<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- ------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- ------------------------------------------------------------------------------
<PAGE>
(4) Proposed maximum aggregate value of transaction:
- ------------------------------------------------------------------------------
(5) Total fee paid:
- ------------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
- ------------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- ------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- ------------------------------------------------------------------------------
(3) Filing Party:
- ------------------------------------------------------------------------------
(4) Date Filed:
- ------------------------------------------------------------------------------
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
73 Tremont Street
Boston, Massachusetts 02108-3913
Dear Shareholder:
You are cordially invited to attend the Special Meetings of
Shareholders of Excelsior Funds, Inc., Excelsior Tax-Exempt Funds, Inc. and
Excelsior Institutional Trust (each a "Company" and, together, the "Companies")
to be held on Wednesday, May 3, 2000 at 10:00 a.m., Eastern Time, at the offices
of United States Trust Company of New York, 114 West 47/th/ Street, New York,
New York 10036.
At the Meetings, shareholders will be asked to vote on the following
matters: (1) election of trustees of Excelsior Institutional Trust by
shareholders of that Company; and (2) approval of investment advisory agreements
between each Company and United States Trust Company of New York and U.S. Trust
Company and approval by the shareholders of the California Tax-Exempt Income
Fund of the sub-advisory agreement between United States Trust Company of New
York, U.S. Trust Company and U.S. Trust Company, N.A.
Whether or not you plan to be present at a Meeting, your vote is
needed. If you do not plan to be present at the relevant Meeting, please
complete, sign and return the enclosed proxy card(s) promptly. A postage paid
envelope is enclosed for this purpose.
We look forward to seeing you at the Meetings or receiving your proxy
card(s) so your shares may be voted at the Meetings.
Sincerely yours,
Frederick S. Wonham
President
SHAREHOLDERS ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY CARD(S) IN THE
ENCLOSED ENVELOPE.
<PAGE>
[Preliminary Copy]
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
March ___, 2000
To the Shareholders of Excelsior Funds, Inc.,
Excelsior Tax-Exempt Funds, Inc. and
Excelsior Institutional Trust:
Special Meetings of shareholders of Excelsior Funds, Inc., Excelsior
Tax-Exempt Funds, Inc. and Excelsior Institutional Trust (each a "Company" and,
together, the "Companies") will be held on Wednesday, May 3, 2000 at 10:00 a.m.
Eastern Time, at the offices of United States Trust Company of New York, 114
West 47/th/ Street, New York, New York 10036.
The Funds ("Funds") of each Company are as follows:
Company Fund
- ------- ----
Excelsior Funds, Inc. Blended Equity Fund
Large Cap Growth Fund
Small Cap Fund
Value and Restructuring Fund
Energy and Natural Resources Fund
Real Estate Fund
International Fund
Latin America Fund
Pacific/Asia Fund
Pan European Fund
Emerging Markets Fund
Intermediate-Term Managed Income Fund
Short-Term Government Securities Fund
Managed Income Fund
Money Fund
Government Money Fund
Treasury Money Fund
Excelsior Tax-Exempt Funds, Inc. Tax-Exempt Money Fund
New York Tax-Exempt Money Fund
Long-Term Tax-Exempt Fund
Intermediate-Term Tax-Exempt Fund
Short-Term Tax-Exempt Securities Fund
<PAGE>
Company Fund
- ------- ----
New York Intermediate-Term Tax-Exempt Fund
California Tax-Exempt Income Fund
Excelsior Institutional Trust Value Equity Fund
Optimum Growth Fund
Equity Fund
Income Fund
Total Return Bond Fund
International Equity Fund
The meetings will be held for the following purposes:
(1) To elect Messrs. Wonham, Tannachion, Campbell, Dugan, Frankl,
Robinson, Drake and Piel as trustees of Excelsior Institutional
Trust;
(2) With respect to each Fund, to approve a new investment advisory
agreement between the relevant Company and United States Trust
Company of New York and U.S. Trust Company; and with respect to
the California Tax-Exempt Income Fund only, to approve a new sub-
advisory agreement among United States Trust Company of New York,
U.S. Trust Company and U.S. Trust Company, N.A.; and
(3) The transaction of such other business as may properly come
before the Meetings or any adjournments thereof.
The proposals referred to above are discussed in the Joint Proxy
Statement attached to this Notice. Each shareholder is invited to attend the
relevant Special Meeting(s) of Shareholders in person. Shareholders of record at
the close of business on March 6, 2000 have the right to vote at the Meetings.
If you cannot be present at a Meeting, we urge you to fill in, sign and promptly
return the enclosed proxy in order that the Meetings can be held and a maximum
of shares may be voted.
By Order of the Boards of Directors
of Excelsior Funds, Inc. and Excelsior Tax-
Exempt Funds, Inc. and the Board of
Trustees of Excelsior Institutional Trust
W. Bruce McConnel, III
Secretary
<PAGE>
WE NEED YOUR PROXY VOTE IMMEDIATELY
A SHAREHOLDER MAY THINK HIS OR HER VOTE IS NOT IMPORTANT, BUT IT IS VITAL. BY
-----
LAW, A SPECIAL MEETING OF SHAREHOLDERS SCHEDULED FOR MAY 3, 2000 WILL HAVE TO BE
ADJOURNED WITHOUT CONDUCTING ANY BUSINESS IF LESS THAN A MAJORITY OF THE SHARES
ELIGIBLE TO VOTE ARE REPRESENTED AT A MEETING. IN THAT EVENT, A COMPANY WOULD
CONTINUE TO SOLICIT VOTES IN AN ATTEMPT TO ACHIEVE A QUORUM. CLEARLY, YOUR VOTE
COULD BE CRITICAL IN ALLOWING A COMPANY TO HOLD THE MEETING AS SCHEDULED, SO
PLEASE RETURN YOUR PROXY CARD IMMEDIATELY.
-----------
<PAGE>
[Preliminary Copy]
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
73 Tremont Street
Boston, Massachusetts 02108-3913
JOINT PROXY STATEMENT
This Joint Proxy Statement is furnished in connection with the solicitation
of proxies by the Boards of Directors of Excelsior Funds, Inc. and Excelsior
Tax-Exempt Funds, Inc. and the Board of Trustees of Excelsior Institutional
Trust (together with Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc.,
the "Companies" and each individually, a "Company"). The Special Meetings will
be held at the offices of United States Trust Company of New York, 114 West
47/th/ Street, New York, New York 10036 on Wednesday, May 3, 2000 at 10:00 a.m.
Eastern Time (such meetings and any adjournments thereof are referred to
collectively as the "Meetings" and individually as a "Meeting"). The Funds
("Funds") of each Company are as follows:
Company Fund
- ------- ----
Excelsior Funds, Inc. Blended Equity Fund
Large Cap Growth Fund
Small Cap Fund
Value and Restructuring Fund
Energy and Natural Resources Fund
Real Estate Fund
International Fund
Latin America Fund
Pacific/Asia Fund
Pan European Fund
Emerging Markets Fund
Intermediate-Term Managed Income Fund
Short-Term Government Securities Fund
Managed Income Fund
Money Fund
Government Money Fund
Treasury Money Fund
-1-
<PAGE>
Company Fund
- ------- ----
Excelsior Tax-Exempt Funds, Inc. Tax-Exempt Money Fund
New York Tax-Exempt Money Fund
Long-Term Tax-Exempt Fund
Intermediate-Term Tax-Exempt Fund
Short-Term Tax-Exempt Securities Fund
New York Intermediate-Term Tax-Exempt Fund
California Tax-Exempt Income Fund
Excelsior Institutional Trust Value Equity Fund
Optimum Growth Fund
Equity Fund
Income Fund
Total Return Bond Fund
International Equity Fund
It is expected that the solicitation of proxies will be primarily by
mail. The Companies' officers and investment advisers and administrators may
also solicit proxies by telephone, telegraph, facsimile, personal interview or
the Internet. In connection with the solicitation of certain shareholders, U.S.
Trust and the Companies' administrators have retained D.F. King & Co., Inc. to
assist in the solicitation of proxies at a cost of approximately $__________.
United States Trust Company of New York will bear the proxy solicitation costs.
Any shareholder giving a proxy may revoke it at any time before it is exercised
by submitting to the relevant Company a written notice of revocation or a
subsequently executed proxy or by attending the relevant Meeting and electing to
vote in person. This Joint Proxy Statement is being used in order to reduce the
preparation, printing, handling and postage expenses that would result from the
use of a separate proxy statement for each Company. This Proxy Statement and the
enclosed Proxy are expected to be distributed to shareholders on or about March
16, 2000.
The following table summarizes the proposals to be voted on at the
Meetings and indicates those shareholders who are being solicited with respect
to each proposal.
Proposal Shareholders Solicited
- -------- ----------------------
1. To elect Messrs. Frederick S. Wonham, The shareholders of Excelsior
Alfred Tannachion, Donald Campbell, Institutional Trust will vote
Joseph H. Dugan, Wolfe J. Frankl, Robert together as a single class.
A. Robinson, Rodman L. Drake and
Jonathan Piel trustees of Excelsior
Institutional Trust.
-2-
<PAGE>
2. To approve a new Investment Advisory The shareholders of each Fund
Agreement between each Company and of each Company will vote
United States Trust Company of New York separately on a Fund-by-Fund
and U.S. Trust Company and a new basis on the new Investment
Sub-Advisory Agreement among United States Advisory Agreement, and all
Trust Company of New York, U.S. Trust classes of the same Fund will
Company and U.S. Trust Company, N.A. vote together. The
shareholders of the California
Tax-Exempt Income Fund will
vote separately on the new
Sub-Advisory Agreement.
A Proxy is enclosed with respect to the shares you own in a Company.
If the Proxy is executed properly and returned, the shares represented by it
will be voted at the Meetings in accordance with the instructions thereon. Each
full share is entitled to one vote and each fractional share to a proportionate
fractional vote. If you do not expect to be present at a Meeting and wish your
shares to be voted, please complete the enclosed Proxy and mail it in the
enclosed reply envelope.
THE BOARDS OF EXCELSIOR FUNDS, INC., EXCELSIOR
TAX-EXEMPT FUNDS, INC. AND EXCELSIOR INSTITUTIONAL TRUST
RECOMMEND A VOTE FOR THE APPROVAL OF EACH PROPOSAL APPLICABLE
TO SUCH COMPANY DESCRIBED IN THIS JOINT PROXY STATEMENT.
-3-
<PAGE>
INTRODUCTION
On January 12, 2000, The Charles Schwab Corporation ("Schwab") and
U.S. Trust Corporation entered into a definitive agreement to merge (the
"Merger"). After the merger, U.S. Trust Corporation will be a wholly-owned
subsidiary of Schwab. The Merger is anticipated to close by July 2000; however,
it is subject to a number of conditions, including certain regulatory and
shareholder approvals.
United States Trust Company of New York ("U.S. Trust NY") and U.S.
Trust Company ("U.S. Trust Co." and together with U.S. Trust NY, "U.S. Trust" or
the "Investment Adviser"), subsidiaries of U.S. Trust Corporation and the
investment advisers to the Companies, will continue to serve as investment
advisers to the Companies after the Merger. U.S. Trust Company, N.A. ("U.S.
Trust NA" or the "Sub-Adviser") will continue to serve as sub-adviser to the
California Tax-Exempt Income Fund after the Merger. The Merger, however,
represents a change in ownership of the parent corporation of U.S. Trust NY,
U.S. Trust Co. and U.S. Trust NA and, as such, may have the effect under the
Investment Company Act of 1940 (the "1940 Act") of terminating the existing
advisory agreements between the Companies and U.S. Trust NY and U.S. Trust Co.
and the sub-advisory agreement among U.S. Trust NY, U.S. Trust Co. and U.S.
Trust NA (collectively, the "Existing Agreements") at the date of the
consummation of the Merger.
As a consequence of the Merger and in order to provide continuity of
investment advisory services, each of the Boards of Directors of Excelsior
Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. and the Board of Trustees of
Excelsior Institutional Trust (together, the "Boards" and, individually, a
"Board") has proposed for the approval of its respective shareholders new
advisory agreements with U.S. Trust. The Board of Directors of Excelsior Tax-
Exempt Funds, Inc. has also proposed for the approval of the shareholders of the
California Tax-Exempt Income Fund a new sub-advisory agreement among U.S. Trust
and U.S. Trust NA. Except as described below, the terms of the new investment
advisory and sub-advisory agreements are substantially the same as those in the
existing agreements. In addition, the advisory and sub-advisory fees provided
for in the existing agreements will remain the same and not change in the new
advisory and sub-advisory agreements. The election of Trustees of Excelsior
Institutional Trust is also on the agenda for the Meeting for Excelsior
Institutional Trust.
-4-
<PAGE>
PROPOSAL 1: ELECTION OF TRUSTEES
(EXCELSIOR INSTITUTIONAL TRUST)
The first proposal to be considered at the Meeting of Excelsior
Institutional Trust is the election of Trustees of Excelsior Institutional
Trust.
At the Meeting, shareholders of Excelsior Institutional Trust will be
asked to consider the election of eight board members who will constitute the
entire Board of Trustees of Excelsior Institutional Trust. Each Board member so
elected will hold office until his successor is elected and qualifies, or until
his term as a Trustee is terminated as provided in the Company's By-Laws. The
persons named as proxies in the accompanying Proxy have been designated by the
Company's Board and intend to vote for the nominees named below. All nominees
are incumbent Trustees who are standing for re-election. All nominees, except
Mr. Wonham, were most recently elected as Trustees of Excelsior Institutional
Trust at a Special Meeting of Shareholders held on November 15, 1995. Mr. Wonham
was elected Trustee of Excelsior Institutional Trust at a regular meeting of the
Board of Trustees held on December 15, 1995.
All shares represented by valid Proxies will be voted in the election
of Trustees for each nominee named below unless authority to vote for a
particular nominee is withheld. With respect to the Company, the eight nominees
who receive the highest number of votes cast at the Meeting will be elected as
Trustees. Cumulative voting is not permitted. Should any nominee withdraw from
the election or otherwise be unable to serve, the named proxies will vote for
the election of such substitute nominee as the Board of Trustees may recommend
unless a decision is made to reduce the number of Trustees. The following table
sets forth certain information about each of the nominees:
Trustee Principal Occupation During
Name Age Since Past 5 Years and Other Affiliations
- ---- --- ----- -----------------------------------
Frederick S. Wonham/1/ 68 12/95 Retired; Chairman of the Boards,
President, Treasurer and Director of
Excelsior Funds, Inc. and Excelsior Tax-
Exempt Fund (since 1995); Chairman of
the Board, President, Treasurer and
Trustee of Excelsior Funds and Excelsior
Institutional Trust (since 1995); Vice
Chairman of U.S. Trust Corporation and
U.S. Trust New York (from February 1990
until September 1995); and Chairman,
U.S. Trust Company (from March 1993 to
May 1997).
Donald L. Campbell 73 11/95 Retired; Director of Excelsior Funds,
Inc. and Excelsior Tax-Exempt Funds,
Inc. (since 1984); Director of UST
Master Variable Series, Inc. (from 1994
to June 1997); Trustee of Excelsior
Institutional Trust (since 1995); and
Director, Royal Life Insurance Co. of
New York (since 1991).
-5-
<PAGE>
Trustee Principal Occupation During
Name Age Since Past 5 Years and Other Affiliations
- ---- --- ----- -----------------------------------
Rodman L. Drake 56 6/94 Director of Excelsior Funds, Inc. and
Excelsior Tax-Exempt Funds, Inc. (since
1996); Trustee of Excelsior
Institutional Trust and Excelsior Funds
(since 1994); Director, Parsons
Brinkerhoff, Inc. (engineering firm)
(since 1995); President, Continuation
Investments Group, Inc. (since 1997);
President, Mandrake Group (investment
and consulting firm) (1994-1997);
Chairman, MetroCashcard International,
Inc. (since 1999); Director,
Hotelvision, Inc. (since 1999);
Director, Alliance Group Services, Inc.
(since 1998); Director, Hyperion Total
Return Fund, Inc. and three other funds
for which Hyperion Capital Management,
Inc. serves as investment adviser (since
1991); Co-Chairman, KMR Power
Corporation (power plants) (from 1993 to
1996); Director, The Latin America
Smaller Companies Fund, Inc. (from 1993
to 1998); 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 74 11/95 Retired; Director of Excelsior Funds,
Inc. and Excelsior Tax-Exempt Funds,
Inc. (since 1984); Director of UST
Master Variable Series, Inc. (from 1994
to June 1997); and Trustee of Excelsior
Institutional Trust (since 1995).
Wolfe J. Frankl 79 11/95 Retired; Director of Excelsior Funds,
Inc. and Excelsior Tax-Exempt Funds,
Inc. (since 1986); 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); and Trustee,
HSBC Funds Trust and HSBC Mutual Funds
Trust (since 1988).
Jonathan Piel 60 6/94 Director of Excelsior Funds, Inc. and
Excelsior Tax-Exempt Funds, Inc. (since
1996); Trustee of Excelsior
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 73 11/95 Director of Excelsior Funds, Inc. and
Excelsior Tax-Exempt Funds, Inc. (since
1987); Director of UST Master Variable
Series, Inc. (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.
(1974-1998); Trustee, HSBC Funds Trust
and HSBC Mutual Funds Trust (since
1982); and Director, Infinity Funds,
Inc. (since 1995).
-6-
<PAGE>
Trustee Principal Occupation During
Name Age Since Past 5 Years and Other Affiliations
- ---- --- ----- -----------------------------------
Alfred C.Tannachion/2/ 73 11/95 Retired; Director of Excelsior Funds,
Inc. and Excelsior Tax-Exempt Funds,
Inc. (1985 to 1995); Chairman of the
Board of Excelsior Funds, Inc. and
Excelsior Tax-Exempt Funds, Inc. (1991-
1997) and Excelsior Institutional Trust
(1996-1997); President and Treasurer of
Excelsior Funds, Inc. and Excelsior Tax-
Exempt Funds, Inc. (1994-1997) and
Excelsior Institutional Trust (1996-
1997); Chairman of the Board, President
and Treasurer of UST Master Variable
Series, Inc. (1994-1997); and Trustee of
Excelsior Institutional Trust (since
1995).
___________________
/1/ This Trustee is considered to be an "interested person" of the Company as
defined in the 1940 Act. As of December 31, 1999, Mr. Wonham owned 52,997
shares of U.S. Trust Corporation common stock; owned 95,242 "phantom
shares" in U.S. Trust Corporation's Deferred Income Account; possessed
voting control of an additional 3,435 shares of U.S. Trust Corporation; and
owned 33,675 shares of Chase Manhattan Corporation common stock.
/2/ This Trustee is considered to be an "interested person" of the Company as
defined in the 1940 Act. As of December 3, 1999, Mr. Tannachion owned 1,414
shares of Chase Manhattan Corporation and 2,000 shares of U.S. Trust
Corporation.
In the fiscal year of the Company ended March 31, 1999, the Trustees
met four times. Each of the current Trustees attended all of the meetings of the
Board.
The Board of Excelsior Institutional Trust has a Nominating Committee
consisting of Messrs. Drake, Piel and Robinson. The Nominating Committee is
responsible for considering candidates for election to the Board of the Company
in the event a position is vacated or created. The Nominating Committee of the
Company was constituted in March 2000 and, therefore, did not meet during the
fiscal year ended March 31, 1999. The Nominating Committee will consider
nominees recommended by the Company's shareholders. Shareholders who wish to
recommend a nominee should send nominations to the Secretary of the Company.
Excelsior Institutional Trust does not have audit or compensation
committees.
Each Trustee of Excelsior Institutional Trust receives an annual fee
of $4,000 plus a meeting fee of $250 for each meeting attended and is reimbursed
for expenses incurred in connection with service as a Trustee. Each Director of
Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. receives an annual
fee of $9,000 per Company plus a per Company meeting fee of $1,500 for each
meeting attended and is reimbursed for expenses for attending meetings. The
Chairman of the Boards of each of the Companies receives an additional $5,000
per annum with respect to each Company for services in this capacity. The
members of the Nominating Committee each receive $2,000 per Company for services
with respect to Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. and
$1,000 per annum with respect to Excelsior Institutional Trust.
As of March 6, 2000 the Board members and officers of Excelsior
Institutional Trust as a group owned beneficially less than 1% of the
outstanding shares of each Fund of each
-7-
<PAGE>
Company, and less than 1% of the outstanding shares of all Funds of the Company
in the aggregate.
The following chart provides certain information about the fees
received by the Company's Trustees in the fiscal year ended March 31, 1999.
<TABLE>
<CAPTION>
Total Compensation
Aggregate Pension or Retirement from the Companies
Compensation from Benefits Accrued as and Fund Complex*
Name of Excelsior Part of Paid to
Person/Position Institutional Trust Fund Expenses Directors/Trustees
- --------------- ------------------- ------------- ------------------
<S> <C> <C> <C>
Donald L. Campbell $4,750 None $33,250(3)**
Director/Trustee
Rodman L. Drake $5,000 None $41,250(4)**
Director/Trustee
Joseph H. Dugan $5,000 None $36,500(3)**
Director/Trustee
Wolfe J. Frankl $5,000 None $36,500(3)**
Director/Trustee
W. Wallace $3,500 None $28,000(4)**
McDowell, Jr.***
Director/Trustee
Jonathan Piel $5,000 None $41,500(4)**
Director/Trustee
Robert A. Robinson $5,000 None $36,500(3)**
Director/Trustee
Alfred C. Tannachion $5,000 None $36,500(3)**
Director/Trustee
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Total Compensation
Aggregate Pension or Retirement from the Companies
Compensation from Benefits Accrued as and Fund Complex*
Name of Excelsior Part of Paid to
Person/Position Institutional Trust Fund Expenses Directors/Trustees
- --------------- ------------------- ------------- ------------------
<S> <C> <C> <C>
Frederick S. Wonham $5,000 None $51,500(4)**
Chairman of the
Boards,
President and
Treasurer
</TABLE>
- ----------------------
* The "Fund Complex" consists of Excelsior Funds, Inc., Excelsior Tax-Exempt
Funds, Inc., Excelsior Funds and Excelsior Institutional Trust. As of
December 16, 1999, the sole portfolio of Excelsior Funds, the Institutional
Money Fund, was merged into Excelsior Funds, Inc.'s Money Fund. Excelsior
Funds, which is a Delaware business trust, has ceased operations and is in
the process of being deregistered as an investment company.
** Number of investment companies in the Fund Complex for which each
individual served as Director or Trustee.
*** Mr. McDowell resigned from the Companies on May 21, 1999.
-9-
<PAGE>
PROPOSAL 2: APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS
(WITH RESPECT TO THE INVESTMENT ADVISORY AGREEMENT, ALL FUNDS)
(WITH RESPECT TO THE SUB-ADVISORY AGREEMENT, THE CALIFORNIA TAX-EXEMPT INCOME
FUND ONLY)
At the Meetings, shareholders of each of the Funds will be asked to
vote on the approval of a new investment advisory agreement for their respective
Fund or Funds (such agreements, collectively, the "New Advisory Agreements") and
shareholders of the California Tax-Exempt Income Fund will also be asked to vote
on the approval of a new sub-advisory agreement for such Fund (such agreement,
the "New Sub-Advisory Agreement," and together with the New Advisory Agreements,
collectively, the "New Agreements"). The principal terms of the New Agreements
are summarized below.
A copy of each of the New Advisory Agreements is attached to this
Proxy Statement as an Appendix. The following chart indicates the relevant
Appendix for each Fund.
<TABLE>
<CAPTION>
FUND APPENDIX
- ---- --------
<S> <C>
EXCELSIOR FUNDS, INC.
International Fund, Latin America Fund, Pacific Asia Fund, A
Pan European Fund and Emerging Markets Fund.............................
Money Fund, Government Money Fund, Blended Equity Fund, Small Cap Fund,
Energy and Natural Resources Fund, Value and Restructuring Fund,
Treasury Money Fund, Managed Income Fund, Short-Term Government
Securities Fund, Intermediate-Term Managed Income Fund, Real Estate
Fund and Large Cap Growth Fund........................................... B
EXCELSIOR TAX-EXEMPT FUNDS, INC.
Tax-Exempt Money Fund, Intermediate-Term Tax-Exempt Fund, Long-Term
Tax-Exempt Fund, New York Tax-Exempt Money Fund, New York
Intermediate-Term Tax-Exempt Fund, Short-Term Tax-Exempt Fund and
California Tax-Exempt Income Fund........................................ C
EXCELSIOR INSTITUTIONAL TRUST
Equity Fund, Income Fund, Total Return Bond Fund, Value Equity Fund and
Optimum Growth Fund...................................................... D
International Equity Fund................................................ E
</TABLE>
A copy of the New Sub-Advisory Agreement is attached to this Proxy
Statement as Appendix F. The description of the New Advisory and Sub-Advisory
Agreements that follows is qualified in its entirety by reference to Appendices
A through F.
10
<PAGE>
U.S. Trust NY and U.S. Trust Co. are the investment advisers of the
Funds, and U.S. Trust NA is the sub-investment adviser of the California Tax-
Exempt Income Fund. U.S. Trust Corporation is the parent corporation of U.S.
Trust NY, U.S. Trust Co. and U.S. Trust NA.
Through its principal subsidiary Charles Schwab & Co., Inc., Schwab is
the nation's fourth largest financial services firm and the nation's largest
electronic brokerage firm, in each case measured by customer assets. At
December 31, 1999, Schwab served 6.6 million active accounts with $725 billion
in customer assets through 340 branch offices, four regional customer telephone
service centers and automated telephonic and online channels. Approximately 30%
of Schwab's customer assets and approximately 13% of its customer accounts are
managed by the 5,800 independent, fee-based investment advisors served by
Schwab's institutional investor segment.
The Merger is subject to Federal Reserve Board and other regulatory
approvals and to approval by U.S. Trust Corporation's shareholders. The
transaction is expected to close by July 2000.
As required by the 1940 Act, the existing investment advisory
agreements between each Company and U.S. Trust (each such agreement, an
"Existing Advisory Agreement") and the existing sub-advisory agreement between
U.S. Trust NA and U.S. Trust (the "Existing Sub-Advisory Agreement," and
together with the Existing Advisory Agreements, the "Existing Agreements")
provide for their automatic termination upon "assignment." Consummation of the
Merger may be deemed to be an assignment (as defined in the 1940 Act) of the
Existing Agreements resulting in the termination of the Existing Agreements in
accordance with their terms. In anticipation of the consummation of the Merger,
and to provide continuity in investment advisory services, the Board of
Directors and Trustees, as the case may be, of each of the Companies, including,
in each case, a majority of the Board members who are not "interested persons"
(as defined in the 1940 Act), at concurrent meetings held on March 3, 2000,
approved and directed that there be submitted to the shareholders of each Fund,
for approval, new investment advisory agreements between such Company and U.S.
Trust. In addition, the Board of Directors of Excelsior Tax-Exempt Funds, Inc.,
including a majority of the Board members who are not "interested persons" (as
defined in the 1940 Act), at a meeting held on March 3, 2000, approved and
directed that there be submitted to the shareholders of the California Tax-
Exempt Income Fund, for approval, a new sub-advisory agreement between U.S.
Trust and U.S. Trust NA.
If the Merger is not completed but the proposed advisory agreements
(and sub-advisory agreement with respect to the California Tax-Exempt Income
Fund) are approved by the shareholders, U.S. Trust will operate under the New
Advisory Agreements and U.S. Trust and U.S. Trust NA will operate under the New
Sub-Advisory Agreement with respect to the California Tax-Exempt Income Fund.
If the Merger is not completed, the New Agreements would become effective upon
termination of the definitive merger agreement. In the event the proposed
advisory agreement with respect to any Fund (or sub-advisory agreement with
respect to the California Tax-Exempt Income Fund) is not approved by
shareholders of such Fund and the Merger is completed, the Board of such Company
will promptly seek to enter into new advisory arrangements for such Fund,
subject to any required approval by the shareholders of such Fund. If the New
Agreements are not approved and the Merger is not completed, the Companies will
continue to operate under the Existing Agreements.
Compliance With Section 15(f) Of The 1940 Act
Section 15(f) of the 1940 Act provides that when a change in the
control of an investment adviser occurs, the investment adviser or any of its
affiliated persons may receive any amount or benefit in
11
<PAGE>
connection therewith as long as two conditions are satisfied. First, no "unfair
burden" may be imposed on the investment company as a result of the transaction
relating to the change of control, or any express or implied terms, conditions
or understandings applicable thereto. Second, during the three-year period
immediately following consummation of the transaction, at least 75% of the
investment company's board of directors must not be "interested persons" of the
investment adviser within the meaning of the 1940 Act.
With respect to the first condition, the term "unfair burden," as
defined in the 1940 Act, includes any arrangement during the two-year period
after the change in control whereby the investment adviser (or predecessor or
successor adviser), or any interested person of any such adviser, receives or is
entitled to receive any compensation, directly or indirectly, from the
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any person in connection with the
purchase or sale of securities or other property to, from, or on behalf of the
investment company (other than fees for bona fide principal underwriting
services). No Company is aware of any such compensation arrangements insofar as
any of their respective Funds is concerned.
With respect to the second condition, two of the Directors/Trustees
are currently interested persons of U.S. Trust Corporation and will become
interested persons of Schwab upon consummation of the Merger. Since at least 75%
of the Directors/Trustees will not be interested persons of Schwab upon
consummation of the Merger, each of the Companies expects to comply with this
condition of Section 15(f).
Description Of The Existing And New Agreements
The Existing Advisory Agreements were last approved by shareholders as follows:
<TABLE>
<CAPTION>
Fund Agreement Approved*
- ---- --------- --------
<S> <C> <C>
Excelsior Funds, Inc.
Money Fund....................................... May 16, 1997 July 29, 1988/1/
Government Money Fund............................ May 16, 1997 July 29, 1988/1/
Blended Equity Fund.............................. May 16, 1997 July 29, 1988/1/
Small Cap Fund................................... May 16, 1997 December 29, 1992/2/
Energy and Natural Resources Fund................ May 16, 1997 December 29, 1992/2/
Value and Restructuring Fund..................... May 16, 1997 December 29, 1992/2/
Latin America Fund............................... May 16, 1997 December 29, 1992/2/
Pacific/Asia Fund................................ May 16, 1997 December 29, 1992/2/
Pan European Fund................................ May 16, 1997 December 29, 1992/2/
Short-Term Government Securities Fund............ May 16, 1997 December 29, 1992/2/
Intermediate-Term Managed Income Fund............ May 16, 1997 December 29, 1992/2/
Large Cap Growth Fund............................ Amendment No. 1
Real Estate Fund................................. July 25, 1997 September 25, 1997/2/
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Fund Agreement Approved*
- ---- --------- --------
<S> <C> <C>
Emerging Markets Fund............................ Amendment No. 2
November 14, 1997 December 30, 1997/2/
Managed Income Fund.............................. May 16, 1997 July 29, 1988/1/
International Fund............................... May 16, 1997 July 29, 1988/1/
Treasury Money Fund.............................. May 16, 1997 November 20, 1991/1/
Excelsior Tax-Exempt Funds, Inc.
Tax-Exempt Money Fund............................ May 16, 1997 November 20, 1991/1/
Intermediate-Term Tax-Exempt Fund................ May 16, 1997 November 20, 1991/1/
Long-Term Tax-Exempt Fund........................ May 16, 1997 November 20, 1991/1/
New York Intermediate-Term Tax-Exempt Fund....... May 16, 1997 November 20, 1991/1/
Short-Term Tax-Exempt Securities Fund............ May 16, 1997 December 29, 1992/2/
California Tax-Exempt Income Fund................ May 16, 1997 September 25, 1996/2/
New York Tax-Exempt Money Fund................... Amendment No. 1
July 31, 1998 August 3, 1998/2/
Excelsior Institutional Trust
Equity Fund...................................... May 16, 1997 November 15, 1995/3/
Income Fund...................................... May 16, 1997 November 15, 1995/3/
Total Return Bond Fund........................... May 16, 1997 November 15, 1995/3/
Value Equity Fund................................ May 16, 1997 May 1, 1996/2/
Optimum Growth Fund.............................. May 16, 1997 May 1, 1996/2/
International Equity Fund........................ December 28, 1998 December 28, 1998/4/
</TABLE>
The Existing Sub-Advisory Agreement was last approved by shareholders as
follows:
<TABLE>
<S> <C> <C>
California Tax-Exempt Income Fund................ May 16, 1997 September 25, 1996/2/
</TABLE>
______________________
* The Existing Agreements were approved by the relevant Company's Board as of
the dates indicated in the column captioned "Agreement." The Existing
Agreements were entered into as a result of a restructuring of U.S. Trust
that did not involve a change of control of the entity; consequently
13
<PAGE>
shareholder approval of the Existing Agreements was not required by the
1940 Act. The dates in the column captioned "Approved" represent the dates
of the shareholder approval of the investment advisory and sub-advisory
agreement (the "Previous Agreements") that pre-dated the Existing
Agreements. The Previous Agreements were substantially similar to the
Existing Agreements.
/1/ These Agreements were submitted to shareholders for purposes of approval of
amendments in connection with certain undertakings of the investment
adviser.
/2/ Consent of Sole Shareholder (initial approval).
/3/ These Agreements were submitted to shareholders in connection with the
withdrawal of the Funds from a master-feeder structure.
/4/ This Agreement was submitted to shareholders for purposes of approving U.S.
Trust as investment adviser to the Fund.
Terms and Conditions. As previously noted, the terms and conditions
of each of the New Advisory Agreements are substantially the same as those of
its corresponding Existing Advisory Agreement and the terms and conditions of
the New Sub-Advisory Agreement are substantially the same as those of the
Existing Sub-Advisory Agreement, except that:
. each New Advisory Agreement and the New Sub-Advisory Agreement will be
dated as of the date of the Merger if the Merger is completed, or upon
termination of the definitive merger agreement if the Merger is not
completed;
. each New Advisory Agreement and Sub-Advisory Agreement provides that
each of U.S. Trust and U.S. Trust NA, as the case may be, could
provide advisory services through its own employees or the employees
of an affiliated company as long as such employees function as part of
an organized group of persons, the use of such employees does not
result in a change of actual control or management of the Investment
Adviser or Sub-Adviser, as the case may be under the 1940 Act, and the
use of such employees has been approved by the Board of the relevant
Company;
. each New Advisory and Sub-Advisory Agreement provides that an
affiliate may assume the obligations of U.S. Trust and U.S. Trust NA,
as the case may be, under the New Advisory or Sub-Advisory Agreement,
as the case may be, so long as:
. the affiliate is qualified to act as an investment adviser to the
relevant Company under applicable law;
. the assumption will not result in a change of actual control or
management of U.S. Trust or U.S. Trust NA, as the case may be,
under the 1940 Act; and
. the assumption of U.S. Trust's and U.S. Trust NA's obligations
has been approved by the Board of the relevant Company.
. the New Advisory Agreement for each of the Latin America Fund, Pacific
Asia Fund, Pan European Fund and Emerging Markets Fund of Excelsior
Funds, Inc. provide that U.S. Trust may appoint a sub-adviser to
perform the Investment Adviser's obligations, subject to certain
restrictions.
. the New Advisory Agreement for each Fund provide that they may be
amended by a vote of the Board of each Company if the amendment does
not require shareholder approval under the 1940 Act. The Existing
Agreements for Excelsior Institutional Trust already have this
provision.
14
<PAGE>
Unless a difference is specifically discussed above the terms of the
New Agreements are substantially the same as those in the Existing Agreements
and there are no other material differences. The advisory fees provided for in
the Existing Agreements will remain the same and not change in the New
Agreements.
Each Existing and New Advisory Agreement with respect to the Funds of
Excelsior Funds, Inc. (other than the International Fund) and Excelsior Tax-
Exempt Funds, Inc., provides that, subject to the supervision of the Board of
Directors of such Company, U.S. Trust will, among other things, (1) provide a
continuous investment program for the Funds that are the subject of the
agreement, including investment research and management with respect to all
securities, investments, cash and cash equivalents in the Funds that are the
subject of such agreement; (2) determine from time to time what securities and
other investments will be purchased, retained or sold by the Funds that are the
subject of the agreement; (3) provide the services rendered by it in accordance
with the investment objectives and policies as stated in the prospectus of the
Funds that are the subject of the agreement; (4) place orders pursuant to its
investment determinations for the Funds that are the subject of the agreement
either directly with the issuer or with any broker or dealer selected by it; (5)
maintain books and records with respect to the securities transactions relating
to the Funds that are the subject of the agreement; and (6) render to such
Company's Board of Directors such periodic and special reports as the Board may
request.
The Existing and New Advisory Agreement between U.S. Trust and
Excelsior Funds, Inc. with respect to the International Fund, and the New
Advisory Agreement with respect to the Latin America Fund, Pacific Asia Fund,
Pan European Fund and Emerging Markets Fund permits the appointment of a sub-
adviser to the Funds and provides that U.S. Trust will, among other things, (1)
subject to the supervision of the Board of Directors of the Company, provide
continuous investment advisory assistance and portfolio management advice for
the Funds in accordance with the Funds' investment objectives and policies as
stated in the prospectus; (2) advise the sub-adviser with respect to U.S.
economic factors and trends; (3) assist and consult with the sub-adviser in
connection with the Funds' continuous investment program; (4) approve lists of
foreign countries recommended by the sub-adviser for investments of the Funds;
(5) place orders with respect to purchases and sales of the securities of U.S.
issuers as described in the prospectus of the Funds; (6) manage, in cooperation
with the sub-adviser, the Funds' short-term cash balance positions denominated
in U.S. dollars to preserve required liquidity of the Funds' assets (including
placing of orders for U.S. money market instruments); (7) monitor the sub-
adviser's investment procedures; and (8) periodically review, evaluate and
report to the Company's Board of Directors with respect to the performance of
the sub-adviser under the sub-advisory agreement. Under the Agreement, U.S.
Trust must remain fully responsible for the provision of the sub-adviser's
services. The New Advisory Agreement for the International Fund of Excelsior
Institutional Trust contains identical provisions to those discussed above.
Each Existing and New Advisory Agreement with respect to the Value
Equity Fund, Optimum Growth Fund, Equity Fund, Income Fund and Total Return Bond
Fund of Excelsior Institutional Trust provides that, subject to the general
supervision of the Company's Board of Trustees, U.S. Trust will, among other
things, (1) prepare (or otherwise obtain) and evaluate on both a macroeconomic
and microeconomic level any pertinent research, statistical, financial and
economic data, and other information necessary or appropriate for the
performance of its duties under such agreement; (2) formulate and continuously
review, supervise, and administer an investment program for the Funds that are
the subject of such
15
<PAGE>
agreement; (3) determine the securities to be purchased by the Funds that are
the subject of such agreement, and continuously monitor such securities and the
issuers thereof to determine whether and when to sell, exchange, or take any
other action concerning such securities; (4) determine whether and how to
exercise warrants, voting rights, or other rights with respect to the securities
of the Funds that are the subject of such agreement; (5) provide valuations with
respect to the securities held by the Funds that are the subject of such
agreement (if so requested by the Board); (6) render regular reports to the
Company's officers and the Company's Board concerning the investment performance
of the Funds that are the subject of such agreement, the discharge by U.S. Trust
of its responsibilities under such agreement, and any other subject that the
Company's officers or Board reasonably may request; and (7) assist the Company's
officers in connection with the operation of the Company and perform any further
acts that may be necessary to effectuate the purposes of such agreement.
The Existing and New Advisory Agreements with respect to the Value
Equity Fund, Optimum Growth Fund, Equity Fund, Income Fund and Total Return Bond
Fund of Excelsior Institutional Trust also authorizes U.S. Trust to employ one
or more sub-advisers to perform any or all of the advisory services described
above under the supervision of U.S. Trust.
Pursuant to the Existing and New Sub-Advisory Agreement, U.S. Trust
will employ U.S. Trust NA with respect to the California Tax-Exempt Income Fund.
Under such Existing and New Sub-Advisory Agreement, U.S. Trust NA will (1)
subject to the supervision of the Board of Directors of Excelsior Tax-Exempt
Funds, Inc. and the oversight of U.S. Trust, provide a continuous investment
program for the Fund, including investment research and management with respect
to all securities and investments of the Fund; (2) determine, subject to U.S.
Trust's approval, what securities and other investments will be purchased,
retained or sold by the Fund, including, with the assistance of U.S. Trust if
required, the Fund's investments in futures; (3) provide the services rendered
by it in accordance with the Fund's investment objectives and policies as stated
in the Fund's prospectus; (4) manage the Fund's overall cash positions; (5)
place orders pursuant to its investment determinations for the Fund either
directly with the issuer or with any broker or dealer selected by it; (6)
maintain books and records with respect to the securities and other investment
transactions entered into pursuant to the agreement; and (7) render to U.S.
Trust and the Board of Directors of Excelsior Tax-Exempt Funds, Inc. such
periodic and special reports as they may request. In exchange for the services
provided by U.S. Trust NA under the Existing and New Sub-Advisory Agreement,
U.S. Trust will pay U.S. Trust NA a fee out of the investment advisory fee U.S.
Trust receives from the California Tax-Exempt Income Fund.
Each Existing and New Advisory Agreement provides that U.S. Trust will
furnish at its own expense all office space, office facilities, equipment and
personnel necessary or appropriate to the performance of its duties under such
Existing and New Advisory Agreement. U.S. Trust will also pay the salaries and
fees of all personnel of the Company or U.S. Trust performing services related
to U.S. Trust's duties under each such Existing and New Advisory Agreement. The
Existing and New Sub-Advisory Agreement provides that U.S. Trust will pay all
expenses incurred by U.S. Trust NA in connection with the activities of U.S.
Trust NA under the Existing and New Sub-Advisory Agreement, other than the costs
of securities, commodities and other investments purchased for the California
Tax-Exempt Income Fund.
Each Existing and New Advisory Agreement also provides that U.S. Trust
may place orders for portfolio securities either directly with the issuer or
with any broker or dealer selected by U.S. Trust. The Existing and New Sub-
Advisory Agreement makes similar provision with respect to U.S. Trust NA in
relation to the California Tax-Exempt Income Fund. In placing orders with
brokers and/or dealers under
16
<PAGE>
such Agreements, U.S. Trust and U.S. Trust NA are obligated to use their best
efforts to obtain the best net price and most favorable execution of their
orders, after taking into account all factors they deem relevant, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker and/or dealer, and the
reasonableness of the commission, if any, both for the specific transaction and
on a continuing basis. Consistent with this obligation, U.S. Trust and U.S.
Trust NA may, to the extent permitted by law, purchase and sell portfolio
securities from and to brokers 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 Company and/or other accounts over which U.S. Trust or
U.S. Trust NA, as the case may be, exercises investment discretion. U.S. Trust
and U.S. Trust NA are each authorized under the respective agreements to pay a
broker who provides such brokerage and research services a commission for
effecting a securities transaction which is in excess of the amount of the
commission another broker would have charged for effecting that transaction, if
U.S. Trust or U.S. Trust NA, as the case may be, determines in good faith that
such commission was 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 U.S. Trust or U.S.
Trust NA, as the case may be, with respect to the accounts as to which it
exercises investment discretion.
Under the Existing and New Advisory Agreements between U.S. Trust and
Excelsior Institutional Trust, U.S. Trust may execute transactions through
itself and its affiliates on a securities exchange provided that the commissions
paid by the Company are "reasonable and fair" compared to commissions received
by other brokers having comparable execution capability and provided that the
transactions are effected pursuant to procedures established by the Board of the
relevant Company. In each case, an affiliated broker may transmit, clear and
settle transactions for the Company that are executed on a securities exchange
provided that the affiliated broker arranges for unaffiliated brokers to execute
the transactions.
In addition, the Board of Trustees, in its discretion, may instruct
U.S. Trust to effect all or a portion of its securities transactions with one or
more brokers and/or dealers selected by the Board of Trustees, if the Board of
Trustees determines that the use of such brokers and/or dealers is in the best
interest of the Company. The New Advisory Agreements with respect to the Funds
of Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. prohibit U.S.
Trust from purchasing or selling portfolio securities to itself, the Fund's
principal underwriter, and, in the case of the International Fund, the sub-
adviser, or any affiliated person of any of the foregoing, except as permitted
by the Securities and Exchange Commission.
Under the Existing and New Advisory Agreements between U.S. Trust and
Excelsior Institutional Trust, when U.S. Trust deems the purchase or sale of a
security to be in the best interest of the Company as well as other customers,
U.S. Trust may, to the extent permitted by applicable law, aggregate the
securities to be so sold or purchased in order to obtain the best execution or
lower brokerage commissions. Under such agreements, U.S. Trust may also
purchase or sell a particular security for one or more customers in different
amounts. Allocation of the securities purchased or sold in either manner, as
well as the expenses incurred in the transactions, will be made by U.S. Trust in
a manner that such entity believes is equitable and consistent with applicable
law and regulations and with its fiduciary obligations to the Company and to
such other customers.
The Existing and New Advisory Agreement between U.S. Trust and
Excelsior Institutional Trust requires U.S. Trust to give the Company the
benefit of its best judgment and efforts in
17
<PAGE>
rendering services to the Company. Under all of the Existing and New Agreements,
neither U.S. Trust nor, with respect to the Existing and New Sub-Advisory
Agreement, U.S. Trust NA will be liable to the Company or to any shareholder of
any of the Company's Funds, for any act or omission in the course of, or
connected with, rendering services under such agreement or for any losses that
may be sustained in the purchase, holding or sale of any security, in each case,
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations or duties under such Existing and New Agreement.
The liability of U.S. Trust under each New Advisory Agreement will be joint, but
not several.
Effective Date of New Agreements. If approved by a majority of the
outstanding shares (as defined below) of each Company's Funds and the Merger is
completed, each New Advisory Agreement and the New Sub-Advisory Agreement will
become effective at the time of the consummation of the Merger, and will
continue in effect until July 31, 2001 (unless terminated sooner). If each New
Advisory and Sub-Advisory Agreement are approved by a majority of each Fund's
outstanding shares, but the Merger is not completed, the New Advisory and
Sub-Advisory Agreements will be dated as of the date of termination of the
definitive merger agreement. Thereafter, if not terminated, each such New
Agreement will continue in effect for successive annual periods, provided that
such continuance is specifically approved at least annually by the vote of a
majority of those members of the Board who are not parties to such New Advisory
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party, and either: (i) the vote of a majority of the outstanding shares of the
Company's Funds; or (ii) the vote of a majority of the full Board of the
Company.
Termination. Each Existing and New Advisory Agreement provides that
it may be terminated at any time, without the payment of any penalty, either by:
(i) the Company, by action of the Board or by the vote of a majority of the
Fund's outstanding shares, on 60 days' written notice to U.S. Trust; or (ii)
U.S. Trust, on 90 days' written notice to the relevant Company. The Existing
and New Sub-Advisory Agreements provides that they may be terminated at any
time, without the payment of any penalty, either by: (i) U.S. Trust or
Excelsior Tax-Exempt Funds, Inc. (by action of the Board or by the vote of a
majority of the outstanding shares of the California Tax-Exempt Income Fund), on
60 days' written notice to U.S. Trust NA; or (ii) U.S. Trust NA, on 90 days'
written notice to both Excelsior Tax-Exempt Funds, Inc. and U.S. Trust. The
Existing and New Sub-Advisory Agreements also provide that they will terminate
automatically upon the termination of the investment advisory agreement between
U.S. Trust and Excelsior Tax-Exempt Funds, Inc., with respect to the California
Tax-Exempt Income Fund. Each Existing and New Advisory and Sub-Advisory
Agreement provide that they will terminate upon an "assignment," as defined in
the 1940 Act.
Fees. For the services provided and the expenses assumed pursuant to
the Existing and New Agreements for Excelsior Funds, Inc., U.S. Trust is
entitled to a fee, computed daily and payable monthly, at the following annual
rates: 0.25% of the average daily net assets of each of the Money Fund and the
Government Money Fund; 0.30% of the average daily net assets of each of the
Treasury Money Fund and the Short-Term Government Securities Fund; 0.35% of the
average daily net assets of the Intermediate-Term Managed Income Fund; 0.60% of
the average daily net assets of each of the Small Cap Fund, the Energy and
Natural Resources Fund and the Value and Restructuring Fund; 0.75% of the
average daily net assets of each of the Blended Equity Fund, Managed Income Fund
and Large Cap Growth Fund; 1.00% of the average daily net assets of each of the
International Fund, Latin America Fund, Pacific/Asia Fund, Pan European Fund and
Real Estate Fund; and 1.25% of the average daily net assets of the Emerging
Markets Fund.
For the services provided and the expenses assumed pursuant to the
Existing and New Agreements for Excelsior Tax-Exempt Funds, Inc., U.S. Trust is
entitled to a fee, computed daily and payable monthly, at the following annual
rates: 0.25% of the average daily net assets of the Tax-Exempt Money Fund;
0.30% of the average daily net assets of the Short-Term Tax-Exempt Securities
Fund; 0.35% of the average daily net assets of the Intermediate-Term Tax-Exempt
Fund; 0.50% of the average daily net
18
<PAGE>
assets of each of the Long-Term Tax-Exempt Fund, New York Intermediate-Term Tax-
Exempt Fund, California Tax-Exempt Income Fund and the New York Tax-Exempt Money
Fund.
For the services provided and the expenses assumed pursuant to the
Existing and New Agreements for Excelsior Institutional Trust, U.S. Trust is
entitled to a fee, computed daily and payable monthly, at the following annual
rates: 0.65% of the average daily net assets of each of the Equity Fund, Value
Equity Fund, Optimum Growth Fund, Income Fund and Total Return Bond Fund and
1.00% of the average daily net assets of the International Equity Fund.
For the fiscal year or period ended March 31, 1999, Excelsior Funds,
Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Institutional Trust paid
U.S. Trust net advisory fees and U.S. Trust voluntarily waived advisory fees in
the following amounts:
<TABLE>
<CAPTION>
Total
Advisory Total Fee
Funds Fee Paid Waived
----- -------- ------
<S> <C> <C>
Excelsior Funds, Inc.
Blended Equity....................................... $4,320,430 $360,040
Large Cap Growth Fund................................ $ 803,946 $ 44,157
Small Cap Fund....................................... $ 241,815 $ 51,882
Value and Restructuring Fund......................... $2,624,874 $639,405
Energy and Natural Resources Fund.................... $ 219,983 $ 41,522
Real Estate Fund..................................... $ 295,825 $ 86,406
International Fund................................... $1,935,661 $203,778
Latin America Fund................................... $ 374,039 $ 40,751
Pacific/Asia Fund.................................... $ 255,375 $ 26,291
Pan European Fund.................................... $1,868,811 $142,822
Emerging Markets Fund................................ $ 26,108 $ 48,466
Intermediate-Term Managed Income Fund................ $ 317,118 $ 74,201
Short-Term Government Securities Fund................ $ 98,059 $ 40,855
Managed Income Fund.................................. $1,287,808 $272,533
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Total
Advisory Total Fee
Funds Fee Paid Waived
----- -------- ------
<S> <C> <C>
Money Fund........................................... $1,475,748 $358,360
Government Money Fund................................ $1,381,779 $184,188
Treasury Money Fund.................................. $1,403,045 $151,843
Excelsior Tax-Exempt Funds, Inc.
Tax-Exempt Money Fund................................ $2,696,982 $827,107
New York Tax-Exempt Money Fund....................... $ 277,593 $532,521
Long-Term Tax-Exempt Fund............................ $ 690,785 $150,919
Intermediate-Term Tax-Exempt Fund.................... $ 844,392 $186,350
Short-Term Tax-Exempt Securities Fund................ $ 92,164 $ 28,715
New York Intermediate-Term Tax-Exempt Fund........... $ 696,284 $ 33,685
California Tax-Exempt Income Fund.................... -0- $240,924
Excelsior Institutional Trust
Value Equity Fund.................................... $ 135,038 $ 91,255
Optimum Growth Fund.................................. $ 304,737 $155,809
Equity Fund.......................................... $ 684,933 $298,579
Income Fund.......................................... $ 150,590 $262,853
Total Return Bond Fund............................... $ 530,461 $781,974
International Equity Fund............................ $ 135,769 $ 84,911
</TABLE>
Evaluation By The Boards Of The Companies.
The New Advisory Agreements relating to each Company's Funds were
unanimously approved by the Board of each such Company and by a majority of
those members of each such Board who were not "interested persons" (as that term
is defined in the 1940 Act) of any party to such Company's New
20
<PAGE>
Advisory Agreement at the concurrent meetings held on March 3, 2000. Each Board
considered the Merger, that the New Advisory Agreements for the Company are
substantially the same as the Company's Existing Advisory Agreements (except as
noted above) and that the contractual advisory fee rate payable by each Fund
under the New Advisory Agreement for the Company would be identical to that
payable under the Company's Existing Advisory Agreements. Each Board also
considered the benefits that U.S. Trust may derive from the New Advisory
Agreements, including but not limited to soft dollar arrangements. With respect
to the provisions of the New Agreements regarding use of employees and
affiliates of U.S. Trust, each Board considered that such provisions would allow
U.S. Trust to use the best talent within its organization to operate the Funds.
The Board of Excelsior Funds, Inc. also considered that the provision permitting
U.S. Trust to appoint a sub-adviser for the Latin America Fund, Pacific/Asia
Fund, Pan European Fund and Emerging Markets Fund would enable U.S. Trust to
appoint a third party to manage those Funds if it thought it was in the Funds'
best interest to do so and the appointment received Board approval. Finally, the
Boards of Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. considered
that the provision permitting the Boards of such Companies to approve an
amendment to the New Agreements unless shareholder approval was required under
the 1940 Act was permitted by current law and would provide the Companies' with
the flexibility to make non-material changes to the agreements without the
expense of a shareholder vote. Based on its evaluation, each Board concluded
that approval of the New Advisory Agreements relating to such Company's Funds
would be in the best interests of the Company and its shareholders.
The Board of Directors of Excelsior Tax-Exempt Funds, Inc. also undertook
similar consideration with respect to the New Sub-Advisory Agreement. Based on
its evaluation, the Board of Excelsior Tax-Exempt Funds, Inc., concluded that
approval of the New Sub-Advisory Agreement would be in the best interests of the
Company and its shareholders.
Information About the Proposed Co-Investment Advisers. U.S. Trust NY,
which has its principal offices at 114 West 47/th/ Street, New York, New York
10036, is a New York State-chartered bank and trust company and a member bank of
the Federal Reserve System. U.S. Trust Co., which has its principal offices at
225 High Ridge Road, East Building, Stamford, Connecticut 06905, is an FDIC-
insured Connecticut state bank and trust company. U.S. Trust NY and U.S. Trust
Co. serve as co-investment advisers to the Companies under the Existing Advisory
Agreements and are wholly owned subsidiaries of the U.S. Trust Corporation, a
registered bank holding company, which has its principal offices at 114 West
47/th/ Street, New York, New York 10036. U.S. Trust provides wealth management,
fiduciary and banking services to individuals, corporations and institutions,
both nationally and internationally, including investment management and
consulting, trust and estate services, financial and estate planning, corporate
trust and agency services, custodial services and personal and corporate
banking. On December 31, 1999, U.S. Trust had approximately $55.0 billion in
aggregate assets under management.
The principal executive officers and directors of U.S. Trust NY and
their principal occupations as of December 31, 1999 are set forth in Annex I
hereto.
The principal executive officers and directors of U.S. Trust Co. and
their principal occupations as of December 31, 1999 are set forth in Annex II
hereto.
U.S. Trust currently serves as investment adviser to the following
registered investment company portfolios, which have investment objectives
similar to the Funds. These portfolios, their approximate net assets (as of
October 31, 1999, except for Excelsior Income Shares, Inc. for which assets are
given as of December 31, 1999), and the annual advisory fees payable by these
portfolios to U.S. Trust and fees waived by U.S. Trust are as follows:
<TABLE>
<CAPTION>
Annual Net Advisory Fees Waived/
Name of Investment Company Approximate Net Assets Advisory Fees Expenses Reimbursed
- -------------------------- ---------------------- ------------- -------------------
<S> <C> <C> <C>
UST Private Equity Investors Fund II, Inc. $ 40,295,269 $ 321,323 $146,907
Excelsior Private Equity Fund II, Inc. $245,106,914 $2,364,920 0
Excelsior Income Shares, Inc. $ 38,282,699 $ 193,272 0
</TABLE>
21
<PAGE>
No officer or director or trustee of any of the Companies is an officer,
employee, or general partner of U.S. Trust or U.S. Trust NA.
Information About the Proposed Sub-Investment Adviser. U.S. Trust NA,
which has its principal offices at 515 South Flower Street, Los Angeles, CA
90071, is a national bank having trust powers. U.S. Trust NA serves as sub-
investment adviser to the Excelsior Tax-Exempt Funds, Inc., with respect to the
California Tax-Exempt Income Fund, under the Existing Sub-Advisory Agreement and
is a wholly-owned subsidiary of the U.S. Trust Corporation, a registered bank
holding company, which has its principal offices at 114 West 47/th/ Street, New
York, New York 10036. U.S. Trust NA provides wealth management, fiduciary and
banking services to individuals, corporations and institutions, both nationally
and internationally, including investment management and consulting, trust and
estate services, financial and estate planning, corporate trust and agency
services, and personal and corporate banking. U.S. Trust NA also provides
specialized investment management, fiduciary and consulting services to employee
benefit plans with respect to plan holdings of employer stock. On December 31,
1999, U.S. Trust NA had approximately $19.7 billion in assets under management.
The principal executive officers and directors of U.S. Trust NA and their
principal occupations as of December 31, 1999 are set forth in Annex III hereto.
The approval of each New Advisory Agreement requires the affirmative vote
of the holders of a "majority of the outstanding shares" of each Fund to which
it would apply (as defined by the 1940 Act), which means the lesser of (a) the
holders of 67% or more of the shares of each Fund present at the Meetings if the
holders of more than 50% of the outstanding shares of such Fund are present in
person or by proxy or (b) more than 50% of the outstanding shares of such Fund.
This voting requirement is hereafter referred to as a "majority of the
outstanding shares." For more information, see "Voting Information - Quorum."
If a New Advisory Agreement is approved by the shareholders of a Fund and
the Merger is completed, then the corresponding Existing Advisory Agreement will
terminate with respect to such Fund upon the consummation of the Merger. If a
New Advisory Agreement is not approved with respect to any Fund and the merger
is consummated, then the Board of the relevant Company will promptly seek to
enter into a new advisory arrangement for the Fund, subject to any required
approval by the Fund's shareholders.
If the Merger is not completed and the New Advisory and Sub-Advisory
Agreements are approved by each Fund's shareholders, the Existing Advisory and
Sub-Advisory Agreements will terminate on the date that the definitive merger
agreement is terminated and the New Advisory and Sub-Advisory Agreements will
become effective on such date.
If the Merger is not completed and the New Advisory and Sub-Advisory
Agreements are not approved by each Fund's shareholders, U.S. Trust will
continue to operate under the Existing Advisory and Sub-Advisory Agreements.
The New Sub-Advisory Agreement must be approved by a "majority of the
outstanding shares" of the California Tax-Exempt Income Fund (as described
above). If the New Sub-Advisory Agreement is approved by shareholders of the
Fund and the Merger is completed, then the Existing Sub-Advisory Agreement will
terminate upon the execution of the New Sub-Advisory Agreement. If the New Sub-
Advisory Agreement is not approved with respect to the Fund and the Merger is
completed, then the Board will promptly seek to enter into a new sub-advisory
arrangement for the Fund, subject to any required approval by the Fund's
shareholders.
THE BOARDS OF EACH COMPANY RECOMMEND
THAT SHAREHOLDERS VOTE "FOR" THE NEW ADVISORY AND
SUB-ADVISORY AGREEMENTS
22
<PAGE>
VOTING INFORMATION
Record Date. Only shareholders of record at the close of business on
March 6, 2000 will be entitled to vote at the Meetings. On that date, the
number of outstanding shares of each of the Funds were as follows:
Number of Outstanding
Company and Fund Shares
- ---------------- ---------------------
Excelsior Funds, Inc.
- ---------------------
Blended Equity Fund
Large Cap Growth Fund
Small Cap Fund
Value and Restructuring Fund
Energy and Natural Resources Fund
Real Estate Fund
International Fund
Latin America Fund
Pacific/Asia Fund
Pan European Fund
Emerging Markets Fund
Short-Term Government Securities Fund
Intermediate-Term Managed Income Fund
Managed Income Fund
Money Fund
Government Money Fund
Treasury Money Fund
23
<PAGE>
Number of Outstanding
Company and Fund Shares
- ---------------- ---------------------
Excelsior Tax-Exempt Funds, Inc.
- --------------------------------
Tax-Exempt Money Fund
New York Tax-Exempt Money Fund
Long-Term Tax-Exempt Fund
Intermediate-Term Tax-Exempt Fund
Short-Term Tax-Exempt Securities Fund
New York Intermediate-Term Tax-Exempt Fund
California Tax-Exempt Income Fund
Excelsior Institutional Trust
- -----------------------------
Value Equity Fund
Optimum Growth Fund
Equity Fund
Income Fund
Total Return Bond Fund
International Equity Fund
All shares of Excelsior Institutional Trust will vote in the aggregate
and not by class or Fund at the Meeting with respect to Proposal 1. With
respect to Proposal 2 as to the approval of the New Advisory Agreements, each
Fund of each Company will vote separately on a Fund-by-Fund basis and all
classes of a Fund will vote together. With respect to Proposal 2 as to the
approval of the New Sub-Advisory Agreement, the shareholders of the California
Tax-Exempt Income Fund will vote separately as a single class.
If you do not plan to be present at a Meeting, you should send your
vote in by one of the following methods:
1. Complete, sign and return the enclosed proxy card(s) promptly in
the postage-paid envelope; or
24
<PAGE>
2. Sign the proxy card and fax both sides to D.F. King & Co., Inc.,
the proxy solicitor, at ( ) _______.
3. Vote by phone by calling ________________.
4. Vote through the Internet by ________________.
Quorum. A quorum is constituted with respect to each Company, and,
for Proposal 2 with respect to each Fund by the presence in person or by proxy
of the holders of more than 50% of the outstanding shares entitled to vote. For
purposes of determining the presence of a quorum, abstentions and broker "non-
votes" (that is, proxies from brokers or nominees indicating that such persons
have not received instructions from the beneficial owners or other persons
entitled to vote shares on a particular matter with respect to which the brokers
or nominees do not have discretionary power), will be treated as shares that are
present at a Meeting. Abstentions and broker "non-votes" will have the effect of
a "no" vote for purposes of obtaining the requisite approval of Proposal 2 but
not Proposal 1.
In the event that a quorum is not present at a Meeting or at any
adjournment thereof, or in the event that a quorum is present at a Meeting but
sufficient votes to approve any of the proposals are not received, the persons
named as proxies, or their substitutes, may propose and vote for one or more
adjournments of a Meeting to permit the further solicitation of proxies. Any
such adjournment will require the affirmative vote of a majority of those shares
affected by the adjournment that are represented at a Meeting in person or by
proxy. If a quorum is present, the persons named as proxies will vote those
proxies which they are entitled to vote FOR any of the proposals in favor of
such adjournments, and will vote those proxies required to be voted AGAINST all
proposals against any such adjournments. A shareholder vote may be taken with
respect to a Company or one or more of such Company's Funds on any of the
Proposals prior to any such adjournment as to which sufficient votes have been
received for approval.
Other Shareholder Information. At the record date for the Meeting,
U.S. Trust and its affiliates held of record approximately the following
percentages of the outstanding shares of the Funds, as agent or custodian for
their customers:
The name, address and share ownership of each person who may have
possessed sole or shared voting or investment power with respect to more than 5%
of each Fund's outstanding shares at the record date were:
25
<PAGE>
Number of Percent
Outstanding Shares of Class
------------------ --------
Excelsior Funds, Inc.
- ---------------------
Blended Equity Fund
U.S. Trust Company of New York,
Trustee 1,116,712.342 7.6%
FBO U.S. Trust Place
Attn. Sandra Woolcock
4380 S.W. Macadam Ave.
Suite 450
Portland, OR 97201
UST Retirement Fund
c/o United States Trust Company of NY 1,783,463 12.15%
114 west 47/th/ Street
New York, NY 10036
Small Cap Fund
UST Retirement Fund 847,476 16.73%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
Value and Restructuring Fund
Charles Schwab & Co., Inc. 7,888,390.307 37.4%
Special Custody Account
Attn. Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
Energy and Natural Resources Fund
Charles Schwab & Co., Inc. 951,209,757 26.8%
Special Custody Account
Attn. Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
26
<PAGE>
Number of Percent
Outstanding Shares of Class
------------------ --------
Real Estate Fund
Eugene Higgens Resid. 494,065 7.93%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
UST Retirement Fund 639,627 10.27%
114 West 47/th/ Street
New York, NY 10036
International Fund
UST Retirement Fund 1,833,806 9.30%
c/o United States Trust Company of NY
114 West 47/th/ street
New York, NY 10036
Latin America Fund
Charles Schwab & Co., Inc. 263,004.683 9.4%
Special Custody Account
Attn. Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
UST Retirement Fund 180,433 6.42%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
27
<PAGE>
Number of Percent
Outstanding Shares of Class
------------------ --------
Emerging Markets Fund
Dan Weiden 116,015 5.62%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
Prudence Miller Agency 132,625 6.42%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
UST Retirement Fund 285,714 13.84%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
Short-Term Government Securities Fund
Charles Schwab & Co., Inc. 556,529.573 8.2%
Special Custody Account
Attn. Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
Managed Income Fund
U.S. Trust Company of New York, Trustee 1,453,017.721 6.3%
FBO U.S. Trust Place
Attn. Sandra Woolcock
4380 S.W. Macadam Ave.
Suite 450
Portland, OR 97201
UST Retirement Fund
c/o United States Trust Company of NY 12,335,765 53.89%
114 West 47/th/ Street
New York, NY 10036
28
<PAGE>
Number of Percent
Outstanding Shares of Class
------------------ --------
Treasury Money Fund
Stephen Schwarzman 29,665,809 7.24%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
Excelsior Tax-Exempt Funds, Inc.
- --------------------------------
New York Tax-Exempt Money Fund
Christopher Browne 20,000,000 5.62%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
Sara Wilford 30,129,008 8.47%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
Long-Term Tax-Exempt Fund
Charles Schwab & Co., Inc. 922,253,761 8.0%
Special Custody Account
Attn. Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
California Tax-Exempt Income Fund
David & Suzanne Johnson 856,400 9.35%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
29
<PAGE>
Number of Percent
Outstanding Shares of Class
------------------ --------
Excelsior Institutional Trust
- -----------------------------
Value Equity Fund
George S. Warburg 7,804.370 57.6%
820 Hartford Turnpike
Hamden, CT 06517-1600
William P. Cleary 3,442.628 25.4%
9343 246/th/ Street
Floral Park, NY 11001
Cameron B. Masson 1,380.340 10.2%
717 C Avenue, Unit C
Coronado, CA 92118
Optimum Growth Fund
U.S. Trust Company, Trustee 538,682,044 15.9%
FBO U.S. Trust Plan
U.S. Trust Co. of Pacific Northwest
4380 S.W. Macadam Avenue
Suite 450
Portland, OR 97201
UST Retirement Fund 1,479,279 51.43%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
Equity Fund
Olympus America Pen Plan 671,105 5.54%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
PJM INTRCM DB Plan 1,110,591 9.17%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
30
<PAGE>
<TABLE>
<CAPTION>
Number of Percent
Outstanding Shares of Class
------------------ --------
<S> <C> <C>
Income Fund
Planned Parenthood NY 1,371,144 9.20%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
Persimmon Char Rem 2,276,176 15.27%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
Eugene Higgens Resid. 8,398,998 56.33%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
Total Return Bond Fund
The Library Fund 4,110,389 11.49%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
The Florence Gould Fund 5,243,924 14.66%
c/o United States Trust Company of NY
114 West 47/th/ Street
New York, NY 10036
</TABLE>
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company.
As of February 23, 2000, the Directors and Trustees share ownership in
the Funds was as follows:
<TABLE>
<CAPTION>
Title of Name of Amount and Nature Percent
Class Beneficial Owner of Beneficial Ownership Of Class
-------- ---------------- ----------------------- -------
<S> <C> <C> <C>
Blended Equity Fund Wolfe J. Frankl 4,128 *
(trustee)
Small Cap Fund Wolfe J. Frankl 3,949 *
(trustee)
Value and Restructuring Fund Wolfe J. Frankl 1,780 *
(trustee)
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Title of Name of Amount and Nature Percent
Class Beneficial Owner of Beneficial Ownership Of Class
-------- ---------------- ----------------------- -------
<S> <C> <C> <C>
Pan European Fund Wolfe J. Frankl 3,752 *
(trustee)
Money Fund Jonathan Piel 20,751 *
Managed Income Fund Jonathan Piel 4,640 *
Intermediate-Term Managed Jonathan Piel 5,991 *
Income Fund
Blended Equity Fund Jonathan Piel 3,049 *
Large Cap Growth Fund Jonathan Piel 2,094 *
Pacific/Asia Fund Jonathan Piel 2,124 *
Pan European Fund Jonathan Piel 2,302 *
Value & Restructuring Fund Jonathan Piel 2,485 *
Intermediate-Term Tax-Exempt Rodman L. Drake 5793.743 *
Fund
Tax-Exempt Money Fund Robert A. Robinson 49,548.080 *
Intermediate Term Robert A. Robinson 45,999.314 *
Tax-Exempt Fund
Long-Term Robert A. Robinson 13,998.807 *
Tax-Exempt Fund
Short-Term Robert A. Robinson 18,319.184 *
Tax-Exempt Fund
Tax-Exempt Money Market Fund Frederick S. Wonham 2,891,810** *
International Fund Frederick S. Wonham 9,471*** *
Emerging Markets Fund Frederick S. Wonham 6,540
Pan European Fund Frederick S. Wonham 4,969
Value and Restructuring Fund Frederick S. Wonham 1,465
</TABLE>
*Less than 1%.
**Includes 268,578 shares owned by Mr. Wonham's spouse, for which Mr. Wonham
disclaims beneficial ownership.
***Includes 3,097 shares owned by Mr. Wonham's spouse, for which Mr. Wonham
disclaims beneficial ownership.
ADDITIONAL INFORMATION
Officers. Officers of the Companies are elected by the Directors and
Trustees and hold office until they resign, are removed or are otherwise
disqualified to serve. The following table sets forth certain information about
the Companies' officers:
32
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation
Position with During Past 5 Years and
Name and Address Each Company Other Affiliations
- ----------------- ------------ ------------------
<S> <C> <C>
Frederick S. Wonham President Retired; President, Treasurer and
c/o U.S. Trust Company and Treasurer Director of Excelsior Funds, Inc.
of New York and Excelsior Tax-Exempt Fund (since
114 West 47/th/ Street 1995); President, Treasurer and
New York, NY 10036 Trustee of Excelsior Funds and
Age: 65 Excelsior Institutional Trust (since
1995); Vice Chairman of U.S. Trust
Corporation and U.S. Trust New York
(from February 1990 until September
1995); and Chairman, U.S. Trust
Company (from March 1993 to May
1997).
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation
Position with During Past 5 Years and
Name and Address Each Company Other Affiliations
- ----------------- ------------ ------------------
<S> <C> <C>
Patricia M. Leyne/1/ Assistant Vice President, Chase Global Funds
Chase Global Funds Treasurer Services Company (since July 1999);
Services Company Assistant Vice President, Senior
73 Tremont Street Manager of Fund Administration,
Boston, MA 02108-3913 Chase Global Funds Services Company
Age: 32 (from July 1998 to July 1999);
Assistant Treasurer, Manager of Fund
Administration, Chase Global Funds
Services Company (from November 1996
to July 1998); Supervisor, Chase
Global Funds Services Company (from
September 1995 to November 1996);
Fund Administrator, Chase Global
Funds Services Company (from
February 1993 to September 1995).
</TABLE>
- -------------------
/1/ Ms. Leyne owns one share of U.S. Trust Co. She became Assistant Treasurer
of the Companies on July 30,1999.
Drinker Biddle & Reath LLP, of which Messrs. McConnel and Malloy are
partners, receives legal fees as counsel to the Companies. The employees of
Chase Global Funds Services Company do not receive any compensation from the
Companies for acting as officers of the Companies. No person who is currently
an officer, director or employee of the Investment Adviser or Sub-Adviser serves
as an officer, director or employee of the Companies.
Payments to Affiliates. U.S. Trust Co. serves as one of the
Companies' administrators and will continue to do so after the New Agreements
are approved by shareholders. For the fiscal year ended March 31, 1999, the
Companies paid U.S. Trust Co. the following fees:
<TABLE>
<CAPTION>
Total
Administration Total Fees
Funds Fees Paid Waived
----- --------- ------
<S> <C> <C>
Excelsior Funds, Inc.
Blended Equity Fund....................... $ 952,859 $ 1,957
Large Cap Growth Fund..................... 171,488 1,525
Small Cap Fund............................ 74,865 28
Value and Restructuring Fund.............. 712,300 120,091
Energy and Natural Resources Fund......... 59,511 43
Real Estate Fund.......................... 58,438 379
International Fund........................ 427,509 1,386
Latin America Fund........................ 81,572 274
Pacific/Asia Fund......................... 56,059
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Total
Administration Total Fees
Funds Fees Paid Waived
----- --------- ------
<S> <C> <C>
Pan European Fund......................... $ 397,805 $ 4,522
Emerging Markets Fund..................... 11,814 0
Intermediate-Term Managed Income
Fund................................... 170,673 389
Short-Term Government Securities
Fund................................... 70,684 162
Managed Income Fund....................... 316,445 1,864
Money Fund................................ 1,122,463 11
Government Money Fund..................... 958,200 172
Treasury Money Fund....................... 792,993 0
Excelsior Tax-Exempt Funds, Inc.
Tax-Exempt Money Fund..................... 2,156,742 0
New York Tax-Exempt Money
Fund................................... 248,317 0
Long-Term Tax-Exempt Fund................. 243,351 14,210
Intermediate-Term Tax-Exempt
Fund................................... 449,336 1,245
Short-Term Tax-Exempt Securities
Fund................................... 61,646 3
New York Intermediate-Term
Tax-Exempt Fund........................ 223,318 53
California Tax-Exempt Income
Fund................................... 73,723 0
Excelsior Institutional Trust
Value Equity Fund......................... 53,266 0
Optimum Growth Fund....................... 108,405 0
Equity Fund............................... 231,504 0
Income Fund............................... 97,318 0
Total Return Bond Fund.................... 308,927 0
International Equity Fund................. 83,501 0
</TABLE>
For the fiscal year ended March 31, 1999, affiliates of U.S. Trust
received the following fees relating to Shares and Institutional Shares of the
following Funds of the Companies pursuant to agreements with shareholder
organizations under the Administrative Services Plans adopted by the Companies.
35
<PAGE>
<TABLE>
<CAPTION>
Fees Paid To Affiliates Of
Fund U.S. Trust Company
---- ------------------
<S> <C>
Excelsior Funds, Inc.
Blended Equity Fund
Shares................................................... $223,499
Large Cap Growth Fund
Shares................................................... $ 36,963
Small Cap Growth Fund
Shares................................................... $ 51,808
Value and Restructuring Fund
Shares................................................... $215,581
Energy and Natural Resources Fund
Shares................................................... $ 15,896
Real Estate Fund
Shares................................................... $ 37,231
International Fund
Shares................................................... $202,445
Latin America Fund
Shares................................................... $ 34,396
Pacific/Asia Fund
Shares................................................... $ 24,951
Pan European Fund
Shares................................................... $121,644
Emerging Markets Fund
Shares................................................... $ 11,666
Intermediate-Term Managed Income Fund
Shares................................................... $ 73,338
Managed Income Fund
Shares................................................... $ 64,528
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Fees Paid To Affiliates Of
Fund U.S. Trust Company
---- ------------------
<S> <C>
Excelsior Tax-Exempt Funds, Inc.
Tax-Exempt Money Fund
Shares................................................... $827,104
Institutional Shares..................................... $ 0
New York Tax-Exempt Money Fund
Shares................................................... $ 7,879
Institutional Shares..................................... $ 0
Long-Term Tax-Exempt Fund
Shares................................................... $114,441
Intermediate-Term Tax-Exempt Fund
Shares................................................... $182,945
New York Intermediate-Term Tax-Exempt Fund
Shares................................................... $ 33,512
California Tax-Exempt Income Fund
Shares................................................... $139,223
</TABLE>
For the fiscal year ended March 31, 1999, U.S. Trust and its
affiliates received no fees relating to Excelsior Funds, Inc.'s Distribution
Plan.
For the fiscal year ended March 31, 1999, the Companies paid the
following brokerage commissions to UST Securities Corp., an affiliated broker of
U.S. Trust:
<TABLE>
<CAPTION>
Brokerage Percentage of Broker
Commissions to Commissions paid to
Company Fund Affiliated Brokers Affiliated Broker
- ------- ---- ------------------ ----------------
<S> <C> <C> <C>
Excelsior Funds, Inc. Value and $525 0.19%
Restructuring Fund
</TABLE>
The Companies make payments to Schwab in connection with the inclusion
of certain Funds in the Schwab One Source Program. These payments are expected
to continue after the Merger.
Principal Underwriter and Administrators. Edgewood Services, Inc.,
which is located at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-5829,
is the principal underwriter for the shares of the Companies' Funds. Edgewood
Services, Inc. is a wholly-owned subsidiary of Federated Investors, Inc. The
Companies' administrators are: U.S. Trust Co.; Chase Global Funds Services
Company, 73 Tremont Street, Boston, Massachusetts 02108-3913; and Federated
Administrative Services, Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779.
37
<PAGE>
OTHER MATTERS
The Companies do not intend to hold meetings of shareholders except to
the extent that such meetings may be required under the 1940 Act or state law.
Shareholders who wish to submit proposals for inclusion in the Proxy Statement
for a subsequent shareholder meeting should send their written proposals to the
Companies at their principal office within a reasonable time before such
meeting.
38
<PAGE>
No business other than the matters described above is expected to come
before the Meetings, but should any other matter requiring a vote of
shareholders arise, including any question as to an adjournment of the Meetings,
the persons named in the enclosed Proxy will vote thereon according to their
best judgment in the interests of each Company.
Dated: March __, 2000
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT A MEETING AND WHO WISH
TO HAVE THEIR SHARES VOTED ARE REQUESTED TO COMPLETE THE ENCLOSED PROXY(S) AND
RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. SHAREHOLDERS MAY ALSO VOTE BY PHONE OR FAX THROUGH -------------,
OUR PROXY SOLICITOR. TO VOTE BY FAX, SIGN THE PROXY CARD AND FAX BOTH SIDES TO
- ---------------- OR SIMPLY CALL -----------------.
EACH COMPANY WILL FURNISH, WITHOUT CHARGE, COPIES OF SUCH COMPANY'S
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS DATED MARCH 31, 1999 AND
SEPTEMBER 30, 1999, RESPECTIVELY, TO ANY SHAREHOLDER UPON REQUEST. EACH
COMPANY'S ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS MAY BE OBTAINED FROM
SUCH COMPANY BY WRITING TO THE COMPANY AT 73 TREMONT STREET, BOSTON,
MASSACHUSETTS 02108-3913, BY CALLING (800) 446-1012 (FROM OVERSEAS, CALL (617)
557-8280) OR BY THE INTERNET: http://www.excelsiorfunds.com
39
<PAGE>
Annex I
<TABLE>
<CAPTION>
Position
with
U.S. Principal Type of
Trust NY Name; Address Occupation Business
- -------- ------------- ---------- --------
<S> <C> <C> <C>
Director Eleanor Baum Dean of School Academic
4 Arleigh Road of Engineering,
Great Neck, NY 11021 The Cooper Union for
the Advancement
of Science & Art
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 Retired Chairman Venture
103 Horseshoe Road of Venrock, Inc. Capital
Mill Neck, NY 11765
Director Antonia M. Grumbach Partner in Patterson, Law Firm
Patterson, Belknap, Belknap, Webb
Webb & Tyler, LLP & Tyler
1133 Avenue of the
Americas
New York, NY 10036
Director, H. Marshall Schwarz Chairman of the Asset Management,
United States Trust Board & Chief Investment Fiduciary
Chairman Company of New York Executive Officer
of the Board 114 West 47/th/ of U.S. Trust
Services and Street New York, NY Corporation and UST NY
Chief 10036
Executive
Officer
Director Philippe de Montebello Director of the Art Museum
The Metropolitan Metropolitan
Museum of Art Museum of Art
1000 Fifth Avenue
New York, NY
10028-0198
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Position
with
U.S. Principal Type of
Trust NY Name; Address Occupation Business
- -------- ------------- ---------- --------
<S> <C> <C> <C>
Director Robert E. Denham Partner in Manger, Law Firm
Manger, Tolls & Olson LLP Tolls & Olson LLP
355 South Grand Avenue
35/th/ Floor
Los Angeles, CA 90071
Director John H. Stookey Chairman of Petrochemicals
Suburban Propane Pts. Suburban Propane Pts. and Propane
P.O. 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 Law Firm
Wien & Malkin LLP Wien & Malkin LLP
Lincoln Building
60 East 42nd Street
New York, NY 10165
Director David A. Olsen Retired Chairman of Risk & Insurance
1120 Park Avenue Johnson & Higgins Services
New York, NY 10128
Director Carl H. Pforzheimer, II Managing Partner Broker-Dealer
Carl H. Pforzheimer & Co. Investment Adviser
650 Madison Avenue
New York, NY 10022
Director Ruth A. Wooden President & CEO of Not-for-
60 Gramercy Park North National Parenting Profit
Apt. 2M Association
New York, NY 10016
Executive Paul K. Napoli Executive Asset Management,
Vice United States Trust Vice President Investment and
Company of New York of U.S. Trust Private Banking
114 West 47/th/ Street Corporation Fiduciary Services
New York, NY 10036 and U.S. Trust NY
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Position
with
U.S. Principal Type of
Trust NY Name; Address Occupation Business
- -------- ------------- ---------- --------
<S> <C> <C> <C>
Director and Maribeth S. Rahe Vice Chairman Asset Management,
Vice Chairman United States Trust of U.S. Trust Fiduciary Services
Company of New York Investment and
114 West 47/th/ Street Corporation
New York, NY 10036 and U.S. Trust NY
Director, Frederick B. Taylor Vice Chairman and Asset Management,
Vice Chair- United States Trust Chief Investment Of- Investment and
man and Company of New York ficer of U.S. Trust Fiduciary Services
Chief Invest- 114 West 47/th/ Street Corporation and
ment Officer New York, NY 10036 U.S. Trust NY
New York, NY 10036
Director, Jeffrey S. Maurer President and Asset Management,
President, United States Trust Chief Operating Investment and
and Chief Company of New York Officer of U.S. Fiduciary Services
Operating 114 West 47/th/ Street Trust Corporation
Officer New York, NY 10036 and U.S. Trust NY
Executive John L. Kirby Executive Asset Management,
Vice United States Trust Vice President and Investment and
President Company of New York Chief Financial Fiduciary Services
and Chief 114 West 47/th/ Street Officer of U.S.
Financial New York, NY 10036 Trust Corporation
Officer and U.S. Trust NY
Executive Kenneth G. Walsh Executive Asset Management,
Vice United States Trust Vice President Investment and
President Company of New York of U.S. Trust Fiduciary Services
114 West 47/th/ Street Corporation and
New York, NY 10036 U.S. Trust NY
Director Philip L. Smith Corporate Director and
P.O. Box 386 Trustee
Ponte Verde
Beach, FL 32004
Executive John M. Deignan Executive Investment
Vice United States Trust Vice President Management and
President Company of New York Fiduciary Services;
114 West 47/th/ Street Private Banking
New York, NY 10036
</TABLE>
42
<PAGE>
Annex II
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust Co. Name; Address Occupation Business
- --------- ------------- ---------- --------
<S> <C> <C> <C>
Director Tucker H. Warner Co-Founder, Consulting Firm
The Nutmeg Financial Partner &
Group, LLC Director
1157 Highland Avenue West
Cheshire, CT 06903
Director Thomas C. Clark Managing Director, Asset Management,
United States Trust U.S. Trust NY Investment and
Company of New York Fiduciary Services
11 West 54th Street
New York, NY 10019
Director, Maribeth S. Rahe Vice Chairman, Asset Management,
Chairman of United States Trust U.S. Trust NY Investment and
Board Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10036
Director Frederick B. Taylor Vice Chairman, Asset Management,
United States Trust U.S. Trust NY Investment and
Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10036
Director Robert C. Bodine Chairman Asset Management
U.S. Trust Company Investment and
100 West Lancaster Avenue Fiduciary Services
Suite 200
Wayne, PA 19087
Director Howard E.N. Wilson Chairman Asset Management
U.S. Trust Company Investment and
100 West Lancaster Avenue Fiduciary Services
Suite 200
Wayne, PA 19087
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NA Name; Address Occupation Business
- --------- ------------- ---------- --------
<S> <C> <C> <C>
Director Kenneth G. Walsh Executive Vice Asset Management,
United States Trust President, Investment and
Company of New York U.S. Trust NY Fiduciary Services
114 West 47th Street
New York, NY 10036
Director, William V. Ferdinand Managing Director Asset Management,
Managing U.S. Trust & CIO Fiduciary Services
Director & of Connecticut & Private Banking
CIO, CT 225 High Ridge Road
Offices Stamford, CT 06905
Director, W. Michael Funck President & CEO Asset Management,
President & U.S. Trust Fiduciary Services
CEO, CT of Connecticut & Private Banking
Offices 225 High Ridge Road
Stamford, CT 06905
</TABLE>
44
<PAGE>
Annex III
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NA Name; Address Occupation Business
- -------- ------------- ---------- --------
<S> <C> <C> <C>
Director and William R. Barrett, Jr. Managing Director Asset
Managing Director 515 So. Flower Street Management,
Suite 2700 Investment and
Los Angeles, CA 90071 Fiduciary Services
Director Thomas C. Clark Managing Director Asset Management,
11 West 54th Street Investment
New York, NY 10019
Director Jeffrey Grubb Managing Director Asset Management,
4380 S.W. Macadam Ave. Director Investment and
Suite 450 Fiduciary Services
Portland, OR 97201
Director Peter K. Maier Managing Director Asset Management,
80 E. Sir Francis Director Investment and
Drake Blvd. Fiduciary Services
Larkspur, CA 94939
Director Jeffrey S. Maurer President and Asset Management,
114 W. 47/th/ Street Chief Operating Investment and
New York, NY 10036 Officer Fiduciary Services
Director/Managing Robert M. Raney Managing Director Asset Management,
Director and Chief 515 So. Flower Street and Chief Investment and
Investment Officer Suite 2700 Investment Officer Fiduciary Services
Los Angeles, CA 90071
Director/President Gregory F. Sanford President and Chief Asset Management,
and Chief Executive 515 So. Flower Street Executive Officer Investment and
Officer Suite 2700 Fiduciary Services
Los Angeles, CA 90071
Director/Chairman Franklin E. Ulf Chairman of the Asset Management,
of the Board 515 So. Flower Street Board Investment and
Suite 2700 Fiduciary Services
Los Angeles, CA 90071
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NA Name; Address Occupation Business
- -------- ------------- ---------- --------
<S> <C> <C> <C>
Director Jay S. Welker Managing Director Asset Management,
One Embarcadero Center Investment and
Suite 2050 Fiduciary Services
San Francisco, CA 94111
Director and Charles E. Wert Executive Vice Asset Management,
Executive Vice 515 So. Flower Street President Investment and
President Suite 2700 Fiduciary Services
Los Angeles, CA 90071
Director Maribeth S. Rahe Vice Chairman Asset Management,
114 W. 47/th/ Street Investment and
New York, NY Fiduciary Services
10036
Director Ralph C. Rittenour Chairman & CEO Asset Management,
4380 S.W. Macadam Ave. Investment and
Suite 450 Fiduciary Services
Portland, OR 97201
Director Kenneth F. Siebel Managing Director Asset Management,
80 E. Sir Francis Investment and
Drake Blvd. Fiduciary Services
Larkspur, CA 94939
Director Charles J. Swindells Vice Chairman Asset Management,
4380 S.W. Macadam Ave. Investment and
Suite 450 Fiduciary Services
Portland, OR 97201
</TABLE>
46
<PAGE>
Appendix A
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of __________, 2000 by and among EXCELSIOR FUNDS,
INC., a Maryland corporation (herein called the "Company"), U.S. TRUST COMPANY
("UST"), 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 UST, the "Investment Adviser").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940 (the
"1940 Act");
WHEREAS, the Company desires to retain the Investment Adviser to
render investment advisory and other services to the Company for its Latin
America Fund, Pacific/Asia Fund, Pan European Fund, Emerging Markets Fund, and
International 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. The Investment Adviser may, in its discretion,
provide such services through its own employees or the employees of one or more
affiliated companies that are qualified to act as investment adviser to the
Company under applicable law provided (i) that all persons, when providing
services hereunder, are functioning as part of an organized group of persons,
(ii) the use of an affiliate's employees does not result in a change of actual
control or management of the Company under the 1940 Act; and (iii) the use of an
affiliate's employees has been approved by the Board of Directors of the
Company.
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 Funds 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. Such sub-adviser is hereinafter referred to as the "Sub-Adviser."
A-1
<PAGE>
3. Delivery of Documents. The Company has furnished or will furnish,
---------------------
as the case may be, 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 Funds and the execution and delivery of this Agreement;
(d) Resolutions of the Board of Directors of the Company
authorizing the appointment of the Sub-Adviser for the Funds 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 F Common Stock, $.001 par value, representing interests in the
International Fund; Class P Common Stock, $.001 par value, representing
interests in the Latin America Fund; Class Q Common Stock, $.001 par value,
representing interests in the Pacific/Asia Fund; Class R Common Stock, $.001 par
value, representing interests in the Pan European Fund; and Class W Common
Stock, $.001 par value, representing interests in the Emerging Markets 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 management advice for the Funds in accordance
with the Funds' respective investment objective and policies as stated in the
Prospectus.
A-2
<PAGE>
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 Funds' continuous investment program;
(iii) Approving lists of foreign countries recommended by
the Sub-Adviser for investments of the Funds;
(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
Funds' short-term cash balance positions denominated in U.S. dollars
to preserve required liquidity of the Funds' 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 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 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 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
A-3
<PAGE>
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, 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 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.
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 requirements of Rule
-----------------
31a-3 under the 1940 Act, 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 under the 1940 Act.
A-4
<PAGE>
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 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 its 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
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 the shares are registered or qualified for
sale so require.
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 following annual rates: 1.00% of the average
daily net assets of each of the Latin America Fund, the Pacific/Asia Fund, the
Pan European Fund and the International Fund; and 1.25% of the average daily net
assets of the Emerging Markets 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 hereof and unless sooner terminated as provided herein, shall
continue until July 31, 2001. 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 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
A-5
<PAGE>
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 1940 Act.) An affiliate of the Investment Adviser may assume the
Investment Adviser's obligations under this Agreement provided that (i) the
affiliate is qualified to act as an investment adviser to the Company under
applicable law; (ii) the assumption will not result in a change of actual
control or management of the Investment Adviser; and (iii) the assumption of the
Investment Adviser's obligations by the affiliate is approved by the Board of
Directors of the Company.
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 be
effective with respect to a Fund until approved by vote of a majority of such
Fund's outstanding voting securities, if such vote is required by the 1940 Act,
or by the vote of a majority 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 amendment.
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.
A-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 President
[Seal]
U.S. TRUST COMPANY
Attest:
____________________________ By:___________________________
UNITED STATES TRUST COMPANY
Attest: OF NEW YORK
____________________________ By:___________________________
A-7
<PAGE>
Appendix B
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of ___________, 2000 by and among EXCELSIOR FUNDS,
INC., a Maryland corporation (herein called the "Company"), U.S. TRUST COMPANY
("UST"), 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 UST, the "Investment Adviser").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940 (the
"1940 Act");
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, Blended Equity Fund, Small Cap Fund, Energy and Natural
Resources Fund, Value and Restructuring Fund, Treasury Money Fund, Managed
Income Fund, Short-Term Government Securities Fund, Intermediate-Term Managed
Income Fund, Real Estate Fund, and Large Cap Growth 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. The Investment Adviser may, in its discretion,
provide such services through its own employees or the employees of one or more
affiliated companies that are qualified to act as investment adviser to the
Company under applicable law provided (i) that all persons, when providing
services hereunder, are functioning as part of an organized group of persons,
(ii) the use of an affiliate's employees does not result in a change of actual
control or management of the Company under the 1940 Act; and (iii) the use of an
affiliate's employees has been approved by the Board of Directors of the
Company.
B-1
<PAGE>
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 ("Shares") of the Funds covered by this Agreement,
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 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
B-2
<PAGE>
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 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 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
B-3
<PAGE>
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.
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 Blended Equity Fund and Large Cap Growth
Fund; .60% of the average daily net assets of each of the Small Cap Fund, the
Energy and Natural Resources Fund and the Value and Restructuring Fund; 1.00% of
the average daily net assets of the Real Estate Fund; .30% of the average daily
net assets of the Treasury Money Fund; .75% of the average daily net assets of
the Managed Income 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 a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Investment
Adviser in the
B-4
<PAGE>
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, 2001. 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.) An affiliate of the Investment
Adviser may assume the Investment Adviser's obligations under this Agreement
provided that (i) the affiliate is qualified to act as an investment adviser to
the Company under applicable law; (ii) the assumption will not result in a
change of actual control or management of the Investment Adviser; and (iii) the
assumption of the Investment Adviser's obligations by the affiliate is approved
by the Board of Directors of the Company.
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, if such vote is required by the 1940 Act,
or by the vote of a majority 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 amendment.
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.
B-5
<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 President
Attest: U.S. TRUST COMPANY
__________________________ By:__________________________
UNITED STATES TRUST COMPANY
Attest: OF NEW YORK
__________________________ By:__________________________
B-6
<PAGE>
Appendix C
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of ___________, 2000 by and among EXCELSIOR TAX-EXEMPT
FUNDS, INC., a Maryland corporation (herein called the "Company"), U.S. TRUST
COMPANY ("UST"), 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 UST, the "Investment Adviser").
WHEREAS, the Company is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940 (the "1940 Act");
WHEREAS, the Company desires to retain the Investment Adviser to render
investment advisory and other services to the Company for its New York
Intermediate-Term Tax-Exempt Fund, Short-Term Tax-Exempt Securities Fund,
California Tax-Exempt Income Fund, Tax-Exempt Money Fund, Intermediate-Term Tax-
Exempt Fund, Long-Term Tax-Exempt Fund and New York Tax-Exempt Fund portfolios
("the Funds"), and the Investment Adviser is willing to so render 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.
-----------
(a) 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. The Investment Adviser may, in its discretion, provide such services
through its own employees or the employees of one or more affiliated companies
that are qualified to act as investment adviser to the Company under applicable
law provided (i) that all persons, when providing services hereunder, are
functioning as part of an organized group of persons, (ii) the use of an
affiliate's employees does not result in a change of actual control or
management of the Company under the 1940 Act; and (iii) the use of an
affiliate's employees has been approved by the Board of Directors of the
Company.
(b) In the event that the Company establishes one or more additional
portfolios with respect to which it desires to retain the Investment Adviser to
act as investment adviser hereunder, it shall notify the Investment Adviser in
writing. If the Investment Adviser is willing to render such services under
this Agreement it shall notify the Company in writing whereupon such 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 Funds to
the Investment Adviser) are modified with respect to such Fund in writing by the
Company and the Investment Adviser at the time.
C-1
<PAGE>
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 and any amendments
thereto;
(b) By-Laws of the Company and any amendments thereto;
(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.
2-93068) relating to shares of the Company's Class A Common Shares, $.001 par
value, representing interests in the Tax-Exempt Money Fund; Class B Common
Shares, $.001 par value, representing interests in the Intermediate-Term Tax-
Exempt Fund; Class C Common Shares, $.001 par value, representing interests in
the Long-Term Tax-Exempt Fund; Class D Common Shares, $.001 par value,
representing interests in the New York Intermediate-Term Tax-Exempt Fund; Class
E Common Shares, $.001 par value, representing interests in the California Tax-
Exempt Income Fund; Class F Common Shares, $.001 par value, representing
interests in the Short-Term Tax-Exempt Securities Fund and Class G Common
Shares, $.001 par value, representing interests in the New York Tax-Exempt Money
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 31, 1984, and all amendments
thereto; and
(f) The most recent prospectuses of the Company relating to the
Funds (such prospectuses and supplements thereto, as presently in effect and as
from time to time amended and supplemented, herein called the "Prospectuses").
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 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 Prospectuses. 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
C-2
<PAGE>
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 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 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 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
C-3
<PAGE>
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.
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 of the Funds 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 any
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.
C-4
<PAGE>
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: 0.25% of the average
daily net assets of the Tax-Exempt Money Fund; 0.35% of the average daily net
assets of the Intermediate-Term Tax-Exempt Fund; 0.50% of the average daily net
assets of the Long-Term Tax-Exempt Fund; 0.50% of the average daily net assets
of the New York Tax-Exempt Money Fund; 0.50% of the average daily net assets of
the New York Intermediate-Term Tax-Exempt Fund; 0.50% of the average daily net
assets of the California Tax-Exempt Income Fund; and 0.30% of the average daily
net assets of the Short-Term Tax-Exempt Securities Fund.
8. Limitation of Liability of the Investment Adviser. The Investment
-------------------------------------------------
Adviser shall not be liable or 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 hereto with respect to the Funds named hereinbefore, and with respect
to any additional Fund, on the date of receipt by the Company of notice from the
Investment Adviser in accordance with Section 1(b) hereof that the Investment
Adviser is willing to serve as investment adviser with respect to such Fund,
provided that this Agreement (as supplemented by the terms specified in any
notice and agreement pursuant to Section l(b) hereof) shall have been approved
by the shareholders of the Funds in accordance with the requirements of the 1940
Act and unless sooner terminated as provided herein, shall continue in effect
until July 31, 2001. Thereafter, if not terminated, this Agreement shall
automatically 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.) An
affiliate of the Investment Adviser may assume the Investment Advisers
obligations under this Agreement to an affiliate provided that (i) the affiliate
is qualified to act as an investment adviser to the Company under applicable
law; (ii) the assumption will not result in a change of actual control or
management of the Investment
C-5
<PAGE>
Adviser; and (iii) the assumption of the Investment Adviser's obligations by the
affiliate is approved by the Board of Directors of the Company.
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, if such vote is required by the 1940 Act,
or by the vote of a majority 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 amendment.
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.
C-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 TAX-EXEMPT FUNDS, INC.
Attest:
______________________________ By: ____________________________
Secretary President
Attest: U.S. TRUST COMPANY
______________________________ By: ____________________________
UNITED STATES TRUST COMPANY OF
NEW YORK
Attest:
______________________________ By:_____________________________
C-7
<PAGE>
Appendix D
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of _______, 2000 by and among EXCELSIOR INSTITUTIONAL
TRUST (the "Trust"), a Delaware business trust registered as an open-end
management investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), UNITED STATES TRUST COMPANY OF NEW YORK
("USTNY"), a state-chartered bank and trust company, and U.S. TRUST COMPANY
("UST"), a Connecticut state bank and trust company (UST and USTNY are
collectively referred to herein as the "Adviser").
In consideration of the promises and the mutual covenants herein contained,
the Trust and the Adviser agree as follows:
1. Appointment. The Trust appoints the Adviser to act as investment
adviser to the Trust with respect to the series of the Trust listed on Exhibit A
hereto (the "Series") for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to provide an
investment program for the compensation provided by this Agreement. In providing
the services and assuming the obligations set forth herein, the Adviser may, at
its own expense, employ one or more sub-advisers; provided that the Adviser
understands and agrees that it shall remain fully responsible for the
performance of all the duties set forth in this Agreement and that it shall
supervise the activities of each sub-adviser. Any agreement between the Adviser
and a sub-adviser shall be subject to the renewal, termination and amendment
provisions applicable to this Agreement.
The Investment Adviser may, in its discretion, provide such services
through its own employees or the employees of one or more affiliated companies
that are qualified to act as investment adviser to the Company under applicable
law and are under the common control of U.S. Trust Corporation provided (i) that
all persons, when providing services hereunder, are functioning as part of an
organized group of persons, (ii) the use of an affiliate's employees does not
result in a change of actual control or management of the Trust under the
Investment Company Act; and (iii) the use of an affiliate's employees has been
approved by the Board of Directors of the Trust.
2. Duties of the Adviser. Subject to the direction and control of the
Board of Trustees of the Trust, the Adviser shall:
(a) prepare (or otherwise obtain) and evaluate on both a
macroeconomic and microeconomic level any pertinent research; statistical,
financial and economic data; and other information necessary or appropriate for
the performance of its duties under this Agreement;
(b) formulate and continuously review, supervise, and administer an
investment program for the Series;
D-1
<PAGE>
(c) determine the securities to be purchased by the Series, and
continuously monitor such securities and the issuers thereof to determine
whether and when to sell, exchange, or take any other action concerning such
securities;
(d) determine whether and how to exercise warrants, voting rights, or
other rights with respect to the Series' securities;
(e) provide valuations with respect to the securities held by the
Series if so requested by the Trustees of the Trust;
(f) render regular reports to the Trust's officers and the Board of
Trustees concerning the investment performance of the Trust, the Adviser's
discharge of its responsibilities under this Agreement, and any other subject as
the Trust's officers or Board of Trustees reasonably may request; and
(g) assist the Trust's officers in connection with the operation of
the Trust and perform any further acts that may be necessary to effectuate the
purposes of this Agreement.
3. Supervision and compliance. The activities of the Adviser shall be
subject at all times to the direction and control of the Board of Trustees of
the Trust and shall comply with: (a) the Trust Instrument and By-Laws of the
Trust; (b) the Registration Statement of the Trust, as it may be amended from
time to time, including the investment objectives and policies set forth
therein; (c) the Investment Company Act and the regulations thereunder; (d) the
Internal Revenue Code of 1986 and the regulations thereunder applicable to
regulated investment companies; (e) any other applicable laws or regulations;
and (f) such other limitations as the Board of Trustees may adopt.
4. Purchase and Sale of Securities. The Adviser shall, at its own
expense, place orders for the purchase, sale or loan of securities by the Trust
either directly with the issuer or with any broker and/or dealer who deals in
such securities.
(a) In placing orders with brokers and/or dealers, the Adviser shall
use its 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 and/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 Adviser may, to the extent permitted by
law, purchase and sell portfolio securities to and from brokers 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 Trust and/or other
accounts over which the Adviser exercises investment discretion. The Adviser is
authorized to pay a broker who provides such brokerage and research services a
commission for effecting a securities transaction which is in excess of the
amount of commission another broker would have charged for effecting that
transaction, if the Adviser determines in good faith that such commission was
reasonable in relation to the value of brokerage and research services
D-2
<PAGE>
provided by such broker. This determination may be viewed in terms of either
that particular transaction or of the overall responsibilities of the Adviser
with respect to the accounts as to which it exercises investment discretion.
(b) The Adviser may execute transactions through itself and its
affiliates on a securities exchange provided that the commissions paid by the
Trust are "reasonable and fair" compared to commissions received by other
brokers having comparable execution capability and provided that the
transactions are effected pursuant to procedures established by the Board of
Trustees of the Trust. An affiliated broker may transmit, clear and settle
transactions for the Trust that are executed on a securities exchange provided
that the affiliated broker arranges for unaffiliated brokers to execute the
transactions.
(c) Notwithstanding the foregoing, the Board of Trustees periodically
shall review the commissions paid by the Trust and determine whether those
commissions were reasonable in relation to the brokerage and research services
received. In addition, the Board of Trustees of the Trust, in its discretion,
may instruct the Adviser to effect all or a portion of its securities
transactions with one or more brokers and/or dealers selected by the Board of
Trustees, if it determines that the use of such brokers and/or dealers is in the
best interest of the Trust.
(d) When the Adviser deems the purchase or sale of a security to be
in the best interest of the Trust as well as other customers, the Adviser, to
the extent permitted by applicable law, may aggregate the securities to be so
sold or purchased in order to obtain the best execution or lower brokerage
commissions. The Adviser also may purchase or sell a particular security for one
or more customers in different amounts. Allocation of the securities purchased
or sold in either manner, as well as the expenses incurred in the transactions,
will be made by the Adviser in a manner that is equitable and consistent with
applicable law and regulations and with its fiduciary obligations to the Trust
and to such other customers.
5. Expenses.
(a) The Adviser shall furnish at its own expense all office space,
office facilities, equipment and personnel necessary or appropriate to the
performance of its duties under this Agreement. The Adviser also shall pay the
salaries and fees of all personnel of the Trust or the Adviser performing
services related to the Adviser's duties under this Agreement.
(b) It is understood that the Trust will pay all of its expenses and
liabilities, including compensation of its independent Trustees; taxes and
governmental fees; interest charges; fees and expenses of the Trust's
independent auditors and legal counsel; trade association membership dues; fees
and expenses of any custodian (including safekeeping of funds and securities,
maintenance of books and accounts and calculation of the net asset value of
beneficial interests of the Series), transfer agent and registrar and dividend
disbursing agent of the Trust; expenses of preparing and mailing reports to
investors and regulatory agencies; expenses relating to the issuance,
registration and qualification of shares of the Series, and the preparation,
printing and mailing of prospectuses for such purposes; insurance premiums;
brokerage and other expenses of executing portfolio transactions; expenses of
investors' and Trustees' meetings; organization expenses; and extraordinary
expenses.
D-3
<PAGE>
6. Compensation of the Adviser. In consideration of the services to be
rendered by the Adviser under this Agreement, the Trust shall pay the Adviser a
fee accrued daily and paid monthly from the Series at an annual rate equal to
that specified in Exhibit A to this Agreement for the Series' average daily net
assets. The fee for any period in which the Adviser serves as investment
adviser pursuant to this Agreement for less than one full month shall be paid
for that portion of the month accrued. For purposes of calculating fees, the
value of the net assets of the Series shall be computed in the manner specified
in its Registration Statement on Form N-1A.
7. Services to Others. The services of the Adviser to the Trust are not
to be deemed exclusive, and the Adviser is free to render services to others and
to engage in other activities, provided, however, that those services and
activities do not adversely affect the Adviser's ability to perform its
obligations under this Agreement.
8. Books, Records, and Information. The Adviser shall provide the Trust
with all records concerning the Adviser's activities that the Trust is required
by law to maintain. Any records required to be maintained and preserved pursuant
to the provisions of Rule 31a-l and Rule 31a-2 under the Investment Company Act
which are prepared or maintained by the Adviser on behalf of the Trust are the
property of the Trust and will be surrendered promptly to the Trust on request.
The Trust also shall comply with all reasonable requests for information by the
Trust's officers or Board of Trustees, including information required for the
Trust's filings with the Securities and Exchange Commission and state securities
commissions.
9. Limitations on Liability.
(a) The Adviser hereby is notified expressly of the limitation of
shareholder liability as set forth in the Trust Instrument and agrees that any
obligation of the Trust or the Series arising in connection with this Agreement
shall be limited in all cases to the Series and its assets, and the Adviser
shall not seek satisfaction of any such obligation from any Trustee or
shareholder of the Series.
(b) The Adviser shall give the Trust the benefit of its best judgment
and efforts in rendering services under this Agreement. In the absence of
willful malfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Adviser, the Adviser shall
not be liable to the Trust or to any shareholder of the Series for any act or
omission in the course of, or connected with, rendering services under this
Agreement or for any losses that may be sustained in the purchase, holding or
sale of any security. The liability of the Adviser hereunder shall be joint,
but not several.
10. Effective Date; Termination; Amendments.
(a) This Agreement shall be effective as of the date hereof and
unless terminated sooner as provided herein, shall continue until July 31, 2001.
Thereafter, unless terminated sooner as provided herein, this Agreement shall
continue in effect as to the Series for successive annual periods, provided that
such continuance is specifically approved at least annually by the vote of a
majority of the Board of Trustees of the Trust who are not parties to this
D-4
<PAGE>
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such continuance, and either: (i) the vote
of a majority of the outstanding voting securities of the Series; or (ii) the
vote of a majority of the full Board of Trustees.
(b) This Agreement may be terminated at any time, without the payment
of any penalty, either by: (i) the Trust, by action of the Board of Trustees or
by vote of a majority of the outstanding voting securities of the Series, on 60
days' written notice to the Adviser; or (ii) the Adviser, on 90 days' written
notice to the Trust. This Agreement shall terminate immediately in the event of
its assignment. An affiliate of the Investment Adviser may assume the
Investment Adviser's obligations under this Agreement provided that (i) the
affiliate is qualified to act as an investment adviser to the Company under
applicable law; (ii) the assumption will not result in a change of actual
control or management of the Investment Adviser and (iii) the assumption of the
Investment Adviser's obligations by the affiliate is approved by the Board of
Trustees of the Company.
(c) This Agreement may be amended only if such amendment is approved
by the vote of a majority of the outstanding voting securities of the Series, if
such vote is required by the Investment Company Act, or by the vote of a
majority 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 amendment.
(d) As used in this Agreement, the terms "specifically approved at
least annually," "majority of the outstanding voting securities," "interested
persons" and "assignment" shall have the same meanings as such terms have in the
Investment Company Act and the regulations thereunder.
11. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Delaware without giving effect to the choice of law
provisions thereof, to the extent that such laws are consistent with provisions
of the Investment Company Act and the regulations thereunder.
12. Miscellaneous. The captions in this Agreement are included for the
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. Should any
part of this Agreement be held or made invalid by a court decision, statute,
regulation, or otherwise, the remainder of this Agreement shall not be affected
thereby. This Agreement shall be binding and shall inure to the benefit of the
parties hereto and their respective successors, to the extent permitted by law.
D-5
<PAGE>
IN WITNESS WHEREOF, the Trust and the Adviser have caused this Agreement to
be executed and delivered in their names and on their behalf by the undersigned,
duly authorized officers, all as of the day and year first above written.
EXCELSIOR INSTITUTIONAL TRUST
By:__________________________
Name:
Title:
UNITED STATES TRUST COMPANY
OF NEW YORK
By:__________________________
Name:
Title:
U.S. TRUST COMPANY
By:__________________________
Name:
Title:
D-6
<PAGE>
Exhibit A
to Investment
Advisory Agreement
SCHEDULE OF SERIES AND FEES UNDER INVESTMENT
ADVISORY AGREEMENT
Annual Fee (as a percentage of the
average daily net assets of the
Series Names Series)
- ------------ ----------------------------------
Equity Fund 0.65%
Income Fund 0.65%
Total Return Bond Fund 0.65%
Value Equity Fund 0.65%
Optimum Growth Fund 0.65%
D-7
<PAGE>
Appendix E
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of ________, 2000 by and among EXCELSIOR INSTITUTIONAL
TRUST (the "Trust"), a Delaware business trust registered as an open-end
diversified management investment company under the Investment Company Act of
1940, as amended (the "Investment Company Act"), U.S. TRUST COMPANY ("UST"), 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
UST, the "Adviser").
In consideration of the promises and the mutual covenants herein contained,
the Trust and the Adviser agree as follows:
1. Appointment. The Trust appoints the Adviser to act as investment
adviser to the Trust with respect to the series of the Trust listed on Exhibit A
hereto (the "Series") for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to provide an
investment program for the compensation provided by this Agreement. In providing
the services and assuming the obligations set forth herein, the Adviser may, at
its own expense, employ one or more sub-advisers; provided that the Adviser
understands and agrees that it shall remain fully responsible for the
performance of all the duties set forth in this Agreement and that it shall
supervise the activities of each sub-adviser. Any agreement between the Adviser
and a sub-adviser shall be subject to the renewal, termination and amendment
provisions applicable to this Agreement.
The Investment Adviser may, in its discretion, provide such services
through its own employees or the employees of one or more affiliated companies
that are qualified to act as investment adviser to the Company under applicable
law and are under the common control of U.S. Trust Corporation provided (i) that
all persons, when providing services hereunder, are functioning as part of an
organized group of persons, (ii) the use of an affiliate's employees does not
result in a change of actual control or management of the Trust under the
Investment Company Act; and (iii) the use of an affiliate's employees has been
approved by the Board of Directors of the Trust.
E-1
<PAGE>
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 Series
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. Such sub-adviser is hereinafter referred to as the "Sub-Adviser."
3. Duties of the Adviser. Subject to the direction and control of the
Board of Trustees of the Trust, the 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 Series' continuous investment program;
(iii) Approving lists of foreign countries recommended by the Sub-
Adviser for investments of the Series;
(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 Series' 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 Adviser further agrees that it:
(a) will prepare (or otherwise obtain) and evaluate on both a
macroeconomic and microeconomic level any pertinent research; statistical,
financial and economic data; and other information necessary or appropriate for
the performance of its duties under this Agreement;
(b) will formulate and continuously review, supervise, and
administer an investment program for the Series;
E-2
<PAGE>
(c) will determine the securities to be purchased by the Series, and
continuously monitor such securities and the issuers thereof to determine
whether and when to sell, exchange, or take any other action concerning such
securities;
(d) will determine whether and how to exercise warrants, voting
rights, or other rights with respect to the Series' securities;
(e) will provide valuations with respect to the securities held by the
Series if so requested by the Trustees of the Trust;
(f) will render regular reports to the Trust's officers and the Board
of Trustees concerning the investment performance of the Trust, the Adviser's
discharge of its responsibilities under this Agreement, and any other subject as
the Trust's officers or Board of Trustees reasonably may request; and
(g) will assist the Trust's officers in connection with the operation
of the Trust and perform any further acts that may be necessary to effectuate
the purposes of this Agreement.
4. Supervision and compliance. The activities of the Adviser shall be
subject at all times to the direction and control of the Board of Trustees of
the Trust and shall comply with: (a) the Trust Instrument and By-Laws of the
Trust; (b) the Registration Statement of the Trust, as it may be amended from
time to time, including the investment objectives and policies set forth
therein; (c) the Investment Company Act and the regulations thereunder; (d) the
Internal Revenue Code of 1986 and the regulations thereunder applicable to
regulated investment companies; (e) any other applicable laws or regulations;
and (f) such other limitations as the Board of Trustees may adopt.
5. Purchase and Sale of Securities. The Adviser shall, at its own
expense, place orders for the purchase, sale or loan of securities by the Trust
either directly with the issuer or with any broker and/or dealer who deals in
such securities.
(a) In placing orders with brokers and/or dealers, the Adviser shall
use its 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 and/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 Adviser may, to the extent permitted by
law, purchase and sell portfolio securities to and from brokers 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 Trust and/or other
accounts over which the Adviser exercises investment discretion. The Adviser is
authorized to pay a broker who provides such brokerage and research services a
commission for effecting a securities transaction which is in excess of the
amount of commission another broker would have charged for effecting that
transaction, if the Adviser determines in good faith that such commission was
reasonable in relation to the value of brokerage and research services provided
by
E-3
<PAGE>
such broker. This determination may be viewed in terms of either that particular
transaction or of the overall responsibilities of the Adviser with respect to
the accounts as to which it exercises investment discretion.
(b) The Adviser may execute transactions through itself and its
affiliates on a securities exchange provided that the commissions paid by the
Trust are "reasonable and fair" compared to commissions received by other
brokers having comparable execution capability and provided that the
transactions are effected pursuant to procedures established by the Board of
Trustees of the Trust. An affiliated broker may transmit, clear and settle
transactions for the Trust that are executed on a securities exchange provided
that the affiliated broker arranges for unaffiliated brokers to execute the
transactions.
(c) Notwithstanding the foregoing, the Board of Trustees periodically
shall review the commissions paid by the Trust and determine whether those
commissions were reasonable in relation to the brokerage and research services
received. In addition, the Board of Trustees of the Trust, in its discretion,
may instruct the Adviser to effect all or a portion of its securities
transactions with one or more brokers and/or dealers selected by the Board of
Trustees, if it determines that the use of such brokers and/or dealers is in the
best interest of the Trust.
(d) When the Adviser deems the purchase or sale of a security to be in
the best interest of the Trust as well as other customers, the Adviser, to the
extent permitted by applicable law, may aggregate the securities to be so sold
or purchased in order to obtain the best execution or lower brokerage
commissions. The Adviser also may purchase or sell a particular security for
one or more customers in different amounts. Allocation of the securities
purchased or sold in either manner, as well as the expenses incurred in the
transactions, will be made by the Adviser in a manner that is equitable and
consistent with applicable law and regulations and with its fiduciary
obligations to the Trust and to such other customers.
6. Expenses.
(a) The Adviser shall furnish at its own expense all office space,
office facilities, equipment and personnel necessary or appropriate to the
performance of its duties under this Agreement. The Adviser also shall pay the
salaries and fees of all personnel of the Trust or the Adviser performing
services related to the Adviser's duties under this Agreement.
(b) It is understood that the Trust will pay all of its expenses and
liabilities, including compensation of its independent Trustees; taxes and
governmental fees; interest charges; fees and expenses of the Trust's
independent auditors and legal counsel; trade association membership dues; fees
and expenses of any custodian (including safekeeping of funds and securities,
maintenance of books and accounts and calculation of the net asset value of
beneficial interests of the Series), transfer agent and registrar and dividend
disbursing agent of the Trust; expenses of preparing and mailing reports to
investors and regulatory agencies; expenses relating to the issuance,
registration and qualification of shares of the Series, and the preparation,
printing and mailing of prospectuses for such purposes; insurance premiums;
brokerage and other expenses of executing portfolio transactions; expenses of
investors' and Trustees' meetings; organization expenses; and extraordinary
expenses.
E-4
<PAGE>
7. Compensation of the Adviser. In consideration of the services to be
rendered by the Adviser under this Agreement, the Trust shall pay the Adviser a
fee accrued daily and paid monthly from the Series at an annual rate equal to
that specified in Exhibit A to this Agreement for the Series' average daily net
assets. The fee for any period in which the Adviser serves as investment adviser
pursuant to this Agreement for less than one full month shall be paid for that
portion of the month accrued. For purposes of calculating fees, the value of the
net assets of the Series shall be computed in the manner specified in its
Registration Statement on Form N-1A.
8. Services to Others. The services of the Adviser to the Trust are not
to be deemed exclusive, and the Adviser is free to render services to others and
to engage in other activities, provided, however, that those services and
activities do not adversely affect the Adviser's ability to perform its
obligations under this Agreement.
9. Books, Records, and Information. The Adviser shall provide the Trust
with all records concerning the Adviser's activities that the Trust is required
by law to maintain. Any records required to be maintained and preserved pursuant
to the provisions of Rule 31a-l and Rule 31a-2 under the Investment Company Act
which are prepared or maintained by the Adviser on behalf of the Trust are the
property of the Trust and will be surrendered promptly to the Trust on request.
The Trust also shall comply with all reasonable requests for information by the
Trust's officers or Board of Trustees, including information required for the
Trust's filings with the Securities and Exchange Commission and state securities
commissions.
10. Limitations on Liability.
(a) The Adviser hereby is notified expressly of the limitation of
shareholder liability as set forth in the Trust Instrument and agrees that any
obligation of the Trust or the Series arising in connection with this Agreement
shall be limited in all cases to the Series and its assets, and the Adviser
shall not seek satisfaction of any such obligation from any Trustee or
shareholder of the Series.
(b) The Adviser shall give the Trust the benefit of its best judgment
and efforts in rendering services under this Agreement. In the absence of
willful malfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Adviser, the Adviser shall
not be liable to the Trust or to any shareholder of the Series for any act or
omission in the course of, or connected with, rendering services under this
Agreement or for any losses that may be sustained in the purchase, holding or
sale of any security. The liability of the Adviser hereunder shall be joint,
but not several.
11. Effective Date; Termination; Amendments.
(a) This Agreement shall be effective as of the date hereof, and,
unless terminated sooner as provided herein, shall continue until July 31, 2001.
Thereafter, unless terminated sooner as provided herein, this Agreement shall
continue in effect as to the Series for successive annual periods, provided that
such continuance is specifically approved at least annually by the vote of a
majority of the Board of Trustees of the Trust who are not parties to this
E-5
<PAGE>
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such continuance, and either: (i) the vote
of a majority of the outstanding voting securities of the Series; or (ii) the
vote of a majority of the full Board of Trustees.
(b) This Agreement may be terminated at any time, without the payment
of any penalty, either by: (i) the Trust, by action of the Board of Trustees or
by vote of a majority of the outstanding voting securities of the Series, on 60
days' written notice to the Adviser; or (ii) the Adviser, on 90 days' written
notice to the Trust. This Agreement shall terminate immediately in the event of
its assignment. An affiliate of the Investment Adviser may assume the Investment
Adviser's obligations under this Agreement provided that (i) the affiliate is
qualified to act as an investment adviser to the Company under applicable law;
(ii) the assumption will not result in a change of actual control or management
of the Investment Adviser; and (iii) the assumption of the Investment Adviser's
obligations under this Agreement is approved by the Board of Trustees of the
Company.
(c) This Agreement may be amended only if such amendment is approved
by the vote of a majority of the outstanding voting securities of the Series, if
such vote is required by the Investment Company Act, or by vote of a majority of
the Board of Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such amendment.
(d) As used in this Agreement, the terms "specifically approved at
least annually," "majority of the outstanding voting securities," "interested
persons" and "assignment" shall have the same meanings as such terms have in the
Investment Company Act and the regulations thereunder.
12. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Delaware without giving effect to the choice of law
provisions thereof, to the extent that such laws are consistent with provisions
of the Investment Company Act and the regulations thereunder.
13. Miscellaneous. The captions in this Agreement are included for the
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. Should any
part of this Agreement be held or made invalid by a court decision, statute,
regulation, or otherwise, the remainder of this Agreement shall not be affected
thereby. This Agreement shall be binding and shall inure to the benefit of the
parties hereto and their respective successors, to the extent permitted by law.
E-6
<PAGE>
IN WITNESS WHEREOF, the Trust and the Adviser have caused this Agreement to
be executed and delivered in their names and on their behalf by the undersigned,
duly authorized officers, all as of the day and year first above written.
Attest: EXCELSIOR INSTITUTIONAL TRUST
_________________________ By:____________________________
President
Attest: U.S. TRUST COMPANY
_________________________ By:____________________________
Attest: UNITED STATES TRUST COMPANY
OF NEW YORK
_________________________ By:____________________________
E-7
<PAGE>
Exhibit A
to Investment
Advisory Agreement
SCHEDULE OF SERIES AND FEES UNDER INVESTMENT
ADVISORY AGREEMENT
Annual Fee (as a percentage of the
average daily net assets of the
Series Names Series)
- ------------ -------
International
Equity Fund 1.00%
E-8
<PAGE>
Appendix F
SUB-ADVISORY AGREEMENT
AGREEMENT made as of __________, 2000 by and among U.S. TRUST COMPANY
("UST"), a Connecticut state bank and trust company, UNITED STATES TRUST COMPANY
OF NEW YORK ("USTNY"), a New York state-chartered bank and trust company
(together with UST, "U.S. Trust"), and U.S. Trust Company, N.A., a national bank
organized under the laws of the United States (herein called "U.S. Trust
California").
WHEREAS, Excelsior Tax-Exempt Funds, Inc. (the "Company") is registered as
an open-end, management investment company under the Investment Company Act of
1940 (the "1940 Act");
WHEREAS, U.S. Trust is the investment adviser to the Company's California
Tax-Exempt Income Fund (the "Fund");
WHEREAS, U.S. Trust desires to retain U.S Trust California to render
investment sub-advisory services to the Company for the Fund, and U.S. Trust
California 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. U.S. Trust hereby appoints U.S. Trust California to act
-----------
as investment sub-adviser to the Company for the Fund for the period and on the
terms set forth in this Agreement. U.S. Trust California accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided. U.S. Trust California may, in its discretion,
provide such services through its own employees or the employees of one or more
affiliated companies that are qualified to act as investment sub-adviser to the
Company under applicable law and are under the common control of U.S. Trust
Corporation provided (i) that all persons, when providing services hereunder,
are functioning as part of an organized group of persons, and (ii) the use of an
affiliate's employees does not result in a change of actual control or
management of the Company under the 1940 Act; and (iii) the use of an
affiliate's employees has been approved by the Board of Directors of the
Company.
F-1
<PAGE>
2. Delivery of Documents. U.S. Trust has furnished U.S. Trust
---------------------
California 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 U.S. Trust as the investment adviser for the Fund
and the execution and delivery of the Investment Advisory Agreement with respect
to the Fund;
(d) Resolutions of the Board of Directors of the Company
authorizing the appointment of U.S. Trust California as the Fund's investment
sub-adviser and the execution and delivery of this Agreement;
(e) Post-Effective Amendment No. 19 to the Company's Registration
Statement under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended (the "1940 Act"), on Form N-1A (No. 2-93068)
relating to the Company's shares representing interests in the Fund;
(f) Notification of Registration of the Company under the 1940
Act, as amended, on Form N-8A as filed with the Securities and Exchange
Commission on August 31, 1984, and all amendments thereto; and
(g) Prospectuses and statements of additional information of the
Company relating to the Company's shares representing interests in the Fund 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").
U.S. Trust will furnish U.S Trust California from time to time with
copies of all amendments of or supplements to the foregoing, if any.
3. Sub-Advisory Services. Subject to the supervision of the Board of
---------------------
Directors of the Company and the oversight of U.S. Trust, U.S. Trust California
will provide a continuous investment program for the Fund, including investment
research and management with respect to all securities and investments of the
Fund. U.S. Trust California will determine, subject to U.S. Trust's approval,
what securities and other investments will be purchased, retained or sold by the
Company for the Fund including, with the assistance of U.S. Trust if required,
the Fund's investments in futures. U.S. Trust California will provide the
services rendered by it hereunder in accordance with the Fund's investment
objectives and policies as stated in the Prospectus. U.S. Trust California
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
F-2
<PAGE>
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 manage the Fund's overall cash positions;
(d) 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, U.S. Trust
California 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 transaction and on a continuing basis. Consistent with this
obligation, U.S. Trust California 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 U.S. Trust California 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,
U.S. Trust California 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 U.S. Trust
California 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 U.S. Trust California 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, U.S.
Trust, U.S. Trust California or any affiliated person thereof except as
permitted by the Securities and Exchange Commission;
(e) will maintain books and records with respect to the
securities and other investment transactions entered into pursuant to this
Agreement and will render to U.S. Trust and the Company's Board of Directors
such periodic and special reports as they may request;
(f) will treat confidentially and as proprietary information of
the Company all records and other information relative to the Company 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 U.S. Trust California 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 U.S. Trust California
from advertising or soliciting the public generally
F-3
<PAGE>
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 sub-advisory services
----------------------
rendered by U.S. Trust California hereunder are not to be deemed exclusive, and
U.S. Trust California 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 1940 Act, U.S. Trust California 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. U.S. Trust California 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.
6. Expenses. During the term of this Agreement, U.S. Trust
--------
California 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 for the Fund.
In addition, U.S. Trust California will pay U.S. Trust an amount equal
to 83% of each expense reimbursement made by U.S. Trust to the Company with
respect to the Fund under the second paragraph of Section 6 of the Investment
Advisory Agreement relating to the Fund.
7. Compensation. For the services provided and the expenses assumed
------------
pursuant to this Agreement, U.S. Trust will pay U.S. Trust California and U.S.
Trust California will accept as full compensation therefor a fee, computed daily
and payable monthly, at the annual rate of .50% of the average daily net assets
of the Fund.
8. Limitation of Liability of the Sub-Adviser. U.S. Trust California
------------------------------------------
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 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 U.S. Trust California
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 become effective
------------------------
upon its execution as of the date first written above and, unless sooner
terminated as provided herein, shall continue until July 31, 2001. Thereafter,
if not terminated, this Agreement shall continue in effect as to the Fund for
successive periods of 12 months each, provided such continuance is specifically
approved at least annually 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 by the Board of Directors of the Company
or the vote of a majority of the outstanding voting securities of the Fund;
provided, however, that this Agreement may be terminated as to the Fund
F-4
<PAGE>
at any time, without the payment of any penalty, by U.S. Trust or by the Company
(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 U.S.
Trust California, and will automatically terminate upon the termination of the
Investment Advisory Agreement between U.S. Trust and the Company with respect to
the Fund. This Agreement may be terminated as to the Fund by U.S. Trust
California at any time, without payment of any penalty, on 90 days' written
notice to the Company and U.S. Trust. 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.) An affiliate
of U.S. Trust California may assume U.S. Trust California's obligations under
this Agreement provided that (i) the affiliate is qualified to act as an
investment adviser to the Company under applicable law; (ii) the assumption will
not result in a change of actual control or management of the Investment
Adviser; and (iii) the assumption by the affiliate of U.S. Trust California's
obligations is approved by the Board of Directors of the Company. An affiliate
of U.S. Trust may assume U.S. Trust's obligations under this Agreement provided
that (w) the affiliate is qualified to act as investment adviser to the Company
under applicable law; (x) the assumption will not result in a change of actual
control or management of U.S. Trust; and (y) the assumption by the affiliate of
U.S. Trust's obligations is approved by the Board of Directors of the Company.
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, if such vote is required by the 1940 Act,
or by the vote of a majority 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 amendment.
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.
F-5
<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.
Attest U.S. TRUST COMPANY
______________________________ By:_______________________________
President & CEO
UNITED STATES TRUST COMPANY
Attest: OF NEW YORK
______________________________ By:_______________________________
Attest: U.S. TRUST COMPANY, N.A.
______________________________ By:_______________________________
F-6
<PAGE>
APPENDIX G
(PRELIMINARY PROXY)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
EXCELSIOR FUNDS, INC.
(THE "COMPANY")
This proxy is solicited by the Board of the Company for use at a special
meeting of shareholders to be held on May 3, 2000, at 10:00 a.m. (Eastern time),
at the offices of United States Trust Company of New York, 114 West 47/th/
Street, New York, New York 10036.
The undersigned hereby appoints Frank Bruno, Mark Dari, Patricia Leyne,
Michael Malloy and Diana McCarthy, and each of them, with full power of
substitution, as proxies of the undersigned to vote at the above-stated special
meeting, and at all adjournments or postponements thereof, all shares
representing interests in the Funds of the Company held of record by the
undersigned on March 6, 2000, the record date for the meeting, upon the
following matters and upon any other matter that may come before the meeting, in
their discretion.
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should sign.
When signing as attorney or executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name by
president or other authorized officer. If a
partnership, please sign in partnership name by
authorized person.
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED.
To vote by telephone
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
To Vote by Internet
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
G-1
<PAGE>
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil.
If you own shares in more than one Fund and you wish to receive an individual
ballot for each Fund check this box. [_]
Every properly signed proxy will be voted in the manner specified thereon
and, in the absence of specification, will be treated as GRANTING authority to
vote FOR Proposal (2)(i).
VOTE ON PROPOSAL
(2)(i) Proposal to approve a new Investment Advisory Agreement among the
Company, United States Trust Company of New York and U.S. Trust
Company.
[_] For [_] Against [_] Abstain
The proxies are authorized to vote in their discretion upon any other
business which may properly come before the Meeting and any adjournments
thereof.
- ---------------------------------- ---- ------------------------ ----
SIGNATURE (PLEASE SIGN WITHIN BOX) DATE SIGNATURE (JOINT OWNERS) DATE
G-2
<PAGE>
APPENDIX H
(PRELIMINARY COPY)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(THE "COMPANY")
This proxy is solicited by the Board of the Company for use at a special
meeting of shareholders to be held on May 3, 2000, at 10:00 a.m. (Eastern time),
at the offices of United States Trust Company of New York, 114 West 47th
Street, New York, New York 10036.
The undersigned hereby appoints Frank Bruno, Mark Dari, Patricia Leyne,
Michael Malloy and Diana McCarthy, and each of them, with full power of
substitution, as proxies of the undersigned to vote at the above-stated special
meeting, and at all adjournments or postponements thereof, all shares
representing interests in the Funds of the Company held of record by the
undersigned on March 6, 2000, the record date for the meeting, upon the
following matters and upon any other matter that may come before the meeting, in
their discretion.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney or executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED.
To vote by telephone
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
To vote by Internet
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
H-1
<PAGE>
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil.
If you own shares in more than one Fund you wish to receive an individual
ballot for each Fund check this box. [_]
Every properly signed proxy will be voted in the manner specified thereon and,
in the absence of specification, will be treated as GRANTING authority to vote
FOR Proposal (2)(i) and Proposal (2)(ii).
Voting on Proposals
(2)(i) Proposal to approve a new Investment Advisory Agreement among the
Company, United States Trust Company of New York and U.S. Trust
Company.
[_]For [_]Against [_]Abstain
(ii) Proposal to approve a new Sub-Advisory Agreement among United States
Trust Company of New York, U.S. Trust Company and U.S. Trust Company,
N.A. (For California Tax-Exempt Income Fund only)
[_]For [_]Against [_]Abstain
The proxies are authorized to vote in their discretion upon any other
business which may properly come before the Meeting and any adjournments
thereof.
<TABLE>
<S> <C>
- --------------------------------------------------- ---------------------------------------------------
| | | | | |
- --------------------------------------------------- ---------------------------------------------------
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date
</TABLE>
H-2
<PAGE>
APPENDIX I
(PRELIMINARY PROXY)
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF
EXCELSIOR INSTITUTIONAL TRUST
(THE "COMPANY")
This proxy is solicited by the Board of the Company for use at a special
meeting of shareholders to be held on May 3, 2000, at 10:00 a.m. (Eastern time),
at the offices of United States Trust Company of New York, 114 West 47th
Street, New York, New York 10036.
The undersigned hereby appoints Frank Bruno, Mark Dari, Patricia Leyne,
Michael Malloy and Diana McCarthy, and each of them, with full power of
substitution, as proxies of the undersigned to vote at the above-stated special
meeting, and at all adjournments or postponements thereof, all shares
representing interests in the Funds of the Company held of record by the
undersigned on March 6, 2000, the record date for the meeting, upon the
following matters and upon any other matter that may come before the meeting, in
their discretion.
Please sign exactly as name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as attorney or
executor, administrator, trustee or
guardian, please give full title as such.
If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
PLEASE SIGN AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
To vote by telephone
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
To vote by Internet
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
I-1
<PAGE>
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil.
If you own shares in more than one Fund and you wish to receive an individual
ballot for each Fund check this box. [_]
(1) Vote on Trustees
[ ] For All
[ ] Withhold All
[ ] For All except:
To withold authority to vote, mark "For All Except" and write the
nominee's number on the line below.
-----------------------------------
01)Frederick S. Wonham
02)Donald L. Campbell
03)Rodman L. Drake
04)Joseph H. Dugan
05)Wolfe J. Frankl
06)Jonathan Piel
07)Robert A. Robinson
08)Alfred C. Tannachion
Every properly signed proxy will be voted in the manner specified thereon
and, in the absence of specification, will be treated as GRANTING authority to
vote FOR Proposal 1 and Proposal 2(i).
VOTE ON PROPOSAL
(2)(i) Proposal to approve a new Investment Advisory Agreement among the
Company, United States Trust Company of New York and U.S. Trust
Company.
[ ]For [ ]Against [ ]Abstain
The proxies are authorized to vote in their discretion upon any other
business which may properly come before the Meeting and any adjournments
thereof.
- ---------------------------------- ---- ------------------------ ----
SIGNATURE (PLEASE SIGN WITHIN BOX) DATE SIGNATURE (JOINT OWNERS) DATE
I-2
