, as a group, nor all
utility companies, as a group, are considered a single industry for purposes of
this limitation.
Commodities Futures Contracts and Oil, Gas and Other Mineral
------------------------------------------------------------
Exploration Programs. The Transferor Funds and the Surviving Fund may not
- ---------------------
purchase or sell commodities futures contracts or invest in oil, gas, or other
mineral exploration or development programs; provided that for the Transferor
Funds and Surviving Fund the foregoing limitation shall not prohibit a Fund from
purchasing publicly traded securities of companies engaging in whole or in part
in such activities. In addition, with respect to the Transferor Funds, the
foregoing limitation shall not prohibit a Transferor Fund from investing in
liquidating trust receipts, certificates of beneficial ownership or other
instruments in accordance with their respective investment objectives and
policies; and each Transferor Fund may enter into futures contracts and futures
options.
The following investment limitations are fundamental with respect to
the Surviving Fund but are merely nonfundamental operating polices with respect
to the Transferor Funds:
Bank Obligations. The Transferor Funds and Surviving Fund may not
-----------------
invest in obligations of foreign branches of financial institutions or in
domestic branches of foreign banks if immediately after such purchase: (i) more
than 5% of the value of their respective total assets would be invested in
obligations of any one foreign branch of the financial institution or domestic
branch or a foreign bank; or (ii) more than 20% of their respective total assets
would be invested in foreign branches of financial institutions or in domestic
branches of foreign banks. It is also a non-fundamental policy of the Surviving
Fund that it will not invest more than 25% of the value of its total assets in
domestic bank obligations.
Illiquid Securities. The Transferor Funds and Surviving Fund may not
--------------------
knowingly invest more than 10% of the value of their respective total assets in
illiquid securities, including repurchase agreements with remaining maturities
in excess of seven days, restricted securities and other securities for which
market quotations are not readily available.
Margin and Short Sales. The Transferor Funds and Surviving Fund may
-----------------------
not purchase securities on margin, make short sales of securities, or maintain a
short position.
-19-
<PAGE>
Options. The Transferor Funds and Surviving Fund may not invest in or
--------
sell put options, call options, straddles, spreads, or any combination thereof;
provided, however, that each 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 Transferor Funds may purchase options
and other rights in accordance with their investment objectives and policies.
Control. The Transferor Funds and Surviving Fund may not invest in
--------
companies for the purpose of exercising management or control.
Unseasoned Issuers. The Transferor Funds and Surviving Fund may not
-------------------
invest more than 5% of their total assets in securities issued by companies
which, together with any predecessor, have been in continuous operation for
fewer than three years.
Investment Companies. The Transferor Funds and Surviving Fund may not
---------------------
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.
-20-
<PAGE>
PERFORMANCE. The average annual total return for the period ended
March 31, 1997 for the Retail Shares of the Transferor Funds and Surviving Fund
were as follows:
<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception
--------------------------------
<S> <C> <C> <C> <C>
Productivity Enhancers Fund 1.02% N/A N/A 10.21%
(inception 12/31/92)
Environmentally-Related
Products and Services Fund 21.22% N/A N/A 7.17%
(inception 12/31/92)
Aging of America Fund 8.18% N/A N/A 10.68%
(inception 12/31/92)
Communication and
Entertainment Fund 0.34% N/A N/A 12.94%
(inception 12/31/92)
Global Competitors Fund 6.64% N/A N/A 13.18%
(inception 12/31/92)
Equity Fund
(inception 4/25/85)
Retail Shares 11.09% 15.38% 11.45% 15.27%
Trust Shares 10.95% 15.35% 11.44% 15.26%
</TABLE>
As of March 31, 1997, the Transferor Funds had not issue Trust Shares in a
public offering.
OTHER INFORMATION. The Company is organized as a Maryland corporation
and, as such, is subject to the provisions of its Articles of Incorporation and
its By-Laws. The Company is registered as an open-end management investment
company under the 1940 Act. Currently, the Company has authorized capital of 35
billion shares of common stock, $.001 par value per share, classified into forty
series of shares representing interests in twenty investment portfolios. The
Company has authorized the issuance of two classes of shares, Retail Shares and
with respect to certain Funds, including but not limited to, the Equity, Aging
of America, Communication and Entertainment, and Global Competitors Funds, a
separate class of shares designated as Trust Shares. Trust Shares have
different expenses than non-Trust Shares, which may affect performance.
Each share in a Fund represents an equal proportionate interest in the
particular Fund with other shares of the same class, and is entitled to such
dividends and distributions out of
-21-
<PAGE>
the income earned on the assets belonging to such Fund as are declared in the
discretion of the Company's Board of Directors. The Company's Charter
authorizes the Board to classify or reclassify any class of shares into one or
more additional classes or series.
The Company's shareholders 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 or series, except as otherwise expressly required by
law.
The foregoing is only a summary of certain material attributes of the
Funds and their shares. Shareholders may obtain copies of the Company's
Articles of Incorporation and By-Laws from the Company upon written request at
the address shown on the cover page of this Combined Proxy Statement/Prospectus.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. This Combined Proxy Statement/Prospectus is
being furnished in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Meeting. It is expected that the
solicitation of proxies will be primarily by mail. The Company's officers and
service contractors may also solicit proxies by telephone, telegraph or personal
interview. In addition, the Company may retain the services of one or more
outside organizations to aid in the solicitation of proxies. Such organizations
normally charge a fee plus out-of-pocket charges.
Only shareholders of record at the close of business on June 2, 1997
will be entitled to vote at the Meeting. On that date, there were outstanding
and entitled to be voted __________ Retail Shares of the Productivity Enhancers
Fund, __________ Retail Shares of the Environmentally-Related Products and
Services Fund, __________ Retail Shares and ________ Trust Shares of the Aging
of America Fund, __________ Retail Shares and __________ Trust Shares of the
Communication and Entertainment Fund and __________ Retail Shares and
___________ Trust Shares of the Global Competitors Fund. Each share or fraction
thereof is entitled to one vote or fraction thereof.
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in
-22-
<PAGE>
accordance with the proxy on all matters that may properly come before the
Meeting. Any shareholder giving a proxy may revoke it at any time before it is
exercised by submitting to the Company a written notice of revocation or a
subsequently executed proxy or by attending the Meeting and electing to vote in
person.
SHAREHOLDER AND BOARD APPROVAL. The Plan of Reorganization and the
transactions contemplated therein are being submitted for approval at the
Meeting by the holders of a majority of the outstanding shares of each
Transferor Fund in accordance with the terms of the Plan. The term "majority of
the outstanding shares" as used herein means more than 50% of all the votes cast
at a meeting at which a quorum is present.
The vote of the shareholders of the Surviving Fund is not being
solicited, because their approval or consent is not required for the
reorganization.
The approval of the Plan of Reorganization by the Board of Directors
of the Company is discussed above under "INFORMATION RELATING TO THE PROPOSED
REORGANIZATION - Board Consideration."
On June 2, 1997, USTNY and its affiliates held of record substantially
all of the shares in each of the Transferor Funds and the Surviving Fund as
agent or custodian for their customers. In addition, at that date, U.S. Trust
and its affiliates held investment and/or voting power with respect to a
majority of each Fund's outstanding shares on behalf of their customers.
At June 2, 1997, the name, address and share ownership of each person
who owned of record 5% or more of the outstanding shares of each Transferor Fund
and the Surviving Fund are listed in the following table. The table also shows
the percentage of each Fund that would be owned by these persons upon the
consummation of the reorganization based on their holdings at that date.
-23-
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
TRANSFEROR OR SURVIVING FUND
PERCENTAGE OF SURVIVING PERCENTAGE OF OWNED ON
CLASS AND CLASS OWNED FUND OWNED CLASS OWNED CONSUMMATION
AMOUNT OF ON RECORD ON RECORD ON RECORD OF
FUND NAME AND ADDRESS SHARES OWNED DATE DATE DATE REORGANIZATION
---- ---------------- ------------ ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Productivity
Enhancers
Environmentally-
Related Product and
Services
Aging of America
Communication and
Entertainment
Global Competitors
Equity
</TABLE>
For purposes of the 1940 Act, any person who owns directly or though
one or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company.
At the record date for the Meeting, the directors and officers of the
Company as a group owned beneficially less than 1% of the outstanding shares of
the Transferor Funds and the Surviving Fund.
QUORUM. In the event that a quorum is not present at the Meeting, or
in the event that a quorum is present at the Meeting but sufficient votes to
approve the Plan of Reorganization are not received, the persons named as
proxies, or their substitutes, may propose one or more adjournments of the
Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares represented at the
Meeting in person or by proxy. If a quorum is not present, the persons named as
proxies will vote those proxies FOR adjournment. If a quorum is present, the
persons named as proxies will vote those proxies which they are entitled to vote
FOR the Plan of Reorganization in favor of such adjournments, and will vote
those proxies required to be voted AGAINST such proposal against any
adjournment. A shareholder vote may be taken with respect to one Transferor
Fund (but not the other Transferor Funds) before any such adjournment if
sufficient votes have been received for approval. A quorum is constituted with
respect to a Fund by the presence in person or by proxy of the holders of more
than 50% of the outstanding shares of the Fund entitled to vote at the Meeting.
Shares represented by broker non-votes are treated as being present for purposes
of determining a quorum. A vote cast does not include an abstention or the
failure to vote for or against a proposal. Therefore, for purposes of
determining the affirmative vote of a "majority of
-24-
<PAGE>
the outstanding shares," an abstention or the failure to vote, including a
broker non-vote, will be the equivalent of voting against approval of the Plan
of Reorganization.
ANNUAL MEETINGS. The Company does not presently intend to hold annual
meetings of shareholders except as required by the 1940 Act or other applicable
law. The Company will call a meeting of shareholders for the purpose of voting
upon the question of removal of a member of the Board of Directors upon written
request of shareholders owning at least 25% of the outstanding shares of the
Company entitled to vote.
ADDITIONAL INFORMATION ABOUT THE FUNDS
Information about the Transferor Funds and the Surviving Fund is
included in the Prospectuses dated August 31, 1996 which is incorporated by
reference herein. Additional information about the Transferor Funds and the
Surviving Fund is included in the Statement of Additional Information dated
August 31, 1996, which has been filed with the SEC and is incorporated by
reference herein. Copies of the Prospectus and the Statement of Additional
Information may be obtained without charge by calling the Company at 1-800-446-
1012. The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 and the 1940 Act, as applicable, and, in
accordance with such requirements, files proxy materials, reports and other
information with the SEC. These materials can be inspected and copied at the
Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and by calling the Company at the telephone number
listed above. In addition, these materials can be inspected and copied at the
SEC's Regional Offices at 7 World Trade Center, Suite 1300, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can also be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
FINANCIAL HIGHLIGHTS
The tables set forth below present financial information for the
Retail Shares of the Transferor Funds and the Surviving Fund. This information
is derived from the Company's audited financial statements for the annual period
ended March 31, 1997. The data should be read in conjunction with the audited
financial statements and related notes which are included in the Statement of
Additional Information related to this Combined Proxy Statement/Prospectus.
Financial highlights for the Transferor Funds and the Surviving Fund for prior
periods are contained in the Prospectus dated August 31, 1996, and financial
statements for the Transferor Funds and the Surviving Fund for the prior periods
are contained in the Company's Annual Report to
-25-
<PAGE>
Shareholders and are incorporated by reference into the Transferor Funds' and
the Surviving Fund's Statement of Additional Information dated August 31, 1996,
which Prospectus and Statement of Additional Information are incorporated herein
by reference. As of March 31, 1997, the Transferor Funds had not issued Trust
Shares in a public offering.
-26-
<PAGE>
Selected data for a Retail Share of capital stock
outstanding throughout the period indicated:
EQUITY FUND
-----------
<TABLE>
<CAPTION>
Fiscal Year Ended
March 31, 1997
--------------------
<S> <C>
Net Asset Value, Beginning $ 24.43
of Period................................ --------
Net Investment Income (Loss).............. 0.18
Net Realized and Unrealized
Gain (Loss) on Investments and Options... 2.50
--------
Total from Investment Operations.......... 2.68
--------
Dividends from Net Investment Income...... (0.14)
Distributions from Net Realized Gain
on Investments and Options............... (1.16)
--------
Total Distributions....................... (1.30)
--------
Net Asset Value, End of Period............ $ 25.81
========
Total Return+............................. 11.09%
Net Assets, End of Period
(000's omitted)......................... $306,990
Ratio of Net Operating Expenses to
Average Net Assets...................... 1.01%
Ratio of Gross Operating Expenses to
Average Net Assets++.................... 1.06%
Ratio of Net Investment Income (Loss) to
Average Net Assets...................... 0.71%
Portfolio Turnover Rate 39%
Fee Waivers............................... $ 0.01
Average Commission Rate# $ 0.0663
</TABLE>
- -----------------------------------
+ Total return data does not reflect the sales load payable on purchases of
shares. The sales load was eliminated effective February 14, 1997.
++ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by USTNY and the Administrators.
# Beginning with fiscal year 1996, each Fund is required to disclose the
average commission rate per share it paid for portfolio trades, on which
commissions were charged, during the period.
-27-
<PAGE>
Selected data for a Trust Share of capital stock
outstanding throughout the period indicated:
EQUITY FUND
-----------
<TABLE>
<CAPTION>
Period From
November 12, 1996 to
March 31, 1997
---------------------
<S> <C>
Net Asset Value, Beginning $ 26.30
of Period................................ ------------
Net Investment Income (Loss).............. 0.04
Net Realized and Unrealized
Gain (Loss) on Investments and Options... 0.03
------------
Total from Investment Operations.......... 0.07
------------
Dividends from Net Investment Income...... (0.03)
Distributions from Net Realized Gain
on Investments and Options............... (0.56)
------------
Total Distributions....................... (0.59)
------------
Net Asset Value, End of Period............ $ 25.78
============
Total Return+............................. 0.23%/*/
Net Assets, End of Period
(000's omitted)......................... $ 81
Ratio of Net Operating Expenses to
Average Net Assets...................... 1.36%/**/
Ratio of Gross Operating Expenses to
Average Net Assets++.................... 1.41%/**/
Ratio of Net Investment Income (Loss) to
Average Net Assets...................... 0.45%/**/
Portfolio Turnover Rate 39%/**/
Fee Waivers............................... $ 0.00
Average Commission Rate# $ 0.0663
</TABLE>
- ------------------------
* Not annualized.
** Annualized.
+ Total return data does not reflect the sales load payable on purchases of
shares. The sales load was eliminated effective February 14, 1997.
++ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by USTNY and the Administrators.
# Beginning with fiscal year 1996, each Fund is required to disclose the
average commission rate per share it paid for portfolio trades, on which
commissions were charged, during the period.
-28-
<PAGE>
Selected data for a Retail Share of capital stock
outstanding throughout the period indicated:
PRODUCTIVITY ENHANCERS FUND
---------------------------
<TABLE>
<CAPTION>
Fiscal Year Ended
March 31, 1997
------------------
<S> <C>
Net Asset Value, Beginning
of Period................................ $ 8.83
-------
Net Investment Income (Loss).............. (0.02)
Net Realized and Unrealized
Gain (Loss) on Investments and Options... 0.16
-------
Total from Investment Operations.......... 0.14
-------
Dividends from Net Investment Income...... 0.00
Distributions from Net Realized Gain
on Investments and Options............... (0.80)
-------
Total Distributions....................... (0.80)
-------
Net Asset Value, End of Period............ $ 8.17
=======
Total Return+............................. 1.02%
Net Assets, End of Period
(000's omitted)......................... $18,057
Ratio of Net Operating Expenses to
Average Net Assets...................... 0.98%
Ratio of Gross Operating Expenses to
Average Net Assets++.................... 1.08%
Ratio of Net Investment Income (Loss) to
Average Net Assets...................... (0.16)%
Portfolio Turnover Rate 300%
Fee Waivers............................... $ 0.01
Average Commission Rate# $0.0797
</TABLE>
- ----------------------------
+ Total return data does not reflect the sales load payable on purchases of
shares. The sales load was eliminated effective February 14, 1997.
++ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by USTNY and the Administrators.
# Beginning with fiscal year 1996, each Fund is required to disclose the
average commission rate per share it paid for portfolio trades, on which
commissions were charged, during the period.
-29-
<PAGE>
Selected data for a Retail Share of capital stock
outstanding throughout the period indicated:
ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND
--------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Year Ended
March 31, 1997
------------------
<S> <C>
Net Asset Value, Beginning
of Period................................ $ 7.73
-------
Net Investment Income (Loss).............. 0.01
Net Realized and Unrealized
Gain (Loss) on Investments and Options... 1.61
-------
Total from Investment Operations.......... 1.62
-------
Dividends from Net Investment Income...... (0.01)
Distributions from Net Realized Gain
on Investments and Options............... 0.00
-------
Total Distributions....................... (0.01)
-------
Net Asset Value, End of Period............ $ 9.34
=======
Total Return+............................. 21.22%
Net Assets, End of Period
(000's omitted)......................... $ 8,869
Ratio of Net Operating Expenses to
Average Net Assets...................... 0.99%
Ratio of Gross Operating Expenses to
Average Net Assets++.................... 1.33%
Ratio of Net Investment Income (Loss) to
Average Net Assets...................... 0.15%
Portfolio Turnover Rate 73%
Fee Waivers............................... $ 0.03
Average Commission Rate# $0.0711
</TABLE>
- --------------------------
+ Total return data does not reflect the sales load payable on purchases of
shares. The sales load was eliminated effective February 14, 1997.
++ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by USTNY and the Administrators.
# Beginning with fiscal year 1996, each Fund is required to disclose the
average commission rate per share it paid for portfolio trades, on which
commissions were charged, during the period.
-30-
<PAGE>
Selected data for a Retail Share of capital stock
outstanding throughout the period indicated:
AGING OF AMERICA FUND
---------------------
<TABLE>
<CAPTION>
Fiscal Year Ended
March 31, 1997
------------------
<S> <C>
Net Asset Value, Beginning
of Period................................ $ 9.81
-------
Net Investment Income (Loss).............. 0.07
Net Realized and Unrealized
Gain (Loss) on Investments and Options... 0.72
-------
Total from Investment Operations.......... 0.79
Dividends from Net Investment Income...... (0.07)
-------
Distributions from Net Realized Gain
on Investments and Options............... (0.39)
-------
Total Distributions....................... (0.46)
-------
Net Asset Value, End of Period............ $ 10.14
=======
Total Return+............................. 8.18%
Net Assets, End of Period
(000's omitted)......................... $45,058
Ratio of Net Operating Expenses to
Average Net Assets...................... 0.95%
Ratio of Gross Operating Expenses to
Average Net Assets++.................... 1.00%
Ratio of Net Investment Income (Loss) to
Average Net Assets...................... 0.67%
Portfolio Turnover Rate 86%
Fee Waivers............................... $ 0.00
Average Commission Rate# $0.0831
</TABLE>
- --------------------------
+ Total return data does not reflect the sales load payable on purchases of
shares. The sales load was eliminated effective February 14, 1997.
++ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by USTNY and the Administrators.
# Beginning with fiscal year 1996, each Fund is required to disclose the
average commission rate per share it paid for portfolio trades, on which
commissions were charged, during the period.
-31-
<PAGE>
Selected data for a Retail Share of capital stock
outstanding throughout the period indicated:
COMMUNICATION AND ENTERTAINMENT FUND
------------------------------------
<TABLE>
<CAPTION>
Annual Period Ended
March 31, 1997
---------------------
<S> <C>
Net Asset Value, Beginning
of Period................................ $ 10.32
-------
Net Investment Income (Loss).............. 0.00
Net Realized and Unrealized
Gain (Loss) on Investments and Options... 0.05
-------
Total from Investment Operations.......... 0.05
-------
Dividends from Net Investment Income...... 0.00
Distributions from Net Realized Gain
on Investments and Options............... (0.05)
-------
Total Distributions....................... (0.05)
-------
Net Asset Value, End of Period............ $ 10.32
=======
Total Return+............................. 0.34%
Net Assets, End of Period
(000's omitted)......................... $34,696
Ratio of Net Operating Expenses to
Average Net Assets...................... 0.99%
Ratio of Gross Operating Expenses to
Average Net Assets++.................... 1.04%
Ratio of Net Investment Income (Loss) to
Average Net Assets...................... (0.03%)
Portfolio Turnover Rate 63%
Fee Waivers............................... $ 0.01
Average Commission Rate# $0.0677
</TABLE>
- ---------------------
+ Total return data does not reflect the sales load payable on purchases of
shares. The sales load was eliminated effective February 14, 1997.
++ Expense ratios before waiver of fees and reimbursement of expenses (if any)
USTNY and the Administrators.
# Beginning with fiscal year 1996, each Fund is required to disclose the
average commission rate per share it paid for portfolio trades, on which
commissions were charged, during the period.
-32-
<PAGE>
Selected data for a Retail Share of capital stock
outstanding throughout the period indicated:
GLOBAL COMPETITORS FUND
-----------------------
<TABLE>
<CAPTION>
Annual Period Ended
March 31, 1997
--------------------
<S> <C>
Net Asset Value, Beginning
of Period................................ $ 10.83
-------
Net Investment Income (Loss).............. 0.06
Net Realized and Unrealized
Gain (Loss) on Investments and Options... 0.66
-------
Total from Investment Operations.......... 0.72
-------
Dividends from Net Investment Income...... (0.07)
Distributions from Net Realized Gain
on Investments and Options............... (0.09)
-------
Total Distributions....................... (0.16)
-------
Net Asset Value, End of Period............ $ 11.39
=======
Total Return+............................. 6.64%
Net Assets, End of Period
(000's omitted)......................... $81,922
Ratio of Net Operating Expenses to
Average Net Assets...................... 0.89%
Ratio of Gross Operating Expenses to
Average Net Assets++.................... 0.94%
Ratio of Net Investment Income (Loss) to
Average Net Assets...................... 0.54%
Portfolio Turnover Rate 25%
Fee Waivers............................... $ 0.00
Average Commission Rate# $0.0873
</TABLE>
- ---------------------
+ Total return data does not reflect the sales load payable on purchases of
shares. The sales load was eliminated effective February 14, 1997.
++ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by USTNY and the Administrators.
# Beginning with fiscal year 1996, each Fund is required to disclose the
average commission rate per share it paid for portfolio trades, on which
commissions were charged, during the period.
-33-
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements for the Transferor Funds and the Surviving
Fund for the annual period ended March 31, 1997 are included in the Statement of
Additional Information related to this Combined Proxy Statement/Prospectus. The
financial highlights for the Transferor Funds and the Surviving Fund for the
fiscal year ended March 31, 1996, included in the Funds' Prospectus dated August
31, 1996, and the financial statements for the Transferor Funds and the
Surviving Fund set forth in the Company's Annual Report to Shareholders for the
fiscal year ended March 31, 1996, are incorporated by reference in such Funds'
Statement of Additional Information dated August 31, 1996, which Prospectus and
Statement of Additional Information are incorporated by reference in this
Combined Proxy Statement/Prospectus and are also included in the Statement of
Additional Information related to this Combined Proxy Statement/Prospectus.
Such audited financial highlights and financial statements have been
incorporated herein in reliance on the report of Ernst & Young LLP, independent
auditors, given on the authority of that firm as experts in accounting and
auditing.
OTHER BUSINESS
The Company's Board of Directors knows of no other business to be brought
before the Meeting with respect to Productivity Enhancers Fund,
Environmentally-Related Products and Services Fund, Aging of America Fund,
Communication and Entertainment Fund and Global Competitors Fund. In addition,
the shareholders of the Long-Term Supply of Energy Fund will vote on certain
matters which are discussed more fully in the enclosed proxy statement relating
to such Fund. However, if any other matters come before the Meeting, it is the
intention of the Board that proxies that do not contain specific restrictions to
the contrary will be voted on such matters in accordance with the judgment of
the persons named in the enclosed form of proxy.
LITIGATION
The Company is not involved in any litigation that would have any material
adverse financial effect upon the funds.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Company in writing at the
address on the cover page of this Combined Proxy Statement/Prospectus or by
telephoning 1-800-446-1012.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED
TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
-34-
<PAGE>
APPENDIX A
PLAN OF REORGANIZATION
This PLAN OF REORGANIZATION (the "Plan") is dated as of the 16th day of
May, 1997, and has been adopted by the Board of Directors of Excelsior Funds,
Inc. (the "Company") to provide for the reorganization of its Productivity
Enhancers Fund, Environmentally-Related Products and Services Fund, Aging of
America Fund, Communication and Entertainment Fund and Global Competitors Fund
(the "Transferor Funds") into its Equity Fund (the "Surviving Fund").
A. BACKGROUND
Each of the Transferor Funds and the Surviving Fund (individually, a
"Fund," collectively, the "Funds") is a separate investment portfolio of the
Company. The Company is organized as a Maryland corporation and is an open-end
management investment company registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940 (the "1940
Act"). The Board of Directors of the Company has determined that it is in the
best interests of each Transferor Fund and its shareholders for each such Fund
to be reorganized through the transfer of all of its assets and liabilities to
the Surviving Fund upon the terms set forth in this Plan (the "Reorganization").
B. THE REORGANIZATION
1. At the Effective Time of the Reorganization as defined below in
Section 5 of this Article B, all property of every description, and all
interests, rights, privileges and powers of each Transferor Fund, subject to all
liabilities of each such Transferor Fund, whether accrued, absolute, contingent
or otherwise (such assets subject to such liabilities are herein referred to as
the "Assets") will be transferred and conveyed by such Transferor Fund to the
Surviving Fund and will be assumed by the Surviving Fund, such that at and after
the Effective Time of the Reorganization the Assets of each Transferor Fund will
become and be the Assets of the Surviving Fund. In exchange for the transfer of
the Assets of each Transferor Fund, the Surviving Fund will contemporaneously
issue to each Transferor Fund full and fractional retail and trust shares, as
applicable, of the Surviving Fund. The number of retail shares and trust shares
of the Surviving Fund so issued will have an aggregate net asset value equal to
the value of the Assets of the particular Transferor Fund. The net asset value
of each Transferor Fund and of the Surviving Fund shall be determined as of 4:00
p.m., Eastern time, on September 12, 1997, or at such other time as may be
determined by the Board of Directors or an authorized officer of the Company.
The net asset value of each Transferor Fund and of the Surviving Fund shall be
computed in the manner set forth
A-1
<PAGE>
in the Funds' then current prospectus under the Securities Act of 1933, as
amended. At and after the Effective Time of the Reorganization, all debts,
liabilities, obligations and duties of each Transferor Fund will attach to the
Surviving Fund as aforesaid and may thenceforth be enforced against the
Surviving Fund to the same extent as if the same had been incurred by it.
2. Prior to the Effective Time of the Reorganization, each of the
Transferor Funds shall have declared a dividend or dividends, with a record date
and ex-dividend date prior to such Effective Time of the Reorganization, which,
together with all previous dividends, shall have the effect of distributing to
its shareholders all of its net investment income, if any, for the taxable
periods or years ended on or before March 31, 1997 and for the period from said
date to and including the Effective Time of the Reorganization applicable to the
Transferor Funds (computed without regard to any deduction for dividends paid)
and all of its net capital gain, if any, realized in taxable years or periods
ended on or before March 31, 1997 and in the period from said date to and
including the Effective Time of the Reorganization applicable to the Transferor
Funds.
3. At the Effective Time of the Reorganization, each Transferor Fund will
make a liquidating distribution to the holders of its retail shares and trust
shares, retail shares and trust shares, as appropriate, of the Surviving Fund,
such that the number of shares of the Surviving Fund that are distributed to a
shareholder of a Transferor Fund will, as indicated above in Section 1 of this
Article B, have an aggregate net asset value equal to the aggregate net asset
value of the shares of the particular Transferor Fund that are outstanding
immediately prior to the Effective Time of the Reorganization. In addition,
each such shareholder will have the right to receive any unpaid dividends or
other distributions that were declared before the Effective Time of the
Reorganization with respect to the shares of such Transferor Fund held by the
shareholder immediately prior to the Effective Time of the Reorganization.
4. The stock transfer books of the Company with respect to each
Transferor Fund will be permanently closed as of the close of business on the
day immediately preceding the Effective Time of the Reorganization. Redemption
requests received thereafter by the Company with respect to a Transferor Fund
will be deemed to be redemption requests for shares of the Surviving Fund issued
in the Reorganization. If any shares of a Transferor Fund are represented by a
share certificate, the certificate must be surrendered to the Company's transfer
agent for cancellation before the Surviving Fund shares issued to the
shareholder in the Reorganization will be redeemed.
A-2
<PAGE>
5. The Effective Time of the Reorganization for purposes of this
Agreement shall be the opening of business on September 15, 1997, or at such
other time as may be determined by the Board of Directors or an authorized
officer of the Company.
C. ACTIONS BY SHAREHOLDERS OF EACH TRANSFEROR FUND
Prior to the Effective Time of the Reorganization and as a condition
thereto, the Board of Directors of the Company will call, and the Company will
hold, a meeting of the shareholders of each Transferor Fund to consider and vote
upon:
(1) Approval of this Plan and the transactions contemplated hereby.
(2) Such other matters as may be determined by the Board of Directors of
the Company.
D. CONDITIONS TO THE REORGANIZATION
Consummation of this Plan and the Effective Time of the Reorganization will
be subject to:
(1) the approval of the matters referred to in Article C of this Plan
by the shareholders of each Transferor Fund in the manner required by
law and otherwise deemed necessary or advisable by the Board of
Directors of the Company; and
(2) the following additional conditions:
a. The Company will have received an opinion of Drinker Biddle &
Reath to the effect that:
(i) the shares of the Surviving Fund issued pursuant to this Plan
will, when issued in accordance with the provisions hereof, be legally
issued, fully paid and non-assessable; and
(ii) for federal income tax purposes: (i) the acquisition of the
assets and assumption of the liabilities of the Transferor Funds by
the Surviving Fund in return for retail and trust shares of the
Surviving Fund followed by the distribution of such shares to the
shareholders of the Transferor Funds will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) or Section
368(a)(1)(D) of the Code and the Surviving Fund and the Transferor
Funds will be "a party to the reorganization" within the meaning of
Section 368(b) of the Code; (ii) no gain or loss will be recognized by
any Transferor Fund upon the transfer of their assets and liabilities
to the Surviving Fund; (iii) no gain or loss will be recognized by the
Surviving Fund upon the receipt of
A-3
<PAGE>
the assets of each Transferor Fund in exchange for retail and trust
shares of the Surviving Fund and the assumption by the Surviving Fund
of the liabilities of the Transferor Funds; (iv) no gain or loss will
be recognized by the shareholders of any Transferor Fund upon the
receipt of said Surviving Fund's retail and trust shares in exchange
for their retail and trust shares in the Transferor Funds; (v) the
basis of said Surviving Fund's retail and trust shares received by the
shareholders of the Transferor Funds will be the same as the basis of
the retail and trust shares of the Transferor Funds exchanged
therefor; (vi) the tax basis of the assets of the Transferor Funds in
the hands of the Surviving Fund will be the same as the tax basis of
such assets in the hands of the Transferor Funds immediately prior to
the transfer; (vii) the holding period of said Surviving Fund retail
and trust shares received by the shareholders of the Transferor Funds
will include the holding period of the retail and trust shares of the
Transferor Funds exchanged therefor, provided that at the time of the
exchange the retail and trust shares of the Transferor Funds were held
as capital assets; and (viii) the holding period of the Surviving Fund
for the assets of the Transfer Funds transferred to it will include
the period during which such assets were held by the Transferor Funds.
b. All necessary approvals, registrations and exemptions required
under federal and state laws will have been obtained.
E. MISCELLANEOUS
1. This Plan and the transactions contemplated hereby will be governed
and construed in accordance with the laws of the State of Maryland.
2. This Plan and the Reorganization contemplated hereby may be abandoned
at any time for any reason prior to the Effective Time of the Reorganization
upon the vote of a majority of the Board of Directors of the Company.
3. At any time prior to or (to the fullest extent permitted by law) after
approval of this Plan by the shareholders of any Transferor Fund, the Company
may, upon authorization by the Board of Directors and with or without the
approval of shareholders of any Transferor Fund, amend any of the provisions of
this Plan.
4. Notwithstanding Section 1 of Article B, unamortized organizational
expenses of the Transferor Funds shall not be transferred or assumed hereunder.
The Company has been advised that such expenses will be paid to such Transferor
Funds by one or more third parties and will be eliminated from the balance
A-4
<PAGE>
sheets of such Transferor Funds prior to the Effective Time of the
Reorganization.
5. The expenses incurred in connection with the Reorganization will be
borne by United States Trust Company of New York.
6. The Company, by consent of its Board of Directors, or an officer
authorized by such Board of Directors, may waive any condition to the
obligations of any Transferor Fund or Surviving Fund hereunder if, in its or
such officer's judgment, such waiver will not have a material adverse effect on
the interests of the shareholders of the Transferor Funds and Surviving Fund.
In the event that shareholder approval of the Reorganization is obtained with
respect to one or more Transferor Funds but not with respect to all Transferor
Funds, with the result that the transactions contemplated by this Plan may be
consummated with respect to some but not all Transferor Funds, the Board of
Directors of the Company may, in the exercise of its reasonable business
judgement, either abandon the Plan with respect to all Transferor Funds or
direct the Reorganization be consummated to the degree the Board deems
advisable.
A-5
<PAGE>
APPENDIX B
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
B-1
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
PRODUCTIVITY ENHANCERS FUND
- -------------------------------------------------------------------------------
For the twelve months ended March 31, 1997, the Fund realized a total return
of 1.02%*, versus 19.83%** for the Standard & Poor's 500 Composite Stock Price
Index. During the first half of the fiscal year, we focused heavily on the
technology sector, followed by capital goods and the consumer sector. Weakness
in technology, particularly small-capitalization technology stocks, had a
negative impact on the Fund. During the second half of the fiscal year, we
conducted a thorough review of the Fund's investments, identifying areas where
the Fund was either under-represented or without representation. While the
main drivers of the Fund remained the same--technology, financials, aerospace,
diversified basic materials--we increased diversification and added emphasis
on good long-term fundamental business values at the portfolio's center. We
also shifted weightings somewhat, adding to positions on the consumer side and
in transportation, for instance. During the final quarter, holdings in the
areas of basic materials, financial services, and transportation helped the
Fund, though again performance was hampered by the further slide in technology
stocks.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- -----------------------------------------------------
Productivity Enhancers Fund+
- -----------------------------------------------------
Average Annual Total Return Ended on 3/31/97*
- -----------------------------------------------------
<S> <C>
1 year Since inception (12/31/92)
- -----------------------------------------------------
1.02% 10.21%
- -----------------------------------------------------
</TABLE>
<TABLE>
Prod. Enhancers (reflects maximum sales charge) Prod. Enhancers (exclusive of sales charge) The Standard & Poors 500
---------------------------------------------- ------------------------------------------- --------------------------
<S> <C> <C> <C>
Dec 31, 92 9,550 10,000 10,000
Mar 31, 93 9,468 9,914 10,440
10,105 10,582 10,760
Mar 31, 94 10,775 11,283 10,590
10,728 11,234 11,150
Mar 31, 95 11,255 11,786 12,240
13,501 14,138 14,470
3/31/96 14,291 14,965 16,160
3/31/97 14,437 15,118 19,365
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Productivity
Enhancers Fund and a broad-based index since 12/31/92 (inception date). All
dividends and capital gain distributions are reinvested. The Fund's
performance takes into account fees and expenses. The index does not take into
account charges, fees and other expenses. Further information relating to Fund
performance is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the 4.5%
maximum initial sales charge which was eliminated effective 2/14/97.
** Source: Standard & Poor's Corporation -- Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of U.S. stock market performance.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
++ Reflects 4.5% maximum sales charge on initial investment. The sales charge
was eliminated effective 2/14/97.
B-2
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND
- -------------------------------------------------------------------------------
For the twelve months ended March 31, 1997, the Fund realized a total return
of 21.22%*, versus 19.83%** for the Standard & Poor's 500 Composite Stock
Price Index. While we have expanded the focus of the environmental theme to
include companies that improve resource utilization and/or enhance the
efficiency of our built environment, much of the Fund's gains were led by the
more traditional environmental stocks, in particular the solid waste sector.
In fact, we remained overweighted in the core environmental area of solid
waste. Other big winners, at least through the first three fiscal quarters,
came from the water technology area. The Fund is a blend of small, medium and
large-capitalization companies; in the fourth fiscal quarter, the Fund's
smaller companies hampered performance. As we moved toward year end, though
the structure and strategy of the Fund did not change, we reduced the number
of positions in the portfolio, selling several of our smaller-capitalization
names and concentrating instead on mid and large-capitalization issues.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- -----------------------------------------------------
Environmentally-Released Products and Services Fund+
- -----------------------------------------------------
Average Annual Total Return Ended on 3/31/97*
- -----------------------------------------------------
<S> <C>
1 year Since inception (12/31/92)
- -----------------------------------------------------
21.22% 7.17%
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Environ. Rel. Pr. & Ser. (reflects maximum sales charge) Environ. Rel. Pr. & Ser. (exclusive of sale ch
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
12/31/92 9,550 10,000
3/31/93 9,482 9,929
8,614 9,021
3/31/94 8,519 8,920
8,696 9,106
3/31/95 8,496 8,987
10,056 10,530
3/31/96 10,576 11,075
3/31/97 12,820 13,424
<CAPTION>
The Standard & Poors 500
------------------------
<S> <C>
12/31/92 10,000
3/31/93 10,440
10,760
3/31/94 10,590
11,150
3/31/95 12,240
14,470
3/31/96 16,160
3/31/97 19,365
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in
Environmentally-Related Products and Services Fund and a broad-based index
since 12/31/92 (inception date). All dividends and capital gain distributions
are reinvested. The Fund's performance takes into account fees and expenses.
The index does not take into account charges, fees and other expenses. Further
information relating to Fund performance is contained in the Financial
Highlights section of the Prospectus and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the 4.5%
maximum initial sales charge which was eliminated effective 2/14/97.
** Source: Standard & Poor's Corporation -- Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of U.S. stock market performance.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
++ Reflects 4.5% maximum sales charge on initial investment. The sales charge
was eliminated effective 2/14/97.
B-3
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
AGING OF AMERICA FUND
- -------------------------------------------------------------------------------
For the twelve months ended March 31, 1997, the Fund realized a total return
of 8.18%*, versus 19.83%** for the Standard & Poor's 500 Composite Stock Price
Index. The Fund's overall structure remained consistent--maintaining emphasis
on health care, financials, and large-capitalization consumer stocks. During
the first half, the fund's performance was hampered by weakness in the Fund's
health care positions as well as general weakness from the small-
capitalization sector. Strong performances came from large-capitalization
consumer stocks. Financial stocks were a mixed bag. During the second half,
the Fund's health care and REIT holdings advanced strongly, and the financial
services positions picked up as well. We did become more defensive in our
investment approach as the year progressed, eliminating some of the Fund's
more volatile smaller capitalization holdings.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- ----------------------------------------------------
Aging of America Fund+
- ----------------------------------------------------
Average Annual Total Return Ended on 3/31/97*
- ----------------------------------------------------
<S> <C>
Since inception
1 year (12/31/92)
- ----------------------------------------------------
8.18% 10.68%
- ----------------------------------------------------
</TABLE>
<TABLE>
Aging of Americas Fund Aging of Americas Fund The Standard & Poors 500
(exclusive of sales charge) (reflects maximum)
<S> <C> <C> <C>
12/31/92 10,000 9,550 10,000
3/31/93 10,014 9,563 10,440
10,105 9,560 10,760
3/31/94 10,027 9,576 10,590
10,486 10,014 11,150
3/31/95 11,311 10,802 12,240
12,763 12,189 14,470
3/31/96 14,229 13,589 16,160
3/31/97 15,393 14,701 19,365
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Aging of
America Fund and a broad-based index since 12/31/92 (inception date). All
dividends and capital gain distributions are reinvested. The Fund's
performance takes into account fees and expenses. The index does not take into
account charges, fees and other expenses. Further information relating to Fund
performance is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the 4.5%
maximum initial sales charge which was eliminated effective 2/14/97.
** Source: Standard & Poor's Corporation--Reflects the reinvestment of income
dividends and, where applicable, capital gain distributions. The Standard &
Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index
of U.S. stock market performance.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
++ Reflects 4.5% maximum sales charge on initial investment. The sales charge
was eliminated effective 2/14/97.
B-4
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
COMMUNICATION AND ENTERTAINMENT FUND
- -------------------------------------------------------------------------------
For the twelve months ended March 31, 1997, the Fund realized a total return
of 0.34%*, versus 19.83%** for the Standard & Poor's 500 Composite Stock Price
Index. Despite undeniable and compelling long-term prospects, delays in
technology and murky competitive environments (a result of deregulation)
brought confusion to the communication and entertainment investment theme in
1996. As a result of these near-term concerns, cable, wireless (cellular and
paging), and large telecommunications stocks all underperformed the broader
market last year. During the first half of the fiscal year, we increased
representation in traditional media and larger-capitalization technology
concerns. We also broadened our focus away from essentially growth-oriented
companies to include several transaction value opportunities and strong free
cash flow generators. During the second half, we refocused on several broad
subthemes: premium consumer brands; mature franchises selling at a discount;
emerging brands; and enablers (technology, infrastructure builders). We also
attempted to reduce volatility by paring exposure to the technology group and
to the cable and Competitive Local Exchange Carriers (as asset class valued on
non-traditional measures of future cash flows which tends to underperform
during periods of rising interest rates).
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- -----------------------------------------------------
Communication and Entertainment Fund+
- -----------------------------------------------------
Average Annual Total Return Ended on 3/31/97*
- -----------------------------------------------------
<S> <C>
1 year Since Inception (12/31/92)
- -----------------------------------------------------
0.34% 12.94%
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Comm. & Entern Comm. & Entern The Standard & Poors 500**
(reflects maximum sales charge)++ (exclusive of sales charge)
<S> <C> <C> <C>
12/31/92 9,550 10,000 10,000
3/31/93 10,382 10,871 10,440
12,557 13,149 10,760
3/31/94 12,466 13,054 10,590
13,650 14,293 11,150
3/31/95 14,071 14,734 12,240
17,878 18,721 14,470
3/31/96 15,968 16,720 16,160
3/31/97 16,215 16,777 19,365
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Communication
and Entertainment Fund and a broad-based index since 12/31/92 (inception
date). All dividends and capital gain distributions are reinvested. The Fund's
performance takes into account fees and expenses. The index does not take into
account charges, fees and other expenses. Further information relating to Fund
performance is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the 4.5%
maximum initial sales charge which was eliminated effective 2/14/97.
** Source: Standard & Poor's Corporation--Reflects the reinvestment of income
dividends and, where applicable, capital gain distributions. The Standard &
Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index
of U.S. stock market performance.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
++ Reflects 4.5% maximum sales charge on initial investment. The sales charge
was eliminated effective 2/14/97.
B-5
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
GLOBAL COMPETITORS FUND
- -------------------------------------------------------------------------------
For the twelve months ended March 31, 1997, the Fund realized a total return
of 6.64%*, versus 19.83%** for the Standard & Poor's 500 Composite Stock Price
Index. For the entire fiscal year, we maintained a broadly diversified
portfolio--both in terms of market sectors and investment strategies--
problem/opportunity (growth), value, and early life cycle (small
capitalization). Specifically, we continued to focus on identifying and owning
effective global competitors with above-average growth potential due to strong
product demand, effective capital allocation, and the ability to leverage
competitive advantages to gain market share. In the first fiscal quarter, the
Fund's consumer, financial, and energy stocks showed resilience, while
technology holdings proved a drag overall. The Fund picked up sharply in the
second fiscal quarter, driven by financials, food companies, and interest-rate
sensitive companies in general. Technology (once again) and telecommunications
holdings lagged. This pattern remained in place through the balance of the
year. Portfolio activity during this period involved a continued overweighting
of the financial sector, reducing our weighting in the telecommunications
sector, and shifting the Fund's technology component away from smaller, more
volatile concerns and toward later, well-established companies within the most
attractive technology sectors. We also continued to look favorably upon global
cosmetic and household products companies.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- -----------------------------------------------------
Global Competitors Fund+
- -----------------------------------------------------
Average Annual Total Return Ended on 3/31/97*
- -----------------------------------------------------
<S> <C>
1 year Since inception (12/31/92)
- -----------------------------------------------------
6.64% 13.18%
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Global Competitors Global Competitors The Standard & Poors 500
(reflects maximum sales charge) (exclusive of sales charge)
<S> <C> <C> <C>
12/31/92 9,550 10,000 10,000
3/31/93 9,932 10,400 10,440
10,786 11,295 10,760
3/31/94 10,556 11,054 10,590
10,805 11,315 11,150
3/31/95 11,900 12,461 12,240
13,913 14,569 14,470
3/31/96 15,158 15,874 16,160
3/31/97 16,166 16,928 19,365
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Global
Competitors Fund and a broad-based index since 12/31/92 (inception date). All
dividends and capital gain distributions are reinvested. The Fund's
performance takes into account fees and expenses. The index does not take into
account charges, fees and other expenses. Further information relating to Fund
performance is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the 4.5%
maximum initial sales charge which was eliminated effective 2/14/97.
** Source: Standard & Poor's Corporation--Reflects the reinvestment of income
dividends and, where applicable, capital gain distributions. The Standard &
Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index
of U.S. stock market performance.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
++ Reflects 4.5% maximum sales charge on initial investment. The sales charge
was eliminated effective 2/14/97.
B-6
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
EQUITY FUND
- -------------------------------------------------------------------------------
For the twelve months ended March 31, 1997, the Fund realized a total return
of 11.09%*, versus 19.83%** for the Standard & Poor's 500 Composite Stock
Price Index. Throughout the fiscal year, we maintained broad diversification
across strategies (growth, value, and small-capitalization) as well as longer-
term investment themes. Specifically, we maintained an underweight position in
technology, and generally little in the way of high-volatility small-
capitalization stocks. We maintained an overweight position in financial
service companies (though well diversified within the sector by type of
company), and a market weighting in the energy sector. As the year progressed,
we began to pay special attention to downside risk and keeping the portfolio
in balance. Purchases focused on high-quality, good business core holding
investments. Moving into the final quarter of the fiscal year, we began to
scale back our holdings in the financial area and to look toward consumer
staples and technology areas, and to large-capitalization growth companies in
general.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- ---------------------------------------------------
Equity Fund+
- ---------------------------------------------------
Average Annual Total Return Ended on 3/31/97*
- ---------------------------------------------------
<S> <C> <C>
1 year 5 years 10 years
- ---------------------------------------------------
11.09% 15.38% 11.45%
- ---------------------------------------------------
Trust Shares
- ---------------------------------------------------
Since inception (11/12/96)
- ------------------------------
0.23%
- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
Equity (reflects maximum sales charge) Equity (exclusive of sales charge) The Standard & Poors 500
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mar 31, 87 9,550 10,000 10,000
Mar 31, 88 8,477 8,876 9,160
Mar 31, 89 10,047 10,520 10,830
Mar 31, 90 11,251 11,781 12,930
Mar 31, 91 11,415 11,953 14,790
Mar 31, 92 13,821 14,472 16,420
Mar 31, 93 16,483 17,259 18,920
Mar 31, 94 17,560 18,388 19,200
Mar 31, 95 20,132 21,081 22,180
Mar 31, 96 25,456 26,656 29,300
Mar 31, 97 28,281 29,613 35,100
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Equity Fund and
a broad-based index over the past ten fiscal years. All dividends and capital
gain distributions are reinvested. The Fund's performance takes into account
fees and expenses. The index does not take into account charges, fees and
other expenses. Further information relating to Fund performance is contained
in the Financial Highlights section of the Prospectus and elsewhere in this
report.
The graph presents the performance of the Equity Fund's shares which have
been in existence since the Fund's inception. The performance of the Equity
Fund's Trust shares will be lower based upon the different inception date and
fees assessed to that class.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the 4.5%
maximum initial sales charge which was eliminated effective 2/14/97.
** Source: Standard & Poor's Corporation--Reflects the reinvestment of income
dividends and, where applicable, capital gain distributions. The Standard &
Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index
of U.S. stock market performance.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
++ Reflects 4.5% maximum sales charge on initial investment. The sales charge
was eliminated effective 2/14/97.
B-7
<PAGE>
EXCELSIOR FUNDS, INC.
73 TREMONT STREET
BOSTON, MASSACHUSETTS 02108
STATEMENT OF ADDITIONAL INFORMATION
(1997 SPECIAL MEETING OF
SHAREHOLDERS OF THE PRODUCTIVITY ENHANCERS,
ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES,
AGING OF AMERICA, COMMUNICATION AND
ENTERTAINMENT AND GLOBAL COMPETITORS FUNDS)
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Combined Proxy Statement/Prospectus dated June 13,
1997 ("Combined Proxy Statement/Prospectus") for the Special Meeting of
Shareholders of the Productivity Enhancers, Environmentally-Related Products and
Services, Aging of America, Communication and Entertainment, and Global
Competitors Funds (the "Transferor Funds"), five investment portfolios offered
by Excelsior Funds, Inc. (the "Company") to be held on August 18, 1997. Copies
of the Combined Proxy Statement/Prospectus may be obtained at no charge by
calling (800) 446-1012.
Unless otherwise indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the Combined Proxy
Statement/Prospectus.
This Statement of Additional Information consists of (1) this Cover Page;
(2) General Information about the Reorganization and Miscellaneous Information;
(3) certain pro forma financial statements; (4) the Statement of Additional
Information dated August 1, 1996; and (5) the audited financial statements and
notes and related independent accountant's report of the Transferor Funds and
Surviving Fund for the fiscal year ended March 31, 1997 which are contained in
its Annual Report to Shareholders.
Further information about the Transferor Funds and the Surviving Fund is
contained in and incorporated by reference to said Funds' Statements of
Additional Information dated August 1, 1996.
The date of this Statement of Additional Information is June 13, 1997.
-1-
<PAGE>
TABLE OF CONTENTS
PAGE
----
General Information........................ 3
Miscellaneous Information.................. 3
Pro Forma Financial Statements............. PF-1 - PF-__
Audited Financial Statements for the Transferor
Funds and Surviving Fund dated March 31, 1997 FS-1 - FS___
(includes audited financial statements for
the Income and Growth Fund, Business and
Industrial Restructuring Fund, Early Life
Cycle Fund, and Long-Term Supply of Energy
Fund which are not involved in the
Reorganization).
Statement of Additional Information dated
August 1, 1996........................... SAI-1 - SAI-A-12
-2-
<PAGE>
GENERAL INFORMATION
The shareholders of the Company's Productivity Enhancers,
Environmentally-Related Products and Services, Aging of America, Communication
and Entertainment, and Global Competitors Funds (the "Transferor Funds") are
being asked to approve or disapprove a Plan of Reorganization dated as of May
16, 1997 and the transactions contemplated thereby. The Plan contemplates the
transfer of all of the assets and liabilities of the Transferor Funds to the
Company's Equity Fund (the "Surviving Fund"). In exchange therefor, each
Transferor Fund will receive corresponding retail shares and trust shares of the
Surviving Fund, which will be distributed to the shareholders of the Transferor
Funds in connection with the Transferor Funds' liquidation, such that each
holder of retail and trust shares in a Transferor Fund at the Effective Time of
the Reorganization will receive the same aggregate dollar value of full and
fractional retail and trust shares in the Surviving Fund.
A Special Meeting of Shareholders of the Transferor Funds to consider
the Plan of Reorganization and the related transactions, will be held at the
offices of United States Trust Company of New York at 114 West 47th Street, New
York, New York at 10:00 a.m. Eastern time on August 18, 1997. For further
information about the transaction, see the Combined Proxy Statement/Prospectus.
MISCELLANEOUS
1. Brokerage.
---------
The Company 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 the Company as of the close of its most recent fiscal year. As
of March 31, 1997, the following Funds held the following securities of the
Company regular brokers or dealers or their parents: (a) the Equity Fund held
the following security: 122,360 shares of common stock of Morgan Stanley Group,
Inc.; (b) the Aging of the America Fund held the following security: 15,000
shares of common stock of Dean Witter Discover & Co. and (c) the Global
Competitors Fund held the following security: 45,600 shares of common stock of
Morgan Stanley Group, Inc. Morgan Stanley & Co., Inc. and Dean Witter Reynolds,
Inc. are considered to be regular brokers or dealers of the Company.
For the fiscal years ended March 31, 1997, the Equity Fund,
Productivity Enhancers, Environmentally-Related Products and Services, Aging of
America, Communication and Entertainment and Global Competitors Funds paid
brokerage commissions aggregating $271,411, $218,338, $24,709; $148,591, $97,519
and $64,033, respectively.
-3-
<PAGE>
2. Director's Compensation
-----------------------
The following chart provides certain information about the fees
received by the Company's directors for the fiscal year ended March 31, 1997.
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Compensation from
Accrued as Excelsior Funds, Inc.
Aggregate Part of and Fund
Name of Compensation from Fund Complex* Paid
Person/Position Excelsior Funds, Inc. Expenses to Directors
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Donald L. Campbell $13,500 None $31,750(3)**
Director
Joseph H. Dugan $15,000 None $35,000(3)**
Director
Wolfe J. Frankl $15,000 None $35,000(3)**
Director
Robert A. Robinson $15,000 None $35,000(3)**
Director
Alfred C. Tannachion $20,000 None $45,000(3)**
Director
Frederick S. Wonham $15,000 None $35,000(4)**
Chairman of the Boards,
President and Treasurer
W. Wallace McDowell $ 2,250 None $ 9,250(4)**
Director
Jonathan Piel $ 3,750 None $12,500(4)**
Director
Rodman L. Drake $ 3,750 None $12,250(4)**
Director
</TABLE>
- ---------------------------
/*/ The "Fund Complex" consists of Excelsior Funds, Inc. Excelsior Tax-
Exempt Funds, Inc., UST Master Variable Series, Inc., Excelsior Funds
and Excelsior Institutional Trust.
/**/ Number of investment companies in the Fund Complex for which director
serves as director or trustee.
-4-
<PAGE>
<TABLE>
<CAPTION>
SHARES MARCH 31, 1997
- --------------------------------------------------------------------------------------------------------------
AGING OF COMMUNICATIONS ENVIRONMENTALLY GLOBAL PRODUCTIVITY PRO FORMA
AMERICA AND ENTERTAINMENT RELATED PRODUCTS COMPETITORS ENHANCERS EQUITY COMBINED
FUND FUND AND SERVICES FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL GOODS--10.76%
-- -- -- -- 7,500 -- 7,500 AAR Corp.............
-- -- -- -- 9,000 -- 9,000 AlliedSignal, Inc....
7,000 -- -- 14,500 3,700 -- 25,200 Boeing Co............
-- -- 5,000 -- 7,300 -- 12,300 Case Corp............
-- -- 5,000 -- 8,300 -- 13,300 Deere & Co...........
-- -- -- -- 10,000 -- 10,000 Dover Corp...........
Emerson Electric
-- -- -- -- 10,000 -- 10,000 Co..................
-- -- 4,000 -- -- -- 4,000 Fluor Corp...........
General Electric
-- -- 1,500 27,200 7,000 120,000 155,700 Co..................
Goodyear Tire and
-- -- -- 28,100 -- -- 28,100 Rubber Co...........
-- -- 7,400 -- -- -- 7,400 Harsco Corp..........
-- -- -- -- 18,700 -- 18,700 IDEX Corp............
Illinois Tool Works,
-- -- -- 29,100 7,000 101,533 137,633 Inc.................
-- -- 30,000 -- -- -- 30,000 +ITEQ, Inc...........
-- -- -- -- 12,000 -- 12,000 Kaydon Corp..........
-- -- -- -- 20,000 -- 20,000 +Lear Corp...........
+Philip
Environmental,
-- -- 30,000 -- -- -- 30,000 Inc.................
+Republic Industries,
-- -- 12,000 -- -- -- 12,000 Inc.................
+Thermo Electron
30,000 -- -- 53,350 11,000 135,961 230,311 Corp................
+Thermo Fibergen,
-- -- -- 65,000 -- -- 65,000 Inc.................
+Thermo Voltek
-- -- -- 22,500 -- -- 22,500 Corp................
+ThermoSpectra
-- -- -- 50,000 -- -- 50,000 Corp................
-- -- -- -- 6,300 -- 6,300 Thiokol Corp.........
-- -- 10,500 -- -- -- 10,500 +U.S. Filter Corp....
+U.S.A. Waste
-- -- 13,000 -- -- -- 13,000 Services, Inc.......
WMX Technologies,
-- -- 8,000 -- -- 220,000 228,000 Inc.................
CONSUMER CYCLICAL--
20.43%
Black & Decker
30,000 -- -- -- -- -- 30,000 Corp................
-- 15,000 -- -- -- -- 15,000 Callaway Golf Co.....
-- -- -- -- -- 178,200 178,200 Centex Corp..........
Comcast Corp., Class
-- 40,000 -- -- -- -- 40,000 A Special...........
-- -- -- -- -- 105,000 105,000 Dayton Hudson Corp...
Electronic Data
-- -- -- 32,000 -- -- 32,000 Systems Corp........
Fisher Scientific
27,500 -- -- -- -- -- 27,500 International.......
-- -- -- -- -- 200,000 200,000 Ford Motor Co........
+General Nutrition
43,000 -- -- -- -- -- 43,000 Cos., Inc...........
Harley-Davidson,
-- 12,000 -- -- -- -- 12,000 Inc.................
-- 15,000 -- -- -- -- 15,000 Harte-Hanks..........
-- -- -- -- -- 370,000 370,000 Heilig-Meyers Co.....
-- -- -- 43,600 -- -- 43,600 Hilton Hotels Corp...
Houghton Mifflin
15,000 10,000 -- -- -- 90,000 115,000 Co..................
International
Business Machines
-- 7,500 -- -- -- -- 7,500 Corp................
24,000 -- -- -- -- -- 24,000 Lowe's Cos., Inc.....
Luxottica Group
-- -- -- 37,800 -- 60,000 97,800 S.p.A. ADR..........
Marriott
International,
19,000 -- -- -- -- -- 19,000 Inc.................
-- -- -- 32,000 -- 152,834 184,834 McDonald's Corp......
-- 40,000 -- -- -- -- 40,000 Meredith Corp........
New York Times Co.,
-- 12,000 -- -- -- -- 12,000 Class A.............
+O'Reilly Automotive,
-- -- -- -- 15,200 175,000 190,200 Inc.................
</TABLE>
PF-1
<PAGE>
<TABLE>
<CAPTION>
VALUE (000)
- ------------------------------------------------------------------------------------------------
AGING OF COMMUNICATIONS ENVIRONMENTALLY GLOBAL PRODUCTIVITY PRO FORMA
AMERICA AND ENTERTAINMENT RELATED PRODUCTS COMPETITORS ENHANCERS EQUITY COMBINED
FUND FUND AND SERVICES FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-- -- -- -- 225,000 -- $ 225,000
-- -- -- -- 641,250 -- 641,250
690,375 -- -- 1,430,063 364,913 -- 2,485,351
-- -- 253,750 -- 370,475 -- 624,225
-- -- 217,500 -- 361,050 -- 578,550
-- -- -- -- 525,000 -- 525,000
-- -- -- -- 450,000 -- 450,000
-- -- 210,000 -- -- -- 210,000
-- -- 148,875 2,699,600 694,750 11,910,000 15,453,225
-- -- -- 1,468,225 -- -- 1,468,225
-- -- 269,175 -- -- -- 269,175
-- -- -- -- 439,450 -- 439,450
-- -- -- 2,375,288 571,375 8,287,631 11,234,294
-- -- 195,000 -- -- -- 195,000
-- -- -- -- 502,500 -- 502,500
-- -- -- -- 667,500 -- 667,500
-- -- 453,750 -- -- -- 453,750
-- -- 417,000 -- -- -- 417,000
926,250 -- -- 1,647,181 339,625 4,197,796 7,110,852
-- -- -- 536,250 -- -- 536,250
-- -- -- 208,125 -- -- 208,125
-- -- -- 656,250 -- -- 656,250
-- -- -- -- 348,075 -- 348,075
-- -- 324,188 -- -- -- 324,188
-- -- 461,500 -- -- -- 461,500
-- -- 245,000 -- -- 6,737,500 6,982,500
- ------------------------------------------------------------------------------------------------
1,616,625 -- 3,195,738 11,020,982 6,500,963 31,132,927 53,467,235
- ------------------------------------------------------------------------------------------------
963,750 -- -- -- -- -- 963,750
-- 429,375 -- -- -- -- 429,375
-- -- -- -- -- 6,281,550 6,281,550
-- 675,000 -- -- -- -- 675,000
-- -- -- -- -- 4,383,750 4,383,750
-- -- -- 1,292,000 -- -- 1,292,000
1,213,438 -- -- -- -- -- 1,213,438
-- -- -- -- -- 6,275,000 6,275,000
870,750 -- -- -- -- -- 870,750
-- 406,500 -- -- -- -- 406,500
-- 436,875 -- -- -- -- 436,875
-- -- -- -- -- 5,873,750 5,873,750
-- -- -- 1,057,300 -- -- 1,057,300
810,000 540,000 -- -- -- 4,860,000 6,210,000
-- 1,030,313 -- -- -- -- 1,030,313
897,000 -- -- -- -- -- 897,000
-- -- -- 2,008,125 -- 3,187,500 5,195,625
945,250 -- -- -- -- -- 945,250
-- -- -- 1,512,000 -- 7,221,406 8,733,406
-- 925,000 -- -- -- -- 925,000
-- 529,500 -- -- -- -- 529,500
-- -- -- -- 558,600 6,431,250 6,989,850
</TABLE>
PF-2
<PAGE>
<TABLE>
<CAPTION>
SHARES MARCH 31, 1997
- --------------------------------------------------------------------------------------------------------------
AGING OF COMMUNICATIONS ENVIRONMENTALLY GLOBAL PRODUCTIVITY PRO FORMA
AMERICA AND ENTERTAINMENT RELATED PRODUCTS COMPETITORS ENHANCERS EQUITY COMBINED
FUND FUND AND SERVICES FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
+Paging Network,
-- 38,500 -- -- -- -- 38,500 Inc.................
25,000 -- -- -- -- -- 25,000 +Proffitt's, Inc.....
Reuters Holdings plc
-- -- -- -- -- 70,000 70,000 ADR.................
25,000 -- -- -- -- -- 25,000 +Revco D.S., Inc.....
-- -- -- 20,000 -- -- 20,000 +Samsonite Corp......
Sears, Roebuck &
20,000 -- -- -- -- -- 20,000 Co..................
Stewart Enterprises,
Inc.,
30,000 -- -- -- -- -- 30,000 Class A.............
+Tele-Communications
Liberty Media Group,
-- 45,000 -- -- -- -- 45,000 Class A.............
Teleport
Communications
Group, Inc. Class
-- 40,000 -- -- -- -- 40,000 A...................
+Thermo Fibertek,
-- -- -- 89,200 -- -- 89,200 Inc.................
-- -- -- 65,000 -- -- 65,000 +ThermoLase Corp.....
-- -- -- 25,000 -- -- 25,000 ThermoQuest Corp.....
30,000 20,000 -- -- -- -- 50,000 Time Warner, Inc.....
Times Mirror Co.,
-- 20,000 -- -- -- -- 20,000 Class A..............
-- 25,000 -- -- -- -- 25,000 Tribune Co...........
Tyco International
-- -- 5,200 -- -- 131,220 136,420 Ltd..................
Univision
Communications,
-- 11,200 -- -- -- -- 11,200 Inc.................
30,000 -- -- -- -- -- 30,000 +Vencor, Inc.........
+Viacom, Inc., Class
-- 23,884 -- -- -- -- 23,884 B....................
Wal-Mart Stores,
30,000 -- -- -- -- 215,000 245,000 Inc..................
14,215 18,550 -- 24,250 -- -- 57,015 Walt Disney Co.......
Wiley (John) & Sons,
-- 37,800 -- -- -- -- 37,800 Inc., Class A.......
CONSUMER STAPLES--
17.03%
-- -- -- -- -- 210,000 210,000 Abbott Laboratories..
Air Products &
-- -- 4,900 -- -- -- 4,900 Chemicals, Inc......
+Alliance
Pharmaceutical
-- -- -- -- -- 298,600 298,600 Corp................
Assisted Living
40,000 -- -- -- -- -- 40,000 Concepts, Inc.......
-- -- -- 33,000 -- -- 33,000 Astra AB, Class B....
-- -- -- 24,250 -- -- 24,250 Avon Products, Inc...
-- -- -- -- -- 54,100 54,100 +Cerner Corp.........
Columbia/HCA
30,000 -- -- -- -- -- 30,000 Healthcare Corp.....
15,000 -- -- -- -- -- 15,000 Conagra, Inc.........
CPC International,
-- -- -- 19,400 -- -- 19,400 Inc..................
+CUC International,
-- 37,500 -- -- 16,000 -- 53,500 Inc..................
12,000 12,000 -- -- 6,500 -- 30,500 Eastman Kodak Co.....
Estee Lauder
-- -- -- 12,800 -- -- 12,800 Companies, Class A..
30,000 -- -- -- -- -- 30,000 First Brands Corp....
+Forest Laboratories,
-- -- -- -- -- 136,610 136,610 Inc..................
-- -- -- -- -- 130,000 130,000 +Genzyme Corp........
10,000 -- 4,400 43,000 -- -- 57,400 Gillette Co..........
51,700 -- -- -- -- -- 51,700 +Healthsouth Corp....
18,000 -- -- 38,800 13,300 220,000 290,100 Johnson & Johnson....
-- -- -- 3,300 -- -- 3,300 L'Oreal..............
+Learning Tree
-- 24,000 -- -- -- -- 24,000 International, Inc..
-- -- 3,700 -- -- -- 3,700 Lilly (Eli) & Co.....
</TABLE>
PF-3
<PAGE>
<TABLE>
<CAPTION>
VALUE (000)
- -----------------------------------------------------------------------------------------------
AGING OF COMMUNICATIONS ENVIRONMENTALLY GLOBAL PRODUCTIVITY PRO FORMA
AMERICA AND ENTERTAINMENT RELATED PRODUCTS COMPETITORS ENHANCERS EQUITY COMBINED
FUND FUND AND SERVICES FUND FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-- 310,406 -- -- -- -- $ 310,406
943,750 -- -- -- -- -- 943,750
-- -- -- -- -- 4,068,750 4,068,750
1,012,500 -- -- -- -- -- 1,012,500
-- -- -- 865,000 -- -- 865,000
1,005,000 -- -- -- -- -- 1,005,000
1,087,500 -- -- -- -- -- 1,087,500
-- 894,375 -- -- -- -- 894,375
-- 915,000 -- -- -- -- 915,000
-- -- -- 808,375 -- -- 808,375
-- -- -- 739,375 -- -- 739,375
-- -- -- 350,000 -- -- 350,000
1,297,500 865,000 -- -- -- -- 2,162,500
-- 1,092,500 -- -- -- -- 1,092,500
-- 1,012,500 -- -- -- -- 1,012,500
-- -- 286,000 -- -- 7,217,100 7,503,100
-- 365,400 -- -- -- -- 365,400
1,136,250 -- -- -- -- -- 1,136,250
-- 791,157 -- -- -- -- 791,157
836,250 -- -- -- -- 5,993,125 6,829,375
1,037,695 1,354,150 -- 1,770,250 -- -- 4,162,095
-- 1,143,450 -- -- -- -- 1,143,450
- -----------------------------------------------------------------------------------------------
14,056,633 13,716,501 286,000 10,402,425 558,600 61,793,181 100,813,340
- -----------------------------------------------------------------------------------------------
-- -- -- -- -- 11,786,250 11,786,250
-- -- 332,587 -- -- -- 332,587
-- -- -- -- -- 3,583,200 3,583,200
840,000 -- -- -- -- -- 840,000
-- -- -- 1,554,184 -- -- 1,554,184
-- -- -- 1,273,125 -- -- 1,273,125
-- -- -- -- -- 696,538 696,538
1,008,750 -- -- -- -- -- 1,008,750
813,750 -- -- -- -- -- 813,750
-- -- -- 1,590,800 -- -- 1,590,800
-- 843,750 -- -- 360,000 -- 1,203,750
910,500 910,500 -- -- 493,188 -- 2,314,188
-- -- -- 619,200 -- -- 619,200
735,000 -- -- -- -- -- 735,000
-- -- -- -- -- 5,139,951 5,139,951
-- -- -- -- -- 2,892,500 2,892,500
726,250 -- 319,550 3,122,875 -- -- 4,168,675
988,763 -- -- -- -- -- 988,763
951,750 -- -- 2,051,550 703,237 11,632,500 15,339,037
-- -- -- 1,156,925 -- -- 1,156,925
-- 666,000 -- -- -- -- 666,000
-- -- 304,325 -- -- -- 304,325
</TABLE>
PF-4
<PAGE>
<TABLE>
<CAPTION>
SHARES MARCH 31, 1997
- --------------------------------------------------------------------------------------------------------------
AGING OF COMMUNICATIONS ENVIRONMENTALLY GLOBAL PRODUCTIVITY PRO FORMA
AMERICA AND ENTERTAINMENT RELATED PRODUCTS COMPETITORS ENHANCERS EQUITY COMBINED
FUND FUND AND SERVICES FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
32,500 -- -- -- -- -- 32,500 Mattel, Inc..........
15,000 -- -- -- -- -- 15,000 Novartis AG ADR......
35,000 -- -- -- -- -- 35,000 PepsiCo, Inc.........
14,000 -- -- 30,000 -- 100,900 144,900 Pfizer, Inc..........
Pharmacia & Upjohn,
5,000 -- -- -- -- -- 5,000 Inc..................
Philip Morris
-- -- -- 14,500 -- -- 14,500 Companies, Inc......
25,000 -- -- -- -- -- 25,000 +Premier Parks Inc...
Procter & Gamble
-- -- -- 31,000 -- -- 31,000 Co...................
Schering-Plough
10,000 -- -- 35,000 -- -- 45,000 Corp.................
+Sylvan Learning
-- 28,700 -- -- -- -- 28,700 Systems, Inc........
ENERGY--8.10%
Anadarko Petroleum
-- -- -- 10,000 -- -- 10,000 Corp.................
-- -- -- 25,000 -- -- 25,000 Chevron Corp.........
-- -- 15,000 -- -- -- 15,000 +Cuno Inc............
Louisiana Land &
-- -- -- -- -- 110,103 110,103 Exploration Co......
-- -- -- 25,000 -- 92,000 117,000 Mobil Corp...........
+Newpark Resources,
-- -- 10,000 -- -- -- 10,000 Inc..................
Royal Dutch Petroleum
-- -- -- 16,500 -- -- 16,500 Co...................
+United Meridian
-- -- -- -- -- 95,500 95,500 Corp.................
-- -- -- -- -- 281,680 281,680 Unocal Corp..........
FINANCIAL--20.47%
15,000 -- -- -- -- -- 15,000 Allstate Corp........
American Express
19,000 -- -- -- -- -- 19,000 Co...................
American
International Group,
-- -- -- 24,250 -- -- 24,250 Inc. ...............
Arden Realty Group,
30,000 -- -- -- -- -- 30,000 Inc.................
Associates First
25,200 -- -- 51,400 14,000 131,200 221,800 Capital Corp........
Bank of Boston
-- -- -- 33,000 -- -- 33,000 Corp.................
Barnett Banks of
25,000 -- -- -- -- -- 25,000 Florida, Inc........
15,000 -- -- -- -- -- 15,000 Beneficial Corp......
-- -- -- 27,200 -- -- 27,200 Citicorp.............
Dean Witter Discover
15,000 -- -- -- -- -- 15,000 & Co.................
First Union Corp.
10,000 -- -- -- -- -- 10,000 (North Carolina)....
Fleet Financial
-- -- -- -- -- 185,000 185,000 Group, Inc...........
-- -- -- 14,550 -- 29,240 43,790 General Re Corp......
Health and Retirement
40,000 -- -- -- -- -- 40,000 Properties Trust....
Hospitality
30,000 -- -- -- -- -- 30,000 Properties Trust.....
-- -- -- -- -- 90,500 90,500 MBIA, Inc............
15,000 -- -- -- -- 136,038 151,038 Mellon Bank Corp.....
Morgan Stanley Group,
-- -- -- 45,600 -- 122,360 167,960 Inc..................
Nationwide Financial
Services, Inc.,
12,500 -- -- -- -- -- 12,500 Class A.............
-- -- -- -- 4,000 -- 4,000 Norwest Corp.........
State Street Boston
-- -- -- -- -- 120,000 120,000 Corp.................
Summit Bancorp (New
23,400 -- -- -- -- -- 23,400 Jersey).............
United Asset
-- -- -- -- -- 350,000 350,000 Management Corp.....
</TABLE>
PF-5
<PAGE>
<TABLE>
<CAPTION>
VALUE (000)
- -----------------------------------------------------------------------------------------------
AGING OF COMMUNICATIONS ENVIRONMENTALLY GLOBAL PRODUCTIVITY PRO FORMA
AMERICA AND ENTERTAINMENT RELATED PRODUCTS COMPETITORS ENHANCERS EQUITY COMBINED
FUND FUND AND SERVICES FUND FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
780,000 -- -- -- -- -- $ 780,000
929,806 -- -- -- -- -- 929,806
1,141,875 -- -- -- -- -- 1,141,875
1,177,750 -- -- 2,523,750 -- 8,488,213 12,189,713
183,125 -- -- -- -- -- 183,125
-- -- -- 1,654,812 -- -- 1,654,812
650,000 -- -- -- -- -- 650,000
-- -- -- 3,565,000 -- -- 3,565,000
727,500 -- -- 2,546,250 -- -- 3,273,750
-- 695,975 -- -- -- -- 695,975
- -----------------------------------------------------------------------------------------------
12,564,819 3,116,225 956,462 21,658,471 1,556,425 44,219,152 84,071,554
- -----------------------------------------------------------------------------------------------
-- -- -- 561,250 -- -- 561,250
-- -- -- 1,740,625 -- -- 1,740,625
-- -- 230,625 -- -- -- 230,625
-- -- -- -- -- 5,216,130 5,216,130
-- -- -- 3,265,625 -- 12,017,500 15,283,125
-- -- 437,500 -- -- -- 437,500
-- -- -- 2,887,500 -- -- 2,887,500
-- -- -- -- -- 2,876,938 2,876,938
-- -- -- -- -- 10,739,050 10,739,050
- -----------------------------------------------------------------------------------------------
-- -- 668,125 8,455,000 -- 30,849,618 39,972,743
- -----------------------------------------------------------------------------------------------
890,625 -- -- -- -- -- 890,625
1,137,625 -- -- -- -- -- 1,137,625
-- -- -- 2,846,344 -- -- 2,846,344
817,500 -- -- -- -- -- 817,500
1,083,600 -- -- 2,210,200 602,000 5,641,600 9,537,400
-- -- -- 2,211,000 -- -- 2,211,000
1,162,500 -- -- -- -- -- 1,162,500
969,375 -- -- -- -- -- 969,375
-- -- -- 2,944,400 -- -- 2,944,400
523,125 -- -- -- -- -- 523,125
811,250 -- -- -- -- -- 811,250
-- -- -- -- -- 10,591,250 10,591,250
-- -- -- 2,298,900 -- 4,619,920 6,918,820
720,000 -- -- -- -- -- 720,000
918,750 -- -- -- -- -- 918,750
-- -- -- -- -- 8,676,688 8,676,688
1,091,250 -- -- -- -- 9,896,764 10,988,014
-- -- -- 2,679,000 -- 7,188,650 9,867,650
321,875 -- -- -- -- -- 321,875
-- -- -- -- 185,000 -- 185,000
-- -- -- -- -- 8,325,000 8,325,000
1,023,750 -- -- -- -- -- 1,023,750
-- -- -- -- -- 8,968,750 8,968,750
</TABLE>
PF-6
<PAGE>
<TABLE>
<CAPTION>
SHARES MARCH 31, 1997
- --------------------------------------------------------------------------------------------------------------
AGING OF COMMUNICATIONS ENVIRONMENTALLY GLOBAL PRODUCTIVITY PRO FORMA
AMERICA AND ENTERTAINMENT RELATED PRODUCTS COMPETITORS ENHANCERS EQUITY COMBINED
FUND FUND AND SERVICES FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12,200 -- -- -- -- 120,000 132,200 UNUM Corp............
RAW/INTERMEDIATE
MATERIALS--2.09%
Crown Cork & Seal
-- -- -- 38,800 -- -- 38,800 Co., Inc............
Georgia Pacific
-- -- -- -- 5,100 -- 5,100 Corp.................
Minerals
-- -- 9,000 -- -- -- 9,000 Technologies, Inc....
-- -- 9,000 -- -- -- 9,000 Monsanto Co..........
-- -- 14,000 -- -- 190,000 204,000 Pall Corp............
Pioneer Hi-Bred
International,
-- -- 5,000 -- 3,000 -- 8,000 Inc.................
-- -- -- 58,200 -- -- 58,200 Sigma-Aldrich Corp...
Steel Dynamics,
-- -- -- -- 18,000 -- 18,000 Inc..................
TECHNOLOGY--13.08%
+Advanced Lighting
-- -- 15,000 -- -- -- 15,000 Technologies, Inc...
+Alliance
Pharmaceutical
45,000 -- -- -- -- -- 45,000 Corp................
+America On-Line,
-- 15,000 -- -- -- -- 15,000 Inc..................
+Analog Devices,
-- 41,667 -- -- 18,333 -- 60,000 Inc..................
+Cisco Systems,
-- 20,000 3,000 36,000 -- 74,570 133,570 Inc..................
+Compaq Computer
-- 20,000 -- -- 7,000 -- 7,000 Corp.................
Computer Associates
International,
-- -- -- 10,000 -- -- 10,000 Inc.................
Computer Learning
-- 20,000 -- -- -- -- 20,000 Centers, Inc........
ECI
Telecommunications
-- 45,900 -- -- -- -- 45,900 Limited Designs.....
-- -- -- -- 5,300 -- 5,300 First Data Corp......
-- 25,000 -- -- -- -- 25,000 GTE Corp.............
15,000 -- -- -- -- -- 15,000 Guidant Corp.........
-- -- -- -- 15,000 111,480 126,480 Hewlett-Packard Co...
-- -- 3,300 -- -- -- 3,300 Honeywell Corp.......
+Hyperion Software
-- -- -- 58,200 -- -- 58,200 Corp.................
+Incyte
Pharmaceuticals,
-- -- 1,000 -- -- -- 1,000 Inc..................
-- 25,000 -- 30,000 -- -- 55,000 +Informix Corp.......
-- -- 1,000 20,600 6,000 48,000 75,600 Intel Corp...........
International
Business Machines
-- -- -- 5,000 5,000 -- 10,000 Corp................
Lucent Technologies,
-- 14,740 -- -- -- 56,920 71,660 Inc..................
-- -- 12,500 -- -- -- 12,500 Memtec Ltd. ADR......
-- -- 1,500 -- 5,100 86,020 92,620 +Microsoft Corp......
-- -- -- 10,000 -- -- 10,000 Motorola, Inc........
Nokia Corp., Class A
-- 20,000 -- -- -- -- 20,000 ADR..................
+Oracle System
-- -- -- -- 5,000 -- 5,000 Corp.................
-- -- 4,000 -- -- -- 4,000 Perkin-Elmer Corp....
-- 10,000 -- -- -- -- 10,000 +Qualcomm, Inc.......
-- 45,000 -- -- -- -- 45,000 +SDL, Inc............
-- -- -- -- 9,000 200,000 209,000 Tektronix, Inc.......
Texas Instruments,
-- -- -- 8,000 -- -- 8,000 Inc..................
+Thermo Instrument
-- -- 5,625 -- -- -- 5,625 Systems, Inc. ......
-- 22,000 -- -- -- -- 22,000 +3Com Corp...........
-- 28,500 -- -- -- -- 28,500 +Unitrode Corp.......
</TABLE>
PF-7
<PAGE>
<TABLE>
<CAPTION>
VALUE (000)
- ------------------------------------------------------------------------------------------------
AGING OF COMMUNICATIONS ENVIRONMENTALLY GLOBAL PRODUCTIVITY PRO FORMA
AMERICA AND ENTERTAINMENT RELATED PRODUCTS COMPETITORS ENHANCERS EQUITY COMBINED
FUND FUND AND SERVICES FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
890,600 -- -- -- -- 8,760,000 $ 9,650,600
- ------------------------------------------------------------------------------------------------
12,361,825 -- -- 15,189,844 787,000 72,668,622 101,007,291
- ------------------------------------------------------------------------------------------------
-- -- -- 2,003,050 -- -- 2,003,050
-- -- -- -- 369,750 -- 369,750
-- -- 299,250 -- -- -- 299,250
-- -- 344,250 -- -- -- 344,250
-- -- 323,750 -- -- 4,393,750 4,717,500
-- -- 314,375 -- 188,625 -- 503,000
-- -- -- 1,782,375 -- -- 1,782,375
-- -- -- -- 315,000 -- 315,000
- ------------------------------------------------------------------------------------------------
-- -- 1,281,625 3,785,425 873,375 4,393,750 10,334,175
- ------------------------------------------------------------------------------------------------
-- -- 330,000 -- -- -- 330,000
540,000 -- -- -- -- -- 540,000
-- 635,625 -- -- -- -- 635,625
-- 937,497 -- -- 412,492 -- 1,349,989
-- 962,500 144,375 1,732,500 -- 3,588,681 6,428,056
-- -- -- -- 536,375 -- 536,375
-- -- -- 388,750 -- -- 388,750
-- 655,000 -- -- -- -- 655,000
-- 843,413 -- -- -- -- 843,413
-- -- -- -- 179,538 -- 179,538
-- 1,165,625 -- -- -- -- 1,165,625
922,500 -- -- -- -- -- 922,500
-- -- -- -- 798,750 5,936,310 6,735,060
-- -- 223,987 -- -- -- 223,987
-- -- -- 931,200 -- -- 931,200
-- -- 50,750 -- -- -- 50,750
-- 375,000 -- 450,000 -- -- 825,000
-- -- 139,000 2,863,400 834,000 6,672,000 10,508,400
-- -- -- 686,875 686,875 -- 1,373,750
-- 777,535 -- -- -- 3,002,530 3,780,065
-- -- 317,187 -- -- -- 317,187
-- -- 137,438 -- 467,287 7,881,582 8,486,307
-- -- -- 603,750 -- -- 603,750
-- 1,165,000 -- -- -- -- 1,165,000
-- -- -- -- 192,500 -- 192,500
-- -- 257,500 -- -- -- 257,500
-- 563,750 -- -- -- -- 563,750
-- 753,750 -- -- -- -- 753,750
-- -- -- -- 454,500 10,100,000 10,554,500
-- -- -- 599,000 -- -- 599,000
-- -- 163,125 -- -- -- 163,125
-- 717,750 -- -- -- -- 717,750
-- 926,250 -- -- -- -- 926,250
</TABLE>
PF-8
<PAGE>
<TABLE>
<CAPTION>
SHARES MARCH 31, 1997
- ---------------------------------------------------------------------------------------------------------------------
AGING OF COMMUNICATIONS ENVIRONMENTALLY GLOBAL PRODUCTIVITY PRO FORMA
AMERICA AND ENTERTAINMENT RELATED PRODUCTS COMPETITORS ENHANCERS EQUITY COMBINED
FUND FUND AND SERVICES FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-- -- -- -- 10,000 -- 10,000 +Xilinx, Inc.........
TRANSPORTATION--0.30%
-- -- -- -- 4,000 -- 4,000 CSX Corp.............
Norfolk Southern
-- -- -- -- 2,000 -- 2,000 Corp.................
-- -- -- 14,550 -- -- 14,550+ UAL Corp.............
-- -- -- -- 3,000 -- 3,000 Union Pacific Corp...
UTILITIES--5.08%
-- 24,000 -- -- -- -- 24,000 Ameritech Corp.......
-- -- -- -- -- 113,924 113,924 AT&T Corp............
-- 20,000 -- -- -- -- 20,000 BellSouth Corp.......
+California Energy
-- -- 9,000 -- -- -- 9,000 Co., Inc.............
-- -- -- -- -- 300,000 300,000 Enron Corp...........
+LCI International,
-- 30,000 -- 70,000 -- -- 100,000 Inc..................
MCI Communications
-- 41,600 -- -- -- -- 41,600 Corp.................
+NEXTEL
Communications,
-- 65,000 -- -- -- -- 65,000 Inc., Class A.......
SBC Communications,
-- 16,000 -- -- -- -- 16,000 Inc..................
Vodafone Group plc
-- -- -- 30,000 -- -- 30,000 ADR..................
-- 42,000 -- -- -- -- 42,000 +Worldcom, Inc.......
RIGHTS--0.05%
+Thermo Fibergen,
-- -- -- 65,000 -- -- 65,000 Inc.................
CONVERTIBLE PREFERRED
STOCK--0.18%
SunAmerica, Inc.,
Preferred Exchange
22,500 -- -- -- -- -- 22,500 $3.19...............
DEMAND NOTES--2.43%
Associates Corp. of
North America Master
-- -- $489,000 -- $ 31,000 $3,091,000 $3,611,000 Notes...............
General Electric Co.
1,084,000 -- 461,000 -- 1,246,000 5,612,000 8,403,000 Promissory Notes....
TOTAL INVESTMENTS--
100.00%
(Cost $34,173,700,
29,209,379,
8,051,827,
67,679,200,
16,471,895,
239,891,128, and
395,477,129,
respectively.)
</TABLE>
Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by
independent pricing services or, at fair value as
determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments
maturing within 60 days are valued at amortized cost
which approximates market value. All portfolio
transactions initially expressed in terms of foreign
currencies have been translated into U.S. dollars.
+ Non-income producing security
PF-9
<PAGE>
<TABLE>
<CAPTION>
VALUE (000)
- ---------------------------------------------------------------------------------------------------
AGING OF COMMUNICATIONS ENVIRONMENTALLY GLOBAL PRODUCTIVITY PRO FORMA
AMERICA AND ENTERTAINMENT RELATED PRODUCTS COMPETITORS ENHANCERS EQUITY COMBINED
FUND FUND AND SERVICES FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-- -- -- -- 486,250 -- $ 486,250
- ---------------------------------------------------------------------------------------------------
1,462,500 10,478,695 1,763,362 8,255,475 5,048,568 37,181,103 64,189,702
- ---------------------------------------------------------------------------------------------------
-- -- -- -- 186,000 -- 186,000
-- -- -- -- 170,500 -- 170,500
-- -- -- 942,112 -- -- 942,112
-- -- -- -- 170,250 -- 170,250
- ---------------------------------------------------------------------------------------------------
-- -- -- 942,112 526,750 -- 1,468,862
- ---------------------------------------------------------------------------------------------------
-- 1,476,000 -- -- -- -- 1,476,000
-- -- -- -- -- 3,958,859 3,958,859
-- 845,000 -- -- -- -- 845,000
-- -- 306,000 -- -- -- 306,000
-- -- -- -- -- 11,400,000 11,400,000
-- 502,500 -- 1,172,500 -- -- 1,675,000
-- 1,476,800 -- -- -- -- 1,476,800
-- 861,250 -- -- -- -- 861,250
-- 842,000 -- -- -- -- 842,000
-- -- -- 1,323,750 -- -- 1,323,750
-- 918,750 -- -- -- -- 918,750
- ---------------------------------------------------------------------------------------------------
-- 6,922,300 306,000 2,496,250 -- 15,358,859 25,083,409
- ---------------------------------------------------------------------------------------------------
-- -- -- 255,938 -- -- 255,938
- ---------------------------------------------------------------------------------------------------
888,750 -- -- -- -- -- 888,750
- ---------------------------------------------------------------------------------------------------
-- -- 489,000 -- 31,000 3,091,000 3,611,000
1,084,000 -- 461,000 -- 1,246,000 5,612,000 8,403,000
- ---------------------------------------------------------------------------------------------------
1,084,000 950,000 -- 1,277,000 8,703,000 12,014,000
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
$44,035,152 $34,233,721 $9,407,312 $82,461,922 $17,128,680 $306,300,212 $493,566,999
===================================================================================================
</TABLE>
PF-10
<PAGE>
EXCELSIOR FUNDS, INC.
PRO FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
COMMUNICATION ENVIRONMENTALLY-
AGING OF AND RELATED PRODUCTS GLOBAL PRODUCTIVITY
EQUITY AMERICA ENTERTAINMENT AND SERVICES COMPETITORS ENHANCERS PRO FORMA
FUND FUND FUND FUND FUND FUND ADJUSTMENTS COMBINED
------------ ----------- ------------- ---------------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at
cost--see
accompanying
portfolios...... $239,891,128 $34,173,700 $29,209,379 $8,051,827 $67,679,200 $16,471,895 $395,477,129
============ =========== =========== ========== =========== =========== ============
Investments, at
value........... $306,300,212 $44,035,152 $34,233,721 $9,407,312 $82,461,922 $17,128,680 $493,566,999
Cash............. 43 674 104 77 -- 172 (1,070)(a) 0
Dividends
receivable...... 437,580 41,575 49,624 7,384 49,020 14,941 600,124
Interest
receivable...... 83,283 4,995 1,328 2,824 4,070 2,302 98,802
Receivable for
investments
sold............ 3,186,837 1,128,883 881,681 -- 1,763,534 981,940 7,942,875
Receivable for
fund shares
sold............ 1,075,668 23,886 588 7,993 10,000 400 1,118,535
Receivable from
investment
advisor......... -- -- -- 666 -- 450 (1,116)(a) 0
Withholding tax
receivable...... -- -- -- -- 522 -- 522
Prepaid
expenses........ 11,945 1,773 1,640 316 3,538 782 19,994
Unamortized
organization
costs........... -- 3,171 3,171 3,171 3,171 3,171 15,855
------------ ----------- ----------- ---------- ----------- ----------- ------------
Total Assets.... 311,095,568 45,240,109 35,171,857 9,429,743 84,295,777 18,132,838 503,363,706
LIABILITIES:
Payable for
investments
purchased....... 3,211,712 -- -- 523,941 -- -- 3,735,653
Payable for fund
shares
redeemed........ 478,756 123,920 419,342 22,968 687,501 50,703 1,783,190
Investment
advisory fee
payable......... 199,898 22,366 18,600 -- 42,577 -- (1,116)(a) 282,325
Due to custodian
bank............ -- -- -- -- 1,595,443 -- (1,070)(a) 1,594,373
Accrued expenses
and other
payables........ 134,564 36,269 37,424 13,990 48,457 24,888 295,592
------------ ----------- ----------- ---------- ----------- ----------- ------------
Total
Liabilities.... 4,024,930 182,555 475,366 560,899 2,373,978 75,591 7,691,133
------------ ----------- ----------- ---------- ----------- ----------- ------------
NET ASSETS....... $307,070,638 $45,057,554 $34,696,491 $8,868,844 $81,921,799 $18,057,247 $495,672,573
============ =========== =========== ========== =========== =========== ============
NET ASSETS
consist of:
Undistributed net
investment
income.......... $639,545 $ 32,870 $ -- $ 1,263 $ 65,558 $ -- $ 739,236
Accumulated net
realized gain on
investments..... 7,037,544 1,153,902 754,828 194,299 1,657,958 606,446 11,404,977
Unrealized
appreciation of
investments and
foreign currency
translations.... 66,409,084 9,861,452 5,024,342 1,355,485 14,782,645 656,785 98,089,793
Par value........ 11,897 4,444 3,363 949 7,195 2,210 (10,857)(a) 19,201
Paid-in capital
in excess of par
value........... 232,972,568 34,004,886 28,913,958 7,316,848 65,408,443 16,791,806 10,857 (a) 385,419,366
------------ ----------- ----------- ---------- ----------- ----------- ------------
Total Net
Assets.......... $307,070,638 $45,057,554 $34,696,491 $8,868,844 $81,921,799 $18,057,247 $495,672,573
============ =========== =========== ========== =========== =========== ============
SHARES:
Net Assets....... $306,989,598 $45,057,554 $34,696,491 $8,868,844 $81,921,799 $18,057,247 $495,591,533
Shares of Common
Stock
Outstanding..... 11,893,854 4,444,010 3,363,248 949,105 7,194,476 2,209,782 (10,853,302)(a) 19,201,173
Net Asset Value
Per Share....... $25.81 $10.14 $10.32 $9.34 $11.39 $8.17 $25.81
------ ------ ------ ----- ------ ----- ------
TRUST SHARES:
Net Assets....... 81,040 -- -- -- -- -- 81,040
Shares of Common
Stock
Outstanding..... 3,144 -- -- -- -- -- 3,144
Net Asset Value
Per Share....... $25.78 -- -- -- -- -- $25.78
------ ------
</TABLE>
See Notes to Pro forma Combined Financial Statements
PF-11
<PAGE>
EXCELSIOR FUNDS, INC.
PROJECTED PRO FORMA COMBINED STATEMENT OF OPERATIONS
MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
COMMUNICATION ENVIRONMENTALLY-
AGING OF AND RELATED PRODUCTS GLOBAL PRODUCTIVITY
EQUITY AMERICA ENTERTAINMENT AND SERVICES COMPETITORS ENHANCERS
FUND FUND FUND FUND FUND FUND ADJUSTMENTS
----------- ---------- ------------- ---------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT IN-
COME:
Interest
income......... $ 833,687 $ 96,641 $182,191 $ 28,872 $ 166,985 $ 38,781
Dividend
income......... 3,956,821 669,224 282,639 49,058 1,045,610 172,753
Less: Foreign
taxes
withheld....... -- -- -- -- (3,359) --
----------- ---------- -------- ---------- ---------- ---------
Total Income... 4,790,508 765,865 464,830 77,930 1,209,236 211,534
EXPENSES:
Investment
advisory fees.. 2,087,344 282,456 290,211 40,858 503,823 153,391 321,489 (b)
Administration
fees........... 427,849 72,380 74,287 12,257 129,087 39,265
Administrative
service fees... 132,737 21,988 24,461 3,484 36,378 13,268
Shareholder
servicing agent
fees........... 115,810 33,810 50,982 9,005 38,222 16,308 (71,583)(d)
Custodian fees.. 90,204 17,945 19,367 6,347 27,397 26,558
Registration and
filing fees.... 16,929 18,843 18,831 12,617 17,763 12,813
Legal and audit
fees........... 33,574 8,473 8,165 975 13,493 4,153
Directors' fees
and expenses... 10,880 2,256 2,435 275 3,751 1,336
Shareholder
reports........ 30,601 6,100 6,519 581 10,433 2,655
Amortization of
organization
costs.......... -- 4,176 4,176 4,176 4,176 4,176
Distribution
fees--Trust
Shares......... 88 -- -- -- -- --
Miscellaneous
expenses....... 9,152 2,610 3,062 711 3,686 2,297
----------- ---------- -------- ---------- ---------- ---------
Total Ex-
penses........ 2,955,168 471,037 502,496 91,286 788,209 276,220
Fees waived by
investment
adviser and
administrators.. (132,737) (21,988) (24,461) (23,451) (36,378) (24,184) (321,489)(c)
----------- ---------- -------- ---------- ---------- ---------
Net Expenses... 2,822,431 449,049 478,035 67,835 751,831 252,036
----------- ---------- -------- ---------- ---------- ---------
NET INVESTMENT
INCOME (LOSS).. 1,968,077 316,816 (13,205) 10,095 457,405 (40,502)
----------- ---------- -------- ---------- ---------- ---------
REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS:
Net realized
gain (loss):
Security trans-
actions....... 13,470,108 3,293,736 754,828 678,387 2,417,099 1,237,947
Foreign
currency
translations.. -- -- -- -- (521) 237
----------- ---------- -------- ---------- ---------- ---------
Total net
realized gain.. 13,470,108 3,293,736 754,828 678,387 2,416,578 1,238,184
Change in
unrealized
appreciation/depreciation
on investments
and foreign
currency
translations
during the
year........... 11,035,720 132,436 237,949 345,106 2,778,098 (273,291)
----------- ---------- -------- ---------- ---------- ---------
Net realized and
unrealized gain
on
investments.... 24,505,828 3,426,172 992,777 1,023,493 5,194,676 964,893
----------- ---------- -------- ---------- ---------- ---------
Net increase in
net assets
resulting from
operations..... $26,473,905 $3,742,988 $979,572 $1,033,588 $5,652,081 $ 924,391
=========== ========== ======== ========== ========== =========
<CAPTION>
PRO FORMA
COMBINED
------------
<S> <C>
INVESTMENT IN-
COME:
Interest
income......... $ 1,347,157
Dividend
income......... 6,176,105
Less: Foreign
taxes
withheld....... (3,359)
------------
Total Income... 7,519,903
EXPENSES:
Investment
advisory fees.. 3,679,572
Administration
fees........... 755,125
Administrative
service fees... 232,316
Shareholder
servicing agent
fees........... 192,554
Custodian fees.. 187,818
Registration and
filing fees.... 97,796
Legal and audit
fees........... 68,833
Directors' fees
and expenses... 20,933
Shareholder
reports........ 56,889
Amortization of
organization
costs.......... 20,880
Distribution
fees--Trust
Shares......... 88
Miscellaneous
expenses....... 21,518
------------
Total Ex-
penses........ 5,334,322
Fees waived by
investment
adviser and
administrators.. (584,688)
------------
Net Expenses... 4,749,634
------------
NET INVESTMENT
INCOME (LOSS).. 2,770,269
------------
REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS:
Net realized
gain (loss):
Security trans-
actions....... 21,852,105
Foreign
currency
translations.. (284)
------------
Total net
realized gain.. 21,851,821
Change in
unrealized
appreciation/depreciation
on investments
and foreign
currency
translations
during the
year........... 14,256,018
------------
Net realized and
unrealized gain
on
investments.... 36,107,839
------------
Net increase in
net assets
resulting from
operations..... $38,878,108
============
</TABLE>
See Notes to Pro forma Combined Financial Statements
PF-12
<PAGE>
EXCELSIOR FUNDS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS--(UNAUDITED)
MARCH 31, 1997
Pro forma information is intended to provide shareholders of Excelsior Funds
with information about the impact of the proposed merger by indicating how the
merger might have affected the information had the merger been consummated as
of March 31, 1997.
The pro forma combined statements of assets and liabilities and results of
operations as of March 31, 1997, have been prepared to reflect the merger of
Equity Fund, Aging of America Fund, Communication and Entertainment Fund,
Environmentally-Related Products and Services Fund, Global Competitors Fund
and Productivity Enhancers Fund after giving effect to pro forma adjustments
described in the notes listed below.
(a) Acquisition by Equity Fund of the net assets of Aging of America Fund,
Communication and Entertainment Fund, Environmentally-Related Products and
Services Fund, Global Competitors Fund and Productivity Enhancers Fund and
issuance of Equity Fund Shares in exchange for all the outstanding shares
of Aging of America Fund, Communication and Entertainment Fund,
Environmentally-Related Products and Services Fund, Global Competitors
Fund and Productivity Enhancers Fund.
(b) Investment Advisory Fee was adjusted to reflect the application of the fee
structure for the Equity Fund (0.75% of average net assets).
(c) Waiver of Advisory Fees reflects the Advisor's commitment to temporarily
waive a set amount of advisory fees ($321,489), representing the
incremental Advisory Fees provided for within the Equity Fund versus the
Transferor Funds (0.75% vs. 0.60% of average net assets).
(d) Actual expenses incurred by the individual funds, for various expenses
included on a pro forma basis, were reduced to reflect estimated savings
arising from the merger.
PF-13
<PAGE>
EXCELSIOR FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1997
<TABLE>
<CAPTION>
INCOME AND AGING OF
EQUITY GROWTH AMERICA
FUND FUND FUND
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS:
Investments, at cost--see accompanying
portfolios........................... $239,891,128 $100,064,467 $34,173,700
============ ============ ===========
Investments, at value (Note 1)........ $306,300,212 $132,131,071 $44,035,152
Cash.................................. 43 412 674
Dividends receivable.................. 437,580 85,702 41,575
Interest receivable................... 83,283 734,480 4,995
Receivable for investments sold....... 3,186,837 -- 1,128,883
Receivable for fund shares sold....... 1,075,668 79,125 23,886
Receivable from investment advisor
(Note 2)............................. -- -- --
Withholding tax receivable............ -- 2,718 --
Prepaid expenses...................... 11,945 4,900 1,773
Unamortized organization costs (Note
5)................................... -- -- 3,171
------------ ------------ -----------
TOTAL ASSETS.......................... 311,095,568 133,038,408 45,240,109
LIABILITIES:
Payable for investments purchased..... 3,211,712 -- --
Payable for fund shares redeemed...... 478,756 126,692 123,920
Investment advisory fee payable (Note
2)................................... 199,898 78,059 22,366
Due to custodian bank................. -- -- --
Accrued expenses and other payables... 134,564 66,119 36,269
------------ ------------ -----------
TOTAL LIABILITIES..................... 4,024,930 270,870 182,555
------------ ------------ -----------
NET ASSETS............................. $307,070,638 $132,767,538 $45,057,554
============ ============ ===========
NET ASSETS consist of:
Undistributed net investment income .. $ 639,545 $ 571,900 $ 32,870
Accumulated net realized gain (loss)
on investments....................... 7,037,544 4,968,595 1,153,902
Unrealized appreciation (depreciation)
of investments and foreign currency
translations......................... 66,409,084 32,066,192 9,861,452
Par value (Note 4).................... 11,897 8,705 4,444
Paid-in capital in excess of par
value................................ 232,972,568 95,152,146 34,004,886
------------ ------------ -----------
TOTAL NET ASSETS....................... $307,070,638 $132,767,538 $45,057,554
============ ============ ===========
SHARES:
Net Assets............................ $306,989,598 $132,767,538 $45,057,554
Shares of Common Stock Outstanding.... 11,893,854 8,705,319 4,444,010
NET ASSET VALUE PER SHARE.............. $25.81 $15.25 $10.14
====== ====== ======
TRUST SHARES:
Net Assets............................ $ 81,040 -- --
Shares of Common Stock Outstanding.... 3,144 -- --
NET ASSET VALUE PER SHARE.............. $25.78 -- --
======
</TABLE>
See Notes to Financial Statements
FS-1
<PAGE>
<TABLE>
<CAPTION>
BUSINESS AND COMMUNICATION ENVIRONMENTALLY- LONG-TERM
INDUSTRIAL AND EARLY LIFE RELATED PRODUCTS GLOBAL SUPPLY PRODUCTIVITY
RESTRUCTURING ENTERTAINMENT CYCLE AND SERVICES COMPETITORS OF ENERGY ENHANCERS
FUND FUND FUND FUND FUND FUND FUND
------------- ------------- ----------- ---------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
$ 99,261,956 $29,209,379 $52,479,549 $8,051,827 $67,679,200 $26,885,433 $16,471,895
============ =========== =========== ========== =========== =========== ===========
$125,283,194 $34,233,721 $52,436,200 $9,407,312 $82,461,922 $33,943,203 $17,128,680
317 104 444 77 -- -- 172
185,062 49,624 8,120 7,384 49,020 18,827 14,941
6,478 1,328 1,821 2,824 4,070 5,733 2,302
1,359,955 881,681 1,092,075 -- 1,763,534 -- 981,940
108,767 588 15,142 7,993 10,000 26,743 400
-- -- -- 666 -- -- 450
4,693 -- -- -- 522 -- --
4,583 1,640 2,539 316 3,538 1,169 782
3,171 3,171 3,171 3,171 3,171 3,171 3,171
------------ ----------- ----------- ---------- ----------- ----------- -----------
126,956,220 35,171,857 53,559,512 9,429,743 84,295,777 33,998,846 18,132,838
1,957,749 -- -- 523,941 -- 444,507 --
813,664 419,342 216,788 22,968 687,501 96,822 50,703
61,463 18,600 27,897 -- 42,577 15,761 --
-- -- -- -- 1,595,443 27,215 --
60,275 37,424 48,738 13,990 48,457 21,450 24,888
------------ ----------- ----------- ---------- ----------- ----------- -----------
2,893,151 475,366 293,423 560,899 2,373,978 605,755 75,591
------------ ----------- ----------- ---------- ----------- ----------- -----------
$124,063,069 $34,696,491 $53,266,089 $8,868,844 $81,921,799 $33,393,091 $18,057,247
============ =========== =========== ========== =========== =========== ===========
$ 145,348 $ -- $ -- $ 1,263 $ 65,558 $ 49,837 $ --
1,881,036 754,828 (2,895,898) 194,299 1,657,958 509,900 606,446
26,020,674 5,024,342 (43,349) 1,355,485 14,782,645 7,057,770 656,785
7,787 3,363 6,031 949 7,195 3,002 2,210
96,008,224 28,913,958 56,199,305 7,316,848 65,408,443 25,772,582 16,791,806
------------ ----------- ----------- ---------- ----------- ----------- -----------
$124,063,069 $34,696,491 $53,266,089 $8,868,844 $81,921,799 $33,393,091 $18,057,247
============ =========== =========== ========== =========== =========== ===========
$124,011,153 $34,696,491 $53,258,036 $8,868,844 $81,921,799 $33,393,091 $18,057,247
7,783,856 3,363,248 6,030,747 949,105 7,194,476 3,002,398 2,209,782
$15.93 $10.32 $8.83 $9.34 $11.39 $11.12 $8.17
====== ====== ===== ===== ====== ====== =====
$ 51,916 -- $ 8,053 -- -- -- --
3,264 -- 914 -- -- -- --
$15.91 -- $8.81 -- -- -- --
====== =====
</TABLE>
See Notes to Financial Statements
FS-2
<PAGE>
EXCELSIOR FUNDS, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
INCOME AND AGING OF
EQUITY GROWTH AMERICA
FUND+ FUND FUND
----------- ----------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income....................... $ 833,687 $ 2,468,384 $ 96,641
Dividend income....................... 3,956,821 1,719,063 669,224
Less: Foreign taxes withheld.......... -- (2,348) --
----------- ----------- ----------
TOTAL INCOME.......................... 4,790,508 4,185,099 765,865
EXPENSES:
Investment advisory fees (Note 2)..... 2,087,344 982,751 282,456
Administration fees (Note 2).......... 427,849 201,381 72,380
Administrative service fees (Note 2).. 132,737 106,888 21,988
Shareholder servicing agent fees...... 115,810 69,461 33,810
Custodian fees........................ 90,204 46,731 17,945
Registration and filing fees.......... 16,929 11,745 18,843
Legal and audit fees.................. 33,574 15,832 8,473
Directors' fees and expenses (Note
2).................................... 10,880 5,569 2,256
Shareholder reports................... 30,601 6,192 6,100
Amortization of organization costs
(Note 5).............................. -- -- 4,176
Distribution fees--Trust Shares (Note
2).................................... 88 -- --
Miscellaneous expenses................ 9,152 5,988 2,610
----------- ----------- ----------
TOTAL EXPENSES........................ 2,955,168 1,452,538 471,037
Fees waived by investment adviser and
administrators (Note 2)............... (132,737) (106,888) (21,988)
----------- ----------- ----------
NET EXPENSES.......................... 2,822,431 1,345,650 449,049
----------- ----------- ----------
NET INVESTMENT INCOME (LOSS)........... 1,968,077 2,839,449 316,816
----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 1):
Net realized gain (loss):
Security transactions................. 13,470,108 8,780,963 3,293,736
Foreign currency translations......... -- (7,539) --
----------- ----------- ----------
Total net realized gain (loss)........ 13,470,108 8,773,424 3,293,736
Change in unrealized
appreciation/depreciation on
investments and foreign currency
translations during the year......... 11,035,720 3,899,616 132,436
----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS................. 24,505,828 12,673,040 3,426,172
----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $26,473,905 $15,512,489 $3,742,988
=========== =========== ==========
</TABLE>
+ The Excelsior Fund began offering Trust Shares on November 12, 1996,
September 19, 1996, and September 6, 1996 for Equity Fund, Business and
Industrial Restructuring Fund, and Early Life Cycle Fund, respectively.
See Notes to Financial Statements
FS-3
<PAGE>
<TABLE>
<CAPTION>
BUSINESS AND COMMUNICATION ENVIRONMENTALLY- LONG-TERM
INDUSTRIAL AND EARLY LIFE RELATED PRODUCTS GLOBAL SUPPLY PRODUCTIVITY
RESTRUCTURING ENTERTAINMENT CYCLE AND SERVICES COMPETITORS OF ENERGY ENHANCERS
FUND+ FUND FUND+ FUND FUND FUND FUND
------------- ------------- ------------ ---------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
$ 73,760 $ 182,191 $ 171,656 $ 28,872 $ 166,985 $ 120,506 $ 38,781
1,720,957 282,639 358,990 49,058 1,045,610 404,006 172,753
(5,067) -- -- -- (3,359) -- --
----------- ----------- ------------ ---------- ---------- ---------- ----------
1,789,650 464,830 530,646 77,930 1,209,236 524,512 211,534
594,255 290,211 469,912 40,858 503,823 177,440 153,391
152,356 74,287 120,450 12,257 129,087 45,473 39,265
41,617 24,461 61,972 3,484 36,378 12,270 13,268
55,874 50,982 57,471 9,005 38,222 14,040 16,308
40,422 19,367 30,238 6,347 27,397 15,522 26,558
18,290 18,831 18,494 12,617 17,763 9,787 12,813
15,579 8,165 13,156 975 13,493 4,339 4,153
4,022 2,435 3,974 275 3,751 1,212 1,336
10,816 6,519 11,390 581 10,433 2,091 2,655
4,176 4,176 4,176 4,176 4,176 4,176 4,176
89 -- 10 -- -- -- --
3,555 3,062 4,413 711 3,686 2,519 2,297
----------- ----------- ------------ ---------- ---------- ---------- ----------
941,051 502,496 795,656 91,286 788,209 288,869 276,220
(41,617) (24,461) (61,972) (23,451) (36,378) (12,270) (24,184)
----------- ----------- ------------ ---------- ---------- ---------- ----------
899,434 478,035 733,684 67,835 751,831 276,599 252,036
----------- ----------- ------------ ---------- ---------- ---------- ----------
890,216 (13,205) (203,038) 10,095 457,405 247,913 (40,502)
----------- ----------- ------------ ---------- ---------- ---------- ----------
3,591,561 754,828 (1,252,061) 678,387 2,417,099 3,066,094 1,237,947
(2,769) -- -- -- (521) -- 237
----------- ----------- ------------ ---------- ---------- ---------- ----------
3,588,792 754,828 (1,252,061) 678,387 2,416,578 3,066,094 1,238,184
10,912,205 237,949 (10,176,904) 345,106 2,778,098 3,501,247 (273,291)
----------- ----------- ------------ ---------- ---------- ---------- ----------
14,500,997 992,777 (11,428,965) 1,023,493 5,194,676 6,567,341 964,893
----------- ----------- ------------ ---------- ---------- ---------- ----------
$15,391,213 $ 979,572 $(11,632,003) $1,033,588 $5,652,081 $6,815,254 $ 924,391
=========== =========== ============ ========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
FS-4
<PAGE>
EXCELSIOR FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCOME AND AGING OF
EQUITY GROWTH AMERICA
FUND+ FUND FUND
------------ ------------ -----------
<S> <C> <C> <C>
YEAR ENDED MARCH 31, 1997
Net investment income (loss)......... $ 1,968,077 $ 2,839,449 $ 316,816
Net realized gain (loss) on
investments......................... 13,470,108 8,773,424 3,293,736
Change in unrealized
appreciation/depreciation on
investments and foreign currency
translations during the year........ 11,035,720 3,899,616 132,436
------------ ------------ -----------
Net increase (decrease) in net assets
resulting from operations........... 26,473,905 15,512,489 3,742,988
Distributions to shareholders:
From net investment income:
Shares.............................. (1,439,009) (3,036,535) (314,773)
Trust Shares........................ (103) -- --
From net realized gain on
investments:
Shares.............................. (11,114,096) (5,519,778) (1,835,114)
Trust Shares........................ (27) -- --
In excess of net realized gain on
investments:
Shares.............................. -- -- --
------------ ------------ -----------
Total distributions................ (12,553,235) (8,556,313) (2,149,887)
------------ ------------ -----------
Increase (decrease) in net assets
from fund share transactions (Note
4)
Shares.............................. 104,492,129 (1,683,305) (1,327,320)
Trust Shares........................ 84,035 -- --
------------ ------------ -----------
Total from fund share
transactions...................... 104,576,164 (1,683,305) (1,327,320)
------------ ------------ -----------
Net increase (decrease) in net
assets.............................. 118,496,834 5,272,871 265,781
NET ASSETS:
Beginning of year................... 188,573,804 127,494,667 44,791,773
------------ ------------ -----------
End of year(1)...................... $307,070,638 $132,767,538 $45,057,554
============ ============ ===========
--------
(1) Including undistributed net
investment income.................. $ 639,545 $ 571,900 $ 32,870
============ ============ ===========
YEAR ENDED MARCH 31, 1996
Net investment income (loss)......... $ 892,355 $ 3,359,989 $ 179,442
Net realized gain on investments..... 12,290,132 3,102,820 229,173
Change in unrealized
appreciation/depreciation on
investments and foreign currency
translations during the year........ 24,331,637 19,139,107 7,454,373
------------ ------------ -----------
Net increase in net assets resulting
from operations..................... 37,514,124 25,601,916 7,862,988
Distributions to shareholders:
From net investment income: (775,213) (2,643,489) (162,762)
In excess of net investment income.. -- -- --
From net realized gain on
investments........................ (14,900,357) (495,121) --
In excess of net realized gain on
investments........................ -- -- --
Increase (decrease) in net assets
from fund share transactions (Note
4).................................. 29,318,351 5,106,774 14,917,963
------------ ------------ -----------
Net increase (decrease) in net
assets.............................. 51,156,905 27,570,080 22,618,189
NET ASSETS:
Beginning of year................... 137,416,899 99,924,587 22,173,584
------------ ------------ -----------
End of year(2)...................... $188,573,804 $127,494,667 $44,791,773
============ ============ ===========
--------
(2) Including
undistributed/(distributions in
excess of) net investment income.. $ 110,580 $ 992,864 $ 48,027
============ ============ ===========
</TABLE>
+ The Excelsior Fund began offering Trust Shares on November 12, 1996,
September 19, 1996 and September 6, 1996 for Equity Fund, Business and
Industrial Restructuring Fund, and Early Life Cycle Fund, respectively.
See Notes to Financial Statements
FS-5
<PAGE>
<TABLE>
<CAPTION>
BUSINESS AND COMMUNICATION ENVIRONMENTALLY- LONG-TERM
INDUSTRIAL AND EARLY LIFE RELATED PRODUCTS GLOBAL SUPPLY PRODUCTIVITY
RESTRUCTURING ENTERTAINMENT CYCLE AND SERVICES COMPETITORS OF ENERGY ENHANCERS
FUND+ FUND FUND+ FUND FUND FUND FUND
------------- ------------- ------------ ---------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
$ 890,216 $ (13,205) $ (203,038) $ 10,095 $ 457,405 $ 247,913 $ (40,502)
3,588,792 754,828 (1,252,061) 678,387 2,416,578 3,066,094 1,238,184
10,912,205 237,949 (10,176,904) 345,106 2,778,098 3,501,247 (273,291)
------------ ------------ ------------ ----------- ----------- ----------- ------------
15,391,213 979,572 (11,632,003) 1,033,588 5,652,081 6,815,254 924,391
(770,732) -- -- (8,832) (512,801) (236,119) --
(133) -- -- -- -- -- --
(2,941,935) (243,366) (760,083) -- (672,479) (2,816,614) (2,588,996)
(702) -- (98) -- -- -- --
-- -- (2,895,800) -- -- -- --
------------ ------------ ------------ ----------- ----------- ----------- ------------
(3,713,502) (243,366) (3,655,981) (8,832) (1,185,280) (3,052,733) (2,588,996)
------------ ------------ ------------ ----------- ----------- ----------- ------------
38,284,744 (12,989,055) (9,515,807) 3,897,322 6,150,507 6,336,079 (9,347,427)
48,311 -- 9,034 -- -- -- --
------------ ------------ ------------ ----------- ----------- ----------- ------------
38,333,055 (12,989,055) (9,506,773) 3,897,322 6,150,507 6,336,079 (9,347,427)
------------ ------------ ------------ ----------- ----------- ----------- ------------
50,010,766 (12,252,849) (24,794,757) 4,922,078 10,617,308 10,098,600 (11,012,032)
74,052,303 46,949,340 78,060,846 3,946,766 71,304,491 23,294,491 29,069,279
------------ ------------ ------------ ----------- ----------- ----------- ------------
$124,063,069 $ 34,696,491 $ 53,266,089 $ 8,868,844 $81,921,799 $33,393,091 $ 18,057,247
============ ============ ============ =========== =========== =========== ============
$ 145,348 $ -- $ -- $ 1,263 $ 65,558 $ 49,837 $ --
============ ============ ============ =========== =========== =========== ============
$ 430,247 $ 112,007 $ (110,895) $ (7,710) $ 327,789 $ 183,715 $ 53,347
2,629,951 2,474,867 3,934,385 31,865 721,363 521,934 5,861,616
11,536,487 1,240,983 6,178,733 923,672 9,216,453 3,435,626 (172,413)
------------ ------------ ------------ ----------- ----------- ----------- ------------
14,596,685 3,827,857 10,002,223 947,827 10,265,605 4,141,275 5,742,550
(345,537) (105,302) -- -- (257,433) (168,020) (53,347)
-- -- -- -- -- -- (50,322)
(987,000) (2,340,896) (4,027,696) -- (85,339) -- (4,101,238)
-- -- -- -- (86,658) -- --
30,605,398 15,653,291 24,303,965 (1,360,084) 35,973,688 3,508,362 9,266,366
------------ ------------ ------------ ----------- ----------- ----------- ------------
43,869,546 17,034,950 30,278,492 (412,257) 45,809,863 7,481,617 10,804,009
30,182,757 29,914,390 47,782,354 4,359,023 25,494,628 15,812,874 18,265,270
------------ ------------ ------------ ----------- ----------- ----------- ------------
$ 74,052,303 $ 46,949,340 $ 78,060,846 $ 3,946,766 $71,304,491 $23,294,491 $ 29,069,279
============ ============ ============ =========== =========== =========== ============
$ 137,328 $ (158) $ -- $ -- $ 121,474 $ 38,043 $ --
============ ============ ============ =========== =========== =========== ============
</TABLE>
See Notes to Financial Statements
FS-6
<PAGE>
EXCELSIOR FUNDS, INC.
FINANCIAL HIGHLIGHTS--SELECTED PER SHARE DATA AND RATIOS
For a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
NET REALIZED DIVIDENDS DISTRIBUTIONS
NET ASSET NET AND UNREALIZED DIVIDENDS IN EXCESS OF FROM NET
VALUE, INVESTMENT GAIN (LOSS) TOTAL FROM FROM NET NET REALIZED GAIN
BEGINNING INCOME ON INVESTMENTS INVESTMENT INVESTMENT INVESTMENT ON INVESTMENTS
OF PERIOD (LOSS) AND OPTIONS OPERATIONS INCOME INCOME AND OPTIONS
--------- ---------- -------------- ---------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUND -- (4/25/85*)
Shares:
Year Ended March 31,
1993................... $16.28 $0.08 $3.01 $3.09 $(0.09) -- $(0.51)
1994................... 18.77 0.05 1.16 1.21 (0.08) -- (0.39)
1995................... 19.17 0.07 2.67 2.74 (0.04) -- (0.47)
1996................... 21.40 0.12 5.21 5.33 (0.11) -- (2.19)
1997................... 24.43 0.18 2.50 2.68 (0.14) -- (1.16)
Trust Shares --
(11/12/96*)
Period Ended March 31,
1997.................. 26.30 0.04 0.03 0.07 (0.03) -- (0.56)
INCOME AND GROWTH FUND -- (1/6/87*)
Year Ended March 31,
1993................... $ 9.10 $0.27 $2.43 $2.70 $(0.35) -- $ 0.00
1994................... 11.45 0.31 0.46 0.77 (0.27) -- (0.01)
1995................... 11.94 0.38 0.26 0.64 (0.35) -- (0.41)
1996................... 11.82 0.39 2.61 3.00 (0.31) -- (0.06)
1997................... 14.45 0.33 1.45 1.78 (0.35) -- (0.63)
AGING OF AMERICA FUND -- (12/31/92*)
Period Ended March 31,
1993.................. $ 7.00 $0.01 $0.00 $0.01 $ 0.00 -- $ 0.00
Year Ended March 31,
1994................... 7.01 0.03 (0.02) 0.01 (0.03) -- 0.00
1995................... 6.99 0.04 0.85 0.89 (0.04) -- 0.00
1996................... 7.84 0.05 1.97 2.02 (0.05) -- 0.00
1997................... 9.81 0.07 0.72 0.79 (0.07) -- (0.39)
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND -- (12/31/92*)
Shares:
Period Ended March 31,
1993.................. $ 7.00 $0.02 $0.69 $0.71 $ 0.00 -- $ 0.00
Year Ended March 31,
1994................... 7.71 0.06 1.96 2.02 (0.07) -- (0.02)
1995................... 9.64 0.07 1.02 1.09 (0.06) -- (0.12)
1996................... 10.55 0.10 3.71 3.81 (0.09) -- (0.24)
1997................... 14.03 0.13 2.36 2.49 (0.12) -- (0.47)
Trust Shares --
(9/19/96*)
Period Ended March
31,1997............... 14.61 0.05 1.53 1.58 (0.05) -- (0.23)
COMMUNICATION AND ENTERTAINMENT FUND -- (12/31/92*)
Period Ended March 31,
1993.................. $ 7.00 $0.01 $0.60 $0.61 $ 0.00 -- $ 0.00
Year Ended March 31,
1994................... 7.61 0.02 1.52 1.54 (0.03) -- (0.37)
1995................... 8.75 0.04 1.06 1.10 (0.04) -- (0.17)
1996................... 9.64 0.03 1.30 1.33 (0.03) -- (0.62)
1997................... 10.32 0.00 0.05 0.05 0.00 -- (0.05)
</TABLE>
* Commencement of operations
** Not Annualized
*** Annualized
+ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by adviser and administrators.
++ Total return data for periods prior to March 31, 1997 does not reflect the
sales load payable on purchases of shares. The sales load was eliminated
effective February 14, 1997.
# For fiscal years beginning on or after September 1, 1995, the Funds are
required to disclose the average commission rate per share it paid for
portfolio trades, on which commissions were charged, during the period.
See Notes to Financial Statements
FS-7
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTIONS RATIO RATIO RATIO
IN EXCESS OF OF NET OF GROSS OF NET
NET REALIZED NET ASSETS, OPERATING OPERATING INVESTMENT
GAIN ON NET ASSET END EXPENSES EXPENSES INCOME (LOSS) PORTFOLIO FEE
INVESTMENTS TOTAL VALUE, END TOTAL OF PERIOD TO AVERAGE TO AVERAGE TO AVERAGE TURNOVER WAIVERS
AND OPTIONS DISTRIBUTIONS OF PERIOD RETURN++ (000) NET ASSETS NET ASSETS + NET ASSETS RATE (NOTE 2)
- ------------- ------------- ---------- -------- ----------- ---------- ------------ ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- $(0.60) $18.77 19.26% $106,144 1.08% 1.08% 0.51% 24% $0.00
$(0.34) (0.81) 19.17 6.54% 122,262 1.14% 1.14% 0.25% 17% 0.00
-- (0.51) 21.40 14.65% 137,417 1.05% 1.08% 0.36% 23% 0.00
-- (2.30) 24.43 26.45% 188,574 1.05% 1.12% 0.55% 27% 0.02
-- (1.30) 25.81 11.09% 306,990 1.01% 1.06% 0.71% 39% 0.01
-- (0.59) 25.78 0.23%** 81 1.36%*** 1.41%*** 0.45%*** 39% 0.00
-- $(0.35) $11.45 30.45% $ 51,303 1.15% 1.15% 2.76% 28% $0.00
-- (0.28) 11.94 6.69% 96,682 1.17% 1.17% 2.77% 28% 0.00
-- (0.76) 11.82 5.74% 99,925 1.06% 1.09% 3.31% 36% 0.00
-- (0.37) 14.45 25.83% 127,495 1.05% 1.11% 2.95% 22% 0.01
-- (0.98) 15.25 12.61% 132,768 1.03% 1.11% 2.17% 25% 0.01
-- $ 0.00 $ 7.01 0.14%** $ 2,389 0.99%*** 3.87%*** 0.77%*** 14%*** $0.03
-- (0.03) 6.99 0.13% 10,583 0.99% 1.82% 0.59% 24% 0.04
-- (0.04) 7.84 12.80% 22,174 0.99% 1.26% 0.63% 14% 0.02
-- (0.05) 9.81 25.80% 44,792 0.93% 0.97% 0.54% 34% 0.00
-- (0.46) 10.14 8.18% 45,058 0.95% 1.00% 0.67% 86% 0.00
-- $ 0.00 $ 7.71 10.14%** $ 1,935 0.99%*** 5.85%*** 2.48%*** 9%*** $0.04
-- (0.09) 9.64 26.40% 14,440 0.99% 1.73% 0.77% 75% 0.06
-- (0.18) 10.55 11.49% 30,183 0.98% 1.08% 0.83% 82% 0.01
-- (0.33) 14.03 36.48% 74,052 0.91% 0.95% 0.88% 56% 0.00
-- (0.59) 15.93 18.09% 124,011 0.91% 0.95% 0.90% 62% 0.01
-- (0.28) 15.91 10.85%** 52 1.26%*** 1.30%*** 0.54%*** 62% 0.00
-- $ 0.00 $ 7.61 8.71%** $ 5,785 0.99%*** 2.20%*** 1.06%*** 25%*** $0.01
-- (0.40) 8.75 20.07% 21,024 0.98% 1.16% 0.29% 60% 0.01
-- (0.21) 9.64 12.87% 29,914 0.98% 1.06% 0.46% 56% 0.01
-- (0.65) 10.32 13.48% 46,949 0.92% 0.97% 0.28% 65% 0.00
-- (0.05) 10.32 0.34% 34,696 0.99% 1.04% (0.03)% 65% 0.01
<CAPTION>
DISTRIBUTIONS
IN EXCESS OF
NET REALIZED
GAIN ON AVERAGE
INVESTMENTS COMMISSION
AND OPTIONS RATE#
- ------------- ----------
<S> <C>
-- N/A
$(0.34) N/A
-- N/A
-- N/A
-- $0.0663
-- $0.0663
-- N/A
-- N/A
-- N/A
-- N/A
-- $0.0777
-- N/A
-- N/A
-- N/A
-- N/A
-- $0.0831
-- N/A
-- N/A
-- N/A
-- N/A
-- $0.0755
-- $0.0755
-- N/A
-- N/A
-- N/A
-- N/A
-- $0.0677
</TABLE>
See Notes to Financial Statements
FS-8
<PAGE>
EXCELSIOR FUNDS, INC.
FINANCIAL HIGHLIGHTS--SELECTED PER SHARE DATA AND RATIOS
For a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
NET REALIZED DIVIDENDS DISTRIBUTIONS
NET ASSET NET AND UNREALIZED DIVIDENDS IN EXCESS OF FROM NET
VALUE, INVESTMENT GAIN (LOSS) TOTAL FROM FROM NET NET REALIZED GAIN
BEGINNING INCOME ON INVESTMENTS INVESTMENT INVESTMENT INVESTMENT ON INVESTMENTS
OF PERIOD (LOSS) AND OPTIONS OPERATIONS INCOME INCOME AND OPTIONS
--------- ---------- -------------- ---------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
EARLY LIFE CYCLE FUND -- (12/31/92*)
Shares:
Period Ended March 31,
1993.................. $ 7.00 $ 0.00 $ 0.40 $ 0.40 $ 0.00 -- $ 0.00
Year Ended March 31,
1994................... 7.40 (0.01) 1.36 1.35 0.00 -- (0.09)
1995................... 8.66 (0.02) 1.31 1.29 0.00 -- (0.18)
1996................... 9.77 (0.02) 1.72 1.70 0.00 -- (0.69)
1997................... 10.78 (0.03) (1.43) (1.46) 0.00 -- (0.10)
Trust Shares --
(9/6/96*)
Period Ended March 31,
1997.................. 9.98 (0.03) (0.92) (0.95) 0.00 -- (0.22)
ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND -- (12/31/92*)
Period Ended March 31,
1993.................. $ 7.00 $ 0.00 $(0.05) $(0.05) $ 0.00 -- $ 0.00
Year Ended March 31,
1994................... 6.95 0.00 (0.71) (0.71) 0.00 -- 0.00
1995................... 6.24 (0.01) (0.01) (0.02) 0.00 $(0.01) 0.00
1996................... 6.21 (0.02) 1.54 1.52 0.00 -- 0.00
1997................... 7.73 0.01 1.61 1.62 (0.01) -- 0.00
GLOBAL COMPETITORS FUND -- (12/31/92*)
Period Ended March 31,
1993.................. $ 7.00 $ 0.01 $ 0.27 $ 0.28 $ 0.00 -- $ 0.00
Year Ended March 31,
1994................... 7.28 0.05 0.41 0.46 (0.05) -- 0.00
1995................... 7.69 0.07 0.90 0.97 (0.07) -- 0.00
1996................... 8.59 0.07 2.27 2.34 (0.06) -- (0.02)
1997................... 10.83 0.06 0.66 0.72 (0.07) -- (0.09)
LONG-TERM SUPPLY OF ENERGY FUND -- (12/31/92*)
Period Ended March 31,
1993.................. $ 7.00 $ 0.01 $ 0.80 $ 0.81 $ 0.00 -- $ 0.00
Year Ended March 31,
1994................... 7.81 0.08 (0.12) (0.04) (0.07) -- 0.00
1995................... 7.70 0.09 0.24 0.33 (0.10) -- (0.01)
1996................... 7.92 0.07 1.63 1.70 (0.07) -- 0.00
1997................... 9.55 0.09 2.60 2.69 (0.09) -- (1.03)
PRODUCTIVITY ENHANCERS FUND -- (12/31/92*)
Period Ended March 31,
1993.................. $ 7.00 $ 0.01 $(0.07) $(0.06) $ 0.00 -- $ 0.00
Year Ended March 31,
1994................... 6.94 0.00 0.96 0.96 0.00 $(0.02) 0.00
1995................... 7.88 (0.01) 0.35 0.34 0.00 -- (0.10)
1996................... 8.12 0.02 2.12 2.14 (0.02) (0.01) (1.40)
1997................... 8.83 (0.02) 0.16 0.14 0.00 -- (0.80)
</TABLE>
* Commencement of operations
** Not Annualized
*** Annualized
+ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by adviser and administrators.
++ Total return data for periods prior to March 31, 1997 does not reflect the
sales load payable on purchases of shares. The sales load was eliminated
effective February 14, 1997.
# For fiscal years beginning on or after September 1, 1995, the Funds are
required to disclose the average commission rate per share it paid for
portfolio trades, on which commissions were charged, during the period.
See Notes to Financial Statements
FS-9
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTIONS RATIO RATIO RATIO
IN EXCESS OF OF NET OF GROSS OF NET
NET REALIZED NET ASSETS, OPERATING OPERATING INVESTMENT
GAIN ON NET ASSET END EXPENSES EXPENSES INCOME (LOSS) PORTFOLIO FEE
INVESTMENTS TOTAL VALUE, END TOTAL OF PERIOD TO AVERAGE TO AVERAGE TO AVERAGE TURNOVER WAIVERS
AND OPTIONS DISTRIBUTIONS OF PERIOD RETURN++ (000) NET ASSETS NET ASSETS + NET ASSETS RATE (NOTE 2)
- ------------- ------------- ---------- -------- ----------- ---------- ------------ ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- $ 0.00 $ 7.40 5.71%** $ 5,512 0.99%*** 2.70%*** 0.12%*** 4%*** $0.01
-- (0.09) 8.66 18.27% 24,951 0.95% 1.15% (0.25)% 20% 0.01
-- (0.18) 9.77 15.16% 47,782 0.96% 1.04% (0.23)% 42% 0.01
-- (0.69) 10.78 18.29% 78,061 0.90% 0.98% (0.17)% 38% 0.01
$(0.39) (0.49) 8.83 (14.33)% 53,258 0.94% 1.02% (0.26)% 55% 0.01
-- (0.22) 8.81 (9.77)%** 8 1.29%*** 1.40%*** (0.87)%*** 55% 0.00
-- $ 0.00 $ 6.95 (0.71)%** $ 2,452 0.99%*** 2.83%*** 0.32%*** 0%*** $0.02
-- 0.00 6.24 (10.15)% 4,533 0.99% 2.20% (0.07)% 28% 0.05
-- (0.01) 6.21 (0.27)% 4,359 0.99% 2.42% (0.10)% 61% 0.09
-- 0.00 7.73 24.48% 3,947 0.99% 2.46% (0.18)% 64% 0.12
-- (0.01) 9.34 21.22% 8,869 0.99% 1.33% 0.15% 73% 0.03
-- $ 0.00 $ 7.28 4.00%** $ 2,037 0.99%*** 3.97%*** 0.82%*** 0%*** $0.03
-- (0.05) 7.69 6.29% 10,059 0.99% 1.72% 0.81% 19% 0.05
-- (0.07) 8.59 12.73% 25,495 0.97% 1.18% 1.04% 29% 0.01
$(0.02) (0.10) 10.83 27.39% 71,304 0.89% 0.93% 0.73% 17% 0.00
-- (0.16) 11.39 6.64% 81,922 0.89% 0.94% 0.54% 25% 0.00
-- $ 0.00 $ 7.81 11.57%** $ 1,457 0.99%*** 7.03%*** 1.69%*** 0%*** $0.05
-- (0.07) 7.70 (0.57)% 6,830 0.99% 2.03% 1.21% 6% 0.07
-- (0.11) 7.92 4.28% 15,813 0.98% 1.35% 1.18% 31% 0.03
-- (0.07) 9.55 21.60% 23,294 0.96% 1.09% 0.88% 43% 0.01
-- (1.12) 11.12 28.28% 33,393 0.93% 0.98% 0.84% 87% 0.00
-- $ 0.00 $ 6.94 (0.86)%** $ 3,369 0.99%*** 4.23%*** 1.29%*** 183%*** $0.03
-- (0.02) 7.88 13.81% 15,702 0.99% 1.49% 0.01% 198% 0.10
-- (0.10) 8.12 4.45% 18,265 0.99% 1.21% (0.10)% 276% 0.02
-- (1.43) 8.83 26.97% 29,069 0.98% 1.06% 0.20% 472% 0.01
-- (0.80) 8.17 1.02% 18,057 0.98% 1.08% (0.16)% 300% 0.01
<CAPTION>
DISTRIBUTIONS
IN EXCESS OF
NET REALIZED
GAIN ON AVERAGE
INVESTMENTS COMMISSION
AND OPTIONS RATE#
- ------------- ----------
<S> <C>
-- N/A
-- N/A
-- N/A
-- N/A
$(0.39) $0.0433
-- $0.0433
-- N/A
-- N/A
-- N/A
-- N/A
-- $0.0711
-- N/A
-- N/A
-- N/A
$(0.02) N/A
-- $0.0873
-- N/A
-- N/A
-- N/A
-- N/A
-- $0.0809
-- N/A
-- N/A
-- N/A
-- N/A
-- $0.0797
</TABLE>
See Notes to Financial Statements
FS-10
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
EQUITY FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
-------- ------------
<C> <S> <C>
COMMON STOCKS -- 96.92%
FINANCIAL -- 23.67%
131,200 Associates First Capital Corp. ........................ $ 5,641,600
185,000 Fleet Financial Group, Inc. ........................... 10,591,250
29,240 General Re Corp. ...................................... 4,619,920
90,500 MBIA, Inc. ............................................ 8,676,688
136,038 Mellon Bank Corp. ..................................... 9,896,764
122,360 Morgan Stanley Group, Inc. ............................ 7,188,650
120,000 State Street Boston Corp. ............................. 8,325,000
350,000 United Asset Management Corp. ......................... 8,968,750
120,000 UNUM Corp. ............................................ 8,760,000
------------
72,668,622
------------
CONSUMER CYCLICAL -- 17.77%
178,200 Centex Corp. .......................................... 6,281,550
105,000 Dayton Hudson Corp. ................................... 4,383,750
200,000 Ford Motor Co. ........................................ 6,275,000
370,000 Heilig-Meyers Co. ..................................... 5,873,750
90,000 Houghton Mifflin Co. .................................. 4,860,000
60,000 Luxottica Group S.p.A. ADR............................. 3,187,500
152,834 McDonald's Corp. ...................................... 7,221,406
175,000 +O'Reilly Automotive, Inc. ............................ 6,431,250
70,000 Reuters Holdings plc ADR............................... 4,068,750
215,000 Wal-Mart Stores, Inc. ................................. 5,993,125
------------
54,576,081
------------
TECHNOLOGY -- 14.46%
74,570 +Cisco Systems, Inc. .................................. 3,588,681
111,480 Hewlett-Packard Co. ................................... 5,936,310
48,000 Intel Corp. ........................................... 6,672,000
56,920 Lucent Technologies, Inc. ............................. 3,002,530
86,020 +Microsoft Corp. ...................................... 7,881,582
200,000 Tektronix, Inc. ....................................... 10,100,000
131,220 Tyco International Ltd. ............................... 7,217,100
------------
44,398,203
------------
CONSUMER STAPLES -- 14.40%
210,000 Abbott Laboratories.................................... 11,786,250
298,600 +Alliance Pharmaceutical Corp. ........................ 3,583,200
54,100 +Cerner Corp. ......................................... 696,538
136,610 +Forest Laboratories, Inc. ............................ 5,139,951
130,000 +Genzyme Corp. ........................................ 2,892,500
220,000 Johnson & Johnson...................................... 11,632,500
100,900 Pfizer, Inc. .......................................... 8,488,213
------------
44,219,152
------------
CAPITAL GOODS -- 10.14%
120,000 General Electric Co. .................................. 11,910,000
101,533 Illinois Tool Works, Inc. ............................. 8,287,631
135,961 +Thermo Electron Corp. ................................ 4,197,796
220,000 WMX Technologies, Inc. ................................ 6,737,500
------------
31,132,927
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
---------- ------------
<C> <S> <C>
ENERGY -- 10.05%
110,103 Louisiana Land &
Exploration Co. ..................................... $ 5,216,130
92,000 Mobil Corp. ......................................... 12,017,500
95,500 +United Meridian Corp. .............................. 2,876,938
281,680 Unocal Corp. ........................................ 10,739,050
------------
30,849,618
------------
UTILITIES -- 5.00%
113,924 AT&T Corp. .......................................... 3,958,859
300,000 Enron Corp. ......................................... 11,400,000
------------
15,358,859
------------
RAW/INTERMEDIATE
MATERIALS -- 1.43%
190,000 Pall Corp. .......................................... 4,393,750
------------
TOTAL COMMON STOCKS
(Cost $231,188,128).................................. 297,597,212
------------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
DEMAND NOTES -- 2.83%
$3,091,000 Associates Corp. of North
America Master Notes................................. 3,091,000
5,612,000 General Electric Co.
Promissory Notes..................................... 5,612,000
------------
TOTAL DEMAND NOTES
(Cost $8,703,000).................................... 8,703,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $239,891,128*)....................................... 99.75% $306,300,212
OTHER ASSETS AND
LIABILITIES (NET).......................................... 0.25 770,426
------ ------------
NET ASSETS................................................. 100.00% $307,070,638
====== ============
</TABLE>
- --------
* For Federal tax purposes, the tax basis on investments aggregates
$239,893,069.
+ Non-income producing security.
ADR -- American Depositary Receipt.
See Notes to Financial Statements
FS-11
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
INCOME AND GROWTH FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
---------- ------------
<C> <S> <C>
COMMON STOCKS -- 70.30%
CONSUMER CYCLICAL -- 17.58%
3,495 Bayerische Motoren Werke AG.......................... $ 2,858,707
40,000 Electronic Data Systems Corp......................... 1,615,000
80,000 Heilig-Meyers Co..................................... 1,270,000
50,000 Herman Miller, Inc................................... 3,412,500
45,000 Luxottica Group S.p.A. ADR........................... 2,390,625
75,000 McDonald's Corp...................................... 3,543,750
120,000 ServiceMaster Ltd. Partnership....................... 3,270,000
115,000 Smart & Final, Inc................................... 2,256,875
90,000 Wiley (John) & Sons, Inc., Class A................... 2,722,500
------------
23,339,957
------------
CONSUMER STAPLES -- 10.11%
43,000 Gillette Co.......................................... 3,122,875
60,000 Johnson & Johnson.................................... 3,172,500
32,000 Kellogg Co........................................... 2,152,000
65,000 Novo-Nordisk A.S., ADR............................... 3,282,500
3,040 SMH AG (Bearer)...................................... 1,690,415
------------
13,420,290
------------
TECHNOLOGY -- 9.65%
57,000 Adobe Systems, Inc................................... 2,280,000
153,334 +Analog Devices, Inc................................. 3,450,015
115,000 ECI Telecommunications Limited Designs............... 2,113,125
266,000 +Interleaf, Inc...................................... 399,000
79,000 +SDL, Inc............................................ 1,323,250
100,000 +Unitrode Corp....................................... 3,250,000
------------
12,815,390
------------
FINANCIAL -- 9.17%
21,750 American International
Group, Inc........................................... 2,552,906
26,000 Household International, Inc......................... 2,239,250
95,000 IPC Holdings Ltd..................................... 2,315,625
40,000 Morgan Stanley Group, Inc............................ 2,350,000
75,000 Mutual Risk Management Ltd. ......................... 2,718,750
------------
12,176,531
------------
ENERGY -- 7.38%
22,000 Exxon Corp........................................... 2,370,500
41,000 Norsk Hydro A.S., ADR................................ 2,003,875
40,000 +SEACOR Holdings, Inc. .............................. 2,145,000
65,000 +Transmontaigne Oil Co. ............................. 1,015,625
75,000 +United Meridian Corp................................ 2,259,375
------------
9,794,375
------------
RAW/INTERMEDIATE MATERIALS -- 5.70%
41,000 Nucor Corp........................................... 1,875,750
70,000 Pall Corp............................................ 1,618,750
</TABLE>
<TABLE>
VALUE
SHARES (NOTE 1)
---------- ------------
<C> <S> <C>
RAW/INTERMEDIATE
MATERIALS -- (CONTINUED)
36,000 Pioneer Hi-Bred
International, Inc. ................................. $ 2,263,500
95,000 Worthington Industries, Inc.......................... 1,816,875
------------
7,574,875
------------
CAPITAL GOODS -- 4.98%
42,000 Dover Corp. ......................................... 2,205,000
35,000 Raychem Corp. ....................................... 2,883,125
50,000 Trinity Industries, Inc. ............................ 1,518,750
------------
6,606,875
------------
UTILITIES -- 4.16%
45,000 +AES Corp. .......................................... 2,520,000
65,000 +NEXTEL Communications, Inc., Class A................ 861,250
90,000 UGI Corp. ........................................... 2,137,500
------------
5,518,750
------------
TRANSPORTATION -- 1.57%
40,000 +Federal Express Corp. .............................. 2,085,000
------------
TOTAL COMMON STOCKS
(Cost $62,982,301)................................... 93,332,043
------------
CONVERTIBLE PREFERRED STOCKS -- 5.88%
FINANCIAL -- 3.64%
325,000 Capstead Mortgage Corp.,
Series B, Preferred
Exchange $1.26....................................... 4,834,375
------------
ENERGY -- 2.24%
80,000 Callon Petroleum Co.,
Series A, Preferred
Exchange $2.13....................................... 2,980,000
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $6,484,259).................................... 7,814,375
------------
PRINCIPAL
AMOUNT
----------
CORPORATE BONDS -- 4.61%
TRANSPORTATION -- 1.56%
$2,000,000 Greyhound Lines, Inc.,
Debenture,
10.00%, 07/31/01..................................... 2,070,000
------------
MATERIALS -- 1.55%
2,000,000 Fort Howard Sr. Notes,
9.25%, 03/15/01...................................... 2,060,000
------------
ENERGY -- 1.50%
2,000,000 Vintage Petroleum Sr. Sub-Notes,
9.00%, 12/15/05...................................... 1,990,000
------------
TOTAL CORPORATE BONDS
(Cost $5,807,883).................................... 6,120,000
------------
</TABLE>
See Notes to Financial Statements
FS-12
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
INCOME AND GROWTH FUND -- (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- ------------
<C> <S> <C>
CONVERTIBLE BONDS -- 14.09%
TECHNOLOGY -- 10.35%
$3,400,000 BBN Corp.,
6.00%, 4/01/12...................................... $ 3,043,000
4,236,000 Kollmorgen Corp., Sub-Debenture,
8.75%, 05/01/09..................................... 4,230,705
4,959,000 Network Equipment Technologies, Inc., Sub-Debenture,
7.25%, 05/15/14..................................... 4,103,573
2,500,000 VLSI Technology,
8.25%, 10/01/05..................................... 2,371,875
------------
13,749,153
------------
CONSUMER STAPLES -- 2.36%
3,400,000 Novacare, Inc., Sub-Debenture,
5.50%, 01/15/00..................................... 3,128,000
------------
TRANSPORTATION -- 1.38%
2,800,000 World Corp., Inc.,
7.00%, 05/15/04..................................... 1,830,500
------------
TOTAL CONVERTIBLE BONDS
(Cost $18,633,024).................................. 18,707,653
------------
DEMAND NOTES -- 4.64%
979,000 Associates Corp. of North America Master Notes...... 979,000
5,178,000 General Electric Co. Promissory Notes............... 5,178,000
------------
TOTAL DEMAND NOTES
(Cost $6,157,000)................................... 6,157,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $100,064,467*)...................................... 99.52% $132,131,071
OTHER ASSETS AND LIABILITIES (NET)........................ 0.48 636,467
------ ------------
NET ASSETS................................................ 100.00% $132,767,538
====== ============
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$100,091,722.
+ Non-income producing security.
ADR -- American Depositary Receipt.
See Notes to Financial Statements
FS-13
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
AGING OF AMERICA FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
-------- -----------
<C> <S> <C>
COMMON STOCKS -- 93.35%
CONSUMER CYCLICAL -- 31.20%
30,000 Black & Decker Corp. ................................... $ 963,750
27,500 Fisher Scientific International......................... 1,213,438
43,000 +General Nutrition Cos., Inc. .......................... 870,750
15,000 Houghton Mifflin Co. ................................... 810,000
24,000 Lowe's Cos., Inc. ...................................... 897,000
19,000 Marriott International, Inc. ........................... 945,250
25,000 +Proffitt's, Inc. ...................................... 943,750
25,000 +Revco D.S., Inc. ...................................... 1,012,500
20,000 Sears, Roebuck & Co. ................................... 1,005,000
30,000 Stewart Enterprises, Inc., Class A...................... 1,087,500
30,000 Time Warner, Inc. ...................................... 1,297,500
30,000 +Vencor, Inc. .......................................... 1,136,250
30,000 Wal-Mart Stores, Inc. .................................. 836,250
14,215 Walt Disney Co. ........................................ 1,037,695
-----------
14,056,633
-----------
CONSUMER STAPLES -- 27.89%
40,000 Assisted Living Concepts, Inc. ......................... 840,000
30,000 Columbia/HCA Healthcare Corp. .......................... 1,008,750
15,000 Conagra, Inc. .......................................... 813,750
12,000 Eastman Kodak Co. ...................................... 910,500
30,000 First Brands Corp. ..................................... 735,000
10,000 Gillette Co. ........................................... 726,250
51,700 +Healthsouth Corp. ..................................... 988,763
18,000 Johnson & Johnson....................................... 951,750
32,500 Mattel, Inc. ........................................... 780,000
15,000 Novartis AG ADR......................................... 929,806
35,000 PepsiCo, Inc. .......................................... 1,141,875
14,000 Pfizer, Inc. ........................................... 1,177,750
5,000 Pharmacia & Upjohn, Inc. ............................... 183,125
25,000 +Premier Parks Inc. .................................... 650,000
10,000 Schering-Plough Corp. .................................. 727,500
-----------
12,564,819
-----------
FINANCIAL -- 27.43%
15,000 Allstate Corp. ......................................... 890,625
19,000 American Express Co. ................................... 1,137,625
30,000 Arden Realty Group, Inc. ............................... 817,500
25,200 Associates First Capital Corp. ......................... 1,083,600
25,000 Barnett Banks of Florida, Inc. ......................... 1,162,500
15,000 Beneficial Corp. ....................................... 969,375
15,000 Dean Witter Discover & Co. ............................. 523,125
10,000 First Union Corp. (North Carolina)...................... 811,250
40,000 Health and Retirement Properties Trust.................. 720,000
30,000 Hospitality Properties Trust............................ 918,750
15,000 Mellon Bank Corp. ...................................... 1,091,250
12,500 Nationwide Financial Services, Inc., Class A............ 321,875
23,400 Summit Bancorp (New Jersey)............................. 1,023,750
12,200 UNUM Corp. ............................................. 890,600
-----------
12,361,825
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
---------- -----------
<C> <S> <C>
CAPITAL GOODS -- 3.59%
7,000 Boeing Co. ........................................... $ 690,375
30,000 +Thermo Electron Corp. ............................... 926,250
-----------
1,616,625
-----------
TECHNOLOGY -- 3.24%
45,000 +Alliance Pharmaceutical Corp. ....................... 540,000
15,000 Guidant Corp. ........................................ 922,500
-----------
1,462,500
-----------
TOTAL COMMON STOCKS
(Cost $32,184,950).................................... 42,062,402
-----------
CONVERTIBLE PREFERRED STOCKS -- 1.97%
FINANCIAL -- 1.97%
22,500 SunAmerica, Inc., Preferred
Exchange $3.19
(Cost $904,750)....................................... 888,750
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
DEMAND NOTES -- 2.41%
$1,084,000 General Electric Co.
Promissory Notes
(Cost $1,084,000)..................................... 1,084,000
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $34,173,700*)......................................... 97.73% $44,035,152
OTHER ASSETS AND
LIABILITIES (NET)........................................... 2.27 1,022,402
------ -----------
NET ASSETS.................................................. 100.00% $45,057,554
====== ===========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$34,173,700.
+ Non-income producing security.
ADR -- American Depositary Receipt.
See Notes to Financial Statements
FS-14
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
-------- ------------
<C> <S> <C>
COMMON STOCKS -- 97.61%
FINANCIAL -- 23.97%
100,000 +Amerin Corp. ......................................... $ 1,987,500
35,500 Amvesco plc ADR........................................ 1,925,875
30,000 Aon Corp. ............................................. 1,837,500
30,000 Associates First Capital Corp. ........................ 1,290,000
141,250 Bank Plus Corp. ....................................... 1,465,469
8,000 Bankers Trust New York Corp. .......................... 656,000
18,000 Chase Manhattan Corp. ................................. 1,685,250
42,000 Donaldson, Lufkin & Jenrette, Inc. .................... 1,538,250
65,000 Everest Re Holdings, Inc. ............................. 1,909,375
62,000 FBL Financial Group, Inc.,
Class A................................................ 1,612,000
45,000 GCR Holdings Ltd. ..................................... 1,012,500
77,000 +ITLA Capital Corp. ................................... 1,097,250
25,000 Mellon Bank Corp. ..................................... 1,818,750
40,000 Mid Ocean Ltd. ........................................ 1,910,000
16,500 Morgan (J.P.) & Co., Inc. ............................. 1,621,125
38,000 PNC Bank Corp. ........................................ 1,520,000
105,539 Prime Retail, Inc. .................................... 1,358,815
17,500 Student Loan Marketing Association..................... 1,666,875
38,000 Travelers Group, Inc. ................................. 1,819,250
------------
29,731,784
------------
CONSUMER STAPLES -- 20.23%
30,000 +Amerisource Health Corp.,
Class A................................................ 1,312,500
80,000 +Apria Healthcare Group, Inc. ......................... 1,450,000
43,000 Avon Products, Inc. ................................... 2,257,500
35,000 Bristol-Myers Squibb Co. .............................. 2,065,000
23,000 CPC International, Inc. ............................... 1,886,000
26,000 Eastman Kodak Co. ..................................... 1,972,750
32,000 General Mills, Inc. ................................... 1,988,000
125,000 +Medaphis Corp. ....................................... 1,296,875
48,000 Pharmacia & Upjohn, Inc. .............................. 1,758,000
25,000 Philip Morris Companies, Inc. ......................... 2,853,125
84,500 Suiza Foods Corp. ..................................... 2,260,375
70,000 Sunbeam Corp. ......................................... 2,100,000
22,000 Warner Lambert Co. .................................... 1,903,000
------------
25,103,125
------------
TECHNOLOGY -- 16.70%
130,000 +Amdahl Corp. ......................................... 1,218,750
77,000 +Bell & Howell Holdings Co. ........................... 1,607,375
32,000 Computer Associates International, Inc. .............. 1,244,000
92,000 Digex, Inc. ........................................... 621,000
15,000 International Business Machines Corp. ................. 2,060,625
122,500 Medical Manager Corp. ................................. 1,133,125
30,000 Motorola, Inc. ........................................ 1,811,250
37,000 Nokia Corp., Class A, ADR.............................. 2,155,250
92,000 +Phoenix Technologies Ltd. ............................ 1,357,000
35,000 +Plantronics, Inc. .................................... 1,505,000
4,000 +Plasma-Therm, Inc. ................................... 19,750
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- ------------
<C> <S> <C>
TECHNOLOGY -- (CONTINUED)
110,000 Smallworldwide plc ADR.................................. $ 1,787,500
31,000 Texas Instruments, Inc. ................................ 2,321,125
34,000 Thiokol Corp. .......................................... 1,878,500
------------
20,720,250
------------
CAPITAL GOODS -- 9.26%
12,500 ABB AB ADR.............................................. 1,353,125
26,000 AlliedSignal, Inc. ..................................... 1,852,500
43,000 +American Standard Cos., Inc. .......................... 1,935,000
20,000 Boeing Co. ............................................. 1,972,500
75,000 Chicago Bridge & Iron Co., N.V.--New York Shares........ 1,331,250
75,000 +Coltec Industries, Inc. ............................... 1,387,500
22,000 United Technologies Corp. .............................. 1,655,500
------------
11,487,375
------------
CONSUMER CYCLICAL -- 8.48%
132,000 +Data Documents, Inc. .................................. 1,320,000
67,300 Designer Holdings Ltd. ................................. 529,987
62,000 Ford Motor Co. ......................................... 1,945,250
26,000 General Motors Corp. ................................... 1,439,750
100,000 Viad Corp. ............................................. 1,600,000
89,000 Westinghouse Electric Corp. ............................ 1,579,750
37,000 XEROX Corp. ............................................ 2,104,375
------------
10,519,112
------------
ENERGY -- 6.81%
59,000 +Flores & Rucks, Inc. .................................. 2,389,500
16,000 Mobil Corp. ............................................ 2,090,000
111,000 +Nabors Industries, Inc. ............................... 2,164,500
68,000 YPF S.A. ADR............................................ 1,802,000
------------
8,446,000
------------
TRANSPORTATION -- 5.81%
50,000 +AMERCO................................................. 1,237,500
60,200 Coach USA, Inc. ........................................ 1,715,700
80,000 Hvide Marine, Inc., Class A............................. 1,820,000
126,000 Kitty Hawk, Inc. ....................................... 1,512,000
106,000 Smithway Motor Express, Class A......................... 927,500
------------
7,212,700
------------
RAW/INTERMEDIATE MATERIALS -- 4.34%
48,000 Cambrex Corp. .......................................... 1,608,000
57,000 +Fort Howard Corp. ..................................... 1,767,000
125,000 PalEx, Inc. ............................................ 1,015,625
21,000 W.R. Grace & Co. ....................................... 994,875
------------
5,385,500
------------
HOLDING COMPANY DIVERSIFIED -- 1.18%
48,000 Internatio-Muller N.V. ................................. 1,466,723
------------
UTILITIES -- 0.83%
47,000 +Worldcom, Inc. ........................................ 1,028,125
------------
TOTAL COMMON STOCKS
(Cost $95,191,250)...................................... 121,100,694
------------
</TABLE>
See Notes to Financial Statements
FS-15
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
--------- ------------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS -- 2.66%
CONSUMER CYCLICAL -- 1.51%
35,000 Kmart Financing, Inc., Preferred
Exchange $3.88........................................ $ 1,872,500
------------
CONSUMER STAPLES -- 1.15%
220,000 RJR Nabisco Holdings,
Series C, Preferred
Exchange $0.60........................................ 1,430,000
------------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $3,190,706)..................................... 3,302,500
------------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
DEMAND NOTES -- 0.71%
$143,000 Associates Corp. of North
America Master Notes.................................. 143,000
737,000 General Electric Co.
Promissory Notes...................................... 737,000
------------
TOTAL DEMAND NOTES
(Cost $880,000)....................................... 880,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $99,261,956*)....................................... 100.98% $125,283,194
OTHER ASSETS AND LIABILITIES (NET)........................ (0.98) (1,220,125)
------ ------------
NET ASSETS................................................ 100.00% $124,063,069
====== ============
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$99,282,015.
+ Non-income producing security.
ADR -- American Depositary Receipt.
See Notes to Financial Statements
FS-16
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
COMMUNICATION AND ENTERTAINMENT FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
-------- -----------
<C> <S> <C>
COMMON STOCKS -- 98.67%
CONSUMER CYCLICAL -- 39.54%
15,000 Callaway Golf Co. ...................................... $ 429,375
40,000 Comcast Corp., Class A Special.......................... 675,000
12,000 Harley-Davidson, Inc. .................................. 406,500
15,000 Harte-Hanks............................................. 436,875
10,000 Houghton Mifflin Co. ................................... 540,000
7,500 International Business Machines Corp. .................. 1,030,313
40,000 Meredith Corp. ......................................... 925,000
12,000 New York Times Co., Class A............................. 529,500
38,500 +Paging Network, Inc. .................................. 310,406
45,000 +Tele-Communications Liberty Media Group, Class A....... 894,375
40,000 Teleport Communications Group, Inc., Class A............ 915,000
20,000 Time Warner, Inc. ...................................... 865,000
20,000 Times Mirror Co., Class A............................... 1,092,500
25,000 Tribune Co. ............................................ 1,012,500
11,200 Univision Communications, Inc. ......................... 365,400
23,884 +Viacom, Inc., Class B.................................. 791,157
18,550 Walt Disney Co. ........................................ 1,354,150
37,800 Wiley (John) & Sons, Inc., Class A...................... 1,143,450
-----------
13,716,501
-----------
TECHNOLOGY -- 30.20%
15,000 +America On-Line, Inc. ................................. 635,625
41,667 +Analog Devices, Inc. .................................. 937,497
20,000 +Cisco Systems, Inc. ................................... 962,500
20,000 +Computer Learning Centers, Inc. ....................... 655,000
45,900 ECI Telecommunications Limited Designs.................. 843,413
25,000 GTE Corp. .............................................. 1,165,625
25,000 +Informix Corp. ........................................ 375,000
14,740 Lucent Technologies, Inc. .............................. 777,535
20,000 Nokia Corp., Class A ADR................................ 1,165,000
10,000 +Qualcomm, Inc. ........................................ 563,750
45,000 +SDL, Inc. ............................................. 753,750
22,000 +3Com Corp. ............................................ 717,750
28,500 +Unitrode Corp. ........................................ 926,250
-----------
10,478,695
-----------
UTILITIES -- 19.95%
24,000 Ameritech Corp. ........................................ 1,476,000
20,000 BellSouth Corp. ........................................ 845,000
30,000 +LCI International, Inc. ............................... 502,500
41,600 MCI Communications Corp. ............................... 1,476,800
65,000 +NEXTEL Communications, Inc., Class A................... 861,250
16,000 SBC Communications, Inc. ............................... 842,000
42,000 +Worldcom, Inc. ........................................ 918,750
-----------
6,922,300
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
-------- -----------
<C> <S> <C>
CONSUMER STAPLES -- 8.98%
37,500 +CUC International, Inc. ............................... $ 843,750
12,000 Eastman Kodak Co. ...................................... 910,500
24,000 +Learning Tree International, Inc. ..................... 666,000
28,700 +Sylvan Learning Systems, Inc. ......................... 695,975
-----------
3,116,225
-----------
TOTAL COMMON STOCKS
(Cost $29,209,379)...................................... 34,233,721
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $29,209,379*)......................................... 98.67% $34,233,721
OTHER ASSETS AND
LIABILITIES (NET)........................................... 1.33 462,770
------ -----------
NET ASSETS.................................................. 100.00% $34,696,491
====== ===========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$29,209,379.
+ Non-income producing security.
ADR -- American Depositary Receipt.
See Notes to Financial Statements
FS-17
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
EARLY LIFE CYCLE FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- -----------
<C> <S> <C>
COMMON STOCKS -- 97.64%
CAPITAL GOODS -- 23.01%
80,700 +BE Aerospace, Inc....................................... $ 1,977,150
101,500 Juno Lighting, Inc....................................... 1,611,312
67,500 Lindsay Manufacturing Co................................. 2,143,125
136,000 +Morrison Knudsen Corp................................... 1,428,000
28,000 Teleflex, Inc............................................ 1,480,500
90,000 +Thermedics, Inc......................................... 1,406,250
40,000 Thiokol Corp............................................. 2,210,000
-----------
12,256,337
-----------
TECHNOLOGY -- 18.20%
15,000 +American Management
Systems, Inc. ........................................... 330,000
80,100 +Asyst Technologies, Inc................................. 1,561,950
10,000 +Cisco Systems, Inc...................................... 481,250
35,000 +Glenayre Technologies, Inc.............................. 341,250
70,000 +Hyperion Software Corp.................................. 1,120,000
43,000 +Informix Corp........................................... 645,000
295,200 +Interleaf, Inc. ........................................ 442,800
26,100 +MICROS Systems, Inc. ................................... 893,925
124,500 +Phoenix Technologies Ltd. .............................. 1,836,375
75,000 +Premenos Technology Corp. .............................. 459,375
94,500 +SDL, Inc. .............................................. 1,582,875
-----------
9,694,800
-----------
CONSUMER CYCLICAL -- 15.43%
50,000 +Custom Chrome, Inc...................................... 650,000
25,000 Factory Card Outlet Corp................................. 193,750
33,000 Fair Isaac & Co., Inc.................................... 1,192,125
60,000 +Perceptron, Inc......................................... 1,545,000
27,000 RDO Equipment Co., Class A............................... 472,500
76,000 +Recovery Engineering, Inc............................... 560,500
104,100 +Renters Choice, Inc. ................................... 1,470,413
60,000 +Scientific Games Holdings Corp.......................... 1,275,000
22,500 +WestPoint Stevens, Inc.................................. 857,812
-----------
8,217,100
-----------
FINANCIAL -- 11.74%
100,000 +Americredit Corp. ...................................... 1,737,500
55,000 Cullen/Frost Bankers, Inc. .............................. 1,952,500
30,000 First American Corp. (Tennessee)......................... 1,897,500
61,000 +Homestate Holdings, Inc. ............................... 343,125
12,500 Nationwide Financial Services, Inc., Class A............. 321,875
-----------
6,252,500
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
--------- -----------
<C> <S> <C>
CONSUMER STAPLES -- 11.44%
120,000 +Alliance Pharmaceutical Corp.......................... $ 1,440,000
100,000 +Ligand Pharmaceuticals,
Class B................................................ 1,112,500
227,400 +Pepsi-Cola Puerto Rico Bottling Co., Class B.......... 966,450
75,500 +Pharmacopeia, Inc..................................... 1,255,188
40,000 +Sunrise Medical, Inc. ................................ 520,000
20,000 +Vivus, Inc. .......................................... 797,500
-----------
6,091,638
-----------
TELECOMMUNICATION -- 6.07%
86,700 +Allen Telecom, Inc.................................... 1,517,250
75,000 Teleport Communications Group, Inc., Class A........... 1,715,625
-----------
3,232,875
-----------
RAW/INTERMEDIATE
MATERIALS -- 5.65%
120,200 NN Ball & Roller, Inc. ................................ 1,247,075
75,000 TriMas Corp............................................ 1,762,500
-----------
3,009,575
-----------
TRANSPORTATION -- 3.74%
63,000 Air Express International Corp......................... 1,992,375
-----------
ENERGY -- 2.36%
70,000 +Seagull Energy Corp. ................................. 1,260,000
-----------
TOTAL COMMON STOCKS
(Cost $52,050,549)..................................... 52,007,200
-----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
DEMAND NOTES -- 0.80%
$429,000 General Electric Co.
Promissory Notes
(Cost $429,000)........................................ 429,000
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $52,479,549*)........................................ 98.44% $52,436,200
OTHER ASSETS AND
LIABILITIES (NET).......................................... 1.56 829,889
------ -----------
NET ASSETS.................................................. 100.00% $53,266,089
====== ===========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$52,479,549.
+ Non-income producing security.
See Notes to Financial Statements
FS-18
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- ----------
<C> <S> <C>
COMMON STOCKS -- 95.36%
CAPITAL GOODS -- 36.03%
5,000 Case Corp. ........................................... $ 253,750
5,000 Deere & Co. .......................................... 217,500
4,000 Fluor Corp. .......................................... 210,000
1,500 General Electric Co. ................................. 148,875
7,400 Harsco Corp. ......................................... 269,175
30,000 +ITEQ, Inc. .......................................... 195,000
30,000 +Philip Environmental, Inc. .......................... 453,750
12,000 +Republic Industries, Inc. ........................... 417,000
10,500 +U.S. Filter Corp. ................................... 324,188
13,000 +U.S.A. Waste Services, Inc. ......................... 461,500
8,000 WMX Technologies, Inc. ............................... 245,000
----------
3,195,738
----------
TECHNOLOGY -- 19.88%
15,000 +Advanced Lighting Technologies, Inc. ................ 330,000
3,000 +Cisco Systems, Inc. ................................. 144,375
3,300 Honeywell Corp. ...................................... 223,987
1,000 +Incyte Pharmaceuticals, Inc.......................... 50,750
1,000 Intel Corp. .......................................... 139,000
12,500 Memtec Ltd. ADR....................................... 317,187
1,500 +Microsoft Corp. ..................................... 137,438
4,000 Perkin-Elmer Corp. ................................... 257,500
5,625 +Thermo Instrument Systems, Inc. ..................... 163,125
----------
1,763,362
----------
RAW/INTERMEDIATE
MATERIALS -- 14.45%
9,000 Minerals Technologies, Inc. .......................... 299,250
9,000 Monsanto Co. ......................................... 344,250
14,000 Pall Corp. ........................................... 323,750
5,000 Pioneer Hi-Bred International, Inc. .................. 314,375
----------
1,281,625
----------
CONSUMER STAPLES -- 10.79%
4,900 Air Products & Chemicals, Inc. ....................... 332,587
4,400 Gillette Co. ......................................... 319,550
3,700 Lilly (Eli) & Co. .................................... 304,325
----------
956,462
----------
ENERGY -- 7.53%
15,000 +Cuno Inc. ........................................... 230,625
10,000 +Newpark Resources, Inc. ............................. 437,500
----------
668,125
----------
UTILITIES -- 3.45%
9,000 +California Energy Co., Inc. ......................... 306,000
----------
CONSUMER CYCLICAL -- 3.23%
5,200 Tyco International Ltd. .............................. 286,000
----------
TOTAL COMMON STOCKS
(Cost $7,101,827)..................................... 8,457,312
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- ----------
<C> <S> <C>
DEMAND NOTES -- 10.71%
$489,000 Associates Corp. of North America Master Notes.......... $ 489,000
461,000 General Electric Co.
Promissory Notes........................................ 461,000
----------
TOTAL DEMAND NOTES
(Cost $950,000)......................................... 950,000
----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $8,051,827*).......................................... 106.07% $9,407,312
OTHER ASSETS AND LIABILITIES (NET).......................... (6.07) (538,468)
------ ----------
NET ASSETS.................................................. 100.00% $8,868,844
====== ==========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$8,051,827.
+ Non-income producing security.
ADR -- American Depositary Receipt.
See Notes to Financial Statements.
FS-19
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
GLOBAL COMPETITORS FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS -- 100.35%
CONSUMER STAPLES -- 26.44%
33,000 Astra AB, Class B......................................... $ 1,554,184
24,250 Avon Products, Inc. ...................................... 1,273,125
19,400 CPC International, Inc. .................................. 1,590,800
12,800 Estee Lauder Companies, Class A........................... 619,200
43,000 Gillette Co. ............................................. 3,122,875
38,800 Johnson & Johnson......................................... 2,051,550
3,300 L'Oreal................................................... 1,156,925
30,000 Pfizer, Inc. ............................................. 2,523,750
14,500 Philip Morris Companies, Inc. ............................ 1,654,812
31,000 Procter & Gamble Co. ..................................... 3,565,000
35,000 Schering-Plough Corp. .................................... 2,546,250
-----------
21,658,471
-----------
FINANCIAL -- 18.54%
24,250 American International Group, Inc. ....................... 2,846,344
51,400 Associates First Capital Corp. ........................... 2,210,200
33,000 Bank of Boston Corp. ..................................... 2,211,000
27,200 Citicorp.................................................. 2,944,400
14,550 General Re Corp. ......................................... 2,298,900
45,600 Morgan Stanley Group, Inc. ............................... 2,679,000
-----------
15,189,844
-----------
CAPITAL GOODS -- 13.45%
14,500 Boeing Co. ............................................... 1,430,063
27,200 General Electric Co. ..................................... 2,699,600
28,100 Goodyear Tire and Rubber Co. ............................. 1,468,225
29,100 Illinois Tool Works, Inc. ................................ 2,375,288
53,350 +Thermo Electron Corp. ................................... 1,647,181
65,000 +Thermo Fibergen, Inc. ................................... 536,250
50,000 +ThermoSpectra Corp. ..................................... 656,250
22,500 +Thermo Voltek Corp. ..................................... 208,125
-----------
11,020,982
-----------
CONSUMER CYCLICAL -- 12.70%
32,000 Electronic Data Systems Corp. ............................ 1,292,000
43,600 Hilton Hotels Corp. ...................................... 1,057,300
37,800 Luxottica Group S.p.A. ADR................................ 2,008,125
32,000 McDonald's Corp. ......................................... 1,512,000
20,000 +Samsonite Corp. ......................................... 865,000
89,200 +Thermo Fibertek, Inc. ................................... 808,375
65,000 +ThermoLase Corp. ........................................ 739,375
25,000 ThermoQuest Corp. ........................................ 350,000
24,250 Walt Disney Co. .......................................... 1,770,250
-----------
10,402,425
-----------
ENERGY -- 10.32%
10,000 Anadarko Petroleum Corp. ................................. 561,250
25,000 Chevron Corp. ............................................ 1,740,625
25,000 Mobil Corp. .............................................. 3,265,625
16,500 Royal Dutch Petroleum Co. ................................ 2,887,500
-----------
8,455,000
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
TECHNOLOGY -- 10.08%
36,000 +Cisco Systems, Inc. ..................................... $ 1,732,500
10,000 Computer Associates International, Inc. .................. 388,750
58,200 +Hyperion Software Corp. ................................. 931,200
30,000 +Informix Corp. .......................................... 450,000
20,600 Intel Corp. .............................................. 2,863,400
5,000 International Business Machines Corp. .................... 686,875
10,000 Motorola, Inc. ........................................... 603,750
8,000 Texas Instruments, Inc. .................................. 599,000
-----------
8,255,475
-----------
RAW/INTERMEDIATE
MATERIALS -- 4.62%
38,800 Crown Cork & Seal Co., Inc. .............................. 2,003,050
58,200 Sigma-Aldrich Corp. ...................................... 1,782,375
-----------
3,785,425
-----------
UTILITIES -- 3.05%
70,000 +LCI International, Inc. ................................. 1,172,500
30,000 Vodafone Group plc ADR.................................... 1,323,750
-----------
2,496,250
-----------
TRANSPORTATION -- 1.15%
14,550 +UAL Corp................................................. 942,112
-----------
TOTAL COMMON STOCKS
(Cost $67,484,200)........................................ 82,205,984
-----------
RIGHTS -- 0.31%
CAPITAL GOODS -- 0.31%
65,000 +Thermo Fibergen, Inc.
(Cost $195,000)........................................... 255,938
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $67,679,200*)........................................ 100.66% $82,461,922
OTHER ASSETS AND LIABILITIES (NET)......................... (0.66) (540,123)
------ -----------
NET ASSETS................................................. 100.00% $81,921,799
====== ===========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$67,688,110.
+ Non-income producing security.
ADR -- American Depositary Receipt.
See Notes to Financial Statements
FS-20
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
LONG-TERM SUPPLY OF ENERGY FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- -----------
<C> <S> <C>
COMMON STOCKS -- 91.51%
ENERGY -- 88.15%
15,000 Amoco Corp. ............................................. $ 1,299,375
12,000 Anadarko Petroleum Corp. ................................ 673,500
12,879 British Petroleum Co. plc ADR............................ 1,767,643
25,000 +Chesapeake Energy Corp. ................................ 521,875
12,000 Chevron Corp. ........................................... 835,500
24,000 +Crown Central Petroleum, Class B........................ 288,000
12,000 +Diamond Offshore Drilling, Inc. ........................ 822,000
17,000 Enron Corp. ............................................. 646,000
17,000 +ENSCO International, Inc. .............................. 837,250
18,000 ENI S.p.A. ADR........................................... 911,250
21,000 Exxon Corp. ............................................. 2,262,750
22,000 +Falcon Drilling Company, Inc. .......................... 814,000
19,000 +Flores & Rucks, Inc. ................................... 769,500
23,000 KN Energy, Inc. ......................................... 908,500
16,000 Louisiana Land & Exploration Co. ........................ 758,000
15,000 Mobil Corp. ............................................. 1,959,375
28,800 +Nabors Industries, Inc. ................................ 561,600
20,000 PanEnergy Corp. ......................................... 862,500
11,000 Royal Dutch Petroleum Co. ............................... 1,925,000
10,000 Schlumberger Ltd. ....................................... 1,072,500
13,000 +SEACOR Holdings, Inc. .................................. 697,125
17,000 Sonat, Inc. ............................................. 926,500
16,885 +Tejas Gas Corp. ........................................ 732,387
10,000 Texaco, Inc. ............................................ 1,095,000
24,000 Titan Exploration, Inc. ................................. 201,000
30,000 Tosco Corp. ............................................. 855,000
8,500 Total S.A. ADR........................................... 360,187
20,000 Transmontaigne Oil Co. .................................. 312,500
25,000 +United Meridian Corp. .................................. 753,125
20,000 Unocal Corp. ............................................ 762,500
35,000 USX-Marathon Group, Inc. ................................ 975,625
15,000 +Western Atlas, Inc. .................................... 909,375
20,000 Western Gas Resources, Inc. ............................. 360,000
-----------
29,436,442
-----------
UTILITIES -- 3.36%
20,000 +AES Corp. .............................................. 1,120,000
-----------
TOTAL COMMON STOCKS
(Cost $23,498,672)....................................... 30,556,442
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- ----------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS -- 10.14%
$3,391,000 U.S. Treasury Bill 5.00%#, 04/10/97 (Cost
$3,386,761)........................................... $3,386,761
----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $26,885,433*)........................................ 101.65% $33,943,203
OTHER ASSETS AND LIABILITIES (NET)......................... (1.65) (550,112)
------ -----------
NET ASSETS................................................. 100.00% $33,393,091
====== ===========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$26,885,433.
+ Non-income producing security.
# Discount Rate.
ADR -- American Depositary Receipt.
See Notes to Financial Statements.
FS-21
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
PRODUCTIVITY ENHANCERS FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- -----------
<C> <S> <C>
COMMON STOCKS -- 87.79%
CAPITAL GOODS -- 34.12%
7,500 AAR Corp. ............................................... $ 225,000
9,000 AlliedSignal, Inc. ...................................... 641,250
3,700 Boeing Co. .............................................. 364,913
7,300 Case Corp. .............................................. 370,475
8,300 Deere & Co. ............................................. 361,050
10,000 Dover Corp. ............................................. 525,000
10,000 Emerson Electric Co. .................................... 450,000
7,000 General Electric Co. .................................... 694,750
18,700 IDEX Corp. .............................................. 439,450
7,000 Illinois Tool Works, Inc. ............................... 571,375
12,000 Kaydon Corp. ............................................ 502,500
20,000 +Lear Corp. ............................................. 667,500
6,300 Thiokol Corp. ........................................... 348,075
-----------
6,161,338
-----------
TECHNOLOGY -- 29.84%
18,333 +Analog Devices, Inc. ................................... 412,492
7,000 +Compaq Computer Corp. .................................. 536,375
5,300 First Data Corp. ........................................ 179,538
15,000 Hewlett-Packard Co. ..................................... 798,750
6,000 Intel Corp. ............................................. 834,000
5,000 International Business Machines Corp. ................... 686,875
5,100 +Microsoft Corp. ........................................ 467,287
5,000 +Oracle System Corp. .................................... 192,500
9,000 Tektronix, Inc. ......................................... 454,500
11,000 +Thermo Electron Corp. .................................. 339,625
10,000 +Xilinx, Inc. ........................................... 486,250
-----------
5,388,192
-----------
CONSUMER STAPLES -- 6.62%
6,500 Eastman Kodak Co. ....................................... 493,188
13,300 Johnson & Johnson ....................................... 703,237
-----------
1,196,425
-----------
CONSUMER CYCLICAL -- 5.09%
16,000 +CUC International, Inc. ................................ 360,000
15,200 +O'Reilly Automotive, Inc. .............................. 558,600
-----------
918,600
-----------
RAW/INTERMEDIATE
MATERIALS -- 4.84%
5,100 Georgia Pacific Corp. ................................... 369,750
3,000 Pioneer Hi-Bred International, Inc. ..................... 188,625
18,000 Steel Dynamics, Inc. .................................... 315,000
-----------
873,375
-----------
FINANCIAL -- 4.36%
14,000 Associates First Capital Corp. .......................... 602,000
4,000 Norwest Corp. ........................................... 185,000
-----------
787,000
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
--------- -----------
<C> <S> <C>
TRANSPORTATION -- 2.92%
4,000 CSX Corp. ............................................. $ 186,000
2,000 Norfolk Southern Corp. ................................ 170,500
3,000 Union Pacific Corp. ................................... 170,250
-----------
526,750
-----------
TOTAL COMMON STOCKS
(Cost $15,194,895)..................................... 15,851,680
-----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
DEMAND NOTES -- 7.07%
$ 31,000 Associates Corp. of North America Master Notes......... 31,000
1,246,000 General Electric Co. Promissory Notes.................. 1,246,000
-----------
TOTAL DEMAND NOTES
(Cost $1,277,000)...................................... 1,277,000
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $16,471,895*)........................................ 94.86% $17,128,680
OTHER ASSETS AND LIABILITIES (NET)......................... 5.14 928,567
------ -----------
NET ASSETS 100.00% $18,057,247
====== ===========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$16,517,114.
+ Non-income producing security.
See Notes to Financial Statements.
FS-22
<PAGE>
EXCELSIOR FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Excelsior Funds, Inc. ("Excelsior Fund") was incorporated under the laws of
the State of Maryland on August 2, 1984 and is registered under the Investment
Company Act of 1940 (the "1940 Act"), as amended, as an open-end management
investment company.
Excelsior Fund currently offers shares in twenty managed investment
portfolios, each having its own investment objectives and policies. The
Excelsior Fund offers two classes of shares in each of the Equity, Aging of
America, Communication and Entertainment, Business and Industrial
Restructuring, Global Competitors and Early Life Cycle Funds--Shares and Trust
Shares. Trust Shares bear the additional expense of distribution fees. As of
March 31, 1997, only the Equity, Business and Industrial Restructuring and
Early Life Cycle Funds had Trust Shares outstanding.
The following is a summary of significant accounting policies for Equity
Fund, Income and Growth Fund, Aging of America Fund, Business and Industrial
Restructuring Fund, Communication and Entertainment Fund, Early Life Cycle
Fund, Environmentally-Related Products and Services Fund, Global Competitors
Fund, Long-Term Supply of Energy Fund and Productivity Enhancers Fund (the
"Portfolios"). Such policies are in conformity with generally accepted
accounting principles and are consistently followed by Excelsior Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual
results could differ from these estimates. The financial statements for the
remaining portfolios of Excelsior Fund and Excelsior Tax-Exempt Fund, Inc.
("Excelsior Tax-Exempt Fund") are presented separately.
(A) PORTFOLIO VALUATION:
Investments in securities that are traded on a recognized stock exchange
are valued at the last sale price on the exchange on which such securities
are primarily traded or at the last sale price on the national securities
market. Securities traded over-the-counter are valued each business day on
the basis of the closing over-the-counter bid prices. Securities for which
there were no transactions are valued at the average of the most recent bid
prices (as calculated by an independent pricing service (the "Service")
based upon its evaluation of the market for such securities) when, in the
judgment of the Service, quoted bid prices for securities are readily
available and are representative of the bid side of the market. Portfolio
securities that are primarily traded on foreign securities exchanges are
generally valued at the preceding closing values of such securities on
their respective exchanges, except that when an occurrence subsequent to
the time a value was so established is likely to have changed such value,
then a 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 traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market on which the security is
traded. Securities for which market quotations are not readily available
are valued at fair value, pursuant to guidelines adopted by Excelsior
Fund's Board of Directors. Short-term debt instruments with remaining
maturities of 60 days or less are valued at amortized cost, which
approximates market value.
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 policies established by the Board of
FS-23
<PAGE>
Directors. Investment valuations, other assets, and liabilities initially
expressed in foreign currencies are converted each business day into U.S.
dollars based upon current exchange rates. Purchases and sales of foreign
investments and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions. Gains and losses attributable to foreign currency exchange
rates are recorded for financial statement purposes as net realized gains
and losses on investments. That portion of both realized and unrealized
gains and losses on investments that results from fluctuations in foreign
currency exchange rates is not separately disclosed.
Forward foreign currency exchange contracts: The Portfolios'
participation in forward currency exchange contracts will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging involves the purchase or sale of foreign currency with
respect to specific receivables or payables of a Portfolio generally
arising in connection with the purchase or sale of its portfolio
securities. Risk may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts
and is generally limited to the amount of unrealized gain on the contracts,
if any, at the date of default. Risk may also arise from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
Contracts are marked-to-market daily and the change in market value is
recorded as unrealized appreciation or depreciation. Realized gains or
losses arising from such transactions are included in net realized gains or
losses from foreign currency transactions.
(B) SECURITY TRANSACTIONS AND INVESTMENT INCOME:
Security transactions are recorded on a trade date basis. Realized gains
and losses on investments sold are recorded on the basis of identified
cost. Interest income, adjusted for amortization of premiums and, when
appropriate, discounts on investments, is recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date.
(C) REPURCHASE AGREEMENTS:
Excelsior Fund may purchase portfolio securities from financial
institutions deemed to be creditworthy by the investment adviser subject to
the seller's agreement to repurchase and Excelsior Fund's agreement to
resell such securities at mutually agreed upon prices. Securities purchased
subject to such repurchase agreements are deposited with Excelsior Fund's
custodian or sub-custodian or are maintained in the Federal
Reserve/Treasury book-entry system and must have, at all times, an
aggregate market value greater than 102% of the repurchase price (including
accrued interest).
If the value of the underlying security, including accrued interest,
falls below the value of 102% of the repurchase price plus accrued
interest, Excelsior Fund will require the seller to deposit additional
collateral by the next business day. Default or bankruptcy of the seller
may, however, expose the applicable Portfolio of Excelsior 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 agreement.
(D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income are declared and paid quarterly. Net
realized capital gains are distributed to shareholders at least annually.
FS-24
<PAGE>
Dividends and distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
net operating losses, foreign currency transactions, partnership income,
deferral of losses on wash sales and post-October losses.
In order to avoid a Federal excise tax, each Portfolio is required to
distribute certain minimum amounts of net realized capital gain and net
investment income for the respective periods ending October 31 and December
31 in each calendar year.
(E) FEDERAL TAXES:
It is the policy of Excelsior Fund that each Portfolio continue to
qualify as a regulated investment company, if such qualification is in the
best interest of the shareholders, by complying with the requirements of
the Internal Revenue Code applicable to regulated investment companies, and
by distributing substantially all of its taxable earnings to its
shareholders.
At March 31, 1997, the following Portfolios had approximate capital loss
carryforwards for Federal tax purposes available to offset future net
capital gains through the indicated expiration dates:
<TABLE>
<CAPTION>
EXPIRATION DATE
MARCH 31,
------------------------
2002 2003 2004 TOTAL
------- -------- ------- --------
<S> <C> <C> <C> <C>
Aging of America Fund.................... $32,000 $279,000 $ -- $311,000
Environmentally-Related Products and
Services Fund........................... 154,000 52,000 261,000 467,000
</TABLE>
Net capital losses incurred after October 31 and within the taxable year
are deemed to arise on the first business day of a Portfolio's next taxable
year. Business and Industrial Restructuring Fund and Early Life Cycle Fund
incurred, and elected to defer, net capital losses of approximately $2,000
and $2,862,000, respectively, for the year ended March 31, 1997.
At March 31, 1997, aggregate gross unrealized appreciation for all
securities for which there was an excess of value over tax cost and
aggregate gross unrealized depreciation for all securities for which there
was an excess of tax cost over value is as follows:
<TABLE>
<CAPTION>
NET
TAX BASIS TAX BASIS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ -------------- --------------
<S> <C> <C> <C>
Equity Fund..................... $70,845,635 $(4,438,492) $66,407,143
Income and Growth Fund.......... 35,423,737 (3,384,388) 32,039,349
Aging of America Fund........... 10,033,680 (172,228) 9,861,452
Business and Industrial
Restructuring Fund............. 28,568,801 (2,567,622) 26,001,179
Communication and Entertainment
Fund........................... 6,122,799 (1,098,457) 5,024,342
Early Life Cycle Fund........... 8,711,513 (8,754,862) (43,349)
Environmentally-Related Products
and Services Fund.............. 1,584,650 (229,165) 1,355,485
Global Competitors Fund......... 17,424,151 (2,650,339) 14,773,812
Long-Term Supply of Energy
Fund........................... 7,224,438 (166,668) 7,057,770
Productivity Enhancers Fund..... 1,070,211 (458,645) 611,566
</TABLE>
FS-25
<PAGE>
(F) EXPENSE ALLOCATION:
Expenses directly attributable to a Portfolio or a class of shares in
such Portfolio are charged to that Portfolio or such share class. Other
expenses are allocated to the respective Portfolios based on average net
assets.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE, DISTRIBUTION EXPENSES AND
RELATED PARTY TRANSACTIONS
United States Trust Company of New York ("U.S. Trust") serves as the
investment adviser to Excelsior Fund. For the services provided pursuant to
the Investment Advisory Agreement, U.S. Trust is entitled to receive a fee,
computed daily and paid monthly, at the annual rates of .75% of the average
daily net assets of the Equity Fund and Income and Growth Fund, and .60% of
the average daily net assets of the Aging of America Fund, Business and
Industrial Restructuring Fund, Communication and Entertainment Fund, Early
Life Cycle Fund, Environmentally-Related Products and Services Fund, Global
Competitors Fund, Long-Term Supply of Energy Fund and Productivity Enhancers
Fund.
U.S. Trust, Chase Global Funds Services Company ("CGFSC"), a subsidiary of
The Chase Manhattan Bank and Federated Administrative Services (collectively,
the "Administrators") provide administrative services to Excelsior Fund. For
the services provided to the Portfolios, the Administrators are entitled
jointly to annual fees, computed daily and paid monthly, based on the combined
aggregate average daily net assets of Excelsior Fund (excluding the
international equity portfolios of Excelsior Fund and Excelsior Institutional
Trust), Excelsior Tax-Exempt Fund and Excelsior Institutional Trust, all of
which are affiliated investment companies, as follows: .200% of the first $200
million, .175% of the next $200 million, and .150% over $400 million.
Administration fees payable by each Portfolio of the three investment
companies are determined in proportion to the relative average daily net
assets of the respective Portfolios for the period paid. For the year ended
March 31, 1997, Administration fees charged by U.S. Trust were as follows:
<TABLE>
<S> <C>
Equity Fund............................................................ $49,810
Income and Growth Fund................................................. 22,040
Aging of America Fund.................................................. 7,896
Business and Industrial Restructuring Fund............................. 17,583
Communication and Entertainment Fund................................... 7,918
Early Life Cycle Fund.................................................. 12,655
Environmentally-Related Products and Services Fund..................... 1,250
Global Competitors Fund................................................ 14,478
Long-Term Supply of Energy Fund........................................ 5,177
Productivity Enhancers Funds........................................... 4,085
</TABLE>
From time to time, as they may deem appropriate in their sole discretion, or
pursuant to applicable state expense limitations, U.S. Trust and the
Administrators may undertake to waive a portion or all of the fees payable to
them and also may reimburse the Portfolios for a portion of other expenses. In
addition, until further notice to Excelsior Fund, U.S. Trust intends to
voluntarily waive fees to the extent necessary for each of Aging of America
Fund, Business and Industrial Restructuring Fund, Communication and
Entertainment Fund, Early Life Cycle Fund, Environmentally-Related Products
and Services Fund, Global Competitors Fund, Long-Term Supply of Energy Fund
and Productivity
FS-26
<PAGE>
Enhancers Fund to maintain an annual expense ratio of not more than .99%. For
the year ended March 31, 1997, pursuant to this voluntary expense limitation
U.S. Trust waived fees as follows:
<TABLE>
<S> <C>
Environmentally-Related Products and Services Fund..................... $19,967
Productivity Enhancers Fund............................................ 10,916
</TABLE>
Excelsior Fund has also entered into administrative servicing agreements
with various service organizations (which may include affiliates of U.S.
Trust) requiring them to provide administrative support services to their
customers owning shares of the Portfolios. As a consideration for the
administrative services provided by each service organization to its
customers, each Portfolio will pay the service organization 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 organizations' customers. Such
services may include assisting in processing purchase, exchange and redemption
requests; transmitting and receiving funds in connection with customer orders
to purchase, exchange or redeem shares; and providing periodic statements.
Until further notice to Excelsior Fund, U.S. Trust and the Administrators have
voluntarily agreed to waive investment advisory and administration fees
payable by each Portfolio in an amount equal to administrative service fees
payable by that Portfolio. For the year ended March 31, 1997, U.S. Trust and
the Administrators waived investment advisory and administration fees in
amounts equal to the administrative service fees for the Portfolios as
follows:
<TABLE>
<CAPTION>
U.S.
TRUST ADMINISTRATORS
-------- --------------
<S> <C> <C>
Equity Fund............................................ $127,393 $5,344
Income and Growth Fund................................. 105,756 1,132
Aging of America Fund.................................. 21,945 43
Business and Industrial Restructuring Fund............. 41,509 108
Communication and Entertainment Fund................... 24,418 43
Early Life Cycle Fund.................................. 61,885 87
Environmentally-Related Products and Services Fund..... 3,482 2
Global Competitors Fund................................ 36,364 14
Long-Term Supply of Energy Fund........................ 12,264 6
Productivity Enhancers Fund............................ 13,261 7
</TABLE>
Edgewood Services, Inc. (the "Distributor"), a wholly-owned subsidiary of
Federated Investors, serves as the sponsor and distributor of Excelsior Fund.
Effective February 14, 1997, shares of each Portfolio are sold without a sales
charge. Prior to February 14, 1997, certain sales of Excelsior Fund's shares
were subject to a maximum sales charge of 4.50% of the offering price.
Under the Excelsior Funds' Distribution Plan, adopted pursuant to Rule 12b-1
under the 1940 Act, the Trust Shares of each Fund bear the expense of
distributions fees at the maximum annual rate of .75% of the average daily net
asset value of the Fund's outstanding Trust Shares. Trust Shares of each
Excelsior Fund currently bear the expense of such distribution fees at the
annual rate of .35% of the average daily net asset value of the Fund's
outstanding Trust Shares.
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 for attending meetings. The Chairman receives an additional
annual fee of $5,000.
FS-27
<PAGE>
For the year ended March 31, 1997, brokerage commissions on investment
transactions were paid to U.S. Trust as follows:
<TABLE>
<S> <C>
Aging of America Fund............................................ $ 540
Business and Industrial Restructuring Fund....................... 13,069
Communications and Entertainment Fund............................ 450
Early Life Cycle Fund............................................ 7,047
Environmentally-Related Product and Services Fund................ 3,111
Global Competitors Fund.......................................... 1,490
Long-Term Supply of Energy Fund.................................. 3,330
Productivity Enhancers Fund...................................... 1,170
</TABLE>
3. PURCHASES AND SALES OF SECURITIES:
For the year ended March 31, 1997, purchases and sales of securities,
excluding short-term investments, for the Portfolios aggregated:
<TABLE>
<CAPTION>
CONTRIBUTIONS
PURCHASES IN-KIND SALES
------------ ------------- ------------
<S> <C> <C> <C>
Equity Fund........................... $114,865,681 $79,831,593 $102,632,761
Income and Growth Fund................ 30,597,310 -- 40,891,104
Aging of America Fund................. 38,590,534 -- 41,095,113
Business and Industrial Restructuring
Fund................................. 99,274,113 -- 60,697,300
Communication and Entertainment Fund.. 29,420,723 -- 40,129,527
Early Life Cycle Fund................. 30,553,370 10,267,561 50,776,855
Environmentally-Related Products and
Services Fund........................ 8,062,940 -- 4,625,703
Global Competitors Fund............... 30,103,896 -- 19,827,386
Long-Term Supply of Energy Fund....... 25,264,705 -- 23,753,267
Productivity Enhancers Fund........... 73,837,041 -- 87,512,892
</TABLE>
4. COMMON STOCK:
Excelsior Fund currently has authorized capital classified into forty classes
of shares, each representing interests in one of twenty separate portfolios.
Authorized capital for each Portfolio is as follows: With respect to each of
the Equity and Income and Growth Funds, 375 million shares of Common Stock and
500 million shares of Common Stock--Special Series 1 (Trust Shares); and with
respect to each of the Aging of America Fund, Business and Industrial
Restructuring Fund, Communication and Entertainment Fund, Early Life Cycle
Fund, Environmentally-Related Products and Services Fund, Global Competitors
Fund, Long-Term Supply of Energy Fund and Productivity Enhancers Fund, 500
million shares of Common Stock and 500 million shares of Common Stock--Special
Series 1 (Trust Shares).
Each share (irrespective of series designation) has a par value of $.001, and
represents an equal proportionate interest in the particular Portfolio with
other shares of the same Portfolio, and is entitled to such dividends and
distributions of taxable earnings on the assets belonging to such Portfolio as
are declared at the discretion of Excelsior Fund's Board of Directors.
FS-28
<PAGE>
<TABLE>
<CAPTION>
EQUITY FUND
---------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Shares................. 2,986,879 $ 76,672,109 2,335,582 $ 53,181,056
Trust Shares........... 3,154 84,440 -- --
Contributions in-kind.... 3,211,246 79,831,593 -- --
Issued as reinvestment of
dividends
Shares................. 195,908 5,042,100 305,329 6,724,708
Trust Shares........... 5 129 -- --
Redeemed
Shares................. (2,218,612) (57,053,673) (1,343,291) (30,587,413)
Trust Shares........... (15) (534) -- --
---------- ------------ ---------- ------------
Net Increase............. 4,178,565 $104,576,164 1,297,620 $ 29,318,351
========== ============ ========== ============
<CAPTION>
INCOME AND GROWTH FUND
---------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,397,170 $ 21,067,243 2,141,034 $ 28,619,545
Issued as reinvestment of
dividends............... 175,558 2,635,563 67,047 859,603
Redeemed................. (1,688,433) (25,386,111) (1,842,621) (24,372,374)
---------- ------------ ---------- ------------
Net Increase (Decrease).. (115,705) $ (1,683,305) 365,460 $ 5,106,774
========== ============ ========== ============
<CAPTION>
AGING OF AMERICA FUND
---------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,152,870 $ 11,418,942 2,314,243 $ 20,136,308
Issued as reinvestment of
dividend................ 9,236 91,921 717 6,037
Redeemed................. (1,282,425) (12,838,183) (577,612) (5,224,382)
---------- ------------ ---------- ------------
Net Increase (Decrease).. (120,319) $ (1,327,320) 1,737,348 $ 14,917,963
========== ============ ========== ============
<CAPTION>
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND
---------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Shares................. 3,573,877 $ 54,756,284 2,885,350 $ 36,357,535
Trust Shares........... 3,212 47,503 -- --
Issued as reinvestment of
dividend:
Shares................. 23,121 351,922 8,050 103,087
Trust Shares........... 54 835 -- --
Redeemed:
Shares................. (1,090,887) (16,823,462) (476,976) (5,855,224)
Trust Shares........... (2) (27) -- --
---------- ------------ ---------- ------------
Net Increase............. 2,509,375 $ 38,333,055 2,416,424 $ 30,605,398
========== ============ ========== ============
</TABLE>
FS-29
<PAGE>
<TABLE>
<CAPTION>
COMMUNICATION AND ENTERTAINMENT FUND
---------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
-------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold..................... 869,723 $ 9,495,234 2,119,351 $22,797,588
Issued as reinvestment of
dividends............... 2,618 30,755 29,026 316,412
Redeemed................. (2,057,577) (22,515,044) (701,525) (7,460,709)
----------- ------------ ---------- -----------
Net Increase (Decrease).. (1,185,236) $(12,989,055) 1,446,852 $15,653,291
=========== ============ ========== ===========
<CAPTION>
EARLY LIFE CYCLE FUND
---------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
-------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold:
Shares................. 1,632,860 $ 17,229,638 3,520,395 $36,370,860
Trust Shares........... 934 9,231 -- --
Contributions in-kind.... 873,834 10,267,561 -- --
Issued as reinvestment of
dividends:
Shares................. 36,989 400,554 41,814 408,622
Trust Shares........... 10 97 -- --
Redeemed:
Shares................. (3,753,354) (37,413,560) (1,214,105) (12,475,517)
Trust Shares........... (30) (294) -- --
----------- ------------ ---------- -----------
Net Increase (Decrease).. (1,208,757) $ (9,506,773) 2,348,104 $24,303,965
=========== ============ ========== ===========
<CAPTION>
ENVIRONMENTALLY-RELATED PRODUCTS
AND SERVICES FUND
---------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
-------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold..................... 592,783 $ 5,313,037 186,141 $ 1,314,576
Issued as reinvestment of
dividends............... 32 300 -- --
Redeemed................. (154,610) (1,416,015) (377,073) (2,674,660)
----------- ------------ ---------- -----------
Net Increase (Decrease).. 438,205 $ 3,897,322 (190,932) $(1,360,084)
=========== ============ ========== ===========
<CAPTION>
GLOBAL COMPETITORS FUND
---------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
-------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold..................... 2,453,720 $ 27,414,389 4,254,987 $42,316,428
Issued as reinvestment of
dividends............... 5,021 57,433 1,393 13,702
Redeemed................. (1,848,157) (21,321,315) (640,495) (6,356,442)
----------- ------------ ---------- -----------
Net Increase............. 610,584 $ 6,150,507 3,615,885 $35,973,688
=========== ============ ========== ===========
</TABLE>
FS-30
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM SUPPLY OF ENERGY FUND
-------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold....................... 1,183,409 $ 13,166,360 1,212,809 $10,257,682
Issued as reinvestment of
dividends................. 14,801 166,314 820 6,920
Redeemed................... (635,829) (6,996,595) (770,397) (6,756,240)
---------- ------------ ---------- -----------
Net Increase............... 562,381 $ 6,336,079 443,232 $ 3,508,362
========== ============ ========== ===========
<CAPTION>
PRODUCTIVITY ENHANCERS FUND
-------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold....................... 749,379 $ 6,393,358 2,029,415 $18,271,102
Issued as reinvestment of
dividends................. 12,604 110,279 16,492 143,555
Redeemed................... (1,843,037) (15,851,064) (1,005,818) (9,148,291)
---------- ------------ ---------- -----------
Net Increase (Decrease).... (1,081,054) $ (9,347,427) 1,040,089 $ 9,266,366
========== ============ ========== ===========
</TABLE>
5. ORGANIZATION COSTS
Excelsior Fund has borne all costs in connection with the initial
organization of new portfolios, including the fees for registering and
qualifying its shares for distribution under Federal and state securities
regulations. All such costs are being amortized on the straight-line basis over
periods of five years from the dates on which each Portfolio commenced
operations.
FS-31
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors Excelsior Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Equity, Income and Growth,
Aging of America, Business and Industrial Restructuring, Communication and
Entertainment, Early Life Cycle, Environmentally-Related Products and Services,
Global Competitors, Long-Term Supply of Energy and Productivity Enhancers
Portfolios (ten of the portfolios constituting the Excelsior Funds, Inc.) as of
March 31, 1997, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1997 by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned Portfolios of Excelsior Funds, Inc. at March 31, 1997,
the results of their operations for the year then ended, the changes in their
net assets for each of the two years in the period then ended and financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 9, 1997
FS-32
<PAGE>
FEDERAL TAX INFORMATION: (UNAUDITED)
For the year ended March 31, 1997, the percentage of dividends paid that
qualify for the 70.0% dividends received deduction for corporate shareholders
and the designation of long-term capital gain for the Portfolios are
approximated as follows:
<TABLE>
<CAPTION>
DIVIDENDS RECEIVED LONG-TERM
FUND DEDUCTION CAPITAL GAIN
---- ------------------ ------------
<S> <C> <C>
Equity Fund................................ 78.02% $10,777,978
Income and Growth Fund..................... 35.02% 4,590,976
Aging of America Fund...................... 100.00% 1,835,114
Business and Industrial Restructuring
Fund...................................... 62.67% 2,174,207
Communication and Entertainment Fund....... -- 243,366
Early Life Cycle Fund...................... 13.07% 2,420,034
Environmentally-Related Products and Serv-
ices Fund................................. 100.00% --
Global Competitors Fund.................... 100.00% 672,480
Long-Term Supply of Energy Fund............ 20.11% 1,373,733
Productivity Enhancers Fund................ 3.59% --
</TABLE>
FS-33
<PAGE>
EXCELSIOR FUNDS, INC.
Equity Fund
Income and Growth 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
Early Life Cycle Fund
STATEMENT OF ADDITIONAL INFORMATION
August 1, 1996
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current prospectuses for the Equity, Income and Growth,
Long-Term Supply of Energy, Productivity Enhancers, Environmentally-Related
Products and Services, Aging of America, Communication and Entertainment,
Business and Industrial Restructuring, Global Competitors and Early Life Cycle
Funds (individually, a "Fund" and collectively, the "Funds") of Excelsior Funds,
Inc. ("Excelsior Fund") dated August 1, 1996 (the "Prospectuses"). Much of the
information contained in this Statement of Additional Information expands upon
the subjects discussed in the Prospectuses. This Statement of Additional
Information relates to Trust Shares of the Equity, Aging of America,
Communication and Entertainment, Business and Industrial Restructuring, Global
Competitors and Early Life Cycle Funds and to the other series of shares in each
of the Funds that does not bear the expense of 12b-1 fees (the "Services Shares"
and, collectively with the Trust Shares, the "Shares"). No investment in Shares
of the Funds described herein (collectively, the "Shares") should be made
without reading the Prospectuses. 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 OBJECTIVES AND POLICIES............................... SAI 1
Other Investment Considerations -
Equity and Theme Funds....................................... SAI 1
Other Investment Considerations -
Income and Growth Fund....................................... SAI 3
Additional Information on Portfolio Instruments................ SAI 4
Additional Investment Limitations.............................. SAI 13
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................... SAI 15
INVESTOR PROGRAMS................................................ SAI 23
Systematic Withdrawal Plan..................................... SAI 23
Exchange Privilege............................................. SAI 23
Other Investor Programs........................................ SAI 24
DESCRIPTION OF CAPITAL STOCK..................................... SAI 24
MANAGEMENT OF THE FUNDS.......................................... SAI 26
Directors and Officers......................................... SAI 26
Investment Advisory and Administration Agreements.............. SAI 30
Service Organizations.......................................... SAI 33
Expenses....................................................... SAI 35
Custodian and Transfer Agent................................... SAI 36
PORTFOLIO TRANSACTIONS........................................... SAI 37
INDEPENDENT AUDITORS............................................. SAI 40
COUNSEL.......................................................... SAI 40
ADDITIONAL INFORMATION CONCERNING TAXES.......................... SAI 40
PERFORMANCE INFORMATION.......................................... SAI 42
MISCELLANEOUS.................................................... SAI 45
FINANCIAL STATEMENTS............................................. SAI 46
APPENDIX......................................................... SAI A-1
-i-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
----------------------------------
The investment objective of the Equity Fund and of the Long-Term
Supply of Energy, Productivity Enhancers, Environmentally-Related Products and
Services, Aging of America, Communication and Entertainment, Business and
Industrial Restructuring, Global Competitors and Early Life Cycle Funds
(collectively, the "Theme Funds") is to seek long-term capital appreciation.
The investment objective of the Income and Growth Fund is to seek to provide
moderate current income and to attempt to achieve capital appreciation. Under
normal market and economic conditions, each Fund invests a significant portion
of its assets in common stock, preferred stock and debt securities convertible
into common stock. The following policies supplement the Funds' investment
objectives and policies as set forth in the Prospectuses.
Other Investment Considerations - Equity Fund and Theme Funds
- -------------------------------------------------------------
The Equity Fund and the Theme Funds invest primarily in common stocks,
but each Fund may purchase both preferred stocks and securities convertible into
common stock at the discretion of United States Trust Company of New York (the
"Investment Adviser" or "U.S. Trust"). While current income is secondary to the
objective of long-term capital appreciation, Excelsior Fund expects that the
broad and diversified strategies utilized by the Investment Adviser 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.
(a) 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.
<PAGE>
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.
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 each Funds' 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.
(b) 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.
(c) 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 Funds' 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
SAI-2-
<PAGE>
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.
Other Investment Considerations - Income and Growth Fund
- --------------------------------------------------------
The Income and Growth Fund is expected to have a greater portion of
its assets invested in debt obligations under normal market conditions than the
Equity Fund and Theme Funds. Further, although the Investment Adviser will
generally use the three strategies described above for the Equity and Theme
Funds, the Income and Growth Fund will generally invest in those companies which
are expected to generate the greater income. As a result, the Income and Growth
Fund is likely to have a relatively small portion of its assets invested in
Early Life Cycle companies.
As stated in the Prospectuses, the Income and Growth Fund may invest
up to 10% of its assets in instruments such as liquidating trust receipts;
certificates of beneficial ownership; limited partnership interests; creditor
claims; loan participations; and warrants, options and other rights to purchase
securities. Liquidating trust receipts, as well as certificates of beneficial
interest, acquired by the Income and Growth Fund represent interests in trusts
holding specific assets. In the case of a liquidating trust, such assets may
include airplanes, ships and trucks that have been leased to third parties.
Limited partnership interests acquired by the Fund may represent equitable
interests in enterprises engaged in activities related to leasing of electronic,
computer and other types of equipment. Normally, the profits and losses
attributable to the foregoing types of instruments pass directly to the holders
of the instruments and are not taxed at the trust or partnership level.
Creditor claims (which may be in the form of notes or debentures)
acquired by the Income and Growth Fund comprise debt obligations of companies
being reorganized under bankruptcy or insolvency laws. Creditor claims normally
sell at a substantial discount from their face value, may be convertible into
stock of the reorganized company, and have a high degree of potential risk and
reward. Loan participations acquired by the Income and Growth Fund represent
interests in either separate, privately negotiated loans that have been made by
lending institutions to third parties or pools of privately negotiated loans
maintained in the loan portfolios of lending institutions. Lending institutions
may sell loan participations to the Income and Growth Fund and other
institutional investors in order to achieve additional revenues and to reduce
their exposure on the loans involved, as well as for other reasons. Loan
participations are
SAI-3-
<PAGE>
considered to be illiquid securities subject to the 10% limitation on
investments in illiquid securities described in the Prospectuses.
The instruments described above may provide a higher than normal rate
of return but may also entail greater risks. These risks include the absence of
any secondary or other organized market for certain instruments that the Income
and Growth Fund may acquire; the likelihood that the transfer of certain
instruments will otherwise be restricted because they have not been registered
under Federal or state securities laws; the probability that certain instruments
will represent interests in a single asset or project and will be entirely
dependent upon market and economic factors affecting such asset or project and
upon the skill of project managers to produce value; the possibility of volatile
changes in the value of an instrument because of changes in the value of the
asset underlying the instrument; the possibility that certain instruments will
be subject to heavy cash flow dependency, defaults by borrowers, self-
liquidation and the risk that the underlying portfolio company will fail to
qualify for favorable tax treatment under the Internal Revenue Code of 1986, as
amended (the "Code"); the possibility that the Fund's loss with respect to an
instrument may exceed the amount of its investment; and, with respect to
creditor claims and other debt instruments, the quality of the credit extended.
In addition, as discussed in the Prospectuses, income from some of the
instruments described above may be non-qualifying income for purposes of the
Code and must be monitored by the Investment Adviser so that the amount of any
such non-qualifying income does not exceed the amount permitted by the Code.
The Investment Adviser will purchase such instruments only when it determines
that the expected return justifies the attendant risks.
Additional Information on Portfolio Instruments
- -----------------------------------------------
Options
-------
As stated in the Prospectuses, the Income and Growth Fund and the
Theme Funds 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 each such 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
SAI-4-
<PAGE>
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 Income and Growth and Theme
Funds 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 Prospectuses, each Fund may engage in writing
covered call options and enter into closing purchase transactions with respect
to such options. When any of the Funds 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 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 Funds 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 Funds to make a
closing purchase transaction in order to close out its position.
When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by that Fund is included in the liability
section of that Fund's statement of assets and liabilities as a deferred credit.
The
SAI-5-
<PAGE>
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 involved 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 involved 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
involved will realize a gain or loss. Premiums from expired call options
written by the Funds 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
Prospectuses generally equals the price paid by a 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 Funds' custodian (or sub-custodian) or
in the Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered loans by a Fund under the Investment Company Act of 1940 (the "1940
Act").
Futures Contracts and Related Options
-------------------------------------
The Theme Funds may invest in futures contracts and options thereon.
The Theme Funds may enter into interest rate 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 Theme Funds 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 a Fund's
SAI-6-
<PAGE>
securities 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, a 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 securities 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 Theme Funds is also subject to the
Investment Adviser's ability to correctly predict movements in the direction of
the market. For example, if a Fund has hedged against the possibility of a
decline in the market adversely affecting securities held by it and securities
prices increase instead, the Fund will lose part or all of the benefit to the
increased value of its securities which it has hedged because it will have
approximately equal offsetting losses in its futures positions. In addition, in
some situations, if a Fund has insufficient cash, it may have to sell securities
to meet daily variation margin requirements. Such sales of securities may be,
but will not necessarily be, at increased prices which reflect the rising
market. The Fund may have to sell securities at a time when it may be
disadvantageous to do so.
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 Theme Funds involves the
risk of loss by a Fund of margin deposits in the event of bankruptcy of a broker
with whom such Fund has an open position in a futures contract or related
option.
SAI-7-
<PAGE>
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 Theme Funds 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) 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
SAI-8-
<PAGE>
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 a Fund agrees to purchase securities on a "when-issued" or
forward commitment basis, the custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the custodian will set aside portfolio securities to satisfy a
purchase commitment and, in such case, the Fund may be required subsequently to
place additional 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 a 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 a Fund will set aside cash or liquid assets to
satisfy its purchase commitments in the manner described, 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.
A 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, a 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 a 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 a Fund starting
SAI-9-
<PAGE>
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 Currency Transactions
-----------------------------
Each Fund will conduct its currency exchange transactions either on a
spot (i.e., cash) basis at the rate prevailing in the currency exchange markets,
or by entering into forward currency contracts. A forward foreign currency
contract involves an obligation to purchase or sell a specific currency for a
set price at a future date. In this respect, forward currency contracts are
similar to foreign currency futures contracts; however, unlike futures contracts
which are traded on recognized commodities exchange, forward currency contracts
are traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. Also, forward currency
contracts usually involve delivery of the currency involved instead of cash
payment as in the case of futures contracts.
A Fund's participation in forward currency contracts will be limited
to hedging involving either specific transactions or portfolio positions.
Transaction hedging involves the purchase or sale of foreign currency with
respect to specific receivables or payables of the Fund generally arising in
connection with the purchase or sale of its portfolio securities. The purpose
of transaction hedging is to "lock in" the U.S. dollar equivalent price of such
specific securities. Position hedging is the sale of foreign currency with
respect to portfolio security positions denominated or quoted in that currency.
The Fund will not speculate in foreign currency exchange transactions.
Transaction and position hedging will not be limited to an overall percentage of
a Fund's assets, but will be employed as necessary to correspond to particular
transactions or positions. A Fund may not hedge its currency positions to an
extent greater than the aggregate market value (at the time of entering into the
forward contract) of the securities held in its portfolio denominated, quoted
in, or currently convertible into that particular currency. When the Funds
engage in forward currency transactions, certain asset segregation requirements
must be satisfied to ensure that the use of foreign currency transactions is
unleveraged. When a Fund takes a long position in a forward currency contract,
it must maintain a segregated account containing cash and/or certain liquid
assets equal to the purchase price of the contract, less any margin or deposit.
When a Fund takes a short position in a forward currency contract, the Fund must
maintain a segregated account containing cash and/or certain liquid assets in an
amount equal to the market value of the currency underlying such contract (less
any margin or deposit), which amount must be at least equal to the market price
SAI-10-
<PAGE>
at which the short position was established. Asset segregation requirements are
not applicable when a Fund "covers" a forward currency position generally by
entering into an offsetting position.
The transaction costs to the Funds of engaging in forward currency
transactions described in the Prospectus vary with factors such as the currency
involved, the length of the contract period and prevailing currency market
conditions. Because currency transactions are usually conducted on a principal
basis, no fees or commissions are involved. The use of forward currency
contracts does not eliminate fluctuations in the underlying prices of the
securities being hedged, but it does establish a rate of exchange that can be
achieved in the future. Thus, although forward currency contracts used for
transaction or position hedging purposes may limit the risk of loss due to an
increase in the value of the hedged currency, 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
fluctuations, and a Fund may incur losses in connection with its currency
transactions that it would not otherwise incur. If a price movement in a
particular currency is generally anticipated, a Fund may not be able to contract
to sell or purchase that currency at an advantageous price.
At or before the maturity of a forward sale contract, a Fund may sell
a portfolio security and make delivery of the currency, or retain the security
and offset its contractual obligation to deliver the currency by purchasing a
second contract pursuant to which the Fund will obtain, on the same maturity
date, the same amount of the currency which it is obligated to deliver. If the
Fund retains the portfolio security 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 a Fund's
entering into a forward contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Fund will suffer a loss to the extent the price of
the currency it has agreed to sell is less than the price of the currency it has
agreed to purchase in the offsetting contract. The foregoing principles
generally apply also to forward purchase contracts.
Real Estate Investment Trusts
-----------------------------
Each Fund may invest in equity real estate investment trusts
("REITs"). REITs pool investors' funds for investment
SAI-11-
<PAGE>
primarily in commercial real estate properties. Investments in REITs may
subject a Fund to certain risks. REITs may be affected by changes in the value
of the underlying property owned 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, a 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 a Fund bears
directly in connection with its own operations.
Securities Lending
------------------
When a 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 a Fund if a material event affecting the investment is to occur.
Restricted Securities
---------------------
The Productivity Enhancers Fund may invest in restricted securities
(privately placed securities) and other securities without readily available
market quotations. The Fund's investments in securities without readily
available market quotations will not exceed 5% of its total assets at the time
of purchase. Restricted securities may be sold only in private transactions or
in a public offering with respect to which a registration statement is in effect
under the Securities Act of 1933 (the "1933 Act"). Where registration may be
required, the Fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the decision
to sell and the time the Fund may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, the Fund might obtain a less favorable price than
prevailed when it decided to sell. Certain transactions in restricted
securities may qualify for the registration exemption provided in Rule 144A
under the 1933 Act.
SAI-12-
<PAGE>
Additional Investment Limitations
- ---------------------------------
In addition to the investment limitations disclosed in the
Prospectuses, the Funds are subject to the investment limitations enumerated
below. Fundamental investment limitations may be changed with respect to a Fund
only by a vote of a majority of the holders of such Fund's outstanding Shares
(as defined under "Miscellaneous" in the Prospectuses). However, investment
limitations which are "operating policies" with respect to a 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
each Fund. Each 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 each Fund may purchase
securities of issuers which deal in real estate and may purchase securities
which are secured by interests in real estate; and
3. Issue any senior securities, except insofar as any borrowing in
accordance with a Fund's investment limitation contained in the Prospectuses
might be considered to be the issuance of a senior security.
The following investment limitations are fundamental with respect to
the Equity and Income and Growth Funds, but are operating policies with respect
to the Theme Funds. No Fund may:
4. Purchase securities on margin, make short sales of securities, or
maintain a short position;
5. Invest in or sell put options, call options, straddles, spreads,
or any combination thereof; provided, however, that each 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
involved does not exceed 25% of the value of its total assets; and provided that
the Income and Growth Fund and Theme Funds may purchase options and other rights
in accordance with their investment objectives and policies;
SAI-13-
<PAGE>
6. Invest in companies for the purpose of exercising management or
control;
7. 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
8. 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.
The following investment limitation is fundamental with respect to the
Equity and Income and Growth Funds. The Equity and Income and Growth Funds may
not:
9. Purchase or sell commodities futures contracts or invest in oil,
gas, or other mineral exploration or development programs; provided, however,
that this shall not prohibit either Fund from purchasing publicly traded
securities of companies engaging in whole or in part in such activities or the
Income and Growth Fund from investing in liquidating trust receipts,
certificates of beneficial ownership or other instruments in accordance with its
investment objectives and policies.
The following investment limitation is fundamental with respect to the
Theme Funds. Each Theme Fund may not:
10. Purchase or sell commodities or commodities futures contracts or
invest in oil, gas, or other mineral exploration or development programs;
provided, however, that i) this shall not prohibit any Theme Fund from
purchasing publicly traded securities of companies engaging in whole or in part
in such activities or from investing in liquidating trust receipts, certificates
of beneficial ownership or other instruments in accordance with its investment
objectives and policies, and ii) each Theme Fund may enter into futures
contracts and futures options.
* * *
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 Funds' 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 involved.
SAI-14-
<PAGE>
Included within that amount, but not to exceed 2% of the value of a 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 a Fund in
units or attached to securities will be deemed to be without value. The Funds
also intend to refrain from entering into arbitrage transactions.
Each of the Equity and Income and Growth Funds may not purchase or
sell commodities except as provided in Investment Limitation No. 9 above.
Pursuant to the requirements of state securities laws, each Fund
currently intends to limit its option transactions so that they do not exceed,
at the time when they are written, 25% of the net (rather than total) assets of
the particular Fund involved. See Investment Limitation No. 5 above.
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 a Fund's securities will not constitute a violation of such limitation.
In order to permit the sale of Shares in certain states, Excelsior
Fund may make on behalf of the Funds other commitments more restrictive than the
investment policies and limitations described above and in the Prospectuses.
Should Excelsior Fund determine that any such commitment is no longer in the
Funds' best interests, it will revoke the commitment by terminating sales of
Shares to investors residing in the state involved.
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 Prospectuses, Shares may be sold to customers
("Customers") of financial institutions ("Shareholder Organizations"). Service
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 in Shares selected by the Customer. Investors
purchasing Shares may include officers, directors, or employees of the
particular Shareholder Organization.
SAI-15-
<PAGE>
Pursuant to Rule 12b-1 of the 1940 Act, Excelsior Fund has adopted a
Distribution Plan (the "Distribution Plan") which permits the Trust Shares of
the Funds to bear certain expenses in connection with the distribution of those
Shares. As required by Rule 12b-1, the Funds' Distribution Plan and related
distribution agreement have been approved, and are subject to annual approval
by, a majority of Excelsior Fund's Board of Directors, and by a majority of the
directors who are not interested persons of Excelsior Fund and have no direct or
indirect interest in the operation of the Distribution Plan or any agreement
relating to the Distribution Plan, by vote cast in person at a meeting called
for the purpose of voting on the Distribution Plan and related agreement. Rule
12b-1 also requires that persons authorized to direct the disposition of monies
payable by a Fund (in the Funds' case, the Distributor) provide for the
directors' review of quarterly reports on the amounts expended and the purposes
for the expenditures.
Any change in the Distribution Plan that would materially increase the
distribution expenses of Trust Shares requires approval by holders of those
Shares, but otherwise, the Distribution Plan may be amended by the directors,
including a majority of the disinterested directors who do not have any direct
or indirect financial interest in the Distribution Plan or any related
agreement. The Distribution Plan and related agreement may be terminated as to
a particular Fund by a vote of a majority of Excelsior Fund's disinterested
directors or by vote of the holders of a majority of the Trust Shares of the
Fund.
The Distribution Plan provides that each Fund will reimburse the
Distributor for distribution expenses in an amount not to exceed the annual rate
of .75% of the average daily net asset value of outstanding Trust Shares of the
Fund. The Trust Shares of the Equity, Aging of America, Communication and
Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds currently bear the expense of such payments at the annual
rate of .35% of the average daily net asset value of each such Fund's
outstanding Trust Shares. Distribution expenses payable by the Distributor
pursuant to the Distribution Plan include direct and indirect costs and expenses
incurred in connection with advertising and marketing a Fund's Distribution
Shares, and direct and indirect costs and expenses of preparing, printing and
distributing its prospectuses to other than current shareholders and payments to
financial institutions that are not affiliated with the Distributor
("Distribution Organizations").
The Distribution Plan will continue in effect for successive one year
periods, provided that such continuance is specifically approved by the vote of
a majority of the directors who are not parties to the Distribution Plan or
interested
SAI-16-
<PAGE>
persons of any such party and who have no direct or indirect financial interest
in the Distribution Plan or any related agreement and the vote of a majority of
the entire Board of Directors.
Any material amendment to Excelsior Fund's arrangements with
Distribution Organizations must be approved by a majority of Excelsior Fund's
Board of Directors (including a majority of the disinterested directors). So
long as the Distribution Plan is 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.
Shares of the Funds are offered for sale with a maximum sales charge
of 4.50%. An illustration of the computation of the offering price per share of
the Funds, using the value of each Fund's net assets and number of outstanding
securities at the close of business on March 31, 1996 and the value of the
initial capitalization of each Fund's Trust Shares prior to the commencement of
operations, is as follows:
SAI-17-
<PAGE>
<TABLE>
<CAPTION>
Income
Equity & Growth
Fund Fund
Service Shares Service Shares
-------------- --------------
<S> <C> <C>
Net Assets.................. $188,573,804 $127,494,667
Outstanding Shares.......... 7,718,433 8,821,024
Net Asset Value Per Share... $ 24.43 $ 14.45
Sales Charge (4.50% of the
offering price)........... $ 1.15 $ 0.68
Offering to Public.......... $ 25.58 $ 15.13
</TABLE>
<TABLE>
<CAPTION>
Environmentally-
Long-Term Related
Supply of Products
Energy Fund Productivity and Services Aging of
Service Enhancers Fund Fund Service America Fund
Shares Service Shares Shares Service Shares
----------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net Assets.................. $ 23,294,491 $29,069,279 $3,946,766 $44,791,773
Outstanding Shares.......... 2,440,017 3,290,836 510,900 4,564,329
Net Asset Value Per Share... $ 9.55 $ 8.83 $ 7.73 $ 9.81
Sales Charge (4.50% of the
offering price)........... $ 0.45 $ 0.42 $ 0.36 $ 0.46
Offering to Public.......... $ 10.00 $ 9.25 $ 8.09 $ 10.27
</TABLE>
SAI-18-
<PAGE>
<TABLE>
<CAPTION>
Business and
Communication Industrial
and Restructuring Global Early Life
Entertainment Fund Service Fund Service Competitors Fund Cycle Fund
Shares Shares Service Shares Service Shares
--------------------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Net Assets.................. $46,949,340 $74,052,303 $71,304,491 $78,060,846
Outstanding Shares.......... 4,548,484 5,277,747 6,583,892 7,240,420
Net Asset Value Per Share... $ 10.32 $ 14.03 $ 10.83 $ 10.78
Sales Charge (4.50% of the
offering price)........... $ 0.49 $ 0.63 $ 0.51 $ 0.51
Offering to Public.......... $ 10.81 $ 14.69 $ 11.34 $ 11.29
</TABLE>
Equity
Fund
Trust
Shares
------
Net Assets.................. $100.00
Outstanding Shares.......... 10
Net Asset Value Per Share... $ 10.00
Sales Charge (4.50% of the
offering price)........... $ .47
Offering to Public.......... $ 10.47
Aging of
--------
America
-------
Fund
----
Trust
-----
Shares
------
Net Assets.................. $100.00
Outstanding Shares.......... 10
Net Asset Value Per Share... $10.00
Sales Charge (4.50% of the $ .47
offering price)...........
Offering to Public.......... $10.47
SAI-19-
<PAGE>
<TABLE>
<CAPTION>
Business and Early Life
Communication and Industrial Global Cycle
Entertainment Fund Restructuring Competitors Fund Trust
Trust Shares Fund Trust Shares Fund Trust Shares Shares
--------------------------- ------------------ ------------------ ----------------
<S> <C> <C> <C> <C>
Net Assets.................. $ 100.00 $ 100.00 $ 100.00 $ 100.00
Outstanding Shares.......... 10 10 10 10
Net Asset Value Per Share... $ 10.00 $ 10.00 $ 10.00 $ 10.00
Sales Charge (4.50% of the
offering price)........... $ .47 $ .47 $ .47 $ .47
Offering to Public.......... $ 10.47 $ 10.47 $ 10.47 $ 10.47
</TABLE>
As stated in the Prospectuses, the sales load described above will not be
applicable to: (a) purchases of Shares by customers of the Investment Adviser
or its affiliates; (b) trust, agency or custodial accounts opened through the
trust department of a bank, trust company or thrift institution, provided that
appropriate notification of such status is given at the time of investment; (c)
companies, corporations and partnerships (excluding full service broker/dealers
and financial planners, registered investment advisers and depository
institutions not covered by the exemptions in (d) and (e) below); (d) financial
planners and registered investment advisers not affiliated with or clearing
purchases through full service broker/dealers; (e) purchases of Shares by
depository institutions for their own account as principal; (f) exchange
transactions (described below under "Investor Programs -- Exchange Privilege")
where the Shares being exchanged were acquired in connection with the
distribution of assets held in trust, agency or custodial accounts maintained
with the trust department of a bank; (g) corporate/business retirement plans
(such as 401(k), 403(b)(7), 457 and Keogh accounts) sponsored by the Distributor
and IRA accounts sponsored by the Investment Adviser; (h) company-sponsored
employee pension or retirement plans making direct investments in the Funds; (i)
purchases of Shares by officers, trustees, directors, employees, former
employees and retirees of Excelsior Fund, Excelsior Tax-Exempt Funds, Inc.
("Excelsior Tax-Exempt Fund"), Excelsior Institutional Trust, Excelsior Funds,
the Investment Adviser, the Distributor or of any direct or indirect affiliate
of any of them; (j) purchases of Shares by all beneficial shareholders of
Excelsior Fund or Excelsior Tax-Exempt Fund as of May 22, 1989; (k) purchases of
Shares by investment advisers registered under the Investment Advisers Act of
1940 for their customers through an omnibus account established with United
States Trust Company of New York; (l) purchases of Shares by directors, officers
and employees of brokers and dealers selling shares pursuant to a selling
agreement with Excelsior Fund, Excelsior Tax-Exempt Fund, Excelsior
Institutional Trust or Excelsior Funds; (m) purchase of shares by investors who
are members of affinity groups serviced
SAI-20-
<PAGE>
by USAffinity Investments Limited Partnership; and (n) customers of certain
financial institutions who purchase shares through a registered representative
of UST Financial Services Corp. on the premises of their financial institutions.
In addition, no sales load is charged on the reinvestment of dividends or
distributions or in connection with certain share exchange transactions.
Investors who have previously redeemed shares in a portfolio of Excelsior Fund
or Excelsior Tax-Exempt Fund on which a sales load has been paid also have a
one-time privilege of purchasing shares of another portfolio of either company
at net asset value without a sales charge, provided that such privilege will
apply only to purchases made within 30 calendar days from the date of redemption
and only with respect to the amount of the redemption.
Total sales charges paid by shareholders of the Equity and Income and Growth
Funds during the fiscal years ended March 31, 1996, 1995 and 1994 were $2,725,
$7,492 and $10,877, respectively, and $1,223, $1,713 and $5,866, respectively.
Of these respective amounts, UST Distributors, Inc., the Funds' former
distributor, retained $473, $7,092 and $9,249 with respect to the Equity Fund
and $298, $1,703 and $5,037 with respect to the Income and Growth Fund for the
period April 1, 1995 through July 31, 1995 and for the fiscal years ended March
31, 1995 and 1994, respectively. The balance was paid to selling dealers.
Edgewood Services, Inc., the Funds' distributor, retained none of the foregoing
sales charges with respect to the Equity and Income and Growth Funds for the
period August 1, 1995 through March 31, 1996.
For the fiscal years ended March 31, 1996, 1995 and 1994, total sales
charges paid by shareholders of the Long-Term Supply of Energy, Productivity
Enhancers, Environmentally-Related Products and Services, Aging of America,
Communication and Entertainment, Business and Industrial Restructuring, Global
Competitors and Early Life Cycle Funds were $0, $84 and $315; $347, $143 and
$181; $325, $0, and $45; $1,662, $357 and $272; $1,728, $438 and $2,453; $3,970,
$779 and $1,672; $405, $353 and $136; and $961, $1,107 and $840, respectively.
Of these respective amounts, UST Distributors, Inc., the Funds' former
distributor, retained $0, $84 and $280 with respect to the Long-Term Supply of
Energy Fund; $0, $143 and $160 with respect to the Productivity Enhancers Fund;
$0, $0 and $0 with respect to the Environmentally-Related Products and Services
Fund; $0, $37 and $200 with respect to the Aging of America Fund; $74, $438 and
$2,175 with respect to the Communication and Entertainment Fund; $42, $779 and
$1,282 with respect to the Business and Industrial Restructuring Fund; $0, $353
and $120 with respect to the Global Competitors Fund; and $0, $1,107 and $744
with respect to the Early Life Cycle Fund for the period April 1, 1995 through
July 31, 1995 and for the fiscal years ended March 31, 1995 and 1994,
respectively. Edgewood Services, Inc. retained none of the foregoing sales
charges with respect to the Long-Term Supply of
SAI-21-
<PAGE>
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 and Early
Life Cycle Fund for the period August 1, 1995 through March 31, 1996. 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; (b) the Exchange is
closed for other than customary weekend and holiday closings; (c) the Securities
and Exchange Commission has by order permitted such suspension; or (d) an
emergency exists as determined by the Securities and Exchange Commission.
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 that
Fund's portfolio securities.
Excelsior Fund reserves the right to honor any request for redemption or
repurchase of a 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 a 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 a 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 a 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 any Fund acquiring such
securities; (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
SAI-22-
<PAGE>
are actively traded, money market securities and other similar securities with a
readily ascertainable value.
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 Funds' sub-transfer agent. Under this Plan, dividends and
distributions are automatically reinvested in additional Shares of a 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 involved 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 a Fund
while at the same time participating in the Systematic Withdrawal Plan with
respect to an account in the same 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 Fund (the "Companies")
or for Trust Shares 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
SAI-23-
<PAGE>
or Excelsior Institutional Trust. As of the date of this Statement of
Additional Information, Trust Shares were available only in the Equity, Global
Competitors, Aging of America, Communication and Entertainment, Business and
Industrial Restructuring and Early Life Cycle Funds of Excelsior Fund and the
Value Equity and Optimum Growth Funds of Excelsior Institutional Trust. 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 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 effects an
exchange of Shares for shares of another portfolio of the Companies within 90
days of the purchase and is able to reduce the sales load 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 Prospectuses, Shares of the Funds 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,
SAI-24-
<PAGE>
qualifications, and terms and conditions of redemption. The Prospectuses
describe the classes of shares into which Excelsior Fund's authorized capital is
currently classified.
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 Prospectuses, Shares will be fully paid and non-
assessable. In the event of a liquidation or dissolution of a Fund,
shareholders of any series of that Fund are entitled to receive the assets
available for distribution belonging to that Fund and allocable to such series
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 or series, 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 or series. 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
SAI-25-
<PAGE>
a 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 involved to be redeemed at a price
which is equal to their net asset value and which may be paid in cash or by
distribution of the securities or other consideration received from the sale and
conveyance; (b) sell and convert a Fund's assets into money and, in connection
therewith, to cause all outstanding Shares of the Fund involved to be redeemed
at their net asset value; or (c) combine the assets belonging to a 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 involved 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 particular 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 FUNDS
-----------------------
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:
SAI-26-
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupation
with During Past 5 Years and
Name and Address Excelsior Fund Other Affiliations
- ---------------- ---------------- -----------------------------
<S> <C> <C>
Alfred C. Tannachion/1/ Chairman of the Retired; Chairman of the
1135 Hyde Park Court Board, President Boards, President and
Mahwah, NJ 07430 and Treasurer Treasurer of Excelsior Fund
Age: 70 and Excelsior Tax-Exempt;
Chairman of the Board,
President and Treasurer of UST
Master Variable Series, Inc.
(since 1994); Chairman of the
Board, President and Treasurer
of Excelsior Institutional
Trust (since 1995).
Donald L. Campbell Director Retired; Director of
333 East 69th Street Excelsior Fund and Excelsior
Apt. 10-H Tax-Exempt; Director of UST
New York, NY 10021 Master Variable Series, Inc.
Age: 70 (since 1994); Trustee of
Excelsior Institutional Trust
(since 1995); Director, Royal
Life Insurance Co. of NY
(since 1991).
Joseph H. Dugan Director Retired; Director of
913 Franklin Lakes Road Excelsior Fund and Excelsior
Franklin Lakes, NJ 07417 Tax-Exempt; Director of UST
Age: 71 Master Variable Series, Inc.
(since 1994); Trustee of
Excelsior Institutional Trust
(since 1995).
Wolfe J. Frankl Director Retired; Director of
2320 Cumberland Road Excelsior Fund and Excelsior
Charlottesville, VA 22901 Tax-Exempt; Director of UST
Age: 75 Master Variable Series, Inc. (since
1994); 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 1995).
</TABLE>
- --------------------
1. This director is considered to be an "interested person" of Excelsior Fund
as defined in the 1940 Act.
SAI-27-
<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 Director of UST Master
New York, NY 10017 Variable Series, Inc. (since
Age: 70 1994); Trustee of Excelsior
Institutional Trust (since 1995);
President Emeritus, The Church Pension
Fund and its affiliated companies
(since 1968); 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).
Frederick S. Wonham/1/ Director Retired; Director of Excelsior Fund
238 June Road and Excelsior Tax-Exempt; Trustee of
Stamford, CT 06903 Excelsior Funds and Excelsior
Age: 65 Institutional Trust (since 1995);
Vice Chairman of U.S. Trust Corporation
and U.S. Trust Company of New York
(until September, 1995); Chairman, U.S.
Trust of Connecticut.
W. Bruce McConnel, III Secretary Partner of the law firm of Drinker
Philadelphia National Biddle & Reath.
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Age: 53
Sherry Aramini Assistant Second Vice President, Blue
Chase Global Funds Secretary Sky Compliance Manager,
Services Company Chase Global Funds Services
73 Tremont Street Company since May 1996;
Boston, MA 02108-3913 Technical Resource Manager,
Age: 32 Chase Global Funds Services
Company, April 1995-May 1996; Financial
Reporting Supervisor, Chase Global
Funds Services Company, September 1993-
April 1995; Audit Supervisor, Coopers &
Lybrand L.L.P., July 1990-August 1993.
</TABLE>
- -----------------------
1. This director is considered to be an "interested person" of Excelsior Fund
as defined in the 1940 Act.
SAI-28-
<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 (July 1996-present);
Boston, MA 02108-3913 Second Vice President, Manager
Age: 31 of Administration, Chase Global
Funds Services Company (October
1993-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 per-Company 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 with respect to each Company
for services in such capacity. Drinker Biddle & Reath, 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 15, 1996, the
directors and officers of Excelsior Fund as a group owned beneficially less than
1% of the outstanding Shares of each Fund of the Company, and less than 1% of
the outstanding Shares of all Funds of the Company 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.
SAI-29-
<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 $16,500 None $39,500(4)**
Director
Joseph H. Dugan $16,500 None $39,500(4)**
Director
Wolfe J. Frankl $16,500 None $39,500(4)**
Director
Robert A. Robinson $16,500 None $39,500(4)**
Director
Alfred C. Tannachion $21,500 None $51,500(4)**
Chairman of the Boards,
President and Treasurer
Frederick S. Wonham+ $ 6,375 None $ 14,424**
</TABLE>
- ---------------------------
/*/ The "Fund Complex" consists of Excelsior Fund, Excelsior Tax-Exempt
Funds, Inc., UST Master Variable Series, Inc., Excelsior Funds and
Excelsior Institutional Trust.
/**/ Number of investment companies in the Fund Complex for which director
serves as director or trustee.
/+/ Frederick S. Wonham was elected to the Board of Directors of Excelsior
Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. on November 17, 1995.
Investment Advisory and Administration Agreements
- -------------------------------------------------
United States Trust Company of New York serves as Investment Adviser
to the Funds. In the Investment Advisory Agreement, the Investment Adviser has
agreed to provide the services described in the Prospectuses. The Investment
Adviser has also agreed to pay all expenses incurred by it in connection with
its activities under the respective agreements other than the cost of
securities, including brokerage commissions, purchased for the Funds.
For the fiscal year ended March 31, 1994, Excelsior Fund paid the
Investment Adviser $870,735, $555,404, $599, $12,682, $0, $2,216, $59,196,
$4,566, $5,162 and $53,036 with respect to the Equity, Income and Growth, Long-
Term Supply of
SAI-30-
<PAGE>
Energy, Productivity Enhancers, Environmentally-Related Products and Services,
Aging of America, Communication and Entertainment, Business and Industrial
Restructuring, Global Competitors and Early Life Cycle Funds, respectively. For
the same period, the Investment Adviser waived fees totalling $1,516, $1,179,
$22,139, $30,754, $18,247, $32,626, $22,594, $29,394, $26,625 and $23,696 with
respect to the Equity, Income and Growth, Long-Term Supply of Energy,
Productivity Enhancers, Environmentally-Related Products and Services, Aging of
America, Communication and Entertainment, Business and Industrial Restructuring,
Global Competitors and Early Life Cycle Funds, respectively.
For the fiscal year ended March 31, 1995, Excelsior Fund paid the
Investment Adviser advisory fees of $880,638, $726,295, $48,882, $79,570, $0,
$68,122, $136,328, $120,783, $79,924 and $194,501 with respect to the Equity,
Income and Growth, Long-Term Supply of Energy, Productivity Enhancers,
Environmentally-Related Products and Services, Aging of America, Communication
and Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively. For the same period, the Investment
Adviser waived fees totalling $26,987, $24,620, $20,193, $22,983, $26,278,
$24,503, $17,130, $18,380, $15,637 and $26,625 with respect to the Equity,
Income and Growth, Long-Term Supply of Energy, Productivity Enhancers,
Environmentally-Related Products and Services, Aging of America, Communication
and Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively.
For the fiscal year ended March 31, 1996, Excelsior Fund paid the
Investment Adviser advisory fees of $1,111,127; $785,037; $114,497; $147,036;
$0; $185,180; $222,009; $273,025; $253,937; and $336,194 with respect to the
Equity, Income and Growth, Long-Term Supply of Energy, Productivity Enhancers,
Environmentally-Related Products and Services, Aging of America, Communication
and Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively. For the same period, the Investment
Adviser waived fees totalling $106,377, $69,637, $10,935, $11,813, $25,855,
$15,937, $18,360, $21,119, $16,714, and $57,942 with respect to the Equity,
Income and Growth, Long-Term Supply of Energy, Productivity Enhancers,
Environmentally-Related Products and Services, Aging of America, Communication
and Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively.
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 Funds in connection with the performance of such agreements,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from
SAI-31-
<PAGE>
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 Group independently of its Banking
Group.
Chase Global Funds Services Company ("CGFSC"), Federated
Administrative Services, an affiliate of the Distributor, and U.S. Trust (the
"Administrators") serve as the Funds' administrators. Under the Administration
Agreement, the Administrators have agreed to maintain office facilities for the
Funds, furnish the Funds with statistical and research data, clerical,
accounting and bookkeeping services, and certain other services required by the
Funds, and to compute the net asset value, net income and realized capital gains
or losses, if any, of the respective Funds. The Administrators prepare
semiannual reports to the Securities and Exchange Commission, 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 Funds' financial accounts and records, and generally assist
in the Funds' operations.
Prior to August 1, 1995, administrative services were provided to the
Funds 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, 1994, Excelsior Fund paid the
former administrators $179,398, $114,452, $5,826, $17,527, $4,739, $7,444,
$22,881, $10,016, $10,462 and $21,420 in the aggregate with respect to the
Equity, Income and Growth, Long-Term Supply of Energy, Productivity Enhancers,
Environmentally-Related Products and Services, Aging of America, Communication
and Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively. For the same period, the former
administrators waived fees totalling $17,424, $5,723, $18,511, $15,806, $2,360,
$13,234, $12,788 and $1,861 with respect to the Long-Term Supply of Energy,
Productivity Enhancers, Environmentally-Related Products and Services, Aging of
America, Communication and Entertainment, Business and Industrial Restructuring,
Global Competitors and Early Life Cycle Funds, respectively.
For the fiscal year ended March 31, 1995, Excelsior Fund paid the
former administrators $186,366, $154,582, $19,660, $26,357, $5,451, $24,003,
$39,403, $35,765, $24,816 and $56,809 in the aggregate with respect to the
Equity, Income and Growth, Long-Term Supply of Energy, Productivity Enhancers,
SAI-32-
<PAGE>
Environmentally-Related Products and Services, Aging of America, Communication
and Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively. For the same period, the former
administrators waived fees totalling $22,090, $15,393, $36,299, $17,747, $2,347,
$5,985 and $16,934 with respect to the Long-Term Supply of Energy, Productivity
Enhancers, Environmentally-Related Products and Services, Aging of America,
Communication and Entertainment, Business and Industrial Restructuring and
Global Competitors Funds, respectively.
For the period April 1, 1995 through July 31, 1995, Excelsior Fund
paid the former administrators $72,709, $53,296, $9,318, $11,203, $6,000,
$13,476, $16,964, $18,319, $16,756 and $27,350 in the aggregate with respect to
the Equity, Income and Growth, Long-Term Supply of Energy, Productivity
Enhancers, Environmentally-Related Products and Services, Aging of America,
Communication and Entertainment, Business and Industrial Restructuring, Global
Competitors and Early Life Cycle Funds, respectively. For the same period, the
former administrators waived fees totalling $1,640, $575, $9, $10, $0, $13, $37,
$34, $16 and $75 with respect to the Equity, Income and Growth, Long-Term Supply
of Energy, Productivity Enhancers, Environmentally-Related Products and
Services, Aging of America, Communication and Entertainment, Business and
Industrial Restructuring, Global Competitors and Early Life Cycle Funds,
respectively.
For the period August 1, 1995 through March 31, 1996, Excelsior Fund
paid the Administrators $171,595, $120,732, $22,976, $29,686, $6,494, $38,285,
$44,871, $57,370, $52,911 and $74,016 in the aggregate with respect to the
Equity, Income and Growth, Long-Term Supply of Energy, Productivity Enhancers,
Environmentally-Related Products and Services, Aging of America, Communication
and Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively. For the same period, the Administrators
waived fees totalling $4,809, $1,416, $17,697, $9,101, $37,506, $13, $16, $19,
$7 and $40 with respect to the Equity, Income and Growth, Long-Term Supply of
Energy, Productivity Enhancers, Environmentally-Related Products and Services,
Aging of America, Communication and Entertainment, Business and Industrial
Restructuring, Global Competitors and Early Life Cycle Funds, respectively.
Service Organizations
- ---------------------
As stated in the Prospectuses, 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
SAI-33-
<PAGE>
a 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 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
SAI-34-
<PAGE>
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, 1996, 1995 and 1994, payments to
Service Organizations totalled $112,827, $26,987 and $1,516; $71,628, $24,620
and $1,179; $10,946, $3,576 and $124; $11,169, $4,525 and $239; $4,404, $1,660
and $83; $15,685, $4,051 and $180; $18,414, $7,168 and $382; $21,172, $5,189 and
$196; $16,737, $3,243 and $117; and $58,058, $17,091 and $779 with respect to
the Equity, Income and Growth, Long-Term Supply of Energy, Productivity
Enhancers, Environmentally-Related Products and Services, Aging of America,
Communication and Entertainment, Business and Industrial Restructuring, Global
Competitors and Early Life Cycle Funds, respectively. Of these amounts,
$97,209, $18,606 and $1,516; $66,022, $22,697 and $1,179; $10,945, $3,525 and
$124; $11,169, $4,446 and $239; $4,403, $1,626 and $83; $15,685, $3,902 and
$180; $18,385, $6,707 and $382; $21,149, $4,851 and $196; $16,737, $3,163 and
$717; and $58,039, $16,428 and $779 were paid to affiliates of U.S. Trust with
respect to the Equity, Income and Growth, Long-Term Supply of Energy,
Productivity Enhancers, Environmentally-Related Products and Services, Aging of
America, Communication and Entertainment, Business and Industrial Restructuring,
Global Competitors and Early Life Cycle Funds, respectively.
Expenses
- --------
Except as otherwise noted, the Investment Adviser and the
Administrators bear all expenses in connection with the performance of their
services. The Funds bear the expenses incurred in their operations. Expenses
of the Funds include taxes; interest; fees (including fees paid to Excelsior
Fund's Directors and officers who are not affiliated with the Distributor or the
Administrators); Securities and Exchange Commission fees; state securities
qualifications fees; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to shareholders; expenses related to the
Distribution Plan; 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 shareholders
reports and shareholder meetings; and any extraordinary expenses. The Funds
also pay for brokerage fees and commissions in connection with the purchase of
portfolio securities.
If the expenses borne by a Fund in any fiscal year exceed expense
limitations imposed by applicable state securities regulations, the Investment
Adviser and the Administrators will reimburse such Fund for a portion of any
such
SAI-35-
<PAGE>
excess to the extent required by such regulations in proportion to the fees
received by them in such year up to the amount of the fees payable to them,
provided, however, to the extent required by such state regulations, the
Investment Adviser and the Administrators have agreed to effect such
reimbursement regardless of the fees payable to them. The amounts of the above
reimbursements, if any, will be estimated, reconciled and paid on a monthly
basis. To Excelsior Fund's knowledge, of the applicable expense limitations in
effect on the date of this Statement of Additional Information, none is more
restrictive than the following: 2 1/2% of the first $30 million of average
annual net assets, 2% of the next $70 million of average annual net assets and
1/2% of average annual net assets in excess of $100 million.
Custodian and Transfer Agent
- ----------------------------
The Chase Manhattan Bank, N.A. ("Chase") serves as custodian of the
Funds' assets. Under the custodian
agreement, Chase has agreed to (i) maintain a separate account or accounts in
the name of the Funds; (ii) make receipts and disbursements of money on behalf
of the Funds; (iii) collect and receive all income and other payments and
distributions on account of the Funds' 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 Funds' operations. Chase
may, at its own expense, open and maintain custody accounts with respect to the
Funds with 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 also serves as the Funds' transfer agent and dividend
disbursing agent. In such capacity, U.S. Trust has agreed to (i) issue and
redeem Shares; (ii) address and mail all communications by the Funds to their
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 Funds' operations. For its transfer agency, dividend disbursing, and
subaccounting services, U.S. Trust is entitled to receive $15.00 per annum per
account and subaccount. In addition, U.S. Trust 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 may, at its own expense, delegate its transfer agency
obligations to another transfer agent registered
SAI-36-
<PAGE>
or qualified under applicable law, provided that U.S. Trust 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 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. For the services provided by CGFSC, U.S. Trust
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 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 each of
the Funds.
The Funds may engage in short-term trading to achieve their investment
objectives. Portfolio turnover may vary greatly from year to year as well as
within a particular year. The Funds' portfolio turnover rate may also be
affected by cash requirements for redemptions of Shares and by regulatory
provisions which enable the Funds to receive certain favorable tax treatment.
Portfolio turnover will not be a limiting factor in making portfolio decisions.
See "Financial Highlights" in the Funds' Prospectuses for the Funds' 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, 1994, March 31, 1995 and March 31, 1996, the Equity Fund paid
brokerage commissions aggregating $61,608, $123,112 and $174,492, respectively,
and the Income and Growth Fund paid brokerage commissions aggregating $140,168,
$89,218 and $89,512, respectively.
For the fiscal years ended March 31, 1994, March 31, 1995, and March
31, 1996, the Long-Term Supply of Energy, Productivity Enhancers,
Environmentally-Related Products and Services, Aging of America, Communication
and Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds paid brokerage commissions aggregating $15,871, $36,759
and $46,678; $40,563, $141,290 and $353,788; $13,602, $16,669 and $18,680;
$20,905, $28,296 and $67,494; $40,593, $50,724 and $68,004; $46,444, $121,755
and $152,269;
SAI-37-
<PAGE>
$17,428, $41,638 and $79,458; and $40,397, $73,534 and $95,108, 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 Funds, 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 Funds 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.
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 Funds. Such
information may be useful to the Investment Adviser in serving the Funds 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 Funds.
SAI-38-
<PAGE>
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 Securities and Exchange Commission.
Investment decisions for the Funds 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 Funds. When a purchase or sale of
the same security is made at substantially the same time on behalf of a 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
Funds or the size of the position obtained by the Funds. To the extent
permitted by law, the Investment Adviser may aggregate the securities to be sold
or purchased for the Funds 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 a 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, 1996, the following Funds held the following securities of
Excelsior Fund's regular brokers or dealers or their parents: (a) the Equity
held the following security: 88,000 shares of common stock of Morgan Stanley &
Co., Inc.; (b) the Income & Growth Fund held the following security: 48,000
shares of common stock of Morgan Stanley & Co., Inc.; (c) the Business and
Industrial Restructuring Fund held the following security: 18,000 shares of
common stock of First National Bank of Chicago; (d) the Aging of America Fund
held the following security: 16,000 shares of common stock of Dean Witter
Reynolds; (e) the Global Competitors Fund held the following security: 45,000
shares of common stock of Morgan Stanley & Co., Inc. Morgan Stanley & Co.,
Inc., First National Bank of Chicago and Dean Witter Reynolds, Inc. are
considered to be regular brokers or dealers of Excelsior Fund.
SAI-39-
<PAGE>
INDEPENDENT AUDITORS
--------------------
Ernst & Young LLP, independent auditors, 200 Clarendon Street, Boston,
MA 02116, serve as auditors of Excelsior Fund. The Funds' Financial Highlights
included in the Prospectuses and the financial statements for the period ended
March 31, 1996 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 (of which Mr. McConnel, Secretary of Excelsior
Fund, is a partner), Philadelphia National Bank Building, 1345 Chestnut Streets,
Philadelphia, Pennsylvania 19107, is counsel to Excelsior Fund and will pass
upon the legality of the Shares offered by the Prospectuses.
ADDITIONAL INFORMATION CONCERNING TAXES
---------------------------------------
The following supplements the tax information contained in the
Prospectuses.
Each 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, a Fund does not qualify for a
taxable year for the special Federal tax treatment afforded regulated investment
companies, such 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.
A 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
SAI-40-
<PAGE>
and capital gain net income (excess of capital gains over capital losses). The
Funds intend to make sufficient distributions or deemed distributions of their
ordinary taxable income and any capital gain net income prior to the end of each
calendar year to avoid liability for this excise tax.
A 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 "30% 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 a 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 a 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
SAI-41-
<PAGE>
be netted for purposes of determining whether the 30% test is met.
Each 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 Funds may advertise the "average annual total return" for its
Service Shares and Trust 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 /1/n/
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.
SAI-42-
<PAGE>
Each Fund that advertises an "aggregate total return" for its Service
Shares and Trust Shares computes such return 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 (reflecting any sales load charged
upon such reinvestment), (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 a 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. In
addition, the Funds' average annual total return and aggregate total return
quotations will reflect the deduction of the maximum sales load charged in
connection with the purchase of Shares.
Based on the foregoing calculations, the total returns for the Service
Shares of the Equity, Income and Growth, Long-Term Supply of Energy,
Productivity Enhancers, Environmentally-Related Products and Services, Aging of
America, Communication and Entertainment, Business and Industrial Restructuring,
Global Competitors and Early Life Cycle Funds for the one year period ended
March 31, 1996 were 20.75%, 20.14%, 16.17%, 21.30%, 18.92%, 20.14%, 8.42%,
30.31%, 21.72% and 12.97%, respectively. The average annual total returns for
the Service Shares of the Equity Fund and the Income and Growth Fund for the
five year period ended March 31, 1996 were 15.49% and 14.73%, respectively. The
average annual total return for the Service Shares of the Equity Fund for the
ten year period ended March 31, 1996 was 11.58%. The average annual total
returns for the Service Shares of the Income and Growth Fund for the period
January 6, 1987 (the commencement of operations) to March 31, 1996 was 10.93%
The average annual total returns for the Service Shares of the Long-Term Supply
of Energy, Productivity Enhancers, Environmentally-Related Products and
Services, Aging of America, Communication and Entertainment, Business and
Industrial Restructuring, Global Competitors and Early Life Cycle Funds for the
period from December 31, 1992 (commencement of operations) to March 31, 1996
were 9.52%, 11.63%, 1.74%, 9.91%, 15.51%, 24.24%, 13.67% and
SAI-43-
<PAGE>
16.16%, respectively. No Trust Shares of the Funds had been issued as of March
31, 1996.
The Funds 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 a Fund's performance with other measures of investment return. For
example, in comparing a 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, a 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. A Fund does not, for these
purposes, deduct from the initial value invested any amount representing sales
charges. A Fund will, however, disclose the maximum sales charge and will also
disclose that the performance data does not reflect sales charges and that
inclusion of sales charges would reduce the performance quoted.
The total return of Shares of a Fund may be compared to those 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
total return of a 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 a Fund. Advertisements, sales
literature or reports to shareholders may from time to time also include a
discussion and analysis of each Fund's performance, including without
limitation, those factors, strategies and techniques that together with market
conditions and events, materially affected each Fund's performance.
The Funds 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 a Fund
investment are reinvested by being paid in additional Fund Shares, any future
income or capital appreciation of a Fund would increase the value, not only of
the original Fund investment, but also of the additional Fund Shares received
through reinvestment. As a result, the value of the Fund investment would
increase more
SAI-44-
<PAGE>
quickly than if dividends or other distributions had been paid in cash. The
Funds may also include discussions or illustrations of the potential investment
goals of a prospective investor, investment management techniques, policies or
investment suitability of a 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 a 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 a Fund. The Funds may also include in advertisements charts,
graphs or drawings which illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to, stocks,
bonds, treasury bills and Shares of a Fund. In addition, advertisement, sales
literature or shareholder communications may include a discussion of certain
attributes or benefits to be derived by an investment in a Fund. Such
advertisements or communicators may include symbols, headlines or other material
which highlight or summarize the information discussed in more detail therein.
MISCELLANEOUS
-------------
As used in the Prospectuses, "assets belonging to a 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 a 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 25, 1996, U.S. Trust held of record substantially all of
the Shares in the Funds, in each case as agent or custodian for its customers,
but did not own such Shares beneficially because it did not have discretion to
vote or invest such Shares.
SAI-45-
<PAGE>
As of July 25, 1996, the name, address and percentage ownership of
each person, in addition to U.S. Trust, that beneficially owned 5% or more of
the outstanding shares of a Fund were as follows: Equity Fund: United States
-----------
Trust Company Retirement Fund, 114 West 47th Street, New York, New York 10036,
18.6%.
FINANCIAL STATEMENTS
--------------------
Excelsior Fund's Annual Report to Shareholders for the fiscal year
ended March 31, 1996 (the "Annual Report") for the domestic equity portfolios
accompanies this Statement of Additional Information. The financial statements
in the Annual Report for the Equity, Income and Growth, Long-Term Supply of
Energy, Productivity Enhancers, Environmentally-Related Products and Services,
Aging of America, Communication and Entertainment, Business and Industrial
Restructuring, Global Competitors and Early Life Cycle Funds (the "Financial
Statements") are incorporated in this Statement of Additional Information by
reference. The Financial Statements included in the Annual Report for the
fiscal year ended March 31, 1996 have been audited by Excelsior Fund's
independent auditors, Ernst & Young LLP, whose reports thereon also appear in
such Annual Report and are incorporated herein by reference. The Financial
Statements in such Annual Report have been incorporated herein in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing. Additional copies of the 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.
SAI-46-
<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" - Issue's degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory. However,
the relative degree of safety is not as high as for issues designated "A-1."
"A-3" - Issue has an adequate capacity for timely payment. It is,
however, somewhat more vulnerable to the adverse effects of changes and
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is 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" - Issuer or related supporting institutions are considered
to have a superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternate liquidity.
SAI-A-1
<PAGE>
"Prime-2" - Issuer or related supporting institutions are considered
to have a strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternative
liquidity is maintained.
"Prime-3" - Issuer 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" - Issuer does 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
SAI-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" categories.
"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
SAI-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 satisfactory 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.
SAI-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.
SAI-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
SAI-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.
SAI-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"
SAI-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
SAI-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 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.
SAI-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
SAI-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.
SAI-A-12
<PAGE>
FORM N-14
---------
PART C. OTHER INFORMATION
Item 15. 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 Exhibits (2)(a) hereto,
provide for the indemnification of Registrant's directors and officers.
Indemnification of Registrant's principal underwriter, custodian, and transfer
agent is provided for, respectively, in Section 1.12 of the Distribution
Agreement incorporated by reference as Exhibit (7)(a) hereto and Sections 26 and
27 of the Custody and Transfer Agency Agreement, incorporated by reference as
Exhibit (9)(a) 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 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 Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling 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 16. Exhibits
--------
C-1
<PAGE>
(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 concerning the creation of
the Treasury Fund (13).
(h) Articles Supplementary of Registrant concerning the increase of
authorized capital stock (16).
(i) Articles Supplementary of Registrant dated August 31, 1995. (20)
(j) Articles Supplementary of Registrant dated December 28, 1995.
(20)
(2) (a) Bylaws of Registrant (1).
(b) Amendment No. 1 to Bylaws of Registrant (3).
(3) None.
(4) Plan of Reorganization filed herewith as Appendix A to the Combined
Proxy Statement/Prospectus.
(5) (a) Specimen copy of share certificate for Class A Common Stock of
Registrant (3).
(b) Specimen copy of share certificate for Class B Common Stock of
Registrant (3).
(c) Specimen copy of share certificate for Class C Common Stock of
Registrant (3).
(d) Specimen copy of share certificate for Class D Common Stock of
Registrant (3).
C-2
<PAGE>
(e) Specimen copy of share certificate for Class E Common Stock of
Registrant (4).
(f) Specimen copy of share certificate for Class F Common Stock of
Registrant (5).
(g) Specimen copy of share certificate for Class A Common Stock -
Special Series 1 of Registrant (8).
(h) Specimen copy of share certificate for Class B Common Stock -
Special Series 1 of Registrant (8).
(i) Specimen copy of share certificate for Class D Common Stock -
Special Series 1 of Registrant (8).
(j) Specimen copy of share certificate for Class G Common Stock of
Registrant (13).
(k) Specimen copy of share certificate for Class G Common Stock -
Special Series 1 of Registrant (13).
(l) Specimen copy of share certificate for Class H Common Stock of
Registrant. (15)
(m) Specimen copy of share certificate for Class I Common Stock of
Registrant. (15)
(n) Specimen copy of share certificate for Class J Common Stock of
Registrant. (15)
(o) Specimen copy of share certificate for Class K Common Stock of
Registrant. (15)
(p) Specimen copy of share certificate for Class L Common Stock of
Registrant. (15)
(q) Specimen copy of share certificate for Class M Common Stock of
Registrant. (15)
(r) Specimen copy of share certificate for Class N Common Stock of
Registrant. (15)
(s) Specimen copy of share certificate for Class O Common Stock of
Registrant. (15)
(t) Specimen copy of share certificate for Class P Common Stock of
Registrant. (15)
(u) Specimen copy of share certificate for Class Q Common Stock of
Registrant. (15)
C-3
<PAGE>
(v) Specimen copy of share certificate for Class R Common Stock of
Registrant. (15)
(w) Specimen copy of share certificate for Class S Common Stock of
Registrant. (15)
(x) Specimen copy of share certificate for Class S Common Stock -
Special Series 1 of Registrant. (15)
(y) Specimen copy of share certificate for Class T Common Stock of
Registrant. (15)
(z) Specimen copy of share certificate for Class T Common Stock -
Special Series 1 of Registrant. (15)
(6) (a) Investment Advisory Agreement between Registrant and United
States Trust Company of New York ("U.S. Trust") dated February 6,
1985 (2).
(b) Amendment No. 1 to Investment Advisory Agreement between
Registrant and U.S. Trust dated February 6, 1985 (10).
(c) Investment Advisory Agreement between Registrant and U.S. Trust
dated November 26, 1985 (3).
(d) Amendment No. 1 to Investment Advisory Agreement between
Registrant and U.S. Trust dated November 26, 1985 (10).
(e) Investment Advisory Agreement between Registrant and U.S. Trust
dated December 16, 1986 (5).
(f) Amendment No. 1 to Investment Advisory Agreement between
Registrant and U.S. Trust dated December 16, 1986 (10).
(g) Investment Advisory Agreement between Registrant and U.S. Trust
dated May 27, 1987 (7).
(h) Amendment No. 1 to Investment Advisory Agreement between
Registrant and U.S. Trust dated May 27, 1987 (10).
(i) Sub-Advisory Agreement between U.S. Trust and Foreign and
Colonial Asset Management ("FACAM") dated May 27, 1987 (7).
C-4
<PAGE>
(j) Investment Advisory Agreement between Registrant and United
States Trust dated February 1, 1991 with respect to the Treasury
Fund (13).
(k) Amendment No. 2 to Investment Advisory Agreement between
Registrant and U.S. Trust dated February 6, 1985 with respect to
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 Fund and
Intermediate-Term Managed Income Fund (17).
(l) Form of Sub-Advisory Agreement between U.S. Trust and FACAM with
respect to Pacific/Asia Fund and Pan European Fund (16).
(m) Form of Agreement between FACAM and Latin American Securities
Limited with respect to the Emerging Americas Fund (16).
(n) Form of Interim Sub-Advisory Agreement between U.S. Trust and
FCEML with respect to the Emerging Americas Fund and the
Pacific/Asia Fund dated July 1, 1993 (18).
(o) Form of Sub-Advisory Agreement between U.S. Trust and FCEML with
respect to the Emerging Americas Fund and Pacific/Asia Fund (18).
(7) (a) Distribution Agreement dated August 1, 1995 (20) between
Registrant and Edgewood Services, Inc.
(8) None.
(9) (a) Custody and Transfer Agency Agreement between Registrant and U.S.
Trust, Amended and Restated as of November 1, 1987 (7).
(b) International Custodian Agreement between U.S. Trust and Morgan
Stanley Trust Company dated December 15, 1989. (15)
(c) Amendment No. 1 dated December 18, 1989 to the Amended and
Restated Custody and Transfer Agency Agreement between Registrant
and U.S. Trust dated November 1, 1987 (10).
C-5
<PAGE>
(d) Amendment No. 2 to Custody and Transfer Agency Agreement between
Registrant and U.S. Trust with respect to 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 Fund and Intermediate-Term Managed Income Fund (17).
(e) Custody Agreement between Registrant and The Chase Manhattan Bank
dated September 1, 1995.
(10) (a) Amended and Restated Distribution Plan and Related Form of
Distribution Agreement.
(b) Amended and Restated Administrative Services Plan and Related
Form of Shareholder Servicing Agreement.
(c) Plan Pursuant to Rule 18f-3 for Operation of a Multi-Class
System. (20)
(11) Opinion of Drinker Biddle & Reath.
(12) Opinion of Drinker Biddle & Reath as to tax consequences (including
consent of such firm).
(13) Administration Agreement among Registrant, Chase Global Funds Services
Company, Federated Administrative Services and United States Trust
Company of New York dated January 1, 1996. (20)
(14) (a) Consent of Ernst & Young LLP.
(b) Consent of Drinker Biddle & Reath.
(15) None.
(16) None.
(17) (a) Declaration pursuant to Rule 24f-2 under the Investment Company
Act of 1940 of the Registrant.
(b) Forms of Proxy.
(c) Prospectus dated August 1, 1996 for Retail Shares of Registrant's
Equity Fund, Income and Growth Fund, Long-Term Supply of Energy,
Productivity Enhancers Fund, Environmentally-Related Products
C-6
<PAGE>
and Services Fund, Aging of America Fund, Communication and
Entertainment Fund, Business and Industrial Restructuring Fund,
Global Competitors Fund and Early Life Cycle Fund.
(d) Prospectus dated August 1, 1996 for Trust Shares of Excelsior
Funds Inc.'s Equity Fund, Aging of America Fund, Communication
and Entertainment Fund, Business and Industrial Restructuring
Fund, Global Competitors Fund and Early Life Cycle Fund.
(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.
(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 and UST Master Tax-
Exempt Funds, Inc.'s ("Master T/E Fund") joint Post-Effective
Amendments Nos. 9 and 7, respectively, to their Registration
Statements on Form N-1A filed March 12, 1990.
C-7
<PAGE>
(11) Incorporated herein by reference to Registrant's and Master T/E Fund's
joint Post-Effective Amendments Nos. 10 and 8, respectively, to their
Registration Statements on Form N-1A filed July 27, 1990.
(12) Incorporated herein by reference to Registrant's and Master T/E Fund's
joint Post-Effective Amendments Nos. 11 and 9, respectively, to their
Registration Statements on Form N-1A filed December 7, 1990.
(13) Incorporated herein by reference to Registrant's and Master T/E Fund's
joint Post-Effective Amendments Nos. 12 and 10, respectively, to their
Registration Statements on Form N-1A filed May 31, 1991.
(14) Incorporated herein by reference to Registrant's and Master T/E Fund's
joint Post-Effective Amendments Nos. 13 and 11, respectively, to their
Registrant Statements 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.
Item 17. Undertakings
------------
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
a part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, as amended (the
C-8
<PAGE>
"1933 Act"), the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to
the registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
C-9
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of New York, and the
State of New York, on the 12th day of May, 1997.
EXCELSIOR FUNDS, INC.
Registrant
*/ Frederick S. Wonham
----------------------
Frederick S. Wonham
President
(Signature and Title)
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
/s/ Frederick S. Wonham
- -------------------------
Frederick S. Wonham Chairman of the May 12, 1997
Board, President
and Treasurer
/s/ Joseph H. Dugan
- -------------------------
Joseph H. Dugan Director May 12, 1997
/s/ Donald L. Campbell
- -------------------------
Donald L. Campbell Director May 12, 1997
/s/ Wolfe J. Frankl
- -------------------------
Wolfe J. Frankl Director May 12, 1997
/s/ Robert A. Robinson
- -------------------------
Robert A. Robinson Director May 12, 1997
/s/ Alfred Tannachion Director May 12, 1997
- -------------------------
Alfred Tannachion
/s/ W. Wallace McDowell Director May 12, 1997
- -------------------------
W. Wallace McDowell
/s/ Jonathan Piel Director May 12, 1997
- -------------------------
Jonathan Piel
/s/ Rodman L. Drake Director May 12, 1997
- -------------------------
Rodman L. Drake
<PAGE>
N-14
EXHIBIT INDEX
-------------
Exhibit No. Description Page No.
- ----------- ----------- --------
(4) Plan of Reorganization,
filed herewith as
Appendix A to the
Combined Prospectus/Proxy
Statement.
(11) Opinion of Drinker Biddle
& Reath LLP.
(12) Opinion of Drinker Biddle
& Reath LLP as to tax
consequences (including
consent of such firm).
(14)(a) Consent of Ernst & Young LLP.
(14)(b) Consent of Drinker Biddle & Reath LLP.
(17)(a) Declaration of the
Registrant pursuant to
Rule 24f-2 under the
Investment Company Act of
1940.
(17)(b) Forms of Proxy.
(17)(c) Prospectus for the Retail
Shares of Registrant's
Equity Fund, Income and
Growth 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
and Early Life Cycle
Fund.
(17)(d) Prospectus for the
Trust Shares of Registrant's
<PAGE>
Equity Fund, Aging of
America Fund,
Communication and
Entertainment Fund,
Business and Industrial
Restructuring Fund,
Global Competitors Fund
and Early Life Cycle
Fund.
<PAGE>
EXHIBIT 11
Law Offices
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Telephone: (215) 988-2700
Telex: 834684
Fax: (215) 988-2757
May 12, 1997
Excelsior Funds, Inc.
73 Tremont Street
Boston, MA 02108-3913
Dear Sir or Madam:
We have acted as counsel for Excelsior Funds, Inc., a Maryland corporation
("Excelsior"), in connection with the proposed acquisition of substantially all
of the assets and liabilities of the Productivity Enhancers Fund,
Environmentally-Related Products and Services Fund, Aging of America Fund,
Communication and Entertainment Fund, and Global Competitors Fund of Excelsior
by the Excelsior Equity Fund in exchange for retail and trust shares of the
Excelsior Equity Fund.
The aforementioned proposed acquisition is referred herein as the
"Reorganization." The Productivity Enhancers Fund, Environmentally-Related
Products and Services Fund, Aging of America Fund, Communication and
Entertainment Fund, and Global Competitors Fund are referred to herein
collectively as the "Transferor Funds." The Excelsior Equity Fund is referred
to herein as the "Surviving Fund." This opinion relates to retail and trust
shares of common stock of the Surviving Fund (par value $0.001 per share) (the
"Shares") to be issued in the Reorganization and is furnished in connection with
Excelsior's Registration Statement on Form N-14 under the Securities Act of
1933, as amended (the "Registration Statement").
As counsel for Excelsior, we are familiar with the proceedings taken by it
in connection with the authorization, issuance and sale of the Shares. In
addition, we have examined and are familiar with the Articles of Incorporation
of Excelsior, as amended and supplemented, the By-laws of Excelsior, as amended,
Excelsior's Registration Statement and the combined proxy statement and
prospectus (the "Proxy Statement and Prospectus") contained therein, and other
factual matters we deemed relevant.
In our examination, we have assumed that: (i) all documents submitted to
us as originals are authentic, the signatures thereon are genuine and the
persons signing the same were of legal capacity; (ii) all documents submitted to
us as certified or photostatic copies conform to the original documents and that
such originals are authentic; and (iii) all certificates of public officials
upon which we have relied have been duly and properly given and that any public
records reviewed by us are complete.
We have made such examination of law as in our judgment is necessary and
appropriate for the purposes of this opinion. We express no opinion concerning
the laws of any jurisdiction other than the Maryland General Corporation Law and
the Federal law of the United States of America.
On the basis of and subject to the foregoing and such other considerations
as we deem relevant, we are of the opinion that upon (i) approval by the
Excelsior Board of Directors of the Plan of Reorganization and the issuance of
Shares in connection with the Plan and (ii) the prior satisfaction of the
conditions contained in the Plan of Reorganization, a copy of which is set forth
in the Proxy Statement and Prospectus constituting a part of the Registration
Statement, the Shares of the Surviving Fund, when issued pursuant to the Plan of
Reorganization and in the manner referred to in the Registration Statement, will
be validly issued, fully paid and non-assessable, under the laws of the State of
Maryland.
The opinion expressed in this letter is solely for the use of Excelsior,
and this opinion may not be referred to or used for any other purpose or relied
on by any other persons without our prior written approval. The opinion
expressed in this letter is limited to the matters set forth in this letter, and
no other opinions should be inferred beyond the matters expressly stated.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ DRINKER BIDDLE & REATH LLP
<PAGE>
EXHIBIT 12
Law Offices
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Telephone: (215) 988-2700
Telex: 834684
Fax: (215) 988-2757
May 12, 1997
Excelsior Funds, Inc.
73 Tremont Street
Boston, MA 02108-3913
Re: Plan of Reorganization dated as of May 16, 1997
-----------------------------------------------
Dear Sirs and Mesdames:
We have been asked to give our opinion on the Federal income tax
consequences to shareholders of the transactions contemplated in the above Plan
of Reorganization. In our opinion, the material Federal income tax consequences
to shareholders of such transactions are accurately set forth in the description
of our closing opinion in the subsection entitled "INFORMATION RELATING TO THE
PROPOSED REORGANIZATION -- Federal Income Tax Consequences" in the Combined
Prospectus/Proxy Statement contained in the Registration Statement being filed
this day with the Securities and Exchange Commission.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. This does not constitute a consent under section 7 of
the Securities Act of 1933, and in so consenting 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 under the rules and
regulations of the Securities and Exchange Commission issued thereunder.
Very truly yours,
/s/ DRINKER BIDDLE & REATH LLP
<PAGE>
EXHIBIT 99.14 (A)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" and "Financial Statements" in the Preliminary Copy dated May 14,
1997 of the Combined Prospectus/Proxy Statement dated June 13, 1997 in the
Registration Statement on Form N-14 dated May 14, 1997, of Excelsior Funds, Inc.
(the "Company"), and to the inclusion of our report on the financial statements
and financial highlights of the Company's Productivity Enhancers Fund,
Environmentally-Related Products and Services Fund, Aging of America Fund,
Communication and Entertainment Fund, Global Competitors Fund and Equity Fund
(collectively, the "Funds") for the year ended March 31, 1997, dated May 9,
1997, included in the 1997 Annual Report to Shareholders, which is included in
the Statement of Additional Information included in this Registration Statement
on Form N-14, dated June 13, 1997, of Excelsior Funds, Inc., and to the
incorporation by reference of our report on the financial statements and
financial highlights of the Funds for the year ended March 31, 1996, dated May
13, 1996, included in the Funds' Annual Report to Shareholders for the year
ended March 31, 1996, which is incorporated by reference in the Funds'
Prospectus dated August 31, 1996.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
May 9, 1997
<PAGE>
EXHIBIT 14 (B)
CONSENT OF COUNSEL
------------------
We hereby consent to the use of our name and to the references to our Firm
included in the Registration Statement on Form N-14 under the Securities Act of
1933, as amended, 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 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 said
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
May 12, 1997
<PAGE>
EXHBIIT 17(A)
As filed with SEC on August 8, 1984
Registration NO. 2-92665
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [x]
and
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
U. S. T. MASTER FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
NO. 6, The Commons
3512 Silverside Road
Wilmington, Delaware 19810
(Address of Principal Executive Offices)
Registrant's Telephone Number: (800) 441-7379
W. BRUCE McCONNEL, III
Drinker Biddle & Reath
1100 Philadelphia National Bank Building
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19107
(Name and Address of Agent for Service)
Copy to:
BURTON M. LIEBERT
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
(Counsel for the Distributor)
<PAGE>
Approximate Date of Proposed Public Offering:
As Soon As Practicable After The
Effective Date of this Registration Statement
CALCULATION OF REGISTRATION FEE
UNDER THE SECURITIES ACT OF 1933
--------------------------------
<TABLE>
<CAPTION>
Title of Amount Proposed Maximum
Securities Being Offering Price Amount of
Being Registered Registered Per Unit Registration Fee
- ------------------- ---------- ----------------- ----------------
<S> <C> <C> <C>
Common Shares
(Par value $.001 Indefinite $ 1 (Class A & B) $500/*/
Class A, B and C Indefinite $10 (Class C)
</TABLE>
- ----------------------------
/*/ Pursuant to the provisions of Rule 24f-2 under the Investment Company Act
of 1940, Registrant hereby elects to register an indefinite number of shares.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
As filed with the SEC on July 31, 1996
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. 23 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY [x]
ACT OF 1940
Excelsior Funds, Inc.: Amendment No. 25 [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
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)
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
--------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
Title of Amount of Proposed Proposed Amount of
Securities Shares Maximum Maximum Registration
Being Being Offering Aggregate Fee (1)
Registered Registered Price/Share Offering Price
<S> <C> <C> <C> <C>
Shares of
Common Stock 615,496,616 NAV $391,680,667 $100
</TABLE>
(1) Registrant had actual aggregate redemptions of $12,939,812,101 for its
fiscal year ended March 31, 1996; has used $12,548,421,431 for reductions
pursuant to Rule 24f-2(c) under the 1940 Act and has previously used no
available redemptions for reductions pursuant to Rule 24e-2(a) of the 1940 Act
during the current year. Registrant elects to use redemptions in the aggregate
amount of $391,390,670 (615,463,700 shares of Common Stock) for reductions in
its current amendment. While no fee is required to register the 615,463,700
shares of Common Stock, the Registrant has elected to register, for $100, an
additional $289,997 of shares of Common Stock (32,916 shares of Common Stock at
$8.81 per share (the net asset value per share on July 23, 1996 calculated in
accordance with Rule 457(d))).
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, 1996 was filed on May 30, 1996.
<PAGE>
EXHIBIT 17(B)
PRELIMINARY COPY
----------------
EXCELSIOR FUNDS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF EXCELSIOR FUNDS, INC.
("EXCELSIOR") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD AT THE
OFFICES OF UNITED STATES TRUST COMPANY OF NEW YORK, 114 WEST 47TH STREET, NEW
YORK, NEW YORK 10036, ON AUGUST 18, 1997 AT 10:00 A.M. (EASTERN TIME).
THE UNDERSIGNED HEREBY APPOINTS _________________________, AND EACH OF
THEM, WITH FULL POWER OF SUBSTITUTION, AS PROXIES OF THE UNDERSIGNED TO VOTE AT
THE ABOVE-STATED SPECIAL MEETING, AND AT ALL ADJOURNMENTS OR POSTPONEMENTS
THEREOF, ALL SHARES OF COMMON STOCK IN THE BELOW REFERENCED FUND HELD OF RECORD
BY THE UNDERSIGNED ON JUNE 2, 1997, THE RECORD DATE FOR THE MEETING, UPON THE
FOLLOWING MATTERS AND UPON ANY OTHER MATTER THAT MAY COME BEFORE THE MEETING, IN
THEIR DISCRETION.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED HEREON
(EXCEPT THAT IF YOU VOTE ON A PROPOSAL REGARDING A FUND OR SHARE CLASS WHICH YOU
ARE NOT A SHAREHOLDER, SUCH VOTE WILL NOT BE COUNTED) AND, IN THE ABSENCE OF
SPECIFICATION WILL BE TREATED AS GRANTING AUTHORITY TO VOTE "FOR" THE
PROPOSALS.
TO VOTE MARK AN X IN BLUE OR BLACK INK ON THE PROXY CARD BELOW. KEEP THIS
PORTION FOR YOUR RECORDS.
_________________________________________________________________
(DETACH HERE AND RETURN THIS PORTION ONLY)
AGING OF AMERICA FUND (RETAIL SHARES) ONLY
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 1. PROPOSAL TO APPROVE THE PLAN OF REORGANIZATION AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING
THE TRANSFER OF ALL OF THE ASSETS AND LIABILITIES
OF EXCELSIOR'S AGING OF AMERICA FUND ("TRANSFEROR
FUND") TO EXCELSIOR'S EQUITY FUND ("SURVIVING
FUND") IN EXCHANGE FOR RETAIL SHARES OF THE
SURVIVING FUND, AND A LIQUIDATING DISTRIBUTION OF
SUCH SHARES TO HOLDERS OF RETAIL SHARES OF THE
TRANSFEROR FUND.
PRODUCTIVITY ENHANCERS FUND (RETAIL SHARES) ONLY
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 2. PROPOSAL TO APPROVE THE PLAN OF REORGANIZATION AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING
THE TRANSFER OF ALL OF THE ASSETS AND LIABILITIES
OF EXCELSIOR'S PRODUCTIVITY ENHANCERS FUND
("TRANSFEROR FUND") TO EXCELSIOR'S EQUITY FUND
("SURVIVING FUND") IN EXCHANGE FOR RETAIL SHARES
OF THE SURVIVING FUND, AND A LIQUIDATING
DISTRIBUTION OF SUCH SHARES TO HOLDERS OF RETAIL
SHARES OF THE TRANSFEROR FUND.
COMMUNICATION AND ENTERTAINMENT FUND (RETAIL SHARES) ONLY
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 3. PROPOSAL TO APPROVE THE PLAN OF REORGANIZATION AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING
THE TRANSFER OF ALL OF THE ASSETS AND LIABILITIES
OF EXCELSIOR'S COMMUNICATION AND ENTERTAINMENT
FUND ("TRANSFEROR FUND") TO EXCELSIOR'S EQUITY
FUND ("SURVIVING FUND") IN EXCHANGE FOR RETAIL
SHARES OF THE SURVIVING FUND, AND A LIQUIDATING
DISTRIBUTION OF SUCH SHARES TO HOLDERS OF RETAIL
SHARES OF THE TRANSFEROR FUND.
GLOBAL COMPETITORS FUND (RETAIL SHARES) ONLY
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 4. PROPOSAL TO APPROVE THE PLAN OF REORGANIZATION AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING
THE TRANSFER OF ALL OF THE ASSETS AND LIABILITIES
OF EXCELSIOR'S GLOBAL COMPETITORS FUND
("TRANSFEROR FUND") TO EXCELSIOR'S EQUITY FUND
("SURVIVING FUND") IN EXCHANGE FOR RETAIL SHARES
OF THE SURVIVING FUND, AND A LIQUIDATING
DISTRIBUTION OF SUCH SHARES TO HOLDERS OF RETAIL
SHARES OF THE TRANSFEROR FUND.
ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND (RETAIL SHARES) ONLY
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 5. PROPOSAL TO APPROVE THE PLAN OF REORGANIZATION AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING
THE TRANSFER OF ALL OF THE ASSETS AND LIABILITIES
OF EXCELSIOR'S ENVIRONMENTALLY-RELATED PRODUCTS
AND SERVICES FUND ("TRANSFEROR FUND") TO
EXCELSIOR'S EQUITY FUND ("SURVIVING FUND") IN
EXCHANGE FOR RETAIL SHARES OF THE SURVIVING FUND,
AND A LIQUIDATING DISTRIBUTION OF SUCH SHARES TO
HOLDERS OF RETAIL SHARES OF THE TRANSFEROR FUND.
AGING OF AMERICA FUND (TRUST SHARES) ONLY
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 6. PROPOSAL TO APPROVE THE PLAN OF REORGANIZATION AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING
THE TRANSFER OF ALL OF THE ASSETS AND LIABILITIES
OF EXCELSIOR'S AGING OF AMERICA FUND ("TRANSFEROR
FUND") TO EXCELSIOR'S EQUITY FUND ("SURVIVING
FUND") IN EXCHANGE FOR TRUST SHARES OF THE
SURVIVING FUND, AND A LIQUIDATING DISTRIBUTION OF
SUCH SHARES TO HOLDERS OF TRUST SHARES OF THE
TRANSFEROR FUND.
<PAGE>
COMMUNICATION AND ENTERTAINMENT FUND (TRUST SHARES) ONLY
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 7. PROPOSAL TO APPROVE THE PLAN OF REORGANIZATION AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING
THE TRANSFER OF ALL OF THE ASSETS AND LIABILITIES
OF EXCELSIOR'S COMMUNICATION AND ENTERTAINMENT
FUND ("TRANSFEROR FUND") TO EXCELSIOR'S EQUITY
FUND ("SURVIVING FUND") IN EXCHANGE FOR TRUST
SHARES OF THE SURVIVING FUND, AND A LIQUIDATING
DISTRIBUTION OF SUCH SHARES TO HOLDERS OF TRUST
SHARES OF THE TRANSFEROR FUND.
GLOBAL COMPETITORS FUND (TRUST SHARES) ONLY
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 8. PROPOSAL TO APPROVE THE PLAN OF REORGANIZATION AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING
THE TRANSFER OF ALL OF THE ASSETS AND LIABILITIES
OF EXCELSIOR'S GLOBAL COMPETITORS FUND
("TRANSFEROR FUND") TO EXCELSIOR'S EQUITY FUND
("SURVIVING FUND") IN EXCHANGE FOR TRUST SHARES OF
THE SURVIVING FUND, AND A LIQUIDATING DISTRIBUTION
OF SUCH SHARES TO HOLDERS OF TRUST SHARES OF THE
TRANSFEROR FUND.
LONG-TERM SUPPLY OF ENERGY FUND (ONLY)
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 9. PROPOSAL
(a) TO APPROVE A CHANGE TO THE FUND'S SUB-
CLASSIFICATION FROM DIVERSIFIED TO NON-
DIVERSIFIED, AND TO ELIMINATE A RELATED
INVESTMENT LIMITATION.
PROPOSAL
FOR AGAINST ABSTAIN (b) TO APPROVE A CHANGE TO THE FUND'S FUNDAMENTAL
[ ] [ ] [ ] INVESTMENT POLICIES TO PERMIT THE FUND TO
INVEST IN PRECIOUS METAL BULLION AND COINS.
PROPOSAL
FOR AGAINST ABSTAIN (c) TO ADOPT A FUNDAMENTAL INVESTMENT POLICY THAT
[ ] [ ] [ ] WILL ALLOW THE FUND TO INVEST MORE THAN 25%
OF THE VALUE OF ITS TOTAL ASSETS IN COMPANIES
IN THE ENERGY AND OTHER NATURAL RESOURCES
INDUSTRIES.
10. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SIGNING AS ATTORNEY OR
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS
SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR
OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP
NAME BY AUTHORIZED PERSON.
________________________
SIGNATURE DATE
-2-
<PAGE>
[LOGO OF EXCELSIOR
FUNDS INC]
A Management Investment Company
- --------------------------------------------------------------------------------
Equity Funds For initial purchase information, current
73 Tremont Street prices, performance information and existing
Boston, MA 02108-3913 account information, call (800) 446-1012.
(From overseas, call (617) 557-8280.)
- --------------------------------------------------------------------------------
This Prospectus describes a series of shares ("Shares") offered by several sep-
arate portfolios offered to investors by Excelsior Funds, Inc. ("Excelsior
Fund") (formerly UST Master Funds, Inc.), an open-end, management investment
company. Excelsior Fund also issues an additional series of shares in certain
of the portfolios ("Trust Shares") which are offered under a separate prospec-
tus. Each portfolio (individually, a "Fund" and collectively, the "Funds") has
its own investment objective and policies as follows:
EQUITY FUND seeks long-term capital appreciation by investing in companies be-
lieved by the Investment Adviser to represent good long-term values not cur-
rently recognized in the market prices of their securities.
INCOME AND GROWTH FUND seeks moderate current income with capital appreciation
as a secondary goal by investing in common stock, preferred stock and securi-
ties convertible into common stock.
LONG-TERM SUPPLY OF ENERGY FUND seeks long-term capital appreciation by in-
vesting in companies which the Investment Adviser believes will benefit from
the availability, development and delivery of secure hydrocarbon and other en-
ergy sources.
PRODUCTIVITY ENHANCERS FUND seeks long-term capital appreciation by investing
in companies which the Investment Adviser believes will benefit from their
roles as innovators, developers and suppliers of goods and services which en-
hance service and manufacturing productivity or companies that are most effec-
tive at obtaining and applying productivity enhancement developments.
ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND seeks long-term capital ap-
preciation by investing in companies which the Investment Adviser believes will
benefit from their provision of products, technologies and services related to
conservation, protection and restoration of the environment.
AGING OF AMERICA FUND seeks long-term capital appreciation by investing in
companies which the Investment Adviser believes will benefit from the changes
occurring in the demographic structure of the U.S. population, particularly its
growing population of individuals over the age of 40.
COMMUNICATION AND ENTERTAINMENT FUND seeks long-term capital appreciation by
investing in companies which the Investment Adviser believes will benefit from
the technological and international transformation of the communications and
entertainment industries, particularly the convergence of information, communi-
cation and entertainment media.
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND seeks long-term capital apprecia-
tion by investing in companies which the Investment Adviser believes will bene-
fit from their restructuring or redeployment of assets and operations in order
to become more competitive or profitable.
GLOBAL COMPETITORS FUND seeks long-term capital appreciation by investing pri-
marily in U.S.-based companies which the Investment Adviser believes will bene-
fit from their position as effective and strong competitors on a global basis.
EARLY LIFE CYCLE FUND seeks long-term capital appreciation by investing in
smaller companies in the earlier stages of their development or larger or more
mature companies engaged in new and higher growth potential operations.
Each of the Funds is sponsored and distributed by Edgewood Services, Inc. and
advised by United States Trust Company of New York (the "Investment Adviser" or
"U.S. Trust").
This Prospectus sets forth concisely the information about the Funds 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 August 1, 1996 and containing additional information about
the Funds 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 FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR EN-
DORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, 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 COR-
PORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY.
AN INVESTMENT IN THE FUNDS 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.
August 1, 1996
<PAGE>
PROSPECTUS SUMMARY
EXCELSIOR FUNDS, INC. is an investment company offering various diversified
investment portfolios with differing objectives and policies. Founded in 1984,
Excelsior Fund currently offers 20 Funds with combined assets of approximately
$2.4 billion. See "Description of Capital Stock."
INVESTMENT ADVISER: United States Trust Company of New York ("U.S. Trust")
serves as the Funds' investment adviser. U.S. Trust offers a variety of spe-
cialized financial and fiduciary services to high-net worth individuals, in-
stitutions and corporations. Excelsior Fund offers investors access to U.S.
Trust's services. See "Management of the Funds--Investment Adviser."
INVESTMENT OBJECTIVES AND POLICIES: Generally, each Fund is a diversified
investment portfolio which invests in equity securities. The Income and Growth
Fund also may invest significantly in bonds. The Funds' investment objectives
and policies are summarized on the cover and explained in greater detail later
in this Prospectus. See "Investment Objectives and Policies," "Portfolio In-
struments and Other Investment Information" and "Investment Limitations."
HOW TO INVEST: The Funds' Shares are offered at their public offering price,
i.e., their net asset value plus a sales load which is subject to substantial
reductions for large purchases and programs for accumulation. The sales load
is not applicable to investors making their investments through a variety of
institutions, such as U.S. Trust, other banks and trust companies. See "How to
Purchase and Redeem Shares."
The minimum to start an account is $500 per Fund, with a minimum of $50 per
Fund 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 investment dealers or institutional investors with appropri-
ate 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: Generally, each 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 de-
clining prices. These cycles will affect the values of each Fund. In addition,
the Long-Term Supply of Energy Fund will normally concentrate its investments
in the crude oil, petroleum and natural gas industry. This Fund will be sus-
ceptible to industry risk, the possibility that a particular group of stocks
will decline in price due to industry-specific developments. Because the Funds
may invest in securities of foreign issuers, they are 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. Because the Income and Growth
Fund also invests in bonds and other fixed-income securities, it will also be
affected directly by fluctuations in interest rates and the credit markets.
Investments in non-investment grade obligations may subject the Income and
Growth Fund to increased risk of loss upon default. Such securities are gener-
ally unsecured, are often subordinated debt and are often issued by entities
with high levels of indebtedness and that are more sensitive to adverse eco-
nomic conditions. Although each Fund generally seeks to invest for the long
term, each Fund may engage in short-term trading of portfolio securities. A
high rate of portfolio turnover may involve correspondingly greater transac-
tion costs which must be borne directly by a Fund and ultimately by its share-
holders. Investment in the Funds should not be considered a complete invest-
ment program. See "Investment Objectives and Policies."
2
<PAGE>
EXPENSE SUMMARY
The following table summarizes the expenses borne by the Shares offered un-
der this Prospectus.
<TABLE>
<CAPTION>
LONG-TERM PRODUCTIVITY ENVIRONMENTALLY-
EQUITY INCOME AND SUPPLY OF ENHANCERS RELATED PRODUCTS
FUND GROWTH FUND ENERGY FUND FUND AND SERVICES FUND
-------- ----------------- -------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load (as a
percentage of offering
price)................. 4.50% 4.50% 4.50% 4.50% 4.50%
Sales Load on Reinvested
Dividends.............. None None None None None
Deferred Sales Load..... None None None None None
Redemption Fees/1/...... None None None None None
Exchange Fees........... None None None None None
ANNUAL FUND OPERATING
EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Advisory Fees (after fee
waivers)/2/............ .68% .69% .55% .55% 0%
12b-1 Fees.............. None None None None None
Other Operating Expenses
Administrative Servic-
ing Fee/2/............ .07% .06% .05% .04% .10%
Other Expenses/2/ (af-
ter fee waivers)...... .30% .30% .36% .39% .89%
----- ----- ----- ----- -----
Total Operating Expenses
(after fee waivers)/2/
....................... 1.05% 1.05% .96% .98% .99%
===== ===== ===== ===== =====
<CAPTION>
BUSINESS
AGING OF COMMUNICATION AND INDUSTRIAL GLOBAL
AMERICA AND ENTERTAINMENT RESTRUCTURING COMPETITORS EARLY LIFE
FUND FUND FUND FUND CYCLE FUND
-------- ----------------- -------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load (as a
percentage of offering
price)................. 4.50% 4.50% 4.50% 4.50% 4.50%
Sales Load on Reinvested
Dividends.............. None None None None None
Deferred Sales Load..... None None None None None
Redemption Fees/1/ ..... None None None None None
Exchange Fees........... None None None None None
ANNUAL FUND OPERATING
EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Advisory Fees (after fee
waivers)/2/ ........... .56% .55% .56% .56% .52%
12b-1 Fees.............. None None None None None
Other Operating Expenses
Administrative Servic-
ing Fee/2/............ .04% .05% .04% .04% .08%
Other Expenses/2/ (af-
ter fee waivers)...... .33% .32% .31% .29% .30%
----- ----- ----- ----- -----
Total Operating Expenses
(after fee waivers)/2/
....................... .93% .92% .91% .89% .90%
===== ===== ===== ===== =====
</TABLE>
- -------
1. The Fund's transfer agent imposes a direct $8.00 charge on each wire re-
demption by noninstitutional (i.e. individual) investors which is not re-
flected in the expense ratios presented herein. Shareholder organizations
may charge their customers transaction fees in connection with redemptions.
See "Redemption 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 Administra-
tors intend to voluntarily waive fees in an amount equal to the Administra-
tive Servicing Fee; and to further waive fees and reimburse expenses to the
extent necessary for Shares of each of the Long-Term Supply of Energy, Pro-
ductivity Enhancers, Environmentally-Related Products and Services, Aging
of America, Communication and Entertainment, Business and Industrial Re-
structuring, Global Competitors and Early Life Cycle Funds (collectively,
the "Theme Funds"), respectively, to maintain an annual expense ratio of
not more than .99%. Without such fee waivers, "Advisory Fees" would be
.75%, .75%, .60%, .60%, .60%, .60%, .60%, .60%, .60% and .60%, and "Total
Operating Expenses" would be 1.12%, 1.11%, 1.09%, 1.06%, 2.46%, .97%, .97%,
.95%, .93% and .98% for the Equity, Income and Growth, Long-Term Supply of
Energy, Productivity Enhancers, Environmentally-Related Products and Serv-
ices, Aging of America, Communication and Entertainment, Business and In-
dustrial Restructuring, Global Competitors and Early Life Cycle Funds, re-
spectively, and "Other Expenses" would be .44%, .42% and 1.76% for the
Long-Term Supply of Energy, Productivity Enhancers and Environmentally-Re-
lated Products and Services Funds, respectively.
3
<PAGE>
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>
Equity Fund.................................... $55 $77 $100 $167
Income and Growth Fund......................... 55 77 100 167
Long-Term Supply of Energy Fund................ 54 74 96 158
Productivity Enhancers Fund.................... 55 75 97 160
Environmentally-Related Products and Services
Fund.......................................... 55 75 97 161
Aging of America Fund.......................... 54 73 94 154
Communication and Entertainment Fund........... 54 73 94 153
Business and Industrial Restructuring Fund..... 54 73 93 152
Global Competitors Fund........................ 54 72 92 150
Early Life Cycle Fund.......................... 54 72 93 151
</TABLE>
The foregoing expense summary and example (based on the maximum sales load
payable on the Shares) are intended to assist investors in understanding the
costs and expenses that an investor in Shares of the Funds will bear directly
or indirectly. The expense summary sets forth advisory and other expenses pay-
able with respect to Shares of the Funds for the fiscal year ended March 31,
1996. For more complete descriptions of the Funds' operating expenses, see
"Management of the Funds" and "Description of Capital Stock" in this Prospectus
and the financial statements and notes incorporated by reference in the State-
ment 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.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables include 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, 1996 (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 each 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.
The Equity, Aging of America, Communication and Entertainment, Business and
Industrial Restructuring, Global Competitors and Early Life Cycle Funds offer
two separate series of shares--Trust Shares and shares of another series of-
fered under this Prospectus. Trust Shares and the Shares offered under this
Prospectus represent equal pro rata interests in each such Fund, except that
Trust Shares bear the additional expense of distribution fees. See "Descrip-
tion of Capital Stock."
EQUITY FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------ ------ ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $21.40 $ 19.17 $ 18.77 $ 16.28 $14.13 $13.87 $13.22 $11.32 $ 13.56 $12.35
------- ------- ------- ------- ------ ------ ------ ------ -------- ------
Income From Investment
Operations
Net Investment Income.. 0.12 0.07 0.05 0.08 0.13 0.28 0.34 0.19 0.15 0.18
Net Gains or (Losses)
on Securities
(both realized and
unrealized)........... 5.21 2.67 1.16 3.01 2.23 0.39 1.26 1.88 (1.63) 1.86
------- ------- ------- ------- ------ ------ ------ ------ -------- ------
Total From Investment
Operations............ 5.33 2.74 1.21 3.09 2.36 0.67 1.60 2.07 (1.48) 2.04
------- ------- ------- ------- ------ ------ ------ ------ -------- ------
Less Distributions
Dividends From Net
Investment Income..... (0.11) (0.04) (0.08) (0.09) (0.21) (0.23) (0.34) (0.17) (0.14) (0.18)
Dividends in Excess of
Net Investment Income. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions From Net
Realized Gain on
Investments and
Options............... (2.19) (0.47) (0.39) (0.51) 0.00 (0.18) (0.61) 0.00 (0.62) (0.65)
Distributions in Excess
of Net Realized Gain
on Investments and
Options............... 0.00 0.00 (0.34) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------ ------ ------ ------ -------- ------
Total Distributions.... (2.30) (0.51) (0.81) (0.60) (0.21) (0.41) (0.95) (0.17) (0.76) (0.83)
------- ------- ------- ------- ------ ------ ------ ------ -------- ------
Net Asset Value, End of
Period................. $24.43 $ 21.40 $ 19.17 $ 18.77 $16.28 $14.13 $13.87 $13.22 $ 11.32 $13.56
======= ======= ======= ======= ====== ====== ====== ====== ======== ======
Total Return/1/ ........ 26.45% 14.65% 6.54% 19.26% 16.87% 5.11% 11.98% 18.52% (11.24)% 17.61%
Ratios/Supplemental Data
Net Assets, End of
Period (in millions).. $188.57 $137.42 $122.26 $106.14 $71.62 $29.87 $25.98 $17.61 $ 13.58 $13.40
Ratio of Net Operating
Expenses to Average
Net Assets............ 1.05% 1.05% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.21%
Ratio of Gross
Operating Expenses to
Average
Net Assets/2/ ........ 1.12% 1.08% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.30%
Ratio of Net Investment
Income to Average
Net Assets............ 0.55% 0.36% 0.25% 0.51% 0.87% 2.21% 2.45% 1.62% 1.26% 1.53%
Portfolio Turnover
Rate.................. 27.0% 23.0% 17.0% 24.0% 20.0% 41.0% 53.0% 46.0% 67.0% 86.0%
</TABLE>
- -------
NOTES:
1. Total return data does not reflect the sales load payable on purchases of
Shares.
2. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
5
<PAGE>
INCOME AND GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987/1/
------- ------ ------ ------ ------ ------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 11.82 $11.94 $11.45 $ 9.10 $ 8.36 $ 8.84 $ 9.09 $ 8.12 $ 8.95 $ 8.00
------- ------ ------ ------ ------ ------- ------ ------ ------- ------
Income From Investment
Operations
Net Investment Income.. 0.39 0.38 0.31 0.27 0.30 0.29 0.40 0.28 0.44 0.06
Net Gains or (Losses)
on Securities
(both realized and
unrealized)........... 2.61 0.26 0.46 2.43 0.72 (0.43) 0.19 1.15 (0.93) 0.89
------- ------ ------ ------ ------ ------- ------ ------ ------- ------
Total From Investment
Operations............ 3.00 0.64 0.77 2.70 1.02 (0.14) 0.59 1.43 (0.49) 0.95
------- ------ ------ ------ ------ ------- ------ ------ ------- ------
Less Distributions
Dividends From Net
Investment Income..... (0.31) (0.35) (0.27) (0.35) (0.28) (0.34) (0.39) (0.46) (0.21) 0.00
Dividends in Excess of
Net Investment Income. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions From Net
Realized Gain on
Investments and
Options............... (0.06) (0.41) (0.01) 0.00 0.00 0.00 (0.45) 0.00 (0.13) 0.00
Distributions in Excess
of Net Realized Gain
on Investments and
Options............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------ ------ ------ ------ ------- ------ ------ ------- ------
Total Distributions.... (0.37) (0.76) (0.28) (0.35) (0.28) (0.34) (0.84) (0.46) (0.34) 0.00
------- ------ ------ ------ ------ ------- ------ ------ ------- ------
Net Asset Value, End of
Period................. $ 14.45 $11.82 $11.94 $11.45 $ 9.10 $ 8.36 $ 8.84 $ 9.09 $ 8.12 $ 8.95
======= ====== ====== ====== ====== ======= ====== ====== ======= ======
Total Return/2/......... 25.83% 5.74% 6.69% 30.45% 12.42% (1.30%) 6.14% 18.36% (5.43%) 11.88%
Ratios/Supplemental Data
Net Assets, End of
Period (in millions).. $127.50 $99.93 $96.68 $51.30 $23.25 $ 19.59 $23.66 $14.62 $ 6.66 $ 3.71
Ratio of Net Operating
Expenses to Average
Net Assets............ 1.05% 1.06% 1.17% 1.15% 1.23% 1.28% 1.24% 1.22% 1.27% 1.13%/3/
Ratio of Gross
Operating Expenses to
Average
Net Assets/4/......... 1.11% 1.09% 1.17% 1.15% 1.23% 1.28% 1.24% 1.22% 1.27% 1.84%/3/
Ratio of Net Investment
Income to Average
Net Assets............ 2.95% 3.31% 2.77% 2.76% 3.52% 3.64% 4.47% 4.09% 6.20% 4.25%/3/
Portfolio Turnover
Rate.................. 22.0% 36.0% 28.0% 28.0% 81.0% 148.0% 29.0% 24.0% 27.0% 7.0%/3/
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was January 6, 1987.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
6
<PAGE>
LONG-TERM SUPPLY OF ENERGY FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $ 7.92 $ 7.70 $ 7.81 $ 7.00
------ ------ ------- ------
Income From Investment Operations
Net Investment Income............. 0.07 0.09 0.08 0.01
Net Gains or (Losses) on
Securities (both realized and
unrealized)...................... 1.63 0.24 (0.12) 0.80
------ ------ ------- ------
Total From Investment Operations.. 1.70 0.33 (0.04) 0.81
------ ------ ------- ------
Less Distributions
Dividends From Net Investment
Income........................... (0.07) (0.10) (0.07) 0.00
Dividends in Excess of Net
Investment Income................ 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options.. 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
------ ------ ------- ------
Total Distributions............... (0.07) (0.11) (0.07) 0.00
------ ------ ------- ------
Net Asset Value, End of Period...... $ 9.55 $ 7.92 $ 7.70 $ 7.81
====== ====== ======= ======
Total Return/2/..................... 21.60% 4.28% (0.57)% 11.57%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)........................ $23.29 $15.81 $ 6.83 $ 1.46
Ratio of Net Operating Expenses to
Average Net Assets............... 0.96% 0.98% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/......... 1.09% 1.35% 2.03% 7.03%/3/
Ratio of Net Investment Income to
Average Net Assets............... 0.88% 1.18% 1.21% 1.69%/3/
Portfolio Turnover Rate........... 43.0% 31.0% 6.0% 0%
</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.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
7
<PAGE>
PRODUCTIVITY ENHANCERS FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------- ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $ 8.12 $ 7.88 $ 6.94 $ 7.00
------ ------- ------ -------
Income From Investment Operations
Net Investment Income............. 0.02 (0.01) 0.00 0.01
Net Gains or (Losses) on
Securities (both realized and
unrealized)...................... 2.12 0.35 0.96 (0.07)
------ ------- ------ -------
Total From Investment Operations.. 2.14 0.34 0.96 (0.06)
------ ------- ------ -------
Less Distributions
Dividends From Net Investment
Income........................... (0.02) 0.00 0.00 0.00
Dividends in Excess of Net
Investment Income................ (0.01) 0.00 (0.02) 0.00
Distributions From Net Realized
Gain on Investments and Options.. (1.40) (0.10) 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options.......................... 0.00 0.00 0.00 0.00
------ ------- ------ -------
Total Distributions............... (1.43) (0.10) (0.02) 0.00
------ ------- ------ -------
Net Asset Value, End of Period...... $ 8.83 $ 8.12 $ 7.88 $ 6.94
====== ======= ====== =======
Total Return/2/..................... 26.97% 4.45% 13.81% (0.86)%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)........................ $29.07 $ 18.27 $15.70 $ 3.37
Ratio of Net Operating Expenses to
Average Net Assets............... 0.98% 0.99% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/......... 1.06% 1.21% 1.49% 4.23%/3/
Ratio of Net Investment
Income/(Loss) to Average Net
Assets........................... 0.20% (0.10)% 0.01% 1.29%/3/
Portfolio Turnover Rate........... 472.0% 276.0% 198.0% 183.0%/3/
</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.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
8
<PAGE>
ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------- ------- -------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $ 6.21 $ 6.24 $ 6.95 $ 7.00
------- ------- -------- -------
Income From Investment Operations
Net Investment Loss............ (0.02) (0.01) 0.00 0.00
Net Gains or (Losses) on
Securities (both realized and
unrealized)................... 1.54 (0.01) (0.71) (0.05)
------- ------- -------- -------
Total From Investment
Operations.................... 1.52 (0.02) (0.71) (0.05)
------- ------- -------- -------
Less Distributions
Dividends From Net Investment
Income........................ 0.00 0.00 0.00 0.00
Dividends in Excess of Net
Investment Income............. 0.00 (0.01) 0.00 0.00
Distributions From Net Realized
Gain on Investments and
Options....................... 0.00 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options................... 0.00 0.00 0.00 0.00
------- ------- -------- -------
Total Distributions............ 0.00 (0.01) 0.00 0.00
------- ------- -------- -------
Net Asset Value, End of Period... $ 7.73 $ 6.21 $ 6.24 $ 6.95
======= ======= ======== =======
Total Return/2/.................. 24.48% (0.27)% (10.15)% (0.71)%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)..................... $ 3.95 $ 4.36 $ 4.53 $ 2.45
Ratio of Net Operating Expenses
to Average Net Assets......... 0.99% 0.99% 0.99% 0.99%/3/
Ratio of Gross Operating
Expenses to Average Net
Assets/4/..................... 2.46% 2.42% 2.20% 2.83%/3/
Ratio of Net Investment
Income/(Loss) to Average Net
Assets........................ (0.18)% (0.10)% (0.07)% 0.32%/3/
Portfolio Turnover Rate........ 64.0% 61.0% 28.0% 0%
</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.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
9
<PAGE>
AGING OF AMERICA FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------- ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $ 7.84 $ 6.99 $ 7.01 $7.00
------- ------ ------ -----
Income From Investment Operations
Net Investment Income............. 0.05 0.04 0.03 0.01
Net Gains or (Losses) on
Securities (both realized and
unrealized)...................... 1.97 0.85 (0.02) 0.00
------- ------ ------ -----
Total From Investment Operations.. 2.02 0.89 0.01 0.01
------- ------ ------ -----
Less Distributions
Dividends From Net Investment
Income........................... (0.05) (0.04) (0.03) 0.00
Dividends in Excess of Net
Investment Income................ 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options.. 0.00 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options...................... 0.00 0.00 0.00 0.00
------- ------ ------ -----
Total Distributions............... (0.05) (0.04) (0.03) 0.00
------- ------ ------ -----
Net Asset Value, End of Period...... $ 9.81 $ 7.84 $ 6.99 $7.01
======= ====== ====== =====
Total Return/2/..................... 25.80% 12.80% 0.13% 0.14%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)........................ $ 44.79 $22.17 $10.58 $2.39
Ratio of Net Operating Expenses to
Average Net Assets............... 0.93% 0.99% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/......... 0.97% 1.26% 1.82% 3.87%/3/
Ratio of Net Investment Income to
Average Net Assets............... 0.54% 0.63% 0.59% 0.77%/3/
Portfolio Turnover Rate........... 34.0% 14.0% 24.0% 14.0%/3/
</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.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
10
<PAGE>
COMMUNICATION AND ENTERTAINMENT FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 9.64 $ 8.75 $ 7.61 $7.00
------ ------ ------ -----
Income From Investment Operations
Net Investment Income.............. 0.03 0.04 0.02 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 1.30 1.06 1.52 0.60
------ ------ ------ -----
Total From Investment Operations... 1.33 1.10 1.54 0.61
------ ------ ------ -----
Less Distributions
Dividends From Net Investment
Income............................ (0.03) (0.04) (0.03) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... (0.62) (0.17) (0.37) 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options....................... 0.00 0.00 0.00 0.00
------ ------ ------ -----
Total Distributions................ (0.65) (0.21) (0.40) 0.00
------ ------ ------ -----
Net Asset Value, End of Period....... $10.32 $ 9.64 $ 8.75 $7.61
====== ====== ====== =====
Total Return/2/...................... 13.48% 12.87% 20.07% 8.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $46.95 $29.91 $21.02 $5.79
Ratio of Net Operating Expenses to
Average Net Assets................ 0.92% 0.98% 0.98% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 0.97% 1.06% 1.16% 2.20%/3/
Ratio of Net Investment Income to
Average Net Assets................ 0.28% 0.46% 0.29% 1.06%/3/
Portfolio Turnover Rate............ 65.0% 56.0% 60.0% 25.0%/3/
</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.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
11
<PAGE>
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $10.55 $ 9.64 $ 7.71 $ 7.00
------ ------ ------ -------
Income From Investment Operations
Net Investment Income.............. 0.10 0.07 0.06 0.02
Net Gains or (Losses) on Securities
(both realized and unrealized).... 3.71 1.02 1.96 0.69
------ ------ ------ -------
Total From Investment Operations... 3.81 1.09 2.02 0.71
------ ------ ------ -------
Less Distributions
Dividends From Net Investment
Income............................ (0.09) (0.06) (0.07) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... (0.24) (0.12) (0.02) 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options....................... 0.00 0.00 0.00 0.00
------ ------ ------ -------
Total Distributions................ (0.33) (0.18) (0.09) 0.00
------ ------ ------ -------
Net Asset Value, End of Period....... $14.03 $10.55 $ 9.64 $ 7.71
====== ====== ====== =======
Total Return/2/...................... 36.48% 11.49% 26.40% 10.14%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $74.05 $30.18 $14.44 $ 1.94
Ratio of Net Operating Expenses to
Average Net Assets................ 0.91% 0.98% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 0.95% 1.08% 1.73% 5.85%3
Ratio of Net Investment Income to
Average Net Assets................ 0.88% 0.83% 0.77% 2.48%/3/
Portfolio Turnover Rate............ 56.0% 82.0% 75.0% 9.0%/3/
</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.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
12
<PAGE>
GLOBAL COMPETITORS FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 8.59 $ 7.69 $ 7.28 $7.00
------ ------ ------ -----
Income From Investment Operations
Net Investment Income.............. 0.07 0.07 0.05 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 2.27 0.90 0.41 0.27
------ ------ ------ -----
Total From Investment Operations... 2.34 0.97 0.46 0.28
------ ------ ------ -----
Less Distributions
Dividends from Net Investment
Income............................ (0.06) (0.07) (0.05) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions from Net Realized
Gain on Investments and Options... (0.02) 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options....................... (0.02) 0.00 0.00 0.00
------ ------ ------ -----
Total Distributions................ (0.10) (0.07) (0.05) 0.00
------ ------ ------ -----
Net Asset Value, End of Period....... $10.83 $ 8.59 $ 7.69 $7.28
====== ====== ====== =====
Total Return/2/...................... 27.39% 12.73% 6.29% 4.00%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $71.30 $25.50 $10.06 $2.04
Ratio of Net Operating Expenses to
Average Net Assets................ 0.89% 0.97% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 0.93% 1.18% 1.72% 3.97%/3/
Ratio of Net Investment Income to
Average Net Assets................ 0.73% 1.04% 0.81% 0.82%/3/
Portfolio Turnover Rate............ 17.0% 29.0% 19.0% 0%
</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.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
13
<PAGE>
EARLY LIFE CYCLE FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 9.77 $ 8.66 $ 7.40 $7.00
------- ------- ------- -----
Income From Investment Operations
Net Investment Income........... (0.02) (0.02) (0.01) 0.00
Net Gains or (Losses) on
Securities (both realized and
unrealized).................... 1.72 1.31 1.36 0.40
------- ------- ------- -----
Total From Investment
Operations..................... 1.70 1.29 1.35 0.40
------- ------- ------- -----
Less Distributions
Dividends From Net Investment
Income......................... 0.00 0.00 0.00 0.00
Dividends in Excess of Net
Investment Income.............. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and
Options........................ (0.69) (0.18) (0.09) 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options.................... 0.00 0.00 0.00 0.00
------- ------- ------- -----
Total Distributions............. (0.69) (0.18) (0.09) 0.00
------- ------- ------- -----
Net Asset Value, End of Period.... $ 10.78 $ 9.77 $ 8.66 $7.40
======= ======= ======= =====
Total Return/2/................... 18.29% 15.16% 18.27% 5.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)...................... $ 78.06 $ 47.78 $ 24.95 $5.51
Ratio of Net Operating Expenses
to Average Net Assets.......... 0.90% 0.96% 0.95% 0.99%/3/
Ratio of Gross Operating
Expenses to Average Net
Assets/4/...................... 0.98% 1.04% 1.15% 2.70%/3/
Ratio of Net Investment
Income/(Loss) to Average Net
Assets......................... (0.17)% (0.23)% (0.25)% 0.12%/3/
Portfolio Turnover Rate......... 38.0% 42.0% 20.0% 4.0%/3/
</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.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
14
<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 Funds, 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 Funds 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.
Themes. To complete U.S. Trust's investment philosophy, the three portfolio
strategies discussed above are applied in concert with several "longer-term
investment themes" to identify investment opportunities. The Investment Ad-
viser believes these longer-term themes represent strong and inexorable
trends. The Investment Adviser also believes that understanding the instiga-
tion, catalysts and effects of these longer-term trends should help to iden-
tify companies that are beneficiaries of these trends.
INVESTMENT OBJECTIVES AND POLICIES
The Investment Adviser will use its best efforts to achieve the investment
objective of each Fund, although their achievement cannot be assured. The in-
vestment objective of each Fund is "fundamental," meaning that it may not be
changed without a vote of the holders of a majority of the particular Fund's
outstanding shares (as defined under "Miscellaneous"). Except as noted below
in "Investment Limitations," the investment policies of each Fund may be
changed without a vote of the holders of a majority of the outstanding shares
of such Fund.
15
<PAGE>
EQUITY FUND
The Equity Fund's investment objective is to seek long-term capital apprecia-
tion. The Equity Fund invests in companies which the Investment Adviser be-
lieves have value currently not recognized in the market prices of the compa-
nies' securities. The Investment Adviser uses the investment philosophy,
strategies and themes discussed above to identify such investment values and
to diversify the Fund's investments over a variety of industries and types of
companies. See "Investment Policies Common to the Equity Fund and the Theme
Funds" for a discussion of various investment policies applicable to the Eq-
uity Fund.
THEME FUNDS
Eight Theme Funds are offered having the common investment objective of long-
term capital appreciation. As noted above, these Theme Funds are based on
themes identified and followed by the Investment Adviser. Each Theme Fund's
key policies are discussed below. Additional policies common to all Theme
Funds are discussed after this section.
LONG-TERM SUPPLY OF ENERGY FUND--invests in companies which the Investment
Adviser believes will benefit from the availability, development and delivery
of secure hydrocarbon and other energy sources. Such companies include those
engaged in the following types of activities: the production, transmission,
marketing, control or measurement of energy or fuels; providing products or
services to companies engaged in such activities; energy-related research, ex-
perimentation and consulting; and environmental activities such as pollution
control and energy conservation. Included in such companies are oil and gas
production and pipeline companies; drilling and drilling service companies;
electric and gas utilities; and other energy resource companies such as coal
producers and newer resources such as geothermal and solar energy producers.
Normally, at least 25% of the Fund's assets will be invested in the crude oil,
petroleum and natural gas industry. However, less than that amount may be so
invested if there have been changes in governmental regulations, world eco-
nomic and political events, exploration or production spending; or supply, de-
mand 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 companies in that industry. Under normal condi-
tions, at least 65% of the Fund's total assets will be invested in companies
of the type described in this paragraph.
Among the characteristics the Investment Adviser currently looks for in en-
ergy and energy-related investments are companies or energy sources which the
Investment Adviser believes are:
- - dedicated to producing supplies of energy at economically acceptable cost;
- - located in politically and economically stable or "secure" areas, i.e, sub-
ject only to minimal risk of disruption for political or ideological rea-
sons, or by economic "warfare" or systemic economic weakness;
- - available in continuous, sufficient quantity to be reliable and economically
significant; and
- - involved in energy which is easily and economically transportable and dis-
tributable to where it is consumed.
PRODUCTIVITY ENHANCERS FUND--invests in companies which the Investment Ad-
viser believes will benefit from their roles as innovators, developers and
suppliers of goods and services which enhance service and manufacturing pro-
ductivity or companies that are most effective at obtaining and applying pro-
ductivity enhancement developments. The essential criteria for such products
and services is that they have the ability to increase a user's productivity,
e.g., enable the user to generate equal or greater economic value at lower to-
tal unit cost than alternatives or provide measurable improvement of produc-
tivity by the provider or the user. Such companies may include but are not
limited to production automation manufacturers, computer hardware and software
producers and distributors, communications and mobile telephone providers, and
companies involved with cost control, asset redeployment and downsizing activ-
ities and enhancing the
16
<PAGE>
utilization of technology. Under normal conditions, at least 65% of the Fund's
total assets will be invested in companies of the type described in this para-
graph.
ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND--invests in companies
which the Investment Adviser believes will benefit from their provision of
products, technologies and services related to conservation, protection and
restoration of the environment. Such companies may include but are not limited
to companies engaged in waste management and pollution control, prevention and
cleanup activities. The Fund is not intended to be an "environmentally cor-
rect" fund and may invest in companies without regard to whether they are en-
gaged in operations harmful to the environment. Under normal conditions, at
least 65% of the Fund's total assets will be invested in companies of the type
described in this paragraph.
The Fund may also invest a portion of its assets in securities of companies
that offer products and services used by individuals in response to ecological
concerns and concerns relating to their social environment. Such investments
may include, without limitation, securities of companies that produce protec-
tive clothing, sunscreens and personal security products.
AGING OF AMERICA FUND--invests in companies which the Investment Adviser be-
lieves will benefit from the changes occurring in the demographic structure of
the U.S. population, particularly its growing proportion of individuals over
the age of 40. In analyzing companies for this Fund, the Investment Adviser
considers carefully the ongoing changes in the mean and median ages of the
U.S. population and the resulting effects on the lifestyles and day-to-day
economic actions of the population as a whole. Companies currently positioned
to benefit from such changes include health care, pharmaceutical, biotechnol-
ogy and similar health-related firms. In addition, certain clothing, financial
services, entertainment, real estate and housing, food and beverage and other
types of companies may be positioned to benefit from the demographic changes.
Under normal conditions, at least 65% of the Fund's total assets will be in-
vested in companies of the type described in this paragraph.
COMMUNICATION AND ENTERTAINMENT FUND--invests in companies which the Invest-
ment Adviser believes will benefit from the technological and international
transformation of the communications and entertainment industries, particu-
larly the convergence of information, communication and entertainment media.
Such companies may include those engaged in the development, production, sale
and distribution of products or services in the broadcast, radio and televi-
sion, leisure, entertainment, amusement, publishing, telecommunications serv-
ices and equipment, and telephone utilities industries. In analyzing companies
for investment, the Investment Adviser may focus on firms which the Investment
Adviser believes are innovators of or will benefit from the melding of comput-
er, communications and entertainment technologies. Under normal conditions, at
least 65% of the Fund's total assets will be invested in companies of the type
described in this paragraph.
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND--invests in companies which the
Investment Adviser believes will benefit from their restructuring or redeploy-
ment of assets and operations in order to become more competitive or profit-
able. Such companies may include those involved in prospective mergers, con-
solidations, liquidations, spin-offs, financial restructurings and reorganiza-
tions. The business activities of such companies are not limited in any way.
Under normal conditions, at least 65% of the Fund's total assets will be in-
vested in companies of the type described in this paragraph. The Investment
Adviser's focus is to find companies whose restructuring activities offer sig-
nificant value and investment potential. For the past several years, leveraged
buy-outs and mergers have been prominent trends. Currently, a great deal of
value is being created as companies deleverage, recapitalize, and rationalize
their operations in order to increase profitability. There is risk in these
types of investments. For example, should a company be unsuccessful in reduc-
ing its debt, it may be forced into default on its debt, increasing its debt
or bankruptcy.
17
<PAGE>
GLOBAL COMPETITORS FUND--invests primarily in U.S.-based companies which the
Investment Adviser believes will benefit from their position as effective and
strong competitors on a global basis. Such companies are characterized by their
ability to supply something unique or of greater value, or to deliver goods and
services more efficiently or reliably. These companies develop and implement
international marketing strategies for their goods and services. The range of
businesses encompassed by this policy is broad and, by way of example, may in-
clude companies engaged in soft drink production and sales, clothing manufac-
turers, tobacco product producers, precision instrument and aerospace provid-
ers, and a variety of communications systems, biotechnology and high technology
suppliers. While the Fund will invest primarily in U.S.-based companies with
such features, up to 20% of the Fund's assets may be invested in non-U.S.-based
global competitors. The Fund will not engage in currency hedging in an attempt
to anticipate currency fluctuations with respect to any such foreign invest-
ments. Under normal conditions, the Fund will invest in securities of issuers
from at least three countries and at least 65% of the Fund's total assets will
be invested in companies of the type described in this paragraph.
EARLY LIFE CYCLE FUND--invests primarily in smaller companies which are in the
earlier stages of their development or larger or more mature companies engaged
in new and higher growth potential operations. An early life cycle company is
one which is early in its development as a company, yet has demonstrated or is
expected to achieve substantial long-term earnings growth. More mature or larg-
er, established companies may also be positioned for accelerating earnings be-
cause of rejuvenated management, new products, new markets for existing prod-
ucts or structural changes in the economy. In selecting companies for invest-
ment, the Investment Adviser looks for innovative companies whose potential has
not yet been fully recognized by the securities markets. Under normal condi-
tions, at least 65% of the Fund's total assets will be invested in companies
with capitalization of $1 billion or less. The risk and venture oriented nature
of such companies naturally entails greater risk for investors when contrasted
with investing in more established companies.
INVESTMENT POLICIES COMMON TO THE EQUITY FUND AND THE THEME FUNDS
Under normal market and economic conditions, the Equity and each Theme Fund
will invest at least 65% of its total assets in common stock, preferred stock
and securities convertible into common stock. Normally, up to 35% of each such
Fund's total assets may be invested in other securities and instruments includ-
ing, e.g., other investment-grade debt securities, warrants, options, and
futures instruments as described in more detail below. During temporary defen-
sive periods or when the Investment Adviser believes that suitable stocks or
convertible securities are unavailable, each Fund may hold cash or invest some
or all of its assets in U.S. Government securities, high-quality money market
instruments and repurchase agreements collateralized by the foregoing obliga-
tions.
In managing the Equity and Theme Funds, the Investment Adviser seeks to pur-
chase securities having value currently not recognized in the market price of a
security, consistent with the strategies discussed above.
Portfolio holdings will include common stocks of companies having capitaliza-
tions of varying amounts, and all Funds 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. As discussed above,
the Early Life Cycle Fund emphasizes such companies. Certain securities owned
by the Equity and Theme Funds may be traded only in the over-the-counter market
or on a regional securities exchange, may be listed only in the quotation serv-
ice commonly 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 a Fund's Shares, and a Fund
may be required, in order to meet redemptions or for other
18
<PAGE>
reasons, to sell these securities at a discount from market prices, to sell
during periods when such disposition is not desirable, or to make many small
sales over a period of time.
The Equity and Theme Funds may invest in the securities of foreign issuers.
The Funds may invest indirectly in the securities of foreign issuers through
sponsored and unsponsored American Depository Receipts ("ADRs"). ADRs represent
receipts typically issued by a U.S. bank or trust company which evidence owner-
ship of underlying securities of foreign issuers. Investments in unsponsored
ADRs involve additional risk because financial information based on generally
accepted accounting principles ("GAAP") may not be available for the foreign
issuers of the underlying securities. ADRs may not necessarily be denominated
in the same currency as the underlying securities into which they may be con-
verted.
INCOME AND GROWTH FUND
The Income and Growth Fund has two investment objectives. Its primary invest-
ment objective is to seek to provide moderate current income and then, as a
secondary objective, to achieve capital appreciation from its investments. In
attempting to achieve these two objectives, the Income and Growth Fund invests,
during normal market and economic conditions, a substantial portion of its as-
sets in common stock, preferred stock and securities convertible into common
stock. The Fund's investments in equity securities will be income-oriented, and
it is expected that a portion of its assets will be invested on a regular basis
in debt obligations.
The Fund may invest in the securities of foreign issuers. The Fund may also
invest indirectly in the securities of foreign issuers through sponsored and
unsponsored ADRs. For information on ADRs, see "Investment Policies Common to
the Equity Fund and the Theme Funds."
In managing the equity portion of the Income and Growth Fund, the Investment
Adviser will generally select securities that are expected to pay dividends and
other distributions which will result in moderate current income when added to
the income from the Fund's non-equity investments. As a general matter, the In-
vestment Adviser will use the three strategies described above in "U.S. Trust's
Investment Philosophy and Strategies"--problem/opportunity, transaction value,
and early life cycle. In applying these strategies, however, the Investment Ad-
viser will place greater emphasis on the current and anticipated income of par-
ticular securities and lesser emphasis on the potential for capital apprecia-
tion. As a result, the Income and Growth Fund can be expected to have a rela-
tively smaller proportion of its assets invested in common shares of early life
cycle companies than the Equity Fund or other Theme Funds. The Investment Ad-
viser may also purchase equity securities for the Income and Growth Fund from
time to time without regard to the strategies outlined above if it determines
that the purchase is in furtherance of the Fund's investment objectives.
Debt obligations may be acquired by the Income and Growth Fund to produce in-
come and (under certain conditions) capital appreciation, and may include both
convertible and non-convertible corporate and government bonds, debentures,
money market instruments, repurchase agreements collateralized by U.S. Govern-
ment obligations, and other types of instruments listed in the next paragraph.
Except as stated below, investments in debt obligations will be limited to
those that are considered to be investment grade-i.e., debt obligations classi-
fied within the four highest ratings of Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Group ("S&P") or, if unrated, which
are determined by the Investment Adviser to be of comparable quality. However,
the Investment Adviser may at any time acquire other, non-investment grade ob-
ligations when it believes that their investment characteristics make them de-
sirable acquisitions for the Income and Growth Fund in light of its investment
objectives and current portfolio mix, so long as, under normal market and eco-
nomic conditions, no more than 5% of the Fund's total assets are invested in
non-investment grade debt obligations.
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Notwithstanding the foregoing, the Fund may invest up to 35% of its total as-
sets in non-investment grade convertible debt obligations. Non-investment grade
obligations (those that are rated "Ba" or lower by Moody's and, at the same
time, "BB" or lower by S&P or unrated obligations), commonly referred to as
"junk bonds", have speculative characteristics. Risks associated with lower-
rated debt securities are (a) the relative youth and growth of the market for
such securities, (b) the sensitivity of such securities to interest rate and
economic changes, (c) the lower degree of protection of principal and interest
payments, (d) the relatively low trading market liquidity for the securities,
(e) the impact that legislation may have on the high yield bond market (and, in
turn, on the Fund's net asset value and investment practices), and (f) the
creditworthiness of the issuers of such securities. During an economic downturn
or substantial period of rising interest rates, highly leveraged issuers may
experience financial stress which would adversely effect their ability to serv-
ice their principal and interest payment obligations, to meet projected busi-
ness goals and to obtain additional financing. An economic downturn could also
disrupt the market for lower-rated bonds and adversely effect the value of out-
standing bonds and the ability of the issuers to repay principal and interest.
If the issuer of a debt obligation held by the Fund defaulted, the Fund could
incur additional expenses to seek recovery. Adverse publicity and investor per-
ceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of lower-rated securities held by the Fund, especially in
a thinly traded market.
Debt obligations rated "BB," "B" or "CCC" by S&P are regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" represents the
lowest degree of speculation and "CCC" 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 condi-
tions. The rating "CC" is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating. The rating "C" is typically
applied to debt subordinated to senior debt which is assigned an actual or im-
plied "CCC-" debt rating, and may be used to cover a situation where a bank-
ruptcy petition has been filed, but debt service payments are continued. The
rating "CI" is reserved for income bonds on which no interest is being paid.
Debt obligations rated "D" are in default, and payments of interest and/or re-
payment of principal is in arrears. The ratings from "AA" through "CCC" are
sometimes modified by the addition of a plus or minus sign to show relative
standing within the major rating categories. Moody's has a similar classifica-
tion scheme for non-investment grade debt obligations. Debt obligations rated
"Ba," "B," "Caa," "Ca" and "C" provide questionable protection of interest and
principal. The rating "Ba" indicates that a debt obligation has some specula-
tive characteristics. The rating "B" indicates a general lack of characteris-
tics of desirable investment. Debt obligations rated "Caa" are of poor quality,
while debt obligations rated "Ca" are considered highly speculative. "C" repre-
sents the lowest rated class of debt obligations. Moody's applies numerical
modifiers 1, 2 and 3 in each generic classification from "Aa" to "B" in its
bond rating system. The modifier "1" indicates that a security ranks in the
higher end of its rating category; the modifier "2" reflects a mid-range rank-
ing; and the modifier "3" indicates that the security ranks at the lower end of
its generic rating category.
In addition, the Income and Growth Fund may invest up to 10% of its total as-
sets in other types of instruments, including warrants, options and other
rights to purchase securities; liquidating trust receipts; limited partnership
interests; certificates of beneficial ownership; creditor claims; and loan par-
ticipations. Such instruments may represent ownership or creditor interests in
a wide range of assets or businesses, and may be acquired by the Income and
Growth Fund for either income purposes (as would normally be the case with in-
struments such as liquidating trust receipts) or capital appreciation (as would
be the case with warrants and options). In certain instances, there may be
20
<PAGE>
no established market for such instruments. The Income and Growth Fund will,
however, at no time invest more than 10% of the value of its net assets in se-
curities that are illiquid or for which market quotations are not readily
available. Further, certain of these instruments may have speculative charac-
teristics. For example, certain instruments may be issued by companies that
are insolvent or have otherwise defaulted on their debt obligations. Such com-
panies may be involved in bankruptcy reorganization proceedings. Warrants and
options acquired by the Income and Growth Fund are subject to the possible
loss of the entire premium paid by the Fund if the market price of the under-
lying security falls below the exercise price. The Investment Adviser will
purchase such obligations only when it determines that the potential return
justifies the attendant risks. The investment features of the foregoing in-
struments and investment risks involving their acquisition are described fur-
ther in the Statement of Additional Information. Additionally, some of the
instruments described above may not be "securities" or may not produce quali-
fying income for purposes of the provisions of the Internal Revenue Code of
1986, as amended, applicable to investment companies. See "Taxes--Federal" be-
low for a discussion of such provisions.
RISK FACTORS
Each Fund is subject to market risk, interest rate risk and in some cases in-
dustry 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 each Fund. In addition, the
prices of bonds and other debt instruments generally fluctuate inversely with
interest rate changes. Factors affecting debt securities will affect all of
the Funds' debt holdings.
The Long-Term Supply of Energy Fund will normally concentrate its investments
in the crude oil, petroleum and natural gas industry. Accordingly, it will be
susceptible to industry risk, the possibility that a particular group of
stocks will decline in price due to industry-specific developments.
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, governmental regulation, and
world economic and political events. In addition, utilities firms in the en-
ergy field are subject to a variety of factors affecting the public utilities
industries, including: difficulty obtaining adequate returns on invested capi-
tal which are typically subject to the control and scrutiny of public service
commissions; restrictions on operations and increased costs and delays as a
result of environmental considerations; costs of and ability to secure financ-
ing 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, governmental approval and environmen-
tal aspects of nuclear power facilities.
Environmentally-related investments are affected generally by issues and un-
certainties impacting the specialty chemicals, engineering and construction,
machinery and pollution control industries. Such factors include the supply,
demand, and other normal competitive factors for the various portfolio compa-
nies' products and services. The environmental products and services industry
generally has been affected positively by legislation resulting in stricter
governmental regulations and enforcement policies for both commercial and gov-
ernmental generators of waste, as well as by specific expenditures for cleanup
efforts. Chemical products are affected, for example, by product obsolescence
and competition; the handling of hazardous chemicals and products; and the po-
tential for calamitous accidents. In addition to supply and demand factors,
engineering, construction and machinery companies are affected by changes in
interest rates and
21
<PAGE>
governmental spending and financing of public works and cleanup projects. Fi-
nally, all of these types of companies are heavily affected by regulation of
various governments, including the federal Environmental Protection Agency and
its state counterparts. As regulations are developed and enforced, such compa-
nies may be required to alter or cease production of a product or service or
to agree to restrictions on their operations.
Companies in the various communications and entertainment industries encoun-
ter intense competition, short product life cycles and rapidly changing con-
sumer tastes. In addition, companies in the telecommunications and utilities
industries are subject to heavy governmental regulation.
Small companies may have limited product lines, markets, or financial re-
sources, or may be dependent upon a small management group, and their securi-
ties may be subject to more abrupt or erratic market movements than larger,
more established companies, both because their securities typically are traded
in lower volume and because the issuers typically are subject to a greater de-
gree to changes in their earnings and prospects.
All Funds may invest in the securities of foreign issuers. Investments in
foreign securities involve certain risks not ordinarily associated with in-
vestments 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 restric-
tions. In addition, with respect to certain countries there is the possibility
of expropriation of assets, confiscatory taxation, political or social insta-
bility or diplomatic developments which could adversely affect investments in
those countries. There may be less publicly available information about a for-
eign company than about a U.S. company, and foreign companies may not be sub-
ject to accounting, auditing and financial reporting standards and require-
ments comparable to or as uniform as those of U.S.-based companies. Foreign
securities markets, while growing in volume, have, for the most part, substan-
tially 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 markets are gen-
erally higher than in the United States. There is generally less government
supervision and regulation of foreign exchanges, brokers and issuers than
there is in the United States and a Fund might have greater difficulty taking
appropriate legal action in a foreign court. Dividends and interest payable on
a Fund's foreign portfolio securities may be subject to foreign withholding
taxes. To the extent such taxes are not offset by credits or deductions al-
lowed to investors under the Federal income tax provisions, they may reduce
the net return to the shareholders.
The Funds should not be considered a complete investment program. In view of
the specialized nature of their investment activities, investment in the Eq-
uity and Theme Funds' 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.
Securities of companies discussed in this section may be more volatile than
the overall market.
PORTFOLIO INSTRUMENTS AND OTHER
INVESTMENT INFORMATION
MONEY MARKET INSTRUMENTS
All Funds may invest in "money market instruments," which include, among
other things, bank obligations, commercial paper and corporate bonds with re-
maining 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
22
<PAGE>
Federal Deposit Insurance Corporation ("FDIC"), or by a savings and loan asso-
ciation or savings bank which is insured by the Savings Association Insurance
Fund of the FDIC. Bank obligations also include U.S. dollar-denominated obli-
gations of foreign branches of U.S. banks and obligations of domestic branches
of foreign banks. Investments in bank obligations of foreign branches of do-
mestic financial institutions or of domestic branches of foreign banks are
limited so that no more than 5% of the value of a Fund's total assets may be
invested in any one branch, and no more than 20% of a particular Fund's total
assets at the time of purchase may be invested in the aggregate in such obli-
gations (see investment limitation No. 5 below under "Investment Limita-
tions"). Investments in time deposits are limited to no more than 5% of the
value of a Fund's total assets at the time of purchase.
Investments by the Funds 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,
each 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 particular 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 a Fund, the Fund may, from time to time as specified in the
instrument, demand payment of the principal of the instrument or may resell
the instrument to a third party. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument 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 security
which cannot be disposed of within seven days without taking a reduced price
will be considered an illiquid security subject to the 10% limitation dis-
cussed below under "Investment Limitations."
GOVERNMENT OBLIGATIONS
All Funds 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 National 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 Maritime Administration.
REPURCHASE AGREEMENTS
In order to effectively manage their cash holdings, the Funds may enter into
repurchase agreements. Each Fund will enter into repurchase agreements only
with financial institutions that are deemed to be creditworthy by the Invest-
ment Adviser, pursuant to guidelines established by Excelsior Fund's Board of
Directors. No Fund will 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 10% limit described in Investment Limitation No. 6 below.
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 a Fund
at not less than the repurchase price. Default or bankruptcy of the seller
would, however, expose a Fund to possible delay in connection with the dispo-
sition 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 agreement.
SECURITIES LENDING
To increase return on its portfolio securities, each Fund may lend its port-
folio securities to broker/ dealers pursuant to agreements requiring the loans
to
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<PAGE>
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
outstanding loans of a Fund exceeds 30% of the value of its total assets.
There may be risks of delay in receiving additional collateral or in recover-
ing the securities loaned or even a loss of rights in the collateral should
the borrower of the securities fail financially. However, loans are made only
to borrowers 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 their portfolio securities in accordance with
their respective investment objectives and policies, the Funds may enter into
option transactions as described below.
The Income and Growth and Theme Funds may purchase put and call options
listed on a national securities exchange and issued by the Options Clearing
Corporation in an amount not exceeding 5% of a Fund's net assets, as described
further in the Statement of Additional Information. Such options may relate to
particular securities or to various 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.
In addition, each Fund may engage in writing covered call options (options on
securities owned by the particular 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 Clearing Corporation.
The aggregate value of the securities subject to options written by each Fund
may not exceed 25% of the value of its net assets. By writing a covered call
option, a Fund forgoes the opportunity to profit from an increase in the mar-
ket 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 exercised or the Fund ef-
fects a closing purchase transaction by purchasing an option of the same se-
ries. The use of covered call options is not a primary investment technique of
the Funds 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 Funds' Statement of Additional
Information.
FUTURES CONTRACTS
The Theme Funds may also enter into interest rate 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 ex-
changes or in other established financial markets.
The Theme Funds will not engage in futures transactions for speculation, but
only as a hedge against changes in market values of securities which a Fund
holds or intends to purchase. The Theme Funds will engage in futures transac-
tions 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 Funds must satisfy certain asset segregation require-
ments to ensure that the use of futures is unleveraged. When a Fund takes a
long position in a futures contract, it must maintain a segregated account
containing cash and/or certain liquid assets equal to the purchase price of
the contract, less any margin or deposit. When a Fund takes a short position
in a futures contract, the Fund must maintain a segregated account containing
cash and/or certain liquid assets in
24
<PAGE>
an amount equal to the market value of the securities 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 require-
ments are not applicable when a Fund "covers" an options or futures position
generally by entering into an offsetting position. Each Fund will limit its
hedging transactions in futures contracts and related options so that, immedi-
ately after any such transaction, the aggregate initial margin that is required
to be posted by the Fund under the rules of the exchange on which the futures
contract (or futures option) is traded, plus any premiums paid by the Fund on
its open futures options positions, does not exceed 5% of the Fund's total as-
sets, 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 purchase price of the underlying futures
contract exceeds the exercise or strike price; an option to sell a futures con-
tract is "in-the-money" if the exercise or strike price exceeds the then-cur-
rent purchase price of the contract that is the subject of the option. In addi-
tion, the use of futures contracts is further restricted to the extent that no
more than 10% of a Fund's total assets may be hedged.
Transactions in futures as a hedging device may subject a Fund to a number of
risks. Successful use of futures by a Fund is subject to the ability of the In-
vestment Adviser to correctly anticipate movements in the direction of the mar-
ket. In addition, there may be an imperfect correlation, or no correlation at
all, between movements in the price of the futures contracts (or options) 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, a Fund may realize a loss on
a futures transaction that is not offset by a favorable movement in the price
of securities which it holds or intends to purchase or may be unable to close a
futures position in the event of adverse price movements.
INVESTMENT COMPANY SECURITIES
In connection with the management of its daily cash positions, each 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. The Income and
Growth Fund may also purchase securities of unit investment trusts registered
with the SEC as investment companies. In addition to the advisory fees and
other expenses a Fund bears directly in connection with its own operations, as
a shareholder of another investment company, a 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 indirectly 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 each Fund within the limits prescribed by
the Investment Company Act of 1940 (the "1940 Act") which include, subject to
certain exceptions, a prohibition against a Fund investing more than 10% of the
value of its total assets in such securities.
WHEN-ISSUED AND FORWARD TRANSACTIONS
Each Fund may purchase eligible securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. These transactions
involve a commitment by a Fund to purchase or sell particular securities with
payment and delivery taking place in the future, beyond the normal settlement
date, at a stated price and yield. Securities purchased on a "forward commit-
ment" or "when-issued" basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. It
is expected that forward commitments and "when-issued" purchases will not ex-
ceed 25% of the value of a Fund's total assets absent unusual market condi-
tions, and that the length of such commitments will not exceed 45 days. The
Funds do not intend to engage in "when-issued" purchases and forward commit-
ments for speculative purposes, but only in furtherance of their investment ob-
jectives.
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ILLIQUID SECURITIES
No Fund will knowingly invest more than 10% of the value of its net assets in
securities that are illiquid. Each 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 the Act.
Any such security will not be considered illiquid so long as it is determined
by the Investment Adviser, acting under guidelines approved and monitored by
the Board, that an adequate trading market exists for that security. This in-
vestment practice could have the effect of increasing the level of illiquidity
in a Fund during any period that qualified institutional buyers become uninter-
ested in purchasing these restricted securities.
PORTFOLIO TURNOVER
Each Fund may sell a portfolio investment immediately after its acquisition if
the Investment Adviser believes that such a disposition is consistent with the
investment objective of the particular Fund. 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 in-
vestments. A high rate of portfolio turnover may involve correspondingly
greater brokerage commission expenses and other transaction costs, which must
be borne directly by a 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 capital gains are realized, any distributions resulting
from such gains are considered ordinary income for Federal income tax purposes.
(See "Financial Highlights" and "Taxes--Federal.")
INVESTMENT LIMITATIONS
The investment limitations enumerated below are matters of fundamental policy
and may not be changed with respect to a Fund without the vote of the holders
of a majority of a Fund's outstanding shares (as defined under "Miscellane-
ous").
A Fund may not:
1. Purchase securities of any one issuer, other than U.S. Government obliga-
tions, if immediately after such purchase more than 5% of the value of its
total assets would be invested in the securities of such issuer, except that
up to 25% of the value of its total assets may be invested without regard to
this 5% limitation;
2. 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 fa-
cilitate the orderly sale of portfolio securities to accommodate abnormally
heavy redemption requests and is not for leverage purposes.) A Fund will not
purchase portfolio securities 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
3. Make loans, except that (i) each Fund may purchase or hold debt securi-
ties 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, (ii) each Fund may
lend portfolio securities in an amount not exceeding 30% of its total assets,
and (iii) the Income and Growth Fund may purchase or hold creditor claims,
loan participations and other instruments in accordance with its investment
objectives and policies.
Each Fund other than the Long-Term Supply of Energy Fund may not:
4. 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 that
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<PAGE>
(a) with respect to the Equity and Income and Growth Funds, there is no limi-
tation with respect to securities issued or guaranteed by the U.S. Government
or domestic bank obligations, (b) with respect to each Theme Fund, there is
no limitation with respect to securities issued or guaranteed by the U.S.
Government, and (c) neither all finance companies, as a group, nor all util-
ity companies, as a group, are considered a single industry for purposes of
this policy.
Each of the Equity and Income and Growth Funds may not:
5. Invest in obligations of foreign branches of financial institutions or in
domestic branches of foreign banks, if immediately after such purchase
(i) more than 5% of the value of its total assets would be invested in obli-
gations of any one foreign branch of the financial institution or domestic
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; and
6. Knowingly invest more than 10% of the value of its total assets in illiq-
uid securities, including repurchase agreements with remaining maturities in
excess of seven days, restricted securities, and other securities for which
market quotations are not readily available.
* * *
In addition to the investment limitations described above, no Fund may invest
in the securities of any single issuer if, as a result, the Fund holds more
than 10% of the outstanding voting securities of such issuer.
The Theme Funds may not invest in obligations of foreign branches of financial
institutions or in domestic branches of foreign banks if immediately after such
purchase (i) more than 5% of the value of their respective total assets would
be invested in obligations of any one foreign branch of the financial institu-
tion or domestic branch of a foreign bank; or (ii) more than 20% of their re-
spective total assets would be invested in foreign branches of financial insti-
tutions or in domestic branches of foreign banks. The Theme Funds may not know-
ingly invest more than 10% of the value of their respective total assets in il-
liquid securities, including repurchase agreements with remaining maturities in
excess of seven days, restricted securities and other securities for which mar-
ket quotations are not readily available. These investment policies may be
changed by Excelsior Fund's Board of Directors upon reasonable notice to share-
holders.
The Equity and Income and Growth Funds will not invest more than 25% of the
value of their respective total assets in domestic bank obligations.
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 percentage
resulting from a change in value of a Fund's portfolio securities will not con-
stitute a violation of such limitation.
PRICING OF SHARES
The net asset value of each Fund is determined and the Shares of each 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 pric-
ing for each Fund are determined on each day the Exchange and the Investment
Adviser are open for trading ("Business Day"). Currently, the holidays which
the Funds observe are New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Vet-
erans Day, Thanksgiving Day and Christmas. A Fund's net asset value per Share
for purposes of pricing sales and redemptions is calculated by dividing the
value of all securities and other assets allocable to its Shares, less the lia-
bilities allocable to its Shares, by the number of its outstanding Shares.
Assets in the Funds 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
27
<PAGE>
on the national securities market. Securities traded only on over-the-counter
markets are valued on the basis of closing over-the-counter bid prices. Secu-
rities 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 quotations are not readily available, and other assets are valued
at fair value, pursuant to guidelines adopted by Excelsior Fund's Board of Di-
rectors.
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 Funds
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
a Fund's Shares. Excelsior Fund's administrators have undertaken to price the
securities in the Funds' portfolios, and may use one or more independent pric-
ing services in connection with this service.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in each 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.
PURCHASE OF SHARES
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 Funds' 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 Funds, CGFSC will send confir-
mations of such transactions and periodic
28
<PAGE>
account statements directly to Customers. 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"). Shares in the Funds 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."
PUBLIC OFFERING PRICE
The public offering price for Shares of each Fund is the sum of the net asset
value of the Shares purchased plus a sales load according to the table below:
<TABLE>
<CAPTION>
TOTAL SALES CHARGES REALLOWANCE TO DEALERS
------------------------------ ----------------------
AS A % OF AS A % OF AS A % OF
OFFERING PRICE NET ASSET OFFERING PRICE
AMOUNT OF TRANSACTION PER SHARE VALUE PER SHARE PER SHARE
- --------------------- -------------- --------------- ----------------------
<S> <C> <C> <C>
Less than $50,000....... 4.50% 4.71% 4.00%
$50,000 to $99,999...... 4.00 4.17 3.50
$100,000 to $249,999.... 3.50 3.63 3.00
$250,000 to $499,999.... 3.00 3.09 2.50
$500,000 to $999,999.... 2.00 2.05 1.50
$1,000,000 to
$1,999,999............. 1.00 1.00 .50
$2,000,000 and over..... .50 .50 .25
</TABLE>
The reallowance to dealers may be changed from time to time but will remain
the same for all such dealers.
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 reallow to any dealer that sponsors
sales contests or recognition programs conforming to criteria established by
the Distributor, or participates in sales programs sponsored by the Distribu-
tor, an amount not exceeding the total applicable sales charges on the sales
generated by the dealer at the public offering price during such programs. Al-
so, the Distributor in its discretion may from time to time, pursuant to ob-
jective criteria established by the Distributor, pay fees to qualifying deal-
ers for certain services or activities which are primarily intended to result
in sales of Shares of the Funds. If any such program is made available to any
dealer, it will be made available to all dealers on the same terms and condi-
tions. Payments made under such programs will be made by the Distributor out
of its own assets and not out of the assets of the Funds. These programs will
not change the price of Shares or the amount that the Funds will receive from
such sales.
In addition, the Distributor may offer to pay a fee from its own assets (in-
cluding any portion of the sales load retained by the Distributor) to finan-
cial institutions as financial assistance for the continuing investment of
customers' assets in the Funds 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 Funds. 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.
The sales load described above will not be applicable to: (a) purchases of
Shares by customers of the Investment Adviser or its affiliates; (b) trust,
agency or custodial accounts opened through the trust department of a bank,
trust company or thrift institution, provided
29
<PAGE>
that appropriate notification of such status is given at the time of invest-
ment; (c) companies, corporations and partnerships (excluding full service
broker/ dealers and financial planners, registered investment advisers and de-
pository institutions not covered by the exemptions in (d) and (e) below); (d)
financial planners and registered investment advisers not affiliated with or
clearing purchases through full service broker/dealers; (e) purchases of
Shares by depository institutions for their own account as principal; (f) ex-
change transactions (described below under "Investor Programs--Exchange Privi-
lege") where the Shares being exchanged were acquired in connection with the
distribution of assets held in trust, agency or custodial accounts maintained
with the trust department of a bank; (g) corporate/business retirement plans
(such as 401(k), 403(b)(7), 457 and Keogh accounts) sponsored by the Distribu-
tor and IRA accounts sponsored by the Investment Adviser; (h) company-spon-
sored employee pension or retirement plans making direct investments in the
Funds; (i) purchases of Shares by officers, trustees, directors, employees,
former employees and retirees of Excelsior Fund, Excelsior Tax-Exempt Funds,
Inc. ("Excelsior Tax-Exempt Fund"), Excelsior Institutional Trust, Excelsior
Funds, the Investment Adviser, the Distributor or of any direct or indirect
affiliate of any of them; (j) purchases of Shares by all beneficial sharehold-
ers of Excelsior Fund or Excelsior Tax-Exempt Fund as of May 22, 1989;
(k) purchases of Shares by investment advisers registered under the Investment
Advisers Act of 1940 for their customers through an omnibus account estab-
lished with United States Trust Company of New York; (l) purchases of Shares
by directors, officers and employees of brokers and dealers selling shares
pursuant to a selling agreement with Excelsior Fund, Excelsior Tax-Exempt
Fund, Excelsior Institutional Trust or Excelsior Funds; (m) purchases of
shares by investors who are members of affinity groups serviced by USAffinity
Investments Limited Partnership; and (n) customers of certain financial insti-
tutions who purchase Shares through a registered representative of UST Finan-
cial Services Corp. on the premises of their financial institutions. In addi-
tion, no sales load is charged on the reinvestment of dividends or distribu-
tions or in connection with certain share exchange transactions. Investors who
have previously redeemed shares in an "Eligible Fund" (as defined below) on
which a sales load has been paid also have a one-time privilege of purchasing
shares of another "Eligible Fund" at net asset value without a sales charge,
provided that such privilege will apply only to purchases made within 30 cal-
endar days from the date of redemption and only with respect to the amount of
the redemption. These exemptions to the imposition of a sales load are due to
the nature of the investors and/or reduced sales effort that will be needed in
obtaining investments.
QUANTITY DISCOUNTS
An investor in the Funds may be entitled to reduced sales charges through
Rights of Accumulation, a Letter of Intent or a combination of investments, as
described below, even if the investor does not wish to make an investment of a
size that would normally qualify for a quantity discount.
In order to obtain quantity discount benefits, an investor must notify CGFSC
at the time of purchase that he or she would like to take advantage of any of
the discount plans described below. Upon such notification, the investor will
receive the lowest applicable sales charge. Quantity discounts may be modified
or terminated at any time and are subject to confirmation of an investor's
holdings through a check of appropriate records. For more information about
quantity discounts, please call (800) 446-1012 or contact your Shareholder Or-
ganization.
Rights of Accumulation. A reduced sales load applies to any purchase of
shares of any portfolio of Excelsior Fund and Excelsior Tax-Exempt Fund that
is sold with a sales load ("Eligible Fund") where an investor's then current
aggregate investment is $50,000 or more. "Aggregate investment" means the to-
tal of: (a) the dollar amount of the then current purchase of shares of an El-
igible Fund and (b) the value (based on current net asset value) of previously
purchased and beneficially owned shares of any Eligible Fund on which a sales
load has been paid. If, for example, an investor benefi-
30
<PAGE>
cially owns shares of one or more Eligible Funds with an aggregate current
value of $49,000 on which a sales load has been paid and subsequently pur-
chases shares of an Eligible Fund having a current value of $1,000, the load
applicable to the subsequent purchase would be reduced to 4.00% of the offer-
ing price. Similarly, with respect to each subsequent investment, all shares
of Eligible Funds that are beneficially owned by the investor at the time of
investment may be combined to determine the applicable sales load.
Letter of Intent. By completing the Letter of Intent included as part of the
New Account Application, an investor becomes eligible for the reduced sales
load applicable to the total number of Eligible Fund shares purchased in a 13-
month period pursuant to the terms and under the conditions set forth below
and in the Letter of Intent. To compute the applicable sales load, the offer-
ing price of shares of an Eligible Fund on which a sales load has been paid,
beneficially owned by an investor on the date of submission of the Letter of
Intent, may be used as a credit toward completion of the Letter of Intent.
However, the reduced sales load will be applied only to new purchases.
CGFSC will hold in escrow shares equal to 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if an investor does not
purchase the full amount indicated in the Letter of Intent. The escrow will be
released when an investor fulfills the terms of the Letter of Intent by pur-
chasing the specified amount. If purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect an investor's total pur-
chases. If total purchases are less than the amount specified, an investor
will be requested to remit an amount equal to the difference between the sales
load actually paid and the sales load applicable to the total purchases. If
such remittance is not received within 20 days, CGFSC, as attorney-in-fact
pursuant to the terms of the Letter of Intent and at the Distributor's direc-
tion, will redeem an appropriate number of shares held in escrow to realize
the difference. Signing a Letter of Intent does not bind an investor to pur-
chase the full amount indicated at the sales load in effect at the time of
signing, but an investor must complete the intended purchase in accordance
with the terms of the Letter of Intent to obtain the reduced sales load. To
apply, an investor must indicate his or her intention to do so under a Letter
of Intent at the time of purchase.
Qualification for Discounts. For purposes of applying the Rights of Accumula-
tion and Letter of Intent privileges described above, the scale of sales loads
applies to the combined purchases made by any individual and/or spouse pur-
chasing securities for his, her or their own account or for the account of any
minor children, or the aggregate investments of a trustee or custodian of any
qualified pension or profit sharing plan or IRA established (or the aggregate
investment of a trustee or other fiduciary) for the benefit of the persons
listed above.
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 any 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-
31
<PAGE>
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 Reserve
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 Appli-
cation accompanying this Prospectus and forward it to CGFSC. Redemptions by In-
vestors will not be processed until the completed Application for purchase of
Shares has been received by CGFSC and accepted by the Distributor. Investors
making subsequent investments by wire should follow the above instructions.
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 per Fund. The minimum subse-
quent investment for both types of investors is $50 per Fund. Customers may
agree with a particular Shareholder Organization to make a minimum purchase
with respect to their accounts. Depending upon the terms of the particular ac-
count, Shareholder Organizations may charge a Customer's account fees for auto-
matic investment 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.
REDEMPTION PROCEDURES
Customers of Shareholder Organizations holding Shares of record may redeem all
or part of their investments in the Funds 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
32
<PAGE>
the Shares to be redeemed were issued in certificate form, the certificates
must be endorsed for transfer (or accompanied by a duly executed stock power)
and must be submitted to CGFSC together with the redemption request. A redemp-
tion 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 ap-
proved by CGFSC in accordance with its Standards, Procedures and Guidelines for
the Acceptance of Signature Guarantees ("Signature Guarantee Guidelines"). Eli-
gible guarantor institutions generally include banks, broker/dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations. All eligible guarantor institutions
must participate in the Securities Transfer Agents Medallion Program ("STAMP")
in order to be approved by CGFSC pursuant to the Signature Guarantee Guide-
lines. Copies of the Signature Guarantee Guidelines and information on STAMP
can be obtained from CGFSC at (800) 446-1012 or at the address given above.
CGFSC may require additional supporting documents for redemptions made by cor-
porations, executors, administrators, trustees and guardians. A redemption re-
quest will not be deemed to be properly received until CGFSC receives all re-
quired documents in proper form. Payment for Shares redeemed will ordinarily be
made by mail within five Business Days after proper receipt by CGFSC of the re-
demption request. Questions with respect to the proper form for redemption re-
quests 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 instructing CGFSC by
telephone to mail a check for redemption proceeds of $500 or more to the share-
holder of record at his or her address of record. Institutional 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 In-
vestor'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 subsequently 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 "Redemp-
tion by Mail" above, for details regarding signature guarantees). Further docu-
mentation 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 Excel-
sior Fund, CGFSC or the Distributor. EXCELSIOR FUND, CGFSC, AND THE DISTRIBUTOR
WILL NOT BE LIABLE FOR ANY LOSS, LIABILITY, COST OR EXPENSE FOR ACTING UPON
TELEPHONE INSTRUCTIONS THAT ARE REASONABLY BELIEVED TO BE GENUINE. IN ATTEMPT-
ING TO CONFIRM THAT TELEPHONE INSTRUCTIONS ARE GENUINE, EXCELSIOR FUND WILL USE
SUCH PROCEDURES AS ARE CONSIDERED REASONABLE, INCLUDING RECORDING THOSE IN-
STRUCTIONS 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 re-
demption until CGFSC is reasonably satisfied that the check has been collected
in accordance with the applicable banking regulations which
33
<PAGE>
may take up to 15 days. A Direct Investor who anticipates the need for more
immediate access 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 collected, 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 a 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 a 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.
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 a 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-Ex-
empt Fund, or for Trust Shares of Excelsior Institutional Trust, provided that
such other shares may legally be sold in the state of the Investor's resi-
dence.
Excelsior Fund currently offers ten 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,
34
<PAGE>
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;
International Fund, a fund seeking total return derived primarily from in-
vestments in foreign equity securities;
Emerging Americas Fund, a fund seeking long-term capital appreciation
through investments in companies and securities of governments based in all
countries in the Western Hemisphere, except the U.S.;
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.
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 in vestors 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 a Fund
and the investment of the redemption proceeds in shares of another portfolio
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 be-
ing 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 (plus any applicable sales load) next determined
after acceptance of the exchange request. No sales load will be payable on
shares to be acquired
35
<PAGE>
through an exchange to the extent that a sales load was previously paid on the
Shares being exchanged.
Investors may find the exchange privilege useful if their investment objec-
tives or market outlook should change after they invest in a Fund. For further
information regarding exchange privileges, shareholders should call (800) 446-
1012 (from overseas, call (617) 557-8280). Investors exercising the exchange
privilege with the other portfolios of Excelsior Fund, Excelsior Tax-Exempt
Fund or Excelsior Institutional Trust should request and review the prospec-
tuses 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 exchange 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 reject any exchange
request. EXCELSIOR FUND, EXCELSIOR TAX-EXEMPT FUND, EXCELSIOR INSTITUTIONAL
TRUST, CGFSC AND THE DISTRIBUTOR ARE NOT RESPONSIBLE FOR THE AUTHENTICITY OF
EXCHANGE REQUESTS RECEIVED BY TELEPHONE THAT ARE REASONABLY BELIEVED TO BE
GENUINE. IN ATTEMPTING TO CONFIRM THAT TELEPHONE INSTRUCTIONS ARE GENUINE, EX-
CELSIOR FUND, EXCELSIOR TAX-EXEMPT FUND AND EXCELSIOR INSTITUTIONAL TRUST WILL
USE SUCH PROCEDURES AS ARE CONSIDERED REASONABLE, 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 a Fund with a value of $10,000 or more may es-
tablish 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 Funds pursuant to Profit Sharing and Money-Pur-
chase Plans and Keogh Plans are not subject to the minimum investment and
forced redemption provisions described above. The minimum initial investment
for IRAs is $250 per Fund and the minimum subsequent investment is $50 per
Fund. Detailed information concerning eligibility, service fees and other mat-
ters 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 Funds pursuant to retirement plans if such plans are
offered by their Shareholder Organizations.
36
<PAGE>
AUTOMATIC INVESTMENT PROGRAM
The Automatic Investment Program permits Investors to purchase Shares (mini-
mum of $50 per Fund per transaction) at regular intervals selected by the In-
vestor. The minimum initial investment for an Automatic Investment Program ac-
count is $50 per Fund. Provided the Investor's financial institution allows
automatic withdrawals, Shares are purchased by transferring funds from an In-
vestor's checking, bank money market or NOW account designated by the Invest-
or. At the Investor's option, 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 Shares at predetermined
intervals. This may help Investors to reduce their average cost per share be-
cause the agreed upon fixed investment amount allows more Shares to be pur-
chased 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. Investors should be aware, how-
ever, that Shares bought using Dollar Cost Averaging are purchased without re-
gard 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 Funds are declared and paid
quarterly. For dividend purposes, a Fund's investment income is reduced by ac-
crued expenses directly attributable to that Fund and the general expenses of
Excelsior Fund prorated to that Fund on the basis of its relative net assets.
A 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 each of the Funds 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 cor-
respondent banks will be paid in cash. Direct and Institutional Investors and
Customers of other Shareholder Organizations will receive dividends and dis-
tributions in additional Shares of the Fund on which the dividend or distribu-
tion is paid (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. Reinvested dividends and
distributions receive the same tax treatment as those paid in cash.
TAXES
FEDERAL
Each of the Funds qualified for its last taxable year as a "regulated invest-
ment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Each Fund expects to so qualify in future years. Such qualification
generally relieves a Fund of liability for
37
<PAGE>
Federal income taxes to the extent its earnings are distributed in accordance
with the Code.
Qualification as a regulated investment company under the Code requires,
among other things, that a Fund distribute to its shareholders an amount equal
to at least 90% of its investment company taxable income for each taxable
year. In general, a Fund's investment company taxable income will be its in-
come (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. Each Fund intends
to distribute substantially all of its investment company taxable income each
year. Such dividends will be taxable as ordinary income to Fund shareholders
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
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 a Fund from domestic corporations for the taxable year.
Distribution by a 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 a 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 a Fund on or just before the record
date of a dividend should be aware that the amount of the forthcoming dividend
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 effects an exchange of such Shares
for Shares of another Fund within 90 days of the purchase and is able to re-
duce the sales charges applicable to the new Shares (by virtue of the exchange
privilege), the amount equal to such reduction may not be included 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 limitation) in the tax
basis of the new Shares.
Qualification as a regulated investment company under the Code also requires
that each Fund satisfy certain requirements with respect to the source of its
income for a taxable year. At least 90% of the gross income of each Fund must
be derived from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities or for-
eign 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 currencies. The Treasury
Department may by regulation exclude from qualifying income foreign currency
gains which are not directly related to a Fund's principal business of invest-
ing in stock or securities, or options and futures with respect to stock or
securities. Any in-
38
<PAGE>
come derived by a Fund from a partnership or trust is treated for this purpose
as derived with respect to the Fund's business of investing in stock, securi-
ties or currencies 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. Some of the invest-
ments that the Income and Growth Fund may make (such as liquidating trust re-
ceipts and creditor claims) may not be securities or may not produce qualify-
ing income. Therefore, it may be necessary for the Investment Adviser to re-
strict the investments of that Fund to ensure that non-qualifying income does
not exceed 10% of that Fund's total gross income for a taxable year.
The foregoing summarizes some of the important tax considerations generally
affecting the Funds and their shareholders and is not intended as a substitute
for careful tax planning. Accordingly, potential investors in the Funds should
consult their tax advisers with specific reference to their own tax situa-
tions. Shareholders will be advised annually as to the Federal income tax con-
sequences of distributions 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 FUNDS
The business and affairs of the Funds 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 serves as the Investment Adviser to
each Fund. U.S. Trust is a state-chartered bank and trust company. The Invest-
ment 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. The Investment
Adviser is a member bank of the Federal Reserve System and the Federal Deposit
Insurance Corporation and is one of the twelve members of the New York Clear-
ing House Association.
On December 31, 1995, the Investment Adviser's Asset Management Group had ap-
proximately $47 billion in assets under management. The Investment Adviser,
which has its principal offices at 114 W. 47th Street, New York, New York
10036, is a subsidiary of U.S. Trust Corporation, a registered bank holding
company.
The Investment Adviser manages each 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 Equity Fund's portfolio manager, David A. Tillson, is the person primar-
ily responsible for the day-to-day management of the Fund's investment portfo-
lio. Mr. Tillson, a Senior Vice President and Senior Portfolio Manager, has
been with U.S. Trust since 1993, and has been the Fund's portfolio manager
since December 1994. Prior to joining U.S. Trust, Mr. Tillson was the founder
and President of TDA Capital Management Company, and a Senior Vice President
of Matrix Asset Advisors until 1993. He was also a Vice President and Senior
Portfolio Manager with V C S & O Asset Management until 1990.
The Income and Growth Fund portfolio manager, Richard L. Bayles, is the per-
son primarily responsible for the day-to-day management of the investment port-
39
<PAGE>
folio. Mr. Bayles, a Senior Vice President and Senior Portfolio Manager of U.S.
Trust, has been with U.S. Trust since 1990 and has been the Income and Growth
Fund's portfolio manager since 1990. Prior to his reassociation with U.S.
Trust, Mr. Bayles was a Managing Director at John W. Bristol and Company, an
investment advisory firm, from 1987 to 1990.
The Long-Term Supply of Energy Fund portfolio manager, Michael E. Hoover, is
the person primarily responsible 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 De-
cember 1995.
The Productivity Enhancers Fund's portfolio manager, Ronald C. Steele, is the
person primarily responsible for the day-to-day management of the Fund's in-
vestment portfolio. Mr. Steele, a Senior Vice President and Senior Portfolio
Manager of U.S. Trust, has been the Fund's portfolio manager since its incep-
tion.
The Environmentally-Related Products and Services Fund's portfolio manager,
Maria L. Brisbane, is the person primarily responsible for the day-to-day man-
agement of the Fund's investment portfolio. Ms. Brisbane, Vice President of the
Personal Equity and Balanced Investment Division of U.S. Trust, has been with
U.S. Trust since 1994 and has been the Fund's portfolio manager since December
1995. Prior to her association with U.S. Trust, Ms. Brisbane was an Institu-
tional Portfolio Manager at Brown Brothers Harriman & Company.
The Aging of America Fund's portfolio manager, Jonathan L. Stanley, is the
person primarily responsible for the day-to-day management of the Fund's in-
vestment portfolio. Mr. Stanley, a Senior Vice President and Senior Portfolio
Manager of U.S. Trust, has been with U.S. Trust since 1993 and has been the
Fund's portfolio manager since December 1995. Prior to his association with
U.S. Trust, Mr. Stanley was Investment Manager with Deutsche Bank Capital Cor-
poration.
The Communication and Entertainment Fund's portfolio manager, John J.
Apruzzese, is the person primarily responsible for the day-to-day management of
the Fund's investment portfolio. Mr. Apruzzese, a Senior Vice President, De-
partment Manager and Senior Portfolio Manager of U.S. Trust, has been with U.S.
Trust since 1984 and has been the Fund's portfolio manager since its inception.
The Business and Industrial Restructuring Fund's portfolio manager, David J.
Williams, is the person primarily responsible for the day-to-day management of
the Fund's investment portfolio. Mr. Williams, Senior Vice President, Depart-
ment Manager and Senior Portfolio Manager of the Personal Equity and Balanced
Investment Division of U.S. Trust, has been with U.S. Trust since 1987 and has
been the Fund's portfolio manager since its inception.
The Global Competitors Fund's portfolio manager, Wendy S. Popowich, is the
person primarily responsible for the day-to-day management of the Fund's
investment portfolio. Ms. Popowich, a Senior Vice President and Portfolio Man-
ager of the Personal Investment Division of U.S. Trust, has been with U.S.
Trust since 1983 and has been the Fund's portfolio manager since its inception.
The Early Life Cycle Fund's portfolio manager, Timothy W. Evnin, is the person
primarily responsible for the day-to-day management of the Fund's investment
portfolio. Mr. Evnin, a Vice President and Portfolio Manager of U.S. Trust, has
been with U.S. Trust since 1987 and has been the Fund's portfolio manager since
its inception.
For the services provided and expenses assumed pursuant to its Investment Ad-
visory Agreements, the Investment Adviser is entitled to be paid a fee, com-
puted daily and paid monthly, at the annual rates of: .75% of the average daily
net assets of the Equity and the Income and Growth Funds; and .60% of the aver-
age daily net assets of each Theme Fund. The advisory fee rates payable by the
Equity and Income and Growth Funds are higher than the rates payable by
40
<PAGE>
most mutual funds. The Board of Directors believes, based on information sup-
plied to it by the Investment Adviser, that these fees are comparable to the
rates paid by many other funds with similar investment objectives and policies
and are appropriate for the Funds in light of their investment objectives and
policies. For the fiscal year ended March 31, 1996, the Investment Adviser re-
ceived an advisory fee at the effective annual rates of .68%, .69%, .55%,
.55%, 0%, .56%, .55%, .56%, .56% and .52% of the average daily net assets of
the Equity, Income and Growth, Long-Term Supply of Energy, Productivity
Enhancers, Environmentally-Related Products and Services, Aging of America,
Communication and Entertainment, Business and Industrial Restructuring, Global
Competitors and Early Life Cycle Funds, respectively. For the same period, the
Investment Adviser waived advisory fees at the effective annual rates of .07%,
.06%, .05%, .05%, .60%, .04%, .05%, .04%, .04% and .08% of the average daily
net assets of the Equity, Income and Growth, Long-Term Supply of Energy, Pro-
ductivity Enhancers, Environmentally-Related Products and Services, Aging of
America, Communication and Entertainment, Business and Industrial Restructur-
ing, Global Competitors and Early Life Cycle Funds, respectively.
From time to time, the Investment Adviser may waive (either voluntarily or
pursuant to applicable state expense limitations) all or a portion of the ad-
visory fees payable to it by a Fund, which waiver may be terminated at any
time. See "Management of the Funds--Service Organizations" for additional in-
formation on fee waivers.
ADMINISTRATORS
CGFSC, Federated Administrative Services and U.S. Trust serve as the Funds'
administrators (the "Administrators") and provide them with general adminis-
trative and operational assistance. The Administrators also serve as adminis-
trators of the other portfolios of Excelsior Fund and of all the portfolios 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 inter-
national 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 Excel-
sior 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 waive (either vol-
untarily or pursuant to applicable state expense limitations) all or a portion
of the administration fee payable to them by a Fund, which waivers may be ter-
minated at any time. See "Management of the Funds--Service Organizations" for
additional information on fee waivers. For the period from April 1, 1995
through July 31, 1995, CGFSC and the former administrator received an aggre-
gate administration fee (under the same compensation arrangements noted above)
at the effective annual rates of .151%, .152%, .154%, .154%, .409%, .154%,
.154%, .154%, .154% and .154% of the average daily net assets of the Equity,
Income and Growth, Long-Term Supply of Energy, Productivity Enhancers, Envi-
ronmentally-Related Products and Services, Aging of America, Communication and
Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively. For the same period, CGFSC and the for-
mer administrator waived administration fees at the effective annual rates of
.003% and .002% of the average daily net assets of the
41
<PAGE>
Equity and Income and Growth Funds, respectively. From August 1, 1995 through
March 31, 1996, the Administrators received an aggregate administration fee at
the effective annual rates of .150%, .152%, 154%, .154%, .230%, .154%, .154%,
.154%, .154% and .154% of the average daily net assets of the Equity, Income
and Growth, Long-Term Supply of Energy, Productivity Enhancers, Environmental-
ly-Related Products and Services, Aging of America, Communication and
Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively. For the same period, the Administrators
waived administration fees at the effective annual rates of .004%, .002%,
.119%, .047% and 1.325% of the average daily net assets of the Equity, Income
and Growth, Long-Term Supply of Energy, Productivity Enhancers and Environmen-
tally-Related Products and Services Funds, respectively.
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, a Fund will pay the Service Organi-
zation 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 a
Fund in an amount equal to administrative service fees payable by that 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 Funds, but such banking laws and
regulations do not prohibit such a holding company or affiliate or banks gen-
erally 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 regulations. State secu-
rities laws may differ from the interpretations of Federal law discussed in
this paragraph and banks and financial institutions may be required to regis-
ter 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 Funds' method of operations would
affect their 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 Equity, Income
42
<PAGE>
and Growth, Early Life Cycle, Long-Term Supply of Energy, Productivity
Enhancers, Environmentally-Related Products and Services, Aging of America,
Communication and Entertainment, Business and Industrial Restructuring and
Global Competitors Funds. In addition to the Shares offered under this Prospec-
tus, Excelsior Fund offers a separate series of shares designated as Trust
Shares representing interests in the Equity, Aging of America, Communication
and Entertainment, Business and Industrial Restructuring, Global Competitors
and Early Life Cycle Funds. Trust Shares have different expenses than the
Shares offered under this Prospectus, which may affect performance. Call (800)
446-1012 for information regarding each of those Fund's Trust Shares, which are
offered under a separate prospectus.
Each share (irrespective of series designation) in a Fund represents an equal
proportionate interest in the particular 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 such Fund as are declared in the discretion
of Excelsior Fund's Board of Directors. Excelsior Fund's Charter authorizes the
Board of Directors to classify or reclassify 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 or series, except as otherwise expressly required by
law.
Certificates for Shares will not be issued unless expressly requested in writ-
ing to CGFSC and will not be issued for fractional Shares.
As of July 15, 1996, U.S. Trust held of record substantially all of the Shares
in the Funds as agent or custodian for its customers, but did not own such
Shares beneficially because it did not have voting or investment discretion
with respect to such Shares. U.S. Trust is a wholly-owned subsidiary of U.S.
Trust Corporation.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A. ("Chase"), a wholly-owned subsidiary of The
Chase Manhattan Corporation, serves as the custodian of the Funds' assets. Com-
munications to the custodian should be directed to Chase, Mutual Funds Service
Division, 770 Broadway, New York, New York 10003-9598.
Chase may enter into an international sub-custodian agreement with a third
party providing for the custody of foreign securities held by the Funds.
U.S. Trust serves as the Funds' transfer and dividend disbursing agent. U.S.
Trust has also entered into a sub-transfer agency arrangement with CGFSC, 73
Tremont Street, Boston, Massachusetts 02108-3913, pursuant to which CGFSC pro-
vides certain transfer agent, dividend disbursement and registrar services to
the Funds.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders, the per-
formance of the Shares of the Funds may be quoted and compared to that of other
mutual funds with similar investment objectives and to stock or other relevant
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For exam-
ple, the performance of a Fund may be compared to data prepared by Lipper Ana-
lytical Services, Inc., a widely recognized independent service which monitors
the performance of mutual funds. The performance of the Equity and Theme Funds
may be also compared to the Standard & Poor's 500 Stock Index ("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 Exchange.
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
43
<PAGE>
York Times, or in publications of a local or regional nature, may also be used
in comparing the performance of the Funds.
From time to time, each 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 a Fund
from the beginning date of the measuring period to the end of the measuring
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 com-
mencement of a Fund's operations, or on a year-by-year basis). Each 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 specific
period. Both methods of calculating total return assume that dividends and
capital gain distributions made by a Fund during the period are reinvested in
Fund Shares and also reflect the maximum sales load charged by the Fund.
Performance will fluctuate and any quotation of performance should not be
considered as representative of a 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 Funds'
investment operations and annual financial statements audited by the Funds'
independent auditors.
As used in this Prospectus, a "vote of the holders of a majority of the out-
standing shares" of Excelsior Fund or a particular Fund means, with respect to
the approval of an investment advisory agreement or a change in a fundamental
investment policy, the affirmative vote of the lesser of (a) more than 50% of
the outstanding shares of Excelsior Fund or such Fund, or (b) 67% or more of
the shares of Excelsior Fund or such Fund present at a meeting if more than
50% of the outstanding shares of Excelsior Fund or such Fund are represented
at the meeting in person or by proxy.
Inquiries regarding any of the Funds may be directed to the Distributor at
the address listed under "Distributor."
44
<PAGE>
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION
OPENING YOUR ACCOUNT:
Complete the Application(s) and mail to: FOR OVERNIGHT DELIVERY: send to:
Excelsior Funds Excelsior Funds
c/o Chase Global Funds c/o Chase Global Funds
Services Company Services Company--
P.O. Box 2798 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
per Fund; subsequent investments must be in the minimum amount of $50 per
Fund. 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 transfer agent at (800) 446-1012 between 9:00 a.m.
and 5:00 p.m. (Eastern Time).
45
<PAGE>
[LOGO OF 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 #
------------------------------ [_] U.S. Citizen [_] Other (specify) _____
City/State/Zip Code
-----------------------------------------------------------------------------
FUND SELECTION (THE MINIMUM INITIAL AND SUBSEQUENT INVESTMENT IS $500 PER
FUND AND $50 PER FUND, RESPECTIVELY. MAKE CHECKS PAYABLE TO "EXCELSIOR
FUNDS.")
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND INITIAL INVESTMENT FUND INITIAL INVESTMENT
<S> <C> <C> <C>
[_] Equity Fund $ ____________ 800 [_] Communication & Entertainment Fund $ ____________ 817
[_] Income and Growth Fund $ ____________ 801 [_] Business & Industrial $ ____________ 818
[_] Long-Term Energy Fund $ ____________ 813 Restructuring Fund $ ____________ 819
[_] Productivity Enhancers Fund $ ____________ 814 [_] Global Competitors Fund $ ____________ 812
[_] Environmental Fund $ ____________ 815 [_] Early Life Cycle Fund $ ____________
[_] Aging of America Fund $ ____________ 816 [_] Other
-----------------------------
TOTAL INITIAL INVESTMENT: $ ____________
</TABLE>
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 from
ask for the Wire ------------------ ---------------------
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 ____________
not be liable for any loss, Account 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>
- -----------------------------------------------------------------
RIGHTS OF ACCUMULATION
- -----------------------------------------------------------------
To qualify for Rights of Accumulation, you must complete this
section, listing all of your accounts including those in your
spouse's name, joint accounts and accounts held for your
minor children. If you need more space, please attach a
separate sheet.
[_] I/We qualify for the Rights of Accumulation sales charge discount
described in the Prospectus and Statement of Additional Information.
[_] I/We own shares of more than one Fund distributed by Edgewood Services,
Inc. Listed below are the numbers of each of my/our Shareholder Accounts.
[_] The registration of some of my/our shares differs from that shown on this
application. Listed below are the account number(s) and full registration(s)
in each case.
LIST OF OTHER EXCELSIOR FUND ACCOUNTS:
______________________ _______________________________________
______________________ _______________________________________
______________________ _______________________________________
ACCOUNT NUMBER ACCOUNT REGISTRATIONS
- -----------------------------------------------------------------
LETTER OF INTENT
- -----------------------------------------------------------------
[_] I agree to the Letter of Intent provisions set forth in
the Prospectus. Although I am not obligated to purchase, and
Excelsior Fund is not obligated to sell, I intend to invest,
over a 13-month period beginning on , 19 , an aggregate
amount in Eligible Funds of Excelsior Fund and Excelsior Tax-
Exempt Fund at least equal to (check appropriate box):
[_] $50,000[_] $100,000[_] $250,000[_] $500,000[_] $1,000,000[_] $2,000,000
By signing this application, I hereby authorize CGFSC to
redeem an appropriate number of shares held in escrow to pay
any additional sales loads payable in the event that I do not
fulfill the terms of this Letter of Intent.
- -----------------------------------------------------------------
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 appropriate 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, United
States Trust Company of New York, 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 Funds 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.
We agree to notify CGFSC of any purchases made under the
Letter of Intent or Rights of Accumulation.
----------------------------- -------------------------------
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....................................................... 5
U.S. TRUST'S INVESTMENT PHILOSOPHY AND STRATEGIES.......................... 15
INVESTMENT OBJECTIVES AND
POLICIES.................................................................. 15
PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION..................... 22
INVESTMENT LIMITATIONS..................................................... 26
PRICING OF SHARES.......................................................... 27
HOW TO PURCHASE AND REDEEM SHARES.......................................... 28
INVESTOR PROGRAMS.......................................................... 34
DIVIDENDS AND DISTRIBUTIONS................................................ 37
TAXES...................................................................... 37
MANAGEMENT OF THE FUNDS.................................................... 39
DESCRIPTION OF CAPITAL STOCK............................................... 42
CUSTODIAN AND TRANSFER AGENT............................................... 43
PERFORMANCE INFORMATION.................................................... 43
MISCELLANEOUS.............................................................. 44
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION................................... 45
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' 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.
USTEQP896
[LOGO OF EXCELSIOR FUNDS INC.]
EQUITY FUND
INCOME AND GROWTH 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
EARLY LIFE CYCLE FUND
Prospectus
August 1, 1996
<PAGE>
[LOGO OF EXCELSIOR
FUNDS INC.]
A Management Investment Company
- --------------------------------------------------------------------------------
Equity Funds For initial purchase information, current
Trust Shares prices, performance information and ex-
isting account information, call (800)
73 Tremont Street 446-1012.
Boston, MA 02108-3913 (From overseas, call (617) 557-8280.)
- --------------------------------------------------------------------------------
This Prospectus describes the Trust Shares ("Trust Shares" or "Shares") offered
by several separate portfolios offered to investors by Excelsior Funds, Inc.
("Excelsior Fund") (formerly UST Master Funds, Inc.), an open-end, management
investment company. Excelsior Fund also issues an additional series of shares
in the portfolios which are offered under a separate prospectus. Each portfolio
(individually, a "Fund" and collectively, the "Funds") has its own investment
objective and policies as follows:
EQUITY FUND seeks long-term capital appreciation by investing in companies be-
lieved by the Investment Adviser to represent good long-term values not cur-
rently recognized in the market prices of their securities.
AGING OF AMERICA FUND seeks long-term capital appreciation by investing in
companies which the Investment Adviser believes will benefit from the changes
occurring in the demographic structure of the U.S. population, particularly its
growing population of individuals over the age of 40.
COMMUNICATION AND ENTERTAINMENT FUND seeks long-term capital appreciation by
investing in companies which the Investment Adviser believes will benefit from
the technological and international transformation of the communications and
entertainment industries, particularly the convergence of information, communi-
cation and entertainment media.
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND seeks long-term capital apprecia-
tion by investing in companies which the Investment Adviser believes will bene-
fit from their restructuring or redeployment of assets and operations in order
to become more competitive or profitable.
GLOBAL COMPETITORS FUND seeks long-term capital appreciation by investing pri-
marily in U.S.-based companies which the Investment Adviser believes will bene-
fit from their position as effective and strong competitors on a global basis.
EARLY LIFE CYCLE FUND seeks long-term capital appreciation by investing in
smaller companies in the earlier stages of their development or larger or more
mature companies engaged in new and higher growth potential operations.
Each of the Funds is sponsored and distributed by Edgewood Services, Inc. and
advised by United States Trust Company of New York (the "Investment Adviser" or
"U.S. Trust").
This Prospectus sets forth concisely the information about the Funds 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 August 1, 1996 and containing additional information about
the Funds 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 FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR EN-
DORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, 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 COR-
PORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY.
AN INVESTMENT IN THE FUNDS 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.
August 1, 1996
<PAGE>
PROSPECTUS SUMMARY
EXCELSIOR FUNDS, INC. is an investment company offering various diversified
investment portfolios with differing objectives and policies. Founded in 1984,
Excelsior Fund currently offers 20 Funds with combined assets of approximately
$2.4 billion. See "Description of Capital Stock."
INVESTMENT ADVISER: United States Trust Company of New York ("U.S. Trust")
serves as the Funds' investment adviser. U.S. Trust offers a variety of spe-
cialized financial and fiduciary services to high-net worth individuals, in-
stitutions and corporations. Excelsior Fund offers investors access to U.S.
Trust's services. See "Management of the Funds--Investment Adviser."
INVESTMENT OBJECTIVES AND POLICIES: Generally, each Fund is a diversified
investment portfolio which invests in equity securities. The Funds' investment
objectives and policies are summarized on the cover and explained in greater
detail later in this Prospectus. See "Investment Objectives and Policies,"
"Portfolio Instruments and Other Investment Information" and "Investment Limi-
tations."
HOW TO INVEST: The Funds' Shares are offered at their public offering price,
i.e., their net asset value plus a sales load which is subject to substantial
reductions for large purchases and programs for accumulation. The sales load
is not applicable to investors making their investments through a variety of
institutions, such as U.S. Trust, other banks and trust companies. See "How to
Purchase and Redeem Shares."
The minimum to start an account is $500 per Fund, with a minimum of $50 per
Fund 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 investment dealers or institutional investors with appropri-
ate 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: Generally, each 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 de-
clining prices. These cycles will affect the values of each Fund. Because the
Funds may invest in securities of foreign issuers, they are 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 each Fund
generally seeks to invest for the long term, each 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 a Fund and ultimately by its shareholders. Investment in the Funds should
not be considered a complete investment program. See "Investment Objectives
and Policies."
2
<PAGE>
EXPENSE SUMMARY
The following table summarizes the estimated expenses to be borne by the
Trust Shares of each Fund. The expense summary sets forth the expenses borne
by a separate series of shares of the Funds offered under a separate prospec-
tus for the fiscal year ended March 31, 1996, as restated to reflect the addi-
tional cost of distribution fees borne by Trust Shares.
<TABLE>
<CAPTION>
BUSINESS
AGING OF COMMUNICATION AND INDUSTRIAL GLOBAL
EQUITY AMERICA AND ENTERTAINMENT RESTRUCTURING COMPETITORS EARLY LIFE
FUND FUND FUND FUND FUND CYCLE FUND
------ -------- ----------------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load (as a
percentage of offering
price)................. 4.50% 4.50% 4.50% 4.50% 4.50% 4.50%
Sales Load on Reinvested
Dividends.............. None None None None None None
Deferred Sales Load..... None None None None None None
Redemption Fees/1/ ..... None None None None None None
Exchange Fees........... None None None None None None
ANNUAL FUND OPERATING
EXPENSES FOR TRUST
SHARES (AS A PERCENTAGE
OF AVERAGE NET ASSETS)
Advisory Fees (after fee
waivers)/2/ ........... .68% .56% .55% .56% .56% .52%
12b-1 Fees/3/........... .35% .35% .35% .35% .35% .35%
Other Operating Expenses
Administrative Servic-
ing Fee/2/............ .07% .04% .05% .04% .04% .08%
Other Expenses/2/ (af-
ter fee waivers)...... .30% .33% .32% .31% .29% .30%
----- ----- ----- ----- ----- -----
Total Operating Expenses
(after fee waivers)/2/
....................... 1.40% 1.28% 1.27% 1.26% 1.24% 1.25%
===== ===== ===== ===== ===== =====
</TABLE>
- -------
1. The Fund's transfer agent imposes a direct $8.00 charge on each wire re-
demption by noninstitutional (i.e. individual) investors which is not re-
flected in the expense ratios presented herein. Shareholder organizations
may charge their customers transaction fees in connection with redemptions.
See "Redemption 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 Administra-
tors intend to voluntarily waive fees in an amount equal to the Administra-
tive Servicing Fee; and to further waive fees and reimburse expenses to the
extent necessary for Shares of each of the Aging of America, Communication
and Entertainment, Business and Industrial Restructuring, Global Competi-
tors and Early Life Cycle Funds (collectively, the "Theme Funds"), respec-
tively, to maintain an annual expense ratio, net of 12b-1 fees, of not more
than .99%. Without such fee waivers, "Advisory Fees" would be .75%, .60%,
.60%, .60%, .60% and .60%, and "Total Operating Expenses" would be 1.47%,
1.32%, 1.32%, 1.30%, 1.28% and 1.33% for the Equity, Aging of America, Com-
munication and Entertainment, Business and Industrial Restructuring, Global
Competitors and Early Life Cycle Funds, respectively.
3. As a result of the payment of sales charges and distribution fees, long-
term shareholders may pay more than the economic equivalent of the maximum
front-end sales load permitted by the National Association of Securities
Dealers, Inc. ("NASD"). The NASD has adopted rules which generally limit
the aggregate sales charges and payments under Excelsior Fund's Distribu-
tion Plan to a certain percentage of total new gross share sales, plus in-
terest. Excelsior Fund would stop accruing Distribution Plan fees if, to
the extent, and for as long as such limit would otherwise be exceeded.
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>
Equity Fund..................................... $59 $87 $118 $205
Aging of America Fund........................... 57 84 112 193
Communication and Entertainment Fund............ 57 83 112 191
Business and Industrial Restructuring Fund...... 57 83 111 190
Global Competitors Fund......................... 57 83 110 188
Early Life Cycle Fund........................... 57 83 111 189
</TABLE>
3
<PAGE>
The foregoing expense summary and example (based on the maximum sales load
payable on the Shares) are intended to assist investors in understanding the
costs and expenses that an investor in Trust Shares of the Funds will bear di-
rectly or indirectly. The expense summary sets forth advisory and other ex-
penses payable with respect to a separate series of shares of the Funds for the
fiscal year ended March 31, 1996, as restated to reflect the additional cost of
distribution fees borne by Trust Shares. For more complete descriptions of the
Funds' operating expenses, see "Management of the Funds" and "Description of
Capital Stock" in this Prospectus and the financial statements and notes incor-
porated by reference 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.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The Funds offer two separate series of shares, Trust Shares and shares of
another series offered under a separate prospectus. Trust Shares and the
shares of the other series offered by a separate prospectus represent equal
pro rata interests in each Fund, except that Trust Shares bear the additional
expense of distribution fees. See "Description of Capital Stock."
The following tables include selected data for a share of a separate series
of the Fund outstanding throughout each period and other performance informa-
tion derived from the financial statements included in Excelsior Fund's Annual
Report to Shareholders for the year ended March 31, 1996 (the "Financial
Statements"). No Trust Shares were outstanding during the periods reflected in
the following tables. The information contained in the Financial Highlights
for each period has been audited by Ernst & Young LLP, Excelsior Fund's inde-
pendent auditors. The following tables should be read in conjunction with the
Financial Statements and notes thereto. More information about the performance
of each 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.
EQUITY FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- ------ ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 21.40 $ 19.17 $ 18.77 $ 16.28 $ 14.13 $13.87 $ 13.22 $ 11.32 $ 13.56 $ 12.35
------- ------- ------- ------- ------- ------ ------- ------- --------- -------
Income From Investment
Operations
Net Investment Income.. 0.12 0.07 0.05 0.08 0.13 0.28 0.34 0.19 0.15 0.18
Net Gains or (Losses)
on Securities (both
realized and
unrealized)........... 5.21 2.67 1.16 3.01 2.23 0.39 1.26 1.88 (1.63) 1.86
------- ------- ------- ------- ------- ------ ------- ------- --------- -------
Total From Investment
Operations............ 5.33 2.74 1.21 3.09 2.36 0.67 1.60 2.07 (1.48) 2.04
------- ------- ------- ------- ------- ------ ------- ------- --------- -------
Less Distributions
Dividends From Net
Investment Income..... (0.11) (0.04) (0.08) (0.09) (0.21) (0.23) (0.34) (0.17) (0.14) (0.18)
Dividends in Excess of
Net Investment Income. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions From Net
Realized Gain on
Investments and
Options............... (2.19) (0.47) (0.39) (0.51) 0.00 (0.18) (0.61) 0.00 (0.62) (0.65)
Distributions in Excess
of Net Realized Gain
on Investments and
Options............... 0.00 0.00 (0.34) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- ------ ------- ------- --------- -------
Total Distributions.... (2.30) (0.51) (0.81) (0.60) (0.21) (0.41) (0.95) (0.17) (0.76) (0.83)
------- ------- ------- ------- ------- ------ ------- ------- --------- -------
Net Asset Value, End of
Period................. $ 24.43 $ 21.40 $ 19.17 $ 18.77 $ 16.28 $14.13 $ 13.87 $ 13.22 $ 11.32 $ 13.56
======= ======= ======= ======= ======= ====== ======= ======= ========= =======
Total Return/1/ ........ 26.45% 14.65% 6.54% 19.26% 16.87% 5.11% 11.98% 18.52% (11.24)% 17.61%
Ratios/Supplemental Data
Net Assets, End of
Period
(in millions)......... $188.57 $137.42 $122.26 $106.14 $ 71.62 $29.87 $ 25.98 $ 17.61 $ 13.58 $ 13.40
Ratio of Net Operating
Expenses to Average
Net Assets............ 1.05% 1.05% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.21%
Ratio of Gross Operating
Expenses to Average
Net Assets/2/......... 1.12% 1.08% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.30%
Ratio of Net Investment
Income to Average Net
Assets................ 0.55% 0.36% 0.25% 0.51% 0.87% 2.21% 2.45% 1.62% 1.26% 1.53%
Portfolio Turnover
Rate.................. 27.0% 23.0% 17.0% 24.0% 20.0% 41.0% 53.0% 46.0% 67.0% 86.0%
</TABLE>
- -------
NOTES:
1. Total return data does not reflect the sales load payable on purchases of
Shares.
2. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
5
<PAGE>
AGING OF AMERICA FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 7.84 $ 6.99 $ 7.01 $7.00
------ ------ ------ -----
Income From Investment Operations
Net Investment Income.............. 0.05 0.04 0.03 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 1.97 0.85 (0.02) 0.00
------ ------ ------ -----
Total From Investment Operations... 2.02 0.89 0.01 0.01
------ ------ ------ -----
Less Distributions
Dividends From Net Investment
Income............................ (0.05) (0.04) (0.03) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... 0.00 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00 0.00
------ ------ ------ -----
Total Distributions................ (0.05) (0.04) (0.03) 0.00
------ ------ ------ -----
Net Asset Value, End of Period....... $ 9.81 $ 7.84 $ 6.99 $7.01
====== ====== ====== =====
Total Return/2/...................... 25.80% 12.80% 0.13% 0.14%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $44.79 $22.17 $10.58 $2.39
Ratio of Net Operating Expenses to
Average Net Assets................ 0.93% 0.99% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 0.97% 1.26% 1.82% 3.87%/3/
Ratio of Net Investment Income to
Average Net Assets................ 0.54% 0.63% 0.59% 0.77%/3/
Portfolio Turnover Rate............ 34.0% 14.0% 24.0% 14.0%/3/
</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.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
6
<PAGE>
COMMUNICATION AND ENTERTAINMENT FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 9.64 $ 8.75 $ 7.61 $7.00
------ ------ ------ -----
Income From Investment Operations
Net Investment Income.............. 0.03 0.04 0.02 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 1.30 1.06 1.52 0.60
------ ------ ------ -----
Total From Investment Operations... 1.33 1.10 1.54 0.61
------ ------ ------ -----
Less Distributions
Dividends From Net Investment
Income............................ (0.03) (0.04) (0.03) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... (0.62) (0.17) (0.37) 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00 0.00
------ ------ ------ -----
Total Distributions................ (0.65) (0.21) (0.40) 0.00
------ ------ ------ -----
Net Asset Value, End of Period....... $10.32 $ 9.64 $ 8.75 $7.61
====== ====== ====== =====
Total Return/2/...................... 13.48% 12.87% 20.07% 8.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $46.95 $29.91 $21.02 $5.79
Ratio of Net Operating Expenses to
Average Net Assets................ 0.92% 0.98% 0.98% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 0.97% 1.06% 1.16% 2.20%/3/
Ratio of Net Investment Income to
Average Net Assets................ 0.28% 0.46% 0.29% 1.06%/3/
Portfolio Turnover Rate............ 65.0% 56.0% 60.0% 25.0%/3/
</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.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
7
<PAGE>
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $10.55 $ 9.64 $ 7.71 $ 7.00
------ ------ ------ ------
Income From Investment Operations
Net Investment Income.............. 0.10 0.07 0.06 0.02
Net Gains or (Losses) on Securities
(both realized and unrealized).... 3.71 1.02 1.96 0.69
------ ------ ------ ------
Total From Investment Operations... 3.81 1.09 2.02 0.71
------ ------ ------ ------
Less Distributions
Dividends From Net Investment
Income............................ (0.09) (0.06) (0.07) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... (0.24) (0.12) (0.02) 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00 0.00
------ ------ ------ ------
Total Distributions................ (0.33) (0.18) (0.09) 0.00
------ ------ ------ ------
Net Asset Value, End of Period....... $14.03 $10.55 $ 9.64 $ 7.71
====== ====== ====== ======
Total Return/2/...................... 36.48% 11.49% 26.40% 10.14%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $74.05 $30.18 $14.44 $ 1.94
Ratio of Net Operating Expenses to
Average Net Assets................ 0.91% 0.98% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 0.95% 1.08% 1.73% 5.85%/3/
Ratio of Net Investment Income to
Average Net Assets................ 0.88% 0.83% 0.77% 2.48%/3/
Portfolio Turnover Rate............ 56.0% 82.0% 75.0% 9.0%/3/
</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.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
8
<PAGE>
GLOBAL COMPETITORS FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 8.59 $7.69 $ 7.28 $7.00
------ ------ ------ -----
Income From Investment Operations
Net Investment Income.............. 0.07 0.07 0.05 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 2.27 0.90 0.41 0.27
------ ------ ------ -----
Total From Investment Operations... 2.34 0.97 0.46 0.28
------ ------ ------ -----
Less Distributions
Dividends from Net Investment
Income............................ (0.06) (0.07) (0.05) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions from Net Realized
Gain on Investments and Options... (0.02) 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... (0.02) 0.00 0.00 0.00
------ ------ ------ -----
Total Distributions................ (0.10) (0.07) (0.05) 0.00
------ ------ ------ -----
Net Asset Value, End of Period....... $10.83 $ 8.59 $ 7.69 $7.28
====== ====== ====== =====
Total Return/2/...................... 27.39% 12.73% 6.29% 4.00%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $71.30 $25.50 $10.06 $2.04
Ratio of Net Operating Expenses to
Average Net Assets................ 0.89% 0.97% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 0.93% 1.18% 1.72% 3.97%/3/
Ratio of Net Investment Income to
Average Net Assets................ 0.73% 1.04% 0.81% 0.82%/3/
Portfolio Turnover Rate............ 17.0% 29.0% 19.0% 0%
</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.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
9
<PAGE>
EARLY LIFE CYCLE FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 9.77 $ 8.66 $ 7.40 $7.00
------- ------- ------- -----
Income From Investment Operations
Net Investment Income........... (0.02) (0.02) (0.01) 0.00
Net Gains or (Losses) on
Securities (both realized and
unrealized).................... 1.72 1.31 1.36 0.40
------- ------- ------- -----
Total From Investment
Operations..................... 1.70 1.29 1.35 0.40
------- ------- ------- -----
Less Distributions
Dividends From Net Investment
Income......................... 0.00 0.00 0.00 0.00
Dividends in Excess of Net
Investment Income.............. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and
Options........................ (0.69) (0.18) (0.09) 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options.................... 0.00 0.00 0.00 0.00
------- ------- ------- -----
Total Distributions............. (0.69) (0.18) (0.09) 0.00
------- ------- ------- -----
Net Asset Value, End of Period.... $ 10.78 $ 9.77 $ 8.66 $7.40
======= ======= ======= =====
Total Return/2/................... 18.29% 15.16% 18.27% 5.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)...................... $ 78.06 $ 47.78 $ 24.95 $5.51
Ratio of Net Operating Expenses
to Average Net Assets.......... 0.90% 0.96% 0.95% 0.99%/3/
Ratio of Gross Operating
Expenses to Average Net
Assets/4/...................... 0.98% 1.04% 1.15% 2.70%/3/
Ratio of Net Investment Income
to Average Net Assets.......... (0.17)% (0.23)% (0.25)% 0.12%/3/
Portfolio Turnover Rate......... 38.0% 42.0% 20.0% 4.0%/3/
</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.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
10
<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 Funds, 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 Funds 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 demo-graphics 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.
Themes. To complete U.S. Trust's investment philosophy, the three portfolio
strategies discussed above are applied in concert with several "longer-term
investment themes" to identify investment opportunities. The Investment Ad-
viser believes these longer-term themes represent strong and inexorable
trends. The Investment Adviser also believes that understanding the instiga-
tion, catalysts and effects of these longer-term trends should help to iden-
tify companies that are beneficiaries of these trends.
INVESTMENT OBJECTIVES AND POLICIES
The Investment Adviser will use its best efforts to achieve the investment
objective of each Fund, although their achievement cannot be assured. The in-
vestment objective of each Fund is "fundamental", meaning that it may not be
changed without a vote of the holders of a majority of the particular Fund's
outstanding shares (as defined under "Miscellaneous"). Except as noted below
in "Investment Limitations,"
11
<PAGE>
the investment policies of each Fund may be changed without a vote of the
holders of a majority of the outstanding shares of such Fund.
EQUITY FUND
The Equity Fund's investment objective is to seek long-term capital apprecia-
tion. The Equity Fund invests in companies which the Investment Adviser
believes have value currently not recognized in the market prices of the com-
panies' securities. The Investment Adviser uses the investment philosophy,
strategies and themes discussed above to identify such investment values and
to diversify the Fund's investments over a variety of industries and types of
companies. See "Investment Policies Common to the Equity Fund and the Theme
Funds" for a discussion of various investment policies applicable to the Eq-
uity Fund.
THEME FUNDS
Five Theme Funds are offered having the common investment objective of long-
term capital appreciation. As noted above, these Theme Funds are based on
themes identified and followed by the Investment Adviser. Each Theme Fund's
key policies are discussed below. Additional policies common to all Theme
Funds are discussed after this section.
AGING OF AMERICA FUND--invests in companies which the Investment Adviser be-
lieves will benefit from the changes occurring in the demographic structure of
the U.S. population, particularly its growing proportion of individuals over
the age of 40. In analyzing companies for this Fund, the Investment Adviser
considers carefully the ongoing changes in the mean and median ages of the
U.S. population and the resulting effects on the lifestyles and day-to-day
economic actions of the population as a whole. Companies currently positioned
to benefit from such changes include health care, pharmaceutical, biotechnol-
ogy and similar health-related firms. In addition, certain clothing, financial
services, entertainment, real estate and housing, food and beverage and other
types of companies may be positioned to benefit from the demographic changes.
Under normal conditions, at least 65% of the Fund's total assets will be in-
vested in companies of the type described in this paragraph.
COMMUNICATION AND ENTERTAINMENT FUND--invests in companies which the Invest-
ment Adviser believes will benefit from the technological and international
transformation of the communications and entertainment industries, particu-
larly the convergence of information, communication and entertainment media.
Such companies may include those engaged in the development, production, sale
and distribution of products or services in the broadcast, radio and televi-
sion, leisure, entertainment, amusement, publishing, telecommunications serv-
ices and equipment, and tele-phone utilities industries. In analyzing compa-
nies for investment, the Investment Adviser may focus on firms which the In-
vestment Adviser believes are innovators of or will benefit from the melding
of computer, communications and entertainment technologies. Under normal con-
ditions, at least 65% of the Fund's total assets will be invested in companies
of the type described in this paragraph.
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND--invests in companies which the
Investment Adviser believes will benefit from their restructuring or redeploy-
ment of assets and operations in order to become more competitive or profit-
able. Such companies may include those involved in prospective mergers, con-
solidations, liquidations, spin-offs, financial restructurings and reorganiza-
tions. The business activities of such companies are not limited in any way.
Under normal conditions, at least 65% of the Fund's total assets will be in-
vested in companies of the type described in this paragraph. The Investment
Adviser's focus is to find companies whose restructuring activities offer sig-
nificant value and investment potential. For the past several years leveraged
buy-outs and mergers have been prominent trends. Currently, a great deal of
value is being created as companies deleverage, recapitalize, and rationalize
their operations in order to increase profitability. There is risk in these
types of investments. For example, should a company be unsuccessful in reduc-
ing its debt, it may be forced into default on its debt, increasing its debt
or bankruptcy.
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GLOBAL COMPETITORS FUND--invests primarily in U.S.-based companies which the
Investment Adviser believes will benefit from their position as effective and
strong competitors on a global basis. Such companies are characterized by
their ability to supply something unique or of greater value, or to deliver
goods and services more efficiently or reliably. These companies develop and
implement international marketing strategies for their goods and services. The
range of businesses encompassed by this policy is broad and, by way of exam-
ple, may include companies engaged in soft drink production and sales, cloth-
ing manufacturers, tobacco product producers, precision instrument and aero-
space providers, and a variety of communications systems, biotechnology and
high technology suppliers. While the Fund will invest primarily in U.S.-based
companies with such features, up to 20% of the Fund's assets may be invested
in non-U.S.-based global competitors. The Fund will not engage in currency
hedging in an attempt to anticipate currency fluctuations with respect to any
such foreign investments. Under normal conditions, the Fund will invest in se-
curities of issuers from at least three countries and at least 65% of the
Fund's total assets will be invested in companies of the type described in
this paragraph.
EARLY LIFE CYCLE FUND--invests primarily in smaller companies which are in
the earlier stages of their development or larger or more mature companies en-
gaged in new and higher growth potential operations. An early life cycle com-
pany is one which is early in its development as a company, yet has
demonstrated or is expected to achieve substantial long-term earnings growth.
More mature or larger, established companies may also be positioned for
accelerating earnings because of rejuvenated management, new products, new
markets for existing products or structural changes in the economy. In select-
ing companies for investment, the Investment Adviser looks for innovative com-
panies whose potential has not yet been fully recognized by the securities
markets. Under normal conditions, at least 65% of the Fund's total assets will
be invested in companies with capitalization of $1 billion or less. The risk
and venture oriented nature of such companies naturally entails greater risk
for investors when contrasted with investing in more established companies.
INVESTMENT POLICIES COMMON TO THE EQUITY FUND AND THE THEME FUNDS
Under normal market and economic conditions, the Equity and each Theme Fund
will invest at least 65% of its total assets in common stock, preferred stock
and securities convertible into common stock. Normally, up to 35% of each such
Fund's total assets may be invested in other securities and instruments in-
cluding, e.g., other investment-grade debt securities, warrants, options, and
futures instruments as described in more detail below. During temporary defen-
sive periods or when the Investment Adviser believes that suitable stocks or
convertible securities are unavailable, each Fund may hold cash or invest some
or all of its assets in U.S. Government securities, high-quality money market
instruments and repurchase agreements collateralized by the foregoing obliga-
tions.
In managing the Equity and Theme Funds, the Investment Adviser seeks to pur-
chase securities having value currently not recognized in the market price of
a security, consistent with the strategies discussed above.
Portfolio holdings will include common stocks of companies having capitaliza-
tions of varying amounts, and all Funds 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. As discussed above,
the Early Life Cycle Fund emphasizes such companies. Certain securities owned
by the Equity and Theme Funds may be traded only in the over-the-counter mar-
ket or on a regional securities exchange, may be listed only in the quotation
service commonly 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 a Fund's Shares,
and a 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 pe-
riods when such disposition
13
<PAGE>
is not desirable, or to make many small sales over a period of time.
The Equity and Theme Funds may invest in the securities of foreign issuers.
The Funds may invest indirectly in the securities of foreign issuers through
sponsored and unsponsored American Depository Receipts ("ADRs"). ADRs repre-
sent receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities of foreign issuers. Investments in
unsponsored ADRs involve additional risk because financial information based
on generally accepted accounting principles ("GAAP") may not be available for
the foreign issuers of the underlying securities. ADRs may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted.
RISK FACTORS
Each Fund is subject to market risk, interest rate risk and in some cases in-
dustry 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 each Fund. In addition, the
prices of bonds and other debt instruments generally fluctuate inversely with
interest rate changes. Factors affecting debt securities will affect all of
the Funds' debt holdings.
Companies in the various communications and entertainment industries encoun-
ter intense competition, short product life cycles and rapidly changing con-
sumer tastes. In addition, companies in the telecommunications and utilities
industries are subject to heavy governmental regulation.
Small companies may have limited product lines, markets, or financial re-
sources, or may be dependent upon a small management group, and their securi-
ties may be subject to more abrupt or erratic market movements than larger,
more established companies, both because their securities typically are traded
in lower volume and because the issuers typically are subject to a greater de-
gree to changes in their earnings and prospects.
All Funds may invest in the securities of foreign issuers. Investments in
foreign securities involve certain risks not ordinarily associated with in-
vestments 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 restric-
tions. In addition, with respect to certain countries there is the possibility
of expropriation of assets, confiscatory taxation, political or social insta-
bility or diplomatic developments which could adversely affectinvestments in
those countries. There may be less publicly available information about a for-
eign company than about a U.S. company, and foreign companies may not be sub-
ject to accounting, auditing and financial reporting standards and require-
ments comparable to or as uniform as those of U.S.-based companies. Foreign
securities markets, while growing in volume, have, for the most part, substan-
tially 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 markets are gen-
erally higher than in the United States. There is generally less government
supervision and regulation of foreign exchanges, brokers and issuers than
there is in the United States and a Fund might have greater difficulty taking
appropriate legal action in a foreign court. Dividends and interest payable on
a Fund's foreign portfolio securities may be subject to foreign withholding
taxes. To the extent such taxes are not offset by credits or deductions al-
lowed to investors under the Federal income tax provisions, they may reduce
the net return to the shareholders.
The Funds should not be considered a complete investment program. In view of
the specialized nature of their investment activities, investment in the Eq-
uity and Theme Funds' 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.
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Securities of companies discussed in this section may be more volatile than
the overall market.
PORTFOLIO INSTRUMENTS AND OTHER
INVESTMENT INFORMATION
MONEY MARKET INSTRUMENTS
All Funds may invest in "money market instruments," which include, among
other things, bank obligations, commercial paper and corporate bonds with re-
maining 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
a Fund's total assets may be invested in any one branch, and no more than 20%
of a particular 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 a Fund's total assets at the time of purchase.
Investments by the Funds in commercial paper will consist of issues that are
rated "A-2" or better by Standard & Poor's Ratings Group ("S&P") or "Prime-2"
or better by Moody's Investors Service, Inc. ("Moody's"). In addition, each
Fund may acquire unrated commercial paper that is determined by the Investment
Adviser at the time of purchase to be of comparable quality to rated instru-
ments that may be acquired by the particular 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 a Fund, the Fund may, from time to time as specified in the
instrument, demand payment of the principal of the instrument or may resell
the instrument to a third party. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument 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 security
which cannot be disposed of within seven days without taking a reduced price
will be considered an illiquid security subject to the 10% limitation dis-
cussed below under "Investment Limitations."
GOVERNMENT OBLIGATIONS
All Funds 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 National 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 Maritime Administration.
REPURCHASE AGREEMENTS
In order to effectively manage their cash holdings, the Funds may enter into
repurchase agreements. Each Fund will enter into repurchase agreements only
with financial institutions that are deemed to be creditworthy by the Invest-
ment Adviser, pursuant to guidelines established by Excelsior Fund's Board of
Directors. No Fund will enter into repurchase agreements with the Investment
Adviser or any of its affiliates. Repurchase agreements with remaining maturi-
15
<PAGE>
ties in excess of seven days will be considered illiquid securities and will
be subject to the 10% limit described in Investment Limitation No. 6 below.
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 a Fund
at not less than the repurchase price. Default or bankruptcy of the seller
would, however, expose a Fund to possible delay in connection with the dispo-
sition 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 agreement.
SECURITIES LENDING
To increase return on its portfolio securities, each Fund may lend its port-
folio 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
include cash, securities of the U.S. Government, its agencies or instrumental-
ities, 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
outstanding loans of a Fund exceeds 30% of the value of its total assets.
There may be risks of delay in receiving additional collateral or in recover-
ing the securities loaned or even a loss of rights in the collateral should
the borrower of the securities fail financially. However, loans are made only
to borrowers 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 their portfolio securities in accordance with
their respective investment objectives and policies, the Funds may enter into
option transactions as described below.
The Theme Funds may purchase put and call options listed on a national secu-
rities exchange and issued by the Options Clearing Corporation in an amount
not exceeding 5% of a Fund's net assets, as described further in the Statement
of Additional Information. Such options may relate to particular securities or
to various stock or bond indices. Purchasing options is a specialized invest-
ment technique which entails a substantial risk of a complete loss of the
amounts paid as premiums to the writer of the options.
In addition, each Fund may engage in writing covered call options (options on
securities owned by the particular 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 Clearing Corporation.
The aggregate value of the securities subject to options written by each Fund
may not exceed 25% of the value of its net assets. By writing a covered call
option, a Fund forgoes the opportunity to profit from an increase in the mar-
ket 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 exercised or the Fund ef-
fects a closing purchase transaction by purchasing an option of the same se-
ries. The use of covered call options is not a primary investment technique of
the Funds 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 Funds' Statement of Additional
Information.
FUTURES CONTRACTS
The Theme Funds may also enter into interest rate 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 ex-
changes or in other established financial markets.
The Theme Funds will not engage in futures transactions for speculation, but
only as a hedge against changes in market values of securities which a Fund
16
<PAGE>
holds or intends to purchase. The Theme Funds will engage in futures transac-
tions only to the extent per mitted by the Commodity Futures Trading Commis-
sion ("CFTC") and the Securities and Exchange Commission ("SEC"). When invest-
ing in futures contracts, the Funds must satisfy certain asset segregation re-
quirements to ensure that the use of futures is unleveraged. When a Fund takes
a long position in a futures contract, it must maintain a segregated account
containing cash and/or certain liquid assets equal to the purchase price of
the contract, less any margin or deposit. When a Fund takes a short position
in a futures contract, the Fund must maintain a segregated account containing
cash and/or certain liquid assets in an amount equal to the market value of
the securities 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 a Fund
"covers" an options or futures position generally by entering into an offset-
ting position. Each Fund will limit its hedging transactions in futures con-
tracts 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 exchange on which the futures contract (or futures option) is
traded, plus any premiums paid by the Fund on its open futures options posi-
tions, does not exceed 5% of the Fund's total assets, after taking into ac-
count any unrealized profits and unrealized losses on the Fund's open con-
tracts (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 purchase 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
a Fund's total assets may be hedged.
Transactions in futures as a hedging device may subject a Fund to a number of
risks. Successful use of futures by a 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 correlation
at all, between movements in the price of the futures contracts (or options)
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 con-
tract (or option) at any particular time. Consequently, a Fund may realize a
loss on a futures transaction that is not offset by a favorable movement in
the price of securities which it holds or intends to purchase or may be unable
to close a futures position in the event of adverse price movements.
INVESTMENT COMPANY SECURITIES
In connection with the management of its daily cash positions, each 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 a Fund bears directly in connec-
tion with its own operations, as a shareholder of another investment company,
a Fund would bear its pro rata portion of the other investment company's advi-
sory 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 each
Fund within the limits prescribed by the Investment Company Act of 1940 (the
"1940 Act") which include, subject to certain exceptions, a prohibition
against a Fund investing more than 10% of the value of its total assets in
such securities.
WHEN-ISSUED AND FORWARD TRANSACTIONS
Each 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 a Fund to purchase or sell particular securities
with payment and delivery taking place in the future, beyond the normal set-
tlement
17
<PAGE>
date, at a stated price and yield. Securities purchased on a "forward commit-
ment" or "when-issued" basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. It
is expected that forward commitments and "when-issued" purchases will not ex-
ceed 25% of the value of a Fund's total assets absent unusual market condi-
tions, and that the length of such commitments will not exceed 45 days. The
Funds do not intend to engage in "when-issued" purchases and forward commit-
ments for speculative purposes, but only in furtherance of their investment ob-
jectives.
ILLIQUID SECURITIES
No Fund will knowingly invest more than 10% of the value of its net assets in
securities that are illiquid. Each 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 the Act.
Any such security will not be considered illiquid so long as it is determined
by the Investment Adviser, acting under guidelines approved and monitored by
the Board, that an adequate trading market exists for that security. This in-
vestment practice could have the effect of increasing the level of illiquidity
in a Fund during any period that qualified institutional buyers become uninter-
ested in purchasing these restricted securities.
PORTFOLIO TURNOVER
Each Fund may sell a portfolio investment immediately after its acquisition if
the Investment Adviser believes that such a disposition is consistent with the
investment objective of the particular Fund. 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 in-
vestments. A high rate of portfolio turnover may involve correspondingly
greater brokerage commission expenses and other transaction costs, which must
be borne directly by a 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 capital gains are realized, any distributions resulting
from such gains are considered ordinary income for Federal income tax purposes.
(See "Financial Highlights" and "Taxes--Federal").
INVESTMENT LIMITATIONS
The investment limitations enumerated below are matters of fundamental policy
and may not be changed with respect to a Fund without the vote of the holders
of a majority of a Fund's outstanding shares (as defined under "Miscellane-
ous").
A Fund may not:
1. Purchase securities of any one issuer, other than U.S. Government obliga-
tions, if immediately after such purchase more than 5% of the value of its
total assets would be invested in the securities of such issuer, except that
up to 25% of the value of its total assets may be invested without regard to
this 5% limitation;
2. 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 fa-
cilitate the orderly sale of portfolio securities to accommodate abnormally
heavy redemption requests and is not for leverage purposes.) A Fund will not
purchase portfolio securities 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
3. Make loans, except that (i) each Fund may purchase or hold debt securi-
ties 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) each Fund
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<PAGE>
may lend portfolio securities in an amount not exceeding 30% of its total as-
sets.
Each Fund may not:
4. 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 that (a) with respect to the Equity Fund, there is no
limitation with respect to securities issued or guaranteed by the U.S. Gov-
ernment or domestic bank obligations, (b) with respect to each Theme Fund,
there is no limitation with respect to securities issued or guaranteed by the
U.S. Government, and (c) neither all finance companies, as a group, nor all
utility companies, as a group, are considered a single industry for purposes
of this policy.
The Equity Fund may not:
5. Invest in obligations of foreign branches of financial institutions or in
domestic branches of foreign banks, if immediately after such purchase (i)
more than 5% of the value of its total assets would be invested in obliga-
tions of any one foreign branch of the financial institution or domestic
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; and
6. Knowingly invest more than 10% of the value of its total assets in illiq-
uid securities, including repurchase agreements with remaining maturities in
excess of seven days, restricted securities, and other securities for which
market quotations are not readily available.
* * *
In addition to the investment limitations described above, no Fund may invest
in the securities of any single issuer if, as a result, the Fund holds more
than 10% of the outstanding voting securities of such issuer.
The Theme Funds may not invest in obligations of foreign branches of financial
institutions or in domestic branches of foreign banks if immediately after such
purchase (i) more than 5% of the value of their respective total assets would
be invested in obligations of any one foreign branch of the financial institu-
tion or domestic branch of a foreign bank; or (ii) more than 20% of their re-
spective total assets would be invested in foreign branches of financial insti-
tutions or in domestic branches of foreign banks. The Theme Funds may not know-
ingly invest more than 10% of the value of their respective total assets in il-
liquid securities, including repurchase agreements with remaining maturities in
excess of seven days, restricted securities and other securities for which mar-
ket quotations are not readily available. These investment policies may be
changed by Excelsior Fund's Board of Directors upon reasonable notice to share-
holders.
The Equity Fund will not invest more than 25% of the value of its total assets
in domestic bank obligations.
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 percentage
resulting from a change in value of a Fund's portfolio securities will not con-
stitute a violation of such limitation.
PRICING OF SHARES
The net asset value of each Fund is determined and the Shares of each 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 pric-
ing for each Fund are determined on each day the Exchange and the Investment
Adviser are open for trading ("Business Day"). Currently, the holidays which
the Funds observe are New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Vet-
erans Day, Thanksgiving Day and Christmas. A Fund's net asset value per Trust
Share for purposes of pricing sales and redemptions is calculated by dividing
the value of all securities and other assets allocable to its Trust Shares,
19
<PAGE>
less the liabilities allocable to its Trust Shares, by the number of its out-
standing Trust Shares.
Assets in the Funds 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
Funds 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 a Fund's Shares. Excelsior Fund's administrators have undertaken to
price the securities in the Funds' portfolios, and may use one or more inde-
pendent pricing services in connection with this service.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in each 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.
Under Excelsior Fund's Distribution Agreement and Distribution Plan, adopted
pursuant to Rule 12b-1 under the 1940 Act, the Trust Shares of each Fund may
reimburse the Distributor monthly for distribution expenses in an amount not
to exceed the annual rate of .75% of the average daily net asset value of the
Fund's outstanding Trust Shares. Trust Shares of each Fund currently bear the
expense of such distribution fees at the annual rate of .35% of the average
daily net asset value of the Fund's outstanding Trust Shares. Distribution ex-
penses payable by the Distributor under the Distribution Plan include direct
and indirect marketing expenses such as: (i) the expense of preparing, print-
ing and distributing promotional materials and prospectuses (other than pro-
spectuses used for regulatory purposes or for distribution to existing share-
holders); (ii) the expense of other advertising via radio, television or other
print or electronic media; and (iii) the expense of payments to financial in-
stitutions that are not affiliated with the Distributor ("Distribution Organi-
zations") for distribution assistance (including sales incentives).
PURCHASE OF SHARES
Shares may be purchased by customers ("Customers") of financial institutions
("Shareholder Organiza-
20
<PAGE>
tions"). A Shareholder Organization may elect to hold of record Shares for its
Customers and to record beneficial ownership of Shares on the account state-
ments provided by it to its Customers. If it does so, it is the Shareholder
Organization's responsibility to transmit to the Distributor all purchase or-
ders for its Customers and to transmit, on a timely basis, payment for such
orders to Chase Global Funds Services Company ("CGFSC"), the Funds' sub-trans-
fer agent, in accordance with the procedures agreed to by the Shareholder Or-
ganization and the Distributor. Confirmations of all such Customer purchases
and redemptions will be sent by CGFSC to the particular Shareholder Organiza-
tion. As an alternative, a Shareholder Organization may elect to establish its
Customers' accounts of record with CGFSC. In this event, even if the Share-
holder Organization continues to place its Customers' purchase and redemption
orders with the Funds, CGFSC will send confirmations of such transactions and
periodic account statements directly to Customers. A Shareholder Organization
may also elect to establish its Customers as record holders.
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 certain Shareholder Organizations may incur transac-
tion charges in connection with such purchases. Investors should contact their
Shareholder Organizations for further information on transaction fees.
PUBLIC OFFERING PRICE
The public offering price for Shares of each Fund is the sum of the net asset
value of the Shares purchased plus a sales load according to the table below:
<TABLE>
<CAPTION>
TOTAL SALES CHARGES REALLOWANCE TO DEALERS
------------------------------ ----------------------
AS A % OF AS A % OF AS A % OF
OFFERING PRICE NET ASSET OFFERING PRICE
AMOUNT OF TRANSACTION PER SHARE VALUE PER SHARE PER SHARE
- --------------------- -------------- --------------- ----------------------
<S> <C> <C> <C>
Less than $50,000....... 4.50% 4.71% 4.00%
$50,000 to $99,999...... 4.00 4.17 3.50
$100,000 to $249,999.... 3.50 3.63 3.00
$250,000 to $499,999.... 3.00 3.09 2.50
$500,000 to $999,999.... 2.00 2.05 1.50
$1,000,000 to
$1,999,999............. 1.00 1.00 .50
$2,000,000 and over..... .50 .50 .25
</TABLE>
The reallowance to dealers may be changed from time to time but will remain
the same for all such dealers.
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 reallow to any dealer that sponsors
sales contests or recognition programs conforming to criteria established by
the Distributor, or participates in sales programs sponsored by the Distribu-
tor, an amount not exceeding the total applicable sales charges on the sales
generated by the dealer at the public offering price during such programs. Al-
so, the Distributor in its discretion may from time to time, pursuant to ob-
jective criteria established by the Distributor, pay fees to qualifying deal-
ers for certain services or activities which are primarily intended to result
in sales of Shares of the Funds. If any such program is made available to any
dealer, it will be made available to all dealers on the same terms and condi-
tions. Payments made under such programs will be made by the Distributor out
of its own assets and not out of the assets of the Funds. These programs will
not change the price of Shares or the amount that the Funds will receive from
such sales.
In addition, the Distributor may offer to pay a fee from its own assets (in-
cluding any portion of the sales load retained by the Distributor) to finan-
cial institutions as financial assistance for the continuing investment of
customers' assets in the Funds 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 Funds. 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.
The sales load described above will not be applicable to: (a) purchases of
Shares by customers of the Investment Adviser or its affiliates; (b) trust,
agency or custodial accounts opened through the trust department of
21
<PAGE>
a bank, trust company or thrift institution, provided that appropriate notifi-
cation of such status is given at the time of investment; (c) companies, cor-
porations and partnerships (excluding full service broker/dealers and finan-
cial planners, registered investment advisers and depository institutions not
covered by the exemptions in (d) and (e) below); (d) financial planners and
registered investment advisers not affiliated with or clearing purchases
through full service broker/dealers; (e) purchases of Shares by depository in-
stitutions for their own account as principal; (f) exchange transactions (de-
scribed below under "Investor Programs--Exchange Privilege") where the Shares
being exchanged were acquired in connection with the distribution of assets
held in trust, agency or custodial accounts maintained with the trust depart-
ment of a bank; (g) corporate/ business retirement plans (such as 401(k),
403(b)(7), 457 and Keogh accounts) sponsored by the Distributor and IRA ac-
counts sponsored by the Investment Adviser; (h) company-sponsored employee
pension or retirement plans making direct investments in the Funds; (i) pur-
chases of Shares by officers, trustees, directors, employees, former employees
and retirees of Excelsior Fund, Excelsior Tax-Exempt Funds, Inc. ("Excelsior
Tax-Exempt Fund"), Excelsior Institutional Trust, Excelsior Funds, the Invest-
ment Adviser, the Distributor or of any direct or indirect affiliate of any of
them; (j) purchases of Shares by all beneficial shareholders of Excelsior Fund
or Excelsior Tax-Exempt Fund as of May 22, 1989; (k) purchases of Shares by
investment advisers registered under the Investment Advisers Act of 1940 for
their customers through an omnibus account established with United States
Trust Company of New York; (l) purchases of Shares by directors, officers and
employees of brokers and dealers selling shares pursuant to a selling agree-
ment with Excelsior Fund, Excelsior Tax-Exempt Fund, Excelsior Institutional
Trust or Excelsior Fund; (m) purchases of shares by investors who are members
of affinity groups serviced by USAffinity Investments Limited Partnership; and
(n) customers of certain financial institutions who purchase Shares through a
registered representative of UST Financial Services Corp. on the premises of
their financial institutions. In addition, no sales load is charged on the re-
investment of dividends or distributions or in connection with certain share
exchange transactions. Investors who have previously redeemed shares in an
"Eligible Fund" (as defined below) on which a sales load has been paid also
have a one-time privilege of purchasing shares of another "Eligible Fund" at
net asset value without a sales charge, provided that such privilege will ap-
ply only to purchases made within 30 calendar days from the date of redemption
and only with respect to the amount of the redemption. These exemptions to the
imposition of a sales load are due to the nature of the investors and/or re-
duced sales effort that will be needed in obtaining investments.
QUANTITY DISCOUNTS
An investor in the Funds may be entitled to reduced sales charges through
Rights of Accumulation, a Letter of Intent or a combination of investments, as
described below, even if the investor does not wish to make an investment of a
size that would normally qualify for a quantity discount.
In order to obtain quantity discount benefits, an investor must notify CGFSC
at the time of purchase that he or she would like to take advantage of any of
the discount plans described below. Upon such notification, the investor will
receive the lowest applicable sales charge. Quantity discounts may be modified
or terminated at any time and are subject to confirmation of an investor's
holdings through a check of appropriate records. For more information about
quantity discounts, please call (800) 446-1012 or contact your Shareholder Or-
ganization.
Rights of Accumulation. A reduced sales load applies to any purchase of
shares of any portfolio of Excelsior Fund and Excelsior Tax-Exempt Fund that
is sold with a sales load ("Eligible Fund") where an investor's then current
aggregate investment is $50,000 or more. "Aggregate investment" means the to-
tal of: (a) the dollar amount of the then current purchase of shares of an El-
igible Fund and (b) the value (based on current net asset value) of previously
purchased and beneficially
22
<PAGE>
owned shares of any Eligible Fund on which a sales load has been paid. If, for
example, an investor beneficially owns shares of one or more Eligible Funds
with an aggregate current value of $49,000 on which a sales load has been paid
and subsequently purchases shares of an Eligible Fund having a current value
of $1,000, the load applicable to the subsequent purchase would be reduced to
4.00% of the offering price. Similarly, with respect to each subsequent in-
vestment, all shares of Eligible Funds that are beneficially owned by the in-
vestor at the time of investment may be combined to determine the applicable
sales load.
Letter of Intent. By completing the Letter of Intent included as part of the
New Account Application, an investor becomes eligible for the reduced sales
load applicable to the total number of Eligible Fund shares purchased in a 13-
month period pursuant to the terms and under the conditions set forth below
and in the Letter of Intent. To compute the applicable sales load, the offer-
ing price of shares of an Eligible Fund on which a sales load has been paid,
beneficially owned by an investor on the date of submission of the Letter of
Intent, may be used as a credit toward completion of the Letter of Intent.
However, the reduced sales load will be applied only to new purchases.
CGFSC will hold in escrow shares equal to 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if an investor does not
purchase the full amount indicated in the Letter of Intent. The escrow will be
released when an investor fulfills the terms of the Letter of Intent by pur-
chasing the specified amount. If purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect an investor's total pur-
chases. If total purchases are less than the amount specified, an investor
will be requested to remit an amount equal to the difference between the sales
load actually paid and the sales load applicable to the total purchases. If
such remittance is not received within 20 days, CGFSC, as attorney-in-fact
pursuant to the terms of the Letter of Intent and at the Distributor's direc-
tion, will redeem an appropriate number of shares held in escrow to realize
the difference. Signing a Letter of Intent does not bind an investor to pur-
chase the full amount indicated at the sales load in effect at the time of
signing, but an investor must complete the intended purchase in accordance
with the terms of the Letter of Intent to obtain the reduced sales load. To
apply, an investor must indicate his or her intention to do so under a Letter
of Intent at the time of purchase.
Qualification for Discounts. For purposes of applying the Rights of Accumula-
tion and Letter of Intent privileges described above, the scale of sales loads
applies to the combined purchases made by any individual and/or spouse pur-
chasing securities for his, her or their own account or for the account of any
minor children, or the aggregate investments of a trustee or custodian of any
qualified pension or profit sharing plan or IRA established (or the aggregate
investment of a trustee or other fiduciary) for the benefit of the persons
listed above.
PURCHASE PROCEDURES
General
Customers of certain Shareholder Organizations may purchase Shares by com-
pleting the Application for purchase 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 any 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 a Shareholder Organization; or (c) a letter stating the amount of the
investment, the name of the Fund and the account number in which the invest-
ment is to be made.
23
<PAGE>
Purchases by Wire
Customers of certain Shareholder Organizations 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 Reserve 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 Appli-
cation accompanying this Prospectus and forward it to CGFSC. Redemptions by in-
vestors will not be processed until the completed Application for purchase of
Shares has been received by CGFSC and accepted by the Distributor. Investors
making subsequent investments by wire should follow the above instructions.
OTHER PURCHASE INFORMATION
Except as provided in "Investor Programs" below, the minimum initial aggregate
investment by a Shareholder Organization investing on behalf of its Customers
is $500 per Fund. The minimum subsequent investment is $50 per Fund. Customers
may agree with a particular Shareholder Organization to make a minimum purchase
with respect to their accounts. Depending upon the terms of the particular ac-
count, Shareholder Organizations may charge a Customer's account fees for auto-
matic investment 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.
REDEMPTION PROCEDURES
Customers of Shareholder Organizations holding Shares of record may redeem all
or part of their investments in the Funds 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.
No charge for wiring redemption payments to Shareholder Organizations 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 Shareholder Organization
may incur transaction charges in connection with such redemptions. Such invest-
ors should contact their Shareholder Organization for further information on
transaction fees. Investors may redeem all or part of their Shares in accor-
dance with the procedures described below (these procedures also apply to Cus-
tomers of Shareholder Organizations for whom individual accounts have been es-
tablished with CGFSC).
REDEMPTION BY MAIL
Customers of certain Shareholder Organizations may redeem shares by submitting
a written request for redemption to:
Excelsior Funds c/o Chase Global Funds Services Company P.O. Box 2798 Bos-
ton, 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
rec-
24
<PAGE>
ord, 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
Signature Guarantee Guidelines. Copies of the Signature Guarantee Guidelines
and information on STAMP can be obtained from CGFSC at (800) 446-1012 or at
the address given above. CGFSC may require additional supporting documents for
redemptions made by corporations, executors, administrators, trustees and
guardians. A redemption request will not be deemed to be properly received un-
til CGFSC receives all required documents in proper form. Payment for Shares
redeemed 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
Customers of certain Shareholder Organizations who have so indicated on the
Application, or have subsequently arranged in writing to do so, may redeem
Shares by instructing CGFSC by wire or telephone to wire the redemption pro-
ceeds directly to the investor's account at any commercial bank in the United
States. Customers of certain Shareholder Organizations who are shareholders of
record may also redeem Shares by instructing 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. Only redemptions of $500 or more will be wired
to an investor's account. An $8.00 fee for each wire redemption by an investor
is deducted by CGFSC from the proceeds of the redemption. The redemption pro-
ceeds for investors must be paid to the same bank and account as designated on
the Application or in written instructions subsequently 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, an 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 investor, with signatures guaranteed (see "Redemption by
Mail" above, for details regarding signature guarantees). Further documenta-
tion 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. An investor who anticipates the need for more immediate access 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 an investor's purchase check is not collected, the purchase
will be cancelled and CGFSC will charge a fee of $25.00 to the investor's ac-
count.
During periods of substantial economic or market change, telephone redemp-
tions may be difficult to
25
<PAGE>
complete. If a Customer is unable to contact CGFSC by telephone, the Customer
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 a 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 a 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.
INVESTOR PROGRAMS
EXCHANGE PRIVILEGE
Customers of Shareholder Organizations may, after appropriate prior authori-
zation and without an exchange fee imposed by Excelsior Fund, exchange Shares
in a Fund having a value of at least $500 for Shares of any other Fund, or for
Trust Shares of Excelsior Institutional Trust, provided that such other Shares
may legally be sold in the state of the investor's residence.
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 a Fund
and the investment of the redemption proceeds in Shares of another Fund or of
a portfolio of Excelsior Institutional Trust. The redemption will be made at
the per Share net asset value of the Shares being redeemed next determined af-
ter the exchange request is received. The shares of the portfolio to be ac-
quired will be purchased at the per share net asset value of those shares
(plus any applicable sales load) next determined after acceptance of the ex-
change request. No sales load will be payable on shares to be acquired through
an exchange to the extent that a sales load was previously paid on the Shares
being exchanged.
Investors may find the exchange privilege useful if their investment objec-
tives or market outlook should change after they invest in a Fund. For further
information regarding exchange privileges, shareholders should call (800) 446-
1012 (from overseas, call (617) 557-8280). Investors exercising the exchange
privilege with the portfolios of Excelsior Institutional Trust should request
and review the prospectus of such funds. Such prospectuses may be obtained by
calling the telephone numbers listed above. In order to prevent abuse of this
privilege to the disadvantage of other shareholders, Excelsior Fund and Excel-
sior Institutional Trust reserve the right to limit the number of exchange re-
quests of investors to no more than six per year. Excelsior Fund may modify or
terminate the ex-
26
<PAGE>
change program at any time upon 60 days' written notice to shareholders, and
may reject any exchange request. EXCELSIOR FUND, EXCELSIOR INSTITUTIONAL
TRUST, CGFSC AND THE DISTRIBUTOR ARE NOT RESPONSIBLE FOR THE AUTHENTICITY OF
EXCHANGE REQUESTS RECEIVED BY TELEPHONE THAT ARE REASONABLY BELIEVED TO BE
GENUINE. IN ATTEMPTING TO CONFIRM THAT TELEPHONE INSTRUCTIONS ARE GENUINE, EX-
CELSIOR FUND AND EXCELSIOR INSTITUTIONAL TRUST WILL USE SUCH PROCEDURES AS ARE
CONSIDERED REASONABLE, 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
Customers of certain Shareholder Organizations who own Shares of a Fund with
a value of $10,000 or more may establish a Systematic Withdrawal Plan. The in-
vestor may request a declining-balance withdrawal, a fixed-dollar withdrawal,
a fixed-share withdrawal, or a fixed-percentage withdrawal (based on the cur-
rent value of Shares in the account) on a monthly, quarterly, semi-annual or
annual basis. Information concerning the availability of, and the procedures
and fees relating to, such plans may be obtained by Customers directly from
their Shareholder Organizations.
RETIREMENT PLANS
Shares are available for purchase by investors in connection with the follow-
ing tax-deferred prototype retirement plans offered by certain Shareholder Or-
ganizations:
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 Funds pursuant to Profit Sharing and Money-Pur-
chase Plans and Keogh Plans are not subject to the minimum investment and
forced redemption provisions described above. The minimum initial investment
for IRAs is $250 per Fund and the minimum subsequent investment is $50 per
Fund. Detailed information concerning eligibility, service fees and other mat-
ters related to these plans is available from Shareholder Organizations.
Information concerning the availability of, and the procedures and fees re-
lating to, such retirement plans may be obtained by Customers directly from
their Shareholder Organizations.
AUTOMATIC INVESTMENT PROGRAM
The Automatic Investment Program permits Customers of certain Shareholder Or-
ganizations to purchase Shares (minimum of $50 per Fund per transaction) at
regular intervals selected by the Customer. 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 option, the account designated will be deb-
ited 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 Shares at predetermined
intervals. This may help investors to reduce their average cost per share be-
cause the agreed upon fixed investment amount allows more Shares to be pur-
chased 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. Investors should be aware, how-
ever, that Shares bought using Dollar Cost Averaging are purchased without re-
gard 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
27
<PAGE>
prevent a loss if an investor ultimately redeems his Shares at a price which is
lower than their purchase price.
Information concerning the availability of, and the procedures and fees relat-
ing to, Automatic Investment accounts may be obtained by Customers directly
from their Shareholder Organizations.
DIVIDENDS AND DISTRIBUTIONS
Dividends from the net investment income of the Funds are declared and paid
quarterly. For dividend purposes, a Fund's investment income is reduced by ac-
crued expenses directly attributable to that Fund and the general expenses of
Excelsior Fund prorated to that Fund on the basis of its relative net assets. A
Fund's net investment income available for distribution to the holders of Trust
Shares will be reduced by the amount of other expenses allocated to such se-
ries, including the expense of distribution fees associated with Excelsior
Fund's Distribution Plan. Net realized capital gains are distributed at least
annually. Dividends and distributions will reduce the net asset value of each
of the Funds 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. Customers of Share-
holder Organizations will receive dividends and distributions in additional
Shares of the Fund on which the dividend or distribution is paid (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. Reinvested dividends and distributions receive the same
tax treatment as those paid in cash.
TAXES
FEDERAL
Each of the Funds qualified for its last taxable year as a "regulated invest-
ment company" under the Internal Revenue Code of 1986, as amended (the "Code").
Each Fund expects to so qualify in future years. Such qualification generally
relieves a 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 a Fund distribute to its shareholders an amount equal to at
least 90% of its investment company taxable income for each taxable year. In
general, a Fund's investment company taxable income will be its income (includ-
ing 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. Each Fund intends to distribute
substantially all of its investment company taxable income each year. Such div-
idends will be taxable as ordinary income to Fund shareholders who are not cur-
rently exempt from Federal income taxes, whether such income is received in
cash or reinvested in additional Shares. (Federal income taxes for distribu-
tions to IRAs and qualified pension plans are deferred under the Code.) The
dividends received deduction for corporations will apply to such ordinary in-
come distributions to the extent of the total qualifying dividends received by
a Fund from domestic corporations for the taxable year.
Distribution by a 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 capital
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 a 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 a Fund on or just before the record
date of a dividend should be
28
<PAGE>
aware that the amount of the forthcoming dividend 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 effects an exchange of such Shares
for Shares of another Fund within 90 days of the purchase and is able to re-
duce the sales charges applicable to the new Shares (by virtue of the exchange
privilege), the amount equal to such reduction may not be included 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 limitation) in the tax
basis of the new Shares.
Qualification as a regulated investment company under the Code also requires
that each Fund satisfy certain requirements with respect to the source of its
income for a taxable year. At least 90% of the gross income of each Fund must
be derived from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities or for-
eign 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 currencies. The Treasury
Department may by regulation exclude from qualifying income foreign currency
gains which are not directly related to a Fund's principal business of invest-
ing in stock or securities, or options and futures with respect to stock or
securities. Any in come derived by a Fund from a partnership or trust is
treated for this purpose as derived with respect to the Fund's business of in-
vesting in stock, securities or currencies 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 Funds and their shareholders and is not intended as a substitute
for careful tax planning. Accordingly, potential investors in the Funds should
consult their tax advisers with specific reference to their own tax situa-
tions. Shareholders will be advised annually as to the Federal income tax con-
sequences of distributions 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 FUNDS
The business and affairs of the Funds 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 serves as the Investment Adviser to
each Fund. U.S. Trust is a state-chartered bank and trust company. The Invest-
ment 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. The Investment
Adviser is a member bank of the Federal Reserve System and the Federal Deposit
Insurance Corporation and is one of the twelve members of the New York Clear-
ing House Association.
29
<PAGE>
On December 31, 1995, the Investment Adviser's Asset Management Group had ap-
proximately $47 billion in assets under management. The Investment Adviser,
which has its principal offices at 114 W. 47th Street, New York, New York
10036, is a subsidiary of U.S. Trust Corporation, a registered bank holding
company.
The Investment Adviser manages each 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 Equity Fund's portfolio manager, David A. Tillson, is the person primar-
ily responsible for the day-to-day management of the Fund's investment portfo-
lio. Mr. Tillson, a Senior Vice President and Senior Portfolio Manager, has
been with U.S. Trust since 1993, and has been the Fund's portfolio manager
since December 1994. Prior to joining U.S. Trust, Mr. Tillson was the founder
and President of TDA Capital Management Company, and a Senior Vice President
of Matrix Asset Advisors until 1993. He was also a Vice President and Senior
Portfolio Manager with V C S & O Asset Management until 1990.
The Aging of America Fund's portfolio manager, Jonathan L. Stanley, is the
person primarily responsible for the day-to-day management of the Fund's in-
vestment portfolio. Mr. Stanley, a Senior Vice President and Senior Portfolio
Manager of U.S. Trust, has been with U.S. Trust since 1993 and has been the
Fund's portfolio manager since December 1995. Prior to his association with
U.S. Trust, Mr. Stanley was an investment manager with Deutche Bank Capital
Corporation.
The Communication and Entertainment Fund's portfolio manager, John J.
Apruzzese, is the person primarily responsible for the day-to-day management
of the Fund's investment portfolio. Mr. Apruzzese, a Senior Vice President,
Department Manager and Senior Portfolio Manager of U.S. Trust, has been with
U.S. Trust since 1984 and has been the Fund's portfolio manager since its in-
ception.
The Business and Industrial Restructuring Fund's portfolio manager, David J.
Williams, is the person primarily responsible for the day-to-day management of
the Fund's investment portfolio. Mr. Williams, Senior Vice President, Depart-
ment Manager and Senior Portfolio Manager of the Personal Equity and Balanced
Investment Division of U.S. Trust, has been with U.S. Trust since 1987 and has
been the Fund's portfolio manager since its inception.
The Global Competitors Fund's portfolio manager, Wendy S. Popowich, is the
person primarily responsible for the day-to-day management of the Fund's in-
vestment portfolio. Ms. Popowich, a Senior Vice President and Portfolio Man-
ager of the Personal Investment Division of U.S. Trust, has been with U.S.
Trust since 1983 and has been the Fund's portfolio manager since its incep-
tion.
The Early Life Cycle Fund's portfolio manager, Timothy W. Evnin, is the per-
son primarily responsible for the day-to-day management of the Fund's invest-
ment portfolio. Mr. Evnin, a Vice President and Portfolio Manager of U.S.
Trust, has been with U.S. Trust since 1987 and has been the Fund's portfolio
manager since its inception.
For the services provided and expenses assumed pursuant to its Investment Ad-
visory Agreements, the Investment Adviser is entitled to be paid a fee, com-
puted daily and paid monthly, at the annual rates of: .75% of the average
daily net assets of the Equity Fund; and .60% of the average daily net assets
of each Theme Fund. The advisory fee rate payable by the Equity Fund is higher
than the rates payable by most mutual funds. The Board of Directors believes,
based on information supplied to it by the Investment Adviser, that this fee
is comparable to the rates paid by many other funds with similar investment
objectives and policies and is appropriate for the Fund in light of its in-
vestment objective and policies. For the fiscal year ended March 31, 1996, the
Investment Adviser received an advisory fee at the effective annual rates of
.68%, .56%, .55%, .56%, .56% and .52% of the average daily net assets of the
Equity, Aging of America, Communication and Entertainment, Business and Indus-
trial Restructuring, Global Competitors and Early Life Cycle Funds, re-
30
<PAGE>
spectively. For the same period, the Investment Adviser waived advisory fees
at the effective annual rates of .07%, .04%, .05%, .04%, .04% and .08% of the
average daily net assets of the Equity, Aging of America, Communication and
Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively.
From time to time, the Investment Adviser may waive (either voluntarily or
pursuant to applicable state expense limitations) all or a portion of the ad-
visory fees payable to it by a Fund, which waiver may be terminated at any
time. See "Management of the Funds--Service Organizations" for additional in-
formation on fee waivers.
ADMINISTRATORS
CGFSC, Federated Administrative Services and U.S. Trust serve as the Funds'
administrators (the "Administrators") and provide them with general adminis-
trative and operational assistance. The Administrators also serve as adminis-
trators of the other portfolios of Excelsior Fund and of all the portfolios 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 inter-
national 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 Excel-
sior 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 PORTFOLIOS OF EXCELSIOR ANNUAL
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 waive (either
voluntarily or pursuant to applicable state expense limitations) all or a por-
tion of the administration fee payable to them by a Fund, which waivers may be
terminated at any time. See "Management of the Funds--Service Organizations"
for additional information on fee waivers. For the period from April 1, 1995
through July 31, 1995, CGFSC and the former administrator received an aggre-
gate administration fee (under the same compensation arrangements noted above)
at the effective annual rates of .151%, .154%, .154%, .154%, .154% and .154%
of the average daily net assets of the Equity, Aging of America, Communication
and Entertainment, Business and Industrial Restructuring, Global Competitors
and Early Life Cycle Funds, respectively. For the same period, CGFSC and the
former administrator waived administration fees at the effective annual rate
of .003% of the average daily net assets of the Equity Fund. From August 1,
1995 through March 31, 1996, the Administrators received an aggregate adminis-
tration fee at the effective annual rates of .150%, .154%, .154%, .154%, .154%
and .154% of the average daily net assets of the Equity, Aging of America,
Communication and Entertainment, Business and Industrial Restructuring, Global
Competitors and Early Life Cycle Funds, respectively. For the same period, the
Administrators waived administration fees at the effective annual rate of
.004% of the average daily net assets of the Equity Fund.
SERVICE ORGANIZATIONS
Excelsior Fund will enter into Shareholder Servicing agreements ("Servicing
Agreement") with Shareholder Organizations which agree to provide their Cus-
tomers various shareholder administrative services with respect to their
Shares (hereinafter referred to as "Service Organizations"). As a considera-
tion for the administrative services provided to Customers, a Fund will pay
each Service Organization an administrative
31
<PAGE>
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 servic-
es, 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 requests; transmitting and re-
ceiving funds in connection with Customer orders to purchase, exchange or re-
deem Shares; and providing periodic statements. Under the terms of the Servic-
ing Agreement, Service Organizations will be required to provide to Customers
a schedule of any fees that they may charge in connection with a Customer's
investment. Until further notice, the Investment Adviser and Administrators
have voluntarily agreed to waive fees payable by a Fund in an amount equal to
administrative service fees payable by that 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 Funds, but such banking laws and
regulations do not prohibit such a holding company or affiliate or banks gen-
erally 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 regulations. State secu-
rities laws may differ from the interpretations of Federal law discussed in
this paragraph and banks and financial institutions may be required to regis-
ter as dealers pursuant to state law.
Should legislative, judicial, or administrative action prohibit or restrict
the activities of the Investment Ad- viser 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 Funds' method of operations would
affect their 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 Equity, Early Life Cycle, Aging of
America, Communication and Entertainment, Business and Industrial Restructur-
ing and Global Competitors Funds. In addition to the Trust Shares, Excelsior
Fund offers a separate series of shares offered under a separate prospectus
representing interests in each of those Funds. Trust Shares and the other se-
ries of shares offered under a separate prospectus have different expenses,
which may affect performance. Call (800) 446-1012 for information regarding
the other series of shares in each Fund offered under a separate prospectus.
Each share (irrespective of series designation) in a Fund represents an equal
proportionate interest in the particular 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 such Fund as are declared in the discretion
of Excelsior Fund's Board of Directors. Excelsior Fund's Charter authorizes
the Board of Directors to classify or reclassify 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 or series, except as otherwise expressly required by
law.
32
<PAGE>
Certificates for Shares will not be issued unless expressly requested in writ-
ing to CGFSC and will not be issued for fractional Shares.
As of July 15, 1996, U.S. Trust held of record substantially all of the Shares
in the Funds as agent or custodian for its customers, but did not own such
Shares beneficially because it did not have voting or investment discretion
with respect to such Shares. U.S. Trust is a wholly-owned subsidiary of U.S.
Trust Corporation.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A. ("Chase"), a wholly-owned subsidiary of The
Chase Manhattan Corporation, serves as the custodian of the Funds' assets. Com-
munications to the custodian should be directed to Chase, Mutual Funds Service
Division, 770 Broadway, New York, New York 10003-9598.
Chase may enter into an international sub-custodian agreement with a third
party providing for the custody of foreign securities held by the Funds.
U.S. Trust serves as the Funds' transfer and dividend disbursing agent. U.S.
Trust has also entered into a sub-transfer agency arrangement with CGFSC, 73
Tremont Street, Boston, Massachusetts 02108-3913, pursuant to which CGFSC pro-
vides certain transfer agent, dividend disbursement and registrar services to
the Funds.
U.S. Trust may, from time to time, enter into sub-transfer agency arrangements
with third party providers of transfer agency services.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders, the per-
formance of the Shares of the Funds may be quoted and compared to that of other
mutual funds with similar investment objectives and to stock or other relevant
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For exam-
ple, the performance of a Fund may be compared to data prepared by Lipper Ana-
lytical Services, Inc., a widely recognized independent service which monitors
the performance of mutual funds. The performance of the Equity and Theme Funds
may be also compared to the Standard & Poor's 500 Stock Index ("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 Exchange.
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 Funds.
From time to time, each Fund may advertise its performance by using "average
annual total return" over various periods of time. Such total return figure re-
flects the average percentage change in the value of an investment in a Fund
from the beginning date of the measuring period to the end of the measuring pe-
riod. 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 commence-
ment of a Fund's operations, or on a year-by-year basis). Each Fund may also
use aggregate total return figures for various periods, representing the cumu-
lative change in the value of an investment in the Fund for the specific peri-
od. Both methods of calculating total return assume that dividends and capital
gain distributions made by a Fund during the period are reinvested in Fund
Shares and also reflect the maximum sales load charged by the Fund.
Performance will fluctuate and any quotation of performance should not be con-
sidered as representative of a Fund's future performance. Shareholders should
33
<PAGE>
remember that performance is generally a function of the kind and quality of
the instruments held in a portfolio, operating expenses, and market condi-
tions. Any fees charged by Shareholder Organizations with respect to accounts
of Customers that have invested in Shares will not be included in calculations
of performance.
MISCELLANEOUS
Shareholders will receive unaudited semiannual reports describing the Funds'
investment operations and annual financial statements audited by the Funds'
independent auditors.
As used in this Prospectus, a "vote of the holders of a majority of the out-
standing shares" of Excelsior Fund, a particular Fund or a particular series
of a Fund means, with respect to the approval of an investment advisory agree-
ment, a distribution plan or a change in a fundamental investment policy, the
affirmative vote of the lesser of (a) more than 50% of the outstanding shares
of Excelsior Fund or such Fund or series, or (b) 67% or more of the shares of
Excelsior Fund or such Fund or series present at a meeting if more than 50% of
the outstanding shares of Excelsior Fund or such Fund or series are repre-
sented at the meeting in person or by proxy.
Inquiries regarding any of the Funds may be directed to the Distributor at
the address listed under "Distributor."
34
<PAGE>
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION
OPENING YOUR ACCOUNT:
Complete the Application(s) and mail to:
FOR OVERNIGHT DELIVERY: send to:
Excelsior Funds Excelsior Funds
c/o Chase Global Funds Services Company
c/o Chase Global Funds Services Compa-
P.O. Box 2798 ny--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
per Fund; subsequent investments must be in the minimum amount of $50 per
Fund. 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 transfer agent at (800) 446-1012 between 9:00 a.m.
and 5:00 p.m. (Eastern Time).
35
<PAGE>
[LOGO OF EXCELSIOR CHASE GLOBAL FUNDS SERVICES COMPANY
FUNDS INC.] CLIENT SERVICES
P.O. Box 2798 NEW
Boston, MA 02208-2798 ACCOUNT
(800) 446-1012 APPLICATION
(TRUST SHARES)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
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
------------------------------ Indentification #
Name ( )
------------------------------ -----------------------------
Address Telephone #
------------------------------ [_] U.S. Citizen [_] Other
City/State/Zip Code (specify)
-----------------------------------------------------------------------------
FUND SELECTION (THE MINIMUM INITIAL AND SUBSEQUENT INVESTMENT IS $500 PER
FUND AND $50 PER FUND, RESPECTIVELY. MAKE CHECKS PAYABLE TO
"EXCELSIOR FUNDS.")
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND INITIAL INVESTMENT
<S> <C> <C>
[_] Equity Fund $ ___________ 8815
[_] Aging of America
Fund $ ___________ 8816
[_] Communication &
Entertainment Fund $ ___________ 8817
[_] Business &
Industrial
Restructuring Fund $ ___________ 8818
</TABLE>
<TABLE>
<CAPTION>
FUND INITIAL INVESTMENT
<S> <C> <C>
[_] Global Competitors Fund $ ___________ 8819
[_] Early Life Cycle Fund $ ___________ 8812
[_] Other $ ___________
TOTAL INITIAL INVESTMENT: $ ___________
</TABLE>
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 from
(800) 446-1012 and ------------------ ---------------
ask for the Wire Name of Bank Wire Control
Desk. 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
[_] I/We appoint CGFSC as act upon instructions received
my/our agent to act upon by telephone to withdraw $500
instructions received by or more from my/our account in
telephone in order to effect the Excelsior Funds and to
the telephone exchange and wire the amount withdrawn to
redemption privileges. I/We the following commercial bank
hereby ratify any account. I/We understand that
instructions given pursuant CGFSC charges an $8.00 fee for
to this authorization and each wire redemption, which
agree that Excelsior Fund, will be deducted from the
Excelsior Tax-Exempt Fund, proceeds of the redemption.
Excelsior Institutional
Trust, CGFSC and their Title on Bank Account*_________
directors, trustees, Name of Bank __________________
officers and employees will Bank A.B.A. Number Account
not be liable for any loss, Number ________________________
liability, cost or expense Bank Address __________________
for acting upon instructions City/State/Zip Code ___________
believed to be genuine and (attach voided check here)
in accordance with the
procedures described in the A corporation, trust or
then current Prospectus. To partnership must also submit a
the extent that Excelsior "Corporate Resolution" (or
Fund, Excelsior Tax-Exempt "Certificate of Partnership")
Fund and Excelsior indicating the names and
Institutional Trust fail to titles of officers authorized
use reasonable procedures as to act on its behalf.
a basis for their belief, * TITLE ON BANK AND FUND
they or their service ACCOUNT MUST BE IDENTICAL.
contractors may be liable
for instructions that prove
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>
- ------------------------------------------------------------------
RIGHTS OF ACCUMULATION
- ------------------------------------------------------------------
To qualify for Rights of Accumulation, you must complete this
section, listing all of your accounts including those in your
spouse's name, joint accounts and accounts held for your
minor children. If you need more space, please attach a
separate sheet.
[_] I/We qualify for the Rights of Accumulation sales charge
discount described in the Prospectus and Statement of
Additional Information.
[_] I/We own shares of more than one Fund distributed by
Edgewood Services, Inc. Listed below are the numbers of
each of my/our Shareholder Accounts.
[_] The registration of some of my/our shares differs from that
shown on this application. Listed below are the account
number(s) and full registration(s) in each case.
LIST OF OTHER EXCELSIOR FUND ACCOUNTS:
______________________ _______________________________________
______________________ _______________________________________
______________________ _______________________________________
ACCOUNT NUMBER ACCOUNT REGISTRATIONS
- ------------------------------------------------------------------
LETTER OF INTENT
- ------------------------------------------------------------------
[_] I agree to the Letter of Intent provisions set forth in
the Prospectus. Although I am not obligated to purchase, and
Excelsior Fund is not obligated to sell, I intend to invest,
over a 13-month period beginning on , 19 , an aggregate
amount in Eligible Funds of Excelsior Fund and Excelsior Tax-
Exempt Fund at least equal to (check appropriate box):
[_] $50,000[_] $100,000[_] $250,000[_] $500,000[_] $1,000,000[_] $2,000,000
By signing this application, I hereby authorize CGFSC to
redeem an appropriate number of shares held in escrow to pay
any additional sales loads payable in the event that I do not
fulfill the terms of this Letter of Intent.
- ------------------------------------------------------------------
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 appropriate 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, United
States Trust Company of New York, 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 Funds 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 Date __________________________
X ___________________________
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.
We agree to notify CGFSC of any purchases made under the
Letter of Intent or Rights of Accumulation.
----------------------------- -------------------------------
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 CLIENT SERVICES
FUNDS INC.]
LOGO P.O. Box 2798 SUPPLEMENTAL
Boston, MA 02208-2798 APPLICATION
(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 Recipient ________________________________
check payable Street Address ___________________________
to: (To be City, State, Zip Code ____________________
completed only
if redemption
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....................................................... 5
U.S. TRUST'S INVESTMENT PHILOSOPHY AND STRATEGIES.......................... 11
INVESTMENT OBJECTIVES AND POLICIES......................................... 11
PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION..................... 15
INVESTMENT LIMITATIONS..................................................... 18
PRICING OF SHARES.......................................................... 19
HOW TO PURCHASE AND REDEEM SHARES.......................................... 20
INVESTOR PROGRAMS.......................................................... 26
DIVIDENDS AND DISTRIBUTIONS................................................ 28
TAXES...................................................................... 28
MANAGEMENT OF THE FUNDS.................................................... 29
DESCRIPTION OF CAPITAL STOCK............................................... 32
CUSTODIAN AND TRANSFER AGENT............................................... 33
PERFORMANCE INFORMATION.................................................... 33
MISCELLANEOUS.............................................................. 34
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION................................... 35
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' 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 OF EXCELSIOR FUNDS INC.]
EQUITY FUND
AGING OF AMERICA FUND
COMMUNICATION AND ENTERTAINMENT FUND
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND
GLOBAL COMPETITORS FUND
EARLY LIFE CYCLE FUND
TRUST SHARES
Prospectus
August 1, 1996
