<PAGE>
As filed with the Securities and Exchange Commission on February 8, 2000
Registration Nos. 2-92665; 811-4088
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 36 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
Amendment No. 38 [X]
Excelsior Funds, Inc.
(Exact Name of Registrant as Specified in Charter)
73 Tremont Street
Boston, Massachusetts 02108-3913
(Address of Principal Executive Offices)
Registrant's Telephone Number: (800) 446-1012
W. Bruce McConnel, III
Drinker Biddle & Reath LLP
One Logan Square
18/th/ and Cherry Streets
Philadelphia, Pennsylvania 19103-6996
(Name and Address of Agent for Service)
It is proposed that this post-effective amendment will become effective (check
appropriate box)
[_] Immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
- ---
[_] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
__________________________
Title of Securities Being Registered: Shares of Common Stock
<PAGE>
Excelsior Technology Fund
Prospectus
[_________], 2000
Excelsior Funds, Inc.
Investment Adviser
United States Trust Company of New York
U.S. Trust Company
The Securities and Exchange Commission has not approved or disapproved any Fund
shares or determined whether this prospectus is accurate or complete. It is a
crime for anyone to tell you otherwise.
LOGO
<PAGE>
Table of Contents
Excelsior Funds, Inc. is a mutual fund family that offers shares in separate
investment portfolios which have individual investment goals and strategies.
This prospectus gives you important information about the Technology Fund (the
Fund) that you should know before investing. The Technology Fund offers one
class of shares, called Shares. Please read this prospectus and keep it for
future reference.
This prospectus has been arranged into different sections so that you can easily
review this important information. On the next page, there is some general
information you should know about the Fund. For more detailed information about
the Fund, please see:
<TABLE>
<CAPTION>
Page
<S> <C>
Technology Fund....................................................................................................... 2
More Information About Risk........................................................................................... 3
Other Investments..................................................................................................... 4
The Investment Adviser and Portfolio Managers......................................................................... 4
Purchasing, Selling and Exchanging Fund Shares........................................................................ 4
Dividends, Distributions and Taxes.................................................................................... 6
How to Obtain More Information About Excelsior Funds.................................................................. Back Cover
</TABLE>
<PAGE>
General Information About the Fund
The Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
The Fund has its own investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help the
Fund achieve its goal. Still, investing in the Fund involves risk and there is
no guarantee that the Fund will achieve its goal. An investment manager's
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment. In fact, no matter how good
a job an investment manager does, you could lose money on your investment in the
Fund, just as you could with other investments. A Fund share is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation (FDIC) or any government agency.
The value of your investment in the Fund is based on the market value of the
securities the Fund holds. These prices change daily due to economic and other
events that affect particular companies and other issuers. These price
movements, sometimes called volatility, may be greater or lesser depending on
the types of securities the Fund owns and the markets in which they trade. The
effect on the Fund of a change in the value of a single security will depend on
how widely the Fund diversifies its holdings.
The Adviser's Equity Investment Philosophy
The Adviser manages the Fund's investments with a view toward long-term success.
To achieve this success, the Adviser utilizes two fundamental investment
strategies, value and growth. The Adviser believes that, over the long-term, the
blending of these strategies will result in reduced volatility. These strategies
are combined with "longer-term investment themes" to assess the investment
potential of individual companies. Specific investment selection is a "bottom-
up" approach, guided by these strategies and themes to ensure proper risk
control and market focus.
Value
This long-term strategy consists of searching for, identifying and obtaining the
benefits of present or future investment values. For example, such values may be
found in a company's future earnings potential or in its existing resources and
assets. Accordingly, the Adviser is constantly engaged in assessing, comparing
and judging the worth of companies, particularly in comparison to the price the
markets place on such companies' shares.
Growth
This long-term strategy consists of buying and holding equity securities of
companies which it believes to be of high quality and high growth potential.
Typically, these companies are industry leaders with the potential to dominate
their markets by being low-cost, high-quality producers of products or services.
Usually these companies have an identifiable competitive advantage. The Adviser
believes that the earnings growth rate of these companies is the primary
determinant of their stock prices and that efficient markets will reward
consistently above average earnings growth with greater-than-average capital
appreciation over the long-term.
Themes
To complete the Adviser's investment philosophy in managing the Fund, the
investment strategies discussed above are applied in concert with long-term
investment themes to identify investment opportunities. The Adviser believes
these longer-term themes represent strong and inexorable trends arising from
economic, social, demographic and cultural forces. The Adviser also believes
that understanding the instigation, catalysts and effects of these long-term
trends will enable them to identify companies that are currently or will soon
benefit from these trends.
-1-
<PAGE>
Technology Fund
FUND SUMMARY
Investment Goal Superior, long-term total return
Investment Focus Common stocks of technology companies
Share Price Volatility High
Principal Investment Strategy Invests in common stocks of companies
expected to benefit from the development, advancement and use of
technology
Investor Profile Investors seeking long-term growth of capital, and
who are willing to accept the risks of investing in a non-diversified
portfolio of technology companies
Investment Objective
The Technology Fund seeks superior, long-term total return. This objective may
be changed without shareholder approval. The Fund seeks to achieve its objective
by investing in companies expected to benefit from the development, advancement
and use of technology. These companies may be in a variety of industries, and
may include hardware, software, electronic components and systems,
telecommunications, internet, media and information services companies or other
companies that use technology extensively in the development of new or improved
products or processes.
Investment Strategy
Under normal market conditions, the Technology Fund invests at least 65% of its
assets in the equity securities of U.S. and to a lesser extent foreign
technology companies. The Fund may invest in companies of any size, including
small, high growth companies.
In selecting investments for the Fund, the Adviser takes a long-term approach
and seeks to identify technology companies whose value is not recognized in the
prices of their securities or with characteristics that will lead to above-
average earnings growth.
Principal Risks of Investing in the Fund
The Fund is subject to the risk that the securities of issuers engaged in the
technology sector of the economy that the Fund purchases will underperform other
market sectors or the market as a whole. To the extent that the Fund's
investments are concentrated in issuers conducting business in the same
industry, the Fund is subject to legislative or regulatory changes, adverse
market conditions and/or increased competition affecting that industry.
Competitive pressures may significantly impact the financial condition of
technology companies. For example, an increasing number of companies and new
product offerings can lead to price cuts and slower selling cycles, and many of
these companies may be dependent on the success of a principal product, may rely
on sole source providers and third-party manufacturers, and may experience
difficulties in managing growth. In addition, securities of technology companies
may experience dramatic price movements that have little or no basis in
fundamental economic conditions. As a result, the Fund's investment in
technology companies may subject it to more volatile price movements than a more
diversified securities portfolio.
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate substantially from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
The Fund also may be subject to risks particular to its investments in foreign,
medium and smaller capitalization companies. These risks are discussed in
greater detail in the section entitled "More Information About Risk."
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or political/regulatory occurrence affecting one or more
of these issuers, and may experience increased volatility due to its investments
in those securities.
Performance Information
There is no performance information for the Technology Fund because the Fund had
not yet commenced operations as of the date of this prospectus.
-2-
<PAGE>
Fund Fees and Expenses
Every mutual fund has operating expenses to pay for services such as
professional advisory, shareholder, administration and custody services and
other costs of doing business. This table describes the fees and expenses that
you may pay if you buy and hold shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
<TABLE>
<S> <C> <C>
Management Fees 1.00%
Other Expenses
Administrative Servicing Fee 0.25%
Other Operating Expenses 0.25%
Total Other Expenses 0.50%
- ------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.50%
Fee Waiver 0.25%
New Annual Fund Operating Expenses 1.25%*
</TABLE>
* The Fund's total annual fund operating expenses and net annual fund operating
expenses are estimated based on expenses expected to be incurred in the
current fiscal year. The Adviser has contractually agreed to waive its
investment advisory fee or other fees during the current fiscal year, in an
amount equal to the administrative servicing fee paid by the Fund.
Accordingly, Total Net Fund Operating Expenses are expected to be 1.25%. For
more information about these fees, see "Investment Adviser."
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years
- ----------------------------------
<S> <C> <C>
$127 $397
</TABLE>
More Information About Risk
Equity Risk
Equity securities include public and privately issued equity securities, common
and preferred stocks, warrants, rights to subscribe to common stock and
convertible securities, as well as instruments that attempt to track the price
movement of equity indices. Investments in equity securities and equity
derivatives in general are subject to market risks that may cause their prices
to fluctuate over time. The value of securities convertible into equity
securities, such as warrants or convertible debt, is also affected by prevailing
interest rates, the credit quality of the issuer and any call provision.
Small Cap Risk
The smaller capitalization companies in which the Fund may invest may be more
vulnerable to adverse business or economic events than larger, more established
companies. In particular, these small companies may have limited product lines,
markets and financial resources, and may depend upon a relatively small
management group. Therefore, small cap stocks may be more volatile than those of
larger companies.
Mid Cap Risk
The medium capitalization companies that the Fund may invest in may be more
vulnerable to adverse business or economic events than larger companies. In
particular, these companies may have limited product lines, markets and
financial resources, and may depend on a relatively small management group.
Therefore, medium capitalization on stocks may be more volatile than those of
larger companies.
Foreign Security Risks
Investments in securities of foreign companies or governments can be more
volatile than investments in U.S. companies or governments. Diplomatic,
political, or economic developments, including nationalization or appropriation,
could affect investments in foreign countries. Foreign securities markets
generally have less trading volume and less liquidity than U.S. markets. In
addition, the value of securities denominated in foreign currencies, and of
dividends from such securities, can change significantly when foreign currencies
strengthen or weaken relative to the U.S. dollar. Foreign companies or
governments generally are not subject to uniform accounting, auditing, and
financial reporting standards comparable to those applicable to domestic U.S.
companies or governments. Transaction costs are generally higher than those in
the U.S. and expenses for custodial arrangements of foreign securities may be
somewhat greater than typical expenses for custodial arrangements of similar
U.S. securities. Some foreign governments levy withholding taxes against
dividend and interest income. Although in some countries a portion of these
taxes is recoverable, the non-recovered portion will reduce the income received
from the securities comprising the portfolio.
Currency Risk
Investments in foreign securities denominated in foreign currencies involve
additional risks, including:
. The Fund may incur substantial costs in connection with conversions between
various currencies.
. Only a limited market currently exists for hedging transactions relating to
currencies in certain emerging markets.
Year 2000 Risk
The Fund depends on the smooth functioning of computer systems in almost every
aspect of its business. Like other mutual funds, businesses and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process dates on and after January
1, 2000, and distinguish between the year 2000 and the year 1900. This is
commonly known as the "Year 2000 Problem." The Adviser and the Fund's other
service providers advise that they have taken and continue to take steps to
address the Year 2000 Problem with respect to the computer systems that they
use. Currently, they do not anticipate that the transition to the 21st Century
will have any material impact on their ability to continue to service the Fund
at current levels. At this time, however, there
-3-
<PAGE>
can be no assurance that their efforts will be sufficient to avoid any adverse
impact on the Fund as a result of the Year 2000 Problem. In addition, the Fund
and its shareholders may experience losses as a result of computer difficulties
experienced by issuers of portfolio securities or third parties, such as
custodians, banks, broker-dealers or others with which the Fund does business.
Furthermore, many foreign countries are not as prepared as the U.S. for the year
2000 transition. As a result, computer difficulties in foreign markets and with
foreign institutions as a result of the Year 2000 Problem may add to the
possibility of losses to the Fund and its shareholders.
Other Investments
In addition to the investments and strategies described in this prospectus, the
Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information.
The investments and strategies described in this prospectus are those that we
use under normal conditions. During adverse economic, market or other
conditions, the Fund may take temporary defensive positions such as investing up
to 100% of its assets in investments that would not ordinarily be consistent
with the Fund's objective. The Fund may not achieve its objective when so
invested. The Fund will do so only if the Adviser believes that the risk of loss
outweighs the opportunity for capital gains or higher income. Of course, the
Fund cannot guarantee that it will achieve its investment goal.
Investment Adviser
United States Trust Company of New York and U.S. Trust Company (together, U.S.
Trust or the Adviser) serve as investment adviser to the Fund. United States
Trust Company of New York is a state-chartered bank and trust company and a
member bank of the Federal Reserve System. U.S. Trust Company is a Connecticut
state bank and trust company. Each is a wholly-owned subsidiary of U.S. Trust
Corporation, a registered bank holding company.
U.S. Trust is one of the oldest investment management companies in the country.
Since 1853, U.S. Trust has been a leader in wealth management for sophisticated
investors providing trust and banking services to individuals, corporations and
institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency banking, and personal and corporate banking. On December 31, 1999,
U.S. Trust had approximately $86 billion in aggregate assets under management.
United States Trust Company of New York has its principal offices at 114 W. 47th
Street, New York, NY 10036. U.S. Trust Company has its principal offices at 225
High Ridge Road, East Building, Stamford, CT 06905.
The Adviser makes investment decisions for the Fund and continuously reviews,
supervises and administers the Fund's investment program.
The Board of Directors of Excelsior Funds, Inc. supervises the Adviser and
establishes policies that the Adviser must follow in its management activities.
Portfolio Managers
All investment decisions for the Fund are made by a committee of investment
professionals and no persons are primarily responsible for making
recommendations to that committee. United States Trust Company of New York
provides investment advisory services to the Fund primarily through its Campbell
Cowperthwait division.
Purchasing, Selling and Exchanging Fund Shares
This section tells you how to buy, sell (sometimes called "redeem") or exchange
shares of the Funds.
How to Purchase Fund Shares
You may purchase shares directly by:
. Mail
. Telephone
. Wire, or
. Automatic Investment Program
To purchase shares directly from us, please call (800) 446-1012 (from
overseas, call (617) 557-8280), or complete and send in the enclosed
application to Excelsior Funds, c/o Chase Global Funds Services Company, P.O.
Box 2798, Boston, MA 02208-2798. Unless you arrange to pay by wire or through
the automatic investment program, write your check, payable in U.S. dollars,
to "Excelsior Funds" and include the name of the Fund on the check. The Fund
cannot accept third-party checks, credit cards, credit card checks or cash. To
purchase shares by wire, please call us for instructions. Federal funds and
registration instructions should be wired through the Federal Reserve System
to:
The Chase Manhattan Bank
ABA #021000021
Excelsior Funds, Account Number 9102732915
For Further Credit To:
Excelsior Funds
Wire Control Number
Excelsior Funds Account Registration (including account number)
Investors making initial investments by wire must promptly complete the enclosed
application and forward it to the address indicated on the application.
Investors making subsequent investments by wire should follow the above
instructions.
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its
procedures, which may be different from the procedures for investing directly.
Your institution may charge a fee for its services, in addition to the fees
charged by the Fund. You will also generally have to address your correspondence
or questions regarding a Fund to your institution.
The Fund's distributor may institute promotional incentive programs for dealers,
which will be paid for by the distributor out of its own assets and not out of
the assets of the Fund. Under any such program, the distributor may provide
incentives, in the form of cash or other compensation, including merchandise,
airline vouchers, trips and vacation packages, to dealers selling shares of
-4-
<PAGE>
the Fund. If any such program is made available to any dealer, it will be made
available to all dealers on the same terms.
General Information
You may purchase shares on any day that the New York Stock Exchange (NYSE) and
the Adviser are open for business (a "Business Day"). The Fund may reject any
purchase request if it is determined that accepting the request would not be in
the best interests of the Fund or its shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after the Fund receives your purchase request in good
order. We consider requests to be in "good order" when all required documents
are properly completed, signed and received.
The Fund calculates its NAV once each Business Day at the regularly-scheduled
close of normal trading on the NYSE (normally, 4:00 p.m., Eastern time). So, for
you to receive the current Business Day's NAV, the Fund must receive your
purchase request in good order before 4:00 p.m., Eastern time.
How We Calculate NAV
NAV for one Fund share is the value of that share's portion of all of the assets
in the Fund.
In calculating NAV, the Fund generally values its investment portfolio at market
price. If market prices are unavailable or the Adviser thinks that they are
unreliable, fair value prices may be determined in good faith using methods
approved by the Board of Directors. Fixed income investments with remaining
maturities of 60 days or less generally are valued at their amortized cost which
approximates their market value.
The Fund may hold securities that are listed on foreign exchanges. These
securities may trade on weekends or other days when the Fund does not calculate
NAV. As a result, the market value of a Fund's investments may change on days
when you cannot purchase or sell Fund shares.
Minimum Purchases
To purchase shares for the first time, you must invest at least $500 ($250 for
IRAs) in the Fund.
Your subsequent investments must be made in amounts of at least $50.
The Fund may accept investments of smaller amounts at its discretion.
Automatic Investment Program
If you have a checking, money market or NOW account with a bank, you may
purchase shares automatically through regular deductions from your account in
amounts of at least $50 per transaction.
With a $50 minimum initial investment, you may begin regularly scheduled
investments once per month, on either the first or fifteenth day, or twice per
month, on both days.
How to Sell Your Fund Shares
You may sell shares directly by:
. Mail
. Telephone, or
. Systematic Withdrawal Plan
Holders of Fund shares may sell (sometimes called "redeem") shares by following
procedures established when they opened their account or accounts. If you have
questions, call (800) 446-1012 (from overseas, call (617) 557-8280).
You may sell your shares by sending a written request for redemption to:
Excelsior Funds
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Please be sure to indicate the number of shares to be sold, identify your
account number and sign the request.
If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares.
If you own your shares directly and previously indicated on your account
application or arranged in writing to do so, you may sell your shares on any
Business Day by contacting the Fund directly by telephone at (800) 446-1012
(from overseas, call (617) 557-8280). The minimum amount for telephone
redemptions is $500. We may reject a telephone redemption request if we deem it
advisable to do so.
If you would like to sell $50,000 or more of your shares, or any amount if the
proceeds are to be sent to an address other than the address of record, please
notify the Fund in writing and include a signature guarantee by a bank or other
financial institution (a notarized signature is not sufficient).
The sale price of each share will be the next NAV determined after the Fund
receives your request in good order.
Systematic Withdrawal Plan
If you have at least $10,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals from the Fund. The proceeds of each withdrawal
will be mailed to you by check or, if you have a checking or savings account
with a bank, electronically transferred to your account.
Receiving Your Money
Normally, we will send your sale proceeds within five Business Days after we
receive your request in good order. Your proceeds can be wired to your bank
account (if more than $500) or sent to you by check. If you recently purchased
your shares by check, redemption proceeds may not be available until your check
has cleared (which may take up to 15 Business Days).
Redemptions in Kind
We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise, we might pay all or part of
your redemption proceeds in liquid securities with a market value equal to the
redemption price
-5-
<PAGE>
(redemption in kind). It is highly unlikely that your shares would ever be
redeemed in kind, but if they were you would probably have to pay transaction
costs to sell the securities distributed to you, as well as taxes on any capital
gains from the sale as with any redemption.
Involuntary Sales of Your Shares
If your account balance drops below $500 because of redemptions, you may be
required to sell your shares. But, we will always give you at least 60 days'
written notice to give you time to add to your account and avoid the sale of
your shares.
Suspension of Your Right to Sell Your Shares
A Fund may suspend your right to sell your shares if the NYSE restricts trading,
the SEC declares an emergency or for other reasons. More information about this
is in our Statement of Additional Information.
How to Exchange Your Shares
You may exchange your shares on any Business Day for Shares of any portfolio of
Excelsior Funds, Inc., Excelsior Tax-Exempt Funds, Inc., or Excelsior
Institutional Trust. In order to protect other shareholders, we may limit your
exchanges to no more than six per year, and we may reject any exchange request.
Shares can be exchanged directly by mail, or by telephone if you previously
selected the telephone exchange option on the account application.
You may also exchange shares through your financial institution. Exchange
requests must be for an amount of at least $500.
If you recently purchased shares by check you may not be able to exchange your
shares until your check has cleared (which may take up to 15 Business Days).
This exchange privilege may be changed or canceled at any time upon 60 days'
notice.
When you exchange shares, you are really selling your shares and buying other
Fund shares. So, your sale price and purchase price will be based on the NAV
next calculated after the Fund receives your exchange request in good order.
Telephone Transactions
Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Fund has certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, the Fund is not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you or
your financial institution transact with a Fund over the telephone, you will
generally bear the risk of any loss.
Authorized Intermediaries
Certain intermediaries, such as brokers or other shareholder organizations, are
authorized to accept purchase, redemption and exchange requests for Fund shares.
These intermediaries may authorize other organizations to accept purchase,
redemption and exchange requests for Fund shares. These requests are normally
executed at the NAV next determined after the intermediary receives the request
in good order. Authorized intermediaries are responsible for transmitting
requests and delivering funds on a timely basis.
Shareholder Servicing
The Fund is permitted to pay a shareholder servicing fee to certain shareholder
organizations for providing services to their customers who hold shares of the
Fund. These services may include assisting in the processing of purchase,
redemption and exchange requests and providing periodic account statements. The
shareholder servicing fee may be up to 0.25% of the average daily net asset
value of Fund shares held by clients of a shareholder organization.
Dividends, Distributions and Taxes
The Fund distributes dividends from its income annually. The Fund makes
distributions of capital gains, if any, at least annually. If you own Fund
shares on the Fund's record date, you will be entitled to receive the
distribution.
Dividends and distributions for shares held of record by U.S. Trust and its
affiliates or correspondent banks will be paid in cash. Otherwise, dividends and
distributions will be paid in the form of additional Fund shares unless you
elect to receive payment in cash. To elect cash payment, you must notify the
Fund in writing prior to the date of the distribution. Your election will be
effective for dividends and distributions paid after the Fund receives your
written notice. To cancel your election, simply send the Fund written notice.
Taxes
Please consult your tax adviser regarding your specific questions about federal,
state and local income taxes. Below we have summarized some important tax issues
that affect the Funds and their shareholders. This summary is based on current
tax laws, which may change.
Each Fund contemplates declaring as dividends each year all or substantially all
of its taxable income, including its net capital gain (the excess of long-term
capital gain over short-term capital loss). Distributions attributable to the
net capital gain of a Fund will be taxable to you as long-term capital gain,
regardless of how long you have held your shares. Other Fund distributions will
generally be taxable as ordinary income. You will be subject to income tax on
Fund distributions regardless of whether they are paid in cash or reinvested in
additional shares. You will be notified annually of the tax status of
distributions to you.
You should note that if you purchase shares just before a distribution, the
purchase price will reflect the amount of the upcoming distribution, but you
will be taxed on the entire amount of the distribution received, even though, as
an economic matter, the distribution simply constitutes a return of capital.
This is known as "buying into a dividend."
-6-
<PAGE>
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, based on the
difference between your tax basis in the shares and the amount you receive for
them. (To aid in computing your tax basis, you generally should retain your
account statements for the periods during which you held shares.) Generally,
this gain or loss will be long-term or short-term depending on whether your
holding period for the shares exceeds 12 months, except that any loss realized
on shares held for six months or less will be treated as a long-term capital
loss to the extent of any long-term capital gain dividends that were received on
the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of shares held in an IRA (or other tax-
qualified plan) will not be currently taxable.
A Fund's dividends that are paid to its corporate shareholders and are
attributable to qualifying dividends the Fund receives from U.S. domestic
corporations may be eligible, in the hands of the corporate shareholders, for
the corporate dividends received deduction, subject to certain holding period
requirements and debt financing limitations.
Shareowners may also be subject to state and local taxes on distributions and
redemptions. State income taxes may not apply however, to the portions of each
Fund's distributions, if any, that are attributable to interest on federal
securities or interest on securities of the particular state or localities
within the state.
The foregoing is only a summary of certain tax considerations under current law,
which may be subject to change in the future. Shareholders who are nonresident
aliens, foreign trusts or estates, or foreign corporations or partnerships, may
be subject to different United States federal income tax treatment. You should
consult your tax adviser for further information regarding federal, state,
and/or foreign tax consequences relevant to your specific situation.
More information about taxes is in the Statement of Additional Information.
-7-
<PAGE>
Excelsior Funds, Inc.
Investment Adviser
United States Trust Company of New York
114 W. 47th Street
New York, New York 10036
U.S. Trust Company
225 High Ridge Road
East Building
Stamford, Connecticut 06905
Distributor
Edgewood Services, Inc.
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-5829
More information about the Fund is available without charge through the
following:
Statement of Additional Information (SAI)
The SAI, dated [_____], 2000 includes detailed information about Excelsior
Funds, Inc. The SAI is on file with the SEC and is incorporated by reference
into this prospectus. This means that the SAI, for legal purposes, is a part of
this prospectus.
Annual and Semi-Annual Reports
These reports contain additional information about the Fund's investments. The
Annual Report also lists the Fund's holdings and contains information from the
Fund's managers about strategies, and recent market conditions and trends.
[As a shareholder in the Fund, you will receive an Annual Report and a Semi-
Annual Report. To eliminate unnecessary duplication, only one copy of such
reports will be sent to the same mailing address. If you would like a duplicate
copy to be mailed to you, please contact Chase Global Fund Services Company,
P.O. Box 2798, Boston, MA 02208-2798, or call 1-800-446-1012.]
To Obtain More Information:
By Telephone: Call (800) 466-1012 (from overseas, call (617) 557-8280)
By Mail: Excelsior Funds, 73 Tremont Street, Boston, Massachusetts 02108-3913
By Internet: http://www.excelsiorfunds.com
From the SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about Excelsior Funds, Inc., from the SEC's website
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009. Excelsior Funds, Inc.'s Investment Company Act
registration number is 811-4088.
<PAGE>
EXCELSIOR FUNDS, INC.
Technology Fund
STATEMENT OF ADDITIONAL INFORMATION
_________, 2000
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current prospectus for the Technology Fund (the "Fund")
of the Excelsior Funds, Inc. ("the Company") dated _________, 2000 (the
"Prospectus"). A copy of the Prospectus may be obtained by writing the Company
c/o Chase Global Funds Services Company, 73 Tremont Street, Boston, MA 02108-
3913 or by calling (800) 446-1012. Capitalized terms not otherwise defined have
the same meaning as in the Prospectus.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
CLASSIFICATION AND HISTORY.................................................. 1
INVESTMENT OBJECTIVE STRATEGIES AND RISKS................................... 1
Investment Philosophy and Strategies................................... 1
Additional Investment Policies......................................... 3
Additional Information On Portfolio Instruments........................ 3
INVESTMENT LIMITATIONS...................................................... 14
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.............................. 16
Purchase Of Shares..................................................... 17
Redemption Procedures.................................................. 19
Other Redemption Information........................................... 22
INVESTOR PROGRAMS........................................................... 22
Systematic Withdrawal Plan............................................. 22
Exchange Privilege..................................................... 23
Retirement Plans....................................................... 24
Automatic Investment Program........................................... 24
Additional Information................................................. 25
DESCRIPTION OF CAPITAL STOCK................................................ 25
MANAGEMENT OF THE FUND...................................................... 27
Directors And Officers...................................................... 27
Investment Advisory And Administration Agreements........................... 32
Shareholder Organizations................................................... 34
Expenses.................................................................... 35
Custodian And Transfer Agent................................................ 36
PORTFOLIO TRANSACTIONS...................................................... 37
PORTFOLIO VALUATION......................................................... 38
INDEPENDENT AUDITORS........................................................ 39
COUNSEL..................................................................... 39
ADDITIONAL INFORMATION CONCERNING TAXES..................................... 39
PERFORMANCE INFORMATION..................................................... 40
MISCELLANEOUS............................................................... 43
APPENDIX A.................................................................. A-1
</TABLE>
<PAGE>
CLASSIFICATION AND HISTORY
--------------------------
Excelsior Funds, Inc. (the "Company") is an open-end management
investment company. The Fund is a separate series of the Company and is
classified as non-diversified under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Company was organized as a Maryland corporation
on August 2, 1984. Prior to December 28, 1995, the Company was known as "UST
Master Funds, Inc."
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
------------------------------------------
The following information supplements the description of the
investment objective, strategies and risks of the Fund as set forth in the
Prospectus. The investment objective of the Fund may be changed without the
vote of the holders of a majority of its outstanding shares (as defined below).
Except as expressly noted below, the Fund's investment policies may be changed
without shareholder approval.
Investment Philosophy and Strategies
- ------------------------------------
In managing investments for the Fund, the Adviser follows a long-term
investment philosophy which generally does not change with the short-term
variability of financial markets or fundamental conditions. Its approach begins
with the conviction that all worthwhile investments are grounded in value. The
Adviser believes that an investor can identify fundamental values that
eventually should be reflected in market prices, such that over time, a
disciplined search for fundamental value will achieve better results than
attempting to take advantage of short-term price movements.
The Adviser's investment philosophy is to identify investment values
available in the market at attractive prices. Investment value arises from the
ability to generate earnings or from the ownership of assets or resources.
Underlying earnings potential and asset values are frequently demonstrable but
not recognized in the market prices of the securities representing their
ownership. The Adviser employs the following three different but closely
interrelated portfolio strategies to focus and organize its search for
investment values.
1. Problem/Opportunity Companies. Important investment
-----------------------------
opportunities often occur where companies develop solutions to large, complex,
fundamental problems, such as declining industrial productivity; rising costs
and declining sources of energy; the economic imbalances and value erosion
caused by years of high inflation and interest rates; the soaring costs and
competing priorities of providing health care; and the accelerating
interdependence and "shrinking size" of the world.
<PAGE>
Solutions or parts of solutions to large problems may be generated by
established companies or comparatively new companies of all sizes through the
development of new products, technologies or services, or through new
applications of older ones.
Investment in such companies represents a very wide range of
investment potential, current income return rates, and exposure to fundamental
and market risks. Income generated by the Fund's investments in these companies
would be expected to be moderate, characterized by lesser rates than those of a
fund whose sole objective is current income, and somewhat higher rates than
those of a higher-risk growth fund.
2. Transaction Value Companies. In the opinion of the Adviser, the
---------------------------
stock market frequently values the aggregate ownership of a company at a
substantially lower figure than its component assets would be worth if they were
sold off separately over time. Such assets may include intangible assets such
as product and market franchises, operating know-how, or distribution systems,
as well as such tangible properties as oil reserves, timber, real estate, or
production facilities. Investment opportunities in these companies are
determined by the magnitude of difference between economic worth and current
market price.
Market undervaluations are very often corrected by purchase and sale
of the company, restructuring of the company, or market appreciation to
recognize the actual worth. The recognition process may well occur over time,
however, incurring a form of time-exposure risk. Success from investing in
these companies is often great, but may well be achieved only after a waiting
period of inactivity.
Income derived from investing in undervalued companies is expected to
be moderately greater than that derived from investments in either the
problem/opportunity or early life cycle companies.
3. Early Life Cycle Companies. Investments in early life cycle
--------------------------
companies tend to be narrowly focused on an objective of higher rates of capital
appreciation. They correspondingly will involve a significantly greater degree
of risk and the reduction of current income to a negligible level. Such
investments will not be limited to new, small companies engaged only in frontier
technology, but will seek opportunities for maximum appreciation through the
full spectrum of business operations, products, services, and asset values.
Consequently, the Fund's investments in early life cycle companies are primarily
in younger, small- to medium- sized companies in the early stages of their
development. Such companies are usually more flexible in trying new approaches
to problem-solving and in making new or different employment of assets. Because
of the high risk level involved, the ratio of success among such companies is
lower than the average, but for those companies which succeed, the magnitude of
investment reward is potentially higher.
To complete the Adviser's investment philosophy in managing the Fund,
the three portfolio strategies discussed above are applied in concert with other
longer-term investment "themes" to identify investment opportunities. The
Adviser believes these longer-term themes represent strong and inexorable
trends. The Adviser also believes that understanding the
-2-
<PAGE>
instigation, catalysts and effects of these longer-term trends should help to
identify companies that are beneficiaries of these trends.
Additional Investment Policies
- ------------------------------
Under normal market and economic conditions, the Fund will invest at
least 65% of its total assets in equity securities of technology companies.
Technology companies are those companies that are expected to benefit from the
development, advancement and use of technology. Normally, up to 35% of the
Fund's total assets may be invested in other securities and instruments
including, e.g., other investment-grade debt securities (i.e., debt obligations
classified within the four highest ratings of a nationally recognized
statistical rating organization such as Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Services ("S&P") or, if unrated,
determined by the Adviser to be of comparable quality), warrants, options and
futures instruments as described in more detail below. During temporary
defensive periods or when the Adviser believes that suitable investments are
unavailable, the Fund may hold cash and/or invest some or all of its assets in
U.S. Government securities, high-quality money market instruments and repurchase
agreements collateralized by the foregoing obligations.
Portfolio holdings will include equity securities of companies having
capitalizations of varying amounts, and the Fund may invest in the securities of
high growth, small companies when the Adviser expects earnings and the price of
the securities to grow at an above-average rate. Certain securities owned by the
Fund may be traded only in the over-the-counter market or on a regional
securities exchange, may be listed only in the quotation service commonly known
as the "pink sheets," and may not be traded every day or in the volume typical
of trading on a national securities exchange. As a result, there may be a
greater fluctuation in the value of the Fund's Shares, and the Fund may be
required, in order to satisfy redemption requests or for other reasons, to sell
these securities at a discount from market prices, to sell during periods when
such disposition is not desirable, or to make many small sales over a period of
time.
The Fund may invest in the securities of foreign issuers directly or
indirectly through sponsored and unsponsored American Depository Receipts
("ADRs"). ADRs represent receipts typically issued by a U.S. bank or trust
company which evidence ownership of underlying securities of foreign issuers.
Investments in unsponsored ADRs involve additional risk because financial
information based on generally accepted accounting principles ("GAAP") may not
be available for the foreign issuers of the underlying securities. ADRs may not
necessarily be denominated in the same currency as the underlying securities
into which they may be converted. The Fund may also enter into foreign currency
exchange transactions for hedging purposes.
Additional Information on Portfolio Instruments
- -----------------------------------------------
Options
-------
The Fund may purchase put and call options listed on a national
securities exchange and issued by the Options Clearing Corporation. Such
purchases would be in an
-3-
<PAGE>
amount not exceeding 5% of the Fund's net assets. Such options may relate to
particular securities or to various stock and bond indices. Purchase of options
is a highly specialized activity which entails greater than ordinary investment
risks, including a substantial risk of a complete loss of the amounts paid as
premiums to the writer of the options. Regardless of how much the market price
of the underlying security increases or decreases, the option buyer's risk is
limited to the amount of the original investment for the purchase of the option.
However, options may be more volatile than the underlying securities, and
therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than an investment in the underlying securities. A listed
call option gives the purchaser of the option the right to buy from a clearing
corporation, and the writer has the obligation to sell to the clearing
corporation, the underlying security at the stated exercise price at any time
prior to the expiration of the option, regardless of the market price of the
security. The premium paid to the writer is in consideration for undertaking the
obligations under the option contract. A listed put option gives the purchaser
the right to sell to a clearing corporation the underlying security at the
stated exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security. Put and call options purchased
by the Fund will be valued at the last sale price or, in the absence of such a
price, at the mean between bid and asked prices.
The Fund may engage in writing covered call options (options on
securities owned by the Fund) and enter into closing purchase transactions with
respect to such options. Such options must be listed on a national securities
exchange and issued by the Options Clearing Corporation. The aggregate value of
the securities subject to options written by the Fund may not exceed 25% of the
value of its net assets. By writing a covered call option, the Fund forgoes the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price except insofar as the premium represents such
a profit, and it will not be able to sell the underlying security until the
option expires or is exercised or the Fund effects a closing purchase
transaction by purchasing an option of the same series.
When the Fund writes a covered call option, it may terminate its
obligation to sell the underlying security prior to the expiration date of the
option by executing a closing purchase transaction, which is effected by
purchasing on an exchange an option of the same series (i.e., same underlying
security, exercise price and expiration date) as the option previously written.
Such a purchase does not result in the ownership of an option. A closing
purchase transaction will ordinarily be effected to realize a profit on an
outstanding call option, to prevent an underlying security from being called, to
permit the sale of the underlying security or to permit the writing of a new
call option containing different terms on such underlying security. The cost of
such a liquidation purchase plus transaction costs may be greater than the
premium received upon the original option, in which event the writer will have
incurred a loss on the transaction. An option position may be closed out only
on an exchange which provides a secondary market for an option of the same
series. There is no assurance that a liquid secondary market on an exchange
will exist for any particular option. A covered option writer, unable to effect
a closing purchase transaction, will not be able to sell the underlying security
until the option expires or the underlying security is delivered upon exercise,
with the result that the writer in such circumstances will be subject to the
risk of market decline in the underlying security during such period. The Fund
will write an option on a particular security only if the Adviser believes that
a
-4-
<PAGE>
liquid secondary market will exist on an exchange for options of the same
series, which will permit the Fund to make a closing purchase transaction in
order to close out its position.
When the Fund writes an option, an amount equal to the net premium
(the premium less the commission) received by the Fund is included in the
liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of the deferred credit will be subsequently marked
to market to reflect the current value of the option written. The current value
of the traded option is the last sale price or, in the absence of a sale, the
average of the closing bid and asked prices. If an option expires on the
stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund will realize a gain (or loss if the cost of a closing
purchase transaction exceeds the net premium received when the option is sold),
and the deferred credit related to such option will be eliminated. If an option
is exercised, the Fund may deliver the underlying security from its portfolio or
purchase the underlying security in the open market. In either event, the
proceeds of the sale will be increased by the net premium originally received,
and the Fund will realize a gain or loss. Premiums from expired call options
written by the Fund and net gains from closing purchase transactions are treated
as short-term capital gains for Federal income tax purposes, and losses on
closing purchase transactions are short-term capital losses. The use of covered
call options is not a primary investment technique of the Fund and such options
will normally be written on underlying securities as to which the Adviser does
not anticipate significant short-term capital appreciation.
Repurchase Agreements
---------------------
The Fund may agree to purchase portfolio securities subject to the
seller's agreement to repurchase them at a mutually agreed upon date and price
("repurchase agreements"). The Fund will enter into repurchase agreements only
with financial institutions that are deemed to be creditworthy by the Adviser,
pursuant to guidelines established by the Company's Board of Directors. The
Fund will not enter into repurchase agreements with the Adviser or any of its
affiliates. Repurchase agreements with remaining maturities in excess of seven
days will be considered illiquid securities and will be subject to the
limitations described below under "Illiquid Securities." The repurchase price
under a repurchase agreement generally equals the price paid by the Fund plus
interest negotiated on the basis of current short-term rates (which may be more
or less than the rate on the securities underlying the repurchase agreement).
Securities subject to repurchase agreements are held by the Fund's
custodian (or sub-custodian) or in the Federal Reserve/Treasury book-entry
system. The seller under a repurchase agreement will be required to maintain
the value of the securities which are subject to the agreement and held by the
Fund at not less than the repurchase price. Default or bankruptcy of the seller
would, however, expose the Fund to possible delay in connection with the
disposition of the underlying securities or loss to the extent that proceeds
from a sale of the underlying securities were less than the repurchase price
under the agreement. Repurchase agreements are considered loans by the Fund
under the 1940 Act.
-5-
<PAGE>
Futures Contracts and Related Options
-------------------------------------
The Fund may invest in futures contracts and options thereon. The
Fund may enter into interest rate futures contracts and other types of financial
futures contracts, including foreign currency futures contracts, as well as any
index or foreign market futures which are available on recognized exchanges or
in other established financial markets. A futures contract on foreign currency
creates a binding obligation on one party to deliver, and a corresponding
obligation on another party to accept delivery of, a stated quantity of a
foreign currency for an amount fixed in U.S. dollars. Foreign currency futures,
which operate in a manner similar to interest rate futures contracts, may be
used by the Fund to hedge against exposure to fluctuations in exchange rates
between the U.S. dollar and other currencies arising from multinational
transactions.
Futures contracts will not be entered into for speculative purposes,
but to hedge risks associated with the Fund's securities investments. The Fund
will engage in futures transactions only to the extent permitted by the
Commodity Futures Trading Commission ("CFTC") and the Securities and Exchange
Commission ("SEC"). When investing in futures contracts, the Fund must satisfy
certain asset segregation requirements to ensure that the use of futures is
unleveraged. When the Fund takes a long position in a futures contract, it must
maintain a segregated account containing liquid assets equal to the purchase
price of the contract, less any margin or deposit. When the Fund takes a short
position in a futures contract, the Fund must maintain a segregated account
containing liquid assets in an amount equal to the market value of the
securities underlying such contract (less any margin or deposit), which amount
must be at least equal to the market price at which the short position was
established. Asset segregation requirements are not applicable when the Fund
"covers" an options or futures position generally by entering into an offsetting
position. The Fund will limit its hedging transactions in futures contracts and
related options so that, immediately after any such transaction, the aggregate
initial margin that is required to be posted by the Fund under the rules of the
exchange on which the futures contract (or futures option) is traded, plus any
premiums paid by the Fund on its open futures options positions, does not exceed
5% of the Fund's total assets, after taking into account any unrealized profits
and unrealized losses on the Fund's open contracts (and excluding the amount
that a futures option is "in-the-money" at the time of purchase). An option to
buy a futures contract is "in-the-money" if the then-current purchase price of
the underlying futures contract exceeds the exercise or strike price; an option
to sell a futures contract is "in-the-money" if the exercise or strike price
exceeds the then-current purchase price of the contract that is the subject of
the option. In addition, the use of futures contracts is further restricted to
the extent that no more than 10% of the Fund's total assets may be hedged.
Positions in futures contracts may be closed out only on an exchange
which provides a secondary market for such futures. However, there can be no
assurance that a liquid secondary market will exist for any particular futures
contract at any specific time. Thus, it may not be possible to close a futures
position. In the event of adverse price movements, the Fund would continue to
be required to make daily cash payments to maintain its required margin. In
such situations, if the Fund has insufficient cash, it may have to sell
portfolio securities to meet
-6-
<PAGE>
daily margin requirements at a time when it may be disadvantageous to do so. In
addition, the Fund may be required to make delivery of the instruments
underlying futures contracts it holds. The inability to close options and
futures positions also could have an adverse impact on the Fund's ability to
effectively hedge.
Transactions in futures as a hedging device may subject the Fund to a
number of risks. Successful use of futures by the Fund is subject to the
ability of the Adviser to correctly predict movements in the direction of the
market. For example, if the Fund has hedged against the possibility of a
decline in the market adversely affecting securities held by it and securities
prices increase instead, the Fund will lose part or all of the benefit to the
increased value of its securities which it has hedged because it will have
approximately equal offsetting losses in its futures positions. There may be an
imperfect correlation, or no correlation at all, between movements in the price
of the futures contracts (or options) and movements in the price of the
instruments being hedged. In addition, investments in futures may subject the
Fund to losses due to unanticipated market movements which are potentially
unlimited. Further, there is no assurance that a liquid market will exist for
any particular futures contract (or option) at any particular time.
Consequently, the Fund may realize a loss on a futures transaction that is not
offset by a favorable movement in the price of securities which it holds or
intends to purchase or may be unable to close a futures position in the event of
adverse price movements. In addition, in some situations, if the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. Such sales of
securities may be, but will not necessarily be, at increased prices which
reflect the rising market.
As noted above, the risk of loss in trading futures contracts in some
strategies can be substantial, due both to the low margin deposits required, and
the extremely high degree of leverage involved in futures pricing. As a result,
a relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit, before any
deduction for the transaction costs, if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of the
amount invested in the contract.
Utilization of futures transactions by the Fund involves the risk of
loss of margin deposits in the event of bankruptcy of a broker with whom the
Fund has an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices
-7-
<PAGE>
have occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting some futures traders to substantial losses.
The trading of futures contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal trading activity, which could at times make it
difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
Options on Futures Contracts
----------------------------
The Fund may purchase options on the futures contracts described
above. A futures option gives the holder, in return for the premium paid, the
right to buy (call) from or sell (put) to the writer of the option a futures
contract at a specified price at any time during the period of the option. Upon
exercise, the writer of the option is obligated to pay the difference between
the cash value of the futures contract and the exercise price. Like the buyer
or seller of a futures contract, the holder, or writer, of an option has the
right to terminate its position prior to the scheduled expiration of the option
by selling, or purchasing, an option of the same series, at which time the
person entering into the closing transaction will realize a gain or loss.
Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the purchase
of an option also entails the risk that changes in the value of the underlying
futures contract will not be fully reflected in the value of the option
purchased. Depending on the pricing of the option compared to either the
futures contract upon which it is based, or upon the price of the instruments
being hedged, an option may or may not be less risky than ownership of the
futures contract or such instruments. In general, the market prices of options
can be expected to be more volatile than the market prices on the underlying
futures contract. Compared to the purchase or sale of futures contracts,
however, the purchase of call or put options on futures contracts may frequently
involve less potential risk to the Fund because the maximum amount at risk is
the premium paid for the options (plus transaction costs). Although permitted by
its fundamental investment policies, the Fund does not currently intend to write
futures options, and will not do so in the future absent any necessary
regulatory approvals.
When-Issued and Forward Transactions
------------------------------------
The Fund may purchase eligible securities on a "when-issued" basis and
may purchase or sell securities on a "forward commitment" basis. These
transactions involve a commitment by a Fund to purchase or sell particular
securities with payment and delivery taking place in the future, beyond the
normal settlement date, at a stated price and yield. Securities purchased on a
"forward commitment" or "when-issued" basis are recorded as an asset and are
subject to changes in value based upon changes in the general level of interest
rates. When the Fund agrees to purchase securities on a "when-issued" or
"forward commitment" basis, the custodian will set aside cash or liquid
portfolio securities equal to the amount of the commitment
-8-
<PAGE>
in a separate account. Normally, the custodian will set aside portfolio
securities to satisfy a purchase commitment and, in such case, the Fund may be
required subsequently to place additional assets in the separate account in
order to ensure that the value of the account remains equal to the amount of the
Fund's commitment. It may be expected that the Fund's net assets will fluctuate
to a greater degree when it sets aside portfolio securities to cover such
purchase commitments than when it sets aside cash. Because the Fund will set
aside cash or liquid assets to satisfy its purchase commitments in the manner
described above, its liquidity and ability to manage its portfolio might be
affected in the event its forward commitments or commitments to purchase "when-
issued" securities ever exceed 25% of the value of its assets.
It is expected that "forward commitments" and "when-issued" purchases
will not exceed 25% of the value of the Fund's total assets absent unusual
market conditions, and that the length of such commitments will not exceed 45
days. The Fund does not intend to engage in "when-issued" purchases and
"forward commitments" for speculative purposes, but only in furtherance of its
investment objective.
The Fund will purchase securities on a "when-issued" or "forward
commitment" basis only with the intention of completing the transaction. If
deemed advisable as a matter of investment strategy, however, the Fund may
dispose of or renegotiate a commitment after it is entered into, and may sell
securities it has committed to purchase before those securities are delivered to
the Fund on the settlement date. In these cases, the Fund may realize a taxable
capital gain or loss.
When the Fund engages in "when-issued" or "forward commitment"
transactions, it relies on the other party to consummate the trade. Failure of
such other party to do so may result in the Fund incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a "when-issued" purchase
or a "forward commitment" to purchase securities and any subsequent fluctuations
in their market value are taken into account when determining the market value
of the Fund starting on the day the Fund agrees to purchase the securities. The
Fund does not earn interest on the securities it has committed to purchase until
they are paid for and delivered on the settlement date.
-9-
<PAGE>
Forward Currency Transactions
-----------------------------
The Fund will conduct its currency exchange transactions either on a
spot (i.e., cash) basis at the rate prevailing in the currency exchange markets,
or by entering into forward currency contracts. A forward foreign currency
contract involves an obligation to purchase or sell a specific currency for a
set price at a future date. In this respect, forward currency contracts are
similar to foreign currency futures contracts; however, unlike futures contracts
which are traded on recognized commodities exchanges, forward currency contracts
are traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. Also, forward currency
contracts usually involve delivery of the currency involved instead of cash
payment as in the case of futures contracts.
The Fund's participation in forward currency contracts will be limited
to hedging involving either specific transactions or portfolio positions.
Transaction hedging involves the purchase or sale of foreign currency with
respect to specific receivables or payables of the Fund generally arising in
connection with the purchase or sale of its portfolio securities. The purpose
of transaction hedging is to "lock in" the U.S. dollar equivalent price of such
specific securities. Position hedging is the sale of foreign currency with
respect to portfolio security positions denominated or quoted in that currency.
The Fund will not speculate in foreign currency exchange transactions.
Transaction and position hedging will not be limited to an overall percentage of
the Fund's assets, but will be employed as necessary to correspond to particular
transactions or positions. The Fund may not hedge its currency positions to an
extent greater than the aggregate market value (at the time of entering into the
forward contract) of the securities held in its portfolio denominated, quoted
in, or currently convertible into that particular currency. When the Fund
engages in forward currency transactions, certain asset segregation requirements
must be satisfied to ensure that the use of foreign currency transactions is
unleveraged. When the Fund takes a long position in a forward currency
contract, it must maintain a segregated account containing liquid assets equal
to the purchase price of the contract, less any margin or deposit. When the
Fund takes a short position in a forward currency contract, the Fund must
maintain a segregated account containing liquid assets in an amount equal to the
market value of the currency underlying such contract (less any margin or
deposit), which amount must be at least equal to the market price at which the
short position was established. Asset segregation requirements are not
applicable when the Fund "covers" a forward currency position generally by
entering into an offsetting position.
The transaction costs to the Fund of engaging in forward currency
transactions vary with factors such as the currency involved, the length of the
contract period and prevailing currency market conditions. Because currency
transactions are usually conducted on a principal basis, no fees or commissions
are involved. The use of forward currency contracts does not eliminate
fluctuations in the underlying prices of the securities being hedged, but it
does establish a rate of exchange that can be achieved in the future. Thus,
although forward currency contracts used for transaction or position hedging
purposes may limit the risk of loss due to an increase in the value of the
hedged currency, at the same time they limit potential gain that might result
were the contracts not entered into. Further, the Adviser may be incorrect in
its expectations as to currency fluctuations, and the Fund may incur losses in
connection with its currency transactions
-10-
<PAGE>
that it would not otherwise incur. If a price movement in a particular currency
is generally anticipated, the Fund may not be able to contract to sell or
purchase that currency at an advantageous price.
At or before the maturity of a forward sale contract, the Fund may
sell a portfolio security and make delivery of the currency, or retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on the same
maturity date, the same amount of the currency which it is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund, at the time of execution of the offsetting transaction,
will incur a gain or a loss to the extent that movement has occurred in forward
contract prices. Should forward prices decline during the period between the
Fund's entering into a forward contract for the sale of a currency and the date
it enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Fund will suffer a loss to the extent the price of
the currency it has agreed to sell is less than the price of the currency it has
agreed to purchase in the offsetting contract. The foregoing principles
generally apply also to forward purchase contracts.
Securities Lending
------------------
To increase return on its portfolio securities, the Fund may lend its
portfolio securities to broker/dealers pursuant to agreements requiring the
loans to be continuously secured by collateral equal at all times in value to at
least the market value of the securities loaned. Collateral for such loans may
include cash, securities of the U.S. government, its agencies or
instrumentalities, or an irrevocable letter of credit issued by a bank, or any
combination thereof. Such loans will not be made if, as a result, the aggregate
of all outstanding loans of the Fund exceeds 30% of the value of its total
assets. When the Fund lends its securities, it continues to receive interest or
dividends on the securities lent and may simultaneously earn interest on the
investment of the cash loan collateral, which will be invested in readily
marketable, high-quality, short-term obligations. Although voting rights, or
rights to consent, attendant to lent securities pass to the borrower, such loans
may be called at any time and will be called so that the securities may be voted
by the Fund if a material event affecting the investment is to occur.
There may be risks of delay in receiving additional collateral or in
recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Adviser to be of good standing and when, in the
Adviser's judgment, the income to be earned from the loan justifies the
attendant risks.
Money Market Instruments
------------------------
The Fund may invest in "money market instruments," which include,
among other things, bank obligations, commercial paper and corporate bonds with
remaining maturities of 13 months or less.
-11-
<PAGE>
Bank obligations include bankers' acceptances, negotiable certificates
of deposit, and non-negotiable time deposits earning a specified return and
issued by a U.S. bank which is a member of the Federal Reserve System or insured
by the Bank Insurance Fund of the Federal Deposit Insurance Corporation
("FDIC"), or by a savings and loan association or savings bank which is insured
by the Savings Association Insurance Fund of the FDIC. Bank obligations also
include U.S. dollar-denominated obligations of foreign branches of U.S. banks
and obligations of domestic branches of foreign banks. Investments in bank
obligations of foreign branches of domestic financial institutions or of
domestic branches of foreign banks are limited so that no more than 5% of the
value of the Fund's total assets may be invested in any one branch, and no more
than 20% of the Fund's total assets at the time of purchase may be invested in
the aggregate in such obligations (see investment limitation No. 11 below under
"Investment Limitations"). Investments in time deposits are limited to no more
than 5% of the value of the Fund's total assets at the time of purchase.
Investments by the Fund in commercial paper will consist of issues
that are rated "A-2" or better by S&P or "Prime-2" or better by Moody's. In
addition, the Fund may acquire unrated commercial paper that is determined by
the Adviser at the time of purchase to be of comparable quality to rated
instruments that may be acquired by the Fund.
Commercial paper may include variable and floating rate instruments.
While there may be no active secondary market with respect to a particular
instrument purchased by the Fund, the Fund may, from time to time as specified
in the instrument, demand payment of the principal of the instrument or may
resell the instrument to a third party. The absence of an active secondary
market, however, could make it difficult for the Fund to dispose of the
instrument if the issuer defaulted on its payment obligation or during periods
that the Fund is not entitled to exercise its demand rights, and the Fund could,
for this or other reasons, suffer a loss with respect to such instrument.
Government Obligations
----------------------
The Fund may invest in U.S. Government obligations, including U.S.
Treasury Bills and the obligations of Federal Home Loan Banks, Federal Farm
Credit Banks, Federal Land Banks, the Federal Housing Administration, the
Farmers Home Administration, the Export-Import Bank of the United States, the
Small Business Administration, the Government National Mortgage Association, the
Federal National Mortgage Association, the General Services Administration, the
Central Bank for Cooperatives, the Federal Home Loan Mortgage Corporation, the
Federal Intermediate Credit Banks and the Maritime Administration.
Debt Securities and Convertible Securities
------------------------------------------
The Fund may invest in investment grade debt and convertible
securities of domestic and foreign issuers. The convertible securities in which
the Fund may invest include any debt securities or preferred stock which may be
converted into common stock or which carry the right to purchase common stock.
Convertible securities entitle the holder to exchange the
-12-
<PAGE>
securities for a specified number of shares of common stock, usually of the same
company, at specified prices within a certain period of time. Debt obligations
rated in the lowest of the top four investment grade ratings ("Baa" by Moody's
and "BBB" by S&P) are considered to have some speculative characteristics and
may be more sensitive to adverse economic change than higher rated securities.
The Fund will sell in an orderly fashion as soon as possible any convertible and
non-convertible debt securities it holds if they are downgraded below "Baa" by
Moody's or below "BBB" by S&P. Foreign debt and convertible securities are
generally unrated.
Investment Company Securities
-----------------------------
The Fund may invest in securities issued by other investment companies
which invest in high-quality, short-term debt securities and which determine
their net asset value per share based on the amortized cost or penny-rounding
method. In addition to the advisory fees and other expenses the Fund bears
directly in connection with its own operations, as a shareholder of another
investment company, the Fund would bear its pro rata portion of the other
investment company's advisory fees and other expenses. As such, the Fund's
shareholders would indirectly bear the expenses of the Fund and the other
investment company, some or all of which would be duplicative. Such securities
will be acquired by the Fund within the limits prescribed by the 1940 Act, which
include, subject to certain exceptions, a prohibition against the Fund investing
more than 10% of the value of its total assets in such securities.
Borrowing and Reverse Repurchase Agreements
-------------------------------------------
The Fund may borrow funds, in an amount up to 10% of the value of its
total assets, for temporary or emergency purposes, such as meeting larger than
anticipated redemption requests, and not for leverage. The Fund may also agree
to sell portfolio securities to financial institutions such as banks and broker-
dealers and to repurchase them at a mutually agreed date and price (a "reverse
repurchase agreement"). The SEC views reverse repurchase agreements as a form
of borrowing. At the time the Fund enters into a reverse repurchase agreement,
it will place in a segregated custodial account liquid assets having a value
equal to the repurchase price, including accrued interest. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Fund may decline below the repurchase price of those securities.
Illiquid Securities
-------------------
The Fund will not knowingly invest more than 15% of the value of its
net assets in securities that are illiquid. A security will be considered
illiquid if it may not be disposed of within seven days at approximately the
value at which the Fund has valued the security. The Fund may purchase
securities which are not registered under the Securities Act of 1933, as amended
(the "Act"), but which can be sold to "qualified institutional buyers" in
accordance with Rule 144A under the Act. Any such security will not be
considered illiquid so long as it is determined by the Adviser, acting under
guidelines approved and monitored by the Board, that an adequate trading market
exists for that security. This investment practice could have the
-13-
<PAGE>
effect of increasing the level of illiquidity in the Fund during any period that
qualified institutional buyers are no longer interested in purchasing these
restricted securities.
Portfolio Turnover
------------------
The Fund may sell a portfolio investment immediately after its
acquisition if the Adviser believes that such a disposition is consistent with
the investment objective of the Fund. Portfolio investments may be sold for a
variety of reasons, such as a more favorable investment opportunity or other
circumstances bearing on the desirability of continuing to hold such
investments. [The annual portfolio turnover rate for the Fund is not expected
to exceed 100%. A rate of 100% indicates that the equivalent of all of the
Fund's assets have been sold and reinvested in a calendar year.] A high rate of
portfolio turnover may involve correspondingly greater brokerage commission
expenses and other transaction costs, which must be borne directly by the Fund
and ultimately by its shareholders. High portfolio turnover may result in the
realization of substantial net capital gains. To the extent net short-term
capital gains are realized, any distributions resulting from such gains are
considered ordinary income for federal income tax purposes. (See "Additional
Information Concerning Taxes.")
Investment Limitations
- ----------------------
The investment limitations enumerated below are matters of fundamental
policy. Fundamental investment limitations may be changed with respect to the
Fund only by a vote of the holders of a majority of the Fund's outstanding
shares. As used herein, a "vote of the holders of a majority of the outstanding
shares" of the Company or the Fund means, with respect to the approval of an
investment advisory agreement or a change in a fundamental investment policy,
the affirmative vote of the lesser of (a) more than 50% of the outstanding
shares of the Company or the Fund, or (b) 67% or more of the shares of the
Company or the Fund present at a meeting if more than 50% of the outstanding
shares of the Company or the Fund are represented at the meeting in person or by
proxy.
The following investment limitations are fundamental with respect to
the Fund. The Fund may not:
1. Make loans, except that (i) the Fund may purchase or hold debt
securities in accordance with its investment objective and policies, and may
enter into repurchase agreements with respect to obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, and (ii)
the Fund may lend portfolio securities in accordance with its investment
objective and policies;
2. Purchase any securities which would cause more than 25% of the
value of its total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) the Fund will concentrate its
investments in the securities of technology companies, (b) there is no
limitation with respect to securities issued or guaranteed by the U.S.
Government, any state, territory or possession of the United States, the
District of Columbia or any of their authorities, agencies,
-14-
<PAGE>
instrumentalities or political subdivisions, and repurchase agreements secured
by such securities, and (c) neither all finance companies, as a group, nor all
utility companies, as a group, are considered a single industry for purposes of
this policy; and
3. Borrow money or mortgage, pledge or hypothecate its assets except
to the extent permitted under the 1940 Act. Optioned stock held in escrow is
not deemed to be a pledge.
4. Act as an underwriter of securities within the meaning of the
Securities Act of 1933, except insofar as it might be deemed to be an
underwriter upon disposition of certain portfolio securities acquired within the
limitation on purchases of restricted securities and except to the extent that
the purchase of obligations directly from the issuer thereof in accordance with
its investment objective, policies and limitations may be deemed to be
underwriting;
5. Purchase or sell real estate, except that (a) the Fund may
purchase securities of issuers which deal in real estate and may purchase
securities which are secured by real estate or interests therein, and (b) the
Fund may hold and sell any real estate it acquires as a result of the Fund's
ownership of such securities;
6. Issue any senior securities, except insofar as any borrowing in
accordance with the Fund's investment limitations might be considered to be the
issuance of a senior security; and
7. Purchase or sell commodities or commodities futures contracts or
invest in oil, gas, or other mineral exploration or development programs;
provided, however, that the Fund may: (a) purchase publicly traded securities
of companies engaging in whole or in part in such activities or invest in
liquidating trust receipts, certificates of beneficial ownership or other
instruments in accordance with its investment objective and policies, and (b)
purchase and sell options, forward contracts, futures contracts and futures
options.
8. Purchase securities on margin, make short sales of securities, or
maintain a short position;
9. Invest in companies for the purpose of exercising management or
control;
10. Acquire any other investment company or investment company
security, except in connection with a merger, consolidation, reorganization, or
acquisition of assets or where otherwise permitted by the 1940 Act; and
The following investment limitations may be changed by the Board of
Directors without shareholder approval. The Fund may not:
11. Invest in obligations of foreign branches of financial
institutions or in domestic branches of foreign banks, if immediately after such
purchase (i) more than 5% of the value of its total assets would be invested in
obligations of any one foreign branch of the
-15-
<PAGE>
financial institution or domestic branch of a foreign bank; or (ii) more than
20% of its total assets would be invested in foreign branches of financial
institutions or in domestic branches of foreign banks. In addition, the Fund
will not purchase portfolio securities while borrowings in excess of 5% of its
total assets are outstanding.
* * *
For the purpose of Investment Limitation No. 5, the prohibition of
purchases of real estate includes acquisition of limited partnership interests
in partnerships formed with a view toward investing in real estate, but does not
prohibit purchases of shares in real estate investment trusts.
In addition to the above investment limitations, the Fund currently
intends to refrain from entering into arbitrage transactions.
If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in value
of the Fund's securities will not constitute a violation of such limitation.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
----------------------------------------------
Shares are continuously offered for sale by Edgewood Services, Inc.
(the "Distributor"), a registered broker-dealer and the Company's sponsor and
distributor. The Distributor is a wholly-owned subsidiary of Federated
Investors, Inc. and is located at 5800 Corporate Drive, Pittsburgh, PA 15237-
5829. The Distributor has agreed to use appropriate efforts to solicit all
purchase orders.
At various times the Distributor may implement programs under which a
dealer's sales force may be eligible to win nominal awards for certain sales
efforts or under which the Distributor will make payments to any dealer that
sponsors sales contests or recognition programs conforming to criteria
established by the Distributor, or that participates in sales programs sponsored
by the Distributor. The Distributor in its discretion may also from time to
time, pursuant to objective criteria established by the Distributor, pay fees to
qualifying dealers for certain services or activities which are primarily
intended to result in sales of shares of the Fund. If any such program is made
available to any dealer, it will be made available to all dealers on the same
terms and conditions. Payments made under such programs will be made by the
Distributor out of its own assets and not out of the assets of the Fund.
-16-
<PAGE>
In addition, the Distributor may offer to pay a fee from its own
assets to financial institutions for the continuing investment of customers'
assets in the Fund or for providing substantial marketing, sales and operational
support. The support may include initiating customer accounts, participating in
sales, educational and training seminars, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
marketing support furnished by the financial institution.
The net asset value of the Fund is determined and the shares of the
Fund are priced at the close of regular trading hours on the New York Stock
Exchange (the "Exchange"), currently 4:00 p.m. (Eastern time). Net asset value
and pricing for the Fund are determined on each day the Exchange and the Adviser
are open for trading (a "Business Day"). Currently, the holidays which the Fund
observes are New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving Day and Christmas. The Fund's net asset value per share for
purposes of pricing sales and redemptions is calculated by dividing the value of
all securities and other assets allocable to the Fund, less the liabilities
allocable to the Fund, by the number of its outstanding shares.
As described below, shares may be sold to customers ("Customers") of
financial institutions ("Shareholder Organizations"). Shares are also offered
for sale directly to institutional investors and to members of the general
public. Different types of Customer accounts at the Shareholder Organizations
may be used to purchase shares, including eligible agency and trust accounts.
In addition, Shareholder Organizations may automatically "sweep" a Customer's
account not less frequently than weekly and invest amounts in excess of a
minimum balance agreed to by the Shareholder Organization and its Customer in
shares selected by the Customer. Investors purchasing shares may include
officers, directors, or employees of the particular Shareholder Organization.
The Company has authorized certain brokers to accept on its behalf
purchase, exchange and redemption requests. Such brokers are authorized to
designate other intermediaries to accept purchase, exchange and redemption
requests on behalf of the Company. The Company will be deemed to have received
a purchase, exchange or redemption request when the request is received by an
authorized broker or designated intermediary in good order.
Purchase of Shares
- ------------------
Shares of the Fund are offered for sale at their net asset value per
share next computed after a purchase request is received in good order by the
Company's sub-transfer agent or by an authorized broker or designated
intermediary. The Distributor has established several procedures for purchasing
shares in order to accommodate different types of investors.
Shares may be purchased directly by individuals ("Direct Investors")
or by institutions ("Institutional Investors" and, collectively with Direct
Investors, "Investors"). Shares
-17-
<PAGE>
may also be purchased by Customers of the Adviser, its affiliates and
correspondent banks, and other Shareholder Organizations that have entered into
agreements with the Company. A Shareholder Organization may elect to hold of
record shares for its Customers and to record beneficial ownership of shares on
the account statements provided by it to its Customers. If it does so, it is the
Shareholder Organization's responsibility to transmit to the Distributor all
purchase requests for its Customers and to transmit, on a timely basis, payment
for such requests to Chase Global Funds Services Company ("CGFSC"), the Fund's
sub-transfer agent, in accordance with the procedures agreed to by the
Shareholder Organization and the Distributor. Confirmations of all such Customer
purchases (and redemptions) will be sent by CGFSC to the particular Shareholder
Organization. As an alternative, a Shareholder Organization may elect to
establish its Customers' accounts of record with CGFSC. In this event, even if
the Shareholder Organization continues to place its Customers' purchase (and
redemption) requests with the Fund, CGFSC will send confirmations of such
transactions and periodic account statements directly to the shareholders of
record. Shares in the Fund bear the expense of fees payable to Shareholder
Organizations for such services. See "Management of the Fund - Shareholder
Organizations."
Customers wishing to purchase shares through their Shareholder
Organization should contact such entity directly for appropriate instructions.
(For a list of Shareholder Organizations in your area, call (800) 446-1012.) An
Investor purchasing shares through a registered investment adviser or certified
financial planner may incur transaction charges in connection with such
purchases. Such Investors should contact their registered investment adviser or
certified financial planner for further information on transaction fees.
Investors may also purchase shares directly from the Distributor in accordance
with procedures described in the Prospectus.
Direct Investors may purchase shares by completing the Application
accompanying the Prospectus and mailing it, together with a check payable to
Excelsior Funds, Inc., to:
Excelsior Funds, Inc.
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Subsequent investments in an existing account in the Fund may be made
at any time by sending to the above address a check payable to Excelsior Funds,
Inc. along with: (a) the detachable form that regularly accompanies the
confirmation of a prior transaction; (b) a subsequent order form which may be
obtained from CGFSC; or (c) a letter stating the amount of the investment, the
name of the Fund and the account number in which the investment is to be made.
Institutional Investors may purchase shares by transmitting their purchase
orders to CGFSC by telephone at (800) 446-1012 or by terminal access.
Institutional Investors must pay for shares with federal funds or funds
immediately available to CGFSC.
-18-
<PAGE>
Investors may also purchase shares by wiring federal funds to CGFSC.
Prior to making an initial investment by wire, an Investor must telephone CGFSC
at (800) 446-1012 (from overseas, call (617) 557-8280) for instructions).
Federal funds and registration instructions should be wired through the Federal
Reserve System to:
The Chase Manhattan Bank
ABA #021000021
Excelsior Funds, Account No. 9102732915
For further credit to:
Excelsior Funds
Wire Control Number
Account Registration
(including account number)
Investors making initial investments by wire must promptly complete
the Application accompanying the Prospectus and forward it to CGFSC.
Redemptions by Investors will not be processed until the completed Application
for purchase of shares has been received by CGFSC and accepted by the
Distributor. Investors making subsequent investments by wire should follow the
above instructions.
Except as provided below, the minimum initial investment by an
Investor or initial aggregate investment by a Shareholder Organization investing
on behalf of its Customers is $500 per Fund. The minimum subsequent investment
for both types of investors is $50 per Fund. Customers may agree with a
particular Shareholder Organization to make a minimum purchase with respect to
their accounts. Depending upon the terms of the particular account, Shareholder
Organizations may charge a Customer's account fees for automatic investment and
other cash management services provided. the Company reserves the right to
reject any purchase order, in whole or in part, or to waive any minimum
investment requirements. Third party checks will not be accepted as payment for
Fund shares.
Redemption Procedures
- ---------------------
A request for the redemption of shares will receive the net asset
value per share next computed after the request is received in good order by the
Company's sub-transfer agent or an authorized broker or designated intermediary.
Customers of Shareholder Organizations holding shares of record may
redeem all or part of their investments in the Fund in accordance with
procedures governing their accounts at the Shareholder Organizations. It is the
responsibility of the Shareholder Organizations to transmit redemption requests
to CGFSC and credit such Customer accounts with the redemption proceeds on a
timely basis. Redemption requests for Institutional Investors must be
transmitted to CGFSC by telephone at (800) 446-1012 or by terminal access. No
charge for wiring redemption payments to Shareholder Organizations or
Institutional Investors is imposed by the Company, although Shareholder
Organizations may charge a Customer's account for wiring redemption proceeds.
Information relating to such redemption services and charges, if any, is
-19-
<PAGE>
available from the Shareholder Organizations. An Investor redeeming shares
through a registered investment adviser or certified financial planner may incur
transaction charges in connection with such redemptions. Such Investors should
contact their registered investment adviser or certified financial planner for
further information on transaction fees. Investors may redeem all or part of
their shares in accordance with any of the procedures described below (these
procedures also apply to Customers of Shareholder Organizations for whom
individual accounts have been established with CGFSC).
Shares may be redeemed by a Direct Investor by submitting a written
request for redemption to:
Excelsior Funds, Inc.
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
A written redemption request to CGFSC must (i) state the number of
shares to be redeemed, (ii) identify the shareholder account number and tax
identification number, and (iii) be signed by each registered owner exactly as
the shares are registered. If the shares to be redeemed were issued in
certificate form, the certificates must be endorsed for transfer (or accompanied
by a duly executed stock power) and must be submitted to CGFSC together with the
redemption request. A redemption request for an amount in excess of $50,000 per
account, or for any amount if the proceeds are to be sent elsewhere than the
address of record, must be accompanied by signature guarantees from any eligible
guarantor institution approved by CGFSC in accordance with its Standards,
Procedures and Guidelines for the Acceptance of Signature Guarantees ("Signature
Guarantee Guidelines"). Eligible guarantor institutions generally include
banks, broker/dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. All
eligible guarantor institutions must participate in the Securities Transfer
Agents Medallion Program ("STAMP") in order to be approved by CGFSC pursuant to
the Signature Guarantee Guidelines. Copies of the Signature Guarantee
Guidelines and information on STAMP can be obtained from CGFSC at (800) 446-1012
or at the address given above.
CGFSC may require additional supporting documents for redemptions made
by corporations, executors, administrators, trustees and guardians. A
redemption request will not be deemed to be properly received until CGFSC
receives all required documents in good order. Payment for shares redeemed will
ordinarily be made by mail within five Business Days after receipt by CGFSC of
the redemption request in good order. Questions with respect to the proper form
for redemption requests should be directed to CGFSC at (800) 446-1012 (from
overseas, call (617) 557-8280).
Direct Investors who have so indicated on the Application, or have
subsequently arranged in writing to do so, may redeem shares by instructing
CGFSC by wire or telephone to wire the redemption proceeds directly to the
Direct Investor's account at any commercial bank in the United States. Direct
Investors who are shareholders of record may also redeem shares by
-20-
<PAGE>
instructing CGFSC by telephone to mail a check for redemption proceeds of $500
or more to the shareholder of record at his or her address of record.
Institutional Investors may also redeem shares by instructing CGFSC by telephone
at (800) 446-1012 or by terminal access. Only redemptions of $500 or more will
be wired to a Direct Investor's account. The redemption proceeds for Direct
Investors must be paid to the same bank and account as designated on the
Application or in written instructions subsequently received by CGFSC.
In order to arrange for redemption by wire or telephone after an
account has been opened or to change the bank or account designated to receive
redemption proceeds, a Direct Investor must send a written request to the
Company c/o CGFSC, at the address listed above. Such requests must be signed by
the Direct Investor, with signatures guaranteed, as discussed above. Further
documentation may be requested.
CGFSC and the Distributor reserve the right to refuse a wire or
telephone redemption if it is believed advisable to do so. Procedures for
redeeming shares by wire or telephone may be modified or terminated at any time
by the Company, CGFSC or the Distributor. The Company, CGFSC, and the
Distributor will not be liable for any loss, liability, cost or expense for
acting upon telephone instructions that are reasonably believed to be genuine.
In attempting to confirm that telephone instructions are genuine, the Company
will use such procedures as are considered reasonable, including recording those
instructions and requesting information as to account registration.
If any portion of the shares to be redeemed represents an investment
made by personal check, the Company and CGFSC reserve the right not to honor the
redemption until CGFSC is reasonably satisfied that the check has been collected
in accordance with the applicable banking regulations, which may take up to 15
days. A Direct Investor who anticipates the need for more immediate access to
his or her investment should purchase shares by federal funds or bank wire or by
certified or cashier's check. Banks normally impose a charge in connection with
the use of bank wires, as well as certified checks, cashier's checks and federal
funds. If a Direct Investor's purchase check is not collected, the purchase
will be cancelled and CGFSC will charge a fee of $25.00 to the Direct Investor's
account.
During periods of substantial economic or market change, telephone
redemptions may be difficult to complete. If an Investor is unable to contact
CGFSC by telephone, the Investor may also deliver the redemption request to
CGFSC in writing at the address noted above.
Except as described in "Investor Programs" below, Investors may be
required to redeem shares in the Fund after 60 days' written notice if due to
Investor redemptions the balance in the particular account with respect to the
Fund remains below $500. If a Customer has agreed with a particular Shareholder
Organization to maintain a minimum balance in his or her account at the
institution with respect to shares of the Fund, and the balance in such account
falls below that minimum, the Customer may be obliged by the Shareholder
Organization to redeem all or part of his or her shares to the extent necessary
to maintain the required minimum balance.
-21-
<PAGE>
Other Redemption Information
- ----------------------------
The Company may suspend the right of redemption or postpone the date
of payment for shares for more than seven days during any period when (a)
trading on the Exchange is restricted by applicable rules and regulations of the
SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC.
In the event that shares are redeemed in cash at their net asset
value, a shareholder may receive in payment for such shares an amount that is
more or less than his original investment due to changes in the market prices of
the Fund's portfolio securities.
The Company reserves the right to honor any request for redemption or
repurchase of the Fund's shares by making payment in whole or in part in
securities chosen by the Company and valued in the same way as they would be
valued for purposes of computing the Fund's net asset value (a "redemption in
kind"). If payment is made in securities, a shareholder may incur transaction
costs in converting these securities into cash. The Company has filed a notice
of election with the SEC under Rule 18f-1 of the 1940 Act. Therefore, the Fund
is obligated to redeem its shares solely in cash up to the lesser of $250,000 or
1% of its net asset value during any 90-day period for any one shareholder of
the Fund.
Under certain circumstances, the Company may, in its discretion,
accept securities as payment for shares. Securities acquired in this manner
will be limited to securities issued in transactions involving a bona fide
---------
reorganization or statutory merger, or other transactions involving securities
that meet the investment objective and policies of the Fund when acquiring such
securities.
INVESTOR PROGRAMS
-----------------
Systematic Withdrawal Plan
- --------------------------
An Investor who owns shares with a value of $10,000 or more may begin
a Systematic Withdrawal Plan. The withdrawal can be on a monthly, quarterly,
semiannual or annual basis. There are four options for such systematic
withdrawals. The Investor may request:
(1) A fixed-dollar withdrawal;
(2) A fixed-share withdrawal;
(3) A fixed-percentage withdrawal (based on the current value of the
account); or
(4) A declining-balance withdrawal.
-22-
<PAGE>
Prior to participating in a Systematic Withdrawal Plan, the Investor
must deposit any outstanding certificates for shares with CGFSC. Under this
Plan, dividends and distributions are automatically reinvested in additional
shares of the Fund. Amounts paid to investors under this Plan should not be
considered as income. Withdrawal payments represent proceeds from the sale of
shares, and there will be a reduction of the shareholder's equity in the Fund
involved if the amount of the withdrawal payments exceeds the dividends and
distributions paid on the shares and the appreciation of the Investor's
investment in the Fund. This in turn may result in a complete depletion of the
shareholder's investment. An Investor may not participate in a program of
systematic investing in the Fund while at the same time participating in the
Systematic Withdrawal Plan with respect to an account in the Fund. Customers of
Shareholder Organizations may obtain information on the availability of, and the
procedures and fees relating to, the Systematic Withdrawal Plan directly from
their Shareholder Organizations.
Exchange Privilege
- ------------------
Investors and Customers of Shareholder Organizations may exchange
Shares having a value of at least $500 for shares of the Shares Class of any
other portfolio of the Company or Excelsior Tax-Exempt Funds, Inc. ("Excelsior
Tax-Exempt Fund" and, collectively with the Company, the "Companies") or for
shares of the Shares Class of Excelsior Institutional Trust. An exchange
involves a redemption of all or a portion of the shares in the Fund and the
investment of the redemption proceeds in shares of another portfolio. The
redemption will be made at the per share net asset value of the shares being
redeemed next determined after the exchange request is received in good order.
The shares of the portfolio to be acquired will be purchased at the per share
net asset value of those shares next determined after receipt of the exchange
request in good order.
Shares may be exchanged by wire, telephone or mail and must be made to
accounts of identical registration. There is no exchange fee imposed by the
Companies or Excelsior Institutional Trust. In order to prevent abuse of this
privilege to the disadvantage of other shareholders, the Companies and Excelsior
Institutional Trust reserve the right to limit the number of exchange requests
of Investors to no more than six per year. The Companies and Excelsior
Institutional Trust may modify or terminate the exchange program at any time
upon 60 days' written notice to shareholders, and may reject any exchange
request. Customers of Shareholder Organizations may obtain information on the
availability of, and the procedures and fees relating to, such program directly
from their Shareholder Organizations.
For federal income tax purposes, exchanges are treated as sales on
which the shareholder will realize a gain or loss, depending upon whether the
value of the shares to be given up in exchange is more or less than the basis in
such shares at the time of the exchange. Generally, a shareholder may include
sales loads incurred upon the purchase of shares in his or her tax basis for
such shares for the purpose of determining gain or loss on a redemption,
transfer or exchange of such shares. However, if the shareholder effects an
exchange of shares for shares of another portfolio of the Companies within 90
days of the purchase and is able to reduce the sales load otherwise applicable
to the new shares (by virtue of the Companies' exchange
-23-
<PAGE>
privilege), the amount equal to such reduction may not be included in the tax
basis of the shareholder's exchanged shares but may be included (subject to the
limitation) in the tax basis of the new shares.
Retirement Plans
- ----------------
Shares are available for purchase by Investors in connection with the
following tax-deferred prototype retirement plans offered by United States Trust
Company of New York ("U.S. Trust New York"):
. IRAs (including "rollovers" from existing retirement plans) for
individuals and their spouses;
. Profit Sharing and Money-Purchase Plans for corporations and
self-employed individuals and their partners to benefit
themselves and their employees; and
. Keogh Plans for self-employed individuals.
Investors investing in the Fund pursuant to Profit Sharing and Money-
Purchase Plans and Keogh Plans are not subject to the minimum investment and
forced redemption provisions described above. The minimum initial investment
for IRAs is $250 per Fund and the minimum subsequent investment is $50 per Fund.
Detailed information concerning eligibility, service fees and other matters
related to these plans can be obtained by calling (800) 446-1012 (from overseas,
call (617) 557-8280). Customers of Shareholder Organizations may purchase
shares of the Fund pursuant to retirement plans if such plans are offered by
their Shareholder Organizations.
Automatic Investment Program
- ----------------------------
The Automatic Investment Program permits Investors to purchase shares
(minimum of $50 per Fund per transaction) at regular intervals selected by the
Investor. The minimum initial investment for an Automatic Investment Program
account is $50 per Fund. Provided the Investor's financial institution allows
automatic withdrawals, shares are purchased by transferring funds from an
Investor's checking, bank money market or NOW account designated by the
Investor. At the Investor's option, the account designated will be debited in
the specified amount, and shares will be purchased, once a month, on either the
first or fifteenth day, or twice a month, on both days.
The Automatic Investment Program is one means by which an Investor may
use "Dollar Cost Averaging" in making investments. Instead of trying to time
market performance, a fixed dollar amount is invested in shares at predetermined
intervals. This may help Investors to reduce their average cost per share
because the agreed upon fixed investment amount allows more shares to be
purchased during periods of lower share prices and fewer shares during periods
of higher prices. In order to be effective, Dollar Cost Averaging should
usually be followed on a sustained, consistent basis. Investors should be
aware, however, that shares bought using Dollar
-24-
<PAGE>
Cost Averaging are purchased without regard to their price on the day of
investment or to market trends. In addition, while Investors may find Dollar
Cost Averaging to be beneficial, it will not prevent a loss if an Investor
ultimately redeems his shares at a price which is lower than their purchase
price. The Company may modify or terminate this privilege at any time or charge
a service fee, although no such fee currently is contemplated. An Investor may
also implement the Dollar Cost Averaging method on his own initiative or through
other entities.
Additional Information
- ----------------------
Customers of Shareholder Organizations may obtain information on the
availability of, and the procedures and fees relating to, the above programs
directly from their Shareholder Organizations.
DESCRIPTION OF CAPITAL STOCK
----------------------------
The Company's Charter authorizes its Board of Directors to issue up to
thirty-five billion full and fractional shares of common stock, $.001 par value
per share, and to classify or reclassify any unissued shares of the Company into
one or more classes or series by setting or changing in any one or more respects
their respective preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption. The Company's authorized common stock is currently
classified into 48 series of shares representing interests in 19 investment
portfolios.
Each share in the Fund represents an equal proportionate interest in
the Fund with other shares of the same class, and is entitled to such dividends
and distributions out of the income earned on the assets belonging to the Fund
as are declared in the discretion of the Company's Board of Directors.
Shares have no preemptive rights and only such conversion or exchange
rights as the Board of Directors may grant in its discretion. When issued for
payment as described in the Prospectus, shares will be fully paid and non-
assessable. In the event of a liquidation or dissolution of the Fund, its
shareholders are entitled to receive the assets available for distribution
belonging to the Fund and a proportionate distribution, based upon the relative
asset values of the Company's portfolios, of any general assets of the Company
not belonging to any particular portfolio of the Company which are available for
distribution. In the event of a liquidation or dissolution of the Company, its
shareholders will be entitled to the same distribution process.
Shareholders of the Company are entitled to one vote for each full
share held, and fractional votes for fractional shares held, and will vote in
the aggregate and not by class, except as otherwise required by the 1940 Act or
other applicable law or when the matter to be voted upon affects only the
interests of the shareholders of a particular class. Voting rights are not
cumulative and, accordingly, the holders of more than 50% of the aggregate of
the Company's shares may elect all of the Company's directors, regardless of
votes of other shareholders.
-25-
<PAGE>
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Company shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each portfolio affected by the matter. A portfolio is affected by a matter
unless it is clear that the interests of each portfolio in the matter are
substantially identical or that the matter does not affect any interest of the
portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to a portfolio only if approved by a majority of the outstanding
shares of such portfolio. However, the Rule also provides that the ratification
of the appointment of independent public accountants and the election of
directors may be effectively acted upon by shareholders of the Company voting
without regard to class.
The Company's Charter authorizes its Board of Directors, without
shareholder approval (unless otherwise required by applicable law), to: (a)
sell and convey the assets of the Fund to another management investment company
for consideration which may include securities issued by the purchaser and, in
connection therewith, to cause all outstanding shares of the Fund to be redeemed
at a price which is equal to their net asset value and which may be paid in cash
or by distribution of the securities or other consideration received from the
sale and conveyance; (b) sell and convert the Fund's assets into money and, in
connection therewith, to cause all outstanding shares of the Fund to be redeemed
at their net asset value; or (c) combine the assets belonging to the Fund with
the assets belonging to another portfolio of the Company, if the Board of
Directors reasonably determines that such combination will not have a material
adverse effect on shareholders of any portfolio participating in such
combination, and, in connection therewith, to cause all outstanding shares of
the Fund to be redeemed at their net asset value or converted into shares of
another class of the Company's common stock at net asset value. The exercise of
such authority by the Board of Directors will be subject to the provisions of
the 1940 Act, and the Board of Directors will not take any action described in
this paragraph unless the proposed action has been disclosed in writing to the
Fund's shareholders at least 30 days prior thereto.
Notwithstanding any provision of Maryland law requiring a greater vote
of the Company's common stock (or of the shares of the Fund voting separately as
a class) in connection with any corporate action, unless otherwise provided by
law (for example, by Rule 18f-2, discussed above) or by the Company's Charter,
the Company may take or authorize such action upon the favorable vote of the
holders of more than 50% of the outstanding common stock of the Company voting
without regard to class.
Certificates for shares will not be issued unless expressly requested
in writing to CGFSC and will not be issued for fractional shares.
-26-
<PAGE>
MANAGEMENT OF THE FUND
----------------------
Directors and Officers
- ----------------------
The business and affairs of the Fund are managed under the direction
of the Company's Board of Directors. The directors and executive officers of
the Company, their addresses, ages, principal occupations during the past five
years, and other affiliations are as follows:
<TABLE>
<CAPTION>
Principal Occupation During
Name and Address Position with the Company Past 5 Years and Other Affiliations
- ---------------- ------------------------- -----------------------------------
<S> <C> <C>
Frederick S. Wonham/1/ Chairman of the Board, President Retired; Director of the Company and
238 June Road and Treasurer Excelsior Tax-Exempt Fund (since
Stamford, CT 06903 1995); Trustee of the Company and
Age: 68 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 Director Retired; Director of the Company and
333 East 69th Street Excelsior Tax-Exempt Fund (since
Apt. 10-H 1984); Director of UST Master
New York, NY 10021 Variable Series, Inc. (from 1994 to
Age: 73 June 1997); Trustee of Excelsior
Institutional Trust (since 1995); and
Director, Royal Life Insurance Co. of
New York (since 1991).
Rodman L. Drake Director Director of the Company and Excelsior
Continuation Investments Group, Inc. Tax-Exempt Fund (since 1996); Trustee
1251 Avenue of the Americas, 9/th/ Floor of Excelsior Institutional Trust and
New York, NY 10020 the Company (since 1994); Director,
Age: 56 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. (1999-present);
Director, Hotelivision, Inc.
(1999-present);
</TABLE>
- -----------------------------
/1/ This director is considered to be an "interested person" of the Company
as defined in the 1940 Act.
-27-
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation During
Name and Address Position with the Company Past 5 Years and Other Affiliations
- ---------------- ------------------------- -----------------------------------
<S> <C> <C>
Director, Alliance Group Services,
Inc. (1998-present); 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. (1993-1998);
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 Director Retired; Director of the Company and
913 Franklin Lake Road Excelsior Tax-Exempt Fund (since
Franklin Lakes, NJ 07417 1984); Director of UST Master
Age: 74 Variable Series, Inc. (from 1994 to
June 1997); and Trustee of Excelsior
Institutional Trust (since 1995).
Wolfe J. Frankl Director Retired; Director of the Company and
2320 Cumberland Road Excelsior Tax-Exempt Fund (since
Charlottesville, VA 22901-7726 1986); Director of UST Master Variable
Age: 79 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).
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation During
Name and Address Position with the Company Past 5 Years and Other Affiliations
- ---------------- ------------------------- -----------------------------------
<S> <C> <C>
Jonathan Piel Director Director of the Company and Excelsior
558 E. 87th Street Tax-Exempt Fund (since 1996); Trustee
New York, NY 10128 of Excelsior Institutional Trust
Age: 60 (since 1994); Vice President and
Editor, Scientific American, Inc.
(from 1986 to 1994); Director, Group
for The South Fork, Bridgehampton, New
York (since 1993); and Member,
Advisory Committee, Knight Journalism
Fellowships, Massachusetts Institute
of Technology (since 1984).
Robert A. Robinson Director Director of the Company and Excelsior
Church Pension Group Tax-Exempt Fund (since 1987); Director
445 Fifth Avenue of UST Master Variable Series, Inc.
New York, NY 10016 (from 1994 to June 1997); Trustee of
Age: 73 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).
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation During
Name and Address Position with the Company Past 5 Years and Other Affiliations
- ---------------- ------------------------- -----------------------------------
<S> <C> <C>
Alfred C. Tannachion/2/ Director Retired; Director of the Company and
6549 Pine Meadows Drive Excelsior Tax-Exempt Fund (since
Spring Hill, FL 34606 1985); Chairman of the Board of the
Age: 74 Company and Excelsior Tax-Exempt Fund
(1991-1997) and Excelsior
Institutional Trust (1996-1997);
President and Treasurer of the Company
and Excelsior Tax-Exempt Fund
(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).
W. Bruce McConnel, III Secretary Partner of the law firm of Drinker
One Logan Square Biddle & Reath LLP.
18/th/ and Cherry Streets
Philadelphia, PA 19103-6996
Age: 56
Michael P. Malloy Assistant Secretary Partner of the law firm of Drinker
One Logan Square Biddle & Reath LLP.
18/th/ and Cherry Streets
Philadelphia, PA 19103-6996
Age: 40
Eddie Wang Assistant Secretary Manager of Blue Sky Compliance, Chase
Chase Global Funds Global Funds Services Company
Services Company (November 1996 to present); and
73 Tremont Street Officer and Manager of Financial
Boston, MA 02108-3913 Reporting, Investors Bank & Trust
Age: 38 Company (January 1991 to November
1996).
</TABLE>
- ----------------------------------------
2. This director is considered to be an "interested person" of the Company
as defined in the 1940 Act.
-30-
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation During
Name and Address Position with the Company Past 5 Years and Other Affiliations
- ---------------- ------------------------- -----------------------------------
<S> <C> <C>
Patricia M. Leyne Assistant Treasurer Vice President, Senior Manager of Fund
Chase Global Funds Administration, Chase Global Funds
Services Company Services Company (since August 1999);
73 Tremont Street Assistant Vice President, Senior
Boston, MA 02108-3913 Manager of Fund Administration, Chase
Age: 32 Global Funds Services Company (from
July 1998 to August 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>
Each director of the Company receives an annual fee of $9,000 plus a
meeting fee of $1,500 for each meeting attended and is reimbursed for expenses
incurred in attending meetings. The Chairman of the Board is entitled to receive
an additional $5,000 per annum for services in such capacity. Drinker Biddle &
Reath LLP, of which Messrs. McConnel and Malloy are partners, receives legal
fees as counsel to the Company. The employees of CGFSC do not receive any
compensation from the Company for acting as officers of the Company. No person
who is currently an officer, director or employee of the Adviser serves as an
officer, director or employee of the Company. As of December 31, 1999, the
directors and officers of the Company as a group owned beneficially less than 1%
of the outstanding shares of each fund of the Company, and less than 1% of the
outstanding shares of all funds of the Company in the aggregate.
The following chart provides certain information about the fees
received by the Company's directors in the most recently completed fiscal year.
-31-
<PAGE>
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Compensation
Accrued as from the Company
Aggregate Part of and Fund
Name of Compensation from Fund Complex* Paid
Person/Position the Company Expenses to Directors
---------------- ----------------- ---------- ----------------
<S> <C> <C> <C>
Donald L. Campbell $15,000 None $33,250(3)**
Director
Rodman L. Drake $16,500 None $41,250(4)**
Director
Joseph H. Dugan $16,500 None $36,500(3)**
Director
Wolfe J. Frankl $16,500 None $36,500(3)**
Director
W. Wallace McDowell, Jr.*** $11,250 None $28,000(4)**
Director
Jonathan Piel $16,500 None $41,500(4)**
Director
Robert A. Robinson $16,500 None $36,500(3)**
Director
Alfred C. Tannachion $16,500 None $36,500(3)**
Director
Frederick S. Wonham $21,500 None $51,500(4)**
Chairman of the Board,
President and Treasurer
</TABLE>
- ---------------------------
/*/ The "Fund Complex" consists of the Company, Excelsior Tax-Exempt Fund,
and Excelsior Institutional Trust.
/**/ Number of investment companies in the Fund Complex for which director
served as director or trustee.
/***/ Mr. McDowell resigned from the Company, Excelsior Tax-Exempt Fund,
Excelsior Funds and Excelsior Institutional Trust on May 21, 1999.
Investment Advisory and Administration Agreements
- -------------------------------------------------
U.S. Trust of New York and U.S. Trust Company (collectively with U.S.
Trust New York, "U.S. Trust" or the "Adviser") serve as investment advisers to
the Fund. In the
-32-
<PAGE>
Investment Advisory Agreement, the Adviser has agreed to provide the services
described in the Prospectus. The Adviser has also agreed to pay all expenses
incurred by it in connection with its activities under the Agreement other than
the cost of securities, including brokerage commissions, purchased for the Fund.
For the services provided and expenses assumed pursuant to the
Investment Advisory Agreement, the Adviser is entitled to be paid a fee computed
daily and paid monthly, at the annual rate of 0.75% of the average daily net
assets of the Fund.
From time to time, the Adviser may voluntarily waive all or a portion
of the advisory fees payable to it by the Fund, which waiver may be terminated
at any time.
The Investment Advisory Agreement provides that the Adviser shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with the performance of such Agreement, except that
U.S. Trust New York and U.S. Trust Company 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 advisory services or a loss resulting from willful
misfeasance, bad faith or gross negligence in the performance of their duties or
from reckless disregard by them of their duties and obligations thereunder. In
addition, the Adviser has undertaken in the Investment Advisory Agreement to
maintain its policy and practice of conducting its Asset Management Group
independently of its Banking Group.
CGFSC, Federated Administrative Services (an affiliate of the
Distributor) and U.S. Trust Company (collectively, the "Administrators") serve
as the Company's administrators and provide the Fund with general administrative
and operational assistance. Under the Administration Agreement, the
Administrators have agreed to maintain office facilities for the Fund, furnish
the Fund with statistical and research data, clerical, accounting and
bookkeeping services, and certain other services required by the Fund, and to
compute the net asset value, net income and realized capital gains or losses, if
any, of the Fund. The Administrators prepare semiannual reports to the SEC,
prepare federal and state tax returns, prepare filings with state securities
commissions, arrange for and bear the cost of processing share purchase and
redemption orders, maintain the Fund's financial accounts and records, and
generally assist in the Fund's operations.
Prior to May 16, 1997, CGFSC, Federated Administrative Services and
U.S. Trust New York served as the Company's administrators pursuant to an
administration agreement substantially similar to the Administration Agreement
currently in effect for the Company.
The Administrators also provide administrative services to the other
investment portfolios of the Company and to all of the investment portfolios of
Excelsior Tax-Exempt Fund and Excelsior Institutional Trust which are also
advised by U.S. Trust and its affiliates and distributed by the Distributor.
For services provided to all of the investment portfolios of the Company,
Excelsior Tax-Exempt Fund and Excelsior Institutional Trust (except for the
international portfolios of the Company and Excelsior Institutional Trust), the
Administrators are entitled jointly to fees, computed daily and paid monthly,
based on the combined aggregate
-33-
<PAGE>
average daily net assets of the three companies (excluding the international
portfolios of the Company and Excelsior Institutional Trust) as follows:
Combined Aggregate Average Daily Net Assets
of the Company, Excelsior Tax-Exempt Fund and
Excelsior Institutional Trust (excluding
the international portfolios of the Company
and Excelsior Institutional Trust)
----------------------------------
Annual Fee
----------
First $200 million.................................... 0.200%
Next $200 million..................................... 0.175%
Over $400 million..................................... 0.150%
Administration fees payable to the Administrators by each portfolio of
the Company, Excelsior Tax-Exempt Fund and Excelsior Institutional Trust are
allocated in proportion to their relative average daily net assets at the time
of determination. From time to time, the Administrators may voluntarily waive
all or a portion of the administration fee payable to them by a Fund, which
waivers may be terminated at any time.
Shareholder Organizations
- -------------------------
The Company has entered into agreements with certain Shareholder
Organizations. Such agreements require the Shareholder Organizations to provide
shareholder administrative services to their Customers who beneficially own
shares in consideration for the Fund's payment of not more than the annual rate
of 0.25% of the average daily net assets of the Fund's shares beneficially owned
by Customers of the Shareholder Organization. Such services may include: (a)
acting as recordholder of shares; (b) assisting in processing purchase, exchange
and redemption transactions; (c) transmitting and receiving funds in connection
with Customer orders to purchase, exchange or redeem shares; (d) providing
periodic statements showing a Customer's account balances and confirmations of
transactions by the Customer; (e) providing tax and dividend information to
shareholders as appropriate; (f) transmitting proxy statements, annual reports,
updated prospectuses and other communications from the Company to Customers; and
(g) providing or arranging for the provision of other related services. It is
the responsibility of Shareholder Organizations to advise Customers of any fees
that they may charge in connection with a Customer's investment. Until further
notice, the Adviser and Administrators have voluntarily agreed to waive fees
payable by the Fund in an aggregate amount equal to administrative service fees
payable by that Fund.
The Company's agreements with Shareholder Organizations are governed
by an Administrative Services Plan (the "Plan") adopted by the Company.
Pursuant to the Plan, the Company's Board of Directors will review, at least
quarterly, a written report of the amounts expended under the Company's
agreements with Shareholder Organizations and the purposes for which the
expenditures were made. In addition, the arrangements with Shareholder
Organizations will be approved annually by a majority of the Company's
directors, including a
-34-
<PAGE>
majority of the directors who are not "interested persons" of the Company as
defined in the 1940 Act and have no direct or indirect financial interest in
such arrangements (the "Disinterested Directors").
Any material amendment to the Company's arrangements with Shareholder
Organizations must be approved by a majority of the Company's Board of Directors
(including a majority of the Disinterested Directors). So long as the Company's
arrangements with Shareholder Organizations are in effect, the selection and
nomination of the members of the Company's Board of Directors who are not
"interested persons" (as defined in the 1940 Act) of the Company will be
committed to the discretion of such Disinterested Directors.
Personal Trading
- ----------------
The Company and the Adviser have adopted a written Code of Ethics, which
prescribes general rules of conduct and sets forth guidelines with respect to
personal securities trading by "Access Persons" thereof. An Access Person as
defined in the Code of Ethics is an individual who is (1) a director or officer
of the Company, (2) an employee of the Company or of any Company in a control
relationship to the Company who, in connection with his or her regular functions
or duties, makes, participates in, or obtains information regarding the purchase
or sale of a security by the Company or whose functions relate to the making of
any recommendations with respect to such purchases or sales; and (3) any natural
person in a control relationship to the Company who obtains information
concerning recommendations made to the Company with regard to the purchase or
sale of a security. The guidelines on personal securities trading include: (i)
securities being considered for purchase or sale, or purchased or sold, by any
investment company advised by the Adviser, (ii) initial public offerings, (iii)
private placements, (iv) blackout periods and (v) short-term trading profits.
These guidelines are substantially similar to those contained in the Report of
the Advisory Group on Personal Investing issued by the Investment Company
Institute's Advisory Panel. The Adviser reports to the Board of Directors on a
quarterly basis, as to whether there were any violations of the Code of Ethics
by Access Persons of the Company or the Adviser during the quarter.
Expenses
- --------
Except as otherwise noted, the Adviser and the Administrators bear all
expenses in connection with the performance of their services. The Fund bears
the expenses incurred in its operations. Expenses of the Fund include: taxes;
interest; fees (including fees paid to the Company's directors and officers who
are not affiliated with the Distributor or the Administrators); SEC fees; state
securities qualifications fees; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to shareholders; advisory,
administration and administrative servicing fees; charges of the custodian,
transfer agent, and dividend disbursing agent; certain insurance premiums;
outside auditing and legal expenses; costs of independent pricing services;
costs of shareholder reports and shareholder meetings; and any extraordinary
expenses. The Fund also pays for brokerage fees and commissions in connection
with the purchase of portfolio securities.
-35-
<PAGE>
Custodian and Transfer Agent
- ----------------------------
The Chase Manhattan Bank ("Chase"), a wholly-owned subsidiary of The
Chase Manhattan Corporation, serves as custodian of the Fund's assets. Under
the Custodian Agreement, Chase has agreed to: (i) maintain a separate account
or accounts in the name of the Fund; (ii) make receipts and disbursements of
money on behalf of the Fund; (iii) collect and receive all income and other
payments and distributions on account of the Fund's portfolio securities; (iv)
respond to correspondence from securities brokers and others relating to its
duties; (v) maintain certain financial accounts and records; and (vi) make
periodic reports to the Company's Board of Directors concerning the Fund's
operations. Chase may, at its own expense, open and maintain custody accounts
with respect to the Fund with other banks or trust companies, provided that
Chase shall remain liable for the performance of all its custodial duties under
the Custodian Agreement, notwithstanding any delegation. Communications to the
custodian should be directed to Chase, Mutual Funds Service Division, 3 Chase
MetroTech Center, 8/th/ Floor, Brooklyn, NY 11245.
U.S. Trust New York serves as the Fund's transfer agent and dividend
disbursing agent. In such capacity, U.S. Trust New York has agreed to: (i)
issue and redeem shares; (ii) address and mail all communications by the Fund to
its shareholders, including reports to shareholders, dividend and distribution
notices, and proxy materials for its meetings of shareholders; (iii) respond to
correspondence by shareholders and others relating to its duties; (iv) maintain
shareholder accounts; and (v) make periodic reports to the Company's Board of
Directors concerning the Fund's operations. For its transfer agency, dividend
disbursing, and subaccounting services, U.S. Trust New York is entitled to
receive $15.00 per annum per account and subaccount. In addition, U.S. Trust
New York is entitled to be reimbursed for its out-of-pocket expenses for the
cost of forms, postage, processing purchase and redemption orders, handling of
proxies, and other similar expenses in connection with the above services. U.S.
Trust New York is located at 114 W. 47/th/ Street, New York, New York 10036.
U.S. Trust New York may, at its own expense, delegate its transfer
agency obligations to another transfer agent registered or qualified under
applicable law, provided that U.S. Trust New York shall remain liable for the
performance of all of its transfer agency duties under the Transfer Agency
Agreement, notwithstanding any delegation. Pursuant to this provision in the
agreement, U.S. Trust New York has entered into a sub-transfer agency
arrangement with CGFSC, an affiliate of Chase, with respect to accounts of
shareholders who are not Customers of U.S. Trust New York. CGFSC is located at
73 Tremont Street, Boston, Massachusetts 02108-3913. For the services provided
by CGFSC, U.S. Trust New York has agreed to pay CGFSC $15.00 per annum per
account or subaccount plus out-of-pocket expenses. CGFSC receives no fee
directly from the Company for any of its sub-transfer agency services. U.S.
Trust New York may, from time to time, enter into sub-transfer agency
arrangements with third party providers of transfer agency services.
-36-
<PAGE>
PORTFOLIO TRANSACTIONS
----------------------
Subject to the general control of the Company's Board of Directors,
the Adviser is responsible for, makes decisions with respect to, and places
orders for all purchases and sales of all portfolio securities of the Fund.
The Fund may engage in short-term trading to achieve its investment
objective. Portfolio turnover may vary greatly from year to year as well as
within a particular year. The Fund's portfolio turnover rate may also be
affected by cash requirements for redemptions of shares and by regulatory
provisions which enable the Fund to receive certain favorable tax treatment.
Portfolio turnover will not be a limiting factor in making portfolio decisions.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. In executing portfolio
transactions for the Fund, the Adviser may use affiliated brokers in accordance
with the requirements of the 1940 Act. The Adviser may also take into account
the sale of Fund shares in allocating brokerage transactions.
Transactions in domestic over-the-counter markets are generally
principal transactions with dealers, and the costs of such transactions involve
dealer spreads rather than brokerage commissions. With respect to over-the-
counter transactions, the Fund, where possible, will deal directly with the
dealers who make a market in the securities involved, except in those
circumstances where better prices and execution are available elsewhere.
The Investment Advisory Agreement between the Company and the Adviser
provides that, in executing portfolio transactions and selecting brokers or
dealers, the Adviser will seek to obtain the best net price and the most
favorable execution. The Adviser shall consider factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer and
whether such broker or dealer is selling shares of the Company, and the
reasonableness of the commission, if any, for the specific transaction and on a
continuing basis.
In addition, the Investment Advisory Agreement authorizes the Adviser,
to the extent permitted by law and 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, to cause the Fund to pay a broker which furnishes brokerage and
research services a higher commission than that which might be charged by
another broker for effecting the same transaction, provided that the Adviser
determines in good faith that such commission is reasonable in relation to the
value of the brokerage and research services provided by such broker, viewed in
terms of either that particular transaction or the overall responsibilities of
the Adviser to the accounts as to which it exercises investment discretion.
Such brokerage and research services might consist of reports and statistics on
specific companies or industries, general summaries of groups of stocks and
their comparative earnings, or broad overviews of the stock market and the
economy.
-37-
<PAGE>
Supplementary research information so received is in addition to and
not in lieu of services required to be performed by the Adviser and does not
reduce the investment advisory fees payable by the Fund. Such information may
be useful to the Adviser in serving the Fund and other clients and, conversely,
supplemental information obtained by the placement of business of other clients
may be useful to the Adviser in carrying out its obligations to the Fund.
Portfolio securities will not be purchased from or sold to the
Adviser, Distributor, or any of their affiliated persons (as such term is
defined in the 1940 Act) acting as principal, except to the extent permitted by
the SEC.
Investment decisions for the Fund are made independently from those
for other investment companies, common trust funds and other types of funds
managed by the Adviser. Such other investment companies and funds may also
invest in the same securities as the Fund. When a purchase or sale of the same
security is made at substantially the same time on behalf of the Fund and
another investment company or common trust fund, the transaction will be
averaged as to price, and available investments allocated as to amount, in a
manner which the Adviser believes to be equitable to the Fund and such other
investment company or common trust fund. In some instances, this investment
procedure may adversely affect the price paid or received by the Fund or the
size of the position obtained by the Fund. To the extent permitted by law, the
Adviser may aggregate the securities to be sold or purchased for the Fund with
those to be sold or purchased for other investment companies or common trust
funds in order to obtain best execution.
To the extent that the Fund effects brokerage transactions with any
broker-dealer affiliated directly or indirectly with U.S. Trust, such
transactions, including the frequency thereof, the receipt of any commissions
payable in connection therewith, and the selection of the affiliated broker-
dealer effecting such transactions, will be fair and reasonable to the
shareholders of the Fund.
PORTFOLIO VALUATION
-------------------
Assets in the Fund which are traded on a recognized domestic stock
exchange are valued at the last sale price on the securities exchange on which
such securities are primarily traded or at the last sale price on the national
securities market. Securities traded only on over-the-counter markets are
valued on the basis of closing over-the-counter bid prices. Securities for
which there were no transactions are valued at the average of the most recent
bid and asked prices. An option or futures contract is valued at the last sales
price quoted on the principal exchange or board of trade on which such option or
contract is traded, or in the absence of a sale, the mean between the last bid
and asked prices. Restricted securities and securities or other assets for
which market quotations are not readily available are valued at fair value,
pursuant to guidelines adopted by the Company's Board of Directors.
Portfolio securities which are primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on their respective exchanges,
-38-
<PAGE>
except that when an event subsequent to the time where value was so established
is likely to have changed such value, then the fair value of those securities
will be determined by consideration of other factors under the direction of the
Board of Directors. A security which is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the primary
market for such security. Investments in debt securities having a maturity of 60
days or less are valued based upon the amortized cost method. All other foreign
securities are valued at the last current bid quotation if market quotations are
available, or at fair value as determined in accordance with guidelines adopted
by the Board of Directors. For valuation purposes, quotations of foreign
securities in foreign currency are converted to U.S. dollars equivalent at the
prevailing market rate on the day of conversion. Some of the securities acquired
by the Fund may be traded on foreign exchanges or over-the-counter markets on
days which are not Business Days. In such cases, the net asset value of the
shares may be significantly affected on days when investors can neither purchase
nor redeem the Fund's shares. The Company's Administrators have undertaken to
price the securities in the Fund, and may use one or more independent pricing
services in connection with this service. The methods used by the pricing
services and the valuations so established will be reviewed by the
Administrators under the general supervision of the Boards of Directors.
INDEPENDENT AUDITORS
--------------------
Ernst & Young LLP, independent auditors, 200 Clarendon Street, Boston,
MA 02116, serve as auditors of the Company.
COUNSEL
-------
Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary of the
Company, and Mr. Malloy, Assistant Secretary of the Company, are partners), One
Logan Square, 18/th/ and Cherry Streets, Philadelphia, Pennsylvania 19103, is
counsel to the Company and will pass upon the legality of the shares offered by
the Prospectus.
ADDITIONAL INFORMATION CONCERNING TAXES
---------------------------------------
The following supplements the tax information contained in the
Prospectus.
For federal income tax purposes, the Fund is treated as a separate
corporate entity and has qualified and intends to continue to qualify as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). Such qualification generally relieves the Fund of liability for
federal income taxes to the extent its earnings are distributed in accordance
with applicable requirements. If, for any reason, the Fund does not qualify for
a taxable year for the special federal tax treatment afforded regulated
investment companies, the Fund would be subject to federal tax on all of its
taxable income at regular corporate rates, without any deduction for
distributions to shareholders. In such event, dividend distributions
-39-
<PAGE>
(whether or not derived from interest on municipal securities) would be taxable
as ordinary income to shareholders to the extent of the Fund's current and
accumulated earnings and profits and would be eligible for the dividends
received deduction in the case of corporate shareholders.
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to currently distribute an amount equal to specified
percentages of their ordinary taxable income and capital gain net income (excess
of capital gains over capital losses). The Fund intends to make sufficient
distributions or deemed distributions of its ordinary taxable income and any
capital gain net income prior to the end of each calendar year to avoid
liability for this excise tax.
Dividends declared in October, November or December of any year
payable to shareholders of record on a specified date in such months will be
deemed to have been received by shareholders and paid by a Fund on December 31
of such year if such dividends are actually paid during January of the following
year.
The Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends or gross proceeds realized upon sale
paid to shareholders who have failed to provide a correct tax identification
number in the manner required, who are subject to withholding by the Internal
Revenue Service for failure properly to include on their return payments of
taxable interest or dividends, or who have failed to certify to the Fund when
required to do so either that they are not subject to backup withholding or that
they are "exempt recipients."
The foregoing discussion is based on federal tax laws and regulations
which are in effect on the date of this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action. Shareholders are advised to consult their tax advisers concerning their
specific situations and the application of state, local and foreign taxes.
PERFORMANCE INFORMATION
-----------------------
The Fund may advertise the "average annual total return" for its
shares. Such total return figure reflects the average percentage change in the
value of an investment in the Fund from the beginning date of the measuring
period to the end of the measuring period. Average annual total return figures
will be given for the most recent one-year period, and may be given for other
periods as well (such as from the commencement of the Fund's operations, or on a
year-by-year basis). The average annual return is computed by determining the
average annual compounded rate of return during specified periods that equates
the initial amount invested to the ending redeemable value of such investment
according to the following formula:
ERV /1/n/
T = [(-----) - 1]
P
-40-
<PAGE>
Where: T = average annual total return.
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year
(or other) periods at the end of the applicable period
(or a fractional portion thereof).
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in years.
The Fund may also advertise the "aggregate total return" for its
shares for various periods, representing the cumulative change in the value of
an investment in the Fund for the specific period. The aggregate total return
is computed by determining the aggregate compounded rates of return during
specified periods that likewise equate the initial amount invested to the ending
redeemable value of such investment. The formula for calculating aggregate
total return is as follows:
ERV
Aggregate Total Return = [(------)] - 1
P
The above calculations are made assuming that (1) all dividends and
capital gain distributions are reinvested on the reinvestment dates at the price
per share existing on the reinvestment date, (2) all recurring fees charged to
all shareholder accounts are included, and (3) for any account fees that vary
with the size of the account, a mean (or median) account size in the Fund during
the periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.
The Fund may also from time to time include in advertisements, sales
literature and communications to shareholders a total return figure that is not
calculated according to the formula set forth above in order to compare more
accurately the Fund's performance with other measures of investment return. For
example, in comparing the Fund's total return with data published by Lipper
Inc., CDA Investment Technologies, Inc. or Weisenberger Investment Company
Service, or with the performance of an index, the Fund may calculate its
aggregate total return for the period of time specified in the advertisement or
communication by assuming the investment of $10,000 in shares and assuming the
reinvestment of each dividend or other distribution at net asset value on the
reinvestment date. Percentage increases are determined by subtracting the
initial value of the investment from the ending value and by dividing the
remainder by the beginning value.
The total return of shares of the Fund may be compared to that of
other mutual funds with similar investment objectives and to other relevant
indices or to ratings prepared by
-41-
<PAGE>
independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, the total return of the Fund may
be compared to data prepared by Lipper Inc., CDA Investment Technologies, Inc.
and Weisenberger Investment Company Service. Total return and yield data as
reported in national financial publications such as Money Magazine, Forbes,
----- -------- ------
Barron's, The Wall Street Journal and The New York Times, or in publications of
- -------- --- ---- ------ ------- --- --- ---- -----
a local or regional nature, may also be used in comparing the performance of the
Fund. Advertisements, sales literature or reports to shareholders may from time
to time also include a discussion and analysis of the Fund's performance,
including, without limitation, those factors, strategies and techniques that,
together with market conditions and events, materially affected the Fund's
performance.
The Fund may also from time to time include discussions or
illustrations of the effects of compounding in advertisements. "Compounding"
refers to the fact that, if dividends or other distributions on the Fund
investment are reinvested by being paid in additional Fund shares, any future
income or capital appreciation of the Fund would increase the value, not only of
the original Fund investment, but also of the additional Fund shares received
through reinvestment. As a result, the value of a Fund investment would
increase more quickly than if dividends or other distributions had been paid in
cash. The Fund may also include discussions or illustrations of the potential
investment goals of a prospective investor, investment management techniques,
policies or investment suitability of the Fund, economic conditions, the effects
of inflation and historical performance of various asset classes, including but
not limited to, stocks, bonds and Treasury bills. From time to time
advertisements, sales literature or communications to shareholders may summarize
the substance of information contained in shareholder reports (including the
investment composition of the Fund), as well as the views of the Adviser as to
current market, economy, trade and interest rate trends, legislative, regulatory
and monetary developments, investment strategies and related matters believed to
be of relevance to the Fund. The Fund may also include in advertisements
charts, graphs or drawings which illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to, stocks,
bonds, Treasury bills and shares of the Fund. In addition, advertisements,
sales literature or shareholder communications may include a discussion of
certain attributes or benefits to be derived by an investment in the Fund. Such
advertisements or communications may include symbols, headlines or other
material which highlight or summarize the information discussed in more detail
therein.
Performance will fluctuate and any quotation of performance should not
be considered as representative of the Fund's future performance. Shareholders
should remember that performance is generally a function of the kind and quality
of the instruments held in a portfolio, operating expenses, and market
conditions. Any fees charged by Shareholder Organizations with respect to
accounts of Customers that have invested in shares will not be included in
calculations of performance.
-42-
<PAGE>
MISCELLANEOUS
-------------
As used herein, "assets allocable to the Fund" means the consideration
received upon the issuance of shares in the Fund, together with all income,
earnings, profits, and proceeds derived from the investment thereof, including
any proceeds from the sale of such investments, any funds or payments derived
from any reinvestment of such proceeds, and a portion of any general assets of
the Company not belonging to a particular portfolio of the Company. In
determining the Fund's net asset value, assets allocable to the Fund are charged
with the direct liabilities in respect of the Fund and with a share of the
general liabilities of the Company which are normally allocated in proportion to
the relative asset values of the Company's portfolios at the time of allocation.
Subject to the provisions of the Company's Charter, determinations by the Board
of Directors as to the direct and allocable liabilities, and the allocable
portion of any general assets with respect to the Fund, are conclusive.
-43-
<PAGE>
APPENDIX A
----------
Commercial Paper Ratings
- ------------------------
A Standard & Poor's ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and are
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
"D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating will also be used upon
the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:
A-1
<PAGE>
"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is expected.
A-2
<PAGE>
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:
"F1" - Securities possess the highest credit quality. This
designation indicates the strongest capacity for timely payment of financial
commitments and may have an added "+" to denote any exceptionally strong credit
feature.
"F2" - Securities possess good credit quality. This designation
indicates a satisfactory capacity for timely payment of financial commitments,
but the margin of safety is not as great as in the case of the higher ratings.
"F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to non-
investment grade.
"B" - Securities possess speculative credit quality. This designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.
"C" - Securities possess high default risk. This designation
indicates that default is a real possibility and that the capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
"D" - Securities are in actual or imminent payment default.
Thomson Financial BankWatch short-term ratings assess the likelihood
of an untimely payment of principal and interest of debt instruments with
original maturities of one year or less. The following summarizes the ratings
used by Thomson Financial BankWatch:
"TBW-1" - This designation represents Thomson Financial BankWatch's
highest category and indicates a very high likelihood that principal and
interest will be paid on a timely basis.
"TBW-2" - This designation represents Thomson Financial BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of
A-3
<PAGE>
principal and interest is strong, the relative degree of safety is not as high
as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson Financial BankWatch's
lowest investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.
"TBW-4" - This designation represents Thomson Financial BankWatch's
lowest rating category and indicates that the obligation is regarded as non-
investment grade and therefore speculative.
Corporate and Municipal Long-Term Debt Ratings
- ----------------------------------------------
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as
having significant speculative characteristics. "BB" indicates the least degree
of speculation and "C" the highest. While such obligations will likely have
some quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
"BB" - An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation.
A-4
<PAGE>
"B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB", but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
"CCC" - An obligation rated "CCC" is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the obligation.
In the event of adverse business, financial or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation.
"CC" - An obligation rated "CC" is currently highly vulnerable to
nonpayment.
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
"D" - An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The "D" rating also will
be used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include
obligations linked or indexed to equities, currencies or commodities;
obligations exposed to severe prepayment risk - such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as high-
grade bonds. They are rated lower
A-5
<PAGE>
than the best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term risk
appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds are considered as medium-grade obligations, (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic
rating classification from "Aa" through "Caa". The modifier 1 indicates that
the obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking
in the lower end of its generic rating category.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable in periods of greater
economic stress.
A-6
<PAGE>
"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt
rated "B" possesses the risk that obligations will not be met when due. Debt
rated "CCC" is well below investment grade and has considerable uncertainty as
to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the ratings used by Fitch IBCA for corporate
and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of credit risk and
are assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and
indicate very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.
"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of credit risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.
"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this capacity.
"BB" - Bonds considered to be speculative. These ratings indicate
that there is a possibility of credit risk developing, particularly as the
result of adverse economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be met.
Securities rated in this category are not investment grade.
A-7
<PAGE>
"B" - Bonds are considered highly speculative. These ratings indicate
that significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
"CCC", "CC" and "C" - Bonds have high default risk. Default is a real
possibility, and capacity for meeting financial commitments is solely reliant
upon sustained, favorable business or economic developments. "CC" ratings
indicate that default of some kind appears probable, and "C" ratings signal
imminent default.
"DDD," "DD" and "D" - Bonds are in default. The ratings of obligations
in this category are based on their prospects for achieving partial or full
recovery in a reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be estimated with any
precision, the following serves as general guidelines. "DDD" obligations have
the highest potential for recovery, around 90% - 100% of outstanding amounts and
accrued interest. "DD" indicates potential recoveries in the range of 50% -
90%, and "D" the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for redemption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.
To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "CCC" may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major rating
categories.
Thomson Financial BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:
"AAA" - This designation indicates that the ability to repay principal
and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
A-8
<PAGE>
"BBB" - This designation represents the lowest investment-grade
category and indicates an acceptable capacity to repay principal and interest.
Issues rated "BBB" are more vulnerable to adverse developments (both internal
and external) than obligations with higher ratings.
"BB," "B," "CCC" and "CC" - These designations are assigned by Thomson
Financial BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
Municipal Note Ratings
- ----------------------
A Standard and Poor's rating reflects the liquidity factors and market
access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess a
very strong capacity to pay debt Service are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
A-9
<PAGE>
"MIG-2"/"VMIG-2" - This designation denotes high quality, with margins
of protection that are ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with
all security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.
"SG" - This designation denotes speculative quality. Debt instruments
in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
A-10
<PAGE>
EXCELSIOR FUNDS, INC.
FORM N-1A
---------
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) (1) Articles of Incorporation of Registrant dated
August 1, 1984 (4).
(2) Articles Supplementary of Registrant dated
October 29, 1985 (4).
(3) Articles Supplementary of Registrant dated
September 30, 1986 (4).
(4) Articles Supplementary of Registrant dated
April 10, 1987 (4).
(5) Articles Supplementary of Registrant dated
April 27, 1990 (4).
(6) Articles Supplementary of Registrant dated
October 26, 1990 (4).
(7) Articles Supplementary of Registrant dated
January 29, 1991 (4).
(8) Articles Supplementary of Registrant dated
December 23, 1992 (4).
(9) Articles Supplementary of Registrant dated
August 31, 1995 (1).
(10) Articles Supplementary of Registrant dated
December 28, 1995 (1).
(11) Articles Supplementary of Registrant dated
September 11, 1997 (3).
(12) Articles Supplementary of Registrant dated
December 22, 1997 (4).
<PAGE>
(13) Articles Supplementary of Registrant dated
November 13, 1998 (5).
(14) Articles of Amendment of Registrant dated July 1,
1999 (8).
(15) Articles Supplementary of Registrant dated January
3,2000 (8).
(16) Form of Articles Supplementary of Registrant (9).
(b) (1) Amended and Restated By-Laws of Registrant dated
February 2, 1995 (3).
(2) Amendment No. 1 to Amended and Restated By-Laws of
Registrant dated May 16, 1997 (3).
(c) (1) Articles VI, VII, VIII and X of Registrant's Articles
of Incorporation dated August 1, 1984 (4).
(2) Articles I, II, IV and VI of Registrant's Amended and
Restated By-Laws dated February 2, 1995 (3).
(d) (1) Investment Advisory Agreement among Registrant, U.S.
Trust Company of Connecticut and United States Trust Company
of New York dated May 16, 1997 with respect to the Money
Fund, Government Money Fund, Blended Equity Fund, Small Cap
Fund, Long-Term Supply of Energy Fund, Productivity
Enhancers Fund, Environmentally-Related Products and
Services Fund, Aging of America Fund, Communication and
Entertainment Fund, Value and Restructuring Fund, Global
Competitors Fund, Latin America Fund, Pacific/Asia Fund, Pan
European Fund, Short-Term Government Securities Fund and
Intermediate-Term Managed Income Fund (2).
(2) Amendment No. 1 dated July 25, 1997 to the Investment
Advisory Agreement among Registrant, U.S. Trust Company of
Connecticut and United States Trust Company of New York dated May
16, 1997 (adding the Large Cap Growth and Real Estate Funds) (3).
(3) Amendment No. 2 dated November 14, 1997 to the Investment
Advisory Agreement among Registrant, U.S.
-2-
<PAGE>
Trust Company of Connecticut and United States Trust Company of
New York dated May 16, 1997 (adding the Emerging Markets Fund)
(4).
(4) Form of Amendment No. 3 to the Investment Advisory Agreement
among Registrant, U.S. Trust Company and United States Trust
Company of New York dated May 16, 1997 (adding the Technology
Fund) (9).
(5) Investment Advisory Agreement among Registrant, U.S. Trust
Company of Connecticut and United States Trust Company of New
York dated May 16, 1997 with respect to the Managed Income Fund
(2).
(6) Investment Advisory Agreement among Registrant, U.S. Trust
Company of Connecticut and United States Trust Company of New
York dated May 16, 1997 with respect to the Income and Growth
Fund (2).
(7) Investment Advisory Agreement among Registrant, U.S. Trust
Company of Connecticut and United States Trust Company of New
York dated May 16, 1997 with respect to the International Fund
(2).
(8) Investment Advisory Agreement among Registrant, U.S. Trust
Company of Connecticut and United States Trust Company of New
York dated May 16, 1997 with respect to the Treasury Money Fund
(2).
(e) (1) Amended and Restated Distribution Contract dated July
31, 1998 between the Registrant and Edgewood Services, Inc.
(5).
(2) Form of Exhibit A to the Amended and Restated
Distribution Contract (adding the Technology Fund) (9).
(f) None.
(g) (1) Custody Agreement between the Registrant and The Chase
Manhattan Bank dated September 1, 1995 (as amended and restated
on August 1, 1997) (3).
-3-
<PAGE>
(2) Amendment No. 1 dated May 22, 1998 to the Custody Agreement
dated September 1, 1995 (as amended and restated on August 1,
1997) between the Registrant and The Chase Manhattan Bank (5).
(3) Amendment No. 2 dated May 22, 1998 to the Custody Agreement
dated September 1, 1995 (as amended and restated on August 1,
1997, between the Registrant and The Chase Manhattan Bank (5).
(4) Amendment No. 3 dated July 31, 1998 to the Custody Agreement
dated September 1, 1995 (as amended and restated on August 1,
1997) between the Registrant and The Chase Manhattan Bank (5).
(5) Amended Exhibit A dated November 28, 1997 to the Custody
Agreement dated September 1, 1995 (as amended and restated on
August 1, 1997) (4).
(6) Form of Amended Exhibit A to the Custody Agreement dated
September 1, 1995 (as amended and restated on August 1, 1997)
(adding the Technology Fund) (9).
(h) (1) Amended and Restated Administration Agreement dated July 31,
1998 among the Registrant, Chase Global Funds Services Company,
Federated Administrative Services and U.S. Trust Company of
Connecticut (5).
(2) Form of Exhibit A to the Amended and Restated Administration
Agreement dated July 31, 1998 among the Registrant, Chase Global
Funds Services Company, Federated Administrative Services and
U.S. Trust Company (adding the Technology Fund) (9).
(3) Form of Exhibit B to the Amended and Restated Administration
Agreement dated July 31, 1998 among the Registrant, Chase Global
Funds Services Company, Federated Administrative Services and
U.S. Trust Company (adding the Technology Fund) (9).
(4) Amended and Restated Mutual Funds Transfer Agency Agreement
dated as of July 31, 1998 between the Registrant and United
States Trust Company of New York (5).
-4-
<PAGE>
(5) Letter Agreement dated September 11, 1997 with
respect to the Mutual Funds Transfer Agency Agreement
dated September 1, 1995 (4).
(6) Letter Agreement dated November 14, 1997 with
respect to the Mutual Funds Transfer Agency Agreement
dated September 1, 1995 (4).
(7) Form of Letter Agreement with respect to the
Amended and Restated Mutual Funds Transfer Agency
Agreement dated July 31, 1998 (9).
(8) Amended and Restated Mutual Funds Sub-Transfer
Agency Agreement dated as of July 31, 1998 between
United States Trust Company of New York and Chase
Global Funds Services Company (5).
(9) Letter Agreement dated September 11, 1997 with
respect to the Mutual Funds Sub-Transfer Agency
Agreement dated September 1, 1995 (4).
(10) Letter Agreement dated November 14, 1997 with
respect to the Mutual Funds Sub-Transfer Agency
Agreement dated September 1, 1995 (4).
(11) Form of Letter Agreement with respect to the
Mutual Funds Sub-Transfer Agency Agreement dated July
31, 1998 (9).
(12) Amended and Restated Administrative Services Plan
and Related Form of Shareholder Servicing Agreement
(3).
(13) Administrative Services Plan and Related Form of
Servicing Agreement with Respect to the Institutional
Shares of the Money Fund (7).
(14) Administrative Services Plan and Related Form of
Servicing Agreement with Respect to the Advisor Shares
-5-
<PAGE>
Class of the Value and Restructuring, Large Cap Growth,
Blended Equity and Intermediate-Term Managed Income Funds
(8).
(15) Revised Appendix A to the Shareholder Servicing
Agreement (adding the Technology Fund) (9).
(16) Form of Waiver and Reimbursement Agreement among
Registrant, United States Trust Company of New York and
U.S. Trust Company (8).
(17) Credit Agreement dated December 27, 1999 by and among
Registrant, Excelsior Tax-Exempt Funds, Inc., Excelsior
Institutional Trust, The Chase Manhattan Bank and the
other lenders thereunder (8).
(i) Opinion of counsel (9).
(j) (1) Consent of Counsel (included in Exhibit (i)).
(j) (2) None.
(k) None.
(l) (1) Purchase Agreement between Registrant and Shearson
Lehman Brothers Inc. dated February 6, 1985 (4).
(2) Purchase Agreement between Registrant and UST
Distributors, Inc. dated December 29, 1992 (4).
(3) Purchase Agreement between Registrant and Edgewood
Services, Inc. dated November 17, 1995 (1).
(4) Purchase Agreement between Registrant and Edgewood
Services, Inc. dated September 25, 1997 (3).
(5) Purchase Agreement between Registrant and Edgewood
Services, Inc. dated December 30, 1997 (4).
(6) Form of Purchase Agreement between Registrant and
Edgewood Services, Inc. (8)
(7) Form of Purchase Agreement between Registrant and
Edgewood Services, Inc. (9).
-6-
<PAGE>
(m) Distribution Plan and Related Form of Distribution Agreement
relating to Advisor Shares of the Value and Restructuring,
Blended Equity, Large Cap Growth and Intermediate-Term Managed
Income Funds (8).
(n) Amended and Restated Plan Pursuant to Rule 18f-3 for
Operation of a Multi-Class System (8).
(p) Code of Ethics of Registrant (8).
Notes:
- -----
(1) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 23 to its Registration Statement on Form N-1A filed July 31, 1996.
(2) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 29 to its Registration Statement on Form N-1A filed July 31, 1997.
(3) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 30 to its Registration Statement on Form N-1A filed October 8, 1997.
(4) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 31 to its Registration Statement on Form N-1A filed March 13, 1998.
(5) Incorporated herein by reference to Registrant's Registration Statement on
Form N-14 filed April 5, 1999.
(6) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 33 to its Registration Statement on Form N-1A filed May 28, 1999.
(7) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 34 to its Registration Statement on Form N-1A filed July 29, 1999.
(8) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 35 to its Registration Statement on Form N-1A filed January 4, 2000.
(9) Filed herewith.
-7-
<PAGE>
Item 24. Persons Controlled By or Under
Common Control with Registrant
------------------------------
Registrant is controlled by its Board of Directors.
Item 25. Indemnification
---------------
Article VII, Section 3 of Registrant's Articles of Incorporation,
incorporated herein by reference to Exhibit (a)(1) hereto, and Article VI,
Section 2 of Registrant's Amended and Restated Bylaws, incorporated herein by
reference to Exhibit (b)(1) hereto, provide for the indemnification of
Registrant's directors and officers. Indemnification of Registrant's principal
underwriter, custodian, transfer agent and co-administrators is provided for,
respectively, in Section 1.11 of the Amended and Restated Distribution Contract
incorporated herein by reference to Exhibit (e) hereto, Section 12 of the
Custody Agreement incorporated herein by reference to Exhibit (g)(1) hereto,
Section 7 of the Amended and Restated Mutual Funds Transfer Agency Agreement
incorporated herein by reference to Exhibit (h)(2) hereto, and Section 6 of the
Amended and Restated Administration Agreement incorporated herein by reference
to Exhibit (h)(1) hereto. Registrant has obtained from a major insurance carrier
a directors' and officers' liability policy covering certain types of errors and
omissions. In no event will Registrant indemnify any of its directors, officers,
employees, or agents against any liability to which such person would otherwise
be subject by reason of his willful misfeasance, bad faith, gross negligence in
the performance of his duties, or by reason of his reckless disregard of the
duties involved in the conduct of his office or arising under his agreement with
Registrant. Registrant will comply with Rule 484 under the Securities Act of
1933 and Release No. 11330 under the Investment Company Act of 1940 in
connection with any indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue .
Item 26. Business and Other Connections of the Investment Adviser
--------------------------------------------------------
(a) U.S. Trust Company:
-8-
<PAGE>
U.S. Trust Company ("U.S. Trust") is a Connecticut state bank and
trust company located in Stamford, Connecticut. Set forth below are the names
and principal businesses of the directors and certain senior executive officers
of U.S. Trust CT, including those who are engaged in any other business,
profession, vocation or employment of a substantial nature.
-9-
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust CT Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Director John N. Irwin Lawyer
1133 Avenue of the
Americas
New York, NY 10036
Director June Noble Larkin Foundation Not-for-Profit
Edward John Noble Director Organization
Foundation, Inc.
32 East 57th Street
New York, NY 10022
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 United States Trust Investment and
Company of New York Company of New York Fiduciary Services
11 West 54th Street
New York, NY 10019
Director Maribeth S. Rahe Vice Chairman, Asset Management,
United States Trust United States Trust Investment and
Company of New York 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 United States Trust Investment and
Company of New York Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10036
Director Kenneth G. Walsh Executive Vice Asset Management,
United States Trust President, Investment and
Company of New York United States Fiduciary Services
114 West 47th Street Trust Company of
New York, NY 10036 New York
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust CT Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Director William V. Ferdinad Managing Director Asset Management
Managing U.S. Trust Company CIO Fiduciary Services
Director & 225 High Ridge Road & Private Banking
CIO Stamford, CT 06905
Director, W. Michael Funck President & CEO Asset Management,
President & U.S. Trust Company Fiduciary Services
CEO 225 High Ridge Road & Private Banking
Stamford, CT 06905
Vice Presi- Neil M. McDonnell Vice President & Asset Management,
dent & U.S. Trust Company Treasurer Fiduciary Services
Treasurer 225 High Ridge Road & Private Banking
Stamford, CT 06905
Vice Presi- Alberto Rodriguez Vice President & Asset Management,
dent & U.S. Trust Company Secretary Fiduciary Services
Secretary 225 High Ridge Road & Private Banking
Stamford, CT 06905
</TABLE>
-11-
<PAGE>
(b) United States Trust Company of New York:
United States Trust Company of New York ("U.S. Trust NY") is a full-
service state-chartered bank located in New York, New York. Set forth below are
the names and principal businesses of the trustees and certain senior executive
officers of U.S. Trust NY, including those who are engaged in any other
business, profession, vocation, or employment of a substantial nature.
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NY Name Occupation Business
- ------- --------------------- ---------- --------
<S> <C> <C> <C>
Director Eleanor Baum Dean of School Academic
The Cooper Union for of Engineering
the Advancement
of Science & Art
4 Arleigh Road
Great Neck, NY 11021
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 of Venture
103 Horseshoe Road Venrock, Inc. Capital
Mill Neck, NY 11765 Retired
Director Antonia M. Grumbach Partner in Patter- Law Firm
Patterson, Belknap, son, Belknap, Webb
Webb & Tyler LLP & Tyler
1133 Avenue of the
Americas
New York, NY 10036
Director, H. Marshall Schwarz Chairman of the Asset Management,
Chairman United States Trust Board & Chief Exe- Investment and
of the Board Company of New York cutive Officer of Fiduciary Services
and Chief 114 West 47th Street U.S. Trust Corp. and
Executive New York, NY 10036 U.S. Trust Company of
Officer New York
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NY Name Occupation Business
- ------- --------------------- ---------- --------
<S> <C> <C> <C>
Director Philippe de Montebello Director of the Art Museum
The Metropolitan Museum Metropolitan
of Art Museum of Art
1000 Fifth Avenue
New York, NY 10028-0198
Director John H. Stookey Chairman of Petrochemicals and
Box 455 Suburban Propane Pts. Propane
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
Wein & Malkin LLP Wein & 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 Ruth A. Wooden President, Not for Profit
60 Gramercy Park North National Parenting
Apt. 2H Association
New York, NY 10010
Executive Paul K. Napoli Executive Asset Management,
Vice United States Trust Vice President of Investment and
President Company of New York U.S. Trust Corporation Fiduciary Services;
114 West 47th Street and United States Trust Private Banking
New York, NY 10036 Company of New York
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NY Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Director and Maribeth S. Rahe Vice Chairman Asset Management,
Vice Chair- United States Trust of U.S. Trust Corporation Investment and
man Company of New York and United States Trust Fiduciary Services
114 West 47th Street Company of New York
New York, NY 10036
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 47th Street Corporation and United
ment Officer New York, NY 10036 States Trust Company
of New York
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. Trust Fiduciary Services
Operating 114 West 47th Street Corporation and United
Officer New York, NY 10036 States Trust Company of
New York
Executive John L. Kirby Executive Asset Management,
Vice United States Trust Vice President; Investment and
President Company of New York Chief Financial Fiduciary Services
114 West 47th Street Officer of U.S. Trust
New York, NY 10030 Corporation and United
States Trust Company of
New York
Executive Kenneth G. Walsh Executive Asset Management,
Vice United States Trust Vice President of Investment and
President Company of New York U.S. Trust Corporation Fiduciary Services
114 West 47th Street and United States Trust
New York, NY 10030 Company of New York
Director Philip L. Smith Corporate Director and
P.O. Box 386 Trustee
Ponte Verde Beach, FL 32004
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NY Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Director Robert E. Denham Partner in Munger, Tolles Law Firm
Munger, Tolles & & Olson
Olson LLP
355 South Grand Avenue
35/th/ Floor
Los Angeles, CA 90071-1560
Director Carl H. Pforzheimer, III Managing Partner in Broker-Dealer,
Carl H. Pforzheimer & Co. Carl H. Pforzheimer & investment
650 Madison Avenue Co. advisor
23/rd/ Floor
New York, NY 10022
Executive John M. Deignan Executive Investment
Vice United States Trust Vice President Management and
President Company of New York Fiduciary Services;
114 West 47th Street Private Banking
New York, NY 10030
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
(b) Names and Principal Positions and Offices with Offices with
Business Addresses the Distributor Registrant
------------------ --------------------- ----------
<S> <C> <C>
Lawrence Caracciolo Director and President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002
Arthur L. Cherry Director, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002
J. Christopher Donahue Director, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002
Thomas P. Sholes Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002
Ernest L. Linane Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002
Christine T. Johnson Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002
Dennis McAuley, III Assistant Treasurer, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002
Thomas R. Donahue Treasurer, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002
Robert M. Rossi Assistant Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002
Timothy S. Johnson Secretary,
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
(b) Names and Principal Positions and Offices with Offices with
Business Addresses the Distributor Registrant
------------------ --------------- ----------
<S> <C> <C>
Victor R. Siclari Assistant Secretary,
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002
</TABLE>
(c) Not Applicable.
Item 28. Location of Accounts and Records
--------------------------------
1. United States Trust Company of New York, 114 W. 47th Street, New
York, NY 10036 (records relating to its functions as investment adviser and
transfer agent).
2. U.S. Trust Company, 225 High Ridge Road, East Building, Stamford,
Connecticut 06905 (records relating to its function as investment adviser and
co-administrator).
3. Edgewood Services, Inc., Clearing Operations, 5800 Corporate
Drive, Pittsburgh, PA 15237-5829 (records relating to its function as
distributor).
4. Chase Global Funds Services Company, 73 Tremont Street, Boston,
Massachusetts 02108-3913 (records relating to its function as co-administrator
and sub-transfer agent).
5. Federated Administrative Services, Federated Investors Tower,
Pittsburgh, PA 15222-3799 (records relating to its function as co-
administrator).
6. The Chase Manhattan Bank, 3 Chase MetroTech Center, 8th Floor,
Brooklyn, NY 11245 (records relating to its function as custodian).
7. Drinker Biddle & Reath LLP, One Logan Square, 18th and Cherry
Streets, Philadelphia, Pennsylvania 19103-6996 (Registrant's Articles of
Incorporation, Bylaws, and Minute Books).
Item 29. Management Services
-------------------
Not Applicable.
Item 30. Undertakings
------------
Not Applicable.
-17-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 (the "1933
Act") and the Investment Company Act of 1940, Excelsior Funds, Inc. has duly
caused this Registration Statement Post-Effective Amendment No. 36 to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Vero Beach and the State of Florida on the 8th
day of February, 2000.
EXCELSIOR FUNDS, INC.
Registrant
/s/ Frederick S. Wonham
--------------------------------------------
Frederick S. Wonham, President and Treasurer
(Signature and Title)
Pursuant to the requirements of the 1933 Act, this Post-Effective
Amendment No. 36 to Excelsior Funds, Inc.'s Registration Statement on Form N-1A
has been signed below by the following persons in the capacities and on the
dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Frederick S. Wonham Chairman of the Board, February 8, 2000
- -----------------------
Frederick S. Wonham President and Treasurer
* Joseph H. Dugan Director February 8, 2000
- -----------------
Joseph H. Dugan
* Donald L. Campbell Director February 8, 2000
- --------------------
Donald L. Campbell
* Wolfe J. Frankl Director February 8, 2000
- -----------------
Wolfe J. Frankl
* Robert A. Robinson Director February 8, 2000
- --------------------
Robert A. Robinson
* Alfred Tannachion Director February 8, 2000
- -------------------
Alfred Tannachion
* Jonathan Piel Director February 8, 2000
- ---------------
Jonathan Piel
*Rodman L. Drake Director February 8, 2000
- ----------------
Rodman L. Drake
*By: /s/ W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III, Attorney-in-Fact
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s and Excelsior Institutional Trust's
(collectively, the "Companies") respective Registration Statements on Form N-1A
pursuant to the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended (the "Acts") and all instruments necessary or incidental
in connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and said attorney
shall have full power and authority, to do and perform in the name and on behalf
of the undersigned in any and all capacities, every act whatsoever requisite or
necessary to be done, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorney may
lawfully do or cause to be done by virtue hereof.
Dated: May 21, 1999 /s/ Alfred C. Tannachion
------------------------
Alfred C. Tannachion
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s and Excelsior Institutional Trust's
(collectively, the "Companies") respective Registration Statements on Form N-1A
pursuant to the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended (the "Acts") and all instruments necessary or incidental
in connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that either
of said attorneys may lawfully do or cause to be done by virtue hereof.
Dated: May 21, 1999 /s/ Donald L. Campbell
----------------------
Donald L. Campbell
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s and Excelsior Institutional Trust's
(collectively, the "Companies") respective Registration Statements on Form N-1A
pursuant to the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended (the "Acts") and all instruments necessary or incidental
in connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that either
of said attorneys may lawfully do or cause to be done by virtue hereof.
Dated: May 21, 1999 /s/ Joseph H. Dugan
-------------------
Joseph H. Dugan
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s and Excelsior Institutional Trust's
(collectively, the "Companies") respective Registration Statements on Form N-1A
pursuant to the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended (the "Acts") and all instruments necessary or incidental
in connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that either
of said attorneys may lawfully do or cause to be done by virtue hereof.
Dated: May 21, 1999 /s/ Robert A. Robinson
----------------------
Robert A. Robinson
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s and Excelsior Institutional Trust's
(collectively, the "Companies") respective Registration Statements on Form N-1A
pursuant to the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended (the "Acts") and all instruments necessary or incidental
in connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that either
of said attorneys may lawfully do or cause to be done by virtue hereof.
Dated: May 21, 1999 /s/ Wolfe J. Frankl
-------------------
Wolfe J. Frankl
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
W. Bruce McConnel, III his true and lawful attorney-in-fact and agent with full
power of substitution and resubstitution, for him and in his name, place and
stead, in his capacity as director/trustee or officer, or both, to execute
amendments to Excelsior Funds, Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s,
Excelsior Institutional Trust's and Excelsior Funds' (collectively, the
"Companies") respective Registration Statements on Form N-1A pursuant to the
Investment Company Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "Acts") and all instruments necessary or incidental in connection
therewith pursuant to said Acts and any rules, regulations, or requirements of
the Securities and Exchange Commission in respect thereof, and to file the same
with the Securities and Exchange Commission, and said attorney shall have full
power and authority, to do and perform in the name and on behalf of the
undersigned in any and all capacities, every act whatsoever requisite or
necessary to be done, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorney may
lawfully do or cause to be done by virtue hereof.
Dated: May 21, 1999 /s/ Frederick S. Wonham
------------------------
Frederick S. Wonham
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 21, 1999 /s/ Rodman L. Drake
-------------------
Rodman L. Drake
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.
Dated: May 21, 1999 /s/ Jonathan Piel
-----------------
Jonathan Piel
<PAGE>
EXCELSIOR FUNDS, INC.
Certificate of Secretary
The following resolution was duly adopted by the Board of Directors of
Excelsior Funds, Inc. on November 19, 1999 and remains in effect on the date
hereof:
FURTHER RESOLVED, that the directors and officers of Excelsior Funds,
Inc. who may be required to execute such Registration Statement on
Form N-1A (and any amendments thereto), and each of them, hereby appoint
Frederick S. Wonham and W. Bruce McConnel, III, and each of them, their
true and lawful attorney, or attorneys, to execute in their name, place and
stead, in their capacity as director or officer, or both, of Excelsior
Funds, Inc., the Registration Statement on Form N-1A, any amendments
thereto, and all instruments necessary or incidental in connection
therewith, and to file the same with the SEC, and either of said attorneys
shall have power to act with or without the other of said attorneys and
shall have full power of substitution and re-substitution; and either of
said attorneys shall have full power and authority to do and perform in the
name and on behalf of each of said directors or officers, or any or all of
them, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and
purposes as each of said directors or officers, or any or all of them,
being hereby ratified and approved; and
FURTHER RESOLVED, that such Post-Effective Amendment shall be in such
form as the officer or officers executing the same, on the advice of
counsel to Excelsior Funds, Inc., may approve as necessary or desirable,
such approval to be conclusively evidenced by his, her or their execution
thereof.
EXCELSIOR FUNDS, INC.
By: /s/ W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III
Secretary
Dated: February 8, 2000
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
(a)(16) Form of Articles Supplementary of Registrant.
(d)(4) Form of Amendment No. 3 to the Investment Advisory Agreement
among Registrant, U.S. Trust Company and United States Trust
Company of New York dated May 16, 1997.
(e)(2) Form of Exhibit A to the Amended and Restated Distribution
Contract.
(g)(6) Form of Amended Exhibit A to the Custody Agreement dated
September 1, 1995 (as amended and restated on August 1,
1997).
(h)(2) Form of Exhibit A to the Amended and Restated Administration
Agreement dated July 31, 1998 among the Registrant, Chase
Global Funds Services Company, Federated Administrative
Services and U.S. Trust Company.
(h)(3) Form of Exhibit B to the Amended and Restated Administration
Agreement dated July 31, 1998 among the Registrant, Chase
Global Funds Services Company, Federated Administrative
Services and U.S. Trust Company.
(h)(7) Form of Letter Agreement with respect to the Amended and
Restated Mutual Funds Transfer Agency Agreement dated July
31, 1998.
(h)(11) Form of Letter Agreement with respect to the Mutual Funds
Sub-Transfer Agency Agreement dated July 31, 1998.
(h)(15) Revised Appendix A to the Shareholder Servicing Agreement.
(i) Opinion and Consent of Counsel.
(l)(7) Form of Purchase Agreement between Registrant and Edgewood
Services, Inc.
<PAGE>
EXHIBIT (a)(16)
EXCELSIOR FUNDS, INC.
ARTICLES SUPPLEMENTARY
Excelsior Funds, Inc., a Maryland Corporation having its principal office
in the City of Baltimore, Maryland (hereinafter called the "Company"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to Section 2-208 of the Maryland General Corporation Law,
the Board of Directors of the Company (the "Board") has classified Five Hundred
Million (500,000,000) shares of the Company's authorized but unissued and
unclassified shares of capital stock, of the par value of One Mill ($.001) per
share, as Class X Common Stock, of the par value of One Mill ($.001) per share,
pursuant to the following resolutions adopted at a regular meeting of the Board
held on February 18, 1999:
RESOLVED, that pursuant to the authority expressly given to the Board
in Article VI of the Company's Charter, the Board hereby classifies Five
Hundred Million (500,000,000) of the Company's authorized but unissued and
unclassified shares as Class X Common Stock (with an aggregate par value of
Five Hundred Thousand Dollars ($500,000)); and
FURTHER RESOLVED, that each share of Class X Common Stock shall have
all the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption as set forth in the Company's Charter.
SECOND: The shares of capital stock of the Company classified pursuant to
the resolutions set forth herein have been classified by the Board under the
authority contained in the Charter of the Company.
THIRD: These Articles Supplementary do not increase the total number of
shares that the Company is authorized to issue or the aggregate par value
thereof. The total number of shares of capital stock which the Company is
presently authorized to issue remains Thirty-Five Billion (35,000,000,000)
shares of capital stock of the par value of One Mill ($0.001) per share and of
the aggregate par value of Thirty-Five Million Dollars ($35,000,000), classified
or remaining unclassified as follows:
Class A Common Stock: Two Billion (2,000,000,000) shares of capital
--------------------
stock of the Company of the par value of One Mill ($0.001) per share and of
the aggregate par value of Two Million Dollars ($2,000,000);
<PAGE>
Class A Common Stock -- Special Series 1: One Billion (1,000,000,000)
----------------------------------------
shares of capital stock of the Company of the par value of One Mill
($0.001) per share and of the aggregate par value of One Million Dollars
($1,000,000);
Class B Common Stock: Two Billion (2,000,000,000) shares of capital
--------------------
stock of the Company of the par value of One Mill ($0.001) per share and of
the aggregate par value of Two Million Dollars ($2,000,000);
Class B Common Stock -- Special Series 1: One Billion (1,000,000,000)
----------------------------------------
shares of capital stock of the Company of the par value of One Mill
($0.001) per share and of the aggregate par value of One Million Dollars
($1,000,000);
Class C Common Stock: Seven Hundred Fifty Million (750,000,000) shares
--------------------
of capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Seven Hundred Fifty Thousand
Dollars ($750,000);
Class C Common Stock -- Special Series 1: One Billion (1,000,000,000)
----------------------------------------
shares of capital stock of the Company of the par value of One Mill
($0.001) per share and of the aggregate par value of One Million Dollars
($1,000,000);
Class C Common Stock -- Special Series 2: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class D Common Stock: Three Hundred Seventy Five Million
--------------------
(375,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Three Hundred
Seventy Five Thousand Dollars ($375,000);
Class D Common Stock -- Special Series 1: Three Hundred Seventy Five
----------------------------------------
Million (375,000,000) shares of capital stock of the Company of the par
value of One Mill ($0.001) per share and of the aggregate par value of
Three Hundred Seventy Five Thousand Dollars ($375,000);
Class F Common Stock: Three Hundred Seventy Five Million
--------------------
(375,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Three Hundred
Seventy Five Thousand Dollars ($375,000);
Class F Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
-2-
<PAGE>
Class G Common Stock: Two Billion (2,000,000,000) shares of capital
--------------------
stock of the Company of the par value of One Mill ($0.001) per share and of
the aggregate par value of Two Million Dollars ($2,000,000);
Class G Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class H Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class H Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class I Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class I Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class J Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class J Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class K Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class K Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
-3-
<PAGE>
Class L Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class L Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class M Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class M Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class N Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class N Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class N Common Stock -- Special Series 2: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class O Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class O Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class P Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class P Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class Q Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
-4-
<PAGE>
Class Q Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class R Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class R Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class S Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class S Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class T Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class T Common Stock -- Special Series 1: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class T Common Stock -- Special Series 2: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class U Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class U Common Stock -- Special Series 2: Five Hundred Million
----------------------------------------
(500,000,000) shares of capital stock of the Company of the par value of
One Mill ($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000);
Class V Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000);
Class W Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000); and
Class X Common Stock: Five Hundred Million (500,000,000) shares of
--------------------
capital stock of the Company of the par value of One Mill ($0.001) per
share and of the aggregate par value of Five Hundred Thousand Dollars
($500,000).
-5-
<PAGE>
The total number of authorized and unclassified shares of capital stock of
the Company remaining after the actions described above is Six Billion One
Hundred Twenty-Five Million (6,125,000,000) shares of capital stock of the par
value of One Mill ($0.001) per share and of the aggregate par value of Six
Million One Hundred Twenty-Five Thousand Dollars ($6,125,000).
IN WITNESS WHEREOF, Excelsior Funds, Inc. has caused these presents to be
signed in its name and on its behalf by its President and its corporate seal to
be herewith affixed and attested to by its Assistant Secretary as of February
___, 2000.
[SEAL] EXCELSIOR FUNDS, INC.
Attest:
_________________________ By: ____________________________
Michael P. Malloy Frederick S. Wonham
Assistant Secretary President
-6-
<PAGE>
CERTIFICATE
THE UNDERSIGNED, President of Excelsior Funds, Inc., who executed on behalf
of said Corporation the attached Articles Supplementary of said Corporation, of
which this Certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the attached Articles Supplementary to be the
corporate act of said Corporation, and certifies that to the best of his
knowledge, information and belief the matters and facts set forth in the
attached Articles Supplementary with respect to authorization and approval are
true in all material respects, under the penalties for perjury.
_______________________________
Frederick S. Wonham
President
Dated as of: February ___, 2000
<PAGE>
EXHIBIT (D)(4)
EXCELSIOR FUNDS, INC.
AMENDMENT NO. 3
TO
INVESTMENT ADVISORY AGREEMENT
WHEREAS, Excelsior Funds, Inc. (the "Company"), U.S. Trust Company of
Connecticut ("USTCT") and United States Trust Company of New York ("USTNY")
desire to amend the Investment Advisory Agreement of May 16, 1997 (the
"Agreement") by and among them to include the Technology Fund as an investment
portfolio for which USTCT and USTNY render investment advisory and other
services; and
WHEREAS, USTCT and USTNY are willing to render such services to the Company
with respect to the Technology Fund;
The parties hereto, intending to be legally bound hereby, agree that the
Agreement is amended as follows:
1. The third paragraph of the preamble to the Agreement shall
henceforth read:
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,
Latin America Fund, Pacific/Asia Fund, Pan European Fund, Short-Term
Government Securities Fund, Intermediate-Term Managed Income Fund,
Real Estate Fund, Large Cap Growth Fund, Emerging Markets Fund and
Technology Fund portfolios (collectively, the "Funds"), and the
Investment Adviser is willing to so render such services;
2. Paragraph No. 7 shall henceforth read:
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 each of the Blended Equity Fund and the
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% of the average daily net assets of
each of the Latin America Fund, the Pacific/Asia Fund, the Pan
European Fund, the Real Estate Fund and the Technology Fund; 1.25% of
the average daily net assets of
<PAGE>
the Emerging Markets 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.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have caused this instrument to be executed by their officers designated
below as of February 18, 1999.
EXCELSIOR FUNDS, INC.
By: _______________________________
Title: ____________________________
UNITED STATES TRUST COMPANY OF NEW YORK
By: _______________________________
Title: ____________________________
U.S. TRUST COMPANY OF CONNECTICUT
By: _______________________________
Title: ____________________________
-2-
<PAGE>
EXHIBIT (E)(2)
Amended Exhibit A to the
Amended and Restated
Distribution Contract
EXCELSIOR FUNDS, INC.
--------------------
Money Fund
Government Money Fund
Treasury Money Fund
Short-Term Government Securities Fund
Intermediate-Term Managed Income Fund
Managed Income Fund
Blended Equity Fund
Income and Growth Fund
Energy and Natural Resources Fund
Value and Restructuring Fund
Small Cap Fund
International Fund
Latin America Fund
Pacific/Asia Fund
Pan European Fund
Large Cap Growth Fund
Real Estate Fund
Emerging Markets Fund
Technology Fund
In consideration of the mutual covenants set forth in the Distribution
Contract dated as of August 1, 1995, as amended and restated on July 31, 1998,
between Excelsior Funds, Inc. and Edgewood Services, Inc., Excelsior Funds, Inc.
and Edgewood Services, Inc. execute and deliver this intending to be legally
bound and intending this to be Amended Exhibit A to said Distribution Contract.
Witness the due execution hereof this ______________ day of ____________.
EXCELSIOR FUNDS, INC.
____________________________
Name: Frederick S. Wonham
Title: Chairman, President and Treasurer
EDGEWOOD SERVICES, INC.
____________________________
Name:
Title:
<PAGE>
EXHIBIT (G)(6)
AMENDED EXHIBIT A
-----------------
Portfolios covered by the Custody Agreement effective as of September 1,
1995, as amended, between The Chase Manhattan Bank and Excelsior Funds, Inc.
Money Fund
Government Money Fund
Treasury Money Fund
Blended Equity Fund
Income and Growth Fund
Energy and Natural Resources Fund
Productivity Enhancers Fund
Environmentally-Related Products and Services Fund
Aging of America Fund
Communication and Entertainment Fund
Value and Restructuring Fund
Global Competitors Fund
Small Cap Fund
International Fund
Latin America Fund
Pacific/Asia Fund
Pan European Fund
Short-Term Government Securities Fund
Intermediate-Term Managed Income Fund
Managed Income Fund
Large Cap Growth Fund
Real Estate Fund
Emerging Markets Fund
Technology Fund
THE CHASE MANHATTAN BANK
By:_________________________________
EXCELSIOR FUNDS, INC.
By:_________________________________
Dated: _____________, 2000
<PAGE>
EXHIBIT (H)(2)
Exhibit A
to the
Amended and Restated Administration Agreement
EXCELSIOR FUNDS, INC.
---------------------
Money Fund
Government Money Fund
Treasury Money Fund
Short-Term Government Securities Fund
Intermediate-Term Managed Income Fund
Managed Income Fund
Blended Equity Fund
Income and Growth Fund
Energy and Natural Resources Fund
Value and Restructuring Fund
Small Cap Fund
International Fund
Latin America Fund
Pacific/Asia Fund
Pan European Fund
Large Cap Growth Fund
Real Estate Fund
Emerging Markets Fund
Technology Fund
In consideration of the mutual covenants set forth in the Amended and
Restated Administration Agreement dated as of July 31, 1998 among Excelsior
Funds, Inc. (the "Company"), Chase Global Funds Services Company ("CGFSC"),
Federated Administrative Services ("FAS") and U.S. Trust Company of Connecticut
("U.S. Trust"), Excelsior Funds, Inc. executes and delivers this Exhibit on
behalf of the Funds, and with respect to any class or series thereof, first set
forth in this Exhibit.
Pursuant to Section 3 of the Agreement, FAS agrees to provide facilities,
equipment, and personnel to carry out the following administrative services to
the Funds, with the understanding that CGFSC will provide all other services and
duties set forth in said Section 3 but not otherwise listed below:
(a) Performing a due diligence review of SEC required reports and notices
to shareholders of record and to the SEC including, without limitation, Semi-
Annual and Annual Reports to Shareholders, Semi-Annual Reports on Form N-SAR,
Proxy Statements and SEC share registration notices;
<PAGE>
(b) Reviewing the Company's Registration Statement on Form N-1A or any
replacement therefor;
(c) Reviewing and filing with the National Association of Securities
Dealers, Inc. all sales literature (advertisements, brochures and shareholder
communications) for each of the Funds and any class or series thereof;
(d) Preparing distributor's reports to the Company's Board of Directors;
(e) Performing internal audit examinations in accordance with a charter to
be adopted by FAS and the Company;
(f) Upon request, providing individuals reasonably acceptable to the
Company's Board of Directors for nomination, appointment, or election as
officers of the Company, who will be responsible for the management of certain
of the Funds' affairs as determined by the Company;
(g) Consulting with the Funds and the Company's Board of Directors, as
appropriate, on matters concerning the distribution of Funds;
(h) Monitoring the Company's arrangements with respect to services
provided by certain organizations ("Service Organizations") under its Amended
and Restated Administrative Services Plan, provided that FAS will only be
responsible for monitoring arrangements with Service Organizations with whom FAS
has established the servicing relationship on behalf of the Company. With
respect to such Service Organizations, FAS shall specifically monitor and review
the services rendered by Service Organizations to their customers who are the
beneficial owners of shares, pursuant to agreements between the Company and such
Service Organizations ("Servicing Agreements"), including, without limitation,
reviewing the qualifications of financial institutions wishing to be Service
Organizations, assisting in the execution and delivery of Servicing Agreements,
reporting to the Company's Board of Directors with respect to the amounts paid
or payable by the Company from time to time under the Servicing Agreements and
the nature of the services provided by Service Organizations, and maintaining
appropriate records in connection with such duties; and
(i) Consulting with CGFSC and the Company regarding the jurisdictions in
which the Company's shares shall be registered or qualified for sale and, in
connection therewith, reviewing and monitoring the actions of CGFSC in
maintaining the registration or qualification of shares for sale under the
securities laws of any state. Payment of share registration fees and any fees
for qualifying or continuing the qualification of any Fund as a dealer or
broker, if applicable, shall be made by that Fund.
This Exhibit A may be executed in one or more counterparts and all such
counterparts will constitute one and the same instrument.
<PAGE>
Witness the due execution hereof this ____ day of __________, 2000.
EXCELSIOR FUNDS, INC.
By: __________________________________
Name: F.S. Wonham
Title: President and Treasurer
FEDERATED ADMINISTRATIVE SERVICES
By: __________________________________
Name:
Title:
CHASE GLOBAL FUNDS SERVICES COMPANY
By: __________________________________
Name: Donald P. Hearn
Title: Vice Chairman
<PAGE>
Exhibit (h)(3)
Exhibit B
to the
Amended and Restated Administration Agreement
EXCELSIOR FUNDS, INC.
---------------------
Money Fund
Government Money Fund
Treasury Money Fund
Short-Term Government Securities Fund
Intermediate-Term Managed Income Fund
Managed Income Fund
Blended Equity Fund
Income and Growth Fund
Energy and Natural Resources Fund
Value and Restructuring Fund
Small Cap Fund
International Fund
Latin America Fund
Pacific/Asia Fund
Pan European Fund
Large Cap Growth Fund
Real Estate Fund
Emerging Markets Fund
Technology Fund
In consideration of the mutual covenants set forth in the Amended and
Restated Administration Agreement dated as of July 31, 1998 among Excelsior
Funds, Inc. (the "Company"), Chase Global Funds Services Company ("CGFSC"),
Federated Administrative Services ("FAS") and U.S. Trust Company of Connecticut
("U.S. Trust"), Excelsior Funds, Inc. executes and delivers this Exhibit on
behalf of the Funds, and with respect to any class or series thereof, first set
forth in this Exhibit.
Pursuant to Section 3 of the Agreement, U.S. Trust agrees to provide
facilities, equipment, and personnel to carry out the following administrative
services to the Funds:
(a) Providing guidance and assistance in the preparation of SEC required
reports and notices to shareholders of record and to the SEC including, without
limitation, Semi-Annual and Annual Reports to Shareholders, Semi-Annual Reports
on Form N-SAR, Proxy Statements and SEC share registration notices;
(b) Reviewing the Company's Registration Statement on Form N-1A or any
replacement therefor;
<PAGE>
(c) Consulting with the Funds and the Company's Board of Directors, as
appropriate, on matters concerning the administration and operation of the
Funds;
(d) Monitoring the Company's arrangements with respect to services provided
by certain organizations ("Service Organizations") under its Amended and
Restated Administrative Services Plan, provided that U.S. Trust will only be
responsible for monitoring arrangements with Service Organizations with whom
U.S. Trust has established the servicing relationship on behalf of the Company.
With respect to such Service Organizations, U.S. Trust shall specifically
monitor and review the services rendered by Service Organizations to their
customers who are the beneficial owners of shares, pursuant to agreements
between the Company and such Service Organizations ("Servicing Agreements"),
including, without limitation, reviewing the qualifications of financial
institutions wishing to be Service Organizations, assisting in the execution and
delivery of Servicing Agreements, reporting to the Company's Board of Directors
with respect to the amounts paid or payable by the Company from time to time
under the Servicing Agreements and the nature of the services provided by
Service Organizations, and maintaining appropriate records in connection with
such duties.
This Exhibit B may be executed in one or more counterparts and all such
counterparts will constitute one and the same instrument.
Witness the due execution hereof this ____ day of ____________, 2000.
EXCELSIOR FUNDS, INC.
By:___________________________________
Name: F.S. Wonham
Title: President and Treasurer
U.S. TRUST COMPANY OF CONNECTICUT
By:___________________________________
Name:
Title:
<PAGE>
Exhibit (h)(7)
EXCELSIOR FUNDS, INC.
73 Tremont Street
Boston, MA 02108-3913
_______________, 2000
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Gentlemen:
Excelsior Funds, Inc., formerly UST Master Funds, Inc. (the
"Company"), and United States Trust Company of New York ("U.S. Trust") are
parties to an Amended and Restated Mutual Funds Transfer Agency Agreement made
as of July 31, 1998 (the "Agreement").
The Company has established a class of shares for a new portfolio, the
Technology Fund (the "New Fund"). This letter shall serve as written notice that
the Company desires to retain U.S. Trust to serve as transfer agent, registrar
and dividend disbursing agent under and in accordance with the terms of the
Agreement, whereupon the New Fund shall be subject to the provisions of the
Agreement to the same extent as the funds currently covered by the Agreement.
Please sign below to signify U.S. Trust's agreement to serve as
transfer agent, registrar and dividend disbursing agent for each class and/or
series of common stock of the Company with respect to the New Fund for the
period and on the terms set forth in the Agreement.
Very truly yours,
EXCELSIOR FUNDS, INC.
By: ________________________
Name: ______________________
Date: ______________________
Agreed to and Accepted intending
to be legally bound hereby
UNITED STATES TRUST COMPANY OF NEW YORK
By: ________________________
Name: ______________________
Title: ______________________
<PAGE>
EXHIBIT (H)(11)
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
_______________, 2000
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108-3913
Gentlemen:
United States Trust Company of New York ("U.S. Trust"), and Chase
Global Funds Services Company ("CGFSC"), are parties to an Amended and Restated
Mutual Funds Sub-Transfer Agency Agreement made as of July 31, 1998 (the
"Agreement"). Excelsior Funds, Inc. (the "Company") has retained U.S. Trust to
serve as the Company's transfer agent, registrar and dividend disbursing agent.
U.S. Trust, by way of the Agreement, has assigned its duties and obligations to
CGFSC.
The Company has established a class of shares for a new portfolio, the
Technology Fund (the "New Fund"). This letter shall serve as written notice
that U.S. Trust desires to retain CGFSC to serve as sub-transfer agent, sub-
registrar and sub-dividend disbursing agent under and in accordance with the
terms of the Agreement, whereupon the New Fund shall be subject to the
provisions of the Agreement to the same extent as the funds currently covered by
the Agreement.
Please sign below to signify CGFSC's agreement to serve as sub-
transfer agent, sub-registrar and sub-dividend disbursing agent for each class
and/or series of common stock of the Company with respect to the New Fund for
the period and on the terms set forth in the Agreement.
Very truly yours,
UNITED STATES TRUST COMPANY OF NEW YORK
By: _______________________________________
Name:______________________________________
Title:_____________________________________
Agreed to and Accepted intending
to be legally bound hereby
CHASE GLOBAL FUNDS SERVICES COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
Exhibit (h)(15)
APPENDIX A
----------
EXCELSIOR FUNDS, INC.
Pursuant to the terms and conditions set forth in the attached
Shareholder Servicing Agreement, the Organization will receive the fees set
forth below in consideration for the services described in Section 2 of said
Agreement and the incurring of expenses in connection therewith, such fees
(calculated pursuant to Section 3.1 of said Agreement) to be paid in arrears
periodically (but in no event less frequently than semi-annually):
<TABLE>
<CAPTION>
==========================================================================
FUND Shareholder
Servicing
Fee
==========================================================================
<S> <C>
Money Fund __ BP
Government Money Fund __ BP
Treasury Money Fund __ BP
==========================================================================
Short-Term Government Securities Fund __ BP
Intermediate-Term Managed Income Fund __ BP
Managed Income Fund __ BP
==========================================================================
Blended Equity Fund __ BP
Energy and Natural Resources Fund __ BP
Value and Restructuring Fund __ BP
Small Cap Fund __ BP
Large Cap Growth Fund __ BP
Real Estate Fund __ BP
International Fund __ BP
Latin America Fund __ BP
Pacific/Asia Fund __ BP
Pan European Fund __ BP
Emerging Markets Fund __ BP
==========================================================================
</TABLE>
<PAGE>
Exhibit (i)
DRINKER BIDDLE & REATH LLP
One Logan Square, 18/th/ and Cherry Streets
Philadelphia, PA 19103-6996
(215) 988-2700
February 8, 2000
Excelsior Funds, Inc.
73 Tremont Street
Boston, MA 02108-3913
Re: Excelsior Funds, Inc. - Shares of Common Stock
----------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Excelsior Funds, Inc., a Maryland
corporation (the "Company"), in connection with the registration by the Company
of its shares of common stock, par value $.001 per share, under the Securities
Act of 1933, as amended (the "1933 Act").
The Articles of Incorporation of the Company, as amended and
supplemented (the "Articles of Incorporation"), authorize the issuance of
35,000,000,000 shares of common stock. The Board of Directors of the Company has
the power to classify or reclassify any authorized but unissued shares of common
stock into one or more classes of shares and to divide and classify shares of
any class into one or more series of such class. Pursuant to such authority, the
Board of Directors (i) has previously classified 28,875,000,000 of such
authorized shares into 23 classes (the "Classes"), each Class representing
interests in a separate portfolio of investments (the "Portfolios") and (ii) has
classified each Class of shares into one, two or three series of shares (the
"Series"). The Classes and Series are referred to herein as "Shares." The Board
has previously authorized the issuance of Shares to the public. Currently, the
Company is authorized to issue Shares of the following Classes and Series:
<TABLE>
<CAPTION>
Portfolio Authorized Shares
--------- -----------------
<S> <C>
Money Fund
A Shares....................................... 2,000,000,000
A-Special Series 1 Shares...................... 1,000,000,000
Government Money Fund
B Shares....................................... 2,000,000,000
B-Special Series 1 Shares...................... 1,000,000,000
</TABLE>
<PAGE>
Excelsior Funds, Inc.
February 8, 2000
Page 2
Portfolio Authorized Shares
--------- -----------------
Blended Equity Fund
C Shares....................................... 750,000,000
C-Special Series 1 Shares...................... 1,000,000,000
C-Special Series 2 Shares...................... 500,000,000
Managed Income Fund
D Shares....................................... 375,000,000
D-Special Series 1 Shares...................... 375,000,000
International Fund
F Shares....................................... 375,000,000
F-Special Series 1 Shares...................... 500,000,000
Treasury Money Fund
G Shares....................................... 2,000,000,000
G-Special Series 1 Shares...................... 500,000,000
Small Cap Fund
H Shares....................................... 500,000,000
H-Special Series 1 Shares...................... 500,000,000
Energy and Natural Resources Fund
I Shares....................................... 500,000,000
I-Special Series 1 Shares...................... 500,000,000
Productivity Enhancers Fund
J Shares....................................... 500,000,000
J-Special Series 1 Shares...................... 500,000,000
Environmentally-Related Products and Services Fund
K Shares....................................... 500,000,000
K-Special Series 1............................. 500,000,000
Aging of America Fund
L Shares....................................... 500,000,000
L-Special Series 1............................. 500,000,000
<PAGE>
Excelsior Funds, Inc.
February 8, 2000
Page 3
Portfolio Authorized Shares
--------- -----------------
Communication and Entertainment Fund
M Shares....................................... 500,000,000
M-Special Series 1............................. 500,000,000
Value and Restructuring Fund
N Shares....................................... 500,000,000
N-Special Series 1............................. 500,000,000
N-Special Series 2............................. 500,000,000
Global Competitors Fund
O Shares....................................... 500,000,000
O-Special Series 1............................. 500,000,000
Latin America Fund
P Shares....................................... 500,000,000
P-Special Series 1............................. 500,000,000
Pacific/Asia Fund
Q Shares....................................... 500,000,000
Q-Special Series 1............................. 500,000,000
Pan European Fund
R Shares....................................... 500,000,000
R-Special Series 1............................. 500,000,000
Short-Term Government Securities Fund
S Shares....................................... 500,000,000
S-Special Series 1............................. 500,000,000
Intermediate-Term Managed Income Fund
T Shares....................................... 500,000,000
T-Special Series 1............................. 500,000,000
T-Special Series 2............................. 500,000,000
Large Cap Growth Fund
U Shares....................................... 500,000,000
U-Special Series 2............................. 500,000,000
<PAGE>
Excelsior Funds, Inc.
February 8, 2000
Page 4
Portfolio Authorized Shares
--------- -----------------
Real Estate Fund
V Shares....................................... 500,000,000
Emerging Markets Fund
W Shares....................................... 500,000,000
Technology Fund
X Shares....................................... 500,000,000
Unclassified Shares................................. 6,125,000,000
--------------
Total.......................................... 35,000,000,000
We have reviewed the Articles of Incorporation, Amended and Restated
By-Laws (the "By-Laws"), resolutions of the Company's Board of Directors and
shareholders, and such other legal and factual matters as we have deemed
appropriate. We have also reviewed the Company's Registration Statement on Form
N-1A under the 1933 Act (the "Registration Statement"), as amended through Post-
Effective Amendment No. 36 thereto.
This opinion is based exclusively on the Maryland General Corporation
Law and the federal law of the United States of America.
We have also assumed the following for this opinion:
1. Shares have been and will continue to be issued in accordance
with the Company's Articles of Incorporation and By-Laws and resolutions of the
Company's Board of Directors and shareholders relating to the creation,
authorization and issuance of Shares.
2. Shares have been and will continue to be issued against
consideration therefor as described in the Registration Statement, and such
consideration will have been in each case at least equal to the applicable net
asset value and the applicable par value.
3. The number of outstanding Shares will not exceed the number of
Shares authorized for the particular Class or Series.
4. Prior to effectiveness of Post-Effective Amendment No. 36 under
the Securities Act of 1933, as amended, the Company will have filed with the
Maryland
<PAGE>
Excelsior Funds, Inc.
February 8,2000
Page 5
Department of Assessments and Taxation all necessary documents to authorize,
classify and establish the Shares.
On the basis of the foregoing, it is our opinion that any Shares
issued and sold after the date hereof will be validly and legally issued, fully
paid and non-assessable by the Company.
We hereby consent to the use of our name and to the references to our
Firm included in the Registration Statement on Form N-1A under the Securities
Act of 1933, as amended (the "1933 Act"), and the Investment Company Act of
1940, as amended, respectively. This consent does not constitute a consent under
section 7 of the 1933 Act, and in consenting to the use of our name and the
references to our Firm we have not certified any part of the Registration
Statement and do not otherwise come within the categories of persons whose
consent is required under said section 7 or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
------------------------------
DRINKER BIDDLE & REATH LLP
<PAGE>
EXHIBIT (L)(7)
PURCHASE AGREEMENT
------------------
Excelsior Funds, Inc. (the "Company"), a Maryland corporation, and Edgewood
Services, Inc. ("Edgewood"), a New York corporation, hereby agree with each
other as follows:
1. The Company hereby offers Edgewood and Edgewood hereby purchases
two Shares of the Technology Fund of the Company at $10 per Share.
The Company hereby acknowledges receipt from Edgewood of funds in the
total amount of $20 in full payment for the Shares.
2. Edgewood represents and warrants to the Company that the Shares are
being acquired for investment purposes and not with a view to the
distribution thereof.
IN AGREEMENT WHEREOF, and intending to be legally bound hereby, the parties
hereto have executed this Agreement as of the ____ day of _____________, 2000.
EXCELSIOR FUNDS, INC.
By: _______________________
Title: ____________________
EDGEWOOD SERVICES, INC.
By: _______________________
Title: ____________________
