<PAGE>
As filed with the SEC on July 3, 1997
Excelsior Funds, Inc. - Registration Nos. 2-92665; 811-4088
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 x
Excelsior Funds, Inc.: Post-Effective Amendment No. 26 x
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY x
ACT OF 1940
Excelsior Funds, Inc.: Amendment No. 28 x
(Exact Name of Registrant as Specified in Charter)
73 Tremont Street
Boston, Massachusetts 02108-3913
(Address of Principal Executive Offices)
Registrant's Telephone Number: (800) 446-1012
W. Bruce McConnel, III
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)
It is proposed that this post-effective amendment will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
--------------------------
The Registrant has registered an indefinite number of securities under the
Securities Act of 1933 pursuant to Rule 24f-2. The Rule 24f-2 Notice for the
Registrant's fiscal year ended March 31, 1997 was filed on May 29, 1997.
<PAGE>
CROSS-REFERENCE SHEET
---------------------
EXCELSIOR FUNDS, INC.
(Large Cap Growth and Real Estate Funds)
Form N-1A, Part A, Item Prospectus Caption
- ----------------------- ------------------
1. Cover Page........................... Cover Page
2. Synopsis............................. Prospectus Summary;
Expense Summary
3. Condensed Financial Information...... Performance and Yield Information
4. General Description of Registrant.... Prospectus Summary; Investment
Objectives and Policies; Portfolio
Instruments and Other Investment
Information; Investment
Limitations
5. Management of the Fund............... Management of the Funds; Custodian
and Transfer Agent
5A. Management's Discussion of Fund
Performance........................ Not Applicable
6. Capital Stock and
Other Securities................... How to Purchase and Redeem Shares;
Dividends and Distributions;
Taxes; Description of Capital
Stock; Miscellaneous
7. Purchase of Securities
Being Offered...................... Pricing of Shares; How to Purchase
and Redeem Shares; Investor
Programs
8. Redemption or Repurchase............. How to Purchase and Redeem Shares
9. Pending Legal Proceedings............ Inapplicable
<PAGE>
EXCELSIOR
FUNDS INC.
A Management Investment Company
- --------------------------------------------------------------------------------
For initial purchase information, current
Large Cap Growth Fund prices, performance information and existing
account information, call (800) 446-1012.
Real Estate Fund (From overseas, call (617) 557-8280.)
73 Tremont Street
Boston, MA 02108-3913
- --------------------------------------------------------------------------------
This Prospectus describes two separate portfolios offered to investors by Ex-
celsior Funds, Inc. ("Excelsior Fund") (formerly UST Master Funds, Inc.), an
open-end, management investment company. Each portfolio (individually, a "Fund"
and collectively, the "Funds") has its own investment objective and policies as
follows:
LARGE CAP GROWTH FUND is a diversified portfolio that seeks superior, risk-ad-
justed total return by investing in larger companies whose growth prospects, in
the opinion of the Investment Adviser, appear to exceed that of the overall
market.
REAL ESTATE FUND is a non-diversified portfolio that seeks current income and
long-term capital appreciation by investing in real estate investment trusts
and other companies principally engaged in the real estate business.
Each of the Funds is sponsored and distributed by Edgewood Services, Inc. and
advised by United States Trust Company of New York and U.S. Trust Company of
Connecticut (collectively, 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 September , 1997 and containing additional information
about the Funds has been filed with the Securities and Exchange Commission. The
current 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 ("SHARES") ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARAN-
TEED OR ENDORSED BY, U.S. TRUST, ITS PARENT OR AFFILIATES AND THE SHARES ARE
NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
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.
September , 1997
<PAGE>
PROSPECTUS SUMMARY
EXCELSIOR FUNDS, INC. is an investment company offering various diversified
and non-diversified investment portfolios with differing objectives and poli-
cies. Founded in 1984, Excelsior Fund currently offers 17 Funds with combined
assets of approximately $3 billion. See "Description of Capital Stock."
INVESTMENT ADVISER: United States Trust Company of New York ("U.S. Trust New
York") and U.S. Trust Company of Connecticut ("U.S. Trust Connecticut" and,
collectively with U.S. Trust New York, "U.S. Trust" or the "Investment Advis-
er") serve as the Funds' investment adviser. U.S. Trust New York provides its
investment advisory services to the Large Cap Growth Fund primarily through
its Campbell Cowperthwait division. U.S. Trust offers a variety of specialized
financial and fiduciary services to high-net worth individuals, institutions
and corporations. Excelsior Fund offers investors access to U.S. Trust's serv-
ices. See "Management of the Funds--Investment Adviser."
INVESTMENT OBJECTIVES AND POLICIES: Generally, the Large Cap Growth Fund is
a diversified investment portfolio which invests primarily in equity securi-
ties. The Real Estate Fund is a non-diversified investment portfolio which in-
vests primarily in equity securities, including shares of real estate invest-
ment trusts. The Funds' investment objectives and policies are summarized on
the cover and explained in greater detail later in this Prospectus. See "In-
vestment Objectives and Policies," "Portfolio Instruments and Other Investment
Information" and "Investment Limitations."
HOW TO INVEST: The Funds' Shares are offered at their net asset value. Ex-
celsior Fund does not impose a sales load on purchases of Shares. See "How to
Purchase and Redeem Shares."
The minimum to start an account is $500 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 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. The Real Estate Fund
is non-diversified; therefore, its investment return may at times be dependent
upon the performance of a smaller number of securities relative to the number
of securities held in a diversified portfolio. In addition, the Real Estate
Fund will normally concentrate its investments in the real estate industry.
Therefore, it will be susceptible to industry risk, the possibility that a
particular group of stocks will decline in price due to industry-specific de-
velopments. Because both 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.
To the extent the Funds also invest in bonds and other fixed-income securi-
ties, they will also be affected directly by fluctuations in interest rates
and the credit markets. 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
<TABLE>
<CAPTION>
LARGE
CAP REAL
GROWTH ESTATE
FUND FUND
------ ------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load (as a percentage of offering price)............ None None
Sales Load on Reinvested Dividends................................ None None
Deferred Sales Load............................................... None None
Redemption Fees/1/................................................ None None
Exchange Fees..................................................... None None
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees (after fee waivers)/2/.............................. 0.73% 0.50%
12b-1 Fees........................................................ None None
Other Operating Expenses
Administrative Servicing Fee/2/.................................. 0.02% 0.02%
Other Expenses................................................... 0.35% 0.68%
----- -----
Total Operating Expenses (after fee waivers)/2/ .................. 1.10% 1.20%
===== =====
</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 estimated expense ratios presented herein. Shareholder orga-
nizations 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 the Real Estate Fund to maintain an annual
expense ratio of not more than 1.20%. Without such fee waivers, "Advisory
Fees" would be 0.75%, and 1.00%, and "Total Operating Expenses" would be
1.12% and 1.70% for the Large Cap Growth and Real Estate Funds, respective-
ly.
Example: You would pay the following estimated expenses on a $1,000 invest-
ment, assuming (1) 5% annual returns and (2) redemption of your investment at
the end of the following periods:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Large Cap Growth Fund............................................ $11 $35
Real Estate Fund................................................. 12 38
</TABLE>
The foregoing expense summary and example are intended to assist investors
in understanding the costs and expenses that an investor in Shares of the
Funds will bear directly or indirectly. The expense summary sets forth esti-
mated advisory and other expenses payable with respect to Shares of the Funds
for the current fiscal year. For more complete descriptions of the Funds' op-
erating expenses, see "Management of the Funds" and "Description of Capital
Stock" in this Prospectus.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE
GREATER OR LOWER THAN THOSE SHOWN IN THE EXPENSE SUMMARY AND EXAMPLE.
3
<PAGE>
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 Real Estate Fund, U.S. Trust ex-
pects to follow 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 approach begins with the conviction that all worth-
while investments are grounded in value. The Investment Adviser believes that
an investor can identify fundamental values that eventually should be re-
flected 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 Real Estate Fund is constantly engaged in assessing, com-
paring and judging the worth of companies, particularly in comparison to the
price the markets place on such companies' shares.
In managing investments for the Large Cap Growth Fund, U.S. Trust expects to
follow a long-term investment philosophy of buying and holding equity securi-
ties of companies which it believes to be of high quality and of high growth
potential. Typically, these companies are industry leaders with the potential
to dominate their markets by being the low cost, high quality producers of
products or services. U.S. Trust believes that earnings growth is the primary
determinant of stock prices and that efficient financial markets will reward
consistently above-average earnings growth with greater than average capital
appreciation over the long term.
Strategies. In order to translate its investment philosophy into more spe-
cific guidance for selection of investments, the Investment Adviser uses three
specific strategies. These strategies, while identified separately, may over-
lap so that more than one may be applied in an investment decision.
U.S. Trust's "PROBLEM/OPPORTUNITY STRATEGY" seeks to identify industries and
companies with the capabilities to provide solutions to or benefit from com-
plex problems such as the changing demographics and aging of the U.S. popula-
tion or the need to enhance industrial productivity. U.S. Trust's second
strategy is a "TRANSACTION VALUE" comparison of a company's real underlying
asset value with the market price of its shares and with the sale prices for
similar assets changing ownership in public market transactions. Differences
between a company's real asset value and the price of its shares often are
corrected over time by restructuring of the assets or by market recognition of
their value. U.S. Trust's third strategy involves identifying "EARLY LIFE CY-
CLE" companies whose products are in their earlier stages of development or
that seek to exploit new markets. Frequently such companies are smaller compa-
nies, but early life cycle companies may also include larger established com-
panies with new products or markets for existing products. The Investment Ad-
viser believes that over time the value of such companies should be recognized
in the market.
INVESTMENT 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.
4
<PAGE>
LARGE CAP GROWTH FUND
The Large Cap Growth Fund's investment objective is to seek superior, long-
term total return. The Fund attempts to achieve this objective through invest-
ments primarily in companies with capitalizations in excess of $5 billion,
whose growth prospects, in the opinion of U.S. Trust, appear to exceed that of
the overall market. Under normal conditions, at least 65% of the Fund's total
assets will be invested in such companies. Additional policies common to both
the Large Cap Growth and Real Estate Funds are discussed below.
REAL ESTATE FUND
The Real Estate Fund's investment objective is to seek current income and
long-term capital appreciation. The Fund attempts to achieve this objective by
concentrating its investments in companies principally engaged in the real es-
tate business, such as real estate investment trusts ("REITs"), real estate de-
velopers, mortgage lenders and servicers, construction companies and building
material suppliers. Under normal conditions, at least 65% of the Fund's total
assets will be invested in such companies. A company is "principally engaged"
in the real estate business if, at the time of investment, the company derives
at least 50% of its revenues from the ownership, construction, financing, man-
agement or sale of commercial, industrial or residential real estate, or that
such company has at least 50% of its assets in such real estate.
It is expected that the Fund will invest a majority of its assets in shares of
REITs during normal market and economic conditions. REITs pool investors' funds
for investment primarily in income-producing real estate or real estate related
loans or interests. Unlike corporations, REITs do not have to pay income taxes
if they meet certain requirements of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify, a REIT must distribute at least 95% of its
taxable income to its shareholders and receive at least 75% of that income from
rents, mortgages and sales of property. For additional tax information, see
"Taxes--Federal" below.
REITs can generally be classified as equity REITs, mortgage REITs and hybrid
REITs. Equity REITs invest the majority of their assets directly in real prop-
erty and derive their income primarily from rental and lease payments. Equity
REITs can also realize capital gains by selling properties that have appreci-
ated in value. Mortgage REITs make loans to commercial real estate developers
and derive their income primarily from interest payments on such loans. Hybrid
REITs combine the characteristics of both equity and mortgage REITs. The Fund
expects that a substantial portion of its investments in REITs will be in eq-
uity and hybrid REITs.
The Fund's portfolio holdings will include equity securities of companies hav-
ing capitalizations of varying amounts, and the Fund may invest in the securi-
ties of high growth, small companies where the Investment Adviser expects earn-
ings and the price of the securities to grow at an above-average rate. Certain
securities owned by the Fund may be traded only in the over-the-counter market
or on a regional securities exchange, may be listed only in the quotation 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 the Fund's Shares, and the
Fund may be required, in order to meet redemptions or for other reasons, to
sell these securities at a discount from market prices, to sell during periods
when such disposition is not desirable, or to make many small sales over a pe-
riod of time.
The Fund is a non-diversified investment portfolio under the Investment Com-
pany Act of 1940, as amended (the "1940 Act"). As such, the only limitations on
the percentage of its assets that may be invested in the securities of any one
issuer are its own investment restrictions and the diversification requirements
of the Code. See "Taxes--Federal" below.
INVESTMENT POLICIES COMMON TO THE LARGE CAP GROWTH AND REAL ESTATE FUNDS
Under normal market and economic conditions, the Funds will invest at least
65% of their total assets in
5
<PAGE>
equity securities (including shares of REITS), preferred stocks and convert-
ible securities. Normally, up to 35% of each Fund's total assets may be in-
vested in other securities and instruments including, e.g., other investment-
grade debt securities (i.e., debt obligations classified within the four high-
est 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 In-
vestment Adviser to be of comparable quality), warrants, options, and futures
instruments as described in more detail below. During temporary defensive pe-
riods, 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.
In managing the Funds, the Investment Adviser seeks to purchase securities
having value currently not recognized in the market price of a security, con-
sistent with the strategies discussed above.
The Funds may invest in the securities of foreign issuers directly or indi-
rectly through sponsored and unsponsored American Depository Receipts
("ADRs"). ADRs represent 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 in-
formation 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 securi-
ties into which they may be converted.
RISK FACTORS
As noted above, the Real Estate Fund is non-diversified. The investment re-
turn on a non-diversified portfolio typically is dependent upon the perfor-
mance of a smaller number of securities relative to the number of securities
held in a diversified portfolio of comparable size. If the Fund assumes large
positions in the obligations of a small number of issuers, then changes in the
financial condition or in the market's assessment of those issuers may affect
the overall value of the Fund's portfolio to a greater extent than that of a
diversified portfolio.
Each Fund is subject to market risk and interest rate risk, and the Real Es-
tate Fund is also subject to real estate industry risk. Market risk is the
possibility that stock prices will decline over short or even extended peri-
ods. 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 instru-
ments generally fluctuate inversely with interest rate changes. Factors af-
fecting debt securities will affect all of the Funds' debt holdings.
Although the Real Estate Fund will not invest in real estate directly, it is
subject to the same risks that are associated with the direct ownership of
real estate. In general, real estate values are affected by a variety of fac-
tors, including: supply and demand for properties; the economic health of the
country, different regions and local markets; and the strength of specific in-
dustries renting properties. An equity REIT's performance ultimately depends
on the types and locations of the properties it owns and on how well it man-
ages its properties. For instance, rental income could decline because of ex-
tended vacancies, increased competition from nearby properties, tenants' fail-
ure to pay rent, or incompetent management. Property values could decrease be-
cause of overbuilding, environmental liabilities, uninsured damages caused by
natural disasters, a general decline in the neighborhood, rent controls,
losses due to casualty or condemnation, increases in property taxes and/or op-
erating expenses, or changes in zoning laws or other factors.
Changes in interest rates could affect the performance of REITs. In general,
during periods of high interest rates, REITs may lose some of their appeal to
investors who may be able to obtain higher yields from other income-producing
investments, such as long-term bonds. Higher interest rates may also mean that
6
<PAGE>
it is more expensive to finance property purchases, renovations and improve-
ments, which could hinder a REIT's performance.
While equity REITs are affected by changes in the value of the underlying
properties they own, mortgage REITs are affected by changes in the value of
the properties to which they have extended credit. REITs may not be diversi-
fied and are subject to the risks involved with financing projects. REITs may
also be subject to substantial cash flow dependency and self-liquidation. In
addition, REITs could possibly fail to qualify for tax-free pass-through of
income under the Code or to maintain their exemptions from registration under
the 1940 Act.
Such factors may also adversely affect a borrower's or a lessee's ability to
meet its obligations to a REIT. In the event of a default by a borrower or
lessee, a REIT may experience delays in enforcing its rights as a mortgagee or
lessor and may incur substantial costs associated with protecting its invest-
ments.
Under certain circumstances the Real Estate Fund could own real estate di-
rectly as a result of a default on debt securities it owns. If the Fund has
rental income or income from the direct disposition of real property, the re-
ceipt of such income may adversely affect its ability to retain its tax status
as a regulated investment company. See "Taxes--Federal" below.
As noted above, the Real Estate Fund may invest in the securities of smaller
capitalized companies. Such companies may have limited product lines, markets,
or financial resources, or may be dependent upon a small management group, and
their securities may be subject to more abrupt or erratic market movements
than larger capitalized or more established companies, both because their se-
curities typically are traded in lower volume and because the issuers typi-
cally are subject to a greater degree to changes in their earnings and
prospects.
The 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
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.
7
<PAGE>
PORTFOLIO INSTRUMENTS AND OTHER
INVESTMENT INFORMATION
MONEY MARKET INSTRUMENTS
The 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 Limitations" below). In-
vestments 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 15% limitation dis-
cussed below under "Investment Limitations."
GOVERNMENT OBLIGATIONS
The 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.
DEBT SECURITIES AND CONVERTIBLE SECURITIES
Each of the Funds may invest in investment grade debt and convertible securi-
ties of domestic and foreign issuers. The convertible securities in which the
Funds may invest include any debt securities or preferred stock which may be
converted into common stock or which carry the right to purchase common stock.
Convertible securities entitle the holder to exchange the securities for a
specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time.
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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. Neither Fund will enter into repurchase agreements with the Invest-
ment Adviser or any of its affiliates. Repurchase agreements with remaining
maturities in excess of seven days will be considered illiquid securities and
will be subject to the 15% limit described below under "Illiquid Securities."
The seller under a repurchase agreement will be required to maintain the
value of the securities which are subject to the agreement and held by 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 Funds may purchase put and call options listed on a national securities
exchange and issued by the Options Clearing Corporation in an amount not ex-
ceeding 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.
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FUTURES CONTRACTS
The 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 exchanges or in
other established financial markets.
The 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 Funds will engage in futures transactions only to
the extent permitted by the Commodity Futures Trading Commission ("CFTC") and
the Securities and Exchange Commission ("SEC"). When investing in futures con-
tracts, the Funds must satisfy certain asset segregation requirements to en-
sure 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 liquid
assets equal to the purchase price of the contract, less any margin or depos-
it. When a Fund takes a short position in a futures contract, the Fund must
maintain a segregated account containing 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 ap-
plicable when a Fund "covers" an options or futures position generally by en-
tering into an offsetting position. Each Fund will limit its hedging transac-
tions in futures contracts and related options so that, immediately after any
such transaction, the aggregate initial margin that is required to be posted
by the Fund under the rules of the 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 assets, af-
ter 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
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 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.
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WHEN-ISSUED AND FORWARD TRANSACTIONS
Each Fund may purchase eligible securities on a "when-issued" basis and may
purchase or sell securi-ties 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 settle-
ment date, at a stated price and yield. Securities purchased on a "forward com-
mitment" 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
Neither Fund will knowingly invest more than 15% of the value of its net as-
sets 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 de-
termined by the Investment Adviser, acting under guidelines approved and moni-
tored by the Board, that an adequate trading market exists for that security.
This investment practice could have the effect of increasing the level of illi-
quidity in a Fund during any period that qualified institutional buyers become
uninterested 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.
The annual portfolio turnover rate for each Fund is not expected to exceed
100%. A rate of 100% indicates that the equivalent of all of a Fund's assets
have been sold and reinvested in a calendar year. 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 "Taxes--Federal" below.
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. 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;
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2. 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
may lend portfolio securities in an amount not exceeding 30% of its total as-
sets; and
3. Purchase any securities which would cause more than 25% of the value of
its total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the
same industry, provided that (i) there is no limitation with respect to secu-
rities issued or guaranteed by the U.S. Government, (ii) the Real Estate Fund
will concentrate its investments in the securities of issuers principally en-
gaged in the real estate business, and (iii) 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 Large Cap Growth Fund may not:
4. 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.
* * *
In addition to the investment limitations described above, the Large Cap
Growth Fund may not invest in the securities of any single issuer if, as a re-
sult, the Fund holds more than 10% of the outstanding voting securities of such
issuer.
The Funds may not invest in obligations of foreign branches of financial in-
stitutions 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 Funds 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 quo-
tations are not readily available. These investment policies may be changed by
Excelsior Fund's Board of Directors without shareholder approval.
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
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<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.
At various times the Distributor may implement programs under which a deal-
er's sales force may be eligible to win nominal awards for certain sales ef-
forts or under which the Distributor will make payments to any dealer that
sponsors sales contests or recognition programs conforming to criteria estab-
lished by the Distributor, or that participates in sales programs sponsored by
the Distributor. The Distributor in its discretion may also from time to time,
pursuant to objective criteria established by the Distributor, pay fees to
qualifying dealers for certain services or activities which are primarily in-
tended to result in sales of Shares of the Funds. If any such program is made
available to any dealer, it will be made available to all dealers on the same
terms and conditions. Payments made under such programs will be made by the
Distributor out of its own assets and not out of the assets of the Funds.
In addition, the Distributor may offer to pay a fee from its own assets to
financial institutions as financial assistance for the continuing investment
of customers' assets in the Funds or for providing substantial marketing,
sales and operational support. The support may include initiating customer ac-
counts, participating in sales, educational and training seminars, providing
sales literature, and engineering computer software programs that emphasize
the attributes 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 in-
stitution.
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<PAGE>
PURCHASE OF SHARES
Shares in each Fund are sold at their net asset value per Share next computed
after a purchase order is received by Excelsior Fund's sub-transfer agent. The
Distributor has established several procedures for purchasing Shares in order
to accommodate different types of investors.
Shares may be purchased directly by individuals ("Direct Investors") or by in-
stitutions ("Institutional Investors" and, collectively with Direct Investors,
"Investors"). Shares may also be purchased by customers ("Customers") of the
Investment Adviser, its affiliates and correspondent banks, and other institu-
tions ("Shareholder Organizations") that have entered into shareholder servic-
ing 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 Dis-
tributor all purchase orders for its Customers and to transmit, on a timely ba-
sis, 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 Organization may
elect to establish its Customers' accounts of record with CGFSC. In this event,
even if the Shareholder 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 Share-
holder Organization may also elect to establish its Customers as record hold-
ers.
Excelsior Fund enters into shareholder servicing agreements with Shareholder
Organizations which agree to provide their Customers various shareholder admin-
istrative 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--Serv-
ice 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 fi-
nancial planner may incur transaction charges in connection with such pur-
chases. Such investors should contact their registered investment adviser or
certified financial planner for further information on transaction fees. In-
vestors may also purchase Shares directly from the Distributor in accordance
with procedures described below under "Purchase Procedures."
PURCHASE PROCEDURES
General
Direct Investors may purchase Shares by completing the Application for pur-
chase of Shares accompanying this Prospectus and mailing it, together with a
check payable to Excelsior Funds, to:
Excelsior Funds
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Subsequent investments in an existing account in 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-
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<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
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 invest-ments 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 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
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<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 may take up to 15
days. A Direct Investor who anticipates the
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<PAGE>
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 nor-
mally 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 Funds, Inc. ("Excelsior Tax-Exempt Fund") or for Trust Shares of Excel-
sior Institutional Trust, provided that such other shares may legally be sold
in the state of the Investor's residence.
Excelsior Fund currently offers 15 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;
17
<PAGE>
Intermediate-Term Managed Income Fund, a fund seeking a high level of cur-
rent interest income by investing principally in investment grade or better
debt obligations and money market instruments, and having a dollar-weighted
average portfolio maturity of 3 to 10 years;
Managed Income Fund, a fund seeking higher current income through invest-
ments in investment grade debt obligations, U.S. Government obligations and
money market instruments;
Blended Equity Fund, a fund seeking long-term capital appreciation through
investments in a diversified portfolio primarily of equity securities;
Income and Growth Fund, a fund investing substantially in equity securities
in seeking to provide moderate current income and to achieve capital appreci-
ation as a secondary objective;
Energy and Natural Resources Fund, a non-diversified fund seeking long-term
capital appreciation by investing in companies that are in the energy and
other natural resources groups of industries;
Value and Restructuring Fund, a fund seeking long-term capital appreciation
by investing in companies benefitting from their restructuring or redeploy-
ment of assets and operations in order to become more competitive or profit-
able;
Small Cap Fund, a fund seeking long-term capital appreciation by investing
in smaller companies in the earlier stages of their development;
International Fund, a fund seeking total return derived primarily from in-
vestments in foreign equity securities;
Latin America Fund, a fund seeking long-term capital appreciation through
investments in companies and securities of governments based in Latin Ameri-
ca;
Pacific/Asia Fund, a fund seeking long-term capital appreciation through in-
vestments in companies and securities of governments based in Asia and on the
Asian side of the Pacific Ocean; and
Pan European Fund, a fund seeking long-term capital appreciation through in-
vestments in companies and securities of governments located in Europe.
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
18
<PAGE>
with relative stability of principal; this fund invests primarily in Califor-
nia municipal obligations and has a dollar-weighted average portfolio matu-
rity 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 next determined after acceptance of the exchange
request.
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.
19
<PAGE>
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.
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
20
<PAGE>
amount of other expenses allocated to such series. 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 distri-
bution. All dividends and distributions paid on Shares held of record by the
Investment Adviser and its affiliates or correspondent banks will be paid in
cash. Direct and Institutional Investors and Customers of other Shareholder
Organizations will receive dividends and distributions in additional Shares of
the Fund 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 Fund intends to qualify as a "regulated investment company" under the
Code. Such qualification generally relieves a Fund of liability for Federal
income taxes to the extent its earnings are distributed in accordance with the
Code.
Qualification as a regulated investment company 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.
With respect to the Real Estate Fund, the dividends received deduction is not
available for dividends attributable to distributions made by a REIT to the
Fund. In addition, distributions paid by REITs often include a "return of cap-
ital." The Code requires a REIT to distribute at least 95% of its taxable in-
come to investors. In many cases, however, because of "non-cash" expenses such
as property depreciation, an equity REIT's cash flow will exceed its taxable
income. The REIT may distribute this excess cash to offer a more competitive
yield. This portion of the distribution is deemed a return of capital, and is
generally not taxable to shareholders. However, when shareholders receive a
return of capital, the cost basis of their shares is decreased by the amount
of such return of capital. This, in turn, affects the capital gain or loss re-
alized when shares of the Fund are exchanged or sold. Therefore, a sharehold-
er's original investment in the Fund will be reduced by the amount of the re-
turn of capital and capital gains included in a distribution if such share-
holder elects to receive distributions in cash (as opposed to having them re-
invested in additional shares of the Fund). Once a shareholder's cost basis is
reduced to zero, any return of capital is taxable as a capital gain.
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
21
<PAGE>
event such dividends are actually paid during January of the following 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 effected an exchange of such Shares
for Shares of another Fund within 90 days of the purchase and was able to re-
duce the sales charges previously applicable to the new Shares (by virtue of
the exchange privilege), the amount equal to such reduction may not be in-
cluded in the tax basis of the shareholder's exchanged Shares for the purpose
of determining gain or loss, but may be included (subject to the same limita-
tion) in the tax basis of the new Shares.
Qualification as a regulated investment company under the Code also requires
that each Fund satisfy certain requirements with respect to the source of its
income for a taxable year. At least 90% of the gross in-come 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 income 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 ("U.S. Trust New York") and U.S.
Trust Company of Connecticut ("U.S. Trust Connecticut" and, collectively with
U.S. Trust New York, "U.S. Trust" or the "Investment Adviser") serve as the
Investment Adviser to the
22
<PAGE>
Funds. U.S. Trust New York is a state-chartered bank and trust company and a
member bank of the Federal Reserve System and is one of the twelve members of
the New York Clearing House Association. U.S. Trust Connecticut is a Connecti-
cut state bank and trust company. U.S. Trust New York and U.S. Trust Connecti-
cut are wholly-owned subsidiaries of U.S. Trust Corporation, a registered bank
holding company.
The Investment Adviser provides trust and banking services to individuals,
corporations, and institutions both nationally and internationally, including
investment management, estate and trust administration, financial planning,
corporate trust and agency banking, and personal and corporate banking. On De-
cember 31, 1996, the Asset Management Groups of U.S. Trust New York and U.S.
Trust Connecticut had approximately $53 billion in aggregate assets under man-
agement. U.S. Trust New York has its principal offices at 114 W. 47th Street,
New York, New York 10036. U.S. Trust Connecticut has its principal offices at
225 High Ridge Road, East Tower, Stamford, CT 06905.
The Investment Adviser manages 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.
All investment decisions for the Large Cap Growth Fund are made by a commit-
tee of investment professionals and no persons are primarily responsible for
making recommendations to that committee.
Joan Ellis and Katherine Ellis are the persons primarily responsible for the
day-to-day management of the Real Estate Fund's investment portfolio. Ms. Joan
Ellis, Vice President in the Investment Research Division, has been employed
by U.S. Trust since 1984. Ms. Katherine Ellis, Vice President in the Invest-
ment Division, has been employed by U.S. Trust since 1986. Ms. Ellis and Ms.
Ellis have been the Fund's portfolio managers since its inception.
For the services provided and expenses assumed pursuant to its Investment Ad-
visory Agreement, the Investment Adviser is entitled to be paid a fee, com-
puted daily and paid monthly, at the annual rates of: 0.75% of the average
daily net assets of the Large Cap Growth Fund; and 1.00% of the average daily
net assets of the Real Estate Fund.
From time to time, the Investment Adviser may voluntarily waive all or a por-
tion of the advisory fees payable to it by a Fund, which waiver may be termi-
nated at any time. See "Management of the Funds--Service Organizations" for
additional information on fee waivers.
ADMINISTRATORS
CGFSC, Federated Administrative Services and U.S. Trust Connecticut serve as
the Funds' administrators (the "Administrators") and provide them with general
administrative and operational assistance. The Administrators also serve as
administrators of the other portfolios of Excelsior Fund and of all the port-
folios of Excelsior Tax-Exempt Fund and Excelsior Institutional Trust, which
are also advised by the Investment Adviser and its affiliates and distributed
by the Distributor. For the services provided to all portfolios of Excelsior
Fund, Excelsior Tax-Exempt Fund and Excelsior Institutional Trust (except the
international portfolios of Excelsior Fund and Excelsior Institutional Trust),
the Administrators are entitled jointly to annual fees, computed daily and
paid monthly, based on the combined aggregate average daily net assets of the
three companies (excluding the international portfolios of Excelsior Fund and
Excelsior Institutional Trust) as follows:
<TABLE>
<CAPTION>
COMBINED AGGREGATE AVERAGE DAILY NET ASSETS
OF EXCELSIOR FUND, EXCELSIOR TAX-EXEMPT FUND AND EXCELSIOR
INSTITUTIONAL TRUST (EXCLUDING THE INTERNATIONAL ANNUAL
PORTFOLIOS OF EXCELSIOR FUND AND EXCELSIOR INSTITUTIONAL TRUST) FEE
--------------------------------------------------------------- ------
<S> <C>
first $200 million..................................................... .200%
next $200 million...................................................... .175%
over $400 million...................................................... .150%
</TABLE>
Administration fees payable to the Administrators by each portfolio of Excel-
sior Fund, Excelsior Tax-Ex-
23
<PAGE>
empt Fund and Excelsior Institutional Trust are allocated in proportion to
their relative average daily net assets at the time of determination. From
time to time, the Administrators may voluntarily waive all or a portion of the
administration fee payable to them by a Fund, which waivers may be terminated
at any time. See "Management of the Funds--Service Organizations" for addi-
tional information on fee waivers.
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 37 series of shares representing interests in 17 investment
portfolios. This Prospectus describes the Large Cap Growth and Real Estate
Funds.
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 reclas-
24
<PAGE>
sify any class of shares into one or more additional classes or series.
Excelsior Fund's shareholders are entitled to one vote for each full share
held and fractional votes for fractional shares held and will vote in the ag-
gregate and not by class or series, except as otherwise expressly required by
law.
Certificates for Shares will not be issued unless expressly requested in
writing to CGFSC and will not be issued for fractional Shares.
As of July 1, 1997, U.S. Trust and its affiliates held of record substan-
tially all of the shares of Excelsior Fund as agent or custodian for their
customers, but did not own such shares beneficially because they did not have
voting or investment discretion with respect to such shares.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank ("Chase"), a wholly-owned subsidiary of The Chase
Manhattan Corporation, serves as the custodian of the Funds' assets. Communi-
cations to the custodian should be directed to Chase, Mutual Funds Service Di-
vision, 3 Chase MetroTech Center, 8th Floor, Brooklyn, NY 11245.
Chase may enter into an international sub-custodian agreement with a third
party providing for the custody of foreign securities held by the Funds.
U.S. Trust New York serves as the Funds' transfer and dividend disbursing
agent. U.S. Trust New York has also entered into a sub-transfer agency ar-
rangement with CGFSC, 73 Tremont Street, Boston, Massachusetts 02108-3913,
pursuant to which CGFSC provides certain transfer agent, dividend disbursement
and registrar services to the Funds.
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);
SEC fees; state securities registration fees; costs of preparing and printing
prospectuses for regulatory purposes and for distribution to shareholders; ad-
visory, administration and administrative servicing fees; charges of the cus-
todian, transfer agent, and dividend disbursing agent; certain insurance pre-
miums; outside auditing and legal expenses; costs of shareholder 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.
PERFORMANCE AND YIELD INFORMATION
From time to time, in advertisements or in reports to shareholders, the per-
formance and yields 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 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.
The performance of the Large Cap Growth Fund may also be compared to the Rus-
sell 1000 Growth Index. The Russell 1000 Growth Index contains stocks
25
<PAGE>
from the Russell 1000 Index with a greater-than-average growth orientation.
The Russell 1000 Index is composed of the 1,000 largest companies in the Rus-
sell 3000 Index. The Russell 3000 Index is composed of 3,000 large U.S. compa-
nies by market capitalization, representing approximately 98% of the U.S. eq-
uity market.
The performance of the Real Estate Fund may be compared to the National Asso-
ciation of Real Estate Investment Trusts ("NAREIT") Equity REIT Index, an un-
managed index of all tax-qualified REITs listed on the New York Stock Ex-
change, the American Stock Exchange and the National Association of Securities
Dealers Automated Quotations system ("NASDAQ"), which have 75% or more of
their gross invested book assets invested directly or indirectly in the equity
ownership of real estate, or the Morgan Stanley REIT Index, an unmanaged index
of all publicly traded equity REITs (except health care REITs) which have to-
tal market capitalizations of at least $100 million and are considered liquid.
Performance and yield 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 na-
ture, may also be used in comparing the performance and yields 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.
Performance and yields will fluctuate and any quotation of performance and
yield should not be considered as representative of a Fund's future
performance. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in the Funds with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that
performance and yield are generally functions of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses, and
market conditions. 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 and yield.
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."
26
<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
P.O. Box 2798 Company--Sub-Transfer Agent
Boston, MA 02208-2798 73 Tremont Street
Boston, MA 02108-3913
Please enclose with the Application(s) your check made payable to the "Ex-
celsior Funds" in the amount of your investment.
For direct wire purchases please refer to the section of the Prospectus en-
titled "How to Purchase and Redeem Shares--Purchase Procedures."
MINIMUM INVESTMENTS:
Except as provided in the Prospectus, the minimum initial investment is $500
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 sub-transfer agent at (800) 446-1012 between 9:00
a.m. and 5:00 p.m. (Eastern Time).
27
<PAGE>
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
CHASE GLOBAL FUNDS SERVICES COMPANY NEW
EXCELSIOR CLIENT SERVICES ACCOUNT
FUNDS INC. P.O. Box 2798 Boston, MA 02208-2798 APPLICATION
(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
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>
<S> <C>
FUND INITIAL INVESTMENT
[_] Large Cap Growth Fund $ ____________________ 833
[_] Real Estate Fund $ ____________________ 834
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 ------------------ ---------------
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
[_] I/We appoint CGFSC as by telephone to withdraw $500
my/our agent to act upon or more from my/our account in
instructions received by the Excelsior Funds and to
telephone in order to effect wire the amount withdrawn to
the telephone exchange and the following commercial bank
redemption privileges. I/We account. I/We understand that
hereby ratify any CGFSC charges an $8.00 fee for
instructions given pursuant each wire redemption, which
to this authorization and will be deducted from the
agree that Excelsior Fund, proceeds of the redemption.
Excelsior Tax-Exempt Fund, Title on Bank Account*_________
Excelsior Institutional Name of Bank __________________
Trust, CGFSC and their Bank A.B.A. Number Account
directors, trustees, Number ________________________
officers and employees will Bank Address __________________
not be liable for any loss, City/State/Zip Code ___________
liability, cost or expense (attach voided check here)
for acting upon instructions
believed to be genuine and
in accordance with the
procedures described in the
then current Prospectus. To
the extent that Excelsior
Fund, Excelsior Tax-Exempt
Fund and Excelsior
Institutional Trust fail to
use reasonable procedures as
a basis for their belief,
they or their service
contractors may be liable
for instructions that prove
to be fraudulent or
unauthorized.
A corporation, trust or
partnership must also submit a
"Corporate Resolution" (or
"Certificate of Partnership")
indicating the names and
titles of officers authorized
to act on its behalf.
* TITLE ON BANK AND FUND
ACCOUNT MUST BE IDENTICAL.
I/We further acknowledge
that it is my/our
responsibility to read the
Prospectus of any Fund into
which I/we exchange.
[_] I/We do not wish to have
the ability to exercise
telephone redemption and
exchange privileges. I/We
further understand that all
exchange and redemption
requests must be in writing.
SPECIAL PURCHASE AND
REDEMPTION PLANS
I/We have completed and
attached the Supplemental
Application for:
[_] Automatic Investment
Plan
[_] Systematic Withdrawal
Plan
<PAGE>
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
- -----------------------------------------------------------------
AGREEMENT AND SIGNATURES
- -----------------------------------------------------------------
By signing this application, I/we hereby certify under
penalty of perjury that the information on this application
is complete and correct and that as required by Federal law:
[_] I/WE CERTIFY THAT (1) THE NUMBER(S) SHOWN ON THIS FORM
IS/ARE THE CORRECT TAXPAYER IDENTIFICATION NUMBER(S) AND (2)
I/WE ARE NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE
I/WE HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE
THAT I/WE ARE SUBJECT TO BACKUP WITHHOLDING, OR THE IRS HAS
NOTIFIED ME/US THAT I AM/WE ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING. (NOTE: IF ANY OR ALL OF PART 2 IS NOT TRUE,
PLEASE STRIKE OUT THAT PART BEFORE SIGNING.)
[_] IF NO TAXPAYER IDENTIFICATION NUMBER ("TIN") OR SSN HAS
BEEN PROVIDED ABOVE, I/WE HAVE APPLIED, OR INTEND TO APPLY,
TO THE IRS OR THE SOCIAL SECURITY ADMINISTRATION FOR A TIN OR
A SSN, AND I/WE UNDERSTAND THAT IF I/WE DO NOT PROVIDE THIS
NUMBER TO CGFSC WITHIN 60 DAYS OF THE DATE OF THIS
APPLICATION, OR IF I/WE FAIL TO FURNISH MY/OUR CORRECT SSN OR
TIN, I/WE MAY BE SUBJECT TO A PENALTY AND A 31% BACKUP
WITHHOLDING ON DISTRIBUTIONS AND REDEMPTION PROCEEDS. (PLEASE
PROVIDE THIS NUMBER ON FORM W-9. YOU MAY REQUEST THE FORM BY
CALLING CGFSC AT THE NUMBER LISTED ABOVE).
I/We represent that I am/we are of legal age and capacity to
purchase shares of the Excelsior Funds. I/We have received,
read and carefully reviewed a copy of the 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, U.S. Trust,
its parent and affiliates and the Shares are not federally
insured by, guaranteed by, obligations of or otherwise
supported by the U.S. Government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any
other governmental agency; and that an investment in the
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.
----------------------------- -------------------------------
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>
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
EXCELSIOR CHASE GLOBAL FUNDS SERVICES COMPANY SUPPLEMENTAL
FUNDS INC. CLIENT SERVICES P.O. APPLICATION
Box 2798 Boston, MA 02208-2798 SPECIAL INVESTMENT AND
(800) 446-1012 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) Account No. ____________________
To: ________________________
(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 net asset value 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
U.S. TRUST'S INVESTMENT PHILOSOPHY AND STRATEGIES.......................... 4
INVESTMENT OBJECTIVES AND POLICIES......................................... 4
PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION..................... 8
INVESTMENT LIMITATIONS..................................................... 11
PRICING OF SHARES.......................................................... 12
HOW TO PURCHASE AND REDEEM SHARES.......................................... 13
INVESTOR PROGRAMS.......................................................... 17
DIVIDENDS AND DISTRIBUTIONS................................................ 20
TAXES...................................................................... 21
MANAGEMENT OF THE FUNDS.................................................... 22
DESCRIPTION OF CAPITAL STOCK............................................... 24
CUSTODIAN AND TRANSFER AGENT............................................... 25
EXPENSES .................................................................. 25
PERFORMANCE AND YIELD INFORMATION.......................................... 25
MISCELLANEOUS.............................................................. 26
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION................................... 27
</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.
EXCELSIOR
FUNDS INC.
LARGE CAP GROWTH FUND
REAL ESTATE FUND
Prospectus
September , 1997
<PAGE>
EXCELSIOR FUNDS, INC.
Large Cap Growth Fund
Real Estate Fund
STATEMENT OF ADDITIONAL INFORMATION
September __, 1997
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current prospectus for the Large Cap Growth and Real
Estate Funds (individually, a "Fund" and collectively, the "Funds") of Excelsior
Funds, Inc. ("Excelsior Fund") dated September __, 1997 (the "Prospectus").
Much of the information contained in this Statement of Additional Information
expands upon the subjects discussed in the Prospectus. No investment in shares
of the Funds described herein (collectively, the "Shares") should be made
without reading the Prospectus. A copy of the Prospectus may be obtained by
writing Excelsior Fund c/o Chase Global Funds Services Company, 73 Tremont
Street, Boston, MA 02108-3913 or by calling (800) 446-1012.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES................... 1
Other Investment Considerations.................... 1
Additional Information on Portfolio Instruments.... 3
Additional Investment Limitations.................. 10
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION....... 12
INVESTOR PROGRAMS.................................... 13
Systematic Withdrawal Plan......................... 13
Exchange Privilege................................. 14
Other Investor Programs............................ 15
DESCRIPTION OF CAPITAL STOCK......................... 15
MANAGEMENT OF THE FUNDS.............................. 17
Directors and Officers............................. 17
Investment Advisory and Administration Agreements.. 23
Service Organizations.............................. 23
Expenses........................................... 25
Custodian and Transfer Agent....................... 25
PORTFOLIO TRANSACTIONS............................... 26
INDEPENDENT AUDITORS................................. 28
COUNSEL.............................................. 28
ADDITIONAL INFORMATION CONCERNING TAXES.............. 28
PERFORMANCE AND YIELD INFORMATION.................... 31
MISCELLANEOUS........................................ 35
APPENDIX A........................................... A-1
</TABLE>
-i-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
----------------------------------
The investment objective and policies of each Fund are described in
the Prospectus. The following information supplements the description of the
investment objective and policies as set forth in the Prospectus.
Other Investment Considerations - Large Cap Growth and Real Estate Funds
- ------------------------------------------------------------------------
The Funds intend to invest primarily in equity securities, but each
Fund may also purchase both preferred stocks and convertible securities at the
discretion of United States Trust Company of New York ("U.S. Trust New York")
and U.S. Trust Company of Connecticut ("U.S. Trust Connecticut" and,
collectively, with U.S. Trust New York, the "Investment Adviser" or "U.S.
Trust"). The Investment Adviser expects that the broad and diversified
strategies utilized by it will result in somewhat more current income than would
be generated if the Investment Adviser utilized a single strategy more narrowly
focused on rapid growth of principal and involving exposure to higher levels of
risk.
The Investment Adviser's investment philosophy is to identify
investment values available in the market at attractive prices. Investment
value arises from the ability to generate earnings or from the ownership of
assets or resources. Underlying earnings potential and asset values are
frequently demonstrable but not recognized in the market prices of the
securities representing their ownership. The Investment Adviser employs the
following three different but closely interrelated portfolio strategies to focus
and organize its search for investment values.
1. Problem/Opportunity Companies. Important investment
-----------------------------
opportunities often occur where companies develop solutions to large, complex,
fundamental problems, such as declining industrial productivity; rising costs
and declining sources of energy; the economic imbalances and value erosion
caused by years of high inflation and interest rates; the soaring costs and
competing priorities of providing health care; and the accelerating
interdependence and "shrinking size" of the world.
Solutions or parts of solutions to large problems may be generated by
established companies or comparatively new companies of all sizes through the
development of new products, technologies or services, or through new
applications of older ones.
Investment in such companies represents a very wide range of
investment potential, current income return rates, and
<PAGE>
exposure to fundamental and market risks. Income generated by each Fund's
investments in these companies would be expected to be moderate, characterized
by lesser rates than those of a fund whose sole objective is current income, and
somewhat higher rates than those of a higher-risk growth fund.
2. Transaction Value Companies. In the opinion of the Investment
---------------------------
Adviser, the stock market frequently values the aggregate ownership of a company
at a substantially lower figure than its component assets would be worth if they
were sold off separately over time. Such assets may include intangible assets
such as product and market franchises, operating know-how, or distribution
systems, as well as such tangible properties as oil reserves, timber, real
estate, or production facilities. Investment opportunities in these companies
are determined by the magnitude of difference between economic worth and current
market price.
Market undervaluations are very often corrected by purchase and sale,
restructuring of the company, or market appreciation to recognize the actual
worth. The recognition process may well occur over time, however, incurring a
form of time-exposure risk. Success from investing in these companies is often
great, but may well be achieved only after a waiting period of inactivity.
Income derived from investing in undervalued companies is expected to
be moderately greater than that derived from investments in either the
Problem/Opportunity or Early Life Cycle companies.
3. Early Life Cycle Companies. Investments in Early Life Cycle
--------------------------
companies tend to be narrowly focused on an objective of higher rates of capital
appreciation. They correspondingly will involve a significantly greater degree
of risk and the reduction of current income to a negligible level. Such
investments will not be limited to new, small companies engaged only in frontier
technology, but will seek opportunities for maximum appreciation through the
full spectrum of business operations, products, services, and asset values.
Consequently, the 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 making new or different employment of assets. Because
of the high risk level involved, the ratio of success among such companies is
lower than the average, but for those companies which succeed, the magnitude of
investment reward is potentially higher.
-2-
<PAGE>
Additional Information on Portfolio Instruments
- -----------------------------------------------
Options
-------
As stated in the Prospectus, the 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 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 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 Prospectus, each Fund may engage in writing
covered call options and enter into closing purchase transactions with respect
to such options. When either 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
-3-
<PAGE>
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 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
Prospectus 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, as amended
(the "1940 Act").
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<PAGE>
Futures Contracts and Related Options
-------------------------------------
The Funds may invest in futures contracts and options thereon. The
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 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 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 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
-5-
<PAGE>
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 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.
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 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
-6-
<PAGE>
exercise, the writer of the option is obligated to pay the difference between
the cash value of the futures contract and the exercise price. Like the buyer
or seller of a futures contract, the holder, or writer, of an option has the
right to terminate its position prior to the scheduled expiration of the option
by selling, or purchasing, an option of the same series, at which time the
person entering into the closing transaction will realize a gain or loss.
Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the purchase
of an option also entails the risk that changes in the value of the underlying
futures contract will not be fully reflected in the value of the option
purchased. Depending on the pricing of the option compared to either the
futures contract upon which it is based, or upon the price of the instruments
being hedged, an option may or may not be less risky than ownership of the
futures contract or such instruments. In general, the market prices of options
can be expected to be more volatile than the market prices on the underlying
futures contract. Compared to the purchase or sale of futures contracts,
however, the purchase of call or put options on futures contracts may frequently
involve less potential risk to a Fund because the maximum amount at risk is the
premium paid for the options (plus transaction costs). Although permitted by
their fundamental investment policies, the Funds do 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
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<PAGE>
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 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
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<PAGE>
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 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 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 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 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
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<PAGE>
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.
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.
Additional Investment Limitations
- ---------------------------------
In addition to the investment limitations disclosed in the Prospectus,
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 Prospectus). 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 (a) each Fund may
purchase securities of issuers which deal in real estate and may purchase
securities which are secured by real estate or interests therein, and (b) the
Real Estate Fund may sell any real estate it acquires as a result of a default
on debt securities held by such Fund;
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<PAGE>
3. Issue any senior securities, except insofar as any borrowing in
accordance with a Fund's investment limitation contained in the Prospectus might
be considered to be the issuance of a senior security; and
4. Purchase or sell commodities or commodities futures contracts or
invest in oil, gas, or other mineral exploration or development programs;
provided, however, that i) this shall not prohibit either 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
objective and policies, and ii) each Fund may enter into futures contracts and
futures options.
The following investment limitations are operating policies with
respect to the Funds. Neither Fund may:
5. Purchase securities on margin, make short sales of securities, or
maintain a short position;
6. Invest in or sell put options, call options, straddles, spreads,
or any combination thereof; provided, however, that 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 Funds may purchase options and other rights in accordance with their
investment objectives and policies;
7. Invest in companies for the purpose of exercising management or
control;
8. Invest more than 5% of its total assets in securities issued by
companies which, together with any predecessor, have been in continuous
operation for fewer than three years; and
9. Acquire any other investment company or investment company
security, except in connection with a merger, consolidation, reorganization, or
acquisition of assets or where otherwise permitted by the 1940 Act.
* * *
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
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<PAGE>
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. 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.
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.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
----------------------------------------------
Shares are continuously offered for sale by Edgewood Services, Inc.
(the "Distributor"), a wholly-owned subsidiary of Federated Investors, and the
Distributor has agreed to use appropriate efforts to solicit all purchase
orders. As described in the Prospectus, Shares may be sold to customers
("Customers") of financial institutions ("Shareholder Organizations"). Shares
are also offered for sale directly to institutional investors and to members of
the general public. Different types of Customer accounts at the Shareholder
Organizations may be used to purchase Shares, including eligible agency and
trust accounts. In addition, Shareholder Organizations may automatically
"sweep" a Customer's account not less frequently than weekly and invest amounts
in excess of a minimum balance agreed to by the Shareholder Organization and its
Customer in Shares selected by the Customer. Investors purchasing Shares may
include officers, directors, or employees of the particular Shareholder
Organization.
Shares of the Funds are offered for sale at their net asset value per
Share next computed after a purchase order is received by Excelsior Fund's sub-
transfer agent.
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 (the
"SEC"); (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC.
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<PAGE>
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 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;
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(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 Funds, Inc.
("Excelsior Tax-Exempt Fund" and, collectively with Excelsior 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 or
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 and Excelsior
Institutional Trust may modify or terminate the exchange program at any time
upon 60 days' written notice to shareholders, and may reject any exchange
request. Customers of Shareholder Organizations may obtain information on the
availability of, and the procedures relating to, such programs directly from
their Shareholder Organizations.
For Federal income tax purposes, exchanges are treated as sales on
which the shareholder will realize a gain or loss, depending upon whether the
value of the Shares to be given up in exchange is more or less than the basis in
such Shares at the time of the exchange. Generally, a shareholder may include
sales
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loads incurred upon the purchase of Shares in his or her tax basis for such
Shares for the purpose of determining gain or loss on a redemption, transfer or
exchange of such Shares. However, if the shareholder effected an exchange of
Shares for shares of another portfolio of the Companies within 90 days of the
purchase and was able to reduce the sales load previously applicable to the new
shares (by virtue of the Companies' exchange privilege), the amount equal to
such reduction may not be included in the tax basis of the shareholder's
exchanged Shares but may be included (subject to the limitation) in the tax
basis of the new shares.
Other Investor Programs
- -----------------------
As described in the Prospectus, Shares of the 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, qualifications, and terms and conditions of
redemption. The Prospectus describes the class 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 Prospectus, Shares will be fully paid and non-
assessable. In the event of a liquidation or dissolution of a Fund,
shareholders of the Fund are entitled to receive the assets available for
distribution belonging to that Fund and a proportionate distribution, based upon
the relative asset values of Excelsior Fund's portfolios, of any general assets
of Excelsior Fund not belonging to any particular portfolio of Excelsior Fund
which are available for distribution. In the event of a liquidation or
dissolution of Excelsior Fund, its shareholders will be entitled to the same
distribution process.
Shareholders of Excelsior Fund are entitled to one vote for each full
share held, and fractional votes for fractional shares held, and will vote in
the aggregate and not by class, except as otherwise required by the 1940 Act or
other applicable
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<PAGE>
law or when the matter to be voted upon affects only the interests of the
shareholders of a particular class. Voting rights are not cumulative and,
accordingly, the holders of more than 50% of the aggregate of Excelsior Fund's
shares may elect all of Excelsior Fund's directors, regardless of votes of other
shareholders.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as Excelsior Fund shall not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
shares of each portfolio affected by the matter. A portfolio is affected by a
matter unless it is clear that the interests of each portfolio in the matter are
substantially identical or that the matter does not affect any interest of the
portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to a portfolio only if approved by a majority of the outstanding
shares of such portfolio. However, the Rule also provides that the ratification
of the appointment of independent public accountants, the approval of principal
underwriting contracts, and the election of directors may be effectively acted
upon by shareholders of Excelsior Fund voting without regard to class.
Excelsior Fund's Charter authorizes its Board of Directors, without
shareholder approval (unless otherwise required by applicable law), to (a) sell
and convey the assets of 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.
-16-
<PAGE>
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:
<TABLE>
<CAPTION>
Position Principal Occupation
with During Past 5 Years and
Name and Address Excelsior Fund Other Affiliations
- ---------------- -------------- -----------------------
<S> <C> <C>
Frederick S. Wonham/1/ Chairman of the Retired; Director of
238 June Road Board, President Excelsior Fund and Excelsior
Stamford, CT 06903 and Treasurer Tax-Exempt (since 1995);
Age: 66 Trustee of Excelsior Funds
and Excelsior
Institutional Trust (since
1995); Vice Chairman of
U.S. Trust Corporation and
United States Trust
Company of New York (from
__________ until September
1995); Chairman, U.S.
Trust Company of
Connecticut (from _______
to May 1997).
Donald L. Campbell Director Retired; Director of
333 East 69th Street Excelsior Fund and Excelsior
Apt. 10-H Tax-Exempt (since 1984);
New York, NY 10021 Director of UST Master
Age: 71 Variable Series, Inc. (from
1994 to June 1997);
Trustee of Excelsior
Institutional Trust (since
1995); Director, Royal
Life Insurance Co. of New
York (since 1991).
</TABLE>
- ----------
/1/ This director is considered to be an "interested person" of Excelsior Fund
as defined in the 1940 Act.
-17-
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupation
with During Past 5 Years and
Name and Address Excelsior Fund Other Affiliations
- ---------------- -------------- -----------------------
<S> <C> <C>
Rodman L. Drake Director Director, Excelsior Fund
c/o KMR Power Corp. and Excelsior Tax-Exempt
30 Rockfeller Plaza Fund (since 1996); Trustee,
Suite 5425 Excelsior Institutional
New York, NY 10112 Trust and Excelsior Funds
Age: 54 (since 1994); Director,
Parsons Brinkerhoff, Inc.
(engineering firm) (since
1995); President, Mandrake
Group (investment and
consulting firm) (since
1994); Director, Hyperion
Total Return Fund, Inc.
and four other funds for
which Hyperion Capital
Management, Inc. serves as
investment adviser (since
1991); Co-Chairman, KMR
Power Corporation (power
plants) (since 1993);
Director, The Latin
American Growth Fund
(since 1993); Member of
Advisory Board, Argentina
Private Equity Fund L.P.
(from 1992 to 1996) and
Garantia L.P. (Brazil)
(from 1993 to 1996); and
Director, Mueller
Industries, Inc. (from
1992 to 1994).
Joseph H. Dugan Director Retired; Director of
913 Franklin Lakes Road Excelsior Fund and Excelsior
Franklin Lakes, NJ 07417 Tax-Exempt (since 1984);
Age: 72 Director of UST Master
Variable Series, Inc.
(from 1994 to June 1997);
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 (since 1986);
Age: 76 Director of UST Master
Variable Series, Inc.
(from 1994 to June 1997);
Trustee of Excelsior
Institutional Trust (since
1995); Director, Deutsche
Bank Financial, Inc.
(since 1989); Director,
The Harbus Corporation
(since 1951); Trustee,
HSBC Funds Trust and HSBC
Mutual Funds Trust (since
1988).
W. Wallace McDowell, Jr. Director Director, Excelsior Fund
c/o Prospect Capital Corp. and Excelsior Tax-Exempt Fund (since
43 Arch Street 1996); Trustee, Excelsior
Greenwich, CT 06830 Institutional Trust and
Age: 60 Excelsior Funds (since 1994);
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupation
with During Past 5 Years and
Name and Address Excelsior Fund Other Affiliations
- ---------------- -------------- -----------------------
<S> <C> <C>
Private Investor (since
1994); Managing Director,
Morgan Lewis Githens & Ahn
(from 1991 to 1994); and
Director, U.S. Homecare
Corporation (since 1992),
Grossmans, Inc. (from 1993
to 1996), Children's
Discovery Centers (since
1984), ITI Technologies,
Inc. (since 1992) and Jack
Morton Productions (since
1987).
Jonathan Piel Director Director, Excelsior Fund and
558 E. 87th Street Excelsior Tax-Exempt Fund
New York, NY 10128 (since 1996); Trustee, Excelsior
Age: 58 Institutional Trust and
Excelsior Funds (since
1994); Vice President and
Editor, Scientific
American, Inc. (from 1986
to 1994); Director, Group
for The South Fork,
Bridgehampton, New York
(since 1993); and Member,
Advisory Committee, Knight
Journalism Fellowships,
Massachusetts Institute of
Technology (since 1984).
Robert A. Robinson Director Director of Excelsior Fund
Church Pension Fund and Excelsior Tax-Exempt
800 Second Avenue (since 1997); Director of UST
New York, NY 10017 Master Variable Series, Inc.
Age: 71 (from 1994 to June 1997);
Trustee of Excelsior
Institutional Trust (since
1995); President Emeritus,
The Church Pension Fund
and its affiliated
companies (since 1966);
Trustee, H.B. and F.H.
Bugher Foundation and
Director of its wholly
owned subsidiaries --
Rosiclear Lead and
Flourspar Mining Co. and
The Pigmy Corporation
(since 1984); Director,
Morehouse Publishing Co.
(since 1974); Trustee,
HSBC Funds Trust and HSBC
Mutual Funds Trust (since
1982); Director, Infinity
Funds, Inc. (since 1995).
Alfred C. Tannachion/1/ Director Retired; Director of
6549 Pine Meadows Drive Excelsior Fund and
Spring Hill, FL 34606 Excelsior Tax-Exempt
Age: 71 (since 1985); Chairman
</TABLE>
- ----------
/1/ This director is considered to be an "interested person" of Excelsior Fund
as defined in the 1940 Act.
-19-
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupation
with During Past 5 Years and
Name and Address Excelsior Fund Other Affiliations
- ---------------- -------------- -----------------------
<S> <C> <C>
of the Board, President
and Treasurer of UST
Master Variable Series,
Inc. (from 1994 to June
1997); Trustee of
Excelsior Institutional
Trust (since 1995).
W. Bruce McConnel, III Secretary Partner of the law firm of
Philadelphia National Drinker Biddle & Reath LLP.
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Age: 54
Gregory Sackos Assistant Second Vice President, Senior
Chase Global Funds Secretary Manager of Blue Sky Compliance,
Services Company Chase Global Funds Services
73 Tremont Street Company (since March 1997);
Boston, MA 02108-3913 Second Vice President, Senior
Age: 32 Manager of Financial
Reporting, Chase Global
Funds Services Company
(from September 1996 to
March 1997); Assistant
Vice President, Assistant
Manager of Financial
Reporting, Scudder,
Stevens & Clark, Inc.
(from October 1992 to
September 1996).
John M. Corcoran Assistant Vice President, Director of
Chase Global Funds Treasurer Administration Client Group,
Services Company Chase Global Funds Services
73 Tremont Street Company (since July 1996);
Boston, MA 02108-3913 Second Vice President, Manager
Age: 31 of Administration, Chase
Global Funds Services
Company (from October 1993
to July 1996); Audit
Manager, Ernst & Young LLP
(from August 1987 to
September 1993).
</TABLE>
-20-
<PAGE>
Each director of Excelsior Fund receives an annual fee of $9,000 plus
a meeting fee of $1,500 for each meeting attended and is reimbursed for expenses
incurred in attending meetings. The Chairman of the Board is entitled to
receive an additional $5,000 per annum for services in such capacity. Drinker
Biddle & Reath LLP, of which Mr. McConnel is a partner, receives legal fees as
counsel to Excelsior Fund. The employees of Chase Global Funds Services Company
do not receive any compensation from Excelsior Fund for acting as officers of
Excelsior Fund. No person who is currently an officer, director or employee of
the Investment Adviser serves as an officer, director or employee of Excelsior
Fund. As of July 1, 1997, the directors and officers of Excelsior Fund as a
group owned beneficially less than 1% of the outstanding Shares of each fund of
Excelsior Fund, and less than 1% of the outstanding Shares of all funds of
Excelsior Fund in the aggregate.
The following chart provides certain information about the fees
received by Excelsior Fund's directors in the most recently completed fiscal
year.
-21-
<PAGE>
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Compensation
Accrued as from Excelsior Fund
Aggregate Part of and Fund
Name of Compensation from Fund Complex* Paid
Person/Position Excelsior Fund Expenses to Directors
--------------- ----------------- -------- -------------------
<S> <C> <C> <C>
Donald L. Campbell $13,500 None $31,750(4)**
Director
Rodman L. Drake*** $ 3,750 None $12,250(4)**
Director
Joseph H. Dugan $15,000 None $35,000(4)**
Director
Wolfe J. Frankl $15,000 None $35,000(4)**
Director
W. Wallace McDowell, Jr.*** $ 2,250 None $ 9,250(4)**
Director
Jonathan Piel*** $ 3,750 None $12,500(4)**
Director
Robert A. Robinson $15,000 None $35,000(4)**
Director
Alfred C. Tannachion**** $20,000 None $45,000(4)**
Director
Frederick S. Wonham**** $15,000 None $35,000(4)**
Chairman of the Board,
President and Treasurer
</TABLE>
- ---------------------------
/*/ The "Fund Complex" consists of Excelsior Fund, Excelsior Tax-Exempt
Fund, UST Master Variable Series, Inc., Excelsior Funds and Excelsior
Institutional Trust.
/**/ Number of investment companies in the Fund Complex for which director
serves as director or trustee.
/***/ Messrs. Drake, McDowell and Piel were elected to the Board of
Excelsior Fund and Excelsior Tax-Exempt Fund on December 9, 1996.
/****/ Mr. Tannachion served as Excelsior Fund's Chairman of the Board,
President and Treasurer until February 13, 1997. On that date, Mr.
Wonham was elected to serve as Excelsior Fund's Chairman of the Board,
President and Treasurer.
-22-
<PAGE>
Investment Advisory and Administration Agreements
- -------------------------------------------------
United States Trust Company of New York ("U.S. Trust New York") and
U.S. Trust Company of Connecticut ("U.S. Trust Connecticut" and, collectively
with U.S. Trust New York, "U.S. Trust" or the "Investment Adviser") serve as
Investment Adviser to the Funds. In the Investment Advisory Agreement, the
Investment Adviser has agreed to provide the services described in the
Prospectus. The Investment Adviser has also agreed to pay all expenses incurred
by it in connection with its activities under the respective agreements other
than the cost of securities, including brokerage commissions, purchased for the
Funds.
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 the Investment Adviser shall be jointly, but not severally, liable for a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser in the
performance of its duties or from reckless disregard by it of its duties and
obligations thereunder. In addition, the Investment Adviser has undertaken in
the Investment Advisory Agreement to maintain its policy and practice of
conducting its Asset Management Group independently of its Banking Group.
Chase Global Funds Services Company ("CGFSC"), Federated
Administrative Services (an affiliate of the Distributor) and U.S. Trust
Connecticut (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 SEC, prepare Federal and state
tax returns, prepare filings with state securities commissions, arrange for and
bear the cost of processing Share purchase and redemption orders, maintain the
Funds' financial accounts and records, and generally assist in the Funds'
operations.
Service Organizations
- ---------------------
As stated in the Prospectus, Excelsior Fund will enter into agreements
with Service Organizations. Such shareholder servicing agreements will require
the Service Organizations to provide shareholder administrative services to
their Customers who beneficially own Shares in consideration for a Fund's
payment
-23-
<PAGE>
(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
-24-
<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.
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); SEC fees; state securities registration fees; costs of
preparing and printing prospectuses for regulatory purposes and for distribution
to shareholders; advisory, administration and administrative servicing fees;
charges of the custodian, transfer agent, and dividend disbursing agent; certain
insurance premiums; outside auditing and legal expenses; costs of shareholder
reports and shareholder meetings; and any extraordinary expenses. The Funds
also pay for brokerage fees and commissions in connection with the purchase of
portfolio securities.
Custodian and Transfer Agent
- ----------------------------
The Chase Manhattan Bank ("Chase") serves as custodian of the 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 New York serves as the Funds' transfer agent and dividend
disbursing agent. In such capacity, U.S. Trust New York has agreed to (i) issue
and redeem Shares; (ii) address and mail all communications by the 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'
-25-
<PAGE>
operations. For its transfer agency, dividend disbursing, and subaccounting
services, U.S. Trust New York is entitled to receive $15.00 per annum per
account and subaccount. In addition, U.S. Trust New York is entitled to be
reimbursed for its out-of-pocket expenses for the cost of forms, postage,
processing purchase and redemption orders, handling of proxies, and other
similar expenses in connection with the above services.
U.S. Trust New York may, at its own expense, delegate its transfer
agency obligations to another transfer agent registered or qualified under
applicable law, provided that U.S. Trust New York shall remain liable for the
performance of all of its transfer agency duties under the Transfer Agency
Agreement, notwithstanding any delegation. Pursuant to this provision in the
agreement, U.S. Trust New York has entered into a sub-transfer agency
arrangement with CGFSC, an affiliate of Chase, with respect to accounts of
shareholders who are not Customers of U.S. Trust New York. For the services
provided by CGFSC, U.S. Trust New York has agreed to pay CGFSC $15.00 per annum
per account or subaccount plus out-of-pocket expenses. CGFSC receives no fee
directly from Excelsior Fund for any of its sub-transfer agency services. U.S.
Trust New York may, from time to time, enter into sub-transfer agency
arrangements with third party providers of transfer agency services.
PORTFOLIO TRANSACTIONS
----------------------
Subject to the general control of Excelsior Fund's Board of Directors,
the Investment Adviser is responsible for, makes decisions with respect to, and
places orders for all purchases and sales of all portfolio securities of the
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.
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.
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
-26-
<PAGE>
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.
Portfolio securities will not be purchased from or sold to the
Investment Adviser, Distributor, or any affiliated person of either of them (as
such term is defined in the 1940 Act) acting as principal, except to the extent
permitted by the SEC.
Investment decisions for the 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
-27-
<PAGE>
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.
INDEPENDENT AUDITORS
--------------------
Ernst & Young LLP, independent auditors, 200 Clarendon Street, Boston,
MA 02116, serve as auditors of Excelsior Fund.
COUNSEL
-------
Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary of
Excelsior Fund, is a partner), Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107-3496, is counsel to Excelsior
Fund and will pass upon the legality of the Shares offered by the Prospectus.
ADDITIONAL INFORMATION CONCERNING TAXES
---------------------------------------
The following supplements the tax information contained in the
Prospectus.
Each Fund is treated as a separate corporate entity under 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 would be taxable as
-28-
<PAGE>
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 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 "Short-Short Gain Test"): (1)
stock and securities (as defined in section 2(a)(36) of the 1940 Act); (2)
options, futures and forward contracts other than those on foreign currencies;
and (3) foreign currencies (and options, futures and forward contracts on
foreign currencies) that are not directly related to the Fund's principal
business of investing in stock and securities (and options and futures with
respect to stocks and securities). Interest (including original issue discount
and accrued market discount) received by 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
-29-
<PAGE>
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 be
netted for purposes of determining whether the Short-Short Gain 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 Real Estate Fund may invest in real estate investment trusts
("REITs") that hold residual interests in real estate mortgage investment
conduits ("REMICs"). Under Treasury regulations that have not yet been issued,
but may apply retroactively, a portion of the Fund's income from a REIT that is
attributable to the REIT's residual interest in a REMIC (referred to in the Code
as an "excess inclusion") will be subject to Federal income tax in all events.
These regulations are also expected to provide that excess inclusion income of a
regulated investment company, such as the Fund, will be allocated to
shareholders of the regulated investment company in proportion to the dividends
received by such shareholders, with the same consequences as if the shareholders
held the related REMIC residual interest directly. In general, excess inclusion
income allocated to shareholders (i) cannot be offset by net operating losses
(subject to a limited exception for certain thrift institutions), (ii) will
constitute unrelated business taxable income to entities (including a qualified
pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or
other tax-exempt entity) subject to tax on unrelated business income, thereby
potentially requiring such an entity that is
-30-
<PAGE>
allocated excess inclusion income, and otherwise might not be required to file a
tax return, to file a tax return and pay tax on such income, and (iii) in the
case of a foreign shareholder, will not qualify for any reduction in U.S.
Federal withholding tax. In addition, if at any time during any taxable year a
"disqualified organization" (as defined in the Code) is a record holder of a
share in a regulated investment company, then the regulated investment company
will be subject to a tax equal to that portion of its excess inclusion income
for the taxable year that is allocable to the disqualified organization,
multiplied by the highest Federal income tax rate imposed on corporations. The
Investment Adviser does not intend on behalf of the Fund to invest in REITs, a
substantial portion of the assets of which consists of residual interests in
REMICs.
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 AND YIELD INFORMATION
---------------------------------
Each Fund may advertise the "average annual total return" for its
Shares. Such return is computed by determining the average annual compounded
rate of return during specified periods that equates the initial amount invested
to the ending redeemable value of such investment according to the following
formula:
ERV /to the 1 divided by nth power/
T = [(-----) - 1]
P
Where: T = average annual total return.
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year
(or other) periods at the end of the applicable period
(or a fractional portion thereof).
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in years.
-31-
<PAGE>
Each Fund may also advertise the "aggregate total return" for its
Shares which is computed by determining the aggregate compounded rates of return
during specified periods that likewise equate the initial amount invested to the
ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
ERV
Aggregate Total Return = [(------)] - 1
P
The above calculations are made assuming that (1) all dividends and
capital gain distributions are reinvested on the reinvestment dates at the price
per Share existing on the reinvestment date, (2) all recurring fees charged to
all shareholder accounts are included, and (3) for any account fees that vary
with the size of the account, a mean (or median) account size in 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.
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.
The Real Estate Fund may advertise the standardized effective 30-day
(or one month) yield calculated in accordance with the method prescribed by the
SEC for mutual funds. Such yield will be calculated for the Fund according to
the following formula:
a-b
Yield = 2 [(-------- + 1)/to the 6th power/ - 1]
cd
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<PAGE>
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = average daily number of Shares outstanding that were
entitled to receive dividends.
d = maximum offering price per Share on the last day of the
period.
For the purpose of determining interest earned during the period
(variable "a" in the formula), the Real Estate Fund computes the yield to
maturity of any debt obligation held by it based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last business day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest). Such yield
is then divided by 360, and the quotient is multiplied by the market value of
the obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is in the portfolio. It is assumed in the above calculation that
each month contains 30 days. Also, the maturity of a debt obligation with a
call provision is deemed to be the next call date on which the obligation
reasonably may be expected to be called or, if none, the maturity date. The
Fund calculates interest gained on tax-exempt obligations issued without
original issue discount and having a current market discount by using the coupon
rate of interest instead of the yield to maturity. In the case of tax-exempt
obligations with original issue discount, where the discount based on the
current market value exceeds the then-remaining portion of original issue
discount, the yield to maturity is the imputed rate based on the original issue
discount calculation. Conversely, where the discount based on the current
market value is less than the remaining portion of the original issue discount,
the yield to maturity is based on the market value.
Expenses accrued for the period (variable "b" in the formula) include
all recurring fees charged by the Real Estate Fund to all shareholder accounts
and to the particular series of Shares in proportion to the length of the base
period and the Fund's mean (or median) account size. Undeclared earned income
will be subtracted from the maximum offering price per Share (variable "d" in
the formula).
The total return and yield of a Fund may be compared to that of other
mutual funds with similar investment objectives and to other relevant indices or
to ratings prepared by independent
-33-
<PAGE>
services or other financial or industry publications that monitor the
performance of mutual funds. For example, the total return and/or yield 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 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, advertisements, 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.
-34-
<PAGE>
MISCELLANEOUS
-------------
As used in the Prospectus, "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.
-35-
<PAGE>
APPENDIX A
----------
COMMERCIAL PAPER RATINGS
- ------------------------
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt considered short-term in the relevant
market. The following summarizes the rating categories used by Standard and
Poor's for commercial paper:
"A-1" - The highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
"A-2" - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
"A-3" - Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
"B" - Issues are regarded as having only a speculative capacity for
timely payment.
"C" - This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
"D" - Issues are in payment default.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:
"Prime-1" - Issuers or related supporting institutions have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earning coverage of fixed financial
charges and high internal cash generation; and well established access to a
range of financial markets and assured sources of alternate liquidity.
A-1
<PAGE>
"Prime-2" - Issuers or related supporting institutions have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
"Prime-3" - Issuers or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment. Short-
term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issue as investment grade. Risk
A-2
<PAGE>
factors are larger and subject to more variation. Nevertheless, timely payment
is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years. The
following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit quality.
Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as the "F-1+" and "F-1" ratings.
"F-3" - Securities possess fair credit quality. Issues assigned this
rating have characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues assigned this
rating have characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near-term adverse changes in financial and
economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term ratings to
indicate that the rating is based upon a letter of credit issued by a commercial
bank.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one
A-3
<PAGE>
year or less which are 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 posses a particularly strong credit feature
are supported by the highest capacity for timely repayment.
"A1" - Obligations are supported by the highest capacity for timely
repayment.
"A2" - Obligations are supported by a good capacity for timely
repayment.
"A3" - Obligations are supported by a satisfactory capacity for
timely repayment.
"B" - Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.
"C" - Obligations for which there is a high risk of default or which
are currently in default.
A-4
<PAGE>
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
- ----------------------------------------------
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - This designation represents the highest rating assigned by
Standard & Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small degree.
"A" - Debt is considered to have a strong capacity to pay interest and
repay principal although such issues are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
A-5
<PAGE>
"CCC" - Debt has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no interest
is being paid.
"D" - Debt is in payment default. This rating is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience high volatility or
high variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities. The absence of an "r" symbol
should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are
A-6
<PAGE>
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds considered medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing; "Ca"
represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in
default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
(P)... - When applied to forward delivery bonds, indicates that the
rating is provisional pending delivery of the bonds. The rating may be revised
prior to delivery if changes occur in the legal documents or the underlying
credit quality of the bonds.
A-7
<PAGE>
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols, Aa1, A1, Baa1, Ba1 and B1.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt
rated "B" possesses the risk that obligations will not be met when due. Debt
rated "CCC" is well below investment grade and has considerable uncertainty as
to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong
A-8
<PAGE>
as bonds rated "AAA." Because bonds rated in the "AAA" and "AA" 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
A-9
<PAGE>
principal and interest is adequate, although adverse changes in business,
economic or financial conditions are more likely to lead to increased investment
risk than for obligations in other categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of
these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree of
speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating below
"AAA" to denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes
the rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC" - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of
A-10
<PAGE>
principal and interest. "BB" indicates the lowest degree of speculation and
"CC" the highest degree of speculation.
"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.
A-11
<PAGE>
"MIG-4"/"VMIG-4" - Loans bearing this designation are of adequate
quality, carrying specific risk but having protection commonly regarded as
required of an investment security and not distinctly or predominantly
speculative.
"SG" - Loans bearing this designation are of speculative quality and
lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.
A-12
<PAGE>
EXCELSIOR FUNDS, INC.
FORM N-1A
---------
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
(1) Included in Part A:
None.
(2) Included in Part B:
None.
(b) Exhibits:
--------
(1) (a) Articles of Incorporation of Registrant dated
August 1, 1984 (1).
(b) Articles Supplementary of Registrant dated October
30, 1985 (3).
(c) Articles Supplementary of Registrant dated
September 30, 1986 (4).
(d) Articles Supplementary of Registrant dated April
10, 1987 (6).
(e) Articles Supplementary of Registrant dated April
27, 1990 (12).
(f) Articles Supplementary of Registrant dated October
26, 1990 (13).
(g) Articles Supplementary of Registrant dated January
29, 1991 (13).
(h) Articles Supplementary of Registrant dated December
24, 1992 (16).
(i) Articles Supplementary of Registrant dated August
31, 1995 (20).
(j) Articles Supplementary of Registrant dated December
28, 1995 (20).
(2) (a) Bylaws of Registrant (1).
(b) Amendment No. 1 to By-laws of Registrant (3).
<PAGE>
(c) Amendment No. 2 to By-Laws of Registrant (22).
(d) Amendment No. 3 to By-Laws of Registrant (22).
(3) None.
(4) (a) Articles VI, VII, VIII and X of Registrant's
Articles of Incorporation dated August 7, 1984 are incorporated
herein by reference to Exhibit 1(a) of Registrant's Registration
Statement on Form N-1A filed on August 8, 1994;
(b) Articles I, II, IV and VI of Registrant's By-Laws
are incorporated herein by reference to Exhibit 2(a) of
Registrant's Registration Statement on Form N-1A filed on August
8, 1984.
(5) (a) Investment Advisory Agreement between Registrant
and United States Trust Company of New York ("U.S. Trust") dated
February 6, 1985 with respect to the Money, Government Money and
Equity Funds (2).
(b) Amendment No. 1 to Investment Advisory Agreement
between Registrant and U.S. Trust dated February 6, 1985 (10).
(c) 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
Securities Fund and Intermediate-Term Managed Income Fund (17).
(d) Investment Advisory Agreement between Registrant
and U.S. Trust dated November 26, 1985 with respect to the
Managed Income Fund (3).
(e) Amendment No. 1 to Investment Advisory Agreement
between Registrant and U.S. Trust dated November 26, 1985 (10).
(f) Investment Advisory Agreement between Registrant
and U.S. Trust dated December 16, 1986 with respect to the Income
and Growth Fund (5).
(g) Amendment No. 1 to Investment Advisory Agreement
between Registrant and U.S. Trust dated December 16, 1986 (10).
(h) Investment Advisory Agreement between Registrant
and U.S. Trust dated May 27, 1987 with respect to the
International Fund (7).
(i) Amendment No. 1 to Investment Advisory Agreement
between Registrant and U.S. Trust dated May 27, 1987 (10).
(j) Investment Advisory Agreement between Registrant
and United States Trust dated February 1, 1991 with respect to
the Treasury Money Fund (13).
<PAGE>
(k) Form of Investment Advisory Agreement among Registrant, U.S.
Trust Company of Connecticut and United States Trust Company of
New York dated May 16, 1997 with respect to the Money Fund,
Government Money Fund, Equity Fund, Early Life Cycle Fund, Long-
Term Supply of Energy Fund, Productivity Enhancers Fund,
Environmentally-Related Products and Services Fund, Aging of
America Fund, Communication and Entertainment Fund, Business and
Industrial Restructuring Fund, Global Competitors Fund, Emerging
Americas Fund, Pacific/Asia Fund, Pan European Fund, Short-Term
Government Securities Fund and Intermediate-Term Managed Income
Fund (22).
(l) Form of Investment Advisory Agreement among
Registrant, U.S. Trust Company of Connecticut and United States
Trust Company of New York dated May 16, 1997 with respect to the
Managed Income Fund (22).
(m) Form of Investment Advisory Agreement among
Registrant, U.S. Trust Company of Connecticut and United States
Trust Company of New York dated May 16, 1997 with respect to the
Income and Growth Fund (22).
(n) Form of Investment Advisory Agreement among
Registrant, U.S. Trust Company of Connecticut and United States
Trust Company of New York dated May 16, 1997 with respect to the
International Fund (22).
(6) Distribution Contract dated August 1, 1995 between
Registrant and Edgewood Services, Inc. (20).
(7) None.
(8) Form of Custody Agreement between Registrant and The
Chase Manhattan Bank, N.A. dated September 1, 1995 (20).
(9) (a) Amended and Restated Administrative Services Plan
and Related Form of Shareholder Servicing Agreement (20).
(b) 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).
(c) Form of Administration Agreement dated May 16, 1997
among Registrant, Chase Global Funds Services Company, Federated
Administrative Services and U.S. Trust Company of Connecticut
(22).
(d) Mutual Funds Transfer Agency Agreement dated
September 1, 1995 between Registrant and United States Trust
Company of New York (22).
(10) Opinion of counsel/1/.
(11) Consent of Drinker Biddle & Reath LLP (22).
(12) None.
- ----------
/1/ Filed with the SEC as part of Registrant's Rule 24f-2 Notice.
-3-
<PAGE>
(13) (a) Purchase Agreement between Registrant and Shearson
Lehman Brothers Inc. dated February 6, 1985 (2).
(b) Purchase Agreement between Registrant and UST
Distributors, Inc. dated December 29, 1992 (17).
(c) Purchase Agreement between Registrant and Edgewood
Services, Inc. dated November 17, 1995 (20).
(14) None.
(15) Amended and Restated Distribution Plan and Related Form
of Distribution Agreement (21).
(16) (a) Schedule for computation of performance quotation
(14).
(b) Schedule for computation of performance quotation
(17).
(17) None.
(18) Amended and Restated Plan Pursuant to Rule 18f-3 for
Operation of a Multi-Class System (22).
Notes:
- -----
(1) Incorporated herein by reference to Registrant's Registration Statement on
Form N-1A filed August 8, 1984.
(2) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 1 to its Registration Statement on Form N-1A filed October 30, 1985.
(3) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 2 to its Registration Statement on Form N-1A filed June 6, 1986.
(4) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 3 to its Registration Statement on Form N-1A filed October 17, 1986.
(5) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 4 to its Registration Statement on Form N-1A filed March 19, 1987.
(6) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 5 to its Registration Statement on Form N-1A filed July 23, 1987.
(7) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 6 to its Registration Statement on Form N-1A filed July 29, 1988.
(8) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 7 to its Registration Statement on Form N-1A filed November 1, 1988.
(9) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 8 to its Registration Statement on Form N-1A filed June 2, 1989.
(10) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 9 to its Registration Statements on Form N-1A filed March 12, 1990.
-4-
<PAGE>
(11) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 10 to its Registration Statement on Form N-1A filed July 27, 1990.
(12) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 11 to its Registration Statement on Form N-1A filed December 7, 1990.
(13) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 12 to its Registration Statement on Form N-1A filed May 31, 1991.
(14) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 13 to its Registrant Statement on Form N-1A filed August 1, 1991.
(15) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 15 to its Registration Statement on Form N-1A filed October 29, 1992.
(16) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 16 to its Registration Statement on Form N-1A filed December 24, 1992.
(17) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 17 to its Registration Statement on Form N-1A filed August 2, 1993.
(18) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 18 to its Registration Statement on Form N-1A filed December 27, 1993.
(19) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 21 to its Registration Statement on Form N-1A filed August 1, 1995.
(20) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 23 to its Registration Statement on Form N-1A filed July 31, 1996.
(21) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 24 to its Registration Statement on Form N-1A filed May 15, 1997.
(22) Filed herewith.
Item 25. Persons Controlled By or Under
Common Control with Registrant
------------------------------
Registrant is controlled by its Board of Directors.
Item 26. Number of Holders of Securities
-------------------------------
The following information is as of April 24, 1997:
-5-
<PAGE>
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Class A Common Stock 3,810
Class B Common Stock 1,108
Class C Common Stock 1,480
Class C Common Stock -
Special Series 1 0
Class D Common Stock 751
Class E Common Stock 1,114
Class F Common Stock 1,924
Class G Common Stock 1,062
Class H Common Stock 1,423
Class H Common Stock -
Special Series 1 0
Class I Common Stock 1,151
Class J Common Stock 802
Class K Common Stock 653
Class L Common Stock 1,156
Class L Common Stock -
Special Series 1 0
Class M Common Stock 1,016
Class M Common Stock -
Special Series 1 0
Class N Common Stock 1,709
Class N Common Stock -
Special Series 1 0
Class O Common Stock 1,379
Class O Common Stock -
Special Series 1 0
Class P Common Stock 2,386
Class Q Common Stock 2,628
Class R Common Stock 2,572
Class S Common Stock 359
Class T Common Stock 679
</TABLE>
Item 27. Indemnification
---------------
Article VII, Section 3 of Registrant's Articles of Incorporation,
incorporated by reference as Exhibit (1)(a) hereto, and Article VI, Section 2 of
Registrant's Bylaws, incorporated by reference as Exhibits (2)(a) hereto,
provide for the indemnification of Registrant's directors and officers.
Indemnification of Registrant's principal underwriter, custodian, transfer agent
and co-administrators is provided for, respectively, in Section 1.12 of the
Distribution Contract incorporated by reference as Exhibit (6) hereto, Section
12 of the Custody Agreement incorporated by reference as Exhibit (8) hereto,
Section 7 of the Mutual Funds Transfer Agency Agreement filed herewith as
Exhibit 9(c), and Section 6 of the Administration Agreement incorporated by
reference as Exhibit 9(b) hereto. Registrant has obtained from a major
insurance carrier a directors' and officers' liability policy covering certain
types of errors and omissions. In no event will Registrant indemnify any of its
directors, officers, employees, or agents against any liability to which such
person would otherwise be subject by reason of his willful misfeasance, bad
faith, gross negligence in the performance of his duties, or by reason of his
reckless disregard of the duties involved in the 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
-6-
<PAGE>
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a director, officer, or controlling person of
Registrant in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer, or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
(a) United States Trust Company of New York.
United States Trust Company of New York ("U.S. Trust") is a full-
service state-chartered bank located in New York, New York. Set forth below are
the names and principal businesses of the trustees and certain senior executive
officers of U.S. Trust, including those who are engaged in any other business,
profession, vocation, or employment of a substantial nature.
<TABLE>
<CAPTION>
Position Principal Type of
with U.S. Trust Name Occupation Business
- ---------------- ------------------------- ---------------------- ---------------
<S> <C> <C> <C>
Director Eleanor Baum Dean of School Academic
Cooper Union for the of Engineering
Advancement of Science
and Art
51 Astor Place
New York, NY 10003
Director Samuel C. Butler Partner in Cravath, Law Firm
Cravath, Swaine Swaine & Moore
& Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Director Peter O. Crisp Chairman Venture
Venrock Inc. Capital
Room 5600
30 Rockefeller Plaza
New York, NY 10112
Director Antonia M. Grumbach Partner in Patter- Law Firm
Patterson, Belknap, son, Belknap, Webb
Webb & Tyler & Tyler
1133 Avenue of the
Americas
New York, NY 10036
Director, H. Marshall Schwarz Chairman of the Bank
Chairman of United States Trust Board & Chief Exe-
the Board Company of New York cutive Officer of
and Chief 114 West 47th Street U.S. Trust Corp. and
Executive New York, NY 10036 U.S. Trust Company of
Officer N.Y.
Director Philippe de Montebello Director of the Art Museum
Metropolitan Museum of Metropolitan
Art Museum of Art
1000 Fifth Avenue
New York, NY 10028-0198
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Position Principal Type of
with U.S. Trust Name Occupation Business
- ---------------- ------------------------- ---------------------- ---------------
<S> <C> <C> <C>
Director Paul W. Douglas Retired Executive Coal Mining,
250 Park Avenue Transportation
Room 1900 and Security
New York, NY 10177 Services
Director Frederic C. Hamilton Chairman of the Investment and
The Hamilton Companies Board Venture Capital
1560 Broadway
Suite 2000
Denver, CO 80202
Director John H. Stookey
Landmark Volunteers
749 A Main Street
Route 7, Box 455
Sheffield, MA 01257
Director Robert N. Wilson Vice Chairman of Health Care
Johnson & Johnson the Board of Johnson Products
One Johnson & & Johnson
Johnson Plaza
New Brunswick, NJ 08933
Director Peter L. Malkin Chairman of Wein, Law Firm
Wein, Malkin & Bettex Malkin & Bettex
Lincoln Building
60 East 42nd Street
New York, NY 10165
Director Richard F. Tucker Retired-Mobil Petroleum and
11 Over Rock Lane Oil Corporation Chemicals
Westport, CT 06880
Director Carroll L. Wainright, Consulting Partner Law Firm
Jr. of Milbank, Tweed,
Milbank, Tweed, Hadley Hadley & McCloy
& McCloy
One Chase Manhattan Plaza
New York, NY 10005
Director Ruth A. Wooden President & CEO Not for
The Advertising Profit Public
Council, Inc. Service
261 Madison Avenue Advertising
11th Floor
New York, NY 10016
Trustee/ Frederick B. Taylor Vice Chairman and Bank
Director, United States Trust Chief Investment Of-
Vice Chair- Company of New York ficer of U.S. Trust
man and 114 West 47th Street Corporation and United
Chief Invest- New York, NY 10036 States Trust Company
ment Officer of New York
Trustee/ Jeffrey S. Maurer President of U.S. Bank
Director and United States Trust Trust Corporation and
President Company of New York United States Trust
114 West 47th Street Company of New York
New York, NY 10036
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Position Principal Type of
with U.S. Trust Name Occupation Business
- ---------------- ------------------------- ---------------------- ---------------
<S> <C> <C> <C>
Trustee/ Daniel P. Davison Chairman, Christie, Fine Art
Director Christie, Manson Manson & Woods Auctioneer
& Woods International, International, Inc.
Inc.
502 Park Avenue
New York, NY 10021
Trustee/ Orson D. Munn Chairman and Investment
Director Munn, Bernhard & Director of Munn, Advisory
Associates, Inc. Bernhard & Asso- Firm
6 East 43rd Street ciates, Inc.
28th Floor
New York, NY 10017
Trustee/ Philip L. Smith Corporate Director and
Director P.O. Box 386 Trustee
Ponte Verde Beach, FL 32004
</TABLE>
Item 29. Principal Underwriter
---------------------
(a) Edgewood Services, Inc., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following open-end
investment companies: BT Advisor Funds, BT Pyramid Mutual Funds, BT Investment
Funds, BT Institutional Funds, Excelsior Tax-Exempt Funds, Inc., Excelsior
Institutional Trust, Excelsior Funds, FTI Funds, Fund Manager Portfolios,
Marketvest Funds, Marketvest Funds, Inc., and Old Westbury Funds, Inc.
<TABLE>
<CAPTION>
(b) Names and Principal Positions and Offices with Offices with
Business Addresses the Distributor Registrant
------------------------- -------------------------- ------------
<S> <C> <C> <C>
Lawrence Caracciolo Director and President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
</TABLE>
-9-
<PAGE>
<TABLE>
<S> <C> <C> <C>
J. Christopher Donahue Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Sholes Vice President, __
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Schmitt Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3770
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Assistant
Federated Investors Tower Edgewood Services, Inc. Secretary
Pittsburgh, PA 15222-3779
Thomas J. Ward Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Kenneth W. Pegher, Jr. Treasurer, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
</TABLE>
(c) Not Applicable.
Item 30. Location of Accounts and Records
--------------------------------
1. United States Trust Company of New York, 114 W. 47th Street, New
York, NY 10036 (records relating to its functions as investment adviser and
transfer agent).
2. U.S. Trust Company of Connecticut, 225 High Ridge Road, East
Tower, Stamford, Connecticut 06905 (records relating to its function as
investment adviser and co-administrator).
3. Edgewood Services, Inc., Clearing Operations, P.O. Box 897,
Pittsburgh, PA 15230-0897 (records relating to its function as distributor).
4. Chase Global Funds Services Company, 73 Tremont Street, Boston,
Massachusetts 02108-3913 (records relating to its function as co-administrator
and sub-transfer agent).
5. Federated Administrative Services, Federated Investors Tower,
Pittsburgh, PA 15222-3799 (records relating to its function as co-
administrator).
6. Drinker Biddle & Reath LLP, Philadelphia National Bank Building,
1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496 (Registrant's
Articles of Incorporation, Bylaws, and Minute Books).
Item 31. Management Services
-------------------
Inapplicable.
-10-
<PAGE>
Item 32. Undertakings
------------
(1) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of Registrant's latest available Annual Report to
Shareholders upon request and without charge.
(2) Registrant hereby undertakes to file a post-effective amendment
with respect to the Large Cap Growth and Real Estate Funds, using financial
statements which need not be certified, within four to six months from the
effective date of this Post-Effective Amendment to Registrant's 1933 Act
registration statement.
-11-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Excelsior Funds, Inc. has duly caused this Post-
Effective Amendment No. 26 to its Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Philadelphia and the Commonwealth of Pennsylvania on the 3rd day of July,
1997.
EXCELSIOR FUNDS, INC.
Registrant
* Frederick S. Wonham
---------------------
Frederick S. Wonham, President
(Signature and Title)
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 26 to Excelsior Funds, Inc.'s Registration Statement on
Form N-1A has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------- ----------------------- -------------
<S> <C> <C>
* Frederick S. Wonham
- -----------------------
Frederick S. Wonham Chairman of the Board, July 3, 1997
President and Treasurer
* Joseph H. Dugan
- -----------------------
Joseph H. Dugan Director July 3, 1997
* Donald L. Campbell
- --------------------
Donald L. Campbell Director July 3, 1997
* Wolfe J. Frankl
- -----------------
Wolfe J. Frankl Director July 3, 1997
* Robert A. Robinson
- --------------------
Robert A. Robinson Director July 3, 1997
* Alfred Tannachion Director July 3, 1997
- -------------------
Alfred Tannachion
* W. Wallace McDowell, Jr. Director July 3, 1997
- -------------------------
W. Wallace McDowell, Jr.
* Jonathan Piel Director July 3, 1997
- ---------------
Jonathan Piel
* Rodman L. Drake Director July 3, 1997
- -----------------
Rodman L. Drake
</TABLE>
*By: /s/ W. Bruce McConnel, III
---------------------------
W. Bruce McConnel, III, Attorney-in-Fact
-12-
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, to execute amendments to Excelsior Funds, Inc.'s,
Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 17, 1997 /s/ Jonathan Piel
-------------------
Jonathan Piel
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, to execute amendments to Excelsior Funds, Inc,'s,
Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ W. Wallace McDowell
------------------------
W. Wallace McDowell
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, to execute amendments to Excelsior Funds, Inc.'s,
Excelsior Tax-Exempt Fund's, Excelsior Institutional Trust's and Excelsior
Funds' (collectively, the "Companies") respective Registration Statements on
Form N-1A pursuant to the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended (the "Acts") and all instruments necessary or
incidental in connection therewith pursuant to said Acts and any rules,
regulations, or requirements of the Securities and Exchange Commission in
respect thereof, and to file the same with the Securities and Exchange
Commission, and either of said attorneys shall have full power and authority, to
do and perform in the name and on behalf of the undersigned in any and all
capacities, every act whatsoever requisite or necessary to be done, as fully and
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that either of said attorneys may lawfully do or cause to be
done by virtue hereof.
Dated: May 16, 1997 /s/ Rodman L. Drake
---------------------
Rodman L. Drake
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints W.
Bruce McConnel, III his true and lawful attorney-in-fact and agent with full
power of substitution and resubstitution, for him and in his name, place and
stead, in his capacity as director/trustee or officer, or both, to execute
amendments to Excelsior Funds, Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s,
Excelsior Institutional Trust's and Excelsior Funds' (collectively, the
"Companies") respective Registration Statements on Form N-1A pursuant to the
Investment Company Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "Acts") and all instruments necessary or incidental in connection
therewith pursuant to said Acts and any rules, regulations, or requirements of
the Securities and Exchange Commission in respect thereof, and to file the same
with the Securities and Exchange Commission, and said attorney shall have full
power and authority, to do and perform in the name and on behalf of the
undersigned in any and all capacities, every act whatsoever requisite or
necessary to be done, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorney may
lawfully do or cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Frederick S. Wonham
------------------------
Frederick S. Wonham
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Wolfe J. Frankl
--------------------
Wolfe J. Frankl
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Robert A. Robinson
-----------------------
Robert A. Robinson
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Joseph H. Dugan
--------------------
Joseph H. Dugan
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Donald L. Campbell
-----------------------
Donald L. Campbell
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's, and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and said attorney shall have full power and authority, to
do and perform in the name and on behalf of the undersigned in any and all
capacities, every act whatsoever requisite or necessary to be done, as fully and
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney may lawfully do or cause to be done by
virtue hereof.
Dated: May 16, 1997 /s/ Alfred C. Tannachion
-------------------------
Alfred C. Tannachion
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT DESCRIPTION
------- -----------
2(c) Amendment No. 2 to By-Laws.
2(d) Amendment No. 3 to By-Laws.
5(k) Form of Investment Advisory Agreement among
Registrant, U.S. Trust Company of
Connecticut and United States Trust Company
of New York dated May 16, 1997 with respect
to the Money Fund, Government Money Fund,
Equity Fund, Early Life Cycle Fund, Long-
Term Supply of Energy Fund, Productivity
Enhancers Fund, Environmentally-Related
Products and Services Fund, Aging of America
Fund, Communication and Entertainment Fund,
Business and Industrial Restructuring Fund,
Global Competitors Fund, Emerging Americas
Fund, Pacific/Asia Fund, Pan European Fund,
Short-Term Government Securities Fund and
Intermediate-Term Managed Income Fund (22).
5(l) Form of Investment Advisory Agreement among
Registrant, U.S. Trust Company of
Connecticut and United States Trust Company
of New York dated May 16, 1997 with respect
to the Managed Income Fund.
5(m) Form of Investment Advisory Agreement among
Registrant, U.S. Trust Company of
Connecticut and United States Trust Company
of New York dated May 16, 1997 with respect
to the Income and Growth Fund.
5(n) Form of Investment Advisory Agreement among
Registrant, U.S. Trust Company of
Connecticut and United States Trust Company
of New
<PAGE>
York dated May 16, 1997 with respect to the
International Fund.
9(c) Form of Administration Agreement dated May
16, 1997 among Registrant, Chase Global
Funds Services Company, Federated
Administrative Services and U.S. Trust
Company of Connecticut.
9(d) Mutual Funds Transfer Agency Agreement dated
September 1, 1995 between Registrant and
United States Trust Company of New York.
11 Consent of Drinker Biddle & Reath LLP.
18 Amended and Restated Plan Pursuant to Rule
18f-3 for Operation of a Multi-Class System.
<PAGE>
EXHIBIT 2(c)
U.S.T. MASTER FUNDS, INC.
U.S.T. MASTER TAX-EXEMPT FUNDS, INC.
Amendments of By-Laws as adopted at the
Regular Meetings of the Boards of Directors
July 31, 1987
RESOLVED, that Article I of each of the Company's
By-Laws be, and hereby is, amended by the addition of the
following as Section 8:
Section 8. No Annual Meeting Required.
No annual meeting of stockholders of the
Corporation shall be held unless required by
applicable law or otherwise determined by the
Board of Directors.
FURTHER RESOLVED, that the last sentence of
Article II, Section 1 of each Company's By-Laws be, and
hereby is, amended to provide as follows:
Subject to the provisions of Article 1,
Section 8, the members of the Board of Directors
shall be elected by the stockholders at their
annual meeting and each Director shall hold office
until the annual meeting next after his election
and until his successor shall have been duly
elected and qualified, until he shall have
resigned, or until he shall have been removed as
provided in Sections 10 and 11 of this Article II.
<PAGE>
EXHIBIT 2(d)
EXCELSIOR FUNDS, INC.
Amendment of By-Laws as adopted at the Regular Meeting
of the Board of Directors held May 16, 1997
RESOLVED, that ARTICLE I, SECTION 6 of Excelsior Funds, Inc.'s By-Laws
be, and hereby is, amended and restated in its entirety as follows:
SECTION 6. Organization. At every meeting of the stockholders,
------------
the Chairman of the Board, if one has been selected and is present or, if
not, the President, or in the absence of the Chairman of the Board and the
President, a Vice President, or in the absence of the Chairman of the
Board, the President and all the Vice Presidents, a chairman chosen by the
Chairman of the Board, the President, a Vice President or the Secretary,
shall act as chairman; and the Secretary, or in his absence, an Assistant
Secretary, or in the absence of the Secretary and all the Assistant
Secretaries, a person appointed by the Chairman of the Board, the
President, a Vice President, the Secretary or the chairman of the meeting
of stockholders, shall act as secretary.
<PAGE>
EXHIBIT 5(k)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of May 16, 1997 by and among EXCELSIOR FUNDS, INC.,
a Maryland corporation (herein called the "Company"), U.S. TRUST COMPANY OF
CONNECTICUT ("USTCT"), a Connecticut state bank and trust company, and UNITED
STATES TRUST COMPANY OF NEW YORK ("USTNY"), a New York state-chartered bank and
trust company (together with USTCT, the "Investment Adviser").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940;
WHEREAS, the Company desires to retain the Investment Adviser to
render investment advisory and other services to the Company for its Money Fund,
Government Money Fund, Equity Fund, Early Life Cycle Fund, Long-Term Supply of
Energy Fund, Productivity Enhancers Fund, Environmentally-Related Products and
Services Fund, Aging of America Fund, Communication and Entertainment Fund,
Business and Industrial Restructuring Fund, Global Competitors Fund, Emerging
Americas Fund, Pacific/Asia Fund, Pan European Fund, Short-Term Government
Securities Fund and Intermediate-Term Managed Income Fund portfolios ("the
Funds"), and the Investment Adviser is willing to so render such services;
NOW, THEREFORE, this Agreement
WITNESSETH:
In consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Adviser
-----------
to act as investment adviser to the Company for the Funds for the period and on
the terms set forth in this Agreement. The Investment Adviser accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Company has furnished the Investment
---------------------
Adviser with copies properly certified or authenticated of each of the
following:
(a) Articles of Incorporation of the Company;
(b) By-Laws of the Company;
<PAGE>
(c) Resolutions of the Board of Directors of the Company authorizing
the appointment of the Investment Adviser and the execution and delivery of this
Agreement;
(d) Registration Statement under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, on Form N-1A (No.
2-92665) relating to shares of the Company's Class A Common Shares, $.001 par
value, representing interests in the Money Fund; Class B Common Shares, $.001
par value, representing interests in the Government Money Fund; Class C Common
Shares, $.001 par value, representing interests in the Equity Fund; Class H
Common Shares, $.001 par value, representing interests in the Early Life Cycle
Fund; Class I Common Shares, $.001 par value, representing interests in the
Long-Term Supply of Energy Fund; Class J Common Shares, $.001 par value,
representing interests in the Productivity Enhancers Fund; Class K Common
Shares, $.001 par value, representing interests in the Environmentally-Related
Products and Services Fund; Class L Common Shares, $.001 par value, representing
interests in the Aging of America Fund; Class M Common Shares, $.001 par value,
representing interests in the Communication and Entertainment Fund; Class N
Common Shares, $.001 par value, representing interests in the Business and
Industrial Restructuring Fund; Class O Common Shares, $.001 par value,
representing interests in the Global Competitors Fund; Class P Common Shares,
$.001 par value, representing interests in the Emerging Americas Fund; Class Q
Common Shares, $.001 par value, representing interests in the Pacific/Asia Fund;
Class R Common Shares, $.001 par value, representing interests in the Pan
European Fund; Class S Common Shares, $.001 par value, representing interests in
the Short-Term Government Securities Fund; and Class T Common Shares, $.001 par
value, representing interests in the Intermediate-Term Managed Income Fund
("Shares"), and all amendments thereto;
(e) Notification of Registration of the Company under the Investment
Company Act of 1940, as amended, on Form N-8A as filed with the Securities and
Exchange Commission on August 8, 1984, and all amendments thereto; and
(f) Prospectuses of the Company relating to the Shares in effect under
the Securities Act of 1933 (such prospectuses and supplements thereto, as
presently in effect and as from time to time amended and supplemented, herein
called the "Prospectus").
The Company will furnish the Investment Adviser from time to time with
copies of all amendments of or supplements to the foregoing, if any.
3. Management. Subject to the supervision of the Board of Directors
----------
of the Company, the investment Adviser will provide a continuous investment
program for the Funds, including
-2-
<PAGE>
investment research and management with respect to all securities, investments,
cash and cash equivalents in the Funds. The Investment Adviser will determine
from time to time what securities and other investments will be purchased,
retained or sold by the Company for the Funds. The Investment Adviser will
provide the services rendered by it hereunder in accordance with the Funds'
respective investment objectives and policies as stated in the Prospectus. The
Investment Adviser further agrees that it:
(a) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission (herein called the "Rules"), and will in
addition conduct its activities under this Agreement in accordance with
applicable law, including but not limited to applicable banking law;
(b) will not make loans for the purpose of purchasing or carrying
Shares, or make loans to the Company;
(c) will place orders pursuant to its investment determinations for
the Funds either directly with the issuer or with any broker or dealer selected
by it. In placing orders with brokers and dealers, the Investment Adviser will
use its reasonable best efforts to obtain the best net price and the most
favorable execution of its orders, after taking into account all 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 the reason ableness of the commission, if any, both for the
specific transaction and on a continuing basis. Consistent with this
obligation, the Investment Adviser may, to the extent permitted by law, purchase
and sell portfolio securities to and from brokers and dealers who provide
brokerage and research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934) to or for the benefit of any Fund and/or other
accounts over which the Investment Adviser or any of its affiliates exercises
investment discretion. Subject to the review of the Company's Board of
Directors from time to time with respect to the extent and continuation of the
policy, the Investment Adviser is authorized to pay to a broker or dealer who
provides such brokerage and research services a commission for effecting a
securities transaction for any Fund which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Investment Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Investment Adviser
with respect to the accounts as to which it exercises investment discretion. In
no instance will portfolio securities be purchased from or sold to the Funds'
principal underwriter, the Investment Adviser or any
-3-
<PAGE>
affiliated person thereof except as permitted by the Securities and Exchange
Commission;
(d) will maintain books and records with respect to the Funds'
securities transactions and will render to the Company's Board of Directors such
periodic and special reports as the Board may request;
(e) will maintain a policy and practice of conducting its Asset
Management Group independently of its Banking Group. When the Investment
Adviser makes investment recommendations for the Funds, its Asset Management
Group personnel will not inquire or take into consideration whether the issuer
of securities proposed for purchase or sale for the Funds' account are customers
of the Banking Group. In dealing with commercial customers, the Banking Group
will not inquire or take into consideration whether securities of those
customers are held by the Funds;
(f) will treat confidentially and as proprietary information of the
Company all records and other information relative to the Funds and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Company, which approval shall not be unreasonably withheld and may not be
withheld where the Investment Adviser may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the
Company. Nothing contained herein, however, shall prohibit the Investment
Adviser from advertising or soliciting the public generally with respect to
other products or services, regardless of whether such advertisement or
solicitation may include prior, present or potential shareholders of the
Company.
4. Services Not Exclusive. The investment management services
----------------------
rendered by the Investment Adviser hereunder are not to be deemed exclusive, and
the Investment Adviser shall be free to render similar services to others so
long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule
-----------------
31a-3 of the Rules under the Investment Company Act of 1940, the Investment
Adviser hereby agrees that all records which it maintains for the Funds are the
property of the Company and further agrees to surrender promptly to the Company
any of such records upon the Company's request. The Investment Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 the records required
to be maintained by Rule 31a-1 of the Rules.
-4-
<PAGE>
6. Expenses. During the term of this Agreement, the Investment
--------
Adviser will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Funds.
In addition, if the expenses borne by any Fund in any fiscal year
exceed the applicable expense limitations imposed by the securities regulations
of any state in which the Shares are registered or qualified for sale to the
public, the Investment Adviser shall reimburse such Fund for a portion of any
such excess in an amount equal to the proportion that the fees otherwise payable
to the Investment Adviser bear to the total amount of investment advisory and
administration fees otherwise payable by the Fund up to the amount of the fees
payable to the Investment Adviser during such fiscal year pursuant to paragraph
7 hereof; provided, however, that notwithstanding the foregoing, the Investment
Adviser shall reimburse the Fund for a portion of such excess expenses in an
amount equal to the proportion that the fees otherwise payable to the Investment
Adviser bear to the total amount of investment advisory and administration fees
otherwise payable by the Fund regardless of the amount of fees paid to the
Investment Adviser during such fiscal year to the extent that the securities
regulations of any state in which the Shares are registered or qualified for
sale so require.
7. Compensation. For the services provided and the expenses assumed
------------
pursuant to this Agreement, the Company will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor a fee, computed
daily and payable monthly, at the following annual rates: .25% of the average
daily net assets of each of the Money Fund and the Government Money Fund; .75%
of the average daily net assets of the Equity Fund; .60% of the average daily
net assets of each of the Early Life Cycle Fund, the Long-Term Supply of Energy
Fund, the Productivity Enhancers Fund, the Environmentally-Related Products and
Services Fund, the Aging of America Fund, the Communication and Entertainment
Fund, the Business and Industrial Restructuring Fund and the Global Competitors
Fund; 1% of the average daily net assets of each of the Emerging Americas Fund,
Pacific/Asia Fund and the Pan European Fund; .30% of the average daily net
assets of the Short-Term Government Securities Fund; and .35% of the average
daily net assets of the Intermediate-Term Managed Income Fund.
8. Limitation of Liability of the Investment Adviser. The Investment
-------------------------------------------------
Adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Company in connection with the matters to which this
Agreement relates, except the Investment Adviser shall be jointly, but not
severally, liable for a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or
-5-
<PAGE>
a loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
9. Duration and Termination. This Agreement shall be effective as of
------------------------
the date hereof and unless sooner terminated as provided herein, shall continue
until July 31, 1997. Thereafter, if not terminated, this Agreement shall
continue in effect as to a particular Fund for successive periods of 12 months
each, provided such continuance is specifically approved at least annually (a)
by the vote of a majority of those members of the Board of Directors of the
Company who are not parties to this Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Directors of the Company or, with respect to
any Fund, by vote of a majority of the outstanding voting securities of such
Fund; provided, however, that this Agreement may be terminated by the Company as
to any Fund at any time, without the payment of any penalty, by the Board of
Directors of the Company or, with respect to any Fund, by vote of a majority of
the outstanding voting securities of such Fund on 60 days' written notice to the
Investment Adviser, or by the Investment Adviser as to any Fund at any time,
without payment of any penalty, on 90 days' written notice to the Company. This
Agreement will immediately terminate in the event of its assignment. (As used
in this Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings as such terms
have in the Investment Company Act of 1940.)
10. Amendment of this Agreement. No provision of this Agreement may
---------------------------
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective with respect to a Fund until approved by vote of a majority of such
Fund's outstanding voting securities.
11. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by New York law.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
EXCELSIOR FUNDS, INC.
Attest:
_________________________ By:______________________________
Secretary
[Seal]
Attest: U.S. TRUST COMPANY OF CONNECTICUT
_________________________ By:______________________________
[Corporate Seal]
UNITED STATES TRUST COMPANY
Attest: OF NEW YORK
_________________________ By:______________________________
[Corporate Seal]
-7-
<PAGE>
EXHIBIT 5(l)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of May 16, 1997 by and among EXCELSIOR FUNDS, INC.,
a Maryland corporation (herein called the "Company"), U. S. TRUST COMPANY OF
CONNECTICUT ("USTCT"), a Connecticut state bank and trust company, and UNITED
STATES TRUST COMPANY OF NEW YORK ("USTNY"), a New York state-chartered bank and
trust company (together with USTCT, the "Investment Adviser").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940;
WHEREAS, the Company desires to retain the Investment Adviser to
render investment advisory and other services to the Company for its Managed
Income Fund portfolio ("the Fund"), and the Investment Adviser is willing to so
render such services;
NOW, THEREFORE, this Agreement
WITNESSETH:
In consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the investment Adviser to
-----------
act as investment adviser to the Company for the Fund for the period and on the
terms set forth in this Agreement. The Investment Adviser accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Company has furnished the Investment
---------------------
Adviser with copies properly certified or authenticated of each of the
following:
(a) Articles of Incorporation of the Company;
(b) By-Laws of the Company;
(c) Resolutions of the Board of Directors of the Company authorizing
the appointment of the Investment Adviser and the execution and delivery of this
Agreement;
(d) Registration Statement under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, on Form N-1A (No.
2-92665) relating to shares of the Company's Class A Common Shares, $.001 par
value, representing interests in the Money Fund; Class B Common Shares, $.001
par
<PAGE>
value, representing interests in the Government Money Fund; Class C Common
Shares, $.001 par value, representing interests in the Equity Fund and Class D
Common Shares, $.001 par value, representing interests in the Managed Income
Fund, and all amendments thereto;
(e) Notification of Registration of the Company under the Investment
Company Act of 1940, as amended, on Form N-8A as filed with the Securities and
Exchange Commission on August 8, 1984, and all amendments thereto; and
(f) Prospectuses of the Company relating to the Company's shares in
effect under the Securities Act of 1933 (such prospectuses and supplements
thereto, as presently in effect and as from time to time amended and
supplemented, herein called the "Prospectus").
The Company will furnish the Investment Adviser from time to time with
copies of all amendments of or supplements to the foregoing, if any.
3. Management. Subject to the supervision of the Board of Directors
----------
of the Company, the Investment Adviser will provide a continuous investment
program for the Fund, including investment research and management with respect
to all securities, investments, cash and cash equivalents in the Fund. The
Investment Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Company for the Fund.
The Investment Adviser will provide the services rendered by it hereunder in
accordance with the Fund's investment objectives and policies as stated in the
Prospectus. The Investment Adviser further agrees that it:
(a) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission (herein called the "Rules"), and will in
addition conduct its activities under this Agreement in accordance with
applicable law, including but not limited to applicable banking law;
(b) will not make loans for the purpose of purchasing or carrying Fund
shares, or make loans to the Company;
(c) will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or dealer selected
by it. In placing orders with brokers and dealers, the Investment Adviser will
use its reasonable best efforts to obtain the best net price and the most
favorable execution of its orders, after taking into account all 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 the reasonableness of the commission, if any, both for the
specific
-2-
<PAGE>
transaction and on a continuing basis. Consistent with this obligation, the
Investment Adviser may, to the extent permitted by law, purchase and sell
portfolio securities to and from brokers and dealers who provide brokerage and
research services (within the meaning of Section 28(e) of the Securities
Exchange Act of 1934) to or for the benefit of the Fund and/or other accounts
over which the Investment Adviser or any of its affiliates exercises investment
discretion. Subject to the review of the Company's Board of Directors from time
to time with respect to the extent and continuation of the policy, the
Investment Adviser is authorized to pay to a broker or dealer who provides such
brokerage and research services a commission for effecting a securities
transaction for the Fund which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if the
Investment Adviser determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
overall responsibili ties of the Investment Adviser with respect to the accounts
as to which it exercises investment discretion. In no instance will portfolio
securities be purchased from or sold to the Fund's principal underwriter, the
Investment Adviser or any affiliated person thereof except as permitted by the
Securities and Exchange Commission;
(d) will maintain books and records with respect to the Fund's
securities transactions and will render to the Company's Board of Directors such
periodic and special reports as the Board may request;
(e) will maintain a policy and practice of conducting its Asset
Management Group independently of its Banking Group. When the Investment Adviser
makes investment recommendations for the Fund, its Asset Management Group
personnel will not inquire or take into consideration whether the issuer of
securities proposed for purchase or sale for the Fund's account are customers of
the Banking Group. In dealing with commercial customers, the Banking Group will
not inquire or take into consideration whether securities of those customers are
held by the Fund;
(f) will treat confidentially and as proprietary information of the
Company all records and other information relative to the Fund and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Company, which approval shall not be unreasonably withheld and may not be
withheld where the Investment Adviser may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
-3-
<PAGE>
information by duly constituted authorities, or when so requested by the
Company. Nothing contained herein, however, shall prohibit the Investment
Adviser from advertising or soliciting the public generally with respect to
other products or services, regardless of whether such advertisement or
solicitation may include prior, present or potential shareholders of the
Company.
4. Services Not Exclusive. The investment management services
----------------------
rendered by the Investment Adviser hereunder are not to be deemed exclusive, and
the Investment Adviser shall be free to render similar services to others so
long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule
-----------------
31a-3 of the Rules under the Investment Company Act of 1940, the Investment
Adviser hereby agrees that all records which it maintains for the Fund are the
property of the Company and further agrees to surrender promptly to the Company
any of such records upon the Company's request. The Investment Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 the records required
to be maintained by Rule 31a-1 of the Rules.
6. Expenses. During the term of this Agreement, the Investment
--------
Adviser will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Fund.
In addition, if the expenses borne by the Fund in any fiscal year
exceed the applicable expense limitations imposed by the securities regulations
of any state in which its shares are registered or qualified for sale to the
public, the Investment Adviser shall reimburse the Fund for a portion of any
such excess in an amount equal to the proportion that the fees otherwise payable
to the Investment Adviser bear to the total amount of investment advisory and
administration fees otherwise payable by the Fund up to the amount of the fees
payable to the Investment Adviser during such fiscal year pursuant to paragraph
7 hereof; provided, however, that notwithstanding the foregoing, the Investment
Adviser shall reimburse the Fund for a portion of such excess expenses in an
amount equal to the proportion that the fees otherwise payable to the Investment
Adviser bear to the total amount of investment advisory and administration fees
otherwise payable by the Fund regardless of the amount of fees paid to the
Investment Adviser during such fiscal year to the extent that the securities
regulations of any state in which Fund shares are registered or qualified for
sale so require.
7. Compensation. For the services provided and the expenses assumed
------------
pursuant to this Agreement, the Company will pay the Investment Adviser and the
Investment Adviser will accept as
-4-
<PAGE>
full compensation therefor a fee, computed daily and payable monthly, at the
annual rate of .75% of the average daily net assets of the Fund.
8. Limitation of Liability of the Investment Adviser. The Investment
-------------------------------------------------
Adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Company in connection with the matters to which this
Agreement relates, except the Investment Adviser shall be jointly, but not
severally, liable for a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Investment
Adviser in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
9. Duration and Termination. This Agreement shall be effective as of
------------------------
the date of the commencement of the public sale of Fund shares and unless sooner
terminated as provided herein, shall continue until July 31, 1997. Thereafter,
if not terminated, this Agreement shall continue in effect for successive
periods of 12 months each, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Board of
Directors of the Company who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Board of Directors of the Company or by
vote of a majority of the outstanding voting securities of the Fund; provided,
however, that this Agreement may be terminated by the Company at any time,
without the payment of any penalty, by the Board of Directors of the Company or
by vote of a majority of the outstanding voting securities of the Fund on 60
days' written notice to the Investment Adviser, or by the Investment Adviser at
any time, without payment of any penalty, on 90 days' written notice to the
Company. This Agreement will immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested person" and "assignment" shall have the same
meanings as such terms have in the Investment Company Act of 1940.)
10. Amendment of this Agreement. No provision of this Agreement may
---------------------------
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective with respect to the Fund until approved by vote of a majority of the
Fund's outstanding voting securities.
11. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their
-5-
<PAGE>
construction or effect. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by New York law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
EXCELSIOR FUNDS, INC.
Attest:
_________________________ By:______________________________
Secretary
[Seal]
Attest: U.S. TRUST COMPANY OF CONNECTICUT
________________________ By:______________________________
[Corporate Seal]
UNITED STATES TRUST COMPANY
Attest: OF NEW YORK
_________________________ By:______________________________
[Corporate Seal]
-6-
<PAGE>
EXHIBIT 5(m)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of May 16, 1997 by and among EXCELSIOR FUNDS, INC.,
a Maryland corporation (herein called the "Company"), U.S. TRUST COMPANY OF
CONNECTICUT ("USTCT"), a Connecticut state bank and trust company, and UNITED
STATES TRUST COMPANY OF NEW YORK ("USTNY"), a New York state-chartered bank and
trust company (together with USTCT, the "Investment Adviser").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940;
WHEREAS, the Company desires to retain the Investment Adviser to
render investment advisory and other services to the Company for its Income and
Growth Fund portfolio ("the Fund"), and the Investment Adviser is willing to so
render such services;
NOW, THEREFORE, this Agreement
WITNESSETH:
In consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Adviser
-----------
to act as investment adviser to the Company for the Fund for the period and on
the terms set forth in this Agreement. The Investment Adviser accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Company has furnished the Investment
---------------------
Adviser with copies properly certified or authenticated of each of the
following:
(a) Articles of Incorporation of the Company;
(b) By-Laws of the Company;
(c) Resolutions of the Board of Directors of the Company authorizing
the appointment of the Investment Adviser and the execution and delivery of this
Agreement;
(d) Registration Statement under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, on Form N-1A (No.
2-92665) relating to shares of the Company's Class A Common Shares, $.001 par
value, representing interests in the Money Fund; Class B Common Shares, $.001
par
<PAGE>
value, representing interests in the Government Money Fund; Class C Common
Shares, $.001 par value, representing interests in the Equity Fund, Class D
Common Shares, $.001 par value, representing interests in the Managed Income
Fund, and Class E Common Shares, $.001 par value, representing interests in the
Income and Growth Fund, and all amendments thereto;
(e) Notification of Registration of the Company under the Investment
Company Act of 1940, as amended, on Form N-8A as filed with the Securities and
Exchange Commission on August 8, 1984, and all amendments thereto; and
(f) Prospectuses of the Company relating to the Company's shares in
effect under the Securities Act of 1933 (such prospectuses and supplements
thereto, as presently in effect and as from time to time amended and
supplemented, herein called the "Prospectus").
The Company will furnish the Investment Adviser from time to time with
copies of all amendments of or supplements to the foregoing, if any.
3. Management. Subject to the supervision of the Board of Directors
----------
of the Company, the Investment Adviser will provide a continuous investment
program for the Fund, including investment research and management with respect
to all securities, investments, cash and cash equivalents in the Fund. The
Investment Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Company for the Fund.
The Investment Adviser will provide the services rendered by it hereunder in
accordance with the Fund's investment objectives and policies as stated in the
Prospectus. The Investment Adviser further agrees that it:
(a) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission (herein called the "Rules"), and will in
addition conduct its activities under this Agreement in accordance with
applicable law, including but not limited to applicable banking law;
(b) will not make loans for the purpose of purchasing or carrying Fund
shares, or make loans to the Company;
(c) will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or dealer selected
by it. In placing orders with brokers and dealers, the Investment Adviser will
use its reasonable best efforts to obtain the best net price and the most
favorable execution of its orders, after taking into account all 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 the
-2-
<PAGE>
reasonableness of the commission, if any, both for the specific transaction and
on a continuing basis. Consistent with this obligation, the Investment Adviser
may, to the extent permitted by law, purchase and sell portfolio securities to
and from brokers and dealers who provide brokerage and research services (within
the meaning of Section 28(e) of the Securities Exchange Act of 1934) to or for
the benefit of the Fund and/or other accounts over which the Investment Adviser
or any of its affiliates exercises investment discretion. Subject to the review
of the Company's Board of Directors from time to time with respect to the extent
and continuation of the policy, the Investment Adviser is authorized to pay to a
broker or dealer who provides such brokerage and research services a commission
for effecting a securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the Investment Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Investment Adviser
with respect to the accounts as to which it exercises investment discretion. In
no instance will portfolio securities be purchased from or sold to the Fund's
principal underwriter, the Investment Adviser or any affiliated person thereof
except as permitted by the Securities and Exchange Commission;
(d) will maintain books and records with respect to the Fund's
securities transactions and will render to the Company's Board of Directors such
periodic and special reports as the Board may request;
(e) will maintain a policy and practice of conducting its Asset
Management Group independently of its Banking Group. When the Investment
Adviser makes investment recommendations for the Fund, its Asset Management
Group personnel will not inquire or take into consideration whether the issuer
of securities proposed for purchase or sale for the Fund's account are customers
of the Banking Group. In dealing with commercial customers, the Banking Group
will not inquire or take into consideration whether securities of those
customers are held by the Fund;
(f) will treat confidentially and as proprietary information of the
Company all records and other information relative to the Fund and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Company, which approval shall not be unreasonably withheld and may not be
withheld where the Investment Adviser may be exposed to civil or criminal
contempt
-3-
<PAGE>
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Company. Nothing
contained herein, however, shall prohibit the Investment Adviser from
advertising or soliciting the public generally with respect to other products or
services, regardless of whether such advertisement or solicitation may include
prior, present or potential shareholders of the Company.
4. Services Not Exclusive. The investment management services
----------------------
rendered by the Investment Adviser hereunder are not to be deemed exclusive, and
the Investment Adviser shall be free to render similar services to others so
long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule
-----------------
31a-3 under the Investment Company Act of 1940, the Investment Adviser hereby
agrees that all records which it maintains for the Fund are the property of the
Company and further agrees to surrender promptly to the Company any of such
records upon the Company's request. The Investment Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 the records required to be
maintained by such Rule.
6. Expenses. During the term of this Agreement, the Investment
--------
Adviser will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Fund.
In addition, if the expenses borne by the Fund in any fiscal year
exceed the applicable expense limitations imposed by the securities regulations
of any state in which its shares are registered or qualified for sale to the
public, the Investment Adviser shall reimburse the Fund for a portion of any
such excess in an amount equal to the proportion that the fees otherwise payable
to the Investment Adviser bear to the total amount of investment advisory and
administration fees otherwise payable by the Fund up to the amount of the fees
payable to the Investment Adviser during such fiscal year pursuant to paragraph
7 hereof; provided, however, that notwithstanding the foregoing, the Investment
Adviser shall reimburse the Fund for a portion of such excess expenses in an
amount equal to the proportion that the fees otherwise payable to the Investment
Adviser bear to the total amount of investment advisory and administration fees
otherwise payable by the Fund regardless of the amount of fees paid to the
Investment Adviser during such fiscal year to the extent that the securities
regulations of any state in which Fund shares are registered or qualified for
sale so require.
7. Compensation. For the services provided and the expenses assumed
------------
pursuant to this Agreement, the Company will pay the Investment Adviser and the
Investment Adviser will accept as
-4-
<PAGE>
full compensation therefor a fee, computed daily and payable monthly, at the
annual rate of .75% of the average daily net assets of the Fund.
8. Limitation of Liability of the Investment Adviser. The Investment
-------------------------------------------------
Adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the company in connection with the matters to which this
Agreement relates, except the Investment Adviser shall be jointly, but not
severally, liable for a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Investment
Adviser in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
9. Duration and Termination. This Agreement shall be effective as of
------------------------
the date of the commencement of the public sale of Fund shares and unless sooner
terminated as provided herein, shall continue until July 31, 1997. Thereafter,
if not terminated, this Agreement shall continue in effect for successive
periods of 12 months each, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Board of
Directors of the Company who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Board of Directors of the Company or by
vote of a majority of the outstanding voting securities of the Fund; provided,
however, that this Agreement may be terminated by the Company at any time,
without the payment of any penalty, by the Board of Directors of the Company or
by vote of a majority of the outstanding voting securities of the Fund on 60
days' written notice to the Investment Adviser, or by the Investment Adviser at
any time, without payment of any penalty, on 90 days' written notice to the
Company. This Agreement will immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested person" and "assignment" shall have the same
meanings as such terms have in the Investment Company Act of 1940.)
10. Amendment of this Agreement. No provision of this Agreement may
---------------------------
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective with respect to the Fund until approved by vote of a majority of the
Fund's outstanding voting securities.
11. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their
-5-
<PAGE>
construction or effect. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by New York law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
EXCELSIOR FUNDS, INC.
Attest:
_________________________ By:___________________________
Secretary President
[Seal]
Attest: U.S. TRUST COMPANY OF CONNECTICUT
_________________________ By:_____________________________
[Corporate Seal]
UNITED STATES TRUST COMPANY
Attest: OF NEW YORK
_________________________ By:_____________________________
[Corporate Seal]
-6-
<PAGE>
EXHIBIT 5(n)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of May 16, 1997 by and among EXCELSIOR FUNDS, INC.,
a Maryland corporation (herein called the "Company"), U.S. TRUST COMPANY OF
CONNECTICUT ("USTCT"), a Connecticut state bank and trust company, and UNITED
STATES TRUST COMPANY OF NEW YORK ("USTNY"), a New York state-chartered bank and
trust company (together with USTCT, the "Investment Adviser").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940;
WHEREAS, the Company desires to retain the Investment Adviser to
render investment advisory and other services to the Company for its
International Fund portfolio ("the Fund"), and the Investment Adviser is willing
to so render such services;
NOW, THEREFORE, this Agreement
WITNESSETH:
In consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Adviser
-----------
to act as investment adviser to the Company for the Fund for the period and on
the terms set forth in this Agreement. The Investment Adviser accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Sub-Adviser. It is understood that the Investment Adviser may
-----------
from time to time employ or associate with itself such person or persons as the
Investment Adviser believes to be fitted to assist it in the performance of this
Agreement; provided, however, that the compensation of such person or persons
shall be paid by the Investment Adviser and that the Investment Adviser shall be
as fully responsible to the Company for the acts and omissions of any such
person as it is for its own acts and omissions. Without limiting the generality
of the foregoing, it is agreed that the sub-advisory services to the Fund shall
be provided by person or persons agreeable to the Investment Adviser and
approved in accordance with the provisions of the Investment Company Act of 1940
(the "1940 Act"). Such sub-adviser is hereinafter referred to as the "Sub-
Adviser."
<PAGE>
3. Delivery of Documents. The Company has furnished the Investment
---------------------
Adviser with copies properly certified or authenticated of each of the
following:
(a) Articles of Incorporation of the Company;
(b) By-Laws of the Company;
(c) Resolutions of the Board of Directors of the Company authorizing
the appointment of the Investment Adviser as investment adviser for the Fund and
the execution and delivery of this Agreement;
(d) Resolutions of the Board of Directors of the Company authorizing
the appointment of the initial Sub-Adviser for the Fund and the execution and
delivery of the Sub-Advisory Agreement between the Investment Adviser and the
Sub-Adviser relating to the Fund;
(e) Registration Statement under the Securities Act of 1933, as
amended, and the 1940 Act on Form N-1A (No. 2-92665) relating to shares of the
Company's Class A Common Stock, $.001 par value, representing interests in the
Money Fund; Class B Common Stock, $.001 par value, representing interests in the
Government Money Fund; Class C Common Stock, $.001 par value, representing
interests in the Equity Fund, Class D Common Stock, $.001 par value,
representing interests in the Managed Income Fund, Class E Common Stock, $.001
par value, representing interests in the Income and Growth Fund, and Class F
Common Stock, $.001 par value, representing interests in the International Fund,
and all amendments thereto;
(f) Notification of Registration of the Company under the 1940 Act on
Form N-8A, as filed with the Securities and Exchange Commission on August 8,
1984, and all amendments thereto; and
(g) Prospectuses and statements of additional information of the
Company relating to the Company's shares in effect under the Securities Act of
1933 (such prospectuses, statements of additional information and supplements
thereto, as presently in effect and as from time to time amended and
supplemented, herein called the "Prospectus").
The Company will furnish the Investment Adviser from time to time with
copies of all amendments of or supplements to the foregoing, if any.
4. Management. Subject to the supervision of the Board of Directors
----------
of the Company, the Investment Adviser will provide continuous investment
advisory assistance and portfolio
-2-
<PAGE>
management advice for the Fund in accordance with the Fund's investment
objective and policies as stated in the Prospectus.
Investment Adviser's responsibilities include:
(i) Advising the Sub-Adviser with respect to U.S. economic
factors and trends;
(ii) Assisting and consulting with the Sub Adviser in
connection with the Fund's continuous investment program;
(iii) Approving lists of foreign countries recommended by
the Sub-Adviser for investments of the Fund;
(iv) Placing orders with respect to purchases and sales of
the securities of U.S. issuers as described in the Prospectus;
(v) Managing, in cooperation with the Sub Adviser, the
Fund's short-term cash balance positions denominated in U.S. dollars
to preserve required liquidity of the-Fund's assets including placing
of orders for U.S. money market instruments;
(vi) Monitoring the Sub-Adviser's investment procedures; and
(vii) Periodically reviewing, evaluating and reporting to
the Company's Board of Directors with respect to the performance of
the Sub-Adviser under the Sub-Advisory Agreement.
The Investment Adviser further agrees that it:
(a) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission (herein called the "Rules"), and will in
addition conduct its activities under this Agreement in accordance with
applicable law, including but not limited to applicable banking law;
(b) will not make loans for the purpose of purchasing or carrying
Fund shares, or make loans to the Company;
(c) will place orders, if any, pursuant to its investment
determinations for the Fund either directly with the issuer or with any broker
or dealer selected by it. In placing orders with brokers and dealers, the
Investment Adviser will use its reasonable best efforts to obtain the best net
price and the most favorable execution of its orders, after taking into account
all factors it deems relevant, including the breadth of the
-3-
<PAGE>
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing basis.
Consistent with this obligation, the Investment Adviser may, to the extent
permitted by law, purchase and sell portfolio securities to and from brokers and
dealers who provide brokerage and research services (within the meaning of
Section 28(e) of the Securities Exchange Act of 1934) to or for the benefit of
the Fund and/or other accounts over which the Investment Adviser or any of its
affiliates exercises investment discretion. Subject to the review of the
Company's Board of Directors from time to time with respect to the extent and
continuation of the policy, the Investment Adviser is authorized to pay to a
broker or dealer who provides such brokerage and research services a commission
for effecting a securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the Investment Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Investment Adviser
with respect to the accounts as to which it exercises investment discretion. In
no instance will portfolio securities be purchased from or sold to the Fund's
principal underwriter, the Investment Adviser, Sub-Adviser, or any affiliated
person thereof except as permitted by the Securities and Exchange Commission;
(d) will maintain books and records with respect to the Fund's
securities transactions and will render to the Company's Board of Directors such
periodic and special reports as the Board may request;
(e) will maintain a policy and practice of conducting its Asset
Management Group independently of its Banking Group. When the Investment
Adviser makes investment recommendations for the Fund, its Asset Management
Group personnel will not inquire or take into consideration whether the issuer
of securities proposed for purchase or sale for the Fund's account are customers
of the Banking Group. In dealing with commercial customers, the Banking Group
will not inquire or take into consideration whether securities of those
customers are held by the Fund;
(f) will treat confidentially and as proprietary information of the
Company all records and other information relative to the Fund and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Company, which approval shall not be
-4-
<PAGE>
unreasonably withheld and may not be withheld where the Investment Adviser may
be exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Company. Nothing contained herein, however, shall prohibit
the Investment Adviser from advertising or soliciting the public generally with
respect to other products or services, regardless of whether such advertisement
or solicitation may include prior, present or potential shareholders of the
Company.
5. Services Not Exclusive. The investment management services
----------------------
rendered by the Investment Adviser hereunder are not to be deemed exclusive, and
the Investment Adviser shall be free to render similar services to others so
long as its services under this Agreement are not impaired thereby.
6. Books and Records. In compliance with the re quirements of Rule
-----------------
31a-3 under the 1940 Act, the Investment Adviser hereby agrees that all records
which it maintains for the Fund are the property of the Company and further
agrees to surrender promptly to the Company any of such records upon the
Company's request. The Investment Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 the records required to be maintained by Rule
31a-1 under the 1940 Act.
7. Expenses. During the term of this Agreement, the Investment
--------
Adviser will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of securities, commodities, and other
investments (including brokerage commissions and other transaction charges, if
any) purchased or sold for the Fund.
In addition, if the expenses borne by the Fund in any fiscal year
exceed the applicable expense limitations imposed by the securities regulations
of any state in which its shares are registered or qualified for sale to the
public, the Investment Adviser shall reimburse the Fund for a portion of any
such excess in an amount equal to the proportion that the fees otherwise payable
to the Investment Adviser bear to the total amount of investment advisory and
administration fees otherwise payable by the Fund up to the amount of the fees
payable to the Investment Adviser during such fiscal year pursuant to paragraph
8 hereof; provided, however, that notwithstanding the foregoing, the Investment
Adviser shall reimburse the Fund for a portion of such excess expenses in an
amount equal to the proportion that the fees otherwise payable to the Investment
Adviser bear to the total amount of investment advisory and administration fees
otherwise payable by the Fund regardless of the amount of fees paid to the
Investment Adviser during such fiscal year to the extent that the securities
regulations of any state in which Fund shares are registered or qualified for
sale so require.
-5-
<PAGE>
8. Compensation. For the services provided and the expenses assumed
------------
pursuant to this Agreement, the Company will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor a fee, computed
daily and payable monthly, at the annual rate of 1% of the average daily net
assets of the Fund.
9. Limitation of Liability of the Investment Adviser. Subject to
-------------------------------------------------
the provisions of Paragraph 2 above, concerning the Investment Adviser's
responsibility for the acts and omissions of person's employed by or associated
with the Investment Adviser, the Investment Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Company in
connection with the matters to which this Agreement relates, except the
Investment Adviser shall be jointly, but not severally, liable for a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
10. Duration and Termination. This Agreement shall be effective as
------------------------
of the date of the commencement of the public sale of Fund shares and unless
sooner terminated as provided herein, shall continue until July 31, 1997.
Thereafter, if not terminated, this Agreement shall continue in effect for
successive periods of 12 months each, provided such continuance is specifically
approved at least annually (a) by the vote of a majority of those members of the
Board of Directors of the Company who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the Board of Directors of the
Company or by vote of a majority of the outstanding voting securities of the
Fund; provided, however, that this Agreement may be terminated by the Company at
any time, without the payment of any penalty, by the Board of Directors of the
Company or by vote of a majority of the outstanding voting securities of the
Fund on 60 days' written notice to the Investment Adviser, or by the Investment
Adviser at any time, without payment of any penalty, on 90 days' written notice
to the Company. This Agreement will immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested person" and "assignment" shall have the same
meanings as such terms have in the 1940 Act.)
11. Amendment of this Agreement. No provision of this Agreement may
---------------------------
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall
-6-
<PAGE>
be effective with respect to the Fund until approved by vote of a majority of
the Fund's outstanding voting securities.
12. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by New York law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
EXCELSIOR FUNDS, INC.
Attest:
_________________________ By:______________________
Secretary
[Seal]
U.S. TRUST COMPANY OF CONNECTICUT
Attest:
_________________________ By:______________________
[Corporate Seal]
UNITED STATES TRUST COMPANY
Attest: OF NEW YORK
_________________________ By:______________________
[Corporate Seal]
-7-
<PAGE>
Exhibit 9(c)
ADMINISTRATION AGREEMENT
This AGREEMENT made as of May 16, 1997 by and among EXCELSIOR FUNDS,
INC., a Maryland corporation (the "Company"), CHASE GLOBAL FUNDS SERVICES
COMPANY, a Delaware corporation ("CGFSC"), FEDERATED ADMINISTRATIVE SERVICES
("FAS"), a Delaware trust, and U.S. TRUST COMPANY OF CONNECTICUT ("U.S. Trust"),
a Connecticut state bank and trust company (CGFSC, FAS and U.S. Trust are
collectively referred to as the "Administrators").
WITNESSETH:
WHEREAS, the Company is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Company wishes to retain the Administrators to provide,
as co-administrators, certain administration services with respect to one or
more of the Company's investment portfolios (individually, a "Fund," and
collectively, the "Funds"), as described and set forth on one or more exhibits
to this Agreement, and the Administrators are willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Company hereby appoints the Administrators to
-----------
provide administration services to the Funds for the period and on the terms set
forth in this Agreement. The Administrators accept such appointment and agree
to furnish the services herein set forth in return for the compensation as
provided in Section 4 of this Agreement. In the event that the Company
establishes one or more investment portfolios other than the Funds with respect
to which it decides to retain the Administrators to act as co-administrators
hereunder, the Company shall notify the Administrators in writing. If the
Administrators are willing to render such services to a new investment
portfolio, they shall so notify the Company in writing whereupon such investment
portfolio shall become a Fund hereunder and shall be subject to the provisions
of this Agreement to the same extent as the Funds, except to the extent that
said provisions (including those relating to the compensation payable by the
Company) may be modified with respect to such investment portfolio in writing by
the Company and the Administrators at the time of the addition of such new
investment portfolio.
2. DELIVERY OF DOCUMENTS. The Company has furnished each of the
---------------------
Administrators with copies, properly certified or authenticated, of each of the
following:
<PAGE>
(a) Resolutions of the Company's Board of Directors authorizing the
appointment of the Administrators to provide certain administration services to
the Company and approving this Agreement;
(b) The Company's Articles of Incorporation ("Charter");
(c) The Company's Bylaws ("Bylaws");
(d) The Company's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission ("SEC") on August
8, 1984;
(e) The Company's most recent Post-Effective Amendment to its
Registration Statement on Form N-1A (No. 2-92665) (the "Registration Statement")
under the Securities Act of 1933 and the 1940 Act, as filed with the SEC;
(f) The Company's Amended and Restated Administrative Services and
Amended and Restated Distribution Plans; and
(g) The Company's most recent Prospectuses and Statements of
Additional Information and all amendments and supplements thereto (such
Prospectuses and Statements of Additional Information and supplements thereto,
as presently in effect and as from time to time amended and supplemented, herein
called the "Prospectus").
The Company will timely furnish each of the Administrators from time
to time with copies, properly certified or authenticated, of all amendments of
or supplements to the foregoing, if any.
3. SERVICES AND DUTIES. Subject to the supervision and control of
-------------------
the Company's Board of Directors, and as delineated on one or more Exhibit to
the Agreement, the Administrators agree to assist in supervising various aspects
of each Fund's administrative operations, including the performance of the
following specific services for each Fund:
(a) Providing office facilities (which may be in the offices of any of
the Administrators or a corporate affiliate of any of them, but shall be in such
location as the Company shall reasonably approve);
(b) Furnishing statistical and research data, clerical services, and
stationery and office supplies;
-2-
<PAGE>
(c) Keeping and maintaining all financial accounts and records (other
than those required to be maintained by the Company's Custodian and Transfer
Agent);
(d) Computing each Fund's net asset value, net income and net capital
gain (loss) in accordance with the Company's Prospectus and resolutions of its
Board of Directors;
(e) Compiling data for and preparing for execution and filing with the
SEC required reports and notices to shareholders of record and the SEC
including, without limitation, Semi-Annual and Annual Reports to Shareholders,
Semi-Annual Reports on Form N-SAR and timely Rule 24f-2 Notices;
(f) Compiling data for, and preparing for execution and filing all
reports or other documents required by Federal, state and other applicable laws
and regulations, including those required by applicable laws and regulations,
including those required by applicable Federal and state tax laws (other than
those required to be filed by the Company's Custodian or Transfer Agent);
(g) Reviewing and providing advice with respect to all sales
literature (advertisements, brochures and shareholder communications) for each
of the Funds and any class or series thereof;
(h) Assisting in developing and monitoring compliance procedures for
each Fund and any class or series thereof, including, without limitation,
procedures to monitor compliance with applicable law and regulations, each
Fund's investment objectives, policies and restrictions, its continued
qualification as a regulated investment company under the Internal Revenue Code
of 1986, as amended, and other tax matters;
(i) Monitoring the Company's arrangements with respect to services
provided by certain organizations ("Organizations") under its Amended and
Restated Distribution Plan. With respect to Organizations, the Administrators
shall specifically monitor and review the services rendered under the Amended
and Restated Distribution Plan by Organizations to their customers who are the
beneficial owners of shares, pursuant to agreements between the Company and such
Organizations ("Agreements"), including, without limitation, reviewing the
qualifications of financial institutions wishing to be Organizations, assisting
in the execution and delivery of Agreements, reporting to the Company's Board of
Directors with respect to the amounts paid or payable by the Company from time
to time under the Agreements and the nature of the services provided by
Organizations, and maintaining appropriate records in connection with such
duties;
-3-
<PAGE>
(j) Monitoring the Company's arrangements with respect to services
provided by certain organizations ("Service Organizations") under its Amended
and Restated Administrative Services Plan, provided that each Administrator will
only be responsible for monitoring arrangements with Service Organizations with
whom the Administrator has established the servicing relationship on behalf of
the Company. With respect to such Service Organizations, the Administrators
shall specifically monitor and review the services rendered by Service
Organizations to their customers who are the beneficial owners of shares,
pursuant to agreements between the Company and such Service Organizations
("Servicing Agreements"), including, without limitation, reviewing the
qualifications of financial institutions wishing to be Service Organizations,
assisting in the execution and delivery of Servicing Agreements, reporting to
the Company's Board of Directors with respect to the amounts paid or payable by
the Company from time to time under the Servicing Agreements and the nature of
the services provided by Service Organizations, and maintaining appropriate
records in connection with such duties;
(k) Determining, together with the Company's Board of Directors, the
jurisdictions in which the Company's shares shall be registered or qualified for
sale and, in connection therewith, maintaining the registration or
qualification of shares for sale under the securities laws of any state.
Payment of share registration fees and any fees for qualifying or continuing the
qualification of any Fund as a dealer or broker, if applicable, shall be made by
that Fund;
(l) Assisting to the extent requested by the Company and its outside
counsel with the preparation of the Company's Registration Statement on Form N-
1A or any replacement therefor; and
(m) Assisting in the monitoring of regulatory and legislative
developments which may affect the Company and, in response to such developments,
counseling and assisting the Company in routine regulatory examinations or
investigations of the Company, and working with outside counsel to the Company
in connection with regulatory matters or litigation.
In performing their duties as co-administrators of the Company, the
Administrators (a) will act in accordance with the Company's Charter, Bylaws,
Prospectus and the instructions and directions of the Company's Board of
Directors and will conform to, and comply with, the requirements of the 1940 Act
and all other applicable Federal or state laws and regulations, and (b) will
consult with outside legal counsel to the Company, as necessary or appropriate.
-4-
<PAGE>
The Administrators will preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under said Act in connection with the services required to be performed
hereunder. The Administrators further agree that all such records which they
maintain for the Company are the property of the Company and further agree to
surrender promptly to the Company any of such records upon the Company's
request.
4. FEES; EXPENSES; EXPENSE REIMBURSEMENT.
-------------------------------------
For the services rendered pursuant to this Agreement for all Funds
(except the International, Pacific/Asia, Pan European and Emerging Americas
Funds), the Administrators shall be entitled jointly to a fee based on the
average net assets of the Company, determined at the following annual rates
applied to the average combined daily net assets of all of the Funds (except the
International, Pacific/Asia, Pan European and Emerging Americas Funds) and all
of the investment portfolios of Excelsior Tax-Exempt Funds, Inc. and Excelsior
Institutional Trust (the "Trust")(except the International Equity Fund of the
Trust): .20% of the first $200 million; .175% of the next $200 million; and
.15% of any amount in excess of $400 million. Each Fund (except the
International, Pacific/Asia, Pan European and Emerging Americas Funds) will pay
a portion of the total fee payable by the Company in an amount equal to the
proportion that such Fund's average daily net assets bears to the total average
daily net assets of all the Funds of the Company (except the International,
Pacific/Asia, Pan European and Emerging Americas Funds). For the services
provided to the International, Pacific/Asia, Pan European and Emerging Americas
Funds, the Administrators shall be entitled jointly to a fee, at the annual rate
of .20% of the average daily net assets of each such Fund. The fee attributable
to each Fund shall be the several (and not joint or joint and several)
obligation of each Fund. Such fees are to be computed daily and paid monthly on
the first business day of the following month. Upon any termination of this
Agreement before the end of any month, the fee for such part of the month shall
be pro-rated according to the proportion which such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement.
For purposes of determining fees payable to the Administrators, the
value of each Fund's net assets shall be computed as required by its Prospectus,
generally accepted accounting principles, and resolutions of the Company's Board
of Directors.
The Administrators will from time to time employ or associate with
themselves such person or persons as they may believe to be fitted to assist
them in the performance of this Agreement. Such person or persons may be
officers and employees
-5-
<PAGE>
who are employed by both the Administrators and the Company. The compensation
of such person or persons for such employment shall be paid by the
Administrators and no obligation may be incurred on behalf of the Company in
such respect.
The Administrators will bear all expenses in connection with the
performance of their services under this Agreement except as otherwise expressly
provided herein. Other expenses to be incurred in the operation of the Funds,
including taxes, interest, brokerage fees and commissions, if any, salaries and
fees of officers and directors who are not officers, directors, shareholders or
employees of the Administrators, or the Company's investment adviser or
distributor for the Funds, Securities and Exchange Commission fees and state
Blue Sky qualification fees, advisory and administration fees, charges of
custodians, transfer and dividend disbursing agents' fees, certain insurance
premiums, outside auditing and legal expenses, payments to Organizations and
Service Organizations, costs of maintenance of corporate existence, typesetting
and printing of prospectuses for regulatory purposes and for distribution to
current shareholders of the Funds, costs of shareholders' reports and corporate
meetings and any extraordinary expenses, will be borne by the Company, provided,
--------
however, that, except pursuant to the Amended and Restated Distribution Plan,
- -------
the Company will not bear, directly or indirectly, the cost of any activity
which is primarily intended to result in the distribution of shares of the
Funds, and further provided that the Administrators may utilize one or more
----------------
independent pricing services, approved from time to time by the Board of
Directors of the Company, to obtain securities prices in connection with
determining the net asset value of each Fund and that each Fund will reimburse
the Administrators for its share of the cost of such services based upon its
actual use of the services.
If in any fiscal year any Fund's aggregate expenses (as defined under
the securities regulations of any state having jurisdiction over the Fund)
exceed the expense limitations of any such state, the Administrators agree to
reimburse such Fund for a portion of any such excess expenses in an amount equal
to the proportion that the fees otherwise payable to the Administrators bears to
the total amount of investment advisory and administration fees otherwise
payable by the Fund. The expense reimbursement obligation of the Administrators
is limited to the amount of their fees hereunder for such fiscal year, provided,
--------
however, that notwithstanding the foregoing, the Administrators shall reimburse
- -------
such Fund for a portion of any such excess expenses in an amount equal to the
proportion that the fee otherwise payable to the Administrators bears to the
total amount of investment advisory and administration fees otherwise payable by
the Fund regardless of the amount of fees paid to the Administrators during such
fiscal year to the extent that the securities regulations of any state having
jurisdiction over the
-6-
<PAGE>
Funds so require. Such expense reimbursement, if any, will be estimated,
reconciled and paid on a monthly basis. With respect to the amounts required to
be reimbursed under this Section 4 in any fiscal year, the parties to this
Agreement agree that U.S. Trust alone shall reimburse such amounts up to the
amount of fees received by CGFSC and U.S. Trust under this Agreement for such
year. FAS shall only be obligated to reimburse expenses to the extent that the
amounts required to be reimbursed under this Section 4 in any fiscal year exceed
the amount of fees received by CGFSC and U.S. Trust under this Agreement for
such year and to the extent that U.S. Trust makes reimbursements equalling the
amount of all such fees received by CGFSC and U.S. Trust, provided that the
reimbursement obligation of FAS shall be limited to the amount of fees received
by it under this Agreement for such year.
5. PROPRIETARY AND CONFIDENTIAL INFORMATION. The Administrators
----------------------------------------
agree on behalf of themselves and their employees to treat confidentially and as
proprietary information of the Company all records and other information
relative to the Funds and prior, present or potential shareholders, and not to
use such records and information for any purpose other than performance of their
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Company, which approval shall not be unreasonably
withheld and may not be withheld where the Administrators may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Company.
6. LIMITATION OF LIABILITY. Each Administrator shall not be liable
-----------------------
for any error of judgment or mistake of law or for any loss or expense suffered
by the Company in connection with the matters to which this Agreement relates,
except for a loss or expense resulting from willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, partner, employee or agent of any of the
Administrators, who may be or become an officer, director, employee or agent of
the Company shall be deemed when rendering services to the Company or acting on
any business of the Company (other than services or business in connection with
the Administrators' duties hereunder) to be rendering such services to or acting
solely for the Company and not as an officer, partner, employee or agent or one
under the control or direction of the Administrators even though paid by any of
them. The Administrators agree that this Agreement shall not create any joint
and/or several liability among the Administrators with respect to services
provided by any particular Administrator as set forth herein.
-7-
<PAGE>
7. TERM. This Agreement shall become effective on May 16, 1997 and,
----
unless sooner terminated as provided herein, shall continue until July 31, 1997,
and thereafter shall continue automatically with respect to each Fund for
successive annual periods ending on July 31 of each year, provided such
continuance is specifically approved at least annually by the Company's Board of
Directors. This Agreement is terminable with respect to each Fund, without
penalty, on not less than ninety days' notice by the Company's Board of
Directors or by CGFSC, FAS or U.S. Trust. This Agreement will terminate
automatically in the event of its "assignment" (as defined in the Investment
Company Act 1940). The parties agree that an assignment includes the transfer
of "control" of more than 25% of the outstanding voting securities of FAS to a
company that is not a subsidiary of Federated Investors. The parties also agree
that the merger between The Chase Manhattan Corporation and Chemical Banking
Corporation and the merger between The Chase Manhattan Bank, N.A. and Chemical
Bank will not constitute an assignment under this Agreement.
8. GOVERNING LAW. This Agreement shall be governed by New York law.
-------------
9. NOTICES. All notices required or permitted herein shall be in
-------
writing and shall be deemed to be properly given when delivered personally or by
telecopier to the party entitled to receive the notice or when sent by certified
or registered mail, postage prepaid, or delivered to an internationally
recognized overnight courier service, in each case properly addressed to the
party entitled to receive such notice at the address or telecopier number stated
below or to such other address or telecopier number as may hereafter be
furnished in writing by notice similarly given by one party to the other party
hereto:
If to the Company:
Excelsior Funds, Inc.
73 Tremont Street
Boston, Massachusetts 02108-3913
Telecopier Number: (617) 557-8617
With copies to:
W. Bruce McConnel, III, Esq.
Drinker Biddle & Reath
1345 Chestnut Street, Suite 1100
Philadelphia, Pennsylvania 19107
Telecopier Number: (215) 988-2757
-8-
<PAGE>
If to CGFSC:
Chase Global Funds Services Company
73 Tremont Street
Boston, Massachusetts 02108-3913
Telecopier Number: (617) 557-8617
If to FAS:
Federated Administrative Services
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Telecopier Number: (412) 288-8141
If to U.S. Trust:
U.S. Trust Company of Connecticut
225 High Ridge Road
East Tower
Stamford, CT 06905
Telecopier Number: (203) 352-4488
10. MISCELLANEOUS. No provisions of this Agreement may be changed,
-------------
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, discharge or termination is
sought. If a change or discharge is sought against the Company, the instrument
must be signed by each Administrator. This Agreement may be executed in one or
more counterparts and all such counterparts will constitute one and the same
instrument.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below as of the date indicated above.
ATTEST: EXCELSIOR FUNDS, INC.
By:___________________________ By:________________________
Title:
(SEAL)
ATTEST: CHASE GLOBAL FUNDS SERVICES
COMPANY
By:___________________________ By:________________________
Title:
(SEAL)
ATTEST: FEDERATED ADMINISTRATIVE SERVICES
By:___________________________ By:________________________
Title:
(SEAL)
ATTEST: U.S. TRUST COMPANY OF CONNECTICUT
By:___________________________ By:________________________
Title:
(SEAL)
-10-
<PAGE>
Exhibit A
to the
Administration Agreement
EXCELSIOR FUNDS, INC.
---------------------
Money Fund
Government Money Fund
Treasury Money Fund
Short-Term Government Securities Fund
Intermediate-Term Managed Income Fund
Managed Income Fund
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
International Fund
Emerging Americas Fund
Pacific/Asia Fund
Pan European Fund
In consideration of the mutual covenants set forth in the
Administration Agreement dated as of May 16, 1997 among Excelsior Funds, Inc.
(the "Company"), Chase Global Funds Services Company ("CGFSC"), Federated
Administrative Services ("FAS") and U.S. Trust Company of Connecticut ("U.S.
Trust"), Excelsior Funds, Inc. executes and delivers this Exhibit on behalf of
the Funds, and with respect to any class or series thereof, first set forth in
this Exhibit.
Pursuant to Section 3 of the Agreement, FAS agrees to provide
facilities, equipment, and personnel to carry out the following administrative
services to the Funds, with the understanding that CGFSC will provide all other
services and duties set forth in said Section 3 but not otherwise listed below:
(a) Performing a due diligence review of SEC required reports and
notices to shareholders of record and to the SEC including, without limitation,
Semi-Annual and Annual Reports to Shareholders, Semi-Annual Reports on Form N-
SAR, Proxy Statements and SEC share registration notices;
(b) Reviewing the Company's Registration Statement on Form N-1A or any
replacement therefor;
<PAGE>
(c) Reviewing and filing with the National Association of Securities
Dealers, Inc. all sales literature (advertisements, brochures and shareholder
communications) for each of the Funds and any class or series thereof;
(d) Preparing distributor's reports to the Company's Board of
Directors;
(e) Performing internal audit examinations in accordance with a
charter to be adopted by FAS and the Company;
(f) Upon request, providing individuals reasonably acceptable to the
Company's Board of Directors for nomination, appointment, or election as
officers of the Company, who will be responsible for the management of certain
of the Funds' affairs as determined by the Company;
(g) Consulting with the Funds and the Company's Board of Directors, as
appropriate, on matters concerning the distribution of Funds;
(h) Monitoring the Company's arrangements with respect to services
provided by certain organizations ("Organizations") under its Amended and
Restated Distribution Plan. With respect to Organizations, FAS shall
specifically monitor and review the services rendered under the Amended and
Restated Distribution Plan by Organizations to their customers who are the
beneficial owners of shares, pursuant to agreements between the Company and such
Organizations ("Agreements"), including, without limitation, reviewing the
qualifications of financial institutions wishing to be Organizations, assisting
in the execution and delivery of Agreements, reporting to the Company's Board of
Directors with respect to the amounts paid or payable by the Company from time
to time under the Agreements and the nature of the services provided by
Organizations, and maintaining appropriate records in connection with such
duties;
(i) Monitoring the Company's arrangements with respect to services
provided by certain organizations ("Service Organizations") under its Amended
and Restated Administrative Services Plan, provided that FAS will only be
responsible for monitoring arrangements with Service Organizations with whom FAS
has established the servicing relationship on behalf of the Company. With
respect to such Service Organizations, FAS shall specifically monitor and review
the services rendered by Service Organizations to their customers who are the
beneficial owners of shares, pursuant to agreements between the Company and such
Service Organizations ("Servicing Agreements"), including, without limitation,
reviewing the qualifications of financial institutions wishing to be Service
Organizations, assisting in the execution and delivery of Servicing Agreements,
reporting to the Company's Board of Directors with respect to the amounts paid
-2-
<PAGE>
or payable by the Company from time to time under the Servicing Agreements and
the nature of the services provided by Service Organizations, and maintaining
appropriate records in connection with such duties; and
(j) Consulting with CGFSC and the Company regarding the jurisdictions
in which the Company's shares shall be registered or qualified for sale and, in
connection therewith, reviewing and monitoring the actions of CGFSC in
maintaining the registration or qualification of shares for sale under the
securities laws of any state. Payment of share registration fees and any fees
for qualifying or continuing the qualification of any Fund as a dealer or
broker, if applicable, shall be made by that Fund.
Witness the due execution hereof this 16th day of May, 1997.
ATTEST: EXCELSIOR FUNDS, INC.
_____________________ __________________________________
Secretary Title:
(SEAL)
ATTEST: FEDERATED ADMINISTRATIVE
SERVICES
_____________________ __________________________________
Secretary Title:
(SEAL)
ATTEST: CHASE GLOBAL FUNDS SERVICES COMPANY
_____________________ __________________________________
Secretary Title:
(SEAL)
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<PAGE>
Exhibit B
to the
Administration Agreement
EXCELSIOR FUNDS, INC.
---------------------
Money Fund
Government Money Fund
Treasury Money Fund
Short-Term Government Securities Fund
Intermediate-Term Managed Income Fund
Managed Income Fund
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
International Fund
Emerging Americas Fund
Pacific/Asia Fund
Pan European Fund
In consideration of the mutual covenants set forth in the
Administration Agreement dated as of May 16, 1997 among Excelsior Funds, Inc.
(the "Company"), Chase Global Funds Services Company ("CGFSC"), Federated
Administrative Services ("FAS") and U.S. Trust Company of Connecticut ("U.S.
Trust"), Excelsior Funds, Inc. executes and delivers this Exhibit on behalf of
the Funds, and with respect to any class or series thereof, first set forth in
this Exhibit.
Pursuant to Section 3 of the Agreement, U.S. Trust agrees to provide
facilities, equipment, and personnel to carry out the following administrative
services to the Funds:
(a) Providing guidance and assistance in the preparation of SEC
required reports and notices to shareholders of record and to the SEC including,
without limitation, Semi-Annual and Annual Reports to Shareholders, Semi-Annual
Reports on Form N-SAR, Proxy Statements and SEC share registration notices;
(b) Reviewing the Company's Registration Statement on Form N-1A or any
replacement therefor;
(c) Consulting with the Funds and the Company's Board of Directors, as
appropriate, on matters concerning the administration and operation of the
Funds;
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(d) Monitoring the Company's arrangements with respect to services
provided by certain organizations ("Service Organizations") under its Amended
and Restated Administrative Services Plan, provided that U.S. Trust will only be
responsible for monitoring arrangements with Service Organizations with whom
U.S. Trust has established the servicing relationship on behalf of the Company.
With respect to such Service Organizations, U.S. Trust shall specifically
monitor and review the services rendered by Service Organizations to their
customers who are the beneficial owners of shares, pursuant to agreements
between the Company and such Service Organizations ("Servicing Agreements"),
including, without limitation, reviewing the qualifications of financial
institutions wishing to be Service Organizations, assisting in the execution and
delivery of Servicing Agreements, reporting to the Company's Board of Directors
with respect to the amounts paid or payable by the Company from time to time
under the Servicing Agreements and the nature of the services provided by
Service Organizations, and maintaining appropriate records in connection with
such duties.
Witness the due execution hereof this 16th day of May, 1997.
ATTEST: EXCELSIOR FUNDS, INC.
___________________ ____________________________________
Secretary Title:
(SEAL)
ATTEST: U.S. TRUST COMPANY
OF CONNECTICUT
__________________________ By:__________________________
Secretary Title:
(SEAL)
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EXHIBIT 9(d)
MUTUAL FUNDS TRANSFER AGENCY AGREEMENT
AGREEMENT made as of September 1, 1995 by and between UST Master
Funds, Inc. (the "Company") a Maryland corporation, and United States Trust
Company of New York ("U.S. Trust"), a New York corporation.
W I T N E S S E T H:
WHEREAS, the Company is registered as an open-end investment company
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Company is authorized to issue shares of Common Stock in
separate series and classes representing interests in separate portfolios of
securities and other assets;
WHEREAS, the Company wishes to retain U.S. Trust to serve as the
Company's transfer agent, registrar and dividend disbursing agent;
WHEREAS, U.S. Trust desires to assign its duties and obligations with
respect to the provision of such services to Chase Global Funds Services Company
("CGFSC"), and the Company acknowledges the right of U.S. Trust to make such
assignment provided U.S. Trust shall be as fully responsible to the Company for
the acts and omissions of CGFSC as U.S. Trust is for its own acts and omissions;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
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1. APPOINTMENT. The Company hereby appoints U.S. Trust to serve as
transfer agent, registrar and dividend disbursing agent for each class and/or
series of Common Stock of the Company with respect to its existing Funds (as
hereinafter defined) for the period and on the terms set forth in this
Agreement. In the event that the Company establishes additional classes or
series other than the Common Stock of the Funds covered by this Agreement with
respect to which it desires to retain U.S. Trust to serve as transfer agent,
registrar and dividend disbursing agent hereunder, the Company shall notify U.S.
Trust in writing, whereupon such fund shall become a Fund hereunder and shall be
subject to the provisions of this Agreement to the same extent as the Funds
(except to the extent that said provisions, including the compensation payable
on behalf of such new Fund, may be modified in writing by the Company and U.S.
Trust at the time). U.S. Trust accepts such appointment and agrees to furnish
the services herein set forth in return for the compensation as provided in
Paragraph 5 of this Agreement.
2. REPRESENTATIONS AND WARRANTIES.
(a) U.S. Trust represents and warrants to the Company that:
(i) U.S. Trust is a state chartered bank and trust company
organized and existing under the laws of the State of New York;
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(ii) U.S. Trust is empowered under applicable laws and by its
charter and by-laws to enter into and perform this Agreement;
(iii) all requisite corporate proceedings have been taken to
authorize U.S. Trust to enter into and perform this Agreement;
(iv) U.S. Trust is duly registered as a transfer agent under
Section 17A of the Securities Exchange Act of 1934, as amended (the "1934 Act").
U.S. Trust shall promptly give written notice to the Company in the event that
its registration is revoked or a proceeding is commenced that could result in
such revocation;
(v) U.S. Trust has been in, and shall continue to be in,
compliance with all provisions of law, including Section 17A(c) of the 1934 Act,
required in connection with the performance of its duties under this Agreement;
(vi) U.S. Trust has, and will continue to have, access to the
facilities, personnel and equipment required to fully perform its duties and
obligations hereunder;
(vii) no legal or administrative proceedings have been instituted
or threatened which would impair U.S. Trust's ability to perform its duties and
obligations under this Agreement; and
(viii) U.S. Trust's entrance into this Agreement shall not cause a
material breach or be in material conflict with
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any other agreement or obligation of U.S. Trust or any law or regulation
applicable to U.S. Trust;
(b) The Company represents and warrants to U.S. Trust that:
(i) the Company is a Maryland corporation, duly organized and
existing and in good standing under the laws of Maryland;
(ii) the Company is empowered under applicable laws and by its
Articles of Incorporation, as supplemented ("Charter"), and By-Laws, as amended
("By-Laws"), to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize
the Company to enter into and perform this Agreement;
(iv) the Company is an investment company properly registered
under the 1940 Act;
(v) a registration statement under the Securities Act of 1933,
as amended (the "1933 Act") and the 1940 Act on Form N-1A has been filed and
will be effective and will remain effective during the term of this Agreement,
and all necessary filings under the laws of the states will have been made and
will be current during the term of this Agreement;
(vi) no legal or administrative proceedings have been instituted
or threatened which would impair the Company's ability to perform its duties and
obligations under this Agreement;
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<PAGE>
(vii) the Company's registration statement complies in all material
respects with the 1933 Act and the 1940 Act (including the rules and regulations
thereunder) and none of the Company's prospectuses contain any untrue statement
of material fact or omit to state a material fact necessary to make the
statements therein not misleading; and
(viii) the Company's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligation of the Company or any law or regulation applicable to it.
3. DELIVERY OF DOCUMENTS. The Company has furnished U.S. Trust with
copies properly certified or authenticated of each of the following:
(a) Resolutions of the Company's Board of Directors authorizing the
appointment of U.S. Trust as transfer agent, registrar and dividend disbursing
agent for each class and/or series of Common Stock of the Company and approving
this Agreement;
(b) Incumbency and signature certificates identifying and containing
the signatures of the Company's officers and/or the persons authorized to sign
Written Instructions, as hereafter defined, on behalf of the Company;
(c) The Company's Charter;
(d) The Company's By-Laws;
(e) Resolutions of the Company's Board of Directors appointing U.S.
Trust as the investment adviser to the Company's
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<PAGE>
Money, Government Money, Equity, Managed Income, Income and Growth,
International, Treasury Money, 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,
Global Competitors, Emerging Americas, Pacific/Asia, Pan European, Short-Term
Government Securities and Intermediate-Term Managed Income Funds (herein "the
Funds") and resolutions of the Company's Board of Directors and Fund
shareholders ("Shareholders") approving an Investment Advisory Agreement between
U.S. Trust and the Company dated February 6, 1985, as amended; an Investment
Advisory Agreement between U.S. Trust and the Company dated November 26, 1985,
as amended; an Investment Advisory Agreement between U.S. Trust and the Company
dated December 16, 1986, as amended; an Investment Advisory Agreement between
U.S. Trust and the Company dated May 27, 1987, as amended; an Investment
Advisory Agreement between U.S. Trust and the Company dated February 1, 1991; a
Sub-Advisory Agreement dated May 27, 1987 between U.S. Trust and Foreign and
Colonial Asset Management ("FACAM"); a Sub-Advisory Agreement dated December 15,
1992 between U.S. Trust and FACAM; and a Sub-Advisory Agreement dated February
16, 1994 between U.S. Trust and Foreign and Colonial Emerging Markets Limited
(the "Advisory Agreements");
(f) Resolutions of the Company's Board of Directors appointing
Edgewood Services, Inc. (the "Distributor") as the
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<PAGE>
Company's distributor for the Funds and approving a Distribution Agreement
between the Distributor and the Company dated as of August 1, 1995 (the
"Distribution Agreement");
(g) Resolutions of the Company's Board of Directors appointing
Federated Administrative Services ("Federated") as the administrator for the
Funds and approving an Administration Agreement between Federated and the
Company dated as of August 1, 1995 (the "Administration Agreement");
(h) The Advisory Agreements, the Distribution Agreement and the
Administration Agreement;
(i) The Company's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A with the Securities and Exchange
Commission ("SEC") on August 8, 1984;
(j) Post-Effective Amendment No. 21 to the Company's Registration
Statement on Form N-1A under the 1940 Act and the 1933 Act, as filed with the
SEC on August 1, 1995 (File No. 2-92665) relating to shares of the Company's
Class A Common Stock, $.001 par value per share, which represent interests in
the Money Fund; Class B Common Stock, $.001 par value per share, which
represents interests in the Government Money Fund; Class C Common Stock and
Class C Common Stock - Special Series 1, $.001 par value per share, which
represent interests in the Equity Fund; Class D Common Stock, $.001 par value
per share, which represent interests in the Managed Income Fund; Class E Common
Stock and Class E Common Stock - Special Series 1, $.001 par value per share,
which represent interests in the Income and Growth Fund;
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<PAGE>
Class F Common Stock, $.001 par value per share, which represent interests in
the International Fund; Class G Common Stock, $.001 par value per share, which
represent interests in the Treasury Money Fund; Class H Common Stock and Class H
Common Stock -Special Series 1, $.001 par value per share, which represent
interests in the Early Life Cycle Fund; Class I Common Stock and Class I Common
Stock - Special Series 1, $.001 par value per share, which represent interests
in the Long-Term Supply of Energy Fund; Class J Common Stock and Class J Common
Stock -Special Series 1, $.001 par value per share, which represent interests in
the Productivity Enhancers Fund; Class K Common Stock and Class K Common Stock -
Special Series 1, $.001 par value per share, which represent interests in the
Environmentally-Related Products and Services Fund; Class L Common Stock and
Class L Common Stock - Special Series 1, $.001 par value per share, which
represent interests in the Aging of America Fund; Class M Common Stock and Class
M Common Stock -Special Series 1, $.001 par value per share, which represent
interests in the Communication and Entertainment Fund; Class N Common Stock and
Class N Common Stock - Special Series 1, $.001 par value per share, which
represent interests in the Business and Industrial Restructuring Fund; Class O
Common Stock and Class O Common Stock - Special Series 1, $.001 par value per
share, which represent interests in the Global Competitors Fund; Class P Common
Stock, $.001 par value per share, which represent interests in the Emerging
Americas Fund; Class Q Common Stock,
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$.001 par value per share, which represent interests in the Pacific/Asia Fund;
Class R Common Stock, $.001 par value per share, which represent interests in
the Pan European Fund; Class S Common Stock, $.001 par value per share, which
represent interests in the Short-Term Government Securities Fund; and Class T
Common Stock, $.001 par value per share, which represent interests in the
Intermediate-Term Managed Income Fund (such shares and shares of the Company
hereafter classified by the Company's Board of Directors are hereinafter
collectively called "Shares"), and all amendments thereto; and
(k) The Company's most recent prospectuses (such prospectuses, as
currently in effect, and all amendments and supplements thereto and future
versions thereof are herein called the "Prospectuses").
The Company will furnish U.S. Trust from time to time with copies of
all amendments of or supplements to the foregoing, if any, and with comparable
documents with respect to any Fund of the Company organized after the date of
this Agreement that is covered by this Agreement. The Company shall also
deliver to U.S. Trust the following documents on or before the effective date of
any increase or decrease in the total number of Shares authorized to be issued
by the Company: (a) a certified copy of the amendment of the Articles of
Incorporation giving effect to such increase or decrease, and (b) in the case of
an increase, if the appointment of U.S. Trust was theretofore expressly limited,
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<PAGE>
a certified copy of a resolution of the Board of Directors of the Company
increasing the authority of U.S. Trust.
4. SERVICES PROVIDED
(a) U.S. Trust will provide the following services subject to the
control, direction and supervision of the Board of Directors and in compliance
with the objectives, policies and limitations set forth in the Company's
Registration Statement, Charter and By-Laws; applicable laws and regulations;
and all resolutions and policies implemented by the Board of Directors.
The following is a general description of the transfer agency services
U.S. Trust shall provide to the Company.
A. SHAREHOLDER RECORDKEEPING. Maintain records showing for each
Fund shareholder the following: (i) name, address, appropriate
tax certification and tax identifying number; (ii) number of
shares of each Fund; (iii) historical information including, but
not limited to, dividends paid and date and price of all
transactions including individual purchase and redemptions and
appropriate supporting documents; and (iv) any dividend
reinvestment order, application, dividend to a specific address
and correspondence relating to the current maintenance of the
account.
B. SHARE ISSUANCE. Record the issuance of shares of each Fund.
Except as specifically agreed in writing between U.S. Trust and
the Company, U.S.
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Trust shall have no obligation when countersigning and issuing
and/or crediting shares to take cognizance of any other laws
relating to the issue and sale of such shares except insofar as
policies and procedures of the Stock Transfer Association
recognize such laws. U.S. Trust shall notify the Company in case
any proposed issue of shares by the Company shall result in an
over-issue as defined by Section 8-104(2) of Article 8 of the
Maryland Commercial Law Article. In case any issue of shares
would result in such an over-issue, U.S. Trust shall refuse to
issue said shares and shall not countersign and issue
certificates (if any) for such shares.
C. PURCHASE ORDERS. Process all orders for the purchase of shares
of the Company in accordance with the Company's Prospectuses,
including electronic transmissions, which the Company
acknowledges it has authorized. Upon receipt of any check or
other payment for purchase of shares of the Company from an
investor, U.S. Trust will (i) stamp the order or other
documentation with the date and time of receipt, (ii) forthwith
process the same for collection, (iii) determine the amounts
thereof due the Company, and notify the Company of such
determination and deposit,
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such notification to be given on a daily basis of the total
amounts determined and deposited to the Company's custodian bank
account during such day. U.S. Trust shall then credit the share
account of the investor with the number of Fund shares to be
purchased made on the date such payment is received by U.S.
Trust, as set forth in the Company's Prospectus and shall
promptly mail a confirmation of said purchase to the investor,
all subject to any instructions which the Company may give to
U.S. Trust with respect to the timing or manner of acceptance of
orders for shares relating to payments so received by it. Any
purchase order received by U.S. Trust, which is not in good order
will be rejected immediately.
D. REDEMPTION ORDERS. Receive and stamp with the date and time of
receipt all requests for redemptions or repurchase of shares held
in certificate or non-certificate form, and process redemptions
and repurchase requests as follows: (i) if such certificate or
redemption request complies with the applicable standards
approved by the Company, U.S. Trust shall on each business day
notify the Company of the total number of shares presented and
covered by such requests received by U.S. Trust on such day; (ii)
within the time
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specified in the Prospectus and if not so specified on or prior
to the seventh calendar day succeeding any such requests received
by U.S. Trust, shall notify The Chase Manhattan Bank, N.A. (the
"Custodian"), subject to instructions from the Company, to
transfer monies to such account as designated by U.S. Trust for
such payment to the redeeming shareholder of the applicable
redemption or repurchase price; (iii) if any such certificate or
request for redemption of repurchase does not comply with
applicable standards, U.S. Trust shall promptly notify the
investor of such fact, together with the reason therefor, and
shall effect such redemption at the Company's price next
determined after receipt of documents complying with said
standards.
E. TELEPHONE ORDERS. Process redemptions, exchanges and transfers
of Fund shares upon telephone instructions from qualified
shareholders in accordance with the procedures set forth in the
Company's Prospectuses. The administrator shall be permitted to
redeem, exchange and/or transfer Fund shares from any account for
which such services have been authorized, including electronic
transmissions.
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F. TRANSFER OF SHARES. Upon receipt by U.S. Trust of documentation
in proper form to effect a transfer of shares, including in the
case of shares for which certificates have been issued the share
certificates in proper form for transfer, U.S. Trust will
register such transfer on the Company's shareholder records
maintained by U.S. Trust pursuant to instructions received from
the transferor, cancel the certificates representing such shares,
if any, and if so requested, countersign, register, issue and
mail by first class mail new certificates for the same or a
smaller whole number of shares.
G. SHAREHOLDER COMMUNICATIONS. Address and mail all communications
by the Company to its shareholders promptly following the
delivery by the Company of the material to be mailed.
H. PROXY MATERIALS. Prepare shareholder lists, mail and certify as
to the mailing of proxy materials, receive the tabulated proxy
cards, render periodic reports to the Company on the progress of
such tabulation, and provide the Company with inspectors of
election at any meeting of shareholders.
I. SHARE CERTIFICATES. If a shareholder of the Company requests a
certificate representing his
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shares, U.S. Trust as Transfer Agent or CGFSC as sub-transfer
agent, will countersign and mail, a share certificate to the
investor at his/her address as it appears on the Company's
transfer books. U.S. Trust shall supply, at the expense of the
Company a supply of blank share certificates. The certificates
shall be properly signed, manually or by facsimile, as authorized
by the Company, and shall bear the Company's seal or facsimile;
and notwithstanding the death, resignation or removal of any
officers of the Company authorized to sign certificates, U.S.
Trust and/or CGFSC may, until otherwise directed by the Company,
continue to countersign certificates which bear the manual or
facsimile signature of such officer.
J. RETURNED CHECKS. In the event that any check or other order for
the payment of money is returned unpaid for any reason, U.S.
Trust will take such steps, including redepositing the check for
collection or returning the check to the investor, as U.S. Trust
may, at its discretion, deem appropriate and notify the Company
of such action, or as the Company may instruct. However, subject
to Paragraph 7(b) below, the Company remains
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ultimately liable for any returned checks of its shareholders.
K. SHAREHOLDER CORRESPONDENCE. Acknowledge all correspondence from
shareholders relating to their share accounts and undertake such
other shareholder correspondence as may from time to time be
mutually agreed upon.
L. TAX REPORTING. U.S. Trust shall issue appropriate shareholder
tax forms on an annual basis.
M. DIVIDEND DISBURSING. U.S. Trust will serve as the Company's
dividend disbursing agent. U.S. Trust will prepare and mail
checks, place wire transfers of credit income and capital gain
payments to shareholders. The Company will advise U.S. Trust of
the declaration of any dividend or distribution and the record
and payable date thereof at least five (5) days prior to the
record date. U.S. Trust will, on or before the payment date of
any such dividend or distribution, notify the Company's Custodian
of the estimated amount required to pay any portion of such
dividend or distribution payable in cash, and on or before the
payment date of such distribution, the Company will instruct its
Custodian to make available to U.S. Trust sufficient funds for
the cash amount to be paid out. If a shareholder is entitled to
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receive additional shares by virtue of any such distribution or
dividend, appropriate credits will be made to each shareholder's
account.
(b) U.S. Trust will also:
(i) provide office facilities with respect to the provision of
the services contemplated herein (which may be in the offices of U.S. Trust or a
corporate affiliate of U.S. Trust);
(ii) provide the services of individuals to serve as officers
of the Company who will be designated by U.S. Trust and elected by the Board of
Directors subject to reasonable Board approval;
(iii) provide or otherwise obtain personnel sufficient, in
U.S. Trust's sole discretion, for provision of the services contemplated herein;
(iv) furnish equipment and other materials, which U.S. Trust,
in its sole discretion, believes are necessary or desirable for provision of the
services contemplated herein; and
(v) keep records relating to the services provided hereunder
in accordance with the 1940 Act and the rules thereunder. To the extent required
by the 1940 Act and the rules thereunder, U.S. Trust agrees that all such
records prepared or maintained by U.S. Trust relating to the services provided
hereunder are the property of the Company and will be preserved for the periods
prescribed under the 1940 Act and the rules thereunder, maintained at the
Company's expense, and made
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available in accordance with such Act and rules. U.S. Trust further agrees to
surrender promptly to the Company upon its request and cease to retain in its
records and files those records and documents created and maintained by U.S.
Trust pursuant to this Agreement.
5. FEES; EXPENSES; EXPENSE REIMBURSEMENT.
(a) As compensation for the services rendered to the Company pursuant
to this Agreement, the Company shall pay U.S. Trust monthly $15.00 per account
and subaccount of each Fund of the Company per year or for any portion of a year
plus U.S. Trust's out-of-pocket expenses relating to such services, including,
but not limited to, expenses of postage, telephone, TWX rental and line charges,
communication forms, and checks and check processing. Such fees are to be
billed monthly and shall be due and payable upon receipt of the invoice. The
Company shall also pay U.S. Trust monthly any fees and expenses charged by any
sub-transfer agent other than CGFSC provided that the sub-transfer agent and the
fees and expenses charged by that sub-transfer agent have been approved by the
Company's Board of Directors. Upon any termination of this Agreement before the
end of any month, the fee for the part of the month before such termination
shall be prorated according to the proportion which such part bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement.
(b) For the purpose of determining fees calculated as a function of
the Company's assets, the value of the Company's
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assets and net assets shall be computed as required by its Prospectuses,
generally accepted accounting principles, and resolutions of the Board of
Directors.
(c) U.S. Trust may, in its sole discretion, from time to time employ
or associate with such person or persons as may be appropriate to assist U.S.
Trust in the performance of this Agreement. Such person or persons may be
officers and employees who are employed or designated as officers by both U.S.
Trust and the Company. The compensation of such person or persons for such
employment shall be paid by U.S. Trust and no obligation will be incurred by or
on behalf of the Company in such respect.
(d) The Company may request additional services, additional processing,
or special reports. The Company shall submit such requests in writing together
with such specifications and documentation as may be reasonably required by U.S.
Trust. If U.S. Trust elects to provide such services or arrange for their
provision, it shall be entitled to additional fees and expenses at its customary
rates and charges as approved by the Company's Board of Directors.
(e) U.S. Trust will bear all of its own expenses in connection with
the performance of the services under this Agreement except as otherwise
expressly provided herein. The Company agrees to promptly reimburse U.S. Trust
for any equipment and supplies specially ordered by or for the Company through
U.S. Trust, and for any other expenses not contemplated by this Agreement that
U.S. Trust may incur on the Company's behalf, as
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consented to by the Company from time to time. Expenses to be incurred in the
operation of the Company and to be borne by the Company, include, but are not
limited to: taxes; interest; brokerage fees and commissions, salaries and fees
of officers and directors who are not officers, directors, shareholders or
employees of U.S. Trust, or the Company's investment adviser, or distributor or
other service providers; SEC and state Blue Sky registration and qualification
fees, levies, fines and other charges; EDGAR filing fees, processing services
and related fees; advisory and administration fees; charges and expenses of
pricing and data services, independent public accountants and custodians;
insurance premiums including fidelity bond premiums; legal expenses; costs of
maintenance of corporate existence; expenses of typesetting and printing of
prospectuses for regulatory purposes and for distribution to current
shareholders of the Company (the Company's distributor to bear the expense of
all other printing, production, and distribution of prospectuses, statements of
additional information, and marketing materials except as otherwise approved by
the Board of Directors of the Company); expenses of printing and production
costs of shareholders' reports and proxy statements and materials; costs and
expenses of Fund stationery and forms; costs and expenses of special telephone
and data lines and devices; costs associated with corporate, shareholder, and
Board meetings; trade association dues and expenses; and any extraordinary
expenses and other customary Fund expenses. In addition, U.S. Trust may
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utilize one or more independent pricing services, approved from time to time by
the Board, to obtain securities prices and to act as backup to the primary
pricing services, in connection with determining the net asset values of the
Company, and the Company will reimburse U.S. Trust for the Company's share of
the cost of such services based upon the actual usage, or a pro rata estimate of
the use, of the services for the benefit of the Company.
(f) All fees, out-of-pocket expenses, or additional charges of U.S.
Trust shall be billed on a monthly basis and shall be due and payable upon
receipt of the invoice.
U.S. Trust will render, after the close of each month in which
services have been furnished, a statement reflecting all of the charges for such
month.
6. PROPRIETARY AND CONFIDENTIAL INFORMATION. U.S. Trust agrees on behalf
of itself and its employees to treat confidentially and as proprietary
information of the Company, all records and other information relative to the
Company's prior, present or potential shareholders, and to not use such records
and information for any purpose other than performance of U.S. Trust's
responsibilities and duties hereunder. U.S. Trust may seek a waiver of such
confidentiality provisions by furnishing reasonable prior notice to the Company
and obtaining approval in writing from the Company, which approval shall not be
unreasonably withheld and may not be withheld where U.S. Trust may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested to
divulge such information by
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<PAGE>
duly constituted authorities. Waivers of confidentiality are automatically
effective without further action by U.S. Trust with respect to Internal Revenue
Service levies, subpoenas and similar actions, or with respect to any request by
the Company.
7. DUTIES, RESPONSIBILITIES, AND LIMITATION OF LIABILITY.
(a) In the performance of its duties hereunder, U.S. Trust shall be
obligated to act in good faith in performing the services provided for under
this Agreement. In performing its services hereunder, U.S. Trust shall be
entitled to rely on any oral or written instructions, notices or other
communications, including electronic transmissions, from the Company and its
custodians, officers and directors, investors, agents and other service
providers which U.S. Trust reasonably believes to be genuine, valid and
authorized. U.S. Trust shall also be entitled to consult with and rely on the
advice and opinions of outside legal counsel retained by the Company, as
necessary or appropriate.
(b) Except as provided herein, U.S. Trust shall not be liable for any
error of judgment or mistake of law or for any loss or expense suffered by the
Company, in connection with the matters to which this Agreement relates, except
for a loss or expense caused by or resulting from willful misfeasance, bad faith
or negligence on U.S. Trust's part in the performance of its duties or from
reckless disregard by U.S. Trust of its obligations and duties under this
Agreement. Any person, even though also an officer, director, partner, employee
or agent of
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<PAGE>
U.S. Trust, who may be or become an officer, director, partner, employee or
agent of the Company, shall be deemed when rendering services to the Company in
that capacity or acting on any business of the Company in that capacity (other
than services or business in connection with U.S. Trust's duties hereunder) to
be rendering such services to or acting solely for the Company and not as an
officer, director, partner, employee or agent or person under the control or
direction of U.S. Trust even though paid by U.S. Trust.
(c) Subject to Paragraphs 7(b) and (d), U.S. Trust shall not be
responsible for, and the Company shall indemnify and hold U.S. Trust harmless
from and against, any and all losses, damages, costs, reasonable attorneys' fees
and expenses, payments, expenses and liabilities arising out of or attributable
to:
(i) all actions of U.S. Trust or its officers or agents
required to be taken pursuant to this Agreement;
(ii) the reliance on or use by U.S. Trust or its officers or
agents of information, records, or documents which are received by U.S. Trust or
its officers or agents and furnished to it or them by or on behalf of the
Company, and which have been prepared or maintained by the Company or any third
party on behalf of the Company other than U.S. Trust or any of its affiliates;
(iii) the Company's refusal or failure to comply with the terms
of this Agreement or the Company's lack of good
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<PAGE>
faith, or its actions, or lack thereof, involving gross negligence or willful
misfeasance;
(iv) the material breach of any representation or warranty of
the Company hereunder;
(v) the legal taping or other form of legal recording of
telephone conversations or other legal forms of electronic communications with
investors and shareholders, or reliance by U.S. Trust or its officers or agents
on telephone or other electronic instructions of any person acting on behalf of
a shareholder or shareholder account for which telephone or other electronic
services have been authorized;
(vi) the reliance on or the carrying out by U.S. Trust or its
officers or agents of any proper instructions reasonably believed to be duly
authorized, or requests of the Company or recognition by U.S. Trust or its
officers or agents of any share certificates which are reasonably believed to
bear the proper signatures of the officers of the Company and the proper
countersignature of any transfer agent or registrar of the Company;
(vii) any delays, inaccuracies, errors in or omissions from data
provided to U.S. Trust or its officers or agents by data and pricing services;
(viii) the offer or sale of shares by the Company in violation of
any requirement under the Federal securities laws or regulations or the
securities laws or regulations of any state, or in violation of any stop order
or other determination
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<PAGE>
or ruling by any Federal agency or any state agency with respect to the offer or
sale of such shares in such state (1) resulting from activities, actions, or
omissions by the Company or its other service providers and agents other than
U.S. Trust or its officers or agents or any of their affiliates, or (2) existing
or arising out of activities, actions or omissions by or on behalf of the
Company other than by U.S. Trust or its officers or agents or any of their
affiliates prior to the effective date of this Agreement;
(ix) any failure of the Company's registration statement to
comply with the 1933 Act and the 1940 Act (including the rules and regulations
thereunder) and any other applicable laws, or any untrue statement of a material
fact or omission of a material fact necessary to make any statement therein not
misleading in a Fund's prospectus, unless such failure, misstatement or omission
relates to, results from or otherwise arises in connection with, actions,
inactions and/or information provided by U.S. Trust or its officers or agents;
and
(x) the actions taken by the Company, its investment adviser
(other than U.S. Trust or its officers or agents or any of their affiliates),
and its distributor in compliance with applicable securities, tax, commodities
and other laws, rules and regulations, or the failure to so comply.
(d) Notwithstanding anything herein to the contrary, U.S. Trust shall
be as fully responsible to the Company for the
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<PAGE>
acts and omissions of any sub-transfer agent as U.S. Trust is for its own acts
and omissions.
8. TERM. This Agreement shall become effective on the date first
hereinabove written. This Agreement may be modified or amended from time to
time by mutual agreement between the parties hereto. This Agreement shall
continue in effect unless terminated by either party on 120 days' prior written
notice provided that should U.S. Trust fail to be registered pursuant to Section
17A of the 1934 Act as a transfer agent at any time, the Company may, on written
notice to U.S. Trust, immediately terminate this Agreement. Upon termination of
this Agreement, the Company shall pay to U.S. Trust such compensation and any
out-of-pocket or other reimbursable expenses which may become due or payable
under the terms hereof as of the date of termination or after the date that the
provision of services ceases, whichever is later.
9. NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be deemed to have been given when delivered in person or by
certified mail, return receipt requested, to the parties at the following
address (or such other address as a party may specify by notice to the other):
If to the Company:
Drinker Biddle & Reath
1345 Chestnut Street, Suite 1100
Philadelphia, PA 19107
Attn: W. Bruce McConnel, III
Fax: (215) 988-2757
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<PAGE>
If to U.S. Trust:
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Attention: Maureen Scannell Bateman
Fax: (212) 852-1310
Notice shall be effective upon receipt if by mail, on the date of personal
delivery (by private messenger, courier service or otherwise) or upon confirmed
receipt of telex or facsimile, whichever occurs first.
10. ASSIGNMENT AND DELEGATION. This Agreement shall not be assigned and
the rights, duties and obligations of the parties hereunder may not be
subcontracted or delegated by either of the parties hereto without the prior
consent in writing of the other party.
11. WAIVER. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver nor
shall it deprive such party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver must be in
writing signed by the waiving party.
12. FORCE MAJEURE. U.S. Trust shall not be responsible or liable for any
failure or delay in performance of its obligations under this Agreement arising
out of or caused, directly or indirectly, by circumstances beyond its control,
including without limitation, acts of God, earthquakes, fires, floods, wars,
acts of civil or military authorities, or governmental actions, nor shall any
such failure or delay give the Company the
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<PAGE>
right to terminate this Agreement. During the term of this Agreement, at no
additional cost to the Company, U.S. Trust shall provide a facility capable of
safeguarding the transfer agency and dividend disbursing records of the Company
in case of damage to the primary facility providing those services (the "Back-Up
Facility"). Transfer of the transfer agency and dividend records of the Company
to the Back-Up Facility shall be at U.S. Trust's expense, shall commence
immediately after damage to the primary facility results in an inability to
provide the transfer agency and dividend disbursing services, and shall be
completed within 72 hours of commencement. After the primary facility has
recovered, U.S. Trust shall again utilize it to provide the transfer agency and
dividend disbursing services to the Company at no additional cost to the
Company. U.S. Trust shall use reasonable efforts to provide the services
described in this Agreement from the Back-Up Facility.
13. USE OF NAME. The Company and U.S. Trust agree not to use the other's
name nor the names of such other's affiliates, designees, or assignees in any
prospectus, sales literature, or other printed material written in a manner not
previously approved by the other or such other's affiliates, designees, or
assignees except where required by the SEC or other regulatory authorities.
14. AMENDMENTS. This Agreement may be modified or amended from time to
time by mutual written agreement between the parties. No provision of this
Agreement may be changed,
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<PAGE>
discharged, or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, discharge or termination is
sought.
15. SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance it shall nevertheless
remain applicable to all other persons and circumstances.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK, INCLUDING THE DETERMINATION OF WHEN AN
"ASSIGNMENT" HAS OCCURRED.
This Agreement may be executed in one or more counterparts and all
such counterparts will constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below as of the date first written
above.
UST MASTER FUNDS, INC.
By: /s/ Alfred Tannachion
---------------------
Name: Alfred Tannachion
-----------------
Title: President
---------
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Brian F. Schmidt
--------------------
Name: Brian F. Schmidt
----------------
Title: Vice President
--------------
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<PAGE>
EXHIBIT 11
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our Firm
under the caption "Counsel" in the Statement of Additional Information that is
included in Post-Effective Amendment Nos. 26 and 28 to the Registration
Statement (Nos. 2-92665; 811-4088) on Form N-1A of Excelsior Funds, Inc. under
the Securities Act of 1933 and the Investment Company Act of 1940, respectively.
This consent does not constitute a consent under Section 7 of the Securities Act
of 1933, and in consenting to the use of our name and the references to our Firm
under such caption we have not certified any part of the Registration Statement
and do not otherwise come within the categories of persons whose consent is
required under Section 7 or the rules and regulations of the Securities and
Exchange Commission thereunder.
/s/ DRINKER BIDDLE & REATH LLP
--------------------------------
DRINKER BIDDLE & REATH LLP
Philadelphia, Pennsylvania
July 3, 1997
<PAGE>
EXHIBIT 18
EXCELSIOR FUNDS, INC.
(THE "COMPANY")
AMENDED AND RESTATED PLAN PURSUANT TO RULE 18F-3 FOR OPERATION OF
A MULTI-CLASS SYSTEM
----------------------------
I. INTRODUCTION
---------------
On February 23, 1995, the Securities and Exchange Commission (the
"Commission") adopted Rule 18f-3 under the Investment Company Act of 1940, as
amended (the "1940 Act"), which permits the creation and operation of a multi-
class distribution structure without the need to obtain an exemptive order under
Section 18 of the 1940 Act. Rule 18f-3, which became effective on April 3,
1995, requires an investment company to file with the Commission a written plan
specifying all of the differences among classes, including the various services
offered to shareholders, different distribution arrangements for each class,
methods for allocating expenses relating to those differences and any conversion
features or exchange privileges. On May 19, 1995, the Board of Directors of the
Company initially authorized the Company to operate a multi-class distribution
structure in compliance with Rule 18f-3. This Plan pursuant to Rule 18f-3 is
hereby amended and restated as of May 16, 1997.
II. ATTRIBUTES OF CLASSES
-------------------------
A. Generally
---------
The Company is initially authorized to offer two classes of shares under
this Plan as follows:
Equity Funds
------------
Class C shares ("Non-Trust Shares") and Class C-Special Series 1 shares
("Trust Shares") in the Equity Fund; Class E shares ("Non-Trust Shares") and
Class E-Special Series 1 shares ("Trust Shares") in the Income and Growth Fund;
Class H shares ("Non-Trust Shares") and Class H-Special Series 1 shares ("Trust
Shares") in the Early Life Cycle Fund; Class I shares ("Non-Trust Shares") and
Class I-Special Series 1 shares ("Trust Shares") in the Long-Term Supply of
Energy Fund; Class J shares ("Non-Trust Shares") and Class J-Special Series 1
shares ("Trust Shares") in the Productivity Enhancers Fund; Class K shares
("Non-Trust Shares") and Class K-Special Series 1 shares ("Trust Shares") in the
Environmentally-Related Products and Services Fund; Class L shares ("Non-Trust
Shares") and Class L-Special Series 1 shares ("Trust Shares") in the Aging of
America Fund; Class M shares
<PAGE>
("Non-Trust Shares") and Class M-Special Series 1 shares ("Trust Shares") in the
Communication and Entertainment Fund; Class N shares ("Non-Trust Shares") and
Class N-Special Series 1 shares ("Trust Shares") in the Business and Industrial
Restructuring Fund; and Class O shares ("Non-Trust Shares") and Class O-Special
Series 1 shares ("Trust Shares") in the Global Competitors Fund (each a "Fund"
and, collectively, the "Equity Funds"); and
International Funds
-------------------
Class F shares ("Non-Trust Shares") and Class F-Special Series 1 shares
("Trust Shares") in the International Fund; Class P shares ("Non-Trust Shares")
and Class P-Special Series 1 shares ("Trust Shares") in the Emerging Americas
Fund; Class Q shares ("Non-Trust Shares") and Class Q-Special Series 1 shares
("Trust Shares") in the Pacific/Asia Fund; and Class R shares ("Non-Trust
Shares") and Class R-Special Series 1 shares ("Trust Shares") in the Pan
European Fund (each a "Fund" and, collectively, the "International Funds").
In general, shares of each class shall initially be identical except for
different expense variables (which will result in different total returns for
each class), certain related rights and certain shareholder services. More
particularly, the Non-Trust Shares and the Trust Shares shall represent
interests in the same portfolio of investments of the particular Fund, and shall
be identical in all respects, except for: (a) the impact of (i) expenses
assessed to a class pursuant to an Administrative Services Plan ("Non-12b-1
Plan") and/or a Distribution Plan ("12b-1 Plan") adopted for that class, and
(ii) any other incremental expenses identified from time to time that should be
properly allocated to one class so long as any changes in expense allocations
are reviewed and approved by a vote of the Board of Directors, including a
majority of the non-interested directors; (b) the fact that each class shall
vote separately on any matter submitted to shareholders that pertains to (i) the
Non-12b-1 Plan and/or the 12b-1 Plan adopted for that class or (ii) any class
expense borne by that class; (c) the exchange privileges of each class of
shares; (d) the designation of each class of shares of a Fund; and (e) any
different shareholder services relating to a class of shares.
B. Shareholder Servicing and Distribution Arrangements and Sales Charges
---------------------------------------------------------------------
NON-TRUST SHARES
Non-Trust Shares of each Equity and International Fund shall initially
be available for purchase directly by individuals or by institutions. Non-Trust
Shares of each Equity and International Fund shall be offered without a sales
charge.
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<PAGE>
Non-Trust Shares of each Equity and International Fund shall initially
be subject to a fee payable to United States Trust Company of New York, its
affiliates and correspondent banks, and other institutions (collectively,
"Shareholder Organizations") pursuant to the Non-12b-1 Plan adopted for that
class which shall not initially exceed .40% (on an annual basis) of the average
daily net asset value of the Fund's Non-Trust Shares held by customers of such
Shareholder Organizations.
Shareholder services provided under the Non-12b-1 Plan adopted for the
class may include (i) assisting in processing purchase, exchange and redemption
requests; (ii) transmitting and receiving funds in connection with customer
orders to purchase, exchange or redeem shares; and (iii) providing periodic
statements.
TRUST SHARES
Trust Shares of each Equity and International Fund shall initially be
available for purchase by customers of financial intermediaries eligible to
receive payments under the 12b-1 Plan adopted for that class. Trust Shares of
each Equity and International Fund shall be offered without a sales charge.
Trust Shares of each Equity and International Fund shall initially be
subject to a fee payable pursuant to the 12b-1 Plan adopted for that class which
initially shall not exceed .75% (on an annual basis) of the daily net asset
value of the outstanding Trust Shares of the Fund. Payments under the 12b-1
Plan will be used to compensate the Company's distributor for its services which
are intended to result in the sale of Trust Shares.
Trust Shares of each Equity and International Fund shall initially be
subject to a fee payable to Shareholder Organizations pursuant to the Non-12b-1
Plan adopted for that class which shall not initially exceed .40% (on an annual
basis) of the average daily net asset value of the Fund's Trust Shares held by
customers of such Shareholder Organizations.
Shareholder services provided under the Non-12b-1 Plan adopted for the
class may include (i) assisting in processing purchase, exchange and redemption
requests; (ii) transmitting and receiving funds in connection with customer
orders to purchase, exchange or redeem shares; and (iii) providing periodic
statements.
C. Shareholder Services
--------------------
1. Exchange Privileges
-------------------
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<PAGE>
NON-TRUST SHARES
----------------
Investors shall initially be permitted to exchange, without an
exchange fee imposed by the Company, their Non-Trust Shares in a Fund for: (i)
Non-Trust Shares of another Fund offered by the Company; (ii) Non-Trust Shares
of any investment portfolio offered by Excelsior Tax-Exempt Funds, Inc.; and
(iii) Trust Shares of any investment portfolio offered by Excelsior
Institutional Trust, provided that such other shares may legally be sold in the
state of the investor's residence.
TRUST SHARES
Holders of Trust Shares generally shall initially be permitted to
exchange, without an exchange fee imposed by the Company, their Trust Shares in
a Fund for: (i) Trust Shares of another Fund offered by the Company; and (ii)
Trust Shares of any investment portfolio offered by Excelsior Institutional
Trust, provided that such other shares may legally be sold in the state of the
investor's residence.
2. Retirement Plans
----------------
NON-TRUST AND TRUST SHARES
The Company generally shall initially make Non-Trust and Trust Shares
available for purchase by investors in connection with the following tax-
deferred prototype retirement plans: (i) IRAs (including "rollovers" from
existing retirement plans) for individuals and their spouses; (ii) profit-
sharing and money-purchase plans for corporations and self-employed individuals
and their partners to benefit themselves and their employees; and (iii) Keogh
plans for self-employed individuals.
3. Automatic Investment Program
----------------------------
NON-TRUST SHARES AND TRUST SHARES
The Company shall initially offer an automatic investment program
whereby, in general, an investor may arrange to have Non-Trust Shares or Trust
Shares purchased automatically by authorizing the Company's transfer agent to
withdraw funds from the investor's bank account.
4. Systematic Withdrawal Plan
--------------------------
NON-TRUST SHARES AND TRUST SHARES
The Company shall initially offer a systematic withdrawal plan
whereby, in general, an investor may arrange to have Non-Trust Shares or Trust
Shares redeemed automatically.
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<PAGE>
D. Methodology for Allocating Expenses Between Classes
---------------------------------------------------
Class-specific expenses of a Fund shall be allocated to the specific
class of shares of that Fund. Non-class-specific expenses of the Funds shall be
allocated in accordance with paragraph (c) of Rule 18f-3.
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