<PAGE>
As filed with the SEC on May 15, 1998
Excelsior Tax-Exempt Funds, Inc. - Registration Nos. 2-93068; 811-4101
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Excelsior Tax-Exempt Funds, Inc: Post-Effective Amendment No. 24 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY [x]
ACT OF 1940
Excelsior Tax-Exempt Funds, Inc.: Amendment No. 26 [x]
(Exact Name of Registrant as Specified in Charter)
73 Tremont Street
Boston, Massachusetts 02108-3913
(Address of Principal Executive Offices)
Registrant's Telephone Number: (800) 446-1012
W. Bruce McConnel, III
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)
It is proposed that this post-effective amendment will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
------------------
Title of Securities Being Registered...................... Class G Shares of
Common Stock
<PAGE>
CROSS-REFERENCE SHEET
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(New York Tax-Exempt Money Fund)
Form N-1A, Part A, Item Prospectus Caption
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1. Cover Page....................................... Cover Page
2. Synopsis......................................... Prospectus Summary;
Expense Summary
3. Condensed Financial Information.................. Yield Information
4. General Description of Registrant................ Introduction;
Prospectus Summary;
Investment Objective
and Policies;
Portfolio
Instruments and
Other Investment
Information;
Investment
Limitations;
Description of
Capital Stock
5. Management of the Fund........................... Management of the
Fund; Custodian and
Transfer Agent
5A. Management's Discussion of Fund
Performance ................................... Not Applicable
6. Capital Stock and
Other Securities............................... How to Purchase and
Redeem Shares;
Dividends and
Distributions;
Taxes; Description
of Capital Stock;
Miscellaneous
7. Purchase of Securities
Being Offered.................................. Pricing of Shares;
How to Purchase and
Redeem Shares;
Investor Programs
8. Redemption or Repurchase......................... How to Purchase and
Redeem Shares
9. Pending Legal Proceedings........................ Inapplicable
<PAGE>
New York Tax-Exempt Money Fund [Excelsior Tax-Exempt Funds, Inc. Logo]
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73 Tremont Street For initial purchase information,
Boston, Massachusetts 02108-3913 current prices, yield and performance
information and existing account
information, call (800) 446-1012.
(From overseas, call (617) 557-8280.)
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This Prospectus describes the New York Tax-Exempt Money Fund (the "Fund"), a
non-diversified investment portfolio offered to investors by Excelsior
Tax-Exempt Funds, Inc. ("Excelsior Tax-Exempt Fund"), an open-end, management
investment company.
NEW YORK TAX-EXEMPT MONEY FUND'S investment objective is to seek a
moderate level of current interest income that is exempt from federal income tax
and, to the extent possible, from New York State and New York City personal
income taxes, as is consistent with liquidity and stability of principal. The
Fund will invest primarily in New York Municipal Obligations (as defined below),
which generally have remaining maturities of 13 months or less and which meet
certain ratings criteria and present minimal credit risks. The Fund may invest a
significant percentage of its assets in a single issuer. Therefore, investment
in the Fund may be riskier than an investment in other types of money market
funds.
The Fund is sponsored and distributed by Edgewood Services, Inc. and
advised by United States Trust Company of New York and U.S. Trust Company of
Connecticut (collectively, the "Investment Adviser" or "U.S. Trust").
This Prospectus sets forth concisely the information about the Fund
that a prospective investor should consider before investing. Investors should
read this Prospectus and retain it for future reference. A Statement of
Additional Information dated July __, 1998 and containing additional information
about the Fund has been filed with the Securities and Exchange Commission. The
current Statement of Additional Information is available to investors without
charge by writing to the address shown above or by calling (800) 446-1012. The
Statement of Additional Information, as it may be supplemented from time to
time, is incorporated by reference in its entirety into this Prospectus. The
Securities and Exchange Commission maintains a World Wide Web site
(http://www.sec.gov) that contains the Statement of Additional Information and
other information regarding Excelsior Tax-Exempt Fund.
SHARES IN THE FUND ("SHARES") ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, U.S. TRUST, ITS PARENT OR AFFILIATES AND THE SHARES ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY OR OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. THE FUND SEEKS TO MAINTAIN ITS
NET ASSET VALUE PER SHARE AT $1.00 FOR PURPOSES OF PURCHASES AND REDEMPTIONS,
ALTHOUGH THERE CAN BE NO ASSURANCE THAT IT WILL DO SO ON A CONTINUOUS BASIS.
INVESTMENT IN THE FUND INVOLVES INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF
THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
July __, 1998
<PAGE>
EXPENSE SUMMARY
New York
Tax-Exempt
Money
Fund
----------
SHAREHOLDER TRANSACTION EXPENSES
Front-End Sales Load.......................................... None
Sales Load on Reinvested Dividends............................ None
Deferred Sales Load........................................... None
Redemption Fees............................................... None
Exchange Fees................................................. None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees (after fee waivers)(1).......................... .34%
12b-1 Fees.................................................... None
Other Operating Expenses......................................
Administrative Servicing Fee(1)............................. .01%
Other Expenses.............................................. .25%
----
Total Operating Expenses (after fee waivers)(1)............... .60%
====
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1. The Investment Adviser and administrators may from time to time voluntarily
waive part of their respective fees, which waivers may be terminated at any
time. Until further notice, the Investment Adviser and/or administrators
intend to voluntarily waive fees in an amount equal to the Administrative
Servicing Fee, and to further waive fees and reimburse expenses to the
extent necessary for Shares of the Fund to maintain an annual expense ratio
of not more than .60%. Without such fee waivers and expense reimbursements,
"Advisory Fees" would be .50% and "Total Operating Expenses" would be .76%.
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption of your investment at the end of the
following periods.
1 Year 3 Years
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New York Tax-Exempt Money Fund.............. $6 $19
The foregoing expense summary and example are intended to assist the
investor in understanding the costs and expenses that an investor in Shares of
the Fund will bear directly or indirectly. The expense summary sets forth
estimated advisory and other expenses payable with respect to Shares of the Fund
for the current fiscal year. For more complete descriptions of the Fund's
operating expenses, see "Management of the Fund" and "Expenses" in this
Prospectus.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE
GREATER OR LOWER THAN THOSE SHOWN IN THE EXPENSE SUMMARY AND EXAMPLE.
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INVESTMENT OBJECTIVE AND POLICIES
The Investment Adviser will use its best efforts to achieve the
investment objective of the Fund, although its achievement cannot be assured.
The Fund's investment objective and, except as indicated otherwise, the policies
described below may be changed by Excelsior Tax-Exempt Fund's Board of Directors
without a vote of the Fund's shareholders. Certain investment limitations which
cannot be changed without the requisite vote of the shareholders are set forth
below under "Investment Limitations" and in the Statement of Additional
Information.
The Fund uses the amortized cost method to value securities in its
portfolio and has a dollar-weighted average portfolio maturity not exceeding 90
days.
General
The Fund is a non-diversified investment portfolio whose investment
objective is to seek a moderate level of current interest income that is exempt
from federal income tax and, to the extent possible, from New York State and New
York City personal income taxes, as is consistent with liquidity and stability
of principal.
Under normal market conditions, at least 80% of the Fund's net assets
will be invested in debt obligations issued by or on behalf of the State of New
York and other states, territories and possessions of the United States, the
District of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions, the interest on which is, in the
opinion of bond counsel to the issuer, exempt from federal income tax
("Municipal Obligations"). Municipal Obligations also include tax-exempt
derivative securities such as tender option bonds, participations, beneficial
interests in trusts and partnership interests. Dividends paid by the Fund that
are derived from interest on obligations that is exempt from taxation under the
Constitution or statutes of New York ("New York Municipal Obligations") are
exempt from regular federal, New York State and New York City personal income
tax. New York Municipal Obligations include municipal securities issued by the
State of New York and its political sub-divisions, as well as certain other
governmental issuers such as the Commonwealth of Puerto Rico. Dividends derived
from interest on Municipal Obligations other than New York Municipal Obligations
are exempt from federal income tax but may be subject to New York State and New
York City personal income tax (see "Taxes" below). The Fund expects that under
normal market conditions, at least 65% of its total assets will be invested in
New York Municipal Obligations. Portfolio securities held by the Fund generally
will have remaining maturities of not more than 13 months.
From time to time on a temporary defensive basis due to market
conditions, the Fund may hold uninvested cash reserves or invest in taxable
obligations in such proportions as, in the opinion of the Investment Adviser,
prevailing market or economic conditions may warrant. Uninvested cash reserves
will not earn income. Under normal market conditions, up to 20% of the Fund's
net assets may be held in cash or invested in taxable obligations. Such
obligations include: (i) obligations of the U.S. Treasury; (ii) obligations of
agencies and instrumentalities of the U.S. Government; (iii) money market
instruments such as certificates of deposit, commercial paper, and bankers'
acceptances; (iv) repurchase agreements collateralized by U.S. Government
obligations or other money market instruments; and (v) securities issued by
other investment companies that invest in high-quality, short-term securities.
(See "Portfolio Instruments and Other Investment Information.")
The Fund may also invest from time to time in "private activity bonds"
(see "Types of Municipal Obligations" below), the interest on which is treated
as a specific tax preference item under the federal alternative minimum tax.
Investments in such securities, however, will not exceed under normal market
conditions 20% of the Fund's net assets when added together with any taxable
investments by the Fund.
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<PAGE>
PORTFOLIO INSTRUMENTS AND OTHER
INVESTMENT INFORMATION
Quality of Investments
The Fund invests in Municipal Obligations which are determined by the
Investment Adviser to present minimal credit risks pursuant to guidelines
approved by Excelsior Tax-Exempt Fund's Board of Directors. Pursuant to these
guidelines, the Fund may only invest in: (i) securities in the two highest
short-term rating categories of a nationally recognized statistical rating
organization ("NRSRO"), provided that if a security is rated by more than one
NRSRO, at least two NRSROs must rate the security in one of the two highest
short-term rating categories; (ii) unrated securities determined to be of
comparable quality at the time of purchase; (iii) certain money market fund
shares; and (iv) U.S. Government securities (collectively, "Eligible
Securities"). The rating symbols of the NRSROs which the Fund may use are
described in the Appendix to the Statement of Additional Information.
Types of Municipal Obligations
The two principal classifications of Municipal Obligations which may be
held by the Fund are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit, and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as user fees of the
facility being financed. Private activity obligations are in most cases revenue
securities and are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of private activity revenue obligations is
usually directly related to the credit standing of the corporate user of the
facility involved.
The Fund's portfolio may also include "moral obligation" securities,
which are usually issued by public authorities. If the issuer of moral
obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund -- the restoration of which is a
moral commitment, but not a legal obligation of the state or municipality which
created the issuer. There is no limitation on the amount of moral obligation
securities that may be held by the Fund.
The Fund may invest in tax-exempt derivative securities such as tender
option bonds, custodial receipts, participations, beneficial interests in trusts
and partnership interests. A typical tax-exempt derivative security involves the
purchase of an interest in a pool of Municipal Obligations which interest
includes a tender option, demand or other feature, allowing the Fund to tender
the underlying Municipal Obligation to a third party at periodic intervals and
to receive the principal amount thereof. In some cases, Municipal Obligations
are represented by custodial receipts evidencing rights to future principal or
interest payments, or both, on underlying municipal securities held by a
custodian and such receipts include the option to tender the underlying
securities to the sponsor (usually a bank, broker-dealer or other financial
institution).
Government Obligations
Government obligations acquired by the Fund include obligations issued
or guaranteed by the U.S. Government, its agencies and instrumentalities. Such
investments may include obligations issued by the Farm Credit System Financial
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<PAGE>
Assistance Corporation, the Federal Financing Bank, the General Services
Administration, Federal Home Loan Banks and the Tennessee Valley Authority.
Obligations of certain agencies and instrumentalities of the U.S. Government are
supported by the full faith and credit of the U.S. Treasury; others are
supported by the right of the issuer to borrow from the Treasury; others are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; still others are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored instrumentalities if it
is not obligated to do so by law. Obligations of such instrumentalities will be
purchased only when the Investment Adviser believes that the credit risk with
respect to the instrumentality is minimal.
Securities issued or guaranteed by the U.S. Government have
historically involved little risk of loss of principal if held to maturity.
However, due to fluctuations in interest rates, the market value of such
securities may vary during the period a shareholder owns shares of the Fund.
Money Market Instruments
"Money market instruments" that may be purchased by the Fund in
accordance with its investment objective and policies stated above include,
among other things, bank obligations, commercial paper and corporate bonds with
remaining maturities of 13 months or less.
Bank obligations include bankers' acceptances, negotiable certificates
of 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 FDIC. Investments in bank
obligations are limited to the obligations of financial institutions having more
than $2 billion in total assets at the time of purchase. Investments in
non-negotiable time deposits are limited to no more than 5% of the value of the
Fund's total assets at time of purchase, and are further subject to the overall
10% limit on illiquid securities described below under "Illiquid Securities."
Variable and Floating Rate Instruments
The Fund may invest in 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. While the Fund will in
general invest only in securities that mature within 13 months of the date of
purchase, it may invest in variable and floating rate instruments which have
nominal maturities in excess of 13 months if such instruments have demand
features that comply with conditions established by the Securities and Exchange
Commission ("SEC") (see "Additional Information on Portfolio
Instruments--Variable and Floating Rate Instruments" in the Statement of
Additional Information).
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 Investment
-5-
<PAGE>
Adviser, pursuant to guidelines established by the Board of Directors. The Fund
will not enter into repurchase agreements with the Investment 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 10%
limit described below under "Illiquid Securities."
The seller under a repurchase agreement will be required to maintain
the value of the securities which are subject to the agreement and held by the
Fund at not less than the repurchase price. Default or bankruptcy of the seller
would, however, expose the Fund to possible delay in connection with the
disposition of the underlying securities or loss to the extent that proceeds
from a sale of the underlying securities were less than the repurchase price
under the agreement. Income on the repurchase agreements will be taxable.
Investment Company Securities
The Fund may invest in securities issued by other investment companies
which invest primarily in high-quality, short-term Municipal Obligations and
which determine their net asset value per share based on the amortized cost or
penny-rounding method. Securities of other investment companies will be acquired
by the Fund within the limits prescribed by the Investment Company Act of 1940,
as amended (the "1940 Act"). Except as otherwise permitted under the 1940 Act,
the Fund currently intends to limit its investments so that, as determined
immediately after a securities purchase is made: (a) not more than 5% of the
value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
and (c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund. 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. Any
change by the Fund in the future with respect to their policies concerning
investments in securities issued by other investment companies will be made only
in accordance with the requirements of the 1940 Act.
When-Issued and Forward Transactions and Stand-by Commitments
The Fund may purchase eligible securities on a "when-issued" basis and
may purchase or sell such securities on a "forward commitment" basis. These
transactions involve a commitment by the 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. Absent unusual market conditions, "forward commitments" and "when-issued"
purchases will not exceed 25% of the value of the Fund's total assets, and the
length of such commitments will not exceed 45 days. The Fund does not intend to
engage in "when-issued" purchases or "forward commitments" for speculative
purposes, but only in furtherance of its investment objective.
The Fund may also acquire "stand-by commitments" with respect to
Municipal Obligations held by it. Under a "stand-by commitment," a dealer agrees
to purchase at the Fund's option specified Municipal Obligations at a specified
price. The Fund will acquire "stand-by commitments" solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. "Stand-by commitments" acquired by the Fund would be valued at
zero in determining the Fund's net asset value. Further information concerning
"stand-by commitments" is contained in the Statement of Additional Information
under "Additional Information on Portfolio Instruments."
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<PAGE>
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 10% 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 Investment 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
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.
Risk Factors
The Fund is required to comply with Rule 2a-7 under the 1940 Act. The
Fund's compliance with the diversification provisions of that Rule is deemed to
be compliance with the diversification standards of the 1940 Act. Under Rule
2a-7, with respect to 75% of the Fund's total assets, the Fund may not invest
more than 5% of its assets, measured at the time of purchase, in the securities
of any one issuer other than U.S. Government securities, repurchase agreements
collateralized by such securities and securities subject to certain guarantees.
The Fund may invest more than 25% of its assets in Municipal
Obligations the interest on which is paid solely from revenues on similar
projects if such investment is deemed necessary or appropriate by the Investment
Adviser. To the extent that the Fund's assets are concentrated in Municipal
Obligations payable from revenues on similar projects, the Fund will be subject
to the particular risks presented by such projects to a greater extent than it
would be if its assets were not so concentrated.
The Fund is concentrated in securities issued by New York State or
entities within New York State and therefore investment in the Fund may be
riskier than an investment in other types of money market funds. The Fund's
ability to achieve its investment objective is dependent upon the ability of the
issuers of New York Municipal Obligations to meet their continuing obligations
for the payment of principal and interest. New York State and New York City face
long-term economic problems that could seriously affect their ability and that
of other issuers of New York Municipal Obligations to meet their financial
obligations.
Certain substantial issuers of New York Municipal Obligations
(including issuers whose obligations may be acquired by the Fund) have
experienced serious financial difficulties in recent years. These difficulties
have at times jeopardized the credit standing and impaired the borrowing
abilities of all New York issuers and have generally contributed to higher
interest costs for their
-7-
<PAGE>
borrowings and fewer markets for their outstanding debt obligations. Although
several different issues of municipal securities of New York State and its
agencies and instrumentalities and of New York City have been downgraded by
Standard & Poor's Ratings Services ("S&P") and Moody's Investors Service, Inc.
("Moody's"), the most recent actions of S&P and Moody's have been to place the
debt obligations of New York State on CreditWatch with positive implications and
to upgrade the debt obligations of New York City, respectively. Strong demand
for New York Municipal Obligations has also at times had the effect of
permitting New York Municipal Obligations to be issued with yields relatively
lower, and after issuance, to trade in the market at prices relatively higher,
than comparably rated municipal obligations issued by other jurisdictions. A
recurrence of the financial difficulties previously experienced by certain
issuers of New York Municipal Obligations could result in defaults or declines
in the market values of those issuers' existing obligations and, possibly, in
the obligations of other issuers of New York Municipal Obligations. Although as
of the date of this Prospectus, no issuers of New York Municipal Obligations are
in default with respect to the payment of their municipal obligations, the
occurrence of any such default could affect adversely the market values and
marketability of all New York Municipal Obligations and, consequently, the net
asset value of the Fund's portfolio.
Other considerations affecting the Fund's investments in New York
Municipal Obligations are summarized in the Statement of Additional Information.
From time to time, a substantial portion of the Fund's assets may be
invested in Municipal Obligations supported by credit and liquidity enhancements
from banks or other financial institutions. Therefore, changes in the credit
quality of these institutions could cause losses to the Fund and affect its
share price.
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from federal income tax (and, with respect to New
York Municipal Obligations, to the exemption of interest thereon from New York
State and New York City personal income taxes) are rendered by bond counsel to
the respective issuers at the time of issuance, and opinions relating to the
validity of and the tax-exempt status of payments received by the Fund from
tax-exempt derivatives are rendered by counsel to the respective sponsors of
such derivatives. The Fund and the Investment Adviser will rely on such opinions
and will not review independently the underlying proceedings relating to the
issuance of Municipal Obligations, the creation of any tax-exempt derivative
securities, or the bases for such opinions.
Like other investment companies, financial and business organizations
and individuals around the world, the Fund could be affected adversely if the
computer systems used by the Investment Adviser and the Fund's other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." The Investment Adviser and the Fund's other service providers are
taking steps to address the Year 2000 Problem with respect to the computer
systems that they use. At this time, however, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the Fund as a
result of the Year 2000 Problem.
INVESTMENT LIMITATIONS
The investment limitations set forth below are matters of fundamental
policy and may not be changed without the vote of the holders of a majority of
the Fund's outstanding Shares (as defined under "Miscellaneous").
The Fund may not:
1. Invest less than 80% of its net assets in securities the
interest on which is exempt from federal income tax, except during
defensive periods or periods of unusual market conditions;
-8-
<PAGE>
2. Borrow money or mortgage, pledge, or hypothecate its assets
except to the extent permitted under the 1940 Act; and
3. Purchase any securities which would cause more than 25% of
the value of its total assets at the time of purchase to be invested in
the securities of one or more issuers conducting their principal
business activities in the same industry, provided that there is no
limitation with respect to domestic bank obligations or 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, instrumentalities or political
subdivisions, and repurchase agreements secured by such securities.
* * *
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 portfolio securities will not constitute a violation of such
limitation.
See the Statement of Additional Information for the Fund's additional
fundamental investment limitations.
PRICING OF SHARES
The net asset value of the Fund is determined and the Shares of the
Fund are priced for purchases and redemptions as of 12:00 noon (Eastern Time)
and 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 Investment Adviser are
open for trading ("Business Day"). Currently, the holidays which the Fund
observes are New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans
Day, Thanksgiving Day and Christmas. Net asset value per Share for purposes of
pricing sales and redemptions is calculated by dividing the value of all
securities and other assets belonging to the Fund, less the liabilities charged
to the Fund, by the number of its outstanding Shares. The assets in the Fund are
valued by the Fund's administrators based upon the amortized cost method.
HOW TO PURCHASE AND REDEEM SHARES
Distributor
Shares in the Fund are continuously offered for sale by Excelsior
Tax-Exempt Fund's sponsor and distributor, Edgewood Services, Inc. (the
"Distributor"), a wholly-owned subsidiary of Federated Investors. The
Distributor is a registered broker/dealer. Its principal business address is
5800 Corporate Drive, Pittsburgh, PA 15237-5829.
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.
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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
payments will be predicated upon the amount of Shares the financial institution
sells or may sell, and/or upon the type and nature of sales or marketing support
furnished by the financial institution.
Purchase of Shares
Shares in the Fund are offered without any purchase or redemption
charge imposed by Excelsior Tax-Exempt Fund. 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 may also be purchased by customers ("Customers")
of the Investment Adviser, its affiliates and correspondent banks, and other
institutions ("Shareholder Organizations") that have entered into agreements
with Excelsior Tax-Exempt Fund. A Shareholder Organization may elect to hold of
record Shares for its Customers and to record beneficial ownership of Shares on
the account statements provided by it to its Customers. If it does so, it is the
Shareholder Organization's responsibility to transmit to the Distributor all
purchase orders for its Customers and to transmit, on a timely basis, payment
for such orders to Chase Global Funds Services Company ("CGFSC"), the Fund's
sub-transfer agent, in accordance with the procedures agreed to by the
Shareholder Organization and the Distributor. Confirmations of all such Customer
purchases and redemptions will be sent by CGFSC to the particular Shareholder
Organization. As an alternative, a Shareholder Organization may elect to
establish its Customers' accounts of record with CGFSC. In this event, even if
the Shareholder Organization continues to place its Customers' purchase and
redemption orders with the Funds, CGFSC will send confirmations of such
transactions and periodic account statements directly to 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 below under "Purchase Procedures."
Purchase Procedures
General
Direct Investors may purchase Shares by completing the Application for
purchase of Shares accompanying this Prospectus and mailing it, together with a
check payable to Excelsior Funds, to:
Excelsior Funds
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
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Subsequent investments in an existing account in the Fund may be made
at any time by sending to the above address a check payable to Excelsior Funds
along with: (a) the detachable form that regularly accompanies the confirmation
of a prior transaction; (b) a subsequent order form which may be obtained from
CGFSC; or (c) a letter stating the amount of the investment, the name of the
Fund and the account number in which the investment is to be made. 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.
Purchases by Wire
Investors may also purchase Shares by wiring federal funds to CGFSC.
Prior to making an initial investment by wire, an Investor must telephone CGFSC
at (800) 446-1012 (from overseas, call (617) 557-8280) for instructions. Federal
funds and registration instructions should be wired through the Federal Reserve
System to:
The Chase Manhattan Bank
ABA #021000021
Excelsior Funds, Account No. 9102732915
For further credit to:
Excelsior Funds
Wire Control Number
Account Registration
(including account number)
Investors making initial investments by wire must promptly complete the
Application accompanying this Prospectus and forward it to CGFSC. Redemptions by
Investors will not be processed until the completed Application for purchase of
Shares has been received by CGFSC and accepted by the Distributor. Investors
making subsequent investments by wire should follow the above instructions.
Other Purchase Information
Except as provided in "Investor Programs" below, the minimum initial
investment by an Investor or initial aggregate investment by a Shareholder
Organization investing on behalf of its Customers is $500. The minimum
subsequent investment for both types of investors is $50. 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. Excelsior Tax-Exempt
Fund reserves the right to reject any purchase order, in whole or in part, or to
waive any minimum investment requirements.
Redemption Procedures
Customers of Shareholder Organizations holding Shares of record may
redeem all or part of their investments in the Fund in accordance with
procedures governing their accounts at the Shareholder Organizations. It is the
responsibility of the Shareholder Organizations to transmit redemption orders to
CGFSC and credit such Customer accounts with the redemption proceeds on a timely
basis. Redemption orders for Institutional Investors must be transmitted to
CGFSC by telephone at (800) 446-1012 or by terminal access. No charge for wiring
redemption payments to Shareholder Organizations or Institutional Investors is
imposed by Excelsior Tax-Exempt Fund, although Shareholder Organizations may
charge a Customer's account for wiring redemption proceeds. Information relating
to such redemption services and charges, if any, is 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
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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).
Redemption by Mail
Shares may be redeemed by a Direct Investor by submitting a written
request for redemption to:
Excelsior Funds
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
A written redemption request to CGFSC must (i) state the number of
Shares to be redeemed, (ii) identify the shareholder account number and tax
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 an 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 proper form. 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).
Redemption by Wire or Telephone
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 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 have their Shares redeemed by wire 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.
Investors may request that Shares be redeemed and redemption proceeds
wired on the same day if telephone redemption instructions are received by 1:00
p.m. (Eastern Time) on the day of redemption. Shares redeemed and wired on the
same day will not receive the dividend declared on the day of redemption.
Redemption requests made after 12:00 p.m. (Eastern Time) will receive the
dividend declared
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on the day of redemption, and redemption proceeds will be wired the following
Business Day. To request redemption of Shares by wire, Direct Investors should
call CGFSC at (800) 446-1012 (from overseas, call (617) 557-8280).
In order to arrange for redemption by wire or telephone after an
account has been opened or to change the bank or account designated to receive
redemption proceeds, a Direct Investor must send a written request to Excelsior
Tax-Exempt Fund, c/o CGFSC, at the address listed above under "Redemption by
Mail." Such request must be signed by the Direct Investor, with signatures
guaranteed (see "Redemption by Mail" above, for details regarding signature
guarantees). 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 Excelsior Tax-Exempt Fund, CGFSC or the Distributor. Excelsior Tax-Exempt
Fund, CGFSC and the Distributor will not be liable for any loss, liability, cost
or expense for acting upon telephone instructions that are reasonably believed
to be genuine. In attempting to confirm that telephone instructions are genuine,
Excelsior Tax-Exempt Fund will use such procedures as are considered reasonable,
including recording those instructions and requesting information as to account
registration.
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 under "How to Purchase and Redeem
Shares--Redemption by Mail."
Redemption by Check
Except as described in "Investor Programs" below, Direct Investors in
the Fund may redeem Shares, without charge, by check drawn on the Direct
Investor's Fund account. Checks may be made payable to the order of any person
or organization designated by the Direct Investor and must be for amounts of
$500 or more. Direct Investors will continue to earn dividends on the Shares to
be redeemed until the check clears at The Chase Manhattan Bank.
Checks are supplied free of charge, and additional checks are sent to
Direct Investors upon request. Checks will be sent only to the registered owner
at the address of record. Direct Investors who want the option of redeeming
Shares by check must indicate this in the Application for purchase of Shares and
must submit a signature card with signatures guaranteed with such Application.
The signature card is included in the Application for the purchase of Shares
contained in this Prospectus. In order to arrange for redemption by check after
an account has been opened, a written request must be sent to Excelsior
Tax-Exempt Fund, c/o CGFSC, at the address listed above under "Redemption by
Mail" and must be accompanied by a signature card with signatures guaranteed
(see "Redemption by Mail" above, for details regarding signature guarantees).
Stop payment instructions with respect to checks may be given to
Excelsior Tax-Exempt Fund by calling (800) 446-1012 (from overseas, call (617)
557-8280). If there are insufficient Shares in the Direct Investor's account
with the Fund to cover the amount of the redemption check, the check will be
returned marked "insufficient funds," and CGFSC will charge a fee of $25.00 to
the account. Checks may not be used to close an account.
If any portion of the Shares to be redeemed represents an investment
made by personal check, Excelsior Tax-Exempt Fund 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
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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.
Other Redemption Information
Except as provided in "Investor Programs" below, Investors may be
required to redeem Shares in the Fund upon 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.
Excelsior Tax-Exempt Fund may also redeem Shares involuntarily or make
payment for redemption in securities if it appears appropriate to do so in light
of its responsibilities under the 1940 Act.
Effective Time of Purchases and Redemptions
Purchase orders for Shares which are received in good order no later
than 12:00 p.m. (Eastern Time) on any Business Day will be effective as of 12:00
p.m. and will receive the dividend declared on the day of purchase as long as
CGFSC receives payment in federal funds prior to the close of regular trading
hours on the Exchange (currently 4:00 p.m., Eastern Time). Purchase orders
received in good order after 12:00 p.m. (Eastern Time) and prior to 4:00 p.m.
(Eastern Time), on any Business Day for which payment in federal funds has been
received by 4:00 p.m. (Eastern Time), will be effective as of 4:00 p.m., and
will begin receiving dividends the following day. Purchase orders for Shares
made by Direct Investors are not effective until the amount to be invested has
been converted to federal funds. In those cases in which a Direct Investor pays
for Shares by check, federal funds will generally become available two Business
Days after a purchase order is received. In certain circumstances, Excelsior
Tax-Exempt Fund may not require that amounts invested by Shareholder
Organizations on behalf of their Customers or by Institutional Investors be
converted into federal funds. Redemption orders are executed at the net asset
value per Share next determined after receipt of the order.
INVESTOR PROGRAMS
Exchange Privilege
Investors and Customers of Shareholder Organizations may, after
appropriate prior authorization and without an exchange fee imposed by Excelsior
Tax-Exempt Fund, exchange Shares in the Fund having a value of at least $500 for
shares of any other portfolio offered by Excelsior Tax-Exempt Fund, Excelsior
Funds, Inc. or for Trust Shares of Excelsior Institutional Trust, provided that
such other shares may legally be sold in the state of the Investor's residence.
Excelsior Tax-Exempt Fund currently offers 6 additional portfolios as
follows:
Tax-Exempt Money Fund, a diversified tax-exempt money market
fund seeking a moderate level of current interest income exempt from
federal income taxes through investments primarily in high-quality
municipal obligations maturing within 13 months;
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Short-Term Tax-Exempt Securities Fund, a diversified fund
seeking a high level of current interest income exempt from federal
income taxes through investments in municipal obligations and having a
dollar-weighted average portfolio maturity of 1 to 3 years;
Intermediate-Term Tax-Exempt Fund, a diversified fund seeking
a high level of current income exempt from federal income taxes through
investments in municipal obligations and having a dollar-weighted
average portfolio maturity of 3 to 10 years;
Long-Term Tax-Exempt Fund, a diversified fund seeking to
maximize current interest income exempt from federal income taxes
through investments in municipal obligations and having a
dollar-weighted average portfolio maturity of 10 to 30 years;
New York Intermediate-Term Tax-Exempt Fund, a non-diversified
fund designed to provide New York investors with a high level of
current interest income exempt from federal and, to the extent
possible, New York State and New York City income taxes; this fund
invests primarily in New York municipal obligations and has a
dollar-weighted average portfolio maturity of 3 to 10 years; and
California Tax-Exempt Income Fund, a non-diversified fund
designed to provide California investors with as high a level of
current interest income exempt from federal and, to the extent
possible, California State personal income taxes as is consistent with
relative stability of principal; this fund invests primarily in
California municipal obligations and has a dollar-weighted average
portfolio maturity of 3 to 10 years.
Excelsior Funds, Inc. currently offers 18 investment
portfolios as follows:
Money Fund, a money market fund seeking as high a level of
current income as is consistent with liquidity and stability of
principal through investments in high-quality money market instruments
maturing within 13 months;
Government Money Fund, a money market fund seeking as high a
level of current income as is consistent with liquidity and stability
of principal through investments in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and repurchase
agreements collateralized by such obligations;
Treasury Money Fund, a money market fund seeking current
income generally exempt from state and local income taxes through
investments in direct short-term obligations issued by the U.S.
Treasury and certain agencies or instrumentalities of the U.S.
Government;
Short-Term Government Securities Fund, a fund seeking a high
level of current income by investing principally in obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements collateralized by such obligations, and
having a dollar-weighted average portfolio maturity of 1 to 3 years;
Intermediate-Term Managed Income Fund, a fund seeking a high
level of current interest income by investing principally in investment
grade or better debt obligations and money market instruments, and
having a dollar-weighted average portfolio maturity of 3 to 10 years;
Managed Income Fund, a fund seeking higher current income
primarily through investments in investment grade debt obligations,
U.S. Government obligations and money market instruments;
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Blended Equity Fund, a fund seeking long-term capital
appreciation through investments in a diversified portfolio of
primarily equity securities;
Income and Growth Fund, a fund seeking to provide moderate
current income and to achieve capital appreciation as a secondary
objective by investing in common stock, preferred stock and securities
convertible into common stock;
Energy and Natural Resources Fund, a non-diversified fund
seeking long-term capital appreciation by investing in companies that
are in the energy and other natural resources groups of industries;
Value and Restructuring Fund, a fund seeking long-term capital
appreciation by investing in companies benefitting from their
restructuring or redeployment of assets and operations in order to
become more competitive or profitable;
Large Cap Growth Fund, a fund seeking superior, risk-adjusted
total return by investing in larger companies whose growth prospects,
in the opinion of its investment adviser, appear to exceed that of the
overall market;
Real Estate Fund, a non-diversified fund seeking current
income and long-term capital appreciation by investing in real estate
investment trusts and other companies principally engaged in the real
estate business;
Small Cap Fund, a fund seeking long-term capital appreciation
by investing primarily in companies with capitalization of $1 billion
or less;
International Fund, a fund seeking total return derived
primarily from investments in foreign equity securities;
Latin America Fund, a fund seeking long-term capital
appreciation through investments in companies and securities of
governments based in all countries in Central and South America;
Pacific/Asia Fund, a fund seeking long-term capital
appreciation through investments in companies and securities of
governments based in Asia and on the Asian side of the Pacific Ocean;
Pan European Fund, a fund seeking long-term capital
appreciation through investments in companies and securities of
governments based in Europe; and
Emerging Markets Fund, a fund seeking long-term capital
appreciation through investments primarily in equity securities of
emerging country issuers.
Excelsior Institutional Trust currently offers Trust Shares in the
following investment portfolios:
Optimum Growth Fund, a fund seeking superior, risk-adjusted
total return through investments in a diversified portfolio of equity
securities whose growth prospects, in the opinion of its investment
adviser, appear to exceed that of the overall market;
Value Equity Fund, a fund seeking long-term capital
appreciation through investments in a diversified portfolio of equity
securities whose
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market value, in the opinion of its investment adviser, appears to be
undervalued relative to the marketplace;
Balanced Fund, a fund seeking a high total return from a
diversified portfolio of equity and fixed income securities; and
International Equity Fund, a fund seeking long-term capital
appreciation through investment in a diversified portfolio of
marketable foreign securities.
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 of Excelsior Tax-Exempt Fund, Excelsior Funds, Inc. or Excelsior
Institutional Trust. The redemption will be made at the per Share net asset
value of the Shares being redeemed next determined after the exchange request is
received 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.
Investors may find the exchange privilege useful if their investment
objectives or market outlook should change after they invest in the Fund. For
further information regarding exchange privileges, shareholders should call
(800) 446-1012 (from overseas, call (617) 557-8280). Investors exercising the
exchange privilege with the other portfolios of Excelsior Tax-Exempt Fund,
Excelsior Funds, Inc. or Excelsior Institutional Trust should request and review
the prospectuses of such funds. Such prospectuses may be obtained by calling the
numbers listed above. In order to prevent abuse of this privilege to the
disadvantage of other shareholders, Excelsior Tax-Exempt Fund, Excelsior Funds,
Inc. and Excelsior Institutional Trust reserve the right to limit the number of
exchange requests of Investors and Customers of Shareholder Organizations to no
more than six per year. Excelsior Tax-Exempt Fund may modify or terminate the
exchange program at any time upon 60 days' written notice to shareholders, and
may reject any exchange request.
Exchanges by Telephone. For shareholders who have previously selected
the telephone exchange option, an exchange order may be placed by calling (800)
446- 1012 (from overseas, please call (617) 557-8280). By establishing the
telephone exchange option, a shareholder authorizes CGFSC and the Distributor to
act upon telephone instructions believed to be genuine. Excelsior Tax-Exempt
Fund, Excelsior Funds, Inc., Excelsior Institutional Trust, CGFSC and the
Distributor are not responsible for the authenticity of exchange requests
received by telephone that are reasonably believed to be genuine. In attempting
to confirm that telephone instructions are genuine, Excelsior Tax-Exempt Fund,
Excelsior Funds, Inc. or Excelsior Institutional Trust will use such procedures
as are considered reasonable, including recording those instructions and
requesting information as to account registration.
Systematic Withdrawal Plan
An Investor who owns Shares of the Fund with a value of $10,000 or more
may establish a Systematic Withdrawal Plan. The Investor may request a
declining-balance withdrawal, a fixed-dollar withdrawal, a fixed-share
withdrawal, or a fixed-percentage withdrawal (based on the current value of
Shares in the account) on a monthly, quarterly, semi-annual or annual basis. To
initiate the Systematic Withdrawal Plan, an Investor must complete the
Supplemental Application contained in this Prospectus and mail it to CGFSC at
the address given above. Further information on establishing a Systematic
Withdrawal Plan may be obtained by calling (800) 446-1012 (from overseas, call
(617) 557-8280).
Shareholder Organizations may, at their discretion, establish similar
systematic withdrawal plans with respect to the Shares held by their Customers.
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Information about such plans and the applicable procedures may be obtained by
Customers directly from their Shareholder Organizations.
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:
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 and the minimum subsequent investment is $50. Detailed
information concerning eligibility, service fees and other matters related to
these plans can be obtained by calling (800) 446-1012 (from overseas, call (617)
557-8280). Customers of Shareholder Organizations may purchase Shares of the
Fund pursuant to retirement plans if such plans are offered by their Shareholder
Organizations.
Automatic Investment Program
The Automatic Investment Program permits Investors to purchase Shares
(minimum of $50 per transaction) at regular intervals selected by the Investor.
The minimum initial investment for an Automatic Investment Program account is
$50. Provided the Investor's financial institution allows automatic withdrawals,
Shares are purchased by transferring funds from an Investor's checking, bank
money market or NOW account designated by the Investor. At the Investor's
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.
To establish an Automatic Investment account, an Investor must complete
the Supplemental Application contained in this Prospectus and mail it to CGFSC.
An Investor may cancel his participation in this Program or change the amount of
purchase at any time by mailing written notification to CGFSC, P.O. Box 2798,
Boston, MA 02208-2798 and notification will be effective three Business Days
following receipt. Excelsior Tax-Exempt Fund may modify or terminate this
privilege at any time or charge a service fee, although no such fee currently is
contemplated.
DIVIDENDS AND DISTRIBUTIONS
The net investment income of the Fund is declared daily as a dividend
to the persons who are shareholders of the Fund immediately after the 12:00 p.m.
pricing of Shares on the day of declaration. All such dividends are paid within
ten days after the end of each month or within seven days after the redemption
of all of a shareholder's Shares of the Fund. For dividend purposes, the Fund's
investment income is reduced by accrued expenses directly attributable to the
Fund and the general expenses of Excelsior Tax-Exempt Fund prorated to the Fund
on the basis of its relative net assets. Net realized capital gains, if any, are
distributed at least annually.
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All dividends and distributions paid on Shares held of record by the
Investment Adviser and its affiliates or correspondent banks will be paid in
cash. Direct and Institutional Investors and Customers of other Shareholder
Organizations will receive dividends and distributions in additional Shares of
the Fund on which the dividend is paid or the distribution is made (as
determined on the payable date), unless they have requested in writing (received
by CGFSC at Excelsior Tax-Exempt Fund's address prior to the payment date) to
receive dividends and distributions in cash. Reinvested dividends and
distributions receive the same tax treatment as those paid in cash.
TAXES
Federal
The Fund intends 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 the Code.
Qualification as a regulated investment company under the Code
requires, among other things, that the Fund distribute to its shareholders an
amount equal to at least the sum of 90% of its investment company taxable income
and 90% of its exempt-interest income (if any) net of certain deductions for
each taxable year. In general, the Fund's investment company taxable income will
be its taxable income (including interest) subject to certain adjustments and
excluding the excess of any net long-term capital gain for the taxable year over
the net short-term capital loss, if any, for such year. Because all of the
Fund's net investment income is expected to be derived from earned interest, it
is anticipated that no part of any distributions will be eligible for the
dividends received deduction for corporations.
Dividends declared in October, November or December of any year payable
to shareholders of record on a specified date in such months will be deemed to
have been received by shareholders and paid by the Fund on December 31 of such
year in the event such dividends are actually paid during January of the
following year.
The Fund's policy is to pay dividends each year equal to at least the
sum of 90% of its net exempt-interest income and 90% of its investment company
taxable income, if any. Dividends derived from exempt-interest income
("exempt-interest dividends") may be treated by the Fund's shareholders as items
of interest excludable from their gross income under Section 103(a) of the Code,
unless, under the circumstances applicable to the particular shareholder,
exclusion would be disallowed. (See Statement of Additional Information under
"Additional Information Concerning Taxes.")
If the Fund should hold certain "private activity bonds" issued after
August 7, 1986, the portion of dividends paid by the Fund which is attributable
to interest on such bonds must be included in a shareholder's federal
alternative minimum taxable income, as an item of tax preference, for the
purpose of determining liability (if any) for the 26% to 28% alternative minimum
tax for individuals and the 20% alternative minimum tax and the environmental
tax applicable to corporations. Corporate shareholders must also take all
exempt-interest dividends into account in determining certain adjustments for
federal alternative minimum tax purposes. Shareholders receiving Social Security
benefits should note that all exempt-interest dividends will be taken into
account in determining the taxability of such benefits.
Dividends payable by the Fund which are derived from taxable income or
from long-term or short-term capital gains, if any, will be subject to federal
income tax, whether such dividends are paid in the form of cash or additional
Shares.
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<PAGE>
If a shareholder holds Shares of the Fund for six months or less and
during that time receives an exempt-interest dividend on those Shares, any loss
recognized on the sale or exchange of those Shares will be disallowed to the
extent of the exempt-interest dividend.
New York
Exempt-interest dividends (as defined for federal income tax purposes)
derived from interest on New York Municipal Obligations (as defined above) will
be exempt from New York State and New York City personal income taxes (but not
corporate franchise taxes), provided the interest on such obligations is and
continues to be exempt from applicable federal, New York State and New York City
income taxes. To the extent that investors are subject to state and local taxes
outside of New York State and New York City, distributions by the Fund may be
taxable income for purposes thereof. Dividends and distributions derived from
income (including capital gains on all New York Municipal Obligations) other
than interest on the New York Municipal Obligations described above are not
exempt from New York State and New York City taxes.
Interest on indebtedness incurred or continued by a shareholder to
purchase or carry Shares of the Fund generally is not deductible for federal,
New York State or New York City personal income tax purposes.
Miscellaneous
The foregoing summarizes some of the important tax considerations
generally affecting the Fund and its shareholders and is not intended as a
substitute for careful tax planning. Accordingly, potential investors in the
Fund should consult their tax advisers with specific reference to their own tax
situations. Shareholders will be advised annually as to the federal, New York
State and New York City personal income tax consequences of distributions made
each year.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of
Excelsior Tax-Exempt Fund's Board of Directors. The Statement of Additional
Information contains the names of and general background information concerning
Excelsior Tax-Exempt Fund's directors.
Investment Adviser
United States Trust Company of New York ("U.S. Trust New York") and
U.S. Trust Company of Connecticut ("U.S. Trust Connecticut" and, collectively
with U.S. Trust New York, "U.S. Trust" or the "Investment Adviser") serve as the
Investment Adviser to the Fund. U.S. Trust New York is a state-chartered bank
and trust company and a member bank of the Federal Reserve System. U.S. Trust
Connecticut is a Connecticut state bank and trust company. U.S. Trust New York
and U.S. Trust Connecticut are wholly-owned subsidiaries of U.S. Trust
Corporation, a registered bank holding company.
The Investment Adviser provides trust and banking services to
individuals, corporations, and institutions both nationally and internationally,
including investment management, estate and trust administration, financial
planning, corporate trust and agency banking, and personal and corporate
banking. On December 31, 1997, the Asset Management Groups of U.S. Trust New
York and U.S. Trust Connecticut had approximately $61.2 billion in aggregate
assets under management. U.S. Trust New York has its principal offices at 114 W.
47th Street, New York, New York 10036. U.S. Trust Connecticut has its principal
offices at 225 High Ridge Road, East Building, Stamford, Connecticut 06905.
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<PAGE>
The Investment Adviser manages the Fund, makes decisions with respect
to and places orders for all purchases and sales of its portfolio securities,
and maintains records relating to such purchases and sales. For the services
provided and expenses assumed pursuant to its Investment Advisory Agreement, the
Investment Adviser is entitled to a fee, computed daily and paid monthly, at the
annual rate of .50% of the Fund's average daily net assets.
From time to time, the Investment 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. See "Management of the Fund--Shareholder Organizations"
for additional information on fee waivers.
Administrators
CGFSC, Federated Administrative Services and U.S. Trust Connecticut
serve as the Fund's administrators (the "Administrators") and provide it with
general administrative and operational assistance. The Administrators also serve
as administrators of the other portfolios of Excelsior Tax-Exempt Fund and of
all the portfolios of Excelsior Funds, Inc. and Excelsior Institutional Trust,
which are also advised by the Investment Adviser and its affiliates and
distributed by the Distributor. For the services provided to all portfolios of
Excelsior Tax-Exempt Fund, Excelsior Funds, Inc. and Excelsior Institutional
Trust (except the international portfolios of Excelsior Funds, Inc. and
Excelsior Institutional Trust), the Administrators are entitled jointly to
annual fees, computed daily and paid monthly, based on the combined aggregate
average daily net assets of Excelsior Tax-Exempt Fund, Excelsior Funds, Inc. and
Excelsior Institutional Trust (excluding the international portfolios of
Excelsior Funds, Inc. and Excelsior Institutional Trust) as follows:
Combined Aggregate Average Daily Net Assets of
Excelsior Tax-Exempt Fund, Excelsior Funds, Inc. and
Excelsior Institutional Trust (excluding the
international portfolios of Excelsior Funds, Inc.
and Excelsior Institutional Trust) Annual Fee
---------------------------------- ----------
first $200 million.................................................. .200%
next $200 million................................................... .175%
over $400 million................................................... .150%
Administration fees payable to the Administrators by each portfolio of
Excelsior Tax-Exempt Fund, Excelsior Funds, Inc. 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 the Fund,
which waivers may be terminated at any time. See "Management of the
Fund--Shareholder Organizations" for additional information on fee waivers.
Shareholder Organizations
As described above under "Purchase of Shares," Excelsior Tax-Exempt
Fund has agreements with certain Shareholder Organizations--firms that provide
services, which may include acting as record shareholder, to their Customers who
beneficially own Shares. As a consideration for these services, the Fund will
pay the Shareholder Organization an administrative service fee up to the annual
rate of .40% of the average daily net asset value of its Shares held by the
Shareholder Organization's Customers. Such services, which are described more
fully in the Statement of Additional Information under "Management of the
Fund--Shareholder Organizations," may include assisting in processing purchase,
exchange and redemption requests; transmitting and receiving funds in connection
with Customer orders to purchase, exchange or redeem Shares; and providing
periodic statements. It is the responsibility of Shareholder Organizations to
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<PAGE>
advise Customers of any fees that they may charge in connection with a
Customer's investment. Until further notice, the Investment Adviser and
Administrators have voluntarily agreed to waive fees payable by the Fund in an
aggregate amount equal to administrative service fees payable by the Fund.
Banking Laws
Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company continuously engaged in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Shares of the Fund, but such banking laws and
regulations do not prohibit such a holding company or affiliate or banks
generally from acting as investment adviser, transfer agent, or custodian to
such an investment company, or from purchasing shares of such company for and
upon the order of customers. The Investment Adviser, CGFSC and certain
Shareholder Organizations may be subject to such banking laws and regulations.
State securities laws may differ from the interpretations of federal law
discussed in this paragraph and banks and financial institutions may be required
to register as dealers pursuant to state law.
Should legislative, judicial, or administrative action prohibit or
restrict the activities of the Investment Adviser or other Shareholder
Organizations in connection with purchases of Fund Shares, the Investment
Adviser and such Shareholder Organizations might be required to alter materially
or discontinue the investment services offered by them to Customers. It is not
anticipated, however, that any resulting change in the Fund's method of
operations would affect its net asset value per Share or result in financial
loss to any shareholder.
DESCRIPTION OF CAPITAL STOCK
Excelsior Tax-Exempt Fund (formerly UST Master Tax-Exempt Funds, Inc.)
was organized as a Maryland corporation on August 8, 1984. Currently, Excelsior
Tax-Exempt Fund has authorized capital of 14 billion shares of Common Stock,
$.001 par value per share, classified into 7 classes of shares representing 7
investment portfolios currently being offered. Excelsior Tax-Exempt Fund's
Charter authorizes the Board of Directors to classify or reclassify any class of
shares of Excelsior Tax-Exempt Fund into one or more classes or series. Shares
of Class G Common Stock represent interests in the Fund's Shares.
Each Share represents an equal proportionate interest in the Fund with
other shares of the same class, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the Fund as
are declared in the discretion of Excelsior Tax-Exempt Fund's Board of
Directors.
Shareholders are entitled to one vote for each full share held, and
fractional votes for fractional shares held, and will vote in the aggregate and
not by class, except as otherwise expressly required by law.
Certificates for Shares will not be issued unless expressly requested
in writing to CGFSC and will not be issued for fractional Shares.
As of May 1, 1998, U.S. Trust and its affiliates held of record
substantially all of Excelsior Tax-Exempt Fund's outstanding shares as agent or
custodian for their customers, but did not own such shares beneficially because
they did not have voting or investment discretion with respect to such shares.
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<PAGE>
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank ("Chase"), a wholly-owned subsidiary of The
Chase Manhattan Corporation, serves as the custodian of the Fund's assets.
Communications to the custodian should be directed to Chase, Mutual Funds
Service Division, 3 Chase MetroTech Center, 8th Floor, Brooklyn, NY 11245.
U.S. Trust New York serves as the Fund's transfer and dividend
disbursing agent. U.S. Trust New York has also entered into a sub-transfer
agency arrangement with CGFSC, 73 Tremont Street, Boston, Massachusetts
02108-3913, pursuant to which CGFSC provides certain transfer agent, dividend
disbursement and registrar services to the Fund.
EXPENSES
Except as otherwise noted, the Investment Adviser and the
Administrators bear all expenses in connection with the performance of their
services. The Fund bears the expenses incurred in its operations. Expenses of
the Fund include taxes; interest; fees (including fees paid to Excelsior
Tax-Exempt Fund's Directors and officers who are not affiliated with the
Distributor or the Administrators); SEC fees; state securities qualification
fees; costs of preparing and printing prospectuses for regulatory purposes and
for distribution to shareholders; advisory, administration and administrative
servicing fees; charges of the custodian, transfer agent, and dividend
disbursing agent; certain insurance premiums; outside auditing and legal
expenses; costs of shareholder reports and shareholder meetings; and any
extraordinary expenses. The Fund also pays for brokerage fees and commissions in
connection with the purchase of portfolio securities.
YIELD INFORMATION
From time to time, in advertisements or in reports to shareholders, the
yields of the Fund may be quoted and compared to those of other mutual funds
with similar investment objectives and to other relevant indexes or to rankings
prepared by independent services or other financial or industry publications
that monitor the performance of mutual funds. For example, the yields of the
Fund may be compared to the applicable averages compiled by Donoghue's Money
Fund Report, a widely recognized independent publication that monitors the
performance of money market funds.
Yield data as reported in national financial publications including,
but not limited to, Money Magazine, Forbes, Barron's, The Wall Street Journal
and The New York Times, or in publications of a local or regional nature, may
also be used in comparing the Fund's yields.
The Fund may advertise its seven-day yield which refers to the income
generated over a particular seven-day period identified in the advertisement by
an investment in the Fund. This income is annualized, i.e., the income during a
particular week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The Fund may also advertise its
"effective yield" which is calculated similarly but, when annualized, income is
assumed to be reinvested, thereby making the effective yield slightly higher
because of the compounding effect of the assumed reinvestment.
In addition, the Fund may from time to time advertise its
"tax-equivalent yield" to demonstrate the level of taxable yield necessary to
produce an after-tax yield equivalent to that achieved by the Fund. This yield
is computed by increasing the Fund's yield (calculated as above) by the amount
necessary to reflect the payment of federal, New York State and New York City
income taxes at stated tax rates.
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<PAGE>
Yields will fluctuate and any quotation of yield should not be
considered as representative of the Fund's future performance. Since yields
fluctuate, yield data cannot necessarily be used to compare an investment in the
Fund with bank deposits, savings accounts and similar investment alternatives
which often provide an agreed or guaranteed fixed yield for a stated period of
time. Shareholders should remember that yield is generally a function of the
kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses, and market conditions. Any fees charged by Shareholder
Organizations with respect to accounts of Customers that have invested in Shares
will not be included in calculations of yield.
MISCELLANEOUS
Shareholders will receive unaudited semiannual reports describing the
Fund's investment operations and annual financial statements audited by the
Fund's independent auditors.
As used in this Prospectus, a "vote of the holders of a majority of the
outstanding shares" of 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 Fund, or (b) 67% or more of the shares of the Fund present at a
meeting if more than 50% of the outstanding shares of the Fund are represented
at the meeting in person or by proxy.
Inquiries regarding the Fund may be directed to the Distributor at the
address listed under "Distributor."
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<PAGE>
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION
Opening Your Account:
Complete the Application(s) and mail to: For Overnight Delivery: send to:
Excelsior Funds Excelsior Funds
c/o Chase Global Funds c/o Chase Global Funds
Services Company Services Company
P.O. Box 2798 73 Tremont Street
Boston, MA 02208-2798 Boston, MA 02108-3913
Please enclose with the Application(s) your check made payable to the
"Excelsior Funds" in the amount of your investment.
For direct wire purchases please refer to the section of the Prospectus
entitled "How to Purchase and Redeem Shares--Purchase Procedures."
Minimum Investments:
Except as provided in the Prospectus, the minimum initial investment is
$500; subsequent investments must be in the minimum amount of $50. Investments
may be made in excess of these minimums.
Redemptions:
Shares can be redeemed in any amount and at any time in accordance with
procedures described in that Prospectus. In the case of shares recently
purchased by check, redemption proceeds will not be made available until the
transfer agent is reasonably assured that the check has been collected in
accordance with applicable banking regulations.
Certain legal documents will be required from corporations or other
organizations, executors and trustees, or if redemption is requested by anyone
other than the shareholder of record. Written redemption requests in excess of
$50,000 per account must be accompanied by signature guarantees.
Signatures: Please be sure to sign the Application(s).
If the shares are registered in the name of:
- an individual, the individual should sign.
- joint tenants, both tenants should sign.
- a custodian for a minor, the custodian should sign.
- a corporation or other organization, an authorized officer
should sign (please indicate corporate office or title).*
- a trustee or other fiduciary, the fiduciary or fiduciaries
should sign (please indicate capacity).*
* A corporate resolution or appropriate certificate may be required.
Questions:
If you have any questions regarding the Application or redemption
requirements, please contact the sub-transfer agent at (800) 446-1012 between
9:00 a.m. and 5:00 p.m. (Eastern Time).
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<PAGE>
TABLE OF CONTENTS
PAGE
----
EXPENSE SUMMARY.......................................................
INVESTMENT OBJECTIVE AND POLICIES.....................................
PORTFOLIO INSTRUMENTS AND OTHER
INVESTMENT INFORMATION..............................................
INVESTMENT LIMITATIONS................................................
PRICING OF SHARES.....................................................
HOW TO PURCHASE AND REDEEM SHARES.....................................
INVESTOR PROGRAMS.....................................................
DIVIDENDS AND DISTRIBUTIONS...........................................
TAXES .............................................................
MANAGEMENT OF THE FUND................................................
DESCRIPTION OF CAPITAL STOCK..........................................
CUSTODIAN AND TRANSFER AGENT..........................................
EXPENSES .............................................................
YIELD INFORMATION.....................................................
MISCELLANEOUS.........................................................
INSTRUCTIONS FOR NEW ACCOUNT
APPLICATION.........................................................
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Fund's Statement of
Additional Information incorporated herein by reference, in connection with the
offering made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by Excelsior
Tax-Exempt Fund or its Distributor. This Prospectus does not constitute an
offering by Excelsior Tax-Exempt Fund or by its Distributor in any jurisdiction
in which such offering may not lawfully be made.
USTNYMM798
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<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
New York Tax-Exempt Money Fund
STATEMENT OF ADDITIONAL INFORMATION
July __, 1998
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current prospectus for the New York Tax-Exempt Money
Fund (the "Fund") of Excelsior Tax-Exempt Funds, Inc. ("Excelsior Tax-Exempt
Fund") dated July __, 1998 (the "Prospectus"). Much of the information contained
in this Statement of Additional Information expands upon the subjects discussed
in the Prospectus. No investment in shares of the Fund described herein
("Shares") should be made without reading the Prospectus. A copy of the
Prospectus may be obtained by writing Excelsior Tax-Exempt Fund c/o Chase Global
Funds Services Company, 73 Tremont Street, Boston, MA 02108-3913 or by calling
(800) 446-1012.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INVESTMENT OBJECTIVE AND POLICIES...............................................................................
Additional Information on Portfolio Instruments........................................................
Special Considerations Relating to New York Municipal
Obligations......................................................................................
Additional Investment Limitations......................................................................
NET ASSET VALUE AND NET INCOME..................................................................................
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..................................................................
INVESTOR PROGRAMS...............................................................................................
Systematic Withdrawal Plan.............................................................................
Exchange Privilege.....................................................................................
Other Investor Programs................................................................................
DESCRIPTION OF CAPITAL STOCK....................................................................................
MANAGEMENT OF THE FUND..........................................................................................
Directors and Officers.................................................................................
Investment Advisory and Administration Agreements......................................................
Shareholder Organizations..............................................................................
Expenses...............................................................................................
Custodian and Transfer Agent...........................................................................
PORTFOLIO TRANSACTIONS..........................................................................................
INDEPENDENT AUDITORS............................................................................................
COUNSEL .......................................................................................................
ADDITIONAL INFORMATION CONCERNING TAXES.........................................................................
YIELD INFORMATION...............................................................................................
MISCELLANEOUS...................................................................................................
APPENDIX A.................................................................................................... A-1
</TABLE>
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are
described in the Prospectus. The following information supplements the
description of the investment objective and policies as set forth in the
Prospectus.
Additional Information on Portfolio Instruments
Municipal Obligations
Municipal Obligations include debt obligations issued by
governmental entities to obtain funds for various public purposes, including the
construction of a wide range of public facilities, the refunding of outstanding
obligations, the payment of general operating expenses, and the extension of
loans to public institutions and facilities. Private activity bonds that are
issued by or on behalf of public authorities to finance various privately
operated facilities are included within the term "Municipal Obligations" only if
the interest paid thereon is exempt from regular federal income tax and not
treated as a specific tax preference item under the federal alternative minimum
tax.
The Fund may hold tax-exempt derivatives which may be in the
form of tender option bonds, participations, beneficial interests in a trust,
partnership interests or other forms. A number of different structures have been
used. For example, interests in long-term fixed-rate Municipal Obligations, held
by a bank as trustee or custodian, are coupled with tender option, demand and
other features when the tax-exempt derivatives are created. Together, these
features entitle the holder of the interest to tender (or put) the underlying
Municipal Obligation to a third party at periodic intervals and to receive the
principal amount thereof. In some cases, Municipal Obligations are represented
by custodial receipts evidencing rights to receive specific future interest
payments, principal payments, or both, on the underlying municipal securities
held by the custodian. Under such arrangements, the holder of the custodial
receipt has the option to tender the underlying municipal security at its face
value to the sponsor (usually a bank or broker dealer or other financial
institution), which is paid periodic fees equal to the difference between the
bond's fixed coupon rate and the rate that would cause the bond, coupled with
the tender option, to trade at par on the date of a rate adjustment. The Fund
may hold tax-exempt derivatives, such as participation interests and custodial
receipts, for Municipal Obligations which give the holder the right to receive
payment of principal subject to the conditions described above. The Internal
Revenue Service has not ruled on whether the interest received on tax-exempt
derivatives in the form of participation
<PAGE>
interests or custodial receipts is tax-exempt, and accordingly, purchases of any
such interests or receipts are based on the opinion of counsel to the sponsors
of such derivative securities. Neither the Fund nor its investment adviser will
independently review the underlying proceedings related to the creation of any
tax-exempt derivatives or the bases for such opinion.
Before purchasing a tax-exempt derivative for the Fund, the investment
adviser is required by the Fund's Amortized Cost Procedures to conclude that the
tax-exempt security and the supporting short-term obligation involve minimal
credit risks and are Eligible Securities under the Procedures. In evaluating the
creditworthiness of the entity obligated to purchase the tax-exempt security,
the investment adviser will review periodically the entity's relevant financial
information.
The two principal classifications of Municipal Obligations are
"general obligations" and "revenue" issues, but the Fund's portfolio may also
include "moral obligation" issues. There are, of course, variations in the
quality of Municipal Obligations, both within a particular classification and
between classifications, and the yields on Municipal Obligations depend upon a
variety of factors, including general money market conditions, the financial
condition of the issuer, general conditions of the municipal bond market, the
size of a particular offering, the maturity of the obligation, and the rating of
the issue. The ratings of nationally recognized statistical rating organizations
("NRSROs") such as Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Ratings Group ("S&P") described in the Prospectus and Appendix hereto
represent their opinion as to the quality of Municipal Obligations. It should be
emphasized that these ratings are general and are not absolute standards of
quality, and Municipal Obligations with the same maturity, interest rate, and
rating may have different yields while Municipal Obligations of the same
maturity and interest rate with different ratings may have the same yield.
Subsequent to its purchase by the Fund, an issue of Municipal Obligations may
cease to be rated, or its rating may be reduced below the minimum rating
required for purchase by the Fund. The Investment Adviser will consider such an
event in determining whether the Fund should continue to hold the obligation.
The payment of principal and interest on most securities
purchased by the Fund will depend upon the ability of the issuers to meet their
obligations. Each state, the District of Columbia, each of their political
subdivisions, agencies, instrumentalities and authorities, and each multistate
agency of which a state is a member, is a separate "issuer" as that term is used
in this Statement of Additional Information and the Prospectus. An issuer's
obligations under its Municipal Obligations are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and remedies of
-2-
<PAGE>
creditors, such as the federal Bankruptcy Code, and laws, if any, which may be
enacted by federal or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or upon the ability of municipalities to levy taxes. The
power or ability of an issuer to meet its obligations for the payment of
interest on and principal of its Municipal Obligations may be materially
adversely affected by litigation or other conditions.
Private activity bonds are or have been issued to obtain funds
to provide, among other things, privately operated housing facilities, pollution
control facilities, convention or trade show facilities, mass transit, airport,
port or parking facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal. Private activity bonds are also
issued to privately held or publicly owned corporations in the financing of
commercial or industrial facilities. State and local governments are authorized
in most states to issue private activity bonds for such purposes in order to
encourage corporations to locate within their communities. The principal and
interest on these obligations may be payable from the general revenues of the
users of such facilities.
Among other instruments, the Fund may purchase short-term
General Obligation Notes, Tax Anticipation Notes, Bond Anticipation Notes,
Revenue Anticipation Notes, Tax-Exempt Commercial Paper, Construction Loan Notes
and other forms of short-term loans. Such instruments are issued with a
short-term maturity in anticipation of the receipt of tax funds, the proceeds of
bond placements or other revenues. In addition, the Fund may invest in long-term
tax-exempt instruments, such as municipal bonds and private activity bonds, to
the extent consistent with the maturity restrictions applicable to it.
From time to time, proposals have been introduced before
Congress for the purpose of restricting or eliminating the federal income tax
exemption for interest on Municipal Obligations. For example, under the Tax
Reform Act of 1986, interest on certain private activity bonds must be included
in an investor's federal alternative minimum taxable income, and corporate
investors must treat all tax-exempt interest as an item of tax preference.
Excelsior Tax-Exempt Fund cannot, of course, predict what legislation may be
proposed in the future regarding the income tax status of interest on Municipal
Obligations, or which proposals, if any, might be enacted. Such proposals, while
pending or if enacted, might materially adversely affect the availability of
Municipal Obligations for investment by the Fund and the liquidity and value of
its portfolio. In such an event, Excelsior Tax-Exempt Fund would re-evaluate the
Fund's investment objective and policies and consider possible changes in its
structure or possible dissolution.
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<PAGE>
Opinions relating to the validity of Municipal Obligations and
to the exemption of interest thereon from federal income tax are rendered by
bond counsel to the respective issuers at the time of issuance. Neither the Fund
nor the Investment Adviser will review the proceedings relating to the issuance
of Municipal Obligations or the basis for such opinions.
Insured Municipal Obligations
The Fund may purchase Municipal Obligations which are insured
as to timely payment of principal and interest at the time of purchase. The
insurance policies will usually be obtained by the issuer of the bond at the
time of its original issuance. Bonds of this type will be acquired only if at
the time of purchase they satisfy quality requirements generally applicable to
Municipal Obligations as described in the Prospectus. Although insurance
coverage for the Municipal Obligations held by the Fund reduces credit risk by
insuring that the Fund will receive timely payment of principal and interest, it
does not protect against market fluctuations caused by changes in interest rates
and other factors. The Fund may invest more than 25% of its net assets in
Municipal Obligations covered by insurance policies.
Money Market Instruments
Certificates of deposit acquired by the Fund within the limits
set forth in the Prospectus will be those of (i) domestic branches of U.S. banks
which are members of the Federal Reserve System or are insured by the Bank
Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"), or (ii)
savings and loan associations which are insured by the Savings Association
Insurance Fund of the FDIC. (The foregoing limitation does not preclude the Fund
from acquiring Municipal Obligations which are backed by letters of credit
issued by foreign banks.)
Tax-exempt commercial paper purchased by the Fund will consist
of issues rated at the time of purchase "A-2" or higher by S&P or "Prime-2" or
better by Moody's or, if not rated, determined to be of comparable quality by
the Investment Adviser. These rating symbols are described in Appendix A hereto.
Variable and Floating Rate Instruments
With respect to variable and floating rate instruments
described in the Prospectus, United States Trust Company of New York ("U.S.
Trust New York") and U.S. Trust Company of Connecticut ("U.S. Trust Connecticut"
and collectively with U.S. Trust New York, the "Investment Adviser" or "U.S.
Trust") will consider the earning power, cash flows and other liquidity ratios
of the issuers of such instruments and will continuously monitor
-4-
<PAGE>
their financial ability to meet payment on demand. In determining
dollar-weighted average portfolio maturity and whether a variable or floating
rate instrument has a remaining maturity of 13 months or less, the maturity of
each instrument will be computed in accordance with guidelines established by
the Securities and Exchange Commission (the "SEC").
Repurchase Agreements
The repurchase price under the repurchase agreements described
in the Prospectus generally equals the price paid by the Fund plus interest
negotiated on the basis of current short-term rates (which may be more or less
than the rate on the securities underlying the repurchase agreement). Securities
subject to repurchase agreements are held by the Fund's custodian or in the
Federal Reserve/Treasury Money book-entry system. Repurchase agreements are
considered loans by the Fund under the Investment Company Act of 1940, as
amended (the "1940 Act").
When-Issued and Forward Transactions
When the Fund agrees to purchase securities on a "when-issued"
or "forward commitment" basis, the custodian will set aside cash or liquid
portfolio securities equal to the amount of the commitment in a separate
account. Normally, the custodian will set aside portfolio securities to satisfy
a purchase commitment and, in such case, the Fund may be required subsequently
to place additional assets in the separate account in order to ensure that the
value of the account remains equal to the amount of the Fund's commitment. It
may be expected that 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, the Fund's
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.
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
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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.
Stand-By Commitments
The Fund may acquire "stand-by commitments" with respect to
Municipal Obligations held by it. Under a "stand-by commitment," a dealer or
bank agrees to purchase from the Fund, at the Fund's option, specified Municipal
Obligations at a specified price. The amount payable to the Fund upon its
exercise of a "stand-by commitment" is normally (i) the Fund's acquisition cost
of the Municipal Obligations (excluding any accrued interest which the Fund paid
on their acquisition), less any amortized market premium or plus any amortized
market or original issue discount during the period the Fund owned the
securities, plus (ii) all interest accrued on the securities since the last
interest payment date during that period. "Standby commitments" are exercisable
by the Fund at any time before the maturity of the underlying Municipal
Obligations, and may be sold, transferred or assigned by the Fund only with the
underlying instruments.
The Fund expects that "stand-by commitments" will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Fund may pay for a "stand-by commitment" either
separately in cash or by paying a higher price for securities which are acquired
subject to the commitment (thus reducing the yield to maturity otherwise
available for the same securities). Where the Fund has paid any consideration
directly or indirectly for a "stand-by commitment," its cost will be reflected
as unrealized depreciation for the period during which the commitment was held
by the Fund.
The Fund intends to enter into "stand-by commitments" only
with banks and broker/dealers which, in the Investment Adviser's opinion,
present minimal credit risks. In evaluating the creditworthiness of the issuer
of a "stand-by commitment," the Investment Adviser will review periodically the
issuer's assets, liabilities, contingent claims and other relevant financial
information.
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Special Considerations Relating to New York Municipal Obligations
Some of the significant financial considerations relating to
the Fund's investments in New York Municipal Obligations are summarized below.
This summary information is not intended to be a complete description and is
principally derived from official statements relating to issues of New York
Municipal Obligations that were available prior to the date of this Statement of
Additional Information. The accuracy and completeness of the information
contained in those official statements have not been independently verified.
State Economy. New York is the third most populous state in the nation and has a
relatively high level of personal wealth. The State's economy is diverse with a
comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a very small share of the nation's
farming and mining activity. The State has a declining proportion of its
workforce engaged in manufacturing, and an increasing proportion engaged in
service industries. New York City (the "City"), which is the most populous city
in the State and nation and is the center of the nation's largest metropolitan
area, accounts for a large portion of the State's population and personal
income.
The State has historically been one of the wealthiest states
in the nation. For decades, however, the State has grown more slowly than the
nation as a whole, gradually eroding its relative economic position. State per
capita personal income has historically been significantly higher than the
national average, although the ratio has varied substantially.
Moderate growth is projected to continue in 1998 and 1999 for
employment, wages, and personal income, although the growth rates will lessen
gradually during the course of the two years. Overall employment growth is
expected to continue at a modest rate, reflecting the slowing growth in the
national economy, continued spending restraint in government, and restructuring
in the health care, social service, and banking sectors.
There can be no assurance that the State economy will not
experience worse-than-predicted results, with corresponding material and adverse
effects on the State's projections of receipts and disbursements.
State Budget. The State Constitution requires the governor (the "Governor") to
submit to the State legislature (the "Legislature") a balanced executive budget
which contains a complete plan of expenditures for the ensuing fiscal year and
all moneys and revenues estimated to be available therefor, accompanied by bills
containing all proposed appropriations or
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reappropriations and any new or modified revenue measures to be enacted in
connection with the executive budget. The entire plan constitutes the proposed
State financial plan for that fiscal year. The Governor is required to submit to
the Legislature quarterly budget updates which include a revised cash-basis
state financial plan, and an explanation of any changes from the previous state
financial plan.
The State's budget for the 1997-98 fiscal year was adopted by
the Legislature on August 4, 1997, more than four months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State operations
and other purposes, including necessary appropriations for State-supported debt
service. The State Financial Plan for the 1997-98 fiscal year was formulated on
August 11, 1997 and was based on the State's budget as enacted by the
Legislature, as well as actual results for the first quarter of the current
fiscal year (the "1997-98 State Financial Plan"). In recent years, the State has
failed to adopt a budget prior to the beginning of its fiscal year. There can be
no assurance that State budgets in future fiscal years will be adopted by the
April 1 statutory deadline.
The Governor is required by law to propose a balanced budget
each year. In order to address any potential remaining budget gap, the Governor
is expected to make additional proposals to bring receipts in line with
disbursements. The State has closed projected budget gaps of $5.0 billion, $3.9
billion and $2.3 billion in its 1995-96, 1996-97 and 1997-98 fiscal years,
respectively.
The 1997-98 General Fund Financial Plan is projected to be
balanced on a cash basis, with a projected cash surplus of $1.83 billion. As
compared to the Governor's Executive Budget as amended in February 1997, the
State's adopted budget for 1997-98 increased General Fund spending by $1.7
billion, primarily from increases for local assistance ($1.3 billion). Resources
used to fund these additional expenditures include increased revenues projected
for the 1997-98 fiscal year, increased resources produced in the 1996-97 fiscal
year that will be utilized in 1997-98, re-estimates of social service, fringe
benefit and other spending, and certain non-recurring resources.
The 1997-98 adopted budget includes multi-year reductions,
including a State funded property and local income tax reduction program, estate
tax relief, utility gross receipts tax reductions, permanent reductions in the
State sales tax on clothing, and elimination of assessments on medical
providers. These reductions are intended to reduce the overall level of State
and local taxes in New York and to improve the State's competitive position
vis-a-vis other states. The various elements of the State and local tax and
assessments reductions
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have little or no impact on the 1997-98 State Financial Plan, and do not begin
to materially affect the outyear projections until the State's 1999-2000 fiscal
year.
Other actions taken in the 1997-98 adopted budget add further
pressure to future budget balance in New York State. For example, the fiscal
effects of tax reductions adopted in the 1997-98 budget are projected to grow
more substantially beyond the 1998-99 fiscal year, with incremental costs
averaging in excess of $1.3 billion annually over the last three years of the
tax reduction program. These incremental costs reflect the phase-in of
State-funded school property tax and local income tax relief; the phase-out of
the assessments on medical providers; and reductions in estate and gift levies,
utility gross receipts taxes, and the State sales tax on clothing. The full
annual cost of the enacted tax reduction package is estimated at approximately
$4.8 billion when fully effective in State fiscal year 2001-02. In addition, the
1997-98 budget included multi-year commitments for school aid and
pre-kindergarten early learning programs which could add as much as $1.4 billion
in costs when fully annualized in fiscal year 2001-02. These spending
commitments are subject to annual appropriation.
On September 11, 1997, the New York State Comptroller issued a
report which noted that the ability to deal with future budget gaps could become
a significant issue in the State's 2000- 2001 fiscal year, when the cost of tax
cuts increases by $1.9 billion. The report contained projections that, based on
current economic conditions and current law for taxes and spending, showed a gap
in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the
2001-2002 State fiscal year. The report noted that these gaps would be smaller
if recurring spending reductions produce savings in earlier years. The State
Comptroller has also stated that if Wall Street earnings moderate and the State
experiences a moderate recession, the gap for the 2001-2002 State fiscal year
could grow to nearly $12 billion.
The Governor presented his 1998-99 Executive Budget to the
Legislature on January 20, 1998. The Executive Budget contains financial
projections for the State's 1997-98 through 2000-01 fiscal years, detailed
estimates of receipts and a proposed Capital Program and Financing Plan for the
1997-98 through 2002-03 fiscal years. It is expected that the Governor will
prepare amendments to his Executive Budget as permitted under law and that these
amendments will be reflected in a revised Financial Plan. There can be no
assurance that the Legislature will enact into law the Executive Budget as
proposed by the Governor, or that the State's adopted budget projections will
not differ materially and adversely from the projections set forth therein.
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The 1998-99 Financial Plan is projected to be balanced on a
cash basis in the General Fund. Total General Fund receipts, including transfers
from other funds, are projected to be $36.22 billion, an increase of $1.02
billion over projected receipts in the current fiscal year. Total General Fund
disbursements, including transfers to other funds, are projected to be $36.18
billion, an increase of $1.02 billion over the projected expenditures (including
pre-payments), for the current fiscal year. As compared to the 1997-98 State
Financial Plan, the Executive Budget proposes year-to-year growth in General
Fund spending of 2.89 percent. State Funds spending (i.e., General Fund plus
other dedicated funds, with the exception of federal aid) is projected to grow
by 8.5 percent. Spending from All Governmental Funds (excluding transfers) is
proposed to increase by 7.6 percent from the prior fiscal year.
The forecast of General Fund receipts in 1998-99 incorporates
several Executive Budget tax proposals that, if enacted, would further reduce
receipts otherwise available to the General Fund by approximately $700 million
during 1998-99. The Executive Budget proposes accelerating school tax relief for
senior citizens under STAR, which is projected to reduce General Fund receipts
by $537 million in 1998-99. The proposed reduction supplements STAR tax
reductions already scheduled in law, which are projected at $187 million in
1998-99. The Budget also proposes several new tax-cut initiatives and other
funding changes that are projected to further reduce receipts available to the
General Fund by over $200 million. These initiatives include reducing the fee to
register passenger motor vehicles and earmarking a larger portion of such fees
to dedicated funds and other purposes; extending the number of weeks in which
certain clothing purchases are exempt from sales taxes; more fully conforming
State law to reflect recent Federal changes in estate taxes; continuing lower
pari-mutuel tax rates; and accelerating scheduled property tax relief for
farmers from 1999 to 1998. In addition to the specific tax and fee reductions
discussed above, the Executive Budget also proposes establishing a reserve of
$100 million to permit the acceleration into 1998-99 of other tax reductions
that are otherwise scheduled in law for implementation in future fiscal years.
The Division of the Budget estimates that the 1998-99
Financial Plan includes approximately $62 million in non-recurring resources,
comprising less than two-tenths of one percent of General Fund disbursements.
The non-recurring resources projected for use in 1998-99 consist of $27 million
in retroactive federal welfare reimbursements for family assistance recipients
with HIV/AIDS, $25 million in receipts from the Housing Finance Agency that were
originally anticipated in 1997- 98, and $10 million in other measures, including
$5 million in asset sales.
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Disbursements from Capital Projects funds in 1998-99 are
estimated at $4.82 billion, or $1.07 billion higher than 1997-98. The proposed
spending plan includes: $2.51 billion in disbursements for transportation
purposes, including the State and local highway and bridge program; $815 million
for environmental activities; $379 million for correctional services; $228
million for the State University of New York ("SUNY") and the City University of
New York ("CUNY"); $290 million for mental hygiene projects; and $375 million
for CEFAP. Approximately 28 percent of capital projects are proposed to be
financed by "pay-as-you-go" resources. State-supported bond issuances finance 46
percent of capital projects, with federal grants financing the remaining 26
percent.
The economic and financial condition of the State may be
affected by various financial, social, economic and political factors. These
factors may be very complex, may vary from fiscal year to fiscal year, and are
frequently the result of actions taken not only by the State and its agencies
and instrumentalities, but also by entities, such as the federal government,
that are not under the control of the State. In addition, the financial plan is
based upon forecasts of national and State economic activity. Economic forecasts
have frequently failed to predict accurately the timing and magnitude of changes
in the national and the State economies. Actual results, however, could differ
materially and adversely from the projections set forth in a financial plan, and
those projections may be changed materially and adversely from time to time.
In the past, the State has taken management actions and has
made use of internal sources to address potential State financial plan
shortfalls. The Division of Budget believes it could take similar actions should
variances occur in its projections for the current fiscal year.
Recent Financial Results. The General Fund is the principal operating fund of
the State and is used to account for all financial transactions, except those
required to be accounted for in another fund. It is the State's largest fund and
receives almost all State taxes and other resources not dedicated to particular
purposes.
The State ended the first six months of its 1997-98 fiscal
year with an unaudited General Fund cash balance of $3.2 billion, or $254
million above the August Financial Plan estimate. Total unaudited receipts,
including transfers from other funds, totaled $18.8 billion, or $340 million
higher than expected. The additional receipts reflected higher-than-anticipated
tax revenues of $244 million and miscellaneous receipts of $93 million.
Unaudited General Fund spending for the same period equaled $16.0 billion, or
$86 million above the cashflow projections published in the August Financial
Plan. For
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fiscal year 1997-98, total General Fund receipts were projected at $35.09
billion, an increase of $2.05 billion from 1996-97 results. Total disbursements,
including transfers to capital projects, debt service and other funds, were
projected at $34.60 billion, or 5.2 percent higher than disbursements in
1996-97.
The mid-year update projected a closing balance in the General
Fund of $927 million, which was composed of a $530 million reserve for future
needs, a $332 million balance in the Tax Stabilization Reserve Fund ("TSRF") and
a $65 million balance in the Contingency Reserve Fund ("CRF").
As part of the 1997-98 Adopted Budget Report, the State also
issued its update to the GAAP-basis Financial Plan for the State's 1997-98
fiscal year, based on the cash-basis 1997-98 State Financial Plan completed in
August. The GAAP-basis update projected a General Fund operating deficit of $959
million, primarily reflecting the use of a portion of the 1996-97 cash surplus
to fund 1997-98 liabilities, offset by the $530 million reserve for future
needs.
Debt Limits and Outstanding Debt. There are a number of methods by which the
State of New York may incur debt. Under the State Constitution, the State may
not, with limited exceptions for emergencies, undertake long-term general
obligation borrowing (i.e., borrowing for more than one year) unless the
borrowing is authorized in a specific amount for a single work or purpose by the
Legislature and approved by the voters. There is no limitation on the amount of
long-term general obligation debt that may be so authorized and subsequently
incurred by the State.
The State may undertake short-term borrowings without voter
approval (i) in anticipation of the receipt of taxes and revenues by issuing tax
and revenue anticipation notes and (ii) in anticipation of the receipt of
proceeds from the sale of duly authorized but unissued general obligation bonds
by issuing bond anticipation notes. The State may also, pursuant to specific
constitutional authorization, directly guarantee certain obligations of the
State of New York's authorities and public benefit corporations ("Authorities").
Payments of debt service on New York State general obligation and New York
State-guaranteed bonds and notes are legally enforceable obligations of the
State of New York.
The State employs additional long-term financing mechanisms,
lease-purchase and contractual-obligation financings, which involve obligations
of public authorities or municipalities that are State-supported but are not
general obligations of the State. Under these financing arrangements, certain
public authorities and municipalities have issued obligations to finance the
construction and rehabilitation of facilities or the acquisition and
rehabilitation of equipment, and expect to meet
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their debt service requirements through the receipt of rental or other
contractual payments made by the State. Although these financing arrangements
involve a contractual agreement by the State to make payments to a public
authority, municipality or other entity, the State's obligation to make such
payments is generally expressly made subject to appropriation by the Legislature
and the actual availability of money to the State for making the payments. The
State has also entered into a contract-ual-obligation financing arrangement with
the Local Government Assistance Corporation ("LGAC") to restructure the way the
State makes certain local aid payments.
In February 1997, the Job Development Authority ("JDA") issued
approximately $85 million of State-guaranteed bonds to refinance certain of its
outstanding bonds and notes in order to restructure and improve JDA's capital
structure. Due to concerns regarding the economic viability of its programs,
JDA's loan and loan guarantee activities had been suspended since the Governor
took office in 1995. As a result of the structural imbalances in JDA's capital
structure, and defaults in its loan portfolio and loan guarantee program
incurred between 1991 and 1996, JDA would have experienced a debt service cash
flow shortfall had it not completed its recent refinancing. JDA anticipates that
it will transact additional refinancings in 1999, 2000 and 2003 to complete its
long-term plan of finance and further alleviate cash flow imbalances which are
likely to occur in future years. The State does not anticipate that it will be
called upon to make any payments pursuant to the State guarantee in the 1997-98
fiscal year. JDA recently resumed its lending activities under a revised set of
lending programs and underwriting guidelines.
In 1990, as part of a State fiscal reform program, legislation
was enacted creating LGAC, a public benefit corporation empowered to issue
long-term obligations to fund certain payments to local governments
traditionally funded through New York State's annual seasonal borrowing. The
legislation empowered LGAC to issue its bonds and notes in an amount to yield
net proceeds not in excess of $4.7 billion (exclusive of certain refunding
bonds). Over a period of years, the issuance of these long-term obligations,
which were to be amortized over no more than 30 years, was expected to eliminate
the need for continued short-term seasonal borrowing. The legislation also
dedicated revenues equal to one-quarter of the four cent State sales and use tax
to pay debt service on these bonds. The legislation also imposed a cap on the
annual seasonal borrowing of the State at $4.7 billion, less net proceeds of
bonds issued by LGAC and bonds issued to provide for capitalized interest,
except in cases where the Governor and the legislative leaders have certified
the need for additional borrowing and provided a schedule for reducing it to the
cap. If borrowing above the cap was thus permitted in any fiscal year, it was
required by law to be reduced to the cap by the fourth fiscal
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year after the limit was first exceeded. As of June 1995, LGAC had issued bonds
to provide net proceeds of $4.7 billion, completing the program.
On January 13, 1992, S&P reduced its ratings on the State's
general obligation bonds from A to A- and, in addition, reduced its ratings on
the State's moral obligation, lease purchase, guaranteed and contractual
obligation debt. On August 28, 1997, S&P revised its ratings on the State's
general obligation bonds from A- to A and revised its ratings on the State's
moral obligation, lease purchase, guaranteed and contractual obligation debt. On
March 2, 1998, S&P affirmed its A rating on the State's outstanding bonds.
On January 6, 1992, Moody's reduced its ratings on outstanding
limited-liability State lease purchase and contractual obligations from A to
Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's
general obligation long-term indebtedness. On March 20, 1998, Moody's assigned
the highest commercial paper rating of P-1 to the short-term notes of the State
and stated that the outlook for the State's general obligations is stable.
The State anticipates that its capital programs will be
financed in part by State and public authorities borrowings in the 1997-98
fiscal year. The State expects to issue $605 million in general obligation bonds
(including $140 million for purposes of redeeming outstanding bond anticipation
notes) and $140 million in general obligation commercial paper. The Legislature
has also authorized the issuance of $311 million in certificates of
participation (including costs of issuance, reserve funds and other costs)
during the State's 1997-98 fiscal year for equipment purchases. The projection
of State borrowings for the 1997-98 fiscal year is subject to change as market
conditions, interest rates and other factors vary throughout the fiscal year.
The proposed 1997-98 through 2002-03 Capital Program and
Financing Plan was released with the 1998-99 Executive Budget on January 20,
1998. As a part of that Plan, changes were proposed to the State's 1997-98
borrowing plan, including: the delay in the issuance of COPs to finance welfare
information systems until 1998-99 to permit a thorough assessment of needs; and
the elimination of issuances for the CEFAP to reflect the proposed conversion of
that bond-financed program to pay-as-you-go financing.
As a result of these changes, the State's 1997-98 borrowing
plan now reflects: $501 million in general obligation bonds (including $140
million for purposes of redeeming outstanding bond anticipation notes) and $140
million in general obligation commercial paper; the issuance of $83 million in
COPs for equipment purchases; and approximately $1.8 billion in
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borrowings by public authorities pursuant to lease-purchase and
contractual-obligation financings for capital programs of the State, including
costs of issuance, reserve funds, and other costs, net of anticipated refundings
and other adjustments for 1997-98 capital projects. The projection of State
borrowings for the 1997-98 fiscal year is subject to change as market
conditions, interest rates and other factors vary through the end of the fiscal
year.
New York State has never defaulted on any of its general
obligation indebtedness or its obligations under lease-purchase or
contractual-obligation financing arrangements and has never been called upon to
make any direct payments pursuant to its guarantees.
Litigation. Certain litigation pending against New York State or its officers or
employees could have a substantial or long-term adverse effect on New York State
finances. Among the more significant of these cases are those that involve (1)
the validity of agreements and treaties by which various Indian tribes
transferred title to New York State of certain land in central and upstate New
York; (2) certain aspects of New York State's Medicaid policies, including its
rates, regulations and procedures; (3) action against New York State and New
York City officials alleging inadequate shelter allowances to maintain proper
housing; (4) challenges to the practice of reimbursing certain Office of Mental
Health patient care expenses from the client's Social Security benefits; (5)
alleged responsibility of New York State officials to assist in remedying racial
segregation in the City of Yonkers; (6) challenges to regulations promulgated by
the Superintendent of Insurance establishing certain excess medical malpractice
premium rates; (7) challenges to certain aspects of petroleum business taxes;
(8) action alleging damages resulting from the failure by the State's Department
of Environmental Conservation to timely provide certain data; (9) challenges to
the constitutionality of Public Health Law 2807-d, which imposes a gross
receipts tax from certain patient care services; (10) an action seeking
reimbursement from the State for certain costs arising out of the provision of
pre-school services and programs for children with handicapped conditions; (11)
action seeking enforcement of certain sales and excise taxes and tobacco
products and motor fuel sold to non-Indian consumers on Indian reservations; and
(12) a challenge to the constitutionality of Clean Water/Clean Air Bond Act.
Several actions challenging the constitutionality of
legislation enacted during the 1990 legislative session which changed actuarial
funding methods for determining state and local contributions to state employee
retirement systems have been decided against the State. As a result, the
Comptroller developed a plan to restore the State's retirement systems to
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prior funding levels. Such funding is expected to exceed prior levels by $116
million in fiscal 1996-97 and $193 million in fiscal 1997-98, peaking at $241
million in fiscal 1998-99. Beginning in fiscal 2001-02, State contributions
required under the Comptroller's plan are projected to be less than that
required under the prior funding method. As a result of the United States
Supreme Court decision in the case of State of Delaware v. State of New York, on
January 21, 1994, the State entered into a settlement agreement with various
parties. Pursuant to all agreements executed in connection with the action, the
State was required to make aggregate payments of $351.4 million. Annual payments
to the various parties will continue through the State's 2002-03 fiscal year in
amounts which will not exceed $48.4 million in any fiscal year subsequent to the
State's 1994-95 fiscal year. Litigation challenging the constitutionality of the
treatment of certain moneys held in a reserve fund was settled in June 1996 and
certain amounts in a Supplemental Reserve Fund previously credited by the State
against prior State and local pension contributions will be paid in 1998.
The legal proceedings noted above involve State finances,
State programs and miscellaneous cure rights, tort, real property and contract
claims in which the State is a defendant and the monetary damages sought are
substantial, generally in excess of $100 million. These proceedings could affect
adversely the financial condition of the State in the 1997-98 fiscal year or
thereafter. Adverse developments in these proceedings, other proceedings for
which there are unanticipated, unfavorable and material judgments, or the
initiation of new proceedings may affect the ability of the State to maintain a
balanced financial plan. An adverse decision in any of these proceedings may
exceed the amount of the reserve established in the State's financial plan for
the payment of judgments and, therefore, could affect the ability of the State
to maintain a balanced financial plan. In its audited financial statements for
the 1996-97 fiscal year, the State reported its estimated liability for awarded
and anticipated unfavorable judgments to be $364 million, of which $134 million
is expected to be paid during the 1997-98 fiscal year.
Although other litigation is pending against New York State,
except as described herein, no current litigation involves New York State's
authority, as a matter of law, to contract indebtedness, issue its obligations,
or pay such indebtedness when it matures, or affects New York State's power or
ability, as a matter of law, to impose or collect significant amounts of taxes
and revenues.
Authorities. The fiscal stability of New York State is related, in part, to the
fiscal stability of its Authorities, which generally have responsibility for
financing, constructing and
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operating revenue-producing public benefit facilities. Authorities are not
subject to the constitutional restrictions on the incurrence of debt which apply
to the State itself, and may issue bonds and notes within the amounts of, and as
otherwise restricted by, their legislative authorization. The State's access to
the public credit markets may be impaired, and the market price of its
outstanding debt may be materially and adversely affected, if any of the
Authorities were to default on their respective obligations, particularly with
respect to debt that is State-supported or State-related.
Authorities are generally supported by revenues generated by
the projects financed or operated, such as fares, user fees on bridges, highway
tolls and rentals for dormitory rooms and housing. In recent years, however, New
York State has provided financial assistance through appropriations, in some
cases of a recurring nature, to certain of the Authorities for operating and
other expenses and, in fulfillment of its commitments on moral obligation
indebtedness or otherwise, for debt service. This operating assistance is
expected to continue to be required in future years. In addition, certain
statutory arrangements provide for State local assistance payments otherwise
payable to localities to be made under certain circumstances to certain
Authorities. The State has no obligation to provide additional assistance to
localities whose local assistance payments have been paid to Authorities under
these arrangements. However, in the event that such local assistance payments
are so diverted, the affected localities could seek additional State funds.
New York City and Other Localities. The fiscal health of the State of New York
may also be impacted by the fiscal health of its localities, particularly the
City of New York, which has required and continues to require significant
financial assistance from New York State. The City depends on State aid both to
enable the City to balance its budget and to meet its cash requirements. There
can be no assurance that there will not be reductions in State aid to the City
from amounts currently projected or that State budgets will be adopted by the
April 1 statutory deadline or that any such reductions or delays will not have
adverse effects on the City's cash flow or expenditures. In addition, the
Federal budget negotiation process could result in a reduction in or a delay in
the receipt of Federal grants which could have additional adverse effects on the
City's cash flow or revenues.
In 1975, New York City suffered a fiscal crisis that impaired
the borrowing ability of both the City and New York State. In that year the City
lost access to the public credit markets. The City was not able to sell
short-term notes to the public again until 1979. In 1975, S&P suspended its A
rating of City bonds. This suspension remained in effect until March 1981,
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at which time the City received an investment grade rating of BBB from S&P.
On July 2, 1985, S&P revised its rating of City bonds upward
to BBB+ and on November 19, 1987, to A-. On February 3, 1998, S&P placed a BBB+
rating on the City's general obligation debt on CreditWatch with positive
implications. Moody's ratings of City bonds were revised in November 1981 from B
(in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to
Baa1, in May 1988 to A and again in February 1991 to Baa1. On February 25, 1998,
Moody's upgraded nearly $28 billion of the City's debt from Baa1 to A3.
New York City is heavily dependent on New York State and
federal assistance to cover insufficiencies in its revenues. There can be no
assurance that in the future federal and State assistance will enable the City
to make up its budget deficits. To help alleviate the City's financial
difficulties, the Legislature created the Municipal Assistance Corporation
("MAC") in 1975. Since its creation, MAC has provided, among other things,
financing assistance to the City by refunding maturing City short-term debt and
transferring to the City funds received from sales of MAC bonds and notes. MAC
is authorized to issue bonds and notes payable from certain stock transfer tax
revenues, from the City's portion of the State sales tax derived in the City
and, subject to certain prior claims, from State per capita aid otherwise
payable by the State to the City. Failure by the State to continue the
imposition of such taxes, the reduction of the rate of such taxes to rates less
than those in effect on July 2, 1975, failure by the State to pay such aid
revenues and the reduction of such aid revenues below a specified level are
included among the events of default in the resolutions authorizing MAC's
long-term debt. The occurrence of an event of default may result in the
acceleration of the maturity of all or a portion of MAC's debt. MAC bonds and
notes constitute general obligations of MAC and do not constitute an enforceable
obligation or debt of either the State or the City. As of June 30, 1997, MAC had
outstanding an aggregate of approximately $4.267 billion of its bonds. MAC is
authorized to issue bonds and notes to refund its outstanding bonds and notes
and to fund certain reserves, without limitation as to principal amount, and to
finance certain capital commitments to the Transit Authority and the New York
City School Construction Authority through the 1997 fiscal year in the event the
City fails to provide such financing.
Since 1975, the City's financial condition has been subject to
oversight and review by the New York State Financial Control Board (the "Control
Board") and since 1978 the City's financial statements have been audited by
independent accounting firms. To be eligible for guarantees and assistance, the
City is required during a "control period" to submit annually for Control
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Board approval, and when a control period is not in effect for Control Board
review, a financial plan for the next four fiscal years covering the City and
certain agencies showing balanced budgets determined in accordance with GAAP.
New York State also established the Office of the State Deputy Comptroller for
New York City ("OSDC") to assist the Control Board in exercising its powers and
responsibilities. On June 30, 1986, the City satisfied the statutory
requirements for termination of the control period. This means that the Control
Board's powers of approval are suspended, but the Board continues to have
oversight responsibilities.
On June 10, 1997, the City submitted to the Control Board the
Financial Plan (the "1998-2001 Financial Plan") for the 1998 through 2001 fiscal
years, relating to the City, the Board of Education ("BOE") and CUNY and
reflected the City's expense and capital budgets for the 1998 fiscal year, which
were adopted on June 6, 1997. The 1998-2001 Financial Plan projected revenues
and expenditures for the 1998 fiscal year balanced in accordance with GAAP. The
1998-99 Financial Plan projects General Fund receipts (including transfers from
other funds) of $36.22 billion, an increase of $1.02 billion over the estimated
1997-98 level. Recurring growth in the State General Fund tax base is projected
to be approximately six percent during 1998-99, after adjusting for tax law and
administrative changes. This growth rate is lower than the rates for 1996-97 or
currently estimated for 1997-98, but roughly equivalent to the rate for 1995-96.
The 1998-99 forecast for user taxes and fees also reflects the
impact of scheduled tax reductions that will lower receipts by $38 million, as
well as the impact of two Executive Budget proposals that are projected to lower
receipts by an additional $79 million. The first proposal would divert $30
million in motor vehicle registration fees from the General Fund to the
Dedicated Highway and Bridge Trust Fund; the second would reduce fees for motor
vehicle registrations, which would further lower receipts by $49 million. The
underlying growth of receipts in this category is projected at 4 percent, after
adjusting for these scheduled and recommended changes.
In comparison to the current fiscal year, business tax
receipts are projected to decline slightly in 1998-99, falling from $4.98
million to $4.96 billion. The decline in this category is largely attributable
to scheduled tax reductions. In total, collections for corporation and utility
taxes and the petroleum business tax are projected to fall by $107 million from
1997-98. The decline in receipts in these categories is partially offset by
growth in the corporation franchise, insurance and bank taxes, which are
projected to grow by $88 million over the current fiscal year.
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The Financial Plan is projected to show a GAAP-basis surplus
of $131 million for 1997-98 and a GAAP-basis deficit of $1.3 billion for 1998-99
in the General Fund, primarily as a result of the use of the 1997-98 cash
surplus. In 1998-99, the General Fund GAAP Financial Plan shows total revenues
of $34.68 billion, total expenditures of $35.94 billion, and net other financing
sources and uses of $42 million.
Since the preparation of the 1998-2001 Financial Plan, the
State has adopted its budget for the 1997-1998 fiscal year. The State budget
enacted a smaller sales tax reduction than the tax reduction program assumed by
the City in the financial plan, which will increase projected City sales tax
revenues; provided for State aid to the City which was less than assumed in the
financial plan; and enacted a State funded tax relief program which begins a
year later than reflected in the financial plan. In addition, the net effect of
tax law changes made in the Federal Balanced Budget Act of 1997 is expected to
increase tax revenues in the 1998 fiscal year.
Although the City has maintained balanced budgets in each of
its last sixteen fiscal years and is projected to achieve balanced operating
results for the 1997 fiscal year, there can be no assurance that the gap-closing
actions proposed in the 1998- 2001 Financial Plan can be successfully
implemented or that the City will maintain a balanced budget in future years
without additional State aid, revenue increases or expenditure reductions.
Additional tax increases and reductions in essential City services could
adversely affect the City's economic base.
The projections set forth in the 1998-2001 Financial Plan were
based on various assumptions and contingencies which are uncertain and which may
not materialize. Changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements. Such assumptions and contingencies
include the condition of the regional and local economies, the impact on real
estate tax revenues of the real estate market; wage increases for City employees
consistent with those assumed in the 1998-2001 Financial Plan; employment
growth; the ability to implement proposed reductions in City personnel and other
cost reduction initiatives; the ability of the Health and Hospitals Corporation
and the BOE to take actions to offset reduced revenues; the ability to complete
revenue generating transactions; provision of State and Federal aid and mandate
relief and the impact on City revenues and expenditures of Federal and State
welfare reform; and any future legislation affecting Medicare or other
entitlements.
Implementation of the 1998-2001 Financial Plan is also
dependent upon the City's ability to market its securities successfully. The
City's financing program for fiscal years 1998
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through 2001 contemplates the issuance of $5.7 billion of general obligation
bonds and $5.7 billion of bonds to be issued by the proposed New York City
Transitional Finance Authority (the "Finance Authority") to finance City capital
projects. The Finance Authority, was created as part of the City's effort to
assist in keeping the City's indebtedness within the forecast level of the
constitutional restrictions on the amount of debt the City is authorized to
incur. Despite this additional financing mechanism, the City currently projects
that, if no further action is taken, it will reach its debt limit in City fiscal
year 1999-2000. Indebtedness subject to the constitutional debt limit includes
liability on capital contracts that are expected to be funded with general
obligation bonds, as well as general obligation bonds. On June 2, 1997, an
action was commenced seeking a declaratory judgment declaring the legislation
establishing the Transitional Finance Authority to be unconstitutional. If such
legislation were voided, projected contracts for the City capital projects would
exceed the City's debt limit during fiscal year 1997-98. Future developments
concerning the City or entities issuing debt for the benefit of the City, and
public discussion of such developments, as well as prevailing market conditions
and securities credit ratings, may affect the ability or cost to sell securities
issued by the City or such entities and may also affect the market for their
outstanding securities.
The City Comptroller and other agencies and public officials
have issued reports and made public statements which, among other things, state
that projected revenues and expenditures may be different from those forecast in
the City's financial plans. It is reasonable to expect that such reports and
statements will continue to be issued and to engender public comment.
The City since 1981 has fully satisfied its seasonal financing
needs in the public credit markets, repaying all short-term obligations within
their fiscal year of issuance. Although the City's current financial plan
projects $2.4 billion of seasonal financing for the 1998 fiscal year, the City
expects to undertake only approximately $1.4 billion of seasonal financing. The
City issued $2.4 billion of short-term obligations in fiscal year 1997. Seasonal
financing requirements for the 1996 fiscal year increased to $2.4 billion from
$2.2 billion and $1.75 billion in the 1995 and 1994 fiscal years, respectively.
Seasonal financing requirements were $1.4 billion in the 1993 fiscal year. The
delay in the adoption of the State's budget in certain past fiscal years has
required the City to issue short-term notes in amounts exceeding those expected
early in such fiscal years.
Certain localities, in addition to the City, have experienced
financial problems and have requested and received
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additional New York State assistance during the last several State fiscal years.
The potential impact on the State of any future requests by localities for
additional assistance is not included in the State's projections of its receipts
and disbursements for the 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers
("Yonkers") resulted in the re-establishment of the Financial Control Board for
the City of Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers
Board is charged with oversight of the fiscal affairs of Yonkers. Future actions
taken by the State to assist Yonkers could result in increased State
expenditures for extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of
budgetary deficits that resulted in the establishment of a Supervisory Board for
the City of Troy in 1994. The Supervisory Board's powers were increased in 1995,
when Troy MAC was created to help Troy avoid default on certain obligations. The
legislation creating Troy MAC prohibits the city of Troy from seeking federal
bankruptcy protection while Troy MAC bonds are outstanding. Troy MAC has issued
bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance
during the 1996 legislative session through $50 million in special
appropriations targeted for distressed cities, and that was largely continued in
1997. Twenty-eight municipalities are scheduled to share in more than $32
million in targeted unrestricted aid allocated in the 1997-98 budget. An
additional $21 million will be dispersed among all cities, towns and villages, a
3.97% increase in General Purpose State Aid.
Municipalities and school districts have engaged in
substantial short-term and long-term borrowings. In 1995, the total indebtedness
of all localities in New York State other than New York City was approximately
$19 billion. A small portion (approximately $102.3 million) of that indebtedness
represented borrowing to finance budgetary deficits and was issued pursuant to
enabling New York State legislation. State law requires the comptroller to
review and make recommendations concerning the budgets of those local government
units other than New York City authorized by State law to issue debt to finance
deficits during the period that such deficit financing is outstanding. Eighteen
localities had outstanding indebtedness for deficit financing at the close of
their fiscal year ending in 1995.
From time to time, federal expenditure reductions could
reduce, or in some cases eliminate, federal funding of some local programs and
accordingly might impose substantially increased expenditure requirements on
affected localities. If New York State, New York City or any of the Authorities
were to suffer
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serious financial difficulties jeopardizing their respective access to the
public credit markets, the marketability of notes and bonds issued by localities
within New York State could be adversely affected. Localities also face
anticipated and potential problems resulting from certain pending litigation,
judicial decisions and long-range economic trends. Long-range potential problems
of declining urban population, increasing expenditures and other economic trends
could adversely affect localities and require increasing New York State
assistance in the future.
Additional Investment Limitations
In addition to the investment limitations set forth in the
Prospectus, the Fund is subject to the investment limitations enumerated below,
which may be changed only by a vote of the holders of a majority of the Fund's
outstanding Shares (as defined under "Miscellaneous" in the Prospectus).
The Fund may not:
1. Act as an underwriter of securities within the meaning of
the Securities Act of 1933, except to the extent that purchase by the Fund of
securities directly from the issuer thereof in accordance with the Fund's
investment objective, policies and limitations may be deemed to be underwriting;
2. Purchase or sell real estate, except that the Fund may
invest in securities secured by real estate or interests therein;
3. Purchase or sell commodities or commodity contracts, or
invest in oil, gas, or other mineral exploration or development programs;
4. 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
5. Make loans, except that the Fund may purchase or hold debt
obligations in accordance with its investment objective, policies, and
limitations.
In addition, the Fund is subject to the following
non-fundamental limitations, which may be changed without the vote of
shareholders. The Fund may not:
1. Purchase securities on margin, make short sales of
securities, or maintain a short position, except that the Fund may obtain
short-term credit as may be necessary for the clearance of portfolio
transactions;
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<PAGE>
2. 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;
3. Invest in companies for the purpose of exercising
management or control; and
4. Invest more than 10% of its net assets in illiquid
securities.
* * *
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 portfolio securities will not constitute a
violation of such limitation.
For the purpose of Investment Limitation No. 2, the
prohibition of purchases of real estate includes acquisition of limited
partnership interests in partnerships formed with a view toward investing in
real estate, but does not prohibit purchases of shares in real estate investment
trusts.
NET ASSET VALUE AND NET INCOME
Excelsior Tax-Exempt Fund uses the amortized cost method of
valuation to value Shares in the Fund. Pursuant to this method, a security is
valued at its cost initially, and thereafter a constant amortization to maturity
of any discount or premium is assumed, regardless of the impact of fluctuating
interest rates on the market value of the security. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price the Fund would receive if it sold the security. The market value
of portfolio securities held by the Fund can be expected to vary inversely with
changes in prevailing interest rates.
The Fund invests only in high-quality instruments and
maintains a dollar-weighted average portfolio maturity appropriate to its
objective of maintaining a constant net asset value per Share. The Fund will not
purchase any security deemed to have a remaining maturity of more than 13 months
within the meaning of the 1940 Act or maintain a dollar-weighted average
portfolio maturity which exceeds 90 days. Excelsior Tax-Exempt Fund's Board of
Directors has established procedures that are intended to stabilize the net
asset value per Share of the Fund for purposes of sales and redemptions at
$1.00. These procedures include the determination, at such intervals as the
Board deems appropriate, of the extent, if any, to which the net asset value per
Share of the Fund calculated by using available market quotations deviates from
$1.00 per Share. In the event such
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<PAGE>
deviation exceeds one half of one percent, the Board of Directors will promptly
consider what action, if any, should be initiated. If the Board of Directors
believes that the extent of any deviation from the Fund's $1.00 amortized cost
price per Share may result in material dilution or other unfair results to new
or existing investors, it will take appropriate steps to eliminate or reduce, to
the extent reasonably practicable, any such dilution or unfair results. These
steps may include selling portfolio instruments prior to maturity; shortening
the average portfolio maturity; withholding or reducing dividends; redeeming
Shares in kind; reducing the number of the Fund's outstanding Shares without
monetary consideration; or utilizing a net asset value per Share determined by
using available market quotations.
Net income of the Fund for dividend purposes consists of (i)
interest accrued and discount earned on the Fund's assets, less (ii)
amortization of market premium on such assets, accrued expenses directly
attributable to the Fund, and the general expenses or the expenses common to
more than one portfolio of Excelsior Tax-Exempt Fund (e.g., administrative,
legal, accounting, and directors' fees) prorated to each portfolio of Excelsior
Tax-Exempt Fund on the basis of its relative net assets.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares are continuously offered for sale by Edgewood Services,
Inc. (the "Distributor"), a wholly-owned subsidiary of Federated Investors, and
the Distributor has agreed to use appropriate efforts to solicit all purchase
orders. As described in the Prospectus, Shares may be sold to customers
("Customers") of financial institutions ("Shareholder Organizations"). Shares
are also offered for sale directly to institutional investors and to members of
the general public. Different types of Customer accounts at the Shareholder
Organizations may be used to purchase Shares, including eligible agency and
trust accounts. In addition, Shareholder Organizations may automatically "sweep"
a Customer's account not less frequently than weekly and invest amounts in
excess of a minimum balance agreed to by the Shareholder Organization and its
Customer in Shares selected by the Customer. Investors purchasing Shares may
include officers, directors, or employees of the particular Shareholder
Organization.
Shares of the Fund are offered for sale at their net asset
value per Share next computed after a purchase order is received by Excelsior
Tax-Exempt Fund's sub-transfer agent.
As stated in the Prospectus, no sales charge is imposed by
Excelsior Tax-Exempt Fund on purchases of Shares. In addition, no sales load is
charged on the reinvestment of dividends or distributions or in connection with
certain Share
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<PAGE>
exchanges as described in the Prospectus under "Investor Programs--Exchange
Privilege."
As described in the Prospectus, Direct Investors may redeem
Shares by writing a check. Checks to redeem Shares are drawn on Excelsior
Tax-Exempt Fund's account at The Chase Manhattan Bank ("Chase"). Direct
Investors will be subject to the same rules and regulations that Chase applies
to checking accounts and will have the same rights and duties with respect to
stop-payment orders, "stale" checks, unauthorized signatures, collection of
deposits, alterations and unauthorized endorsements as bank checking account
customers do under the New York Uniform Commercial Code. When a check is
presented to Chase for payment, Chase, as the shareholder's agent, will cause
the Fund to redeem sufficient Shares in the shareholder's account to cover the
amount of the check.
Excelsior Tax-Exempt Fund may suspend the right of redemption
or postpone the date of payment for Shares for more than 7 days during any
period when (a) trading on The New York Stock Exchange (the "Exchange") is
restricted by applicable rules and regulations of the SEC; (b) the Exchange is
closed for other than customary weekend and holiday closings; (c) the SEC has by
order permitted such suspension; or (d) an emergency exists as determined by the
SEC.
In the event that Shares are redeemed in cash at their net
asset value, a shareholder may receive in payment for such Shares an amount that
is more or less than his original investment due to changes in the market prices
of the Fund's portfolio securities.
Excelsior Tax-Exempt Fund reserves the right to honor any
request for redemption or repurchase of the Fund's Shares by making payment in
whole or in part in securities chosen by Excelsior Tax-Exempt Fund and valued in
the same way as they would be valued for purposes of computing the Fund's net
asset value. If payment is made in securities, a shareholder may incur
transaction costs in converting these securities into cash. Such redemptions in
kind will be governed by Rule 18f-1 under the 1940 Act so that the Fund is
obligated to redeem its Shares solely in cash up to the lesser of $250,000 or 1%
of its net asset value during any 90-day period for any one shareholder of the
Fund.
Under limited circumstances, Excelsior Tax-Exempt Fund may
accept securities as payment for Shares. Securities acquired in this manner will
be limited to securities issued in transactions involving a bona fide
reorganization or statutory merger, or will be limited to other securities
(except for municipal debt securities issued by state political subdivisions or
their agencies or instrumentalities) that: (a) meet the investment objective and
policies of the Fund; (b) are acquired
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for investment and not for resale; (c) are liquid securities that are not
restricted as to transfer either by law or liquidity of market; and (d) have a
value that is readily ascertainable (and not established only by evaluation
procedures) as evidenced by a listing on the Exchange, American Stock Exchange
or NASDAQ, or as evidenced by their status as U.S. Government securities, bank
certificates of deposit, banker's acceptances, corporate and other debt
securities that are actively traded, money market securities and other similar
securities with a readily ascertainable value.
INVESTOR PROGRAMS
Systematic Withdrawal Plan
An investor who owns Shares with a value of $10,000 or more
may begin a Systematic Withdrawal Plan. The withdrawal can be on a monthly,
quarterly, semiannual or annual basis. There are four options for such
systematic withdrawals. The investor may request:
(1) A fixed-dollar withdrawal;
(2) A fixed-share withdrawal;
(3) A fixed-percentage withdrawal (based on the
current value of the account); or
(4) A declining-balance withdrawal.
Prior to participating in a Systematic Withdrawal Plan, the investor must
deposit any outstanding certificates for Shares with Chase Global Funds Services
Company, the Fund's sub-transfer agent. Under this Plan, dividends and
distributions are automatically reinvested in additional Shares of the Fund.
Amounts paid to investors under this Plan should not be considered as income.
Withdrawal payments represent proceeds from the sale of Shares, and there will
be a reduction of the shareholder's equity in the Fund if the amount of the
withdrawal payments exceeds the dividends and distributions paid on the Shares
and the appreciation of the investor's investment in the Fund. This in turn may
result in a complete depletion of the shareholder's investment. An investor may
not participate in a program of systematic investing in the Fund while at the
same time participating in the Systematic Withdrawal Plan with respect to an
account in the Fund. Customers of Shareholder Organizations may obtain
information on the availability of, and the procedures and fees relating to, the
Systematic Withdrawal Plan directly from their Shareholder Organizations.
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<PAGE>
Exchange Privilege
Investors and Customers of Shareholder Organizations may
exchange Shares having a value of at least $500 for shares of any other
portfolio of Excelsior Tax-Exempt Fund or Excelsior Funds, Inc. or for Trust
Shares of Excelsior Institutional Trust. Shares may be exchanged by wire,
telephone or mail and must be made to accounts of identical registration. There
is no exchange fee imposed by Excelsior Tax-Exempt Fund, Excelsior Funds, Inc.
or Excelsior Institutional Trust. In order to prevent abuse of this privilege to
the disadvantage of other shareholders, Excelsior Tax-Exempt Fund, Excelsior
Funds, Inc. and Excelsior Institutional Trust reserve the right to limit the
number of exchange requests of investors to no more than six per year. Excelsior
Tax-Exempt Fund, Excelsior Funds, Inc. 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.
Other Investor Programs
As described in the Prospectus, Shares of the Fund may be
purchased in connection with the Automatic Investment Program. Customers of
Shareholder Organizations may obtain information on the availability of, and the
procedures and fees relating to, this and other programs directly from their
Shareholder Organizations.
DESCRIPTION OF CAPITAL STOCK
Excelsior Tax-Exempt Fund's Charter authorizes its Board of
Directors to issue up to 14 billion full and fractional shares of capital stock.
The Charter authorizes the Board of Directors to classify or reclassify any
unissued shares of Excelsior Tax-Exempt Fund into one or more additional classes
or series by setting or changing in any one or more respects their respective
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption. The Prospectus describes the classes of shares into which Excelsior
Tax-Exempt Fund's authorized capital is currently classified.
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<PAGE>
Shares have no preemptive rights and only such conversion or
exchange rights as the Board of Directors may grant in its discretion. When
issued for payment as described in the Prospectus, Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Fund,
shareholders of the Fund are entitled to receive the assets available for
distribution belonging to the Fund and a proportionate distribution, based upon
the relative asset values of Excelsior Tax-Exempt Fund's portfolios, of any
general assets of Excelsior Tax-Exempt Fund not belonging to any particular
portfolio of Excelsior Tax-Exempt Fund which are available for distribution. In
the event of a liquidation or dissolution of Excelsior Tax-Exempt Fund, its
shareholders will be entitled to the same distribution process.
Shareholders of Excelsior Tax-Exempt Fund are entitled to one
vote for each full Share held, and fractional votes for fractional shares held,
and will vote in the aggregate and not by class, except as otherwise required by
the 1940 Act or other applicable law or when the matter to be voted upon affects
only the interests of the shareholders of a particular class. Voting rights are
not cumulative and, accordingly, the holders of more than 50% of Excelsior
Tax-Exempt Fund's aggregate outstanding shares may elect all of Excelsior
Tax-Exempt Fund's directors, regardless of the votes of other shareholders.
Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted to the holders of the outstanding voting securities of
an investment company such as Excelsior Tax-Exempt Fund shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding shares of each portfolio affected by the matter. A portfolio is
affected by a matter unless it is clear that the interests of each portfolio in
the matter are substantially identical or that the matter does not affect any
interest of the portfolio. Under the Rule, the approval of an investment
advisory agreement or any change in a fundamental investment policy would be
effectively acted upon with respect to a portfolio only if approved by a
majority of the outstanding shares of such portfolio. However, the Rule also
provides that the ratification of the appointment of independent public
accountants, the approval of principal underwriting contracts, and the election
of directors may be effectively acted upon by shareholders of Excelsior
Tax-Exempt Fund voting without regard to class.
Excelsior Tax-Exempt Fund's Charter authorizes the 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
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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 to be redeemed at their net asset value; or (c)
combine the assets belonging to the Fund with the assets belonging to another
portfolio of Excelsior Tax-Exempt Fund, if the Board of Directors reasonably
determines that such combination will not have a material adverse effect on
shareholders of any portfolio participating in such combination, and, in
connection therewith, to cause all outstanding shares of any portfolio to be
redeemed at their net asset value or converted into shares of another class of
Excelsior Tax-Exempt Fund's capital stock at net asset value. The exercise of
such authority by the Board of Directors will be subject to the provisions of
the 1940 Act, and the Board of Directors will not take any action described in
this paragraph unless the proposed action has been disclosed in writing to the
Fund's shareholders at least 30 days prior thereto.
Notwithstanding any provision of Maryland law requiring a
greater vote of Excelsior Tax-Exempt Fund'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 Excelsior Tax-Exempt Fund's Charter, Excelsior Tax-Exempt Fund may take or
authorize such action upon the favorable vote of the holders of more than 50% of
its outstanding Common Stock voting without regard to class.
MANAGEMENT OF THE FUND
Directors and Officers
The directors and executive officers of Excelsior Tax-Exempt
Fund, their addresses, ages, principal occupations during the past five years,
and other affiliations are as follows:
<TABLE>
<CAPTION>
Position with Principal Occupation
Excelsior Tax- During Past 5 Years and
Name and Address Exempt Fund Other Affiliations
- ---------------- ----------- ------------------
<S> <C> <C>
Frederick S. Wonham(1) Chairman of the Retired; Director of
238 June Road Board, President Excelsior Tax-Exempt Fund
Stamford, CT 06903 and Treasurer and Excelsior Funds, Inc.
Age: 66 (since 1995); Trustee of
Excelsior Funds and Excelsior
</TABLE>
- --------
(1) This director is considered to be an "interested person" of Excelsior
Tax-Exempt Fund as defined in the 1940 Act.
-30-
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupation
Excelsior Tax- During Past 5 Years and
Name and Address Exempt Fund Other Affiliations
- ---------------- ----------- ------------------
<S> <C> <C>
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
Connecticut (from March 1993 to
May 1997).
Donald L. Campbell Director Retired; Director of
333 East 69th Street Excelsior Tax-Exempt Fund
Apt. 10-H and Excelsior Funds, Inc.
New York, NY 10021 (since 1984); Director of
Age: 71 UST Master Variable Series,
Inc. (from 1994 to June 1997);
Trustee of Excelsior Institutional
Trust (since 1995); and
Director, Royal Life Insurance
Co. of New York (since 1991).
Rodman L. Drake Director Director, Excelsior Tax-
485 Park Avenue Exempt Fund and Excelsior
New York, NY 10022 Funds, Inc. (since 1996);
Age: 54 Trustee, Excelsior Institutional
Trust and Excelsior Funds (since
1994); Director, Parsons Brinkerhoff
Energy Services Inc. (since 1996);
Director, Parsons Brinkerhoff, Inc.
(engineering firm) (since 1995);
President, Mandrake Group
(investment and consulting firm)
(since 1994); Director, Hyperion
Total Return Fund, Inc. and four
other funds for which Hyperion
Capital Management, Inc. serves as
investment adviser (since 1991);
Co-Chairman, KMR Power Corporation
(power plants) (from 1993 to 1996);
Director, The Latin American Growth
Fund (since 1993); Member of
Advisory Board, Argentina Private
Equity Fund L.P. (from 1992 to
1996) and Garantia L.P. (Brazil)
(from 1993 to 1996); and Director,
Mueller Industries, Inc. (from 1992
to 1994).
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupation
Excelsior Tax- During Past 5 Years and
Name and Address Exempt Fund Other Affiliations
- ---------------- ----------- ------------------
<S> <C> <C>
Joseph H. Dugan Director Retired; Director of
913 Franklin Lakes Road Excelsior Tax-Exempt Fund
Franklin Lakes, NJ 07417 and Excelsior Funds, Inc.
Age: 72 (since 1984); Director of
UST Master Variable Series,
Inc.(from 1994 to June 1997); and
Trustee of Excelsior Institutional
Trust (since 199- 5).
Wolfe J. Frankl Director Retired; Director of
2320 Cumberland Road Excelsior Tax-Exempt Fund
Charlottesville, VA 22901 and Excelsior Funds, Inc.
Age: 76 (since 1986); Director of
UST Master Variable Series, Inc.
(from 1994 to June 1997); Trustee
of Excelsior Institutional Trust
(since 1995); Director, Deutsche
Bank Financial, Inc. (since 1989);
Director, The Harbus Corporation
(since 1951); and Trustee, HSBC
Funds Trust and HSBC Mutual Funds
Trust (since 1988).
W. Wallace McDowell, Jr. Director Director, Excelsior Tax-
c/o Prospect Capital Exempt Fund and Excelsior
Corp. Funds, Inc. (since 1996);
43 Arch Street Trustee, Excelsior
Greenwich, CT 06830 Institutional Trust and
Age: 60 Excelsior Funds (since 1994);
Private Investor (since 1994);
Managing Director, Morgan Lewis
Githens & Ahn (from 1991 to 1994);
and Director, U.S. Homecare
Corporation (since 1992),
Grossmans, Inc. (from 1993 to
1996), Children's Discovery Centers
(since 1984), ITI Technologies,
Inc. (since 1992) and Jack Morton
Productions (since 1987).
Jonathan Piel Director Director, Excelsior Tax-
558 E. 87th Street Exempt Fund and Excelsior
New York, NY 10128 Funds, Inc. (since 1996);
Age: 58 Trustee of Excelsior Institutional
Trust and Excelsior Funds (since
1994); Vice President and Editor,
Scientific American, Inc. (from 1986
to 1994); Director, Group for The
South Fork, Bridgehampton, New York
(since 1993); and Member, Advisory
</TABLE>
-32-
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupation
Excelsior Tax- During Past 5 Years and
Name and Address Exempt Fund Other Affiliations
- ---------------- ----------- ------------------
<S> <C> <C>
Committee, Knight Journalism
Fellowships, Massachusetts
Institute of Technology (since 1984).
Robert A. Robinson Director Director of Excelsior Tax-
Church Pension Fund Exempt Fund and Excelsior
800 Second Avenue Funds, Inc. (since 1987); Director
New York, NY 10017 of UST Master Variable Series, Inc.
Age: 71 (from 1994 to June 1997); Trustee of
Excelsior Institutional Trust (since
1995); President Emeritus, The
Church Pension Fund and its
affiliated companies (since 1966);
Trustee, H.B. and F.H. Bugher
Foundation and Director of its wholly
owned subsidiaries -- Rosiclear Lead
and Flourspar Mining Co. and The Pigmy
Corporation (since 1984); Director,
Morehouse Publishing Co. (since
1974); Trustee, HSBC Funds Trust and
HSBC Mutual Funds Trust (since 1982-
); and Director, Infinity Funds,
Inc. (since 1995).
Alfred C. Tannachion(1) Director Retired; Director of
6549 Pine Meadows Drive Excelsior Tax-Exempt Fund
Spring Hill, FL 34606 and Excelsior Funds, Inc.
Age: 71 (since 1985); Chairman
of the Board, President and Treasurer
of UST Master Variable Series,
Inc. (from 1994 to June 1997); and
Trustee of Excelsior Institutional
Trust (since 1995).
W. Bruce McConnel, III Secretary Partner of the law firm of
Philadelphia National Drinker Biddle & Reath LLP
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Age: 55
Michael P. Malloy Assistant Partner of the law firm of
Philadelphia National Secretary Drinker Biddle & Reath LLP.
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Age: 38
</TABLE>
- --------
(1) This director is considered to be an "interested person" of Excelsior
Tax-Exempt Fund as defined in the 1940 Act.
-33-
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupation
Excelsior Tax- During Past 5 Years and
Name and Address Exempt Fund Other Affiliations
- ---------------- ----------- ------------------
<S> <C> <C>
Gregory Sackos Assistant Second Vice President, Senior
Chase Global Funds Secretary Manager of Blue Sky Compliance
Services Company and Financial Reporting, Chase
73 Tremont Street Global Funds Services Company
Boston, MA 02108-3913 (March 1997 to present);
Age: 32 Second Vice President, Senior Manager
of Financial Reporting, Chase
Global Funds Services Company
(September 1996 to March 1997); and
Assistant Vice President, Assistant
Manager of Financial Reporting,
Scudder, Stevens & Clark, Inc.
(October 1992 to September 1996).
John M. Corcoran Assistant Vice President, Director of
Chase Global Funds Treasurer Administration Client Group,
Services Company Chase Global Funds Services
73 Tremont Street Company (since July 1996);
Boston, MA 02108-3913 Second Vice President, Manager
Age: 32 of Administration, Chase Global
Funds Services Company (from
October 1993 to July 1996); and
Audit Manager, Ernst & Young LLP
(from August 1987 to September
1993).
</TABLE>
Each director of Excelsior Tax-Exempt Fund receives an annual
fee of $9000 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 Excelsior Tax-Exempt Fund. The
employees of Chase Global Funds Services Company do not receive any compensation
from Excelsior Tax-Exempt Fund for acting as officers of Excelsior Tax-Exempt
Fund. No person who is currently an officer, director or employee of the
Investment Adviser serves as an officer, director or employee of Excelsior
Tax-Exempt Fund. As of May 1, 1998, the directors and officers of Excelsior
Tax-Exempt Fund as a group owned beneficially less than 1% of the outstanding
shares of each fund of Excelsior Tax-Exempt Fund, and less than 1% of the
outstanding shares of all funds of Excelsior Tax-Exempt Fund in the aggregate.
The following chart provides certain information about the
fees received by Excelsior Tax-Exempt Fund's directors in the most recently
completed fiscal year.
-34-
<PAGE>
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits from Excelsior Tax-
Aggregate Accrued as Exempt Fund
Compensation from Part of and Fund
Name of Excelsior Tax- Fund Complex* Paid
Person/Position Exempt Fund Expenses to Directors
--------------- ----------- -------- ------------
<S> <C> <C> <C>
Donald L. Campbell $ None $ (4)**
---------- -----------
Director
Rodman L. Drake $ None $ (4)**
---------- -----------
Director
Joseph H. Dugan $ None $ (4)**
---------- -----------
Director
Wolfe J. Frankl $ None $ (4)**
---------- -----------
Director
W. Wallace McDowell, Jr. $ None $ (4)**
---------- -----------
Director
Jonathan Piel $ None $ (4)**
---------- -----------
Director
Robert A. Robinson $ None $ (4)**
---------- -----------
Director
Alfred C. Tannachion $ None $ (4)**
---------- -----------
Director
Frederick S. Wonham $ None $ (4)**
---------- -----------
Chairman of the Board,
President and Treasurer
</TABLE>
* The "Fund Complex" consists of Excelsior Funds, Inc., Excelsior Tax-Exempt
Fund, UST Master Variable Series, Inc., Excelsior Funds and Excelsior
Institutional Trust.
** Number of investment companies in the Fund Complex for which director
served as director or trustee.
Investment Advisory and Administration Agreements
United States Trust Company of New York ("U.S. Trust New
York") and U.S. Trust Company of Connecticut ("U.S. Trust Connecticut" and,
collectively with U.S. Trust New York, "U.S. Trust" or the "Investment Adviser")
serve as Investment Adviser to the Fund. In the Investment Advisory Agreement,
U.S. Trust has agreed to provide the services described in the Prospectus. The
Investment Adviser has also agreed to pay all expenses incurred by it in
connection with its activities under the
-35-
<PAGE>
Agreement other than the cost of securities, including brokerage commissions, if
any, purchased for the Fund.
The Investment Advisory Agreement provides that the Investment
Adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the performance of such
Agreement, except that the Investment Adviser shall be jointly, but not
severally, liable for a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for advisory services or a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Investment Adviser in the performance of its duties or from reckless disregard
by it of its duties and obligations thereunder. In addition, the Investment
Adviser has undertaken in the Investment Advisory Agreement to maintain its
policy and practice of conducting its Asset Management Group independently of
its Banking Group.
Chase Global Funds Services Company ("CGFSC"), Federated
Administrative Services (an affiliate of the Distributor) and U.S. Trust
Connecticut (collectively, the "Administrators") serve as the Fund's
administrators. Under the Administration Agreement, the Administrators have
agreed to maintain office facilities for the Fund, furnish the Fund with
statistical and research data, clerical, accounting and bookkeeping services,
and certain other services required by the Fund, and to compute the net asset
value, net income, "exempt-interest dividends," 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.
Shareholder Organizations
As stated in the Prospectus, Excelsior Tax-Exempt Fund has
entered into agreements with 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 .40% 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)
providing periodic statements showing a Customer's account balances and
confirmations of transactions by the Customer; (d) providing tax and dividend
information to shareholders as appropriate; (e) transmitting proxy statements,
annual reports, updated prospectuses and other communications from Excelsior
Tax-Exempt Fund to
-36-
<PAGE>
Customers; and (f) providing or arranging for the provision of other related
services.
Excelsior Tax-Exempt Fund's agreements with Shareholder
Organizations are governed by an Administrative Services Plan (the "Plan")
adopted by Excelsior Tax-Exempt Fund. Pursuant to the Plan, Excelsior Tax-Exempt
Fund's Board of Directors will review, at least quarterly, a written report of
the amounts expended under Excelsior Tax-Exempt Fund'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 Excelsior Tax-Exempt Fund's directors, including a
majority of the directors who are not "interested persons" of Excelsior
Tax-Exempt Fund as defined in the 1940 Act and have no direct or indirect
financial interest in such arrangements (the "Disinterested Directors").
Any material amendment to Excelsior Tax-Exempt Fund's
arrangements with Shareholder Organizations must be approved by a majority of
Excelsior Tax-Exempt Fund's Board of Directors (including a majority of the
Disinterested Directors). So long as Excelsior Tax-Exempt Fund's arrangements
with Shareholder Organizations are in effect, the selection and nomination of
the members of Excelsior Tax-Exempt Fund's Board of Directors who are not
"interested persons" (as defined in the 1940 Act) of Excelsior Tax-Exempt Fund
will be committed to the discretion of such Disinterested Directors.
Expenses
Except as otherwise noted, the Investment Adviser and the
Administrators bear all expenses in connection with the performance of their
services. The Fund bears the expenses incurred in its operations.
Custodian and Transfer Agent
The Chase Manhattan Bank ("Chase") serves as custodian of the
Fund's assets. Under the Custodian Agreement, Chase has agreed to (i) maintain a
separate account or accounts in the name of the Fund; (ii) make receipts and
disbursements of money on behalf of the Fund; (iii) collect and receive all
income and other payments and distributions on account of the Fund's portfolio
securities; (iv) respond to correspondence from securities brokers and others
relating to its duties; (v) maintain certain financial accounts and records; and
(vi) make periodic reports to Excelsior Tax-Exempt Fund's Board of Directors
concerning the Fund's operations. Chase may, at its own expense, open and
maintain custody accounts with respect to the Fund with other banks or trust
companies, provided that Chase shall remain liable
-37-
<PAGE>
for the performance of all its custodial duties under the Custodian Agreement,
notwithstanding any delegation.
U.S. Trust New York serves as the Fund's transfer agent and
dividend disbursing agent. In such capacity, U.S. Trust New York has agreed to
(i) issue and redeem Shares; (ii) address and mail all communications by the
Fund to its shareholders, including reports to shareholders, dividend and
distribution notices, and proxy materials for its meetings of shareholders;
(iii) respond to correspondence by shareholders and others relating to its
duties; (iv) maintain shareholder accounts; and (v) make periodic reports to
Excelsior Tax-Exempt Fund'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 may, at its own expense, delegate its
transfer agency obligations to another transfer agent registered or qualified
under applicable law, provided that U.S. Trust New York shall remain liable for
the performance of all of its transfer agency duties under the Transfer Agency
Agreement, notwithstanding any delegation. Pursuant to this provision in the
agreement, U.S. Trust New York has entered into a sub-transfer agency
arrangement with CGFSC, an affiliate of Chase, with respect to accounts of
shareholders who are not Customers of U.S. Trust New York. For the services
provided by CGFSC, U.S. Trust New York has agreed to pay CGFSC $15.00 per annum
per account or subaccount plus out-of-pocket expenses. CGFSC receives no fee
directly from Excelsior Tax-Exempt Fund for any of its sub-transfer agency
services. U.S. Trust New York may, from time to time, enter into sub-transfer
agency arrangements with third party providers of transfer agency services.
PORTFOLIO TRANSACTIONS
Subject to the general control of Excelsior Tax-Exempt Fund's
Board of Directors, the Investment Adviser is responsible for, makes decisions
with respect to, and places orders for all purchases and sales of all portfolio
securities of the Fund.
The Fund does not intend to seek profits from short-term
trading. Its annual portfolio turnover will be relatively high, but brokerage
commissions are not normally paid on money market instruments, and portfolio
turnover is not expected to have a material effect on the net income of the
Fund.
-38-
<PAGE>
Securities purchased and sold by the Fund are generally traded
in the over-the-counter market on a net basis (i.e., without commission) through
dealers, or otherwise involve transactions directly with the issuer of an
instrument. The cost of securities purchased from underwriters includes an
underwriting commission or concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or mark-down. With
respect to over-the-counter transactions, the Fund, where possible, will deal
directly with the dealers who make a market in the securities involved, except
in those circumstances where better prices and execution are available
elsewhere.
The Investment Advisory Agreement between Excelsior Tax-Exempt
Fund and the Investment Adviser provides that, in executing portfolio
transactions and selecting brokers or dealers, the Investment Adviser will seek
to obtain the best net price and the most favorable execution. The Investment
Adviser shall consider factors it deems relevant, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer and whether such broker or dealer
is selling shares of Excelsior Tax-Exempt Fund, and the reasonableness of the
commission, if any, for the specific transaction and on a continuing basis.
In addition, the Investment Advisory Agreement authorizes the
Investment Adviser, to the extent permitted by law and subject to the review of
Excelsior Tax-Exempt Fund's Board of Directors from time to time with respect to
the extent and continuation of the policy, to cause the Fund to pay a broker
which furnishes brokerage and research services a higher commission than that
which might be charged by another broker for effecting the same transaction,
provided that the Investment Adviser determines in good faith that such
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker, viewed in terms of either that particular
transaction or the overall responsibilities of the Investment Adviser to the
accounts as to which it exercises investment discretion. Such brokerage and
research services might consist of reports and statistics on specific companies
or industries, general summaries of groups of stocks and their comparative
earnings, or broad overviews of the stock market and the economy.
Supplementary research information so received is in addition
to and not in lieu of services required to be performed by the Investment
Adviser and does not reduce the investment advisory fees payable by the Fund.
Such information may be useful to the Investment Adviser in serving the Fund and
other clients and, conversely, supplemental information obtained by the
-39-
<PAGE>
placement of business of other clients may be useful to the Investment Adviser
in carrying out its obligations to the Fund.
Portfolio securities will not be purchased from or sold to the
Investment Adviser, the Distributor, or any affiliated person of either of them
(as such term is defined in the 1940 Act) acting as principal, except to the
extent permitted by the SEC.
Investment decisions for the Fund are made independently from
those for other investment companies, common trust funds and other types of
funds managed by the Investment Adviser. Such other investment companies and
funds may also invest in the same securities as the Fund. When a purchase or
sale of the same security is made at substantially the same time on behalf of
the Fund and another investment company or common trust fund, the transaction
will be averaged as to price, and available investments allocated as to amount,
in a manner which the Investment Adviser believes to be equitable to the Fund
and such other investment company or common trust fund. In some instances, this
investment procedure may adversely affect the price paid or received by the Fund
or the size of the position obtained by the Fund. To the extent permitted by
law, the Investment Adviser may aggregate the securities to be sold or purchased
for the Fund with those to be sold or purchased for other investment companies
or common trust funds in order to obtain best execution.
INDEPENDENT AUDITORS
Ernst & Young LLP, independent auditors, 200 Clarendon Street,
Boston, MA 02116, serve as auditors of Excelsior Tax-Exempt Fund.
COUNSEL
Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary
of Excelsior Tax-Exempt Fund, and Mr. Malloy, Assistant Secretary of Excelsior
Tax-Exempt Fund, are partners), Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107, is counsel to Excelsior
Tax-Exempt Fund, and will pass upon the legality of the Shares offered by the
Prospectus.
ADDITIONAL INFORMATION CONCERNING TAXES
The following supplements the tax information contained in the
Prospectus.
-40-
<PAGE>
The Fund is treated as a separate corporate entity under the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to qualify
as a regulated investment company. If, for any reason, the Fund does not qualify
for a taxable year for the special federal tax treatment afforded regulated
investment companies, the Fund would be subject to federal tax on all of its
taxable income at regular corporate rates, without any deduction for
distributions to shareholders. In such event, dividend distributions (whether or
not derived from interest on Municipal Obligations) 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.
The Fund will be required in certain cases to withhold and
remit to the U.S. Treasury 31% of taxable dividends 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 Fund is not intended to constitute a balanced investment
program and is not designed for investors seeking capital appreciation or
maximum tax-exempt income irrespective of fluctuations in principal. Shares of
the Fund would not be suitable for tax-exempt institutions and may not be
suitable for retirement plans qualified under Section 401 of the Code, H.R. 10
plans and individual retirement accounts because such plans and accounts are
generally tax-exempt and, therefore, not only would not gain any additional
benefit from the Fund's dividends being tax-exempt, but such dividends would be
ultimately taxable to the beneficiaries when distributed to them. In addition,
the Fund may not be an appropriate investment for entities which are
"substantial users" of facilities financed by private activity bonds or "related
persons" thereof. "Substantial user" is defined under the Treasury Regulations
to include a non-exempt person who regularly uses a part of such facilities in
his trade or business and whose gross revenues derived with respect to the
facilities financed by the issuance of bonds are more than 5% of the total
revenues derived by all users of such
-41-
<PAGE>
facilities, who occupies more than 5% of the usable area of such facilities or
for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" include certain related natural
persons, affiliated corporations, a partnership and its partners and an S
Corporation and its shareholders.
In order for the Fund to pay exempt-interest dividends for any
taxable year, at least 50% of the aggregate value of the Fund's portfolio must
consist of exempt-interest obligations at the close of each quarter of its
taxable year. Within 60 days after the close of the taxable year, the Fund will
notify its shareholders of the portion of the dividends paid by the Fund which
constitutes an exempt-interest dividend with respect to such taxable year.
However, the aggregate amount of dividends so designated by the Fund cannot
exceed the excess of the amount of interest exempt from tax under Section 103 of
the Code received by the Fund during the taxable year over any amounts
disallowed as deductions under Sections 265 and 171(a)(2) of the Code. The
percentage of total dividends paid by the Fund with respect to any taxable year
which qualifies as exempt-interest dividends will be the same for all
shareholders receiving dividends from the Fund for such year.
Interest on indebtedness incurred by a shareholder to purchase
or carry the Fund's Shares generally is not deductible for federal income tax
purposes.
The Fund intends to distribute to shareholders any investment
company taxable income earned by the Fund for each taxable year. In general, the
Fund's investment company taxable income will be its taxable income (including
taxable interest and short-term capital gains) subject to certain adjustments
and excluding the excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year. Such distributions
will be taxable to the shareholders as ordinary income (whether paid in cash or
additional Shares).
* * *
The foregoing discussion is based on federal tax laws and
regulations which are in effect on the date of this Statement of Additional
Information; such laws and regulations may be changed by legislative or
administrative action. Shareholders are advised to consult their tax advisers
concerning their specific situations and the application of state and local
taxes.
-42-
<PAGE>
YIELD INFORMATION
The standardized annualized seven-day yields for the Shares of
the Fund are computed separately by determining the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing account in the Fund
having a balance of one Share at the beginning of the period, dividing the net
change in account value by the value of the account at the beginning of the
period to obtain the base period return, and multiplying the base period return
by (365/7). The net change in the value of an account in the Fund includes the
value of additional Shares purchased with dividends from the original Share and
dividends declared on both the original Share and any such additional Shares,
net of all fees that are charged to all shareholder accounts and to the
particular series of Shares in proportion to the length of the base period,
other than nonrecurring account or any sales charges. For any account fees that
vary with the size of the account, the amount of fees charged is computed with
respect to the Fund's mean (or median) account size. The capital changes to be
excluded from the calculation of the net change in account value are realized
gains and losses from the sale of securities and unrealized appreciation and
depreciation. In addition, the Fund may use effective compound yield quotations
for its Shares computed by adding 1 to the unannualized base period return
(calculated as described above), raising the sums to a power equal to 365
divided by 7, and subtracting 1 from the results.
The "tax-equivalent" yield of the Fund is computed by: (a)
dividing the portion of the yield (calculated as above) that is exempt from both
federal and New York State income taxes by one minus a stated combined federal
and New York State income tax rate; (b) dividing the portion of the yield
(calculated as above) that is exempt from federal income tax only by one minus a
stated federal income tax rate; and (c) adding the figures resulting from (a)
and (b) above to that portion, if any, of the yield that is not exempt from
federal income tax. Tax-equivalent yields assume a marginal federal income tax
rate of 28%, a New York State and New York City marginal income tax rate of
10.25% and an overall tax rate taking into account the federal tax deduction for
state and local taxes paid of 35.38%.
From time to time, in advertisements, sales literature or in
reports to shareholders, the yields of the Fund's Shares may be quoted and
compared to those of other mutual funds with similar investment objectives and
to stock or other relevant indices. For example, the yield of the Fund's Shares
may be compared to the Donoghue's Money Fund average, which is an average
compiled by Donoghue's MONEY FUND REPORT of Holliston, MA 01746, a widely
recognized independent publication that monitors the performance of money market
funds, or to the data prepared by Lipper Analytical Services, Inc., a widely
recognized independent
-43-
<PAGE>
service that monitors the performance of mutual funds. 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 current yields for the Fund's Shares may be obtained by
calling (800) 446-1012.
MISCELLANEOUS
As used in the Prospectus, "assets belonging to the Fund"
means the consideration received upon the issuance of Shares in the Fund,
together with all income, earnings, profits, and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and a
portion of any general assets of Excelsior Tax-Exempt Fund not belonging to a
particular portfolio of Excelsior Tax-Exempt Fund. In determining the net asset
value of the Fund's Shares, assets belonging to the Fund are charged with the
direct liabilities of the Fund and with a share of the general liabilities of
Excelsior Tax-Exempt Fund which are normally allocated in proportion to the
relative asset values of Excelsior Tax-Exempt Fund's portfolios at the time of
allocation. Subject to the provisions of Excelsior Tax-Exempt Fund's Charter,
determinations by the Board of Directors as to the direct and allocable
liabilities, and the allocable portion of any general assets with respect to the
Fund, are conclusive.
-44-
<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 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 rated "A-1". 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 on favorable business, financial, and economic conditions for the
obligor to meet its financial 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 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.
A-1
<PAGE>
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually 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:
"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.
A-2
<PAGE>
"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 investment grade. Risk are larger and
subject to more variation. Nevertheless, payment is expected.
"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
securities rated "F1".
"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
A-3
<PAGE>
financial commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
"C" - Securities possess high default risk. This designation
indicates 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 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 BankWatch:
"TBW-1" - This designation represents Thomson 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 BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson 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 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
A-4
<PAGE>
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.
"BB," "B," "CCC," "CC" and "C" - Debt is 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" - Debt is less vulnerable to non-payment 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.
"B" - Debt is more vulnerable to non-payment 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" - Debt is currently vulnerable to non-payment, 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 non-payment.
"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. This
rating is used when payments on an obligation are not made on the date due, even
if the applicable grace period has not
A-5
<PAGE>
expired, unless S & P believes that such payments will be made during such grace
period. "D" rating is also used upon the filing of a bankruptcy petition or the
taking of 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 rating is attached to highlight derivative, hybrid,
and certain other obligations that S & P believes may experience high volatility
or high variability in expected returns due to non-credit risks. Examples of
such obligations are: securities whose principal or interest return is indexed
to equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an "r"
symbol should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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
A-6
<PAGE>
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 operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes are designated by
the symbols, Aa1, A1, Baa1, Ba1 and B1.
The following summarizes the long-term debt ratings used by
Duff & Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.
"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below-average protection factors but
such protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of
these ratings is considered to be below investment grade. Although below
investment grade, debt rated "BB" is deemed likely to meet obligations when due.
Debt rated "B" possesses the risk that obligations will not be met when due.
Debt rated "CCC" is
A-7
<PAGE>
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
investment risk and are assigned only in case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is very 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 investment
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 investment risk and
indicate strong capacity for timely payment of financial commitments. This
capacity may, nevertheless, be more vulnerable to adverse changes in
circumstances or in economic conditions than bonds with 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 investment risk. The capacity for timely payment of financial commitments is
adequate, but adverse changes in circumstances and in economic conditions are
more likely to impair this category.
"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 changes 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.
"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
A-8
<PAGE>
contingent upon a sustained, favorable business and economic environment.
"CCC", "CC", "C" - Bonds have high default risk. Capacity for
meeting financial commitments is 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. Securities are not
meeting obligations and are extremely speculative. "DDD" designates the highest
potential for recovery on these securities, and "D" represents the lowest
potential for recovery.
To provide more detailed indications of credit quality, the
Fitch IBCA ratings from and including "AA" to "B" may be modified by the
addition of a plus (+) or minus (-) sign to show relative standing within these
major rating categories.
Thomson BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:
"AAA" - This designation represents the highest category
assigned by Thomson BankWatch to long-term debt and indicates that the ability
to repay principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to
repay principal and interest on a timely basis with limited incremental risk
compared to issues rated in the highest category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned
by Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of
A-9
<PAGE>
principal and interest. "BB" indicates the lowest degree of speculation and "CC"
the highest degree of speculation.
"D" - This designation indicates that the long-term
debt is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC"
may include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
Municipal Note Ratings
A Standard and Poor's rating reflects the liquidity concerns
and market access risks unique to notes due in three years or less. The
following summarizes the ratings used by Standard & Poor's Ratings Group for
municipal notes:
"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess very
strong characteristics 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,
enjoying strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality, with
margins of protection 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
A-10
<PAGE>
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,
carrying specific risk but having protection commonly regarded as required of an
investment security and not distinctly or predominantly speculative.
"SG" - This designation denotes speculative quality and lack
of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings
described under Commercial Paper Ratings for municipal notes.
A-11
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
FORM N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Included in Part A: None.
(2) Included in Part B: None.
(b) Exhibits:
(1) (a) Articles of Incorporation of Registrant dated August
7, 1984 (7).
(b) Articles Supplementary of Registrant dated April 27,
1990 (7).
(c) Articles Supplementary of Registrant concerning the
increase of authorized capital stock dated as of December 23, 1992
(7).
(d) Articles Supplementary of Registrant dated December
28, 1995 (4).
(2) (a) Amended and Restated Bylaws of Registrant dated
February 10, 1995 (7).
(b) Amendment No. 1 to Amended and Restated Bylaws of
Registrant dated May 16, 1997 (7).
(3) None.
(4) (a) Articles VI, VII, VIII and X of Registrant's Articles
of Incorporation dated August 7, 1984 (7).
(b) Articles I and IV of Registrant's Amended and Restated
By-Laws dated February 10, 1995 (7).
(5) (a) 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 Tax-Exempt Money,
Intermediate-Term Tax-Exempt and Long-Term Tax-Exempt Funds (6).
(b) 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 New York
Intermediate-Term Tax-Exempt Fund, Short-Term Tax-Exempt
Securities Fund and California Tax-Exempt Income Fund (6).
<PAGE>
(c) Sub-Advisory Agreement among U.S. Trust Connecticut
Company of Connecticut, United States Trust Company of New York
and United States Trust Company of California dated May 16, 1997
with respect to the California Tax-Exempt Income Fund (7).
(6) (a) Distribution Contract dated August 1, 1995 between
Registrant and Edgewood Services, Inc. (3).
(b) Exhibit A dated September 25, 1996 to the Distribution
Contract between Registrant and Edgewood Services, Inc. (5).
(7) None.
(8) (a) Custody Agreement dated September 1, 1995 (as amended
and restated on August 1, 1997) between Registrant and The Chase
Manhattan Bank (7).
(9) (a) Amended and Restated Administrative Services Plan and
Related Form of Shareholder Servicing Agreement dated February 21,
1994, as amended as of May 16, 1997 (7).
(b) Administration Agreement dated May 16, 1997 among
Registrant, Chase Global Funds Services Company, Federated
Administrative Services and U.S. Trust Company of Connecticut (6).
(c) Mutual Funds Transfer Agency Agreement dated as of
September 1, 1995 between Registrant and United States Trust
Company of New York (7).
(d) Mutual Funds Sub-Transfer Agency Agreement dated as of
September 1, 1995 between United States Trust Company of New York
and Chase Global Funds Services Company (7).
(10) Opinion of counsel (7).
(11) Consent of Drinker Biddle & Reath LLP (7).
(12) None.
(13) (a) Purchase Agreement between Registrant and Shearson
Lehman Brothers Inc. dated February 6, 1985 (7).
(b) Purchase Agreement between Registrant and Edgewood
Services, Inc. dated September 25, 1996 (5).
(14) None.
(15) None.
(16) (a) Schedule for computation of performance quotation
(1).
(b) Schedule for computation of performance quotation (2).
(17) None.
(18) None.
-2-
<PAGE>
Notes:
(1) Incorporated by reference to Registrant's and Excelsior Funds, Inc.'s
joint Post-Effective Amendments Nos. 12 and 10, respectively, to
their Registration Statements on Form N-1A filed May 31, 1991.
(2) Incorporated by reference to Registrant's Post-Effective Amendment
No. 15 to its Registration Statement on Form N-1A filed August 2,
1993.
(3) Incorporated by reference to Registrant's Post-Effective Amendment
No. 18 to its Registration Statement on Form N-1A filed August 1,
1995.
(4) Incorporated by reference to Registrant's Post-Effective Amendment
No. 19 to its Registration Statement on Form N-1A filed July 18,
1996.
(5) Incorporated by reference to Registrant's Post-Effective Amendment
No. 21 to its Registration Statement on Form N-1A filed March 31,
1997.
(6) Incorporated by reference to Registrant's Post-Effective Amendment
No. 23 to its Registration Statement on Form N-1A filed July 31,
1997.
(7) Filed herewith.
Item 25. Persons Controlled By or Under
Common Control with Registrant
Registrant is controlled by its Board of Directors.
Item 26. Number of Holders of Securities
The following information is as of May 6, 1998:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Class A Common Stock (Tax-Exempt Money Fund) 4,188
Class B Common Stock (Intermediate-Term Tax-Exempt Fund) 1,245
Class C Common Stock (Long-Term Tax-Exempt Fund) 837
Class D Common Stock (New York Intermediate-Term
Tax-Exempt Fund) 493
Class E Common Stock (California Tax-Exempt Income Fund) 169
Class F Common Stock (Short-Term Tax-Exempt
Securities Fund) 372
</TABLE>
Item 27. Indemnification
Article VII, Section 3 of Registrant's Articles of
Incorporation, filed as Exhibit (1)(a) hereto, and Article VI, Section 2 of
Registrant's Bylaws, filed as Exhibit (2)(a) hereto, provide for the
indemnification of Registrant's directors and officers. Indemnification of
Registrant's principal underwriter, custodian, transfer agent and
co-administrators is provided for, respectively, in Section 1.11 of the
Distribution Contract incorporated herein by reference to Exhibit (6)(a)
hereto, Section 12 of the Custody Agreement filed as Exhibit (8)(a) hereto,
Section 7 of the Mutual Funds Transfer Agency Agreement filed as Exhibit 9(c)
hereto, and Section 6 of the Administration Agreement incorporated herein by
reference to Exhibit 9(b) hereto. Registrant has obtained from a major
insurance carrier a directors' and officers' liability policy covering certain
types of errors and omissions.
-3-
<PAGE>
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.
-4-
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
(a) U.S Trust Company of Connecticut:
U.S. Trust Company of Connecticut ("U.S. Trust CT") 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.
<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 10035
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, United Investment and
Company of New York States Trust Company Fiduciary Services
114 West 47th Street of New York
New York, NY 10036
Director, William V. Ferdinand Managing Director Asset Management,
Managing U.S. Trust Company & CIO Fiduciary Services
Director & of Connecticut & Private Banking
CIO 225 High Ridge Road
Stamford, CT 06905
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust CT Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Director, W. Michael Funck President & CEO Asset Management,
President & U.S. Trust Company Fiduciary Services
CEO of Connecticut & Private Banking
225 High Ridge Road
Stamford, CT 06905
Vice Presi- Neil M. McDonnell Vice President & Asset Management,
dent & U.S. Trust Company Treasurer Fiduciary Services
Treasurer of Connecticut & Private Banking
225 High Ridge Road
Stamford, CT 06905
Vice Presi- Alberto Rodriguez Vice President & Asset Management,
dent & U.S. Trust Company Secretary Fiduciary Services
Secretary of Connecticut & Private Banking
225 High Ridge Road
Stamford, CT 06905
</TABLE>
(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 directors 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
51 Astor Place
New York, NY 10003
Director Samuel C. Butler Partner in Cravath, Law Firm
Cravath, Swaine Swaine & Moore
& Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Director Peter O. Crisp Chairman Venture
Venrock Inc. Capital
Room 5600
30 Rockefeller Plaza
New York, NY 10112
Director Antonia M. Grumbach Partner in Patter- Law Firm
Patterson, Belknap, son, Belknap, Webb
Webb & Tyler LLP & Tyler
1133 Avenue of the
Americas
New York, NY 10036
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NY Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
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 N.Y.
Officer
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 Paul W. Douglas Retired Chairman of Coal Mining,
250 Park Avenue The Pittston Company Transportation
Suite 1800 and Security
New York, NY 10177 Services
Director Frederic C. Hamilton Chairman of the Investment and
The Hamilton Companies Board Venture Capital
1560 Broadway
Suite 2000
Denver, CO 80202
Director John H. Stookey Corporate Director
Per Scholas Inc. and Trustee
131 Walnut Avenue
Bronx, New York 10454
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 & Bettex
Lincoln Building
60 East 42nd Street
New York, NY 10165
Director David A. Olsen Vice Chairman Risk & Insurance
Marsh & McLennan, Inc. Services
125 Broad Street
New York, NY 10004
Director Richard F. Tucker Retired Vice Chairman- Petroleum
P.O.Box 2072 Mobil Oil Corporation and Chemicals
New York, NY 10163
Director Carroll L. Wainright, Consulting Partner Law Firm
Jr. of Milbank, Tweed,
Milbank, Tweed, Hadley Hadley & McCloy
& McCloy
One Chase Manhattan Plaza
New York, NY 10005
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NY Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Director Ruth A. Wooden President & CEO Not for
The Advertising Profit Public
Council, Inc. Service
261 Madison Avenue Advertising
11th Floor
New York, NY 10016
Executive Paul K. Napoli Executive Asset Management,
Vice United States Trust Vice President Investment and
President Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10036
Director and Maribeth S. Rahe Vice Chairman Asset Management,
Vice Chair- United States Trust Investment and
man Company of New York Fiduciary Services
114 West 47th Street
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 U.S.
ment Officer New York, NY 10036 Trust N.Y.
Director, Jeffrey S. Maurer President and Asset Management,
President, United States Trust Chief Operating Investment and
and Chief Company of New York Officer Fiduciary Services
Operating 114 West 47th Street
Officer New York, NY 10036
Trustee/ Daniel P. Davison Chairman, Christie, Fine Art
Director Christie, Manson Manson & Woods Auctioneer
& Woods International, Inc.
International,Inc.
502 Park Avenue
New York, NY 10021
Trustee/ Orson D. Munn Chairman and Investment
Director Munn, Bernhard & Director of Munn, Advisory
Associates, Inc. Bernhard & Asso- Firm
6 East 43rd Street ciates, Inc.
28th Floor
New York, NY 10017
Executive John L. Kirby Executive Asset Management,
Vice United States Trust Vice President Investment and
President Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10030
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NY Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Executive Kenneth G. Walsh Executive Asset Management,
Vice United States Trust Vice President Investment and
President Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10030
Director Philip L. Smith Corporate Director and
P.O. Box 386 Trustee
Ponte Verde Beach, FL 32004
Executive John C. Hover, II Executive Asset Management,
Vice United States Trust Vice President Investment and
President Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10030
Executive John M. Deignan Executive Asset Management,
Vice United States Trust Vice President Investment and
President Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10030
</TABLE>
(c) Investment Sub-Adviser - United States Trust Company of
California.
United States Trust Company of California ("U.S. Trust California")
serves as sub-adviser with respect to the California Tax-Exempt Income Fund.
U.S. Trust California is a full-service state-chartered bank located in Los
Angeles, California. Set forth below are the names and principal businesses of
the directors and certain senior executive officers of U.S. Trust California,
including those who are engaged in any other business, profession, vocation, or
employment of a substantial nature.
<TABLE>
<CAPTION>
Position
with U.S.
Trust Principal Type of
California Name Occupation Business
- ---------- ---- ---------- --------
<S> <C> <C> <C>
Director and William R. Barrett, Jr. Managing Asset
Managing Director Director Management,
Investment
and
Fiduciary
Services
Director Thomas C. Clark Managing Asset
Director Management,
Investment
and
Fiduciary
Services
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Position
with U.S.
Trust Principal Type of
California Name Occupation Business
- ---------- ---- ---------- --------
<S> <C> <C> <C>
Director Jeffrey S. Maurer President Asset
and Chief Management,
Operating Investment
Officer and
Fiduciary
Services
Director/Managing Robert M. Raney Managing Director Asset
Director and Chief and Chief Management,
Investment Officer Investment Investment
Officer and
Fiduciary
Services
Director/President Gregory F. Sanford President and Asset
and Chief Operating Chief Operating Management,
Officer Officer Investment
and
Fiduciary
Services
Director/Chairman Franklin E. Ulf Chairman of the Asset
of the Board Board Management,
Investment
and
Fiduciary
Services
Director and Charles E. Wert Executive Vice Asset
Executive Vice President Management,
President Investment
and
Fiduciary
Services
</TABLE>
Item 29. Principal Underwriter
(a) Edgewood Services, Inc., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following open-end
investment companies: BT Advisor Funds, BT Pyramid Mutual Funds, BT Investment
Funds, BT Institutional Funds, Deutsche Portfolios, Deutsche Funds, Inc.,
Excelsior Funds, Inc., Excelsior Institutional Trust, Excelsior Funds, FTI
Funds, FundManager Portfolios, Great Plains Funds, Marketvest Funds, Marketvest
Funds, Inc., Old Westbury Funds, Inc. Robertsons Stephens Investment Trust,
WesMark Funds and WCT Funds.
(b) Names and Principal Positions and Offices with Offices with
Business Addresses the Distributor Registrant
------------------ --------------- ----------
Lawrence Caracciolo Director and President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829
Arthur L. Cherry Director, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829
-10-
<PAGE>
J. Christopher Donahue Director, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829
Ronald M. Petnuch Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829
Thomas P. Schmitt Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829
Thomas P. Scholes Vice President,
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829
Ernest L. Linane Assistant Vice President,
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829
S. Elliott Cohan Assistant Secretary, Assistant
5800 Corporate Drive Edgewood Services, Inc. Secretary
Pittsburgh, PA 15237-5829
Thomas J. Ward Assistant Secretary, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829
Kenneth W. Pegher, Jr. Treasurer, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829
(c) Not Applicable.
Item 30. Location of Accounts and Records
(1) United States Trust Company of New York, 114 W. 47th Street, New
York, NY 10036 (records relating to its functions as investment adviser and
transfer agent).
(2) U.S. Trust Company of Connecticut, 225 High Ridge Road, East
Building, Stamford, Connecticut 06905 (records relating to its function as
investment adviser and co-administrator).
(3) United States Trust Company of California, 515 South Flower
Street, Los Angeles, CA 90071 (records relating to its function as sub-adviser
to the California Tax-Exempt Income Fund).
(4) Edgewood Services, Inc., Clearing Operations, 5800 Corporate
Drive, Pittsburgh, PA 15237-5829 (records relating to its function as
distributor).
(5) Chase Global Funds Services Company, 73 Tremont Street, Boston,
Massachusetts 02108-3913 (records relating to its function as co-administrator
and sub-transfer agent).
(6) Federated Administrative Services, Federated Investors Tower,
Pittsburgh, PA 15222-3779 (records relating to its function as co-
administrator).
(7) The Chase Manhattan Bank, 3 Chase MetroTech Center, 8th Floor,
Brooklyn, NY 11245 (records relating to its function as custodian).
-11-
<PAGE>
(8) Drinker Biddle & Reath LLP, Philadelphia National Bank Building,
1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496 (Registrants'
Articles of Incorporation, Bylaws, and Minute Books).
Item 31. Management Services
Inapplicable.
Item 32. Undertakings
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest available Annual Report to
Shareholders which includes Management's Discussion of Registrant's performance,
upon request and without charge.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 (the "1933
Act") and the Investment Company Act of 1940, Excelsior Tax-Exempt Funds, Inc.
has duly caused this Post-Effective Amendment No. 24 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Philadelphia and
the Commonwealth of Pennsylvania on the 15th day of May, 1998.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
Registrant
*Frederick S. Wonham
------------------------------
Frederick S. Wonham, President
(Signature and Title)
Pursuant to the requirements of the 1933 Act, this Amendment No. 24
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*Frederick S. Wonham Chairman of the May 15, 1998
------------------------ Board, President
Frederick S. Wonham and Treasurer
*Joseph H. Dugan
------------------------
Joseph H. Dugan Director May 15, 1998
*Donald L. Campbell
------------------------
Donald L. Campbell Director May 15, 1998
*Wolfe J. Frankl
------------------------
Wolfe J. Frankl Director May 15, 1998
*Robert A. Robinson
------------------------
Robert A. Robinson Director May 15, 1998
*Alfred Tannachion
------------------------
Alfred Tannachion Director May 15, 1998
*W. Wallace McDowell, Jr.
------------------------
W. Wallace McDowell, Jr. Director May 15, 1998
*Jonathan Piel
------------------------
Jonathan Piel Director May 15, 1998
*Rodman L. Drake
------------------------
Rodman L. Drake Director May 15, 1998
* By: /s/ W. Bruce McConnel, III
---------------------------
W. Bruce McConnel, III, Attorney-in-Fact
</TABLE>
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
appoints Frederick S. Wonham and W. Bruce McConnel, III, and either of them,
his true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him and in his name, place and stead, in his capacity
as director/trustee or officer, or both, to execute amendments to Excelsior
Funds, Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional
Trust's, and Excelsior Funds' (collectively, the "Companies") respective
Registration Statements on Form N-1A pursuant to the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended (the "Acts") and
all instruments necessary or incidental in connection therewith pursuant to
said Acts and any rules, regulations, or requirements of the Securities and
Exchange Commission in respect thereof, and to file the same with the
Securities and Exchange Commission, and said attorney shall have full power
and authority, to do and perform in the name and on behalf of the undersigned
in any and all capacities, every act whatsoever requisite or necessary to be
done, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney may lawfully do
or cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Alfred C. Tannachion
-------------------------
Alfred C. Tannachion
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
appoints Frederick S. Wonham and W. Bruce McConnel, III, and either of them,
his true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him and in his name, place and stead, in his capacity
as director/trustee or officer, or both, to execute amendments to Excelsior
Funds, Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional
Trust's and Excelsior Funds' (collectively, the "Companies") respective
Registration Statements on Form N-1A pursuant to the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended (the "Acts") and
all instruments necessary or incidental in connection therewith pursuant to
said Acts and any rules, regulations, or requirements of the Securities and
Exchange Commission in respect thereof, and to file the same with the
Securities and Exchange Commission, and either of said attorneys shall have
full power and authority, to do and perform in the name and on behalf of the
undersigned in any and all capacities, every act whatsoever requisite or
necessary to be done, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that either of said
attorneys may lawfully do or cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Donald L. Campbell
-----------------------
Donald L. Campbell
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
appoints Frederick S. Wonham and W. Bruce McConnel, III, and either of them,
his true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him and in his name, place and stead, in his capacity
as director/trustee or officer, or both, to execute amendments to Excelsior
Funds, Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional
Trust's and Excelsior Funds' (collectively, the "Companies") respective
Registration Statements on Form N-1A pursuant to the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended (the "Acts") and
all instruments necessary or incidental in connection therewith pursuant to
said Acts and any rules, regulations, or requirements of the Securities and
Exchange Commission in respect thereof, and to file the same with the
Securities and Exchange Commission, and either of said attorneys shall have
full power and authority, to do and perform in the name and on behalf of the
undersigned in any and all capacities, every act whatsoever requisite or
necessary to be done, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that either of said
attorneys may lawfully do or cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Joseph H. Dugan
--------------------
Joseph H. Dugan
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
appoints Frederick S. Wonham and W. Bruce McConnel, III, and either of them,
his true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him and in his name, place and stead, in his capacity
as director/trustee or officer, or both, to execute amendments to Excelsior
Funds, Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional
Trust's and Excelsior Funds' (collectively, the "Companies") respective
Registration Statements on Form N-1A pursuant to the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended (the "Acts") and
all instruments necessary or incidental in connection therewith pursuant to
said Acts and any rules, regulations, or requirements of the Securities and
Exchange Commission in respect thereof, and to file the same with the
Securities and Exchange Commission, and either of said attorneys shall have
full power and authority, to do and perform in the name and on behalf of the
undersigned in any and all capacities, every act whatsoever requisite or
necessary to be done, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that either of said
attorneys may lawfully do or cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Robert A. Robinson
-----------------------
Robert A. Robinson
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
appoints Frederick S. Wonham and W. Bruce McConnel, III, and either of them,
his true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him and in his name, place and stead, in his capacity
as director/trustee or officer, or both, to execute amendments to Excelsior
Funds, Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional
Trust's and Excelsior Funds' (collectively, the "Companies") respective
Registration Statements on Form N-1A pursuant to the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended (the "Acts") and
all instruments necessary or incidental in connection therewith pursuant to
said Acts and any rules, regulations, or requirements of the Securities and
Exchange Commission in respect thereof, and to file the same with the
Securities and Exchange Commission, and either of said attorneys shall have
full power and authority, to do and perform in the name and on behalf of the
undersigned in any and all capacities, every act whatsoever requisite or
necessary to be done, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that either of said
attorneys may lawfully do or cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Wolfe J. Frankl
--------------------
Wolfe J. Frankl
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
appoints W. Bruce McConnel, III his true and lawful attorney-in-fact and agent
with full power of substitution and resubstitution, for him and in his name,
place and stead, in his capacity as director/trustee or officer, or both, to
execute amendments to Excelsior Funds, Inc.'s, Excelsior Tax-Exempt Funds,
Inc.'s, Excelsior Institutional Trust's and Excelsior Funds' (collectively,
the "Companies") respective Registration Statements on Form N-1A pursuant to
the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "Acts") and all instruments necessary or incidental in
connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and said
attorney shall have full power and authority, to do and perform in the name
and on behalf of the undersigned in any and all capacities, every act
whatsoever requisite or necessary to be done, as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney may lawfully do or cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Frederick S. Wonham
------------------------
Frederick S. Wonham
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
appoints Frederick S. Wonham and W. Bruce McConnel, III, and either of them,
his true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him and in his name, place and stead, in his capacity
as trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Fund's, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and
Exchange Commission in respect thereof, and to file the same with the
Securities and Exchange Commission, and either of said attorneys shall have
full power and authority, to do and perform in the name and on behalf of the
undersigned in any and all capacities, every act whatsoever requisite or
necessary to be done, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that either of said
attorneys may lawfully do or cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ Rodman L. Drake
--------------------
Rodman L. Drake
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
appoints Frederick S. Wonham and W. Bruce McConnel, III, and either of them,
his true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him and in his name, place and stead, in his capacity
as trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc,'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's
and Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and
Exchange Commission in respect thereof, and to file the same with the
Securities and Exchange Commission, and either of said attorneys shall have
full power and authority, to do and perform in the name and on behalf of the
undersigned in any and all capacities, every act whatsoever requisite or
necessary to be done, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that either of said
attorneys may lawfully do or cause to be done by virtue hereof.
Dated: May 16, 1997 /s/ W. Wallace McDowell
------------------------
W. Wallace McDowell
<PAGE>
EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
appoints Frederick S. Wonham and W. Bruce McConnel, III, and either of them,
his true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him and in his name, place and stead, in his capacity
as trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's
and Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and
Exchange Commission in respect thereof, and to file the same with the
Securities and Exchange Commission, and either of said attorneys shall have
full power and authority, to do and perform in the name and on behalf of the
undersigned in any and all capacities, every act whatsoever requisite or
necessary to be done, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that either of said
attorneys may lawfully do or cause to be done by virtue hereof.
Dated: May 17, 1997 /s/ Jonathan Piel
------------------
Jonathan Piel
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- --- ----------------------
(1)(a) Articles of Incorporation of Registration dated August 7,
1984.
(1)(b) Articles Supplementary of Registrant dated April 27, 1990.
(1)(c) Articles Supplementary of Registrant concerning the increase
of authorized capital stock dated as of December 23, 1992.
(2)(a) Amended and Restated Bylaws of Registrant dated February 10,
1995.
(2)(b) Amendment No. 1 to Bylaws of Registrant dated May 16, 1997.
(5)(c) Sub-Advisory Agreement among U.S. Trust Company of
Connecticut, United States Trust Company of New York and
United States Trust Company of California dated May 16, 1997
with respect to the California Tax-Exempt Income Fund.
(8)(a) Custody Agreement dated September 1, 1995 between Registrant
and The Chase Manhattan Bank.
(9)(a) Amended and Restated Administrative Services Plan and
Related Form of Shareholder Servicing Agreement dated
February 21, 1994, as amended as of May 16, 1997.
(9)(c) Mutual Funds Transfer Agency Agreement dated as of
September 1, 1995 between Registrant and United States Trust
Company of New York.
(9)(d) Mutual Funds Sub-Transfer Agency Agreement dated as of
September 1, 1995 between United States Trust Company of New
York and Chase Global Funds Services Company.
(10) Opinion of Counsel.
(11) Consent of Drinker Biddle & Reath LLP.
(13)(a) Purchase Agreement between Registrant and Shearson Lehman
Brothers Inc. dated February 6, 1985.
<PAGE>
Exhibit 1(a)
ARTICLES OF INCORPORATION
OF
U.S.T. MASTER TAX-EXEMPT FUNDS, INC.
* * * *
ARTICLE I
THE UNDERSIGNED, Wayne D. Moore, whose post office address is 1100
Philadelphia National Bank Building, Philadelphia, Pennsylvania 19107, being
at least eighteen years of age, does hereby act as an incorporator, under and
by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations and with the intention of forming a corporation.
ARTICLE II
The name of the Corporation is:
U S.T. MASTER TAX-EXEMPT FUNDS, INC.
ARTICLE III
The purpose for which the Corporation is formed is to act as
management investment company under the Investment Company Act of 1940.
ARTICLE IV
The Corporation is expressly empowered as follows:
(1) To hold, invest and reinvest its assets in securities an other
investments or to hold part or all of its assets in cash.
(2) To issue and sell shares of its capital stock in such amounts
and on such terms and conditions and for such purposes and for such amount or
kind of consideration as may now or hereafter be permitted by law.
<PAGE>
(3) To redeem, purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any manner
and to the extent now or hereafter permitted by law and by the Charter of the
Corporation.
(4) To enter into a written contract or contracts with any person or
persons providing for a delegation of the management of all or part of the
Corporation's securities portfolio(s) and also for the delegation of the
performance of various administrative or corporate functions, subject to the
direction of the Board of Directors. Any such contract or contracts may be
made with any person even though such person may be an officer, other
employee, director or stockholder of this Corporation or a corporation,
partnership, trust or association in which any such officer, other employee,
director or stockholder may be interested.
(5) To enter into a written contract or contracts appointing one or
more distributors or agents or both for the sale of the shares of the
Corporation on such terms and conditions as the Board of Directors of this
Corporation may deem reasonable and proper, and to allow such person or
persons a commission on the sale of such shares. Any such contract or
contracts may be made with any person even though such person may be an
officer, other employee, director or stockholder of this Corporation or a
corporation, partnership, trust or association in which any such officer,
other employee, director or stockholder may be interested.
(6) To enter into a written contract or contracts employing such
custodian or custodians for the safekeeping of the property of the Corporation
and of its shares, such dividend disbursing agent or agents, and such transfer
agent or agents and registrar or registrars for its shares, on such terms and
conditions as the Board of Directors of the Corporation may deem reasonable
and proper for the conduct of the affairs of the Corporation, and to pay the
fees and disbursements of such custodians, dividend disbursing agents,
transfer agents, and registrars out of the income and/or any other property of
the Corporation. Notwithstanding any other provision of these Articles of
Incorporation or the By-Laws of the Corporation, the Board of Directors may
cause any or all of the property of the Corporation to be transferred to, or
to be acquired and held in the name of, any custodian so appointed or any
nominee or nominees of the Corporation or nominee or nominees of such
custodian satisfactory to the Board of Directors.
(7) To employ the same person in any multiple capacity under
Sections (4), (5) and (6) of this Article IV who
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may receive compensation from the Corporation in as many capacities in which
such person shall serve the Corporation.
(8) To do any and all such further acts or things and to exercise
any and all such further owners or rights as may be necessary, incidental,
relative, conducive, appropriate or desirable for the accomplishment, carrying
out or attainment of the purposes stated in Article III hereof.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by
the General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE V
The post office address of the principal office of the Corporation in the
State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation
in this State is The Corporation Trust Incorporated, a corporation of this
State, and the post office address of the resident agent is 32 South Street,
Baltimore, Maryland 21202.
ARTICLE VI
(1) The total number of shares of capital stock which the Corporation
shall have authority to issue is Four Billion (4,006,000,000) shares, of the
par value of One Mill ($0.001) per share and of the aggregate par value of
Four Million Dollars ($4,000,000).
(2) Any fractional share shall carry proportionately all the rights of a
whole share, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.
(3) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of the Charter and the ByLaws of the
Corporation.
(4) Except to the extent otherwise provided by applicable law, the Board
of Directors shall have authority by resolution to classify and reclassify any
authorized but unissued shares of capital stock from time to time by setting
or changing in any one or more respects the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
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qualifications or terms or conditions of redemption of the capital stock. The
power of the Board of Directors to classify or reclassify any of the shares of
capital stock shall include, without limitation, authority to classify or
reclassify any such stock into one or more classes and to divide and classify
shares of any class into one or more series of such class.
Subject to the Board of Directors' authority to classify and reclassify
any authorized but unissued shares as hereinabove provided, Two Billion
(2,000,000,000) shares of capital stock of the Corporation (of the aggregate
par value of Two Millon Dollars ($2,000,000) are classified and designated as
Class A Common Stock; One Billion (1,000,000,000) shares of capital stock of
the Corporation (of the aggregate par value of One Million Dollars
($1,000,000) are classified and designated as Class B Common Stock and One
Billion (1,000,000,000) shares of capital stock of the Corporation (of the
aggregate par value of One Million Dollars ($1,000,000)) are classified and
designated as Class C Common Stock.
(5) Subject to the power of the Board of Directors to classify and
reclassify any authorized but unissued shares of capital stock pursuant to
Section (4) of this Article VI, shares of capital stock of the Corporation
shall have the following preferences, conversion and other rights, voting
powers restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption:
(A) Assets Belonging to a Class. All consideration received by the
Corporation for the issue or sale of stock of any class of capital stock,
together with all income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation
thereof, any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, and any general assets of the
Corporation not belonging to any particular class which the Board of
Directors may, in its sole discretion, allocate to a class, shall
irrevocably belong to the class of shares of capital stock with respect
to which such assets, payments or funds were received or allocated for
all purposes, subject only to the rights of creditors, and shall be so
handled upon the books of account of the Corporation. Such assets,
income, earnings, profits and proceeds thereof including any proceeds
derived from the sale, exchange or liquidation thereof, and any assets
derived from any reinvestment of such proceeds in whatever form, are
herein referred to as "assets belonging to" such class.
(B) Liabilities Belonging to a Class. The assets belonging to any
class of capital stock shall be charged with the liabilities in respect
to such class, and shall
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also be charged with such class's proportionate share of the general
liabilities of the Corporation as determined by comparing, before the
allocation of the general liabilities of the Corporation, the net asset
value of such class with the aggregate net asset value of all of the
several classes of capital stock of the Corporation. The liabilities so
allocated to a class are herein referred to as "liabilities belonging to"
such class.
(C) Dividends and Distributions. Shares of each class of capital
stock shall be entitled to such dividends and distributions, in stock or
in cash or both, as may be declared from time to time by the Board of
Directors, acting in its sole discretion, with respect to such class;
provided, however, that dividends and distributions on shares of a class
of capital stock shall be paid only out of the lawfully available assets
belonging to such class as such phrase is defined in Section (5)(A) of
this Article VI.
(D) Liquidating Dividends and Distributions. In the event of the
liquidation or dissolution of the Corporation, stockholders of each class
of capital stock shall be entitled to receive, as a class, out of the
assets of the Corporation available for distribution to stockholders, but
other than general assets not belonging to any particular class of stock,
the assets belong to such class; and the assets so distributable to the
stockholders of any class of capital stock shall be distributed among
such stockholders in proportion to the number of shares of such class
held by them and recorded on the books of the Corporation. In the event
that there are any general assets of the Corporation not belonging to any
particular class of stock and available for distribution, the
stockholders of each class of the Corporation's capital stock shall
receive a proportionate share of such general assets as determined by
comparing, before the allocation of such general assets, the net asset
value of such class with the aggregate net asset value of all of the
several classes of capital stock of the Corporation.
(E) Voting. Each stockholder of each class of capital stock shall be
entitled to one vote for each share of capital stock, irrespective of the
class, then standing in his name on the books of the Corporation, and on
any matter submitted to a vote of stockholders, all shares of capital
stock then issued and outstanding and entitled to vote shall be voted in
the aggregate and not by class except that: (i) when expressly required
by law, or when otherwise permitted by the Board of Directors acting in
its sole discretion, shares of capital stock shall be voted by individual
class and (ii) only shares of capital stock of the respective
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class or classes affected by a matter shall be entitled to vote on
such matter.
(F) Redemption. To the extent the Corporation has funds or other
property legally available therefor, each holder of shares of capital
stock of the Corporation shall be entitled to require the Corporation to
redeem all or any part of the shares of capital stock of the Corporation
standing in the name of such holder on the books of the Corporation, and
all shares of capital stock issued by the Corporation shall be subject to
redemption by the Corporation, at the redemption price of such shares as
in effect from time to time and in the manner determined by the By-Laws
or the Board of Directors of the Corporation in accordance with the
provisions hereof, subject to the right of the Board of Directors of the
Corporation to suspend the right of redemption of shares of capital stock
of the Corporation or postpone the date of payment of such redemption
price in accordance with provisions of applicable law. Without limiting
the generality of the foregoing, the Corporation shall, to the extent
permitted by applicable law, have the right at any time to redeem the
shares owned by any holder of capital stock of the Corporation (i) if
such redemption is, in the opinion of the Board of Directors of the
Corporation, desirable in order to prevent the Corporation from being
deemed a "personal holding company" within the meaning of the Internal
Revenue Code of 1954, as amended, (ii) if the value of such shares in the
account maintained by the Corporation or its transfer agent for any class
of capital stock is less than Five Hundred Dollars ($500.00); provided,
however, that each stockholder shall be notified that the value of his
account is less than Five Hundred Dollars ($500.00) and allowed sixty
(60) days to make additional purchases of shares before such redemption
is processed by the Corporation, or (iii) if it should be appropriate to
carry out the Corporation's responsibilities under the Investment Company
Act of 1940, as amended, subject to such further terms and conditions as
the Board of Directors of the Corporation may from time to time adopt.
The redemption price of shares of any class of capital stock of the
Corporation shall, except as otherwise provided in this Section 5(F), be
the net asset value thereof as determined by the Board of Directors of
the Corporation from time to time in accordance with the provisions of
applicable law, less such redemption fee or other charge if any, as may
be fixed by resolution of the Board of Directors of the Corporation.
Payment of the redemption price shall be made in cash by the Corporation
at such time and in such manner as may be determined from time to time by
the Board of Directors of the Corporation unless, in the opinion of the
Board of Directors, which shall be conclusive, conditions exist which
make payment wholly in cash unwise or
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undesirable; in such event the Corporation may make payment wholly or
partly by securities or other property included in the assets
belonging or allocable to the class of the shares redemption of which
is being sought, the value of which shall be determined as provided
herein. When the net income with respect to any particular class of
capital stock is negative or whenever deemed appropriate by the Board
of Directors in order to carry out the Corporation's responsibilities
under the Investment Company Act of 1940, as amended, the Corporation
may, without payment of monetary compensation but in consideration of
the interest of the Corporation and the stockholders in maintaining a
constant net asset value per share of such class, redeem pro rata
from each stockholder of record on such day, such number of full and
fractional shares of the Corporation's capital stock of such class,
as may be necessary to reduce the aggregate number of outstanding
shares in order to permit the net asset value thereof to remain
constant.
(G) Conversion. Each holder of any class of capital stock of
the Corporation, who surrenders his share certificate in good
delivery form to the Corporation or, if the shares in question are
not represented by certificates, who delivers to the Corporation a
written request in good order signed by the stockholder, shall, to
the extent permitted by the By-Laws or by resolution of the Board of
Directors, be entitled to convert the shares in question on the
basis hereinafter set forth, into shares of any other class of
capital stock of the Corporation with respect to which conversion is
permitted by applicable law. The Corporation shall determine the net
asset value, as provided herein, of the shares to be converted and
may deduct therefrom a conversion cost, in an amount determined
within the discretion of the Board of Directors. Within five (5)
business days after such surrender and payment of any conversion
cost, the Corporation shall issue to the stockholder such number of
shares of stock of the class desired as, taken at the net asset
value thereof determined as provided herein in the same manner and
at the same time as that of the shares surrendered, shall equal the
net asset value of the shares surrendered, less any conversion cost
as aforesaid. Any amount representing a fraction of a share may be
paid in cash at the option of the Corporation. Any conversion cost
may be paid and/or assigned by the Corporation to the underwriter
and/or to any other agency, as it may elect.
(H) Restrictions on Transferability. If, in the opinion of the
Board of Directors of the Corporation, concentration in the
ownership of shares of capital stock might cause the Corporation to
be deemed a personal holding company within the meaning of the
Internal Revenue Code, as
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now or hereafter in force, the Corporation may at any time and from
time to time refuse to give effect on the books of the Corporation to
any transfer or transfers of any share or shares of capital stock in
an effort to prevent such personal holding company status.
(I) Termination of a Class. Without the vote of the shares
of any class of capital stock of the Corporation then outstanding
(unless stockholder approval is otherwise required by applicable
law), the Corporation may, if so determined by the Board of
Directors:
(1) Sell and convey the assets belonging to a class
of capital stock to another trust or corporation that is a management
investment company (as defined in the Investment Company Act of 1940)
and is organized under the laws of any state of the United States for
consideration which may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or contingent,
belonging to such class and which may include securities issued by
such trust or corporation. Following such sale and conveyance, and
after making provision for the payment of any liabilities belonging
to such class that are not assumed by the purchaser of the assets
belonging to such class, the Corporation may, at its option, redeem
all outstanding shares of such class at the net asset value thereof
as determined by the Board of Directors in accordance with the
provisions of applicable law, less such redemption fee or other
charge, if any, as may be fixed by resolution of the Board of
Directors. Notwithstanding any other provision of the Charter of the
Corporation to the contrary, the redemption price may be paid in any
combination of cash or other assets belonging to the Class, including
but not limited to the distribution of the securities or other
consideration received by the Corporation for the assets belonging to
such class upon such conditions as the Board of Directors deems, in
its sole discretion, to be appropriate consistent with applicable law
and the Charter of the Corporation;
(2) Sell and convert the assets belonging to a
class of capital stock into money and, after making provision for the
payment of all obligations, taxes and other liabilities, accrued or
contingent, belonging to such class, the Corporation may, at its
option, (i) redeem all outstanding shares of such class at the net
asset value thereof as determined by the Board of Directors in
accordance with the provisions of applicable law, less such
redemption fee or other charge, if any, as may be fixed by resolution
of the Board of Directors upon such conditions as the Board of
Directors deems, in its sole discretion, to be appropriate consistent
with applicable law and the Charter
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of the Corporation, or (ii) combine the assets belonging to such
class following such sale and conversion with the assets belonging to
any one or more other classes of capital stock of the Corporation
pursuant to and in accordance with Section (5)(I)(3) of this Article
VI; or
(3) Combine the assets belonging to a class of
capital stock with the assets belonging to any one or more other
classes of capital stock of the Corporation if the Board of Directors
reasonably determines that such combination will not have a material
adverse effect on the stockholders of any class of capital stock of
the Corporation participating in such combination. In connection with
any such combination of assets the shares of any class of capital
stock of the Corporation then outstanding may, if so determined by
the Board of Directors, be converted into shares of any other class
or classes of capital stock of the Corporation with respect to which
conversion is permitted by applicable law, or may be redeemed, at the
option of the Corporation, at the net asset value thereof as
determined by the Board of Directors in accordance with the
provisions of applicable law, less such redemption fee or other
charge, or conversion cost, if any, as may be fixed by resolution of
the Board of Directors upon such conditions as the Board of Directors
deems, in its sole discretion, to be appropriate consistent with
applicable law and the Charter of the Corporation. Notwithstanding
any other provision of these Articles of Incorporation to the
contrary, any redemption price, or part thereof, paid pursuant to
this Section (5)(I)(3) may be paid in shares of any other existing or
future class or classes of capital stock of the Corporation.
ARTICLE VII
(1) The number of initial directors of the Corporation shall
be three (3) provided that: (A) The number of directors of the Corporation may
be increased or decreased pursuant to the ByLaws of the Corporation but shall
never be less than three (3), except as provided in this Article VII; (B) if
there is no capital stock of the Corporation outstanding the number of
directors may be less than three (3) not less than one (1); and (C) if there
is capital stock of the Corporation outstanding and so long as there are less
than three (3) stockholders of the Corporation, the number of directors may be
less than three (3) but not less than the number of stockholders. The names of
the directors who shall act until the first annual meeting of stockholders or
until their successors are duly elected and qualify are:
Donald L. Campbell
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Joseph H. Dugan
Karen A. G. Loud
(2) No holder of stock of the Corporation shall, as such
holder, have any right to purchase or subscribe for any shares of the capital
stock of the Corporation or any other security of the Corporation which it may
issue or sell (whether out of the number of shares authorized by the Charter,
or out of any shares of the capital stock of the Corporation acquired by it
after the issue thereof, or otherwise) other than such right, if any, as the
Board of Directors, in its discretion, may determine.
(3) Each director and each officer of the Corporation shall
be indemnified by the Corporation to the full extent permitted the Investment
Company Act of 1940 and applicable state corporation law, now or hereafter in
force, including advance of related expenses.
ARTICLE VIII
Any determination made in good faith and, so far as
accounting matters are involved in accordance with generally accepted
accounting principles, by or pursuant to the direction of the Board of
Directors as to the amount and value of assets, obligations or liabilities of
the Corporation, as to the amount of net income of the Corporation from
dividends and interest for any period or amounts at any time legally available
for the payment of dividends, as to the amount of any reserves or charges set
up and the propriety thereof, as to the time of or purpose for creating
reserves or as to the use, alteration or cancellation of any reserves or
charges (whether or not any obligation or liability for which such reserves or
charges shall have been created shall have been paid or discharged or shall be
then or thereafter required to be paid or discharged), as to the value of any
security owned by the Corporation, as to the allocation of any assets or
Liabilities to a class or classes of capital stock, as to the times at which
shares of any class of capital stock shall be deemed to be outstanding or no
longer outstanding, or as to any other matters relating to the issuance, sale,
redemption or other acquisition or disposition of securities or shares of
capital stock of the Corporation, and any reasonable determination made in
good faith by the Board of Directors as to whether any transaction constitutes
a purchase of securities on "margin," a sale of securities "short," or an
underwriting of the sale of, or a participation in any underwriting or selling
group in connection with the public distribution of, any securities, shall be
final and conclusive, and shall be binding upon the Corporation and all
holders of its capital stock, past, present and future, and shares of the
capital stock of the Corporation are issued and sold on the condition and
understanding, evidenced by the purchase of shares
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of capital stock or acceptance of share certificates, that any and all such
determinations shall be binding as aforesaid. No provision of the Charter of
the Corporation shall be effective to (i) require a waiver of compliance with
any provision of the Securities Act of 1933, as amended, or the Investment
Company Act of 1940, as amended, or of any valid rule, regulation or order of
the Securities and Exchange Commission thereunder or (ii) protect or purport
to protect any director or officer of the Corporation against any liability to
the Corporation or its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
ARTICLE IX
The duration of the Corporation shall be perpetual.
ARTICLE X
(1) The Corporation reserves the right from time to time to
make any amendments to its Charter which may now or hereafter be authorized by
law, including any amendments changing the terms or contract rights, as
expressly set forth in its Charter, of any of its outstanding stock by
classification, reclassification or otherwise, but no such amendment which
changes such terms or contract rights of any of its outstanding stock shall be
valid unless such amendment shall have been authorized by not less than a
majority, of the aggregate number of the votes entitled to be cast thereon by
a vote at a meeting.
(2) Notwithstanding any provision of the General Laws of the
State of Maryland requiring any action to be taken or authorized by the
affirmative vote of the holders of a designated proportion of the votes of all
classes or of any class of stock of the Corporation, such action shall be
effective and valid if taken or authorized by the affirmative vote of the
holders of a majority of the total number of shares outstanding and entitled
to vote thereon, except as otherwise required by applicable law or otherwise
provided herein.
(3) So long as permitted by Maryland law, the books of the
Corporation may be kept outside of the State of Maryland at such place or
places as may be designated from time to time by the Board of Directors or in
the By-Laws of the Corporation.
(4) In furtherance, and not in limitation, of the powers
conferred by the laws of the State of Maryland, the Board of Directors is
expressly authorized:
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(A) To make, alter or reseal the By-Laws of the Corporation,
except where such power is reserved by the ByLaws to the
stockholders, and except as otherwise required, by the Investment
Company Act of 1940, as amended.
(B) From time to time to determine whether and to what
extent and at what times and places and under what conditions and
regulations the books and accounts of the Corporation, or any of them
other than the stock ledger, shall be open to the inspection of the
stockholders, and no stockholder shall have any right to inspect any
account or book or document of the Corporation, except as conferred
by law or authorized by resolution of the Board of Directors or of
the stockholders.
(C) Without the assent or vote of the stockholders, to
authorize the issuance from time to time of shares of the stock of
any class of the Corporation, whether now or hereafter authorized,
and securities convertible into shares of its stock of any class or
classes, whether now or hereafter authorized, for such consideration
as the Board of Directors may deem advisable.
(D) Without the assent or vote of the stockholders, to
authorize and issue obligations of the Corporation, secured and
unsecured, as the Board of Directors may determine, and to authorize
and cause to be executed mortgages and liens upon the property of the
Corporation, real or personal.
(E) Notwithstanding anything in these Articles of
Incorporation to the contrary, to establish in its absolute
discretion in accordance with the provisions of applicable law the
basis or method for determining the value of the assets belonging to
any class, the amount of the liabilities belonging to any class, the
allocation of any assets or liabilities to any class, the net asset
value of any class, the times at which shares of any class shall be
deemed to be outstanding or no longer outstanding and the net asset
value of each share of any class of capital stock of the Corporation
for purposes of sales, redemptions, repurchases of shares or
otherwise.
(F) To determine in accordance with generally accepted
accounting principles and practices what constitutes net profits,
earrings, surplus or net assets in excess of capital, and to
determine what accounting periods shall be used by the Corporation
for any purpose, whether annual or any other period, including daily;
to set apart out of any funds of the Corporation such reserves for
such purposes as it shall determine and to abolish the same; to
declare and pay any dividends and distributions in cash, securities
or other property from surplus or any funds legally available
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therefor, at such intervals (which may be as frequently as daily) or
on such other periodic basis, as it shall determine; to declare such
dividends or distributions by means of a formula or other method of
determination, at meetings held less frequently than the frequency of
the effectiveness of such declarations; to establish payment dates
for dividends or any other distributions on any basis, including
dates occurring less frequently than the effectiveness of
declarations thereof; and to provide for the payment of declared
dividends on a date earlier or later than the specified payment date
in the case of stockholders of the Corporation redeeming their entire
ownership of shares of any class of the Corporation.
(G) In addition to the powers and authorities granted herein
and by statute expressly conferred upon it, the Board of Directors is
authorized to exercise all such powers and do all such acts and
things as may be exercised or done by the Corporation, subject,
nevertheless, to the provisions of Maryland law, these Articles of
Incorporation and the ByLaws of the Corporation.
IN WITNESS WHEREOF, the undersigned incorporator of
U.S.T. MASTER TAX-EXEMPT FUNDS, INC. hereby executes the
foregoing Articles of Incorporation and acknowledges the same to
be his act.
Dated as of the 7th day of August, 1984.
/s/ Wayne D. Moore
--------------------------------------
Wayne D. Moore
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STATE OF MARYLAND EXHIBIT 1(b)
STATE DEPARTMENT OF ASSESSMENTS AND TAXATION
301 West Preston Street Baltimore, Maryland 21201
DATE: JUNE 01, 1990
THIS IS TO ADVISE YOU THAT YOUR ARTICLES SUPPLEMENTARY FOR U.S.T.
MASTER TAX-EXEMPT FUNDS, INC. WERE RECEIVED AND APPROVED FOR RECORD ON JUNE 1,
1990 AT 2:14 PM.
FEE PAID: 543.00
JOSEPH V. STEWART
CHARTER SPECIALIST
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
ARTICLES SUPPLEMENTARY
UST Master Tax-Exempt 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 has reclassified the unissued shares
of the Company's Class A Common Stock, Class B Common Stock and Class C Common
Stock pursuant to the following resolutions:
RESOLVED, that pursuant to Article VI of the Articles of
Incorporation of UST Master Tax-Exempt Funds, Inc. (the "Charter"), (1)
750,000,000 authorized and unissued shares currently classified as
Class A Common Stock (of the par value of One Mill ($.001) per share
and of the aggregate par value of Seven Hundred Fifty Thousand Dollars
($750,000)), be, and hereby are, reclassified into a separate series of
such Class to be known as Class A Common Stock-Special Series 1; (2)
500,000,000 authorized and unissued shares currently classified as
Class B Common Stock (of the par value of One Mill ($.001) per share
and of the aggregate par value of Five Hundred Thousand Dollars
($500,000)), be, and hereby are, reclassified into a separate series of
such Class to be known as Class B Common Stock - Special Series 1; and
(3) 500,000,000 authorized and unissued shares currently classified as
Class C Common Stock (of the par value of One Mill ($.001) per share
and of the aggregate par value of Five Hundred Thousand Dollars
($500,000)), be, and hereby are, reclassified into a separate series of
such Class to be known as Class C Common Stock - Special Series 1;
<PAGE>
Class A Common Stock
FURTHER RESOLVED, that all consideration received by the Company
for the issue or sale of each share of Special Series 1 of Class A
Common Stock shall be invested or reinvested with the consideration
received by the Company for the issue and sale of all other shares now
or hereafter authorized of Class A Common Stock (irrespective of
whether said shares have been designated as part of a series of said
Class and, if so designated, irrespective of the particular series
designation), together with all income, earnings, profits and proceeds
derived from the sale, exchange or liquidation thereof, any funds or
payments derived from any reinvestment of such proceeds in whatever
form the same may be, and any general assets of the Company allocated
to the shares of such Special Series 1 (or to such other shares) by the
Board of Directors of the Company in accordance with the Company's
Charter;
FURTHER RESOLVED, that the assets belonging to Class A Common
Stock, including Class A Common Stock - Special Series 1, and any other
series of Class A Common Stock hereafter authorized, shall be charged
with the expenses and liabilities of the Company in respect of Class A
Common Stock, Class A Common Stock - Special Series 1 and any other
series of Class A Common Stock hereafter authorized, and in respect of
any general expenses and liabilities of the Company allocated to Class
A Common Stock by the Board of Directors in accordance with the
Company's Charter, except that only shares of Special Series 1 of Class
A Common Stock shall bear: (x) the expenses and liabilities of payments
to institutions under any agreement entered into by or on behalf of the
Company which provides for services exclusively for customers of such
institution who beneficially own shares of such Special Series 1, and
(y) any other liabilities and expenses which the Board of Directors
determines are directly attributable to shares of such Special Series 1
and which are to be borne solely by such Special Series 1 shares;
FURTHER RESOLVED, that income, earnings, gain or loss on the
assets belonging to Class A Common Stock (including Class A Common
Stock - Special Series 1 and any other series of Class A Common Stock
hereafter authorized) shall be allocated among Class A Common Stock,
Class A Common Stock - Special Series 1 and any other series of Class A
Common Stock hereafter authorized pro rata in accordance with the
number of shares outstanding of Class A Common Stock, Class A Common
Stock - Special Series 1 and any other new series of Class A Common
Stock hereafter authorized;
-3-
<PAGE>
FURTHER RESOLVED, that dividends on shares of Class A Common
Stock, Class A Common Stock - Special Series 1 and any other series of
Class A Common Stock hereafter authorized, shall be paid only out of
the assets allocable to such respective series less the liabilities and
expenses allocable to such series in accordance with the preceding
resolutions;
FURTHER RESOLVED, that in the event of the liquidation or
dissolution of the Company's portfolio consisting of Class A Common
Stock, Class A Common Stock - Special Series 1 and any other series of
Class A Common Stock hereafter authorized, the stockholders of each
such series shall be entitled to receive, out of the assets of this
portfolio available for distribution, only the assets allocable to each
such series, respectively;
FURTHER RESOLVED, that each share of Special Series 1 of Class A
Common Stock shall otherwise have the same preferences, conversion and
other rights, voting powers, restrictions, limitations, qualifications
and terms and conditions of redemption as each other share of such
Special Series 1 and all other shares now or hereafter authorized of
Class A Common Stock (irrespective of whether said shares have been
designated as part of a series of said Class and, if so designated,
irrespective of the particular series designation), except that on any
matter that pertains to the agreements or any of the liabilities or
expenses referred to in the immediately preceding resolution and that
is submitted to a vote of shareholders, only shares of Special Series 1
of Class A Common Stock bearing such liabilities and expenses shall be
entitled to vote, except that (i) if said matter affects shares of the
Company other than shares of such Special Series 1, such other affected
shares shall also be entitled to vote, and in such case shares of
Special Series 1 of Class A Common Stock shall be voted in the
aggregate together with such other affected shares and not by class or
series except where otherwise required by law or permitted by the Board
of Directors of the Company; and (ii) if said matter does not affect
shares of Special Series 1 of Class A Common Stock bearing such
liabilities and expenses, said shares shall not be entitled to vote
(except where required by law or permitted by the Board of Directors)
even though the matter is submitted to a vote of the holders of shares
other than shares of such Special Series 1;
-4-
<PAGE>
Class B Common Stock
FURTHER RESOLVED, that all consideration received by the Company
for the issue or sale of each share of Special Series 1 of Class B
Common Stock shall be invested or reinvested with the consideration
received by the Company for the issue and sale of all other shares now
or hereafter authorized of Class B Common Stock (irrespective of
whether said shares have been designated as part of a series of said
Class and, if so designated, irrespective of the particular series
designation), together with all income, earnings, profits and proceeds
derived from the sale, exchange or liquidation thereof, any funds or
payments derived from any reinvestment of such proceeds in whatever
form the same may be, and any general assets of the Company allocated
to the shares of such Special Series 1 (or to such other shares) by the
Board of Directors of the Company in accordance with the Company's
Charter;
FURTHER RESOLVED, that the assets belonging to Class B Common
Stock, including Class B Common Stock - Special Series 1, and any other
series of Class B Common Stock hereafter authorized, shall be charged
with the expenses and liabilities of the Company in respect of Class B
Common Stock, Class B Common Stock - Special Series 1 and any other
series of Class B Common Stock hereafter authorized, and in respect of
any general expenses and liabilities of the Company allocated to Class
B Common Stock by the Board of Directors in accordance with the
Company's Charter, except that only shares of Special Series 1 of Class
B Common Stock shall bear: (x) the expenses and liabilities of payments
to institutions under any agreement entered into by or on behalf of the
Company which provides for services exclusively for customers of such
institution who beneficially own shares of such Special Series 1, and
(y) any other liabilities and expenses which the Board of Directors
determines are directly attributable to shares of such Special Series 1
and which are to be borne solely by such Special Series 1 shares;
FURTHER RESOLVED, that income, earnings, gain or loss on the
assets belonging to Class B Common Stock (including Class B Common
Stock - Special Series 1 and any other series of Class B Common Stock
hereafter authorized) shall be allocated among Class B Common Stock,
Class B Common Stock - Special Series 1 and any other series of Class B
Common Stock hereafter authorized pro rata in accordance with the
number of shares outstanding of Class B Common Stock, Class B Common
Stock - Special Series 1 and any other new series of Class B Common
Stock hereafter authorized;
-5-
<PAGE>
FURTHER RESOLVED, that dividends on shares of Class B Common
Stock, Class B Common Stock - Special Series 1 and any other series of
Class B Common Stock hereafter authorized, shall be paid only out of
the assets allocable to such respective series less the liabilities and
expenses allocable to such series in accordance with the preceding
resolutions;
FURTHER RESOLVED, that in the event of the liquidation or
dissolution of the Company's portfolio consisting of Class B Common
Stock, Class B Common Stock - Special Series 1 and any other series of
Class B Common Stock hereafter authorized, the stockholders of each
such series shall be entitled to receive, out of the assets of this
portfolio available for distribution, only the assets allocable to each
such series, respectively;
FURTHER RESOLVED, that each respective share of Special Series 1
of Class B Common Stock shall otherwise have the same preferences,
conversion and other rights, voting powers, restrictions, limitations,
qualifications and terms and conditions of redemption as each other
share of such Special Series 1 and all other shares now or hereafter
authorized of Class B Common Stock (irrespective of whether said shares
have been designated as part of a series of said Class and, if so
designated, irrespective of the particular series designation), except
that on any matter that pertains to the agreements or any of the
liabilities or expenses referred to in the immediately preceding
resolution and that is submitted to a vote of shareholders, only shares
of Special Series 1 of Class B Common Stock bearing such liabilities
and expenses shall be entitled to vote, except that (i) if said matter
affects shares of the Company other than shares of such Special Series
1, such other affected shares shall also be entitled to vote, and in
such case shares of Special Series 1 of Class B Common Stock shall be
voted in the aggregate together with such other affected shares and not
by class or series except where otherwise required by law or permitted
by the Board of Directors of the Company; and (ii) if said matter does
not affect shares of Special Series 1 of Class B Common Stock bearing
such liabilities and expenses, said shares shall not be entitled to
vote (except where required by law or permitted by the Board of
Directors) even though the matter is submitted to a vote of the holders
of shares other than shares of such Special Series 1;
-6-
<PAGE>
Class C Common Stock
FURTHER RESOLVED, that all consideration received by the Company
for the issue or sale of each share of Special Series 1 of Class C
Common Stock shall be invested or reinvested with the consideration
received by the Company for the issue and sale of all other shares now
or hereafter authorized of Class C Common Stock (irrespective of
whether said shares have been designated as part of a series of said
Class and, if so designated, irrespective of the particular series
designation), together with all income, earnings, profits and proceeds
derived from the sale, exchange or liquidation thereof, any funds or
payments derived from any reinvestment of such proceeds in whatever
form the same may be, and any general assets of the Company allocated
to the shares of such Special Series 1 (or to such other shares) by the
Board of Directors of the Company in accordance with the Company's
Charter;
FURTHER RESOLVED, that the assets belonging to Class C Common
Stock, including Class C Common Stock - Special Series 1, and any other
series of Class C Common Stock hereafter authorized, shall be charged
with the expenses and liabilities of the Company in respect of Class C
Common Stock, Class C Common Stock - Special Series 1 and any other
series of Class C Common Stock hereafter authorized, and in respect of
any general expenses and liabilities of the Company allocated to Class
C Common Stock by the Board of Directors in accordance with the
Company's Charter, except that only shares of Special Series 1 of Class
C Common Stock shall bear: (x) the expenses and liabilities of payments
to institutions under any agreement entered into by or on behalf of the
Company which provides for services exclusively for customers of such
institution who beneficially own shares of such Special Series 1, and
(y) any other liabilities and expenses which the Board of Directors
determines are directly attributable to shares of such Special Series 1
and which are to be borne solely by such Special Series 1 shares;
FURTHER RESOLVED, that income, earnings, gain or loss on the
assets belonging to Class C Common Stock (including Class C Common
Stock - Special Series 1 and any other series of Class C Common Stock
hereafter authorized) shall be allocated among Class C Common Stock,
Class C Common Stock - Special Series 1 and any other series of Class C
Common Stock hereafter authorized pro rata in accordance with the
number of shares outstanding of Class C Common Stock, Class C Common
Stock - Special Series 1 and any other new series of Class C Common
Stock hereafter authorized;
-7-
<PAGE>
FURTHER RESOLVED, that dividends on shares of Class C Common
Stock, Class C Common Stock - Special Series 1 and any other series of
Class C Common Stock hereafter authorized, shall be paid only out of
the assets allocable to such respective series less the liabilities and
expenses allocable to such series in accordance with the preceding
resolutions;
FURTHER RESOLVED, that in the event of the liquidation or
dissolution of the Company's portfolio consisting of Class C Common
Stock, Class C Common Stock - Special Series 1 and any other series of
Class C Common Stock hereafter authorized, the stockholders of each
such series shall be entitled to receive, out of the assets of this
portfolio available for distribution, only the assets allocable to each
such series, respectively;
FURTHER RESOLVED, that each share of Special Series 1 of Class C
Common Stock shall otherwise have the same preferences, conversion and
other rights, voting powers, restrictions, limitations, qualifications
and terms and conditions of redemption as each other share of such
Special Series 1 and all other shares now or hereafter authorized of
Class C Common Stock (irrespective of whether said shares have been
designated as part of a series of said Class and, if so designated,
irrespective of the particular series designation), except that on any
matter that pertains to the agreements or any of the liabilities or
expenses referred to in the immediately preceding resolution and that
is submitted to a vote of shareholders, only shares of Special Series 1
of Class C Common Stock bearing such liabilities and expenses shall be
entitled to vote, except that (i) if said matter affects shares of the
Company other than shares of such Special Series 1, such other affected
shares shall also be entitled to vote, and in such case shares of
Special Series 1 of Class C Common Stock shall be voted in the
aggregate together with such other affected shares and not by class or
series except where otherwise required by law or permitted by the Board
of Directors of the Company; and (ii) if said matter does not affect
shares of Special Series 1 of Class C Common Stock bearing such
liabilities and expenses, said shares shall not be entitled to vote
(except where required by law or permitted by the Board of Directors)
even though the matter is submitted to a vote of the holders of shares
other than shares of such Special Series 1.
-8-
<PAGE>
SECOND: Pursuant to Section 2-105(c) of the Maryland General
Corporation Law, the Board of Directors of the Company, an open-end company
registered under the Investment Company Act of 1940, has increased the total
number of shares of capital stock which the Company shall have authority to
issue pursuant to the following resolution:
RESOLVED, that the total number of shares of capital stock which
UST Master Tax-Exempt Funds, Inc. (the "Company") shall have authority
to issue be increased to Ten Billion (10,000,000,000) shares of Common
Stock of the par value of One Mill ($0.001) per share, and of the
aggregate par value of Ten Million Dollars ($10,000,000).
THIRD: The Board of Directors of the Company has classified the
unissued and unclassified capital stock of the Company, authorized under the
immediately preceding resolution, pursuant to the following resolutions:
RESOLVED, that the six billion unclassified shares of Common
Stock authorized pursuant to the preceding resolution be classified
hereinafter as follows: Two Hundred Fifty Million (250,000,000) shares
of the par value of One Mill ($0.001) per share and of the aggregate
par value of Two Hundred Fifty Thousand Dollars ($250,000) is
classified as, and added to the previously authorized and classified
shares of, Class A Common Stock; Two Hundred Fifty Million
(250,000,000) shares of the par value of One Mill ($0.001) per share
and of the aggregate par value of Two Hundred Fifty Thousand Dollars
($250,000) is classified as, and added to the previously authorized and
classified shares of, Class A Common Stock - Special Series 1; Five
Hundred Million (500,000,000) shares of the par value of One Mill
($0.001) per share and of the aggregate par value of Five Hundred
Thousand Dollars ($500,000) is classified as new Class D Common Stock;
Five Hundred Million (500,000,000) shares of the par value of One Mill
($0.001) per share and of the aggregate par value
-9-
<PAGE>
of Five Hundred Thousand Dollars ($500,000) is classified as a separate
series of Class D Common Stock, designated as Class D Common Stock -
Special Series 1; Five Hundred Million (500,000,000) shares of the par
value of one Mill ($0.001) per share and of the aggregate par value of
Five Hundred Thousand Dollars ($500,000) is classified as new Class E
Common Stock; Five Hundred Million (500,000,000) shares of the par
value of One Mill ($0.001) per share and of the aggregate par value of
Five Hundred Thousand Dollars ($500,000) is classified as a separate
series of Class E Common Stock, designated as Class E Common Stock -
Special Series 1; and Three Billion Five Hundred Million
(3,500,000,000) shares of the par value of One Mill ($0.001) per share
and of the aggregate par value of Three Million Five Hundred Thousand
Dollars ($3,500,000) remains unclassified, subject to further
resolution of this Board of Directors;
FURTHER RESOLVED, that each new share of Class A Common Stock
and Class A Common Stock - Special Series 1, authorized and classified
pursuant to the foregoing resolution, shall have all of the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as each other share of its respective class or series;
Class D Common Stock
FURTHER RESOLVED, that all consideration received by the Company
for the issue or sale of each share of Class D Common Stock shall be
invested or reinvested with the consideration received by the Company
for the issue and sale of all other shares now or hereafter authorized
of Class D Common Stock (including all shares designated as Class D
Common Stock - Special Series 1, and all shares of any other series of
Class D Common Stock hereafter authorized, irrespective of the
particular series designation), together with all income, earnings,
profits and proceeds derived from the sale, exchange or liquidation
thereof, any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, and any general assets of
the Company allocated to the shares of Class D Common Stock (or to any
Series thereof) by the Board of Directors of the Company in accordance
with the Company's Charter;
FURTHER RESOLVED, that the assets belonging to Class D Common
Stock, including Class D Common Stock - Special Series 1, and any other
series of Class D
-10-
<PAGE>
Common Stock hereafter designated, shall be charged with the expenses
and liabilities of the Company in respect of Class D Common Stock,
Class D Common Stock - Special Series 1 and any other series of Class D
Common Stock hereafter authorized, and in respect of any general
expenses and liabilities of the Company allocated to Class D Common
Stock by the Board of Directors in accordance with the Company's
Charter, except that only shares of Special Series 1 of Class D Common
Stock shall bear: (x) the expenses and liabilities of payments to
institutions under any agreement entered into by or on behalf of the
Company which provides for services exclusively for customers of such
institution who beneficially own shares of such Special Series 1, and
(y) any other liabilities and expenses which the Board of Directors
determines are directly attributable to shares of such Special Series 1
and which are to be borne solely by such Special Series 1 shares;
FURTHER RESOLVED, that income, earnings, gain or loss on the
assets belonging to Class D Common Stock (including Class D Common
Stock - Special Series 1 and any other series of Class D Common Stock
hereafter authorized) shall be allocated among Class D Common Stock,
Class D Common Stock - Special Series 1 and any other series of Class D
Common Stock hereafter authorized pro rata in accordance with the
number of shares outstanding of Class D Common Stock, Class D Common
Stock - Special Series 1 and any other new series hereafter authorized;
FURTHER RESOLVED, that dividends on shares of Class D Common
Stock, Class D Common Stock - Special Series 1 and any other series of
Class D Common Stock hereafter authorized, shall be paid only out of
the assets allocable to such respective series less the liabilities and
expenses allocable to such series in accordance with the preceding
resolutions;
FURTHER RESOLVED, that in the event of the liquidation or
dissolution of the Company's portfolio consisting of Class D Common
Stock, Class D Common Stock - Special Series 1 and any other series of
Class D Common Stock hereafter authorized, the stockholders of each
such series shall be entitled to receive, out of the assets of this
portfolio available for distribution, only the assets allocable to each
such series, respectively;
FURTHER RESOLVED, that each share of Special Series 1 of Class D
Common Stock shall otherwise have
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<PAGE>
the same preferences, conversion and other rights, voting powers,
restrictions, limitations, qualifications and terms and conditions of
redemption as each other share of such Special Series 1 and all other
shares now or hereafter authorized of Class D Common Stock
(irrespective of whether said shares have been designated as part of a
series of said Class and, if so designated, irrespective of the
particular series designation), except that on any matter that pertains
to the agreements or any of the liabilities or expenses referred to in
the immediately preceding resolution and that is submitted to a vote of
shareholders, only shares of Special Series 1 of Class D Common Stock
bearing such liabilities and expenses shall be entitled to vote, except
that (i) if said matter affects shares of the Company other than shares
of such Special Series 1, such other affected shares shall also be
entitled to vote, and in such case shares of Special Series 1 of Class
D Common Stock shall be voted in the aggregate together with such other
affected shares and not by class or series except where otherwise
required by law or permitted by the Board of Directors of the Company;
and (ii) if said matter does not affect shares of Special Series 1 of
Class D Common Stock bearing such liabilities and expenses, said shares
shall not be entitled to vote (except where required by law or
permitted by the Board of Directors) even though the matter is
submitted to a vote of the holders of shares other than shares of such
Special Series 1;
Class E Common Stock
FURTHER RESOLVED, that all consideration received by the Company
for the issue or sale of each share of Class E Common Stock shall be
invested or reinvested with the consideration received by the Company
for the issue and sale of all other shares now or hereafter authorized
of Class E Common Stock (including all shares designated as Class E
Common Stock - Special Series 1, and all shares of any other series of
Class E Common Stock hereafter authorized, irrespective of the
particular series designation), together with all income, earnings,
profits and proceeds derived from the sale, exchange or liquidation
thereof, any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, and any general assets of
the Company allocated to the shares of Class E Common Stock (or to any
series thereof) by the Board of Directors of the Company in accordance
with the Company's Charter;
-12-
<PAGE>
FURTHER RESOLVED, that the assets belonging to Class E Common
Stock, including Class E Common Stock - Special Series 1, and any other
series of Class E Common Stock hereafter authorized, shall be charged
with the expenses and liabilities of the Company in respect of Class E
Common Stock, Class E Common Stock - Special Series 1 and any other
series of Class E Common Stock hereafter authorized, and in respect of
any general expenses and liabilities of the Company allocated to Class
E Common Stock by the Board of Directors in accordance with the
Company's Charter, except that only shares of Special Series 1 of Class
E Common Stock shall bear: (x) the expenses and liabilities of payments
to institutions under any agreement entered into by or on behalf of the
company which provides for services exclusively for customers of such
institution who beneficially own shares of such Special Series 1, and
(y) any other liabilities and expenses which the Board of Directors
determines are directly attributable to shares of such Special Series 1
and which are to be borne solely by such Special Series 1 shares;
FURTHER RESOLVED, that income, earnings, gain or loss on the
assets belonging to Class E Common Stock (including Class E Common
Stock - Special Series 1 and any other series of Class E Common Stock
hereafter authorized) shall be allocated among Class E Common Stock,
Class E Common Stock - Special Series 1 and any other series of Class E
Common Stock hereafter authorized pro rata in accordance with the
number of shares outstanding of Class E Common Stock, Class E Common
Stock - Special Series 1 and any other new series hereafter authorized;
FURTHER RESOLVED, that dividends on shares of Class E Common
Stock, Class E Common Stock - Special Series 1 and any other series of
Class E Common Stock hereafter authorized, shall be paid only out of
the assets allocable to such respective series less the liabilities and
expenses allocable to such series in accordance with the preceding
resolutions;
FURTHER RESOLVED, that in the event of the liquidation or
dissolution of the Company's portfolio consisting of Class E Common
Stock, Class E Common Stock - Special Series 1 and any other series of
Class E Common Stock hereafter authorized, the stockholders of each
such series shall be entitled to receive, out of the assets of this
portfolio available for distribution, only the assets allocable to each
such series, respectively;
-13-
<PAGE>
FURTHER RESOLVED, that each share of Special Series 1 of Class E
Common Stock shall otherwise have the same preferences, conversion and
other rights, voting powers, restrictions, limitations, qualifications
and terms and conditions of redemption as each other share of such
Special Series 1 and all other shares now or hereafter authorized of
class E Common Stock (irrespective of whether said shares have been
designated as part of a series of said Class and, if so designated,
irrespective of the particular series designation), except that on any
matter that pertains to the agreements or any of the liabilities or
expenses referred to in the immediately preceding resolution and that
is submitted to a vote of shareholders, only shares of Special Series 1
of Class E Common Stock bearing such liabilities and expenses shall be
entitled to vote, except that (i) if said matter affects shares of the
Company other than shares of such Special Series 1, such other affected
shares shall also be entitled to vote, and in such case shares of
Special Series 1 of Class E Common Stock shall be voted in the
aggregate together with such other affected shares and not by class or
series except where otherwise required by law or permitted by the Board
of Directors of the Company; and (ii) if said matter does not affect
shares of Special Series 1 of Class E Common Stock bearing such
liabilities and expenses, said shares shall not be entitled to vote
(except where required by law or permitted by the Board of Directors)
even though the matter is submitted to a vote of the holders of shares
other than shares of such Special Series 1.
FOURTH: Immediately before the increase set forth in Article SECOND,
the Company was authorized to issue Four Billion shares of Common Stock of the
par value of One Mill ($0.001) per share, and of the aggregate par value of Four
Million Dollars ($4,000,000), classified as follows:
Class A Common Stock: One Billion Two Hundred Fifty Million
(1,250,000,000) 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 Two Hundred Fifty Thousand Dollars ($1,250,000);
Class A Common Stock - Special Series 1: 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);
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<PAGE>
Class B 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 B 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 C 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 C 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).
There were no authorized and unclassified shares of capital stock of the Company
as of immediately before such increase.
FIFTH: Immediately following the increase set forth in Article SECOND,
the Company was authorized to issue Ten Billion shares of Common Stock of the
par value of One Mill ($0.001) per share, and of the aggregate par value of Ten
Million Dollars ($10,000,000), classified as follows:
Class A Common Stock: One billion Five Hundred Million
(1,500,000,000) 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 One
Million Five Hundred Thousand Dollars ($1,500,000);
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);
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<PAGE>
Class B 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 B 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 C 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 C 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 D 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 D 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 E 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 E 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).
The total number of authorized and unclassified shares of capital stock of the
Company remaining after the actions described above
-16-
<PAGE>
is Three Billion Five Hundred Million (3,500,000,000) shares, of the par value
of One Mill ($0.001) per share, and of the aggregate par value of Three Million
Five Hundred Thousand Dollars ($3,500,000).
SIXTH: The shares of Class A, B and C Common Stock of the Company
reclassified pursuant to the resolutions set forth in Article FIRST of these
Articles Supplementary have been reclassified by the Company's Board of
Directors under the authority contained in the Charter of the Company.
SEVENTH: The shares of Class A, D and E Common Stock of the Company
classified pursuant to the resolutions set forth in Article THIRD of these
Articles Supplementary have been classified by the Company's Board of Directors
under the authority contained in the Charter of the Company.
IN WITNESS WHEREOF, UST Master Tax-Exempt 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 hereunto affixed and attested to by its Secretary as of
April 27, 1990.
UST MASTER TAX-EXEMPT FUNDS, INC.
[SEAL]
Attest: By: /s/ Karen A.G. Loud
---------------------------
Karen A. G. Loud, President
/s/ W. Bruce McConnel, III
- --------------------------
W. Bruce McConnel, III
Secretary
-17-
<PAGE>
CERTIFICATE
THE UNDERSIGNED, President of UST MASTER TAX-EXEMPT 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 her 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.
/s/ Karen A.G. Loud
---------------------------
Karen A. G. Loud, President
Dated as of: April 27, 1990
-18-
<PAGE>
STATE OF MARYLAND
STATE DEPARTMENT OF ASSESSMENTS AND TAXATION
Gene L. Burner, Director
DOCUMENT CODE 16 BUSINESS CODE 03 COUNTY 74
# D1751916 P.A. _____ Religious ____ Close _X_ Stock ____ Nonstock
Merging Surviving
(Transferor)_____________________ (Transferee)____________________
_________________________________ ________________________________
_________________________________ ________________________________
<TABLE>
<CAPTION>
CODE AMOUNT FEE REMITTED
- ---- ------ ------------
<S> <C> <C> <C>
10 70 Expedited Fee Name Change
------
20 410 Organ. & Capitalization (New Name)________________
------
61 Rec. Fee (Arts. of Inc.) __________________________
------
62 20 Rec. Fee (Amendment) __________________________
------
63 Rec. Fee (Merger or Consolidation) _____ Change of Name
------
64 Rec. Fee (Transfer) _____ Change of Principal Office
------
65 Rec. Fee (Dissolution) _____ Change of Resident Agent
------
66 Rec. Fee (Revival) _____ Change of Resident Agent Address
------
52 Foreign Qualification _____ Resignation of Resident Agent
------
50 Cert. of Qual. or Reg. _____ Designation of Resident Agent and
------
Resident Agent's Address
51 Foreign Name Registration _____ Other Change _____________
------ __________________________
13 43 2 Certified Copy 36
------ ----- ---
56 Penalty
------
54 For. Supplemental Cert.
------
53 Foreign Resolution
------
73 Certificate of Conveyance
------ _________________________
_________________________
76 Certificate of Merger/Transfer
------ _________________________
_________________________
75 Special Fee
------
80 For. Limited Partnership
------
83 Cert. Limited Partnership
------
84 Amendment to Limited Partnership
------
85 Termination of Limited Partnership
------
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
21 Recordation Tax
------
22 State Transfer Tax
------
23 Local Transfer Tax
------
31 ____ Corp. Good Standing
------
NA Foreign Corp. Registration
------
87 _____ Limited Part. Good Standing
------
71 Financial
------
600 _______________ Personal Code 063
------ ------
Property Reports and
__________________ late filing
penalties
70 Change of P.O., R.A. or R.A.A. ATTENTION: Craig Spencer
------ ---------------
_________________________
_________________________
91 Amend/Cancellation, For. Limited
Part.
------
__ Other _____________________ MAIL TO ADDRESS:__________
------ __________________________
__________________________
__________________________
__________________________
__________________________
__ Other______________________
------
TOTAL
FEES 543
------
X Check _______ Cash NOTE:
-------
_______ Documents on _____ checks
APPROVED BY: JRS
------
</TABLE>
-20-
<PAGE>
EXHIBIT 1(C)
ARTICLES SUPPLEMENTARY
OF
U.S.T. MASTER TAX-EXEMPT FUNDS
APPROVED AND RECEIVED FOR RECORD BY THE STATE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF MARYLAND DECEMBER 24, 1992 AT 10:55 O'CLOCK A.M.
AS IN CONFORMITY WITH LAW AND ORDERED RECORDED.
--------------------
ORGANIZATION AND RECORDING SPECIAL
CAPITALIZATION FEE PAID: FEE PAID: FEE PAID:
$ 80.00 $ 20.00 $
------------------ ------------------- ---------------
-------------------------
D1751916
TO THE CLERK OF THE COURT OF BALTIMORE CITY
IT IS HEREBY CERTIFIED, THAT THE WITHIN INSTRUMENT, TOGETHER WITH ALL
INDORSEMENTS THEREON, HAS BEEN RECEIVED, APPROVED AND RECORDED BY THE STATE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND.
RETURN TO:
VENABLE, BAETJER & HOWARD
ATTN: LEAH R. SCHUMAN
2 HOPKINS PLAZA
1800 MERCANTILE BANK & TRUST BLDG.
BALTIMORE, MD 21201
130C3063121
A410613
RECORDED IN THE RECORDS OF THE
STATE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF MARYLAND IN LIBER, FOLIO.
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
ARTICLES SUPPLEMENTARY
UST Master Tax-Exempt 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 Sections 2-105(c) and 2-208 of the Maryland
General Corporation Law, the Board of Directors of the Company has increased
the total number of shares of capital stock which the Company shall have
authority to issue from Ten Billion (10,000,000,000) to Fourteen Billion
(14,000,000,000) shares of Common Stock of the par value of One Mil ($0.001)
per share, and of the aggregate par value of Fourteen Million Dollars
($14,000,000):
RESOLVED, that the total number of shares of capital stock which the
Company shall have authority to issue be increased from Ten Billion
(10,000,000,000) to Fourteen Billion (14,000,000,000) shares of Common Stock
of the par value of One Mil ($0.001) per share ("Shares"), with a resulting
aggregate par value of Fourteen Million Dollars ($14,000,000).
SECOND: The Board of Directors of the Company has classified the
unissued and unclassified capital stock of the Company, authorized under the
immediately preceding resolution, pursuant to the following resolution:
FURTHER RESOLVED, that Four Billion Shares of the Four Billion
unclassified shares authorized pursuant to the preceding resolution be
classified hereinafter as follows: Five Hundred Million (with an aggregate par
value of Five Hundred Thousand Dollars ($500,000) classified to such Series:
Class A Common Stock - Special Series 2; Class B Common Stock - Special Series
2; Class C Common Stock - Special Series 2; Class D Common Stock - Special
Series 2; Class E Common Stock - Special Series 2; Class F Common Stock; Class
F Common Stock - Special Series 1; and Class F Common Stock - Special Series
2;
FURTHER RESOLVED, that all consideration received by the Company for
the issue or sale of all shares of Common Stock with the same alphabetical
designation and all shares of any Special Series of said Common Stock
(irrespective of the particular series designation) (collectively "Common
Stock Group") shall be invested and reinvested with the consideration received
by the Company for the issue and sale of all other shares of that Common Stock
Group, together with all income, earnings, profits and
<PAGE>
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, and any general assets of the
Company allocated to shares of that Common Stock Group by the Board of
Directors in accordance with the Company's Articles of Incorporation, and each
share of that Common Stock Group shall share equally and with such other
shares in such consideration and other assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets derived from exchange or liquidation
thereof, and any assets derived from any reinvestment of such proceeds in
whatever form;
FURTHER RESOLVED, that each share in each particular Common Stock
Group shall be charged in proportion to its respective net asset value with
each other share now or hereafter designated as the particular Common Stock
Group (irrespective of whether said share has been designated as part of a
series of said Common Stock Group and, if so designated as a part of a series,
irrespective of the particular series designation) with the expenses and
liabilities of the Company in respect of the Common Stock Group, and in
respect of any general expenses and liabilities of the Company allocated to
the Common Stock Group in accordance with the Company's Articles of
Incorporation except that to the extent permitted by rule or order of the
Securities and Exchange Commission and as may be from time to time determined
by the Board of Directors;
(a) only shares of Class A, B, C, D, E and F Common
Stock shall bear all expenses and liabilities: (1)
arising from transfer agency services that are
directly attributable to those shares; and (2) any
other expenses and liabilities which the Board of
Directors determines should be borne solely by such
shares;
(b) only shares of Class A, B, C, D, E and F Common
Stock - Special Series 1 shall bear all expenses
and liabilities: (1) of payments to service
organizations that are directly attributable to
such Special Series under the Company's servicing
arrangements relating to that Special Series; (2)
arising from transfer agency services that are
directly attributable to such Special Series; and
(3) any other expenses and liabilities which the
Board of Directors determines should be borne
solely by shares of such Special Series;
(c) only shares of Class A, B, C, D, E and F Common
Stock - Special Series 2 shall bear all expenses
and liabilities: (1) of payments to the Company's
<PAGE>
distributor that are directly attributable to such
Special Series under the Company's distribution
arrangements relating to that Special Series; (2)
arising from transfer agency services that are
directly attributable to that Special Series; and
(3) any other expenses and liabilities which the
Board of Directors determines should be borne
solely by such shares; and
FURTHER RESOLVED, that except as otherwise provided by these
resolutions, each share of a Common Stock Group shall have all the
preferences, conversion and other rights, voting powers, restrictions,
limitations, qualifications and terms and conditions of redemption as set
forth in the Company's Articles of Incorporation and shall also have the same
preferences, conversion and other rights, voting powers, restrictions,
limitations, qualifications and terms and conditions of redemption as each
other share of the particular Common Stock Group, except that on any matter
that pertains to the expenses and liabilities described in these resolutions
(or to any agreement, plan or other document relating to said expenses or
liabilities) and is submitted to a vote of stockholders, only shares of the
particular class and/or series affected thereby shall be entitled to vote,
except that: (i) if such matter affects more than one class or series, the
shares of all other affected classes or series shall also be entitled to vote,
and in such case all shares of affected classes or series shall be voted in
the aggregate without regard to class or series except where otherwise
required by law or permitted by the Board of Directors; and (ii) if said
matter does not affect a particular class or series, shares of such class or
series shall not be entitled to vote (except where required by law or
permitted by the Board of Directors) even though the matter is submitted to a
vote of the holders of shares of other classes or series.
THIRD: The shares classified pursuant to the resolutions set forth in
Article SECOND of these Articles Supplementary, have been classified by the
Company's Board of Directors under the authority contained in the Charter of
the Company.
FOURTH: Immediately before the increase set forth in Article SECOND,
the Company was authorized to issue Ten Billion shares of Common Stock of the
par value of One Mill ($0.001) per share, and of the aggregate par value of
Ten Million Dollars ($10,000,000), classified as follows:
Class A Common Stock: One Billion Five Hundred Million
(1,500,000,000) 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 One Million Five Hundred Thousand Dollars ($1,500,000);
<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: 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 B 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 C 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 C 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 D 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 D 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 E 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 E 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).
<PAGE>
There were Three Billion Five Hundred Million (3,500,000,000)
authorized and unclassified shares of capital stock of the Company as of
immediately before such increase.
FIFTH: Immediately following the increase set forth in Article
SECOND, the Company was authorized to issue Fourteen Billion shares of Common
Stock of the par value of One Mill ($0.001) per share, and of the aggregate
par value of Fourteen Million Dollars ($14,000,000), classified as follows:
Class A Common Stock: One Billion Five Hundred Million
(1,500,000,000) 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 One Million Five Hundred Thousand Dollars ($1,500,000);
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 ($1,000,000,000);
Class A 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 B 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 B 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 B 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 C 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);
<PAGE>
Class C 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 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: 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 - 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 D 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 E 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 E 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 E 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 F 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
<PAGE>
aggregate par value of Five Hundred Thousand Dollars
($500,000);
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); and
Class F 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).
The total number of authorized and unclassified shares of capital
stock of the Company remaining after the actions described above is Three
Billion Five Hundred Million (3,500,000,000) shares of capital stock of the
par value of One Mill ($0.001) and of the aggregate par value of Three Million
Five Hundred Thousand Dollars ($3,500,000).
<PAGE>
IN WITNESS WHEREOF, UST Master Tax-Exempt 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 Secretary as
of December 23, 1992.
[SEAL] UST MASTER TAX-EXEMPT FUNDS, INC.
Attest:
/s/ W. Bruce McConnel, III By: /s/ Alfred C. Tannachion
- -------------------------- --------------------------
W. Bruce McConnel, III Alfred Tannachion
Secretary President
<PAGE>
CERTIFICATE
THE UNDERSIGNED, President of UST MASTER TAX-EXEMPT 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.
/s/ Alfred C. Tannachion
----------------------------
Alfred Tannachion
President
Dated as of: December 23, 1992
<PAGE>
STATE OF MARYLAND
DEPARTMENT OF ASSESSMENTS AND TAXATION
CHARTER DIVISION
William Donald Schaefer
Governor
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DOCUMENT CODE 16D BUSINESS CODE 03 COUNTY 74
------- ------- -----
# D1751916 P.A. _____ Religious ____ Close X Stock ____ Nonstock
Merging Surviving
(Transferor)_____________________ (Transferee)____________________
_________________________________ ________________________________
_________________________________ ________________________________
_________________________________ ________________________________
CODE AMOUNT FEE REMITTED
10 70 Expedited Fee
------
20 80 Organ. & Capitalization (New Name)________________
------
61 Rec. Fee (Arts. of Inc.) __________________________
------
62 20 Rec. Fee (Amendment) __________________________
------
63 Rec. Fee (Merger or Consolidation) _____ Change of Name
------
64 Rec. Fee (Transfer) _____ Change of Principal Office
------
65 Rec. Fee (Dissolution) _____ Change of Resident Agent
------
66 Rec. Fee (Revival) _____ Change of Resident Agent
------
Address
52 Foreign Qualification _____ Resignation of Resident Agent
------
50 Cert. of Qual. or Reg. _____ Designation of Resident Agent
------
and Resident Agent's Address
51 Foreign Name Registration _____ Other Change _____________
------
--------------------------
13 35 2 Certified Copy 9
------ ----- ---
56 Penalty
54 For. Supplemental Cert.
53 Foreign Resolution
73 Certificate of Conveyance
-------------------------
-------------------------
76 Certificate of Merger/Transfer
------------------------------
------------------------------
75 Special Fee
80 For. Limited Partnership
83 Cert. Limited Partnership
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
84 Amendment to Limited Partnership
85 Termination of Limited Partnership
21 Recordation Tax
22 State Transfer Tax
23 Local Transfer Tax
31 ______ ____ Corp. Good Standing
NA Foreign Corp. Registration
87 ______ _____ Limited Part. Good Standing
71 Financial
600 ______ _______________ Personal Code 063
------
Property Reports and
__________________ late filing
penalties
70 Change of P.O., R.A. or R.A.A. ATTENTION: Leah R. Schuman
------ -----------------
___________________________
___________________________
91 Amend/Cancellation, For. Limited
Part.
99 Art. of Organization (LLC) MAIL TO ADDRESS:
------
98 LLC Amend, Diss, Continuation
------
97 LLC Cancellation
------
96 Reg. Foreign LLC
------
94 Foreign LLC Supplemental
------
92 ______ LLC Good Standing (Short)
------
______ Other______________________
TOTAL
FEES 205
X Check _______ Cash NOTE:
-----
1 Documents on 2 checks (28.00 + 177.00)
----- -----
APPROVED BY: JMT
---------
</TABLE>
<PAGE>
Exhibit (2)(b)
EXCELSIOR TAX-EXEMPT FUNDS, INC.
Amendment of By-Laws as adopted at the Regular Meeting
of the Board of Directors held May 16, 1997
RESOLVED, that ARTICLE I, SECTION 6 of Excelsior Tax-Exempt Fund's
By-Laws be, and hereby is, amended and restated in its entirety as follows:
SECTION 6. Organization. At every meeting of the stockholders, the
Chairman of the Board, if one has been selected and is present or, if not, the
President, or in the absence of the Chairman of the Board and the President, a
Vice President, or in the absence of the Chairman of the Board, the President
and all the Vice Presidents, a chairman chosen by the Chairman of the Board, the
President, a Vice President or the Secretary, shall act as chairman; and the
Secretary, or in his absence, an Assistant Secretary, or in the absence of the
Secretary and all the Assistant Secretaries, a person appointed by the Chairman
of the Board, the President, a Vice President, the Secretary or the chairman of
the meeting of stockholders, shall act as secretary.
<PAGE>
Exhibit 2(a)
Amended and Restated By-Laws
EXCELSIOR TAX-EXEMPT FUNDS, INC.
BY-LAWS
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meetings. The Corporation is not required to
hold an annual stockholder meeting in any year in which the election of
directors is not required by the Investment Company Act of 1940, as amended (the
"1940 Act"). If the Corporation is required to hold a meeting of stockholders to
elect directors, such meeting shall be designated an annual meeting and shall be
held at the registered office of the Corporation, or at such other place, within
the United States of America, within or without the State of Maryland, as may be
determined by the Board of Directors and as shall be designated in the notice of
said meeting, on such day and at such time as shall be specified by the Board of
Directors for the purpose of electing directors and for the transaction of such
other business as may properly be brought before the meeting.
SECTION 2. Special Meetings. Special meetings of the
stockholders for any purpose or purposes, unless otherwise prescribed by statute
or by the Charter, may be held at any place, within the United States of
America, within or without the State of Maryland, and may be called at any time
by the Board of Directors or by the President, and shall be called by the
President or Secretary at the request in writing of a majority of the Board or
at the request in writing of stockholders entitled to cast at least twenty-five
(25) percent of all the votes entitled to be cast at such meeting. Such request
shall state the purpose or purposes of the proposed meeting and the matters
proposed to be acted on at it; provided, however, that unless requested by
stockholders entitled to cast a majority of all the votes entitled to be cast at
the meeting, a special meeting need not be called to consider any matter which
is substantially the same as a matter voted on at any special meeting of the
stockholders held during the preceding twelve (12) months.
SECTION 3. Notice of Meetings and Shareholder - List. Written
or printed notice of the purpose or purposes and of the time and place of every
meeting of the stockholders shall be given by the Secretary of the Corporation
to each stockholder of record entitled to vote at the meeting and each other
stockholder entitled to notice of the meeting, by placing such notice in the
<PAGE>
mail at least ten (10) days, but not more than ninety (90) days, and in any
event within the period prescribed by law, prior to the date named for the
meeting addressed to each stockholder at his address appearing on the books of
the Corporation or supplied by him to the Corporation for the purpose of notice.
The notice of every meeting of stockholders may be accompanied by a form of
proxy approved by the Board of Directors in favor of such actions or persons as
the Board of Directors may select. At least five (5) days prior to each meeting
of stockholders, the officer or agent having charge of the share transfer books
of the Corporation shall make a complete list of stockholders entitled to vote
at such meeting in alphabetical order with the address of and the number of
shares held by each stockholder.
SECTION 4. Record Date. The Board of Directors may fix a date
not more than ninety (90) days preceding the date of any meeting of
stockholders, or the date fixed for the payment of any dividend, or the date of
the allotment of rights or the date when any change or conversion or exchange of
shares shall go into effect, as a record date for the determination of
stockholders entitled to notice of, or to vote at, any such meeting (or any
adjournment thereof) or entitled to receive payment of any dividend, or to
receive such allotment of rights, or to exercise such rights, as the case may
be. In such case, only stockholders of record at the close of business on the
date so fixed shall be entitled to vote, to receive notice, or receive dividends
or rights, or to exercise rights, notwithstanding any subsequent transfer on the
books of the Corporation. The Board of Directors shall not close the books of
the Corporation against transfers of shares during the whole or any part of such
period. In the case of a meeting of stockholders, the record date shall be fixed
not less than ten (10) days prior to the date of the meeting.
SECTION 5. Quorum and Shareholder Action. Except as otherwise
provided by statute or by the Charter, the presence in person or by proxy of
stockholders of the Corporation entitled to cast at least a majority of all the
votes entitled to be cast at the meeting (without regard to class) shall
constitute a quorum at any meeting of the stockholders, except with respect to
any matter that affects only one or more classes of stock or any matter that,
under the Charter or applicable law, requires approval by a separate vote of one
or more classes of stock, in which case the presence in person or by proxy of
stockholders of the Corporation entitled to cast at least a majority of all of
the votes of the separate class or classes, as the case may be, entitled to be
cast on such matter shall constitute a quorum; and, at a meeting at which a
quorum is present, a majority of all the votes cast and entitled to vote on a
matter at the meeting shall be sufficient to approve any such matter which
properly comes before the meeting. In the absence of a quorum, the stockholders
present in person or by proxy, by majority vote and without notice other than by
announcement at the meeting, may
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adjourn the meeting from time to time as provided in Section 7 of this Article I
until a quorum shall attend. The stockholders present at any duly organized
meeting may continue to do business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
SECTION 6. Organization. At every meeting of the stockholders,
the Chairman of the Board, if one has been selected and is present or, if not,
the President, or in the absence of the Chairman of the Board and the President,
a Vice President, or in the absence of the Chairman of the Board, the President
and all the Vice Presidents, a chairman chosen by the stockholders, shall act as
chairman; and the Secretary, or in his absence, an Assistant Secretary, or in
the absence of the Secretary and all the Assistant Secretaries, a person
appointed by the chairman, shall act as secretary.
SECTION 7. Adjournment. Any meeting of the stockholders may be
adjourned from time to time, without notice other than by announcement at the
meeting at which such adjournment is taken, and at any such adjourned meeting at
which a quorum shall be present any action may be taken that could have been
taken at the meeting originally called; provided, that the meeting may not be
adjourned to a date more than the number of days after the original record date
for the meeting permitted by law, and if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the adjourned meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Election and Powers. The number of directors shall
be.fixed from time to time by resolution of the Board of Directors adopted by a
majority of the directors then in office; provided, however, that the number of
directors shall in no event be less than three (3) nor more than fifteen (15),
except that (a) if there is no stock outstanding the number of directors may be
less than three (3) but not less than one (1), and (b) if there is stock
outstanding and so long as there are less than three (3) stockholders, the
number of directors may be less than three (3) but not less than the number of
stockholders. The business, affairs and property of the Corporation shall be
managed by the Board of Directors, which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute, the
Charter or these By-Laws required to be exercised or done by the stockholders.
Subject to the provisions of Article 1, Section 1, the members of the Board of
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Directors shall be elected by the stockholders at their annual meeting and each
director shall hold office until the annual meeting next after his election and
until his successor shall have been duly elected and qualified, until he shall
have resigned, or until he shall have been removed as provided in Sections 10
and 11 of this Article II.
SECTION 2. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice on such dates as the Board may from time to
time determine.
SECTION 3. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, the
President or by a majority of the directors either in writing or by vote at a
meeting.
SECTION 4. Notice of Special Meetings. Notice of the place,
day and hour of every special meeting shall be delivered personally to each
director or mailed, telegraphed or cabled to his address on the books of the
Corporation at least one (1) day before the meeting. It shall not be requisite
to the validity of any meeting of the Board of Directors that notice thereof
shall have been given to any director who is present thereat, or, if absent,
waives notice thereof in writing filed with the records of the meeting either
before or after the holding thereof.
SECTION 5. Place of Meetings. The Board of Directors may hold
its regular and special meetings at such place or places within or without the
State of Maryland as the Board may from time to time determine.
SECTION 6. Quorum and Board Action. Except as otherwise
provided by statute or by the Charter: (a) one-third (1/3) of the entire Board
of Directors, but in no case less than two (2) directors (unless there is only
one (1) director of the Corporation, in which event one (1) director), shall be
necessary to constitute a quorum for the transaction of business at each meeting
of the Board; (b) the action of a majority of the directors present at a meeting
at which a quorum is present shall be the action of the Board; and (c) if at any
meeting there be less than a quorum present, a majority of those directors
present may adjourn the meeting from time to time, but not for a period greater
than thirty (30) days at any one time, without notice other than by announcement
at the meeting until a quorum shall attend. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally scheduled.
SECTION 7. Chairman. The Board of Directors may at any time
appoint one of its members as Chairman of the Board, who shall serve at the
pleasure of the Board and who shall perform and execute such duties and powers
as may be conferred upon or
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assigned to him by the Board or these By-Laws, but who shall not by reason of
performing and executing these duties and powers be deemed an officer or
employee of the Corporation.
SECTION 8. Organization. At every meeting of the Board of
Directors, the Chairman of the Board, if one has been selected and is present,
and, if not, the President, or in the absence of the Chairman of the Board and
the President, a Vice President, or in the absence of the Chairman of the Board,
the President and all the Vice Presidents, a chairman chosen by a majority of
the directors present, shall preside; and the Secretary, or in his absence, an
Assistant Secretary, or in the absence of the Secretary and all the Assistant
Secretaries, a person appointed by the chairman, shall act as secretary.
SECTION 9. Vacancies. Any vacancy on the Board of Directors
occurring by reason of any increase in the number of directors may be filled by
a majority of the entire Board of Directors then in office. Any vacancy on the
Board of Directors occurring for any other cause may be filled by a majority of
the remaining members of the Board of Directors, whether or not these members
constitute a quorum under Section 6 of this Article II. Any director so chosen
to fill a vacancy shall hold office until the next annual meeting of
stockholders and until his successor shall have been duly elected and qualified.
SECTION 10. Removal. At any meeting of the stockholders called
for that purpose, the stockholders of the Corporation may remove from office any
director, with or without cause, by the affirmative vote of a majority of the
votes entitled to be cast for the election of directors, and another director
may be elected in the place of the director so removed to serve for the
remainder of the term of the removed director.
SECTION 11. Resignations. Any director may resign at any time
by giving written notice to the Board of Directors, the President or the
Secretary. Any such resignation shall take effect at the time of the receipt of
such notice or at any later time specified therein; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 12. Committees. The Board of Directors may appoint
from among its members an executive and other committees of the Board composed
of two (2) or more directors. To the extent permitted by law, the Board of
Directors may delegate to any such committee or committees any of the powers of
the Board of Directors in the management of the business, affairs and property
of the Corporation and may authorize any such committee or committees to cause
the seal of the Corporation to be affixed to all papers which may require it.
Such committee or committees shall have such name or names as may be determined
from time to
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time by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required. The members of a committee present at any meeting, whether or not
they constitute a quorum, may appoint a director to act in the place of an
absent member.
SECTION 13. Telephone Conference. Members of the Board of
Directors or any committee thereof may participate in a meeting of the Board or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time, and participation by such means shall constitute
presence in person at the meeting.
SECTION 14. Written Consent. Any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting, if a written consent to such action is signed by
all members of the Board or of such committee, as the case be, and such written
consent is filed with the minutes of proceedings of the Board or committee.
SECTION 15. Compensation of Directors. Any director, whether
or not he is a compensated officer, employee, agent or contractor of the
Corporation, may be compensated for his services as director or as a member of a
committee, or as Chairman of the Board or chairman of a committee, and in
addition may be reimbursed for transportation and other expenses, all in such
manner and amounts as the directors may from time to time determine.
ARTICLE III
OFFICERS
SECTION 1. Number. The officers of the Corporation shall be a
President, a Secretary and a Treasurer, and may include one or more Vice
Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers,
and such other officers as the Board of Directors may from time to time
determine. Any officer may hold more than one office in the Corporation, except
that an officer may not serve concurrently as both the President and a Vice
President.
SECTION 2. Election and Term of Office. The officers of the
Corporation shall be elected by the Board of Directors and, subject to earlier
termination of office, each officer shall hold office for one year and until his
successor shall have been elected and qualified.
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SECTION 3. Resignations. Any officer may resign at any time by
giving written notice to the Board of Directors or to the President or the
Secretary of the Corporation. Any such resignation shall take effect at the date
of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 4. Removal. If the Board of Directors in its judgment
finds that the best interests of the Corporation will be served, the Board may
remove any officer of the Corporation at any time.
SECTION 5. President. The President shall be the chief
executive officer of the Corporation and shall have general supervision over the
business and operations of the Corporation, subject, however, to the control of
the Board of Directors. He, or such persons as he shall designate, shall sign,
execute, acknowledge, verify, deliver and accept, in the name of the
Corporation, deeds, mortgages, bonds, contracts and other instruments authorized
by the Board of Directors, except in the case where the signing, execution,
acknowledgement, verification, delivery or acceptance thereof shall be delegated
by the Board to some other officer or agent of the Corporation; and, in general,
he shall have general executive powers as well as other powers and duties as
from time to time may be conferred upon or assigned to him by the Board.
SECTION 6. The Vice Presidents. In the absence or disability
of the President, or when so directed by the President, any Vice President
designated by the Board of Directors may perform any or all of the duties of the
President, and, when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the President; provided, however, that no Vice
President shall act as a member of or as chairman of any committee of which the
President is a member or chairman by designation or ex-officio, except when
designated by the Board. Each Vice President shall perform such other duties as
from time to time may be conferred upon or assigned to him by the Board or the
President.
SECTION 7. The Secretary. The Secretary shall record all the
votes of the stockholders and of the directors and the minutes of the meetings
of the stockholders and of the Board of Directors in a book or books to be kept
for that purpose; he shall see that notices of meetings of the stockholders and
the Board of Directors are given and that all records and reports are properly
kept and filed by the Corporation as required by law; he shall be the custodian
of the seal of the Corporation and shall see that it is affixed to all documents
to be executed on behalf of the Corporation under its seal, provided that in
lieu of affixing the corporate seal to any document, it shall be
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sufficient to meet the requirements of any law, rule or regulation relating to a
corporate seal to affix the word "(SEAL)" adjacent to the signature of the
authorized officer of the Corporation; and, in general, he shall perform all
duties incident to the office of Secretary, and such other duties as from time
to time may be conferred upon or assigned to him by the Board or the President.
SECTION 8. Assistant Secretaries. In the absence or disability
of the Secretary, or when so directed by the Secretary, any Assistant Secretary
may perform any or all of the duties of the Secretary, and, when so acting,
shall have all the powers of, and be subject to all restrictions upon, the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be conferred upon or assigned to him by the Board of Directors, the
President or the Secretary.
SECTION 9. The Treasurer. Subject to the provisions of any
contract which may be entered into with any custodian pursuant to authority
granted by the Board of Directors, the Treasurer shall have charge of all
receipts and disbursements of the Corporation and shall have or provide for the
custody of its funds and securities; he shall have full authority to receive and
give receipts for all money due and payable to the Corporation, and to endorse
checks, drafts and warrants, in its name and on its behalf, and to give full
discharge for the same; he shall deposit all funds of the Corporation, except
such as may be required for current use, in such banks or other places of
deposit as the Board of Directors may from time to time designate; and, in
general, he shall perform all duties incident to the office of Treasurer and
such other duties as from time to time may be conferred upon or assigned to him
by the Board or the President.
SECTION 10. Assistant Treasurers. Each Assistant Treasurer
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors or the President.
SECTION 11. Compensation of Officers. The compensation of all
officers shall be fixed from time to time by the Board of Directors, or any
committee or officer authorized by the Board so to do. No officer shall be
precluded, except as determined by the Board of Directors or any such committee
thereof, from receiving such compensation by reason of the fact that he is also
a director of the Corporation.
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ARTICLE IV
STOCK
SECTION 1. Certificates. Each stockholder shall be entitled
upon written request to a stock certificate or certificates, representing and
certifying the number and kind of full shares held by him signed by the
President, a Vice President or the Chairman of the Board and counter-signed by
the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer,
which signatures may be either manual or facsimile signatures, and sealed with
the seal of the Corporation, which seal may be either facsimile or any other
form of seal. Stock certificates shall be in such form, not inconsistent with
law or with the Charter, as shall be approved by the Board of Directors.
SECTION 2. Transfer of Shares. Transfers of shares shall be
made on the books of the Corporation at the direction of the person named on the
Corporation's books or named in the certificate or certificates for such shares
(if issued), or by his attorney lawfully constituted in writing, upon surrender
of such certificate or certificates (if issued) properly endorsed, together with
a proper request for redemption, to the Corporation's Transfer Agent, with such
evidence of the authenticity of such transfer, authorization and such other
matters as the Corporation or its agents may reasonably require, and subject to
such other reasonable terms and conditions as may be required by the Corporation
or its agents; or, if the Board of Directors shall by resolution so provide,
transfer of shares may be made in any other manner permitted by law.
SECTION 3. Transfer Agents and Registrars. The Corporation may
have one or more Transfer Agents and one or more Registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall be valid until countersigned by a Transfer Agent, if
the Corporation shall have a Transfer Agent, or until registered by a Registrar,
if the Corporation shall have a Registrar. The duties of Transfer Agent and
Registrar may be combined.
SECTION 4. Mutilated, Lost, Stolen or Destroyed Certificates.
The Board of Directors, by standing resolution or by resolutions with respect to
particular cases, may authorize the issuance of a new stock certificate in lieu
of any stock certificate lost, stolen, destroyed or mutilated, upon such terms
and conditions as the Board may direct. The Board may in its discretion refuse
to issue such a new certificate, unless ordered to do so by a court of competent
jurisdiction.
SECTION 5. Stock Ledgers. The Corporation shall not be
required to keep original or duplicate stock ledgers at its principal office in
the City of Baltimore, Maryland, but stock ledgers shall be kept at the
respective offices of the Transfer Agents of the Corporation's capital stock.
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ARTICLE V
SEAL
The seal of the Corporation shall be in such form as the Board
of Directors shall prescribe.
ARTICLE VI
SUNDRY PROVISIONS
SECTION 1. Amendments. (a) By Stockholders. By-Laws may be
adopted, altered, amended or repealed in the manner provided in Section 5 of
Article I hereof at any annual or special meeting of the stockholders.
(b) By Directors. By-Laws may be adopted, altered,
amended or repealed in the manner provided in Section 6 of Article II hereof by
the Board of Directors at any regular or special meeting of the Board.
SECTION 2. Indemnification of Directors and Officers (a)
Indemnification. Any person who was or is a party or is threatened to be made a
party in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is a current or former director or officer of the Corporation,
or is or was serving while a director or officer of the Corporation at the
request of the Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust,
enterprise or employee benefit plan, shall be indemnified by the Corporation
against judgments, penalties, fines, excise taxes, settlements and reasonable
expenses (including attorney's fees) actually incurred by such person in
connection with such action, suit or proceeding to the full extent permissible
under the General Laws of the State of Maryland, the Securities Act of 1933 and
the Investment Company Act of 1940, as such statutes are now or hereafter in
force, except that such indemnity shall not protect any such person against any
liability to the Corporation or any stockholder thereof to which such person
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
(b) Advances. Any current or former director or
officer of the Corporation claiming indemnification within the
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scope of this Section 2 shall be entitled to advances from the Corporation for
payment of the reasonable expenses incurred by him in connection with
proceedings to which he is a party in the manner and to the full extent
permissible under the General Laws of the State of Maryland, the Securities Act
of 1933 and the Investment Company Act of 1940, as such statutes are now or
hereafter in force.
(c) Procedure. On the request of any current or
former director or officer requesting indemnification or an advance under this
Section 2, the Board of Directors shall determine, or cause to be determined, in
a manner consistent with the General Laws of the State of Maryland, the
Securities Act of 1933 and the Investment Company Act of 1940, as such statutes
are now or hereafter in force, whether the standards required by this Section 2
have been met.
(d) Other Rights. The indemnification provided by
this Section 2 shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such indemnification may be
entitled under any insurance or other agreement, vote of stockholders or
disinterested directors or otherwise, both as to action by a director or officer
of the Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
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Exhibit 5(c)
SUB-ADVISORY AGREEMENT
AGREEMENT made as of May 16, 1997 by and among U.S. TRUST COMPANY OF
CONNECTICUT ("USTCT"), a Connecticut state bank and trust company, UNITED STATES
TRUST COMPANY OF NEW YORK ("USTNY"), a New York state-chartered bank and trust
company (together with USTCT, "U.S. Trust"), and United States Trust Company of
California, a national bank organized under the laws of the United States
(herein called "U.S. Trust California").
WHEREAS, Excelsior Tax-Exempt Funds, Inc. (the "Company") is registered
as an open-end, management investment company under the Investment Company Act
of 1940;
WHEREAS, U.S. Trust is the investment adviser to the Company's
California Tax-Exempt Income Fund (the "Fund");
WHEREAS, U.S. Trust desires to retain U.S Trust California to render
investment sub-advisory services to the Company for the Fund, and U.S. Trust
California is willing to so render such services;
NOW, THEREFORE, this Agreement
WITNESSETH:
In consideration of the premises and mutual covenants herein contained,
it is agreed between the parties hereto as follows:
1. Appointment. U.S. Trust hereby appoints U.S. Trust California to act
as investment sub-adviser to the Company for the Fund for the period and on the
terms set forth in this Agreement. U.S. Trust California accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. U.S. Trust has furnished U.S. Trust
California with copies properly certified or authenticated of each of the
following:
(a) Articles of Incorporation of the Company;
(b) By-Laws of the Company;
(c) Resolutions of the Board of Directors of the Company
authorizing the appointment of U.S. Trust as the
<PAGE>
investment adviser for the Fund and the execution and delivery of
the Investment Advisory Agreement with respect to the Fund;
(d) Resolutions of the Board of Directors of the Company
authorizing the appointment of U.S. Trust California as the Fund's investment
sub-adviser and the execution and delivery of this Agreement;
(e) Post-Effective Amendment No. 19 to the Company's
Registration Statement under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended (the "1940 Act"), on Form N-1A (No.
2-93068) relating to the Company's shares representing interests in the Fund;
(f) Notification of Registration of the Company under the 1940
Act, as amended, on Form N-8A as filed with the Securities and Exchange
Commission on August 31, 1984, and all amendments thereto; and
(g) Prospectuses and statements of additional information of
the Company relating to the Company's shares representing interests in the Fund
in effect under the Securities Act of 1933 (such prospectuses, statements of
additional information and supplements thereto, as presently in effect and as
from time to time amended and supplemented, herein called the "Prospectus").
U.S. Trust will furnish U.S Trust California from time to time
with copies of all amendments of or supplements to the foregoing, if any.
3. Sub-Advisory Services. Subject to the supervision of the
Board of Directors of the Company and the oversight of U.S. Trust, U.S. Trust
California will provide a continuous investment program for the Fund, including
investment research and management with respect to all securities and
investments of the Fund. U.S. Trust California will determine, subject to U.S.
Trust's approval, what securities and other investments will be purchased,
retained or sold by the Company for the Fund including, with the assistance of
U.S. Trust if required, the Fund's investments in futures. U.S. Trust California
will provide the services rendered by it hereunder in accordance with the Fund's
investment objectives and policies as stated in the Prospectus. U.S. Trust
California further agrees that it:
(a) will conform with all applicable Rules and Regulations of
the Securities and Exchange Commission (herein called the "Rules"), and will in
addition conduct its activities under this Agreement in accordance with
applicable law, including but not limited to applicable banking law;
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(b) will not make loans for the purpose of purchasing or
carrying Fund shares, or make loans to the Company;
(c) will manage the Fund's overall cash positions;
(d) will place orders pursuant to its investment
determinations for the Fund either directly with the issuer or with any broker
or dealer selected by it. In placing orders with brokers and dealers, U.S. Trust
California will use its reasonable best efforts to obtain the best net price and
the most favorable execution of its orders, after taking into account all
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. Consistent with this
obligation, U.S. Trust California may, to the extent permitted by law, purchase
and sell portfolio securities to and from brokers and dealers who provide
brokerage and research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934) to or for the benefit of the Fund and/or other
accounts over which U.S. Trust California or any of its affiliates exercises
investment discretion. Subject to the review of the Company's Board of Directors
from time to time with respect to the extent and continuation of the policy,
U.S. Trust California is authorized to pay to a broker or dealer who provides
such brokerage and research services a commission for effecting a securities
transaction for the Fund which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if U.S. Trust
California determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
overall responsibilities of U.S. Trust California with respect to the accounts
as to which it exercises investment discretion. In no instance will portfolio
securities be purchased from or sold to the Fund's principal underwriter, U.S.
Trust, U.S. Trust California or any affiliated person thereof except as
permitted by the Securities and Exchange Commission;
(e) will maintain books and records with respect to the
securities and other investment transactions entered into pursuant to this
Agreement and will render to U.S. Trust and the Company's Board of Directors
such periodic and special reports as they may request;
(f) will treat confidentially and as proprietary information
of the Company all records and other information relative to the Company and
prior, present or potential shareholders, and will not use such records and
information for
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any purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Company, which
approval shall not be unreasonably withheld and may not be withheld where U.S.
Trust California may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company. Nothing contained
herein, however, shall prohibit U.S. Trust California from advertising or
soliciting the public generally with respect to other products or services,
regardless of whether such advertisement or solicitation may include prior,
present or potential shareholders of the Company.
4. Services Not Exclusive. The investment sub-advisory
services rendered by U.S. Trust California hereunder are not to be deemed
exclusive, and U.S. Trust California shall be free to render similar services to
others so long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, U.S. Trust California hereby agrees that all
records which it maintains for the Fund are the property of the Company and
further agrees to surrender promptly to the Company any of such records upon the
Company's request. U.S. Trust California further agrees to preserve for the
periods prescribed by Rule 31a-2 the records required to be maintained by Rule
31a-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, U.S. Trust
California will pay all expenses incurred by it in connection with its
activities under this Agreement other than the cost of securities, commodities
and other investments (including brokerage commissions and other transaction
charges, if any) purchased for the Fund.
In addition, U.S. Trust California will pay U.S. Trust an
amount equal to 83% of each expense reimbursement made by U.S. Trust to the
Company with respect to the Fund under the second paragraph of Section 6 of the
Investment Advisory Agreement relating to the Fund.
7. Compensation. For the services provided and the expenses
assumed pursuant to this Agreement, U.S. Trust will pay U.S. Trust California
and U.S. Trust California will accept as full compensation therefor a fee,
computed daily and payable monthly, at the annual rate of .50% of the average
daily net assets of the Fund.
8. Limitation of Liability of the Sub-Adviser. U.S. Trust
California shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Company in connection with the matters to which
this Agreement relates,
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except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of U.S. Trust California
in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
9. Duration and Termination. This Agreement shall become
effective upon its execution as of the date first written above and, unless
sooner terminated as provided herein, shall continue until through July 31,
1997. Thereafter, if not terminated, this Agreement shall continue in effect as
to the Fund for successive periods of 12 months each, provided such continuance
is specifically approved at least annually by the vote of a majority of those
members of the Board of Directors of the Company who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval, and by the Board of Directors
of the Company or the vote of a majority of the outstanding voting securities of
the Fund; provided, however, that this Agreement may be terminated as to the
Fund at any time, without the payment of any penalty, by U.S. Trust or by the
Company (by the Board of Directors of the Company or by vote of a majority of
the outstanding voting securities of the Fund) on 60 days' written notice to
U.S. Trust California, and will automatically terminate upon the termination of
the Investment Advisory Agreement between U.S. Trust and the Company with
respect to the Fund. This Agreement may be terminated as to the Fund by U.S.
Trust California at any time, without payment of any penalty, on 90 days'
written notice to the Company and U.S. Trust. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested person" and
"assignment" shall have the same meanings as such terms have in the 1940 Act.)
10. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no amendment of this
Agreement shall be effective with respect to the Fund until approved by vote of
a majority of the Fund's outstanding voting securities.
11. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to
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the benefit of the parties hereto and their respective successors and shall be
governed by New York law.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day and
year first above written.
U.S. TRUST COMPANY
Attest: OF CONNECTICUT
/s/ Francis J. Hearn, Jr. By: /s/ W. Michael Funck
- --------------------------- -----------------------------
President & CEO
UNITED STATES TRUST COMPANY
Attest: OF NEW YORK
/s/ Francis J. Hearn, Jr. By: /s/ Kenneth T. Walsh
- --------------------------- -----------------------------
Executive Vice President
UNITED STATES TRUST COMPANY
Attest: OF CALIFORNIA
/s/ Tana Rutkowski By: /s/ G. Sanford
- --------------------------- -----------------------------
President & CEO
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<PAGE>
Exhibit 8(a)
CUSTODY AGREEMENT
AGREEMENT effective as of September 1, 1995 (as amended and restated on
August 1, 1997) between THE CHASE MANHATTAN BANK ("Bank") and EXCELSIOR
TAX-EXEMPT FUNDS, INC., a Maryland corporation (the "Fund").
WITNESSETH:
WHEREAS, the Fund wishes to retain Bank to provide custodian services to
the Fund for the benefit of the investment portfolios of the Fund listed on
Exhibit A hereto, as the same may be amended from time to time by the parties
hereto (each a "Portfolio," collectively, "Portfolios"), and Bank is willing
to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Custody Account. The Bank agrees to establish and maintain (a) a
separate custody account for each Portfolio of the Fund ("Custody Account")
for any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase or subscribe for
the same or evidencing or representing any other rights or interests therein
and other similar property (hereinafter called "Securities") from time to time
received by the Bank or any subcustodian (as defined in the second paragraph
of Section 3 hereof) for
<PAGE>
the account of the particular Portfolio of the Fund and (b) a separate deposit
account(s) in the name of each Portfolio of the Fund ("Deposit Account") for
any and all cash and cash equivalents in any currency received by the Bank or
any subcustodian for the account of the particular Portfolio of the Fund,
which cash shall not be subject to withdrawal by draft or check. The term
"Property" as used herein shall mean all Securities, cash, cash equivalents
and other assets of the Fund.
2. Maintenance of Property Domestically and Abroad. Securities in a
Custody Account shall be held in the country or other jurisdiction in which
the principal trading market for such Securities is located or the country of
other jurisdiction in which such Securities are to be presented for payment or
are acquired for the Custody Account, and cash in a Deposit Account shall be
credited to an account in such country or other jurisdiction in which such
cash may be legally deposited or is the legal currency for the payment of
public or private debts. Cash may be held pursuant to Instructions (as defined
in Section 9 hereof) in either interest or non-interest bearing accounts as
may be available for the particular currency. To the extent Instructions are
issued and the Bank can comply with such Instructions, the Bank is authorized
to maintain cash balances on deposit for the Fund with itself or one of its
affiliates at such reasonable rates of interest as may from time to time be
paid on such accounts, or in non-interest bearing accounts as the Fund may
direct, if acceptable to the Bank.
3. Eligible Foreign Custodians and Securities Depositories. The Board of
Directors of the Fund authorizes the Bank to hold the Securities in the
Custody Account(s) and the cash in the Deposit Account(s) in custody and
deposit accounts, respectively, which
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have been established by the Bank with one of its branches, a branch of a
qualified U.S. bank, an eligible foreign custodian or an eligible foreign
securities depository; provided, however, that the Board of Directors of the
Fund has approved the use of, and the Bank's contract with, such eligible
foreign custodian or eligible foreign securities depository by resolution, and
Instructions to such effect have been provided to the Bank. Furthermore, if a
branch of the Bank, a branch of a qualified U.S. bank or an eligible foreign
custodian is selected to act as the Bank's subcustodian to hold any Property,
such entity is authorized to hold such Property in its account with any eligible
foreign securities depository in which it participates so long as such foreign
securities depository has been approved by the Board of Directors of the Fund.
For purposes of this Agreement, "qualified U.S. bank" and "eligible foreign
custodian" shall have the same meanings as given in Rule 17f-5 under the
Investment Company Act of 1940, as amended ("Rule 17f-5"), and "eligible foreign
securities depository" shall be a depository within the meaning of Rule
17f-5(c)(2)(iii) and (iv) as said Rule 17f-5 was in effect on September 1, 1995.
Hereinafter the term "subcustodian" will refer to any Bank branch, any
branch of a qualified U.S. bank, any eligible foreign custodian or any eligible
foreign securities depository with which the Bank has entered into an agreement
of the type contemplated hereunder regarding Securities and/or cash held in or
to be acquired for a Custody Account or a Deposit Account.
If, after the initial approval of the subcustodians by the Board of
Directors of the Fund in connection with this Agreement, the Bank wishes to
appoint other subcustodians to hold the Fund's Property, it will so notify the
Fund and will provide it with information
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reasonably necessary to determine any such new subcustodian's eligibility under
Rule 17f-5, including a copy of the proposed agreement with such subcustodian.
The Fund shall within 30 days after receipt of such notice give a written
approval or disapproval of the proposed action.
If the Bank intends to remove any subcustodian previously approved, it
shall so notify the Fund and shall move the Property deposited with such
subcustodian to another subcustodian previously approved or to a new
subcustodian, provided that the appointment of any new subcustodian will be
subject to the requirements set forth in the preceding paragraph. The Bank shall
take steps as may be required to remove any subcustodian which has ceased to
meet the requirements of Rule 17f-5.
4. Use of Subcustodians. With respect to Property which is maintained
by the Bank in the custody of a subcustodian pursuant to Section 3:
(a) The Bank will identify on its books as belonging to the
particular Portfolio of the Fund any Property held by such subcustodian.
(b) In the event that a subcustodian permits any of the
Securities placed in its care to be held in an eligible foreign securities
depository, such subcustodian will be required by its agreement with the Bank to
identify on its books such Securities as being held for the account of the Bank
as a custodian for its customers.
(c) Any Securities in a Custody Account held by a subcustodian
of the Bank will be subject only to the instructions of the Bank or its agents;
and any Securities held in an eligible foreign securities depository for the
account of a subcustodian will be subject only to the instructions of such
subcustodian.
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(d) The Bank will only deposit Securities in an account with a
subcustodian which includes exclusively the assets held by the Bank for its
customers, and the Bank will cause such account to be designated by such
subcustodian as a special custody account for the exclusive benefit of customers
of the Bank.
(e) Any agreement the Bank shall enter into with a
subcustodian with respect to the holding of Securities shall require that (i)
the Securities are not subject to any right, charge, security interest, lien or
claim of any kind in favor of such subcustodian or its creditors except for a
claim of payment for its safe custody or administration and (ii) beneficial
ownership of such Securities is freely transferable without the payment of money
or value other than for safe custody or administration; provided, however, that
the foregoing shall not apply to the extent that any of the above-mentioned
rights, charges, etc. result from any compensation or other expenses arising
with respect to the safekeeping of Securities pursuant to such agreement.
(f) The Bank shall allow independent public accountants of the
Fund such reasonable access to the records of the Bank relating to Property held
in a Custody Account and a Deposit Account as required by such accountants in
connection with their examination of the books and records pertaining to the
affairs of the Fund. The Bank shall, subject to restrictions under applicable
law, also obtain from any subcustodian with which the Fund maintains the
physical possession of any Property an undertaking to permit independent public
accountants of the Fund such reasonable access to the records of such
subcustodian as may be required in connection with their examination of the
books and records pertaining to the affairs of the Fund or to supply a
verifiable confirmation of the contents of such records.
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The Bank shall furnish the Fund such reports (or portions thereof) of the Bank's
external auditors as relate directly to the Bank's system of internal accounting
controls applicable to the Bank's duties under this Agreement. The Bank shall
request for and furnish to the Fund such similar reports as may be furnished to
it with respect to each subcustodian and securities depository holding the
Fund's assets.
(g) The Bank will supply to the Fund, care of its investment
adviser, at least monthly a statement in respect to any Property in a Custody
and a Deposit Account held by each subcustodian, including an identification of
the entity having possession of such Property, and the Bank will send to the
Fund an advice or notification of any transfers of Property to or from the
Custody Account and Deposit Account, indicating, as to Property acquired for an
investment portfolio of the Fund, the identity of the entity having physical
possession of such Property. In the absence of the filing in writing with the
Bank by the Fund of exceptions or objections to any such statement within sixty
(60) days of the Fund's receipt of such statement, or within sixty (60) days
after the date that a material defect is reasonably discoverable, the Fund shall
be deemed to have approved such statement and in such case or upon written
approval of the Fund of any such statement the Bank shall, to the extent
permitted by law and provided the Bank has met the standard of care in Section
12 hereunder, be released, relieved and discharged with respect to all matters
and things set forth in such statement as though such statement has been settled
by the decree of a court of competent jurisdiction in an action in which the
Fund and all persons having any equity interest in the Fund were parties.
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<PAGE>
(h) The Bank hereby warrants to the Fund that in its opinion,
after due inquiry, the established procedures to be followed by each of its
branches, each branch of a qualified U.S. bank and each eligible foreign
custodian holding Securities of the Fund pursuant to this Agreement afford
protection for such Securities at least equal to that afforded by the Bank's
established procedures with respect to similar Securities held by the Bank (and
its securities depositories) in New York.
(i) The Bank hereby warrants to the Fund that as of the date
of this Agreement it is maintaining a Bankers Blanket Bond sufficient to cover
any of its reasonably anticipated liabilities hereunder and hereby agrees to
notify the Fund in the event its Bankers Blanket Bond is canceled or otherwise
lapses.
5. Deposit Account Payments. Subject to the provisions of Section 7,
the Bank shall make, or cause its subcustodian to make, payments of cash
credited to a Deposit Account only:
(a) in connection with the purchase of Securities for the
particular Portfolio of the Fund involved and the delivery of such Securities
to, or the crediting of such Securities to, the particular Custody Account of
the Bank or its subcustodian, each such payment to be made at prices as
confirmed by Instructions from Authorized Persons (as defined in Section 10
hereof);
(b) for the purchase or redemption of shares of the capital
stock of the particular Portfolio of the Fund involved and the delivery to, or
crediting to the account of, the Bank or its subcustodian of such shares to be
so purchased or redeemed;
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<PAGE>
(c) for the payment for the account of the particular
Portfolio of the Fund involved of dividends, interest, taxes, management or
supervisory fees, capital distributions or operating expenses;
(d) for the payments to be made in connection with the
conversion, exchange or surrender of Securities held in a Custody Account;
(e) for spot or forward foreign exchange transactions to
facilitate security trading, receipt of income from Securities or related
transactions;
(f) for other proper corporate purposes of the particular
Portfolio of the Fund involved; or
(g) upon the termination of this Custody Agreement as
hereinafter set forth.
All payments of cash for a purpose permitted by subsection (a), (b),
(c), (d) or (e) of this Section 5 will be made only upon receipt by the Bank of
Instructions from Authorized Persons which shall specify the purpose for which
the payment is to be made and the applicable subsection of this Section 5. In
the case of any payment to be made for the purpose permitted by subsection (f)
of this Section 5, the Bank must first receive a certified copy of a resolution
of the Board of Directors of the Fund adequately describing such payment,
declaring such purpose to be a proper corporate purpose, and naming the person
or persons to whom such payment shall be made. Any payment pursuant to
subsection (g) of this Section 5 will be made in accordance with Section 17
hereof.
In the event that any payment for a Portfolio of the Fund made under
this Section 5 exceeds the funds available in that Portfolio's Deposit Account,
the Bank may, in its
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<PAGE>
discretion, advance the Fund on behalf of that Portfolio an amount equal to such
excess and such advance shall be deemed a loan from the Bank to that Portfolio
payable on demand, bearing interest at the rate of interest customarily charged
by the Bank on similar loans. If the Bank causes a Deposit Account to be
credited on the payable date for interest, dividends or redemptions, the
particular Portfolio of the Fund involved will promptly return to the Bank any
such amount or property so credited upon oral or written notification that such
amount has not been received in the ordinary course of business or that such
amount was incorrectly credited. The Bank or its subcustodian, as the case may
be, shall have no duty or obligation to institute legal proceedings, file a
claim or proof of claim in any insolvency proceeding or take any other action
with respect to the collection of such amount or property.
6. Custody Account Transactions. Subject to the provisions of Section 7,
Securities in a Custody Account will be transferred, exchanged or delivered by
the Bank or its subcustodians only:
(a) upon sale of such Securities for the particular Portfolio
of the Fund involved and receipt by the Bank or its subcustodian of payment
therefor, each such payment to be in the amount confirmed by Instructions from
Authorized Persons;
(b) when such Securities are called, redeemed or retired, or
otherwise become payable;
(c) in exchange for or upon conversion into other Securities
alone or other Securities and cash pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment;
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<PAGE>
(d) upon conversion of such Securities pursuant to their
terms into other Securities;
(e) upon exercise of subscription, purchase or other similar
rights represented by such Securities;
(f) for the purpose of exchanging interim receipts or
temporary Securities for definitive Securities;
(g) for the purpose of redeeming in-kind shares of the capital
stock of the particular Portfolio of the Fund involved against delivery to the
Bank or its subcustodian of such shares to be redeemed;
(h) in connection with any borrowings by the particular
Portfolio requiring a pledge of Securities, but only against receipt of amounts
borrowed;
(i) in connection with any loans, but only against receipt of
adequate collateral as specified in Instructions which shall reflect any
restrictions applicable to the Fund;
(j) for delivery in accordance with the provisions of any
agreement among the Fund, the Bank and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of the
National Association of Securities Dealers, Inc. relating to compliance with the
rules of The Options Clearing Corporation and of any registered national
securities exchange, or of any similar organizations, regarding escrow or other
arrangements in connection with transactions by the particular Portfolio;
(k) for release of Securities to designated brokers under
covered call options, provided, however, that such Securities shall be released
only upon payment to the
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<PAGE>
Bank of monies for the premium due and a receipt for the Securities which are to
be held in escrow. Upon exercise of the option, or at expiration, the Bank will
receive the Securities previously deposited from brokers. The Bank will act
strictly in accordance with Instructions in the delivery of Securities to be
held in escrow and will have no responsibility or liability for any such
Securities which are not returned promptly when due other than to make proper
request for such return.
(l) for other proper corporate purposes of the particular
Portfolio of the Fund involved; or
(m) upon the termination of this Custody Agreement as
hereinafter set forth.
All transfers, exchanges or deliveries of Securities in a Custody Account
for a purpose permitted by either subsection (a), (b), (c), (d), (e) or (f) of
this Section 6 will be made, except as provided in Section 8 hereof, only upon
receipt by the Bank of Instructions from Authorized Persons which shall specify
the purpose of the transfer, exchange or delivery to be made and the applicable
subsection of this Section 6. In the case of any transfer or delivery to be made
for the purpose permitted by subsection (g) of this Section 6, the Bank must
first receive Instructions from Authorized Persons specifying the Securities
held by the Bank or its subcustodian to be so transferred or delivered and
naming the person or persons to whom transfers or delivery of such Securities
shall be made. In the case of any transfer, exchange or delivery to be made for
the purpose permitted by subsections (h) or (l) of this Section 6, the Bank must
first receive a certified copy of a resolution of the Board of Directors of the
Fund adequately describing such transfer, exchange or delivery, declaring
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<PAGE>
such purpose to be a proper corporate purpose, and naming the person or persons
to whom delivery of such Securities shall be made. Any transfer or delivery
pursuant to subsection (m) of this Section 6 will be made in accordance with
Section 17 hereof.
7. Custody Account Procedures. With respect to any transaction
involving Securities held in or to be acquired for a Custody Account, the Bank
in its discretion may cause the Deposit Account for the particular Portfolio of
the Fund involved to be credited on the contractual settlement date with the
proceeds of any sale or exchange of Securities from the particular Custody
Account and to be debited on the contractual settlement date for the cost of
Securities purchased or acquired for the particular Custody Account. The Bank
may reverse any such credit or debit if the transaction with respect to which
such credit or debit was made fails to settle within a reasonable period,
determined by the Bank in its discretion, after the contractual settlement date,
except that if any Securities delivered pursuant to this Section 7 are returned
by the recipient thereof, the Bank may cause any such credits and debits to be
reversed at any time. With respect to any transactions as to which the Bank does
not determine so to credit or debit the particular Deposit Account, the proceeds
from the sale or exchange of Securities will be credited and the cost of such
Securities purchased or acquired will be debited to the particular Deposit
Account on the date such proceeds or Securities are received by the Bank.
Notwithstanding the preceding paragraph and Section 6 hereof,
settlement and payment for Securities received for, and delivery of Securities
out of, a Custody Account may be effected in accordance with the customary or
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the
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<PAGE>
transaction occurs, including, without limitation, delivering Securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such Securities from such purchaser or dealer.
8. Actions of the Bank. Until the Bank receives Instructions from
Authorized Persons to the contrary, the Bank will, or will instruct its
subcustodian, to:
(a) present for payment any Securities in a Custody Account
which are called, redeemed or retired or otherwise become payable and all
coupons and other income items which call for payment upon presentation to the
extent that the Bank or subcustodian is aware of such opportunities for payment,
and hold cash received upon presentation of such Securities in accordance with
the provisions of Sections 2, 3 and 4 hereof;
(b) in respect of Securities in a Custody Account, execute in
the name of the Fund on behalf of the particular Portfolio involved such
ownership and other certificates as may be required to obtain payments in
respect thereof;
(c) exchange interim receipts or temporary Securities in a
Custody Account for definitive Securities;
(d) (if applicable) convert monies received with respect to
Securities of foreign issue into United States dollars or any other currency
necessary to effect any transaction involving the Securities whenever it is
practicable to do so through customary banking channels, using any method or
agency available, including, but not limited to, the facilities of the Bank, its
subsidiaries, affiliates or subcustodians;
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(e) (if applicable) appoint brokers and agents for any
transaction involving the Securities in a Custody Account, including, without
limitation, affiliates of the Bank or any subcustodian; and
(f) apply for a reduction of withholding tax and any refund of
any tax paid or tax credits which apply in each applicable market in respect of
income payments or Securities for the benefit of each Portfolio of the Fund
which the Bank believes may be available to such Portfolio. The provision of tax
reclaim services by the Bank is conditioned upon the Bank receiving from the
Fund (A) a declaration of its identity and place of residence and (B) certain
other documentation (pro forma copies of which are available from the Bank)
requested by the Bank. The Fund shall provide to the Bank such documentation and
information as it may request in connection with taxation, and warrants that,
when given, this information shall be true and correct in every respect, not
misleading in any way, and shall contain all material information. The Fund
undertakes to notify the Bank immediately if any such information requires
updating or amendment. The Bank shall not be liable to the Fund or any third
party for any tax fines or penalties payable by the Bank or the Fund, and shall
be indemnified accordingly, whether these result from the inaccurate completion
of documents by the Fund or any third party, or as a result of the provision to
the Bank or any third party of inaccurate or misleading information or the
withholding of material information by the Fund or any other third party, or as
a result of any delay of any revenue authority or any other matter beyond the
control of the Bank. The Fund confirms that the Bank is authorized to deduct
from any cash received or credited to the Deposit Account any taxes or levies
required by any revenue or governmental authority in respect of
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the Securities or Deposit Accounts. The Bank shall perform tax reclaim services
only with respect to taxation levied by the revenue authorities of the countries
notified to the Fund from time to time and the Bank may, by notification in
writing, at its absolute discretion, supplement or amend the markets in which
the tax reclaim services are offered. Other than as expressly provided in this
clause, the Bank shall have no responsibility with regard to the Fund's tax
position or status in any jurisdiction. The Fund confirms that the Bank is
authorized to disclose any information requested by any revenue authority or any
governmental body in relation to the Fund or the Securities and/or cash held for
the Fund. Tax reclaim services may be provided by the Bank or, in whole or in
part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank), provided that the Bank shall be liable for the
performance of any such third party to the same extent as the Bank would have
been if it performed such services itself.
9. Instructions. As used in this Agreement, the term "Instructions"
means instructions of the Fund received by the Bank via telephone, telex, TWX,
facsimile transmission, bank wire or other teleprocess or electronic instruction
system acceptable to the Bank which the Bank believes in good faith to have been
given by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the particular Portfolio
of the Fund involved will hold the Bank harmless for the Fund's (i) failure to
send such confirmation in writing, or (ii) the
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failure of such confirmation to conform to the telephone Instructions received.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded. If the Bank requires test
arrangements, authentication methods or other security devices to be used with
respect to Instructions, any Instructions given by the Fund thereafter shall be
given and processed in accordance with such terms and conditions for the use of
such arrangements, methods or devices as the Bank may put into effect and modify
from time to time. The Fund shall safeguard any testkeys, identification codes
or other security devices which the Bank shall make available to them. The Bank
may electronically record any Instructions given by telephone, and any other
telephone discussions, with respect to a Custody Account.
10. Authorized Persons. As used in this Agreement, the term "Authorized
Persons" means such officers or such agents of the Fund as have been designated
by a resolution of the Board of Directors of the Fund, a certified copy of which
has been provided to the Bank, to act on behalf of the Fund in the performance
of any acts which Authorized Persons may do under this Agreement. Such persons
shall continue to be Authorized Persons until such time as the Bank receives
Instructions from Authorized Persons that any such officer or agent is no longer
an Authorized Person.
11. Nominees. Securities in a Custody Account which are ordinarily held
in registered form may be registered in the name of the Bank's nominee or, as to
any Securities in the possession of an entity other than the Bank, in the name
of such entity's nominee. The particular Portfolio of the Fund involved agrees
to hold any such nominee harmless from any liability as a holder of record of
such Securities, but not if such liability is a result of
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such nominee's negligence. The Bank may without notice to the Fund cause any
such Securities to cease to be registered in the name of any such nominee and to
be registered in the name of the Fund. In the event that any Securities
registered in the name of the Bank's nominee or held by one of its subcustodians
and registered in the name of such subcustodian's nominee are called for partial
redemption by the issuer of such Security, the Bank may allot, or cause to be
allotted, the called portion to the respective beneficial holders of such class
of security in any manner the Bank deems to be fair and equitable.
12. Standard of Care.
(a) The Bank shall be obligated to perform only such duties as are
set forth in this Agreement or expressly contained in Instructions
given to Bank which are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of
Property. The Bank shall be liable to the Fund for any loss
which shall occur as the result of the failure of a
subcustodian to exercise reasonable care with respect to the
safekeeping of such Property to the same extent that the Bank
would be liable to the Fund if the Bank were holding such
Property in New York. In the event of any loss to the Fund by
reason of the failure of the Bank or its subcustodian to
exercise reasonable care, the Bank shall be liable to the Fund
only to the extent the Fund's direct damages and expenses, to
be determined based on, but not limited to, the market value of
the Property which is the subject of the loss at the date of
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discovery of such loss, and without reference to any special
conditions or circumstances. For purposes of this Section
12(a)(i), the term "subcustodian" shall not include any
securities depository or clearing agency the use of which is
compulsory because: (a) its use is required by law or
regulation, (b) securities cannot be withdrawn from the
depository, or (c) maintaining securities outside the
depository is not consistent with prevailing custodial
practices in the country which the depository serves.
(ii) The Bank will not be responsible for any act, omission,
default or for the solvency of any broker or agent (other than
as provided herein) which it or a subcustodian appoints and
uses unless such appointment and use were made or done
negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability
to, the Fund and the particular Portfolio of the Fund involved
for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise within the scope of this Agreement if
such act or omission was in good faith and without negligence.
In performing its obligations under this Agreement, the Bank
may rely on the genuineness of any document which it believes
in good faith to have been validly executed. (iv) The Fund, on
behalf of the particular Portfolio of the Fund involved, agrees
to cause such Portfolio to pay for and hold the Bank harmless
from any liability or loss resulting from the imposition or
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assessment of any taxes or other governmental charges, and any
related expenses, with respect to income from or Property in
such Portfolio's Custody Account and Deposit Account.
(v) The Bank shall be entitled to rely, and may act upon the
advice of counsel (who may be counsel for the Fund) on all
matters and shall be without liability for any action
reasonably taken or omitted in good faith and without
negligence pursuant to such advice.
(vi) The Bank need not maintain any insurance for the exclusive
benefit of the Fund.
(vii) Without limiting the foregoing, the Bank shall not be
liable for any loss which results from:
(1) the general risk of investing, or
(2) subject to Section 12(a)(i) hereof, investing or holding
Property in a particular country including, but not limited to,
losses resulting from nationalization, expropriation or other
governmental actions; regulation of the banking or securities
industry; currency restrictions, devaluations or fluctuations;
and market conditions which prevent the orderly execution of
securities transactions or affect the value of Property.
(viii) No party shall be liable to the other for any loss due
to forces beyond its control including but not limited to
strikes or work
-19-
<PAGE>
stoppages, acts of war or terrorism, insurrection, revolution,
nuclear fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) Question Instructions or make any suggestions to the Fund
or an Authorized Person regarding such Instructions;
(ii) Supervise or make recommendations with respect to
investments or the retention of Securities;
(iii) Advise the Fund or an Authorized Person regarding any
default in the payment of principal or income of any Security
other than as provided in the last paragraph of Section 5
hereof;
(iv) Subject to Section 12(a)(ii) hereof, evaluate or report to
the Fund or an Authorized Person regarding the financial
condition of any broker, agent or other party to which
Securities are delivered or payments are made pursuant to this
Agreement; or
(v) Review or reconcile trade confirmations received from
brokers. The Fund or its Authorized Persons issuing
Instructions shall bear any responsibility to review such
confirmations against Instructions issued to and statements
issued by the Bank.
(c) The Bank shall provide to the Fund, on an annual basis, a report
confirming that the arrangements hereunder remain in compliance with the rules
of the Securities and Exchange Commission governing such arrangements.
-20-
<PAGE>
(d) The Fund authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank
may have a potential conflict of duty or interest, including the fact that the
Bank or any of its affiliates may provide brokerage services to other
customers, act as financial advisor to the issuer of Securities, act as a
lender to the issuer of Securities, act in the same transaction as agent for
more than one customer, have a material interest in the issue of Securities,
or earn profits from any of the activities listed herein.
13. Compliance with Securities and Exchange Commission Rules and Orders.
Except to the extent the Bank has specifically agreed pursuant to this
Agreement or in an exemptive order to comply with a condition of Rule 17f-5 or
any interpretation or exemptive order promulgated thereunder by or under the
authority of the Securities and Exchange Commission, the Fund shall be solely
responsible to assure that the maintenance of Securities and cash under this
Agreement complies with such Rule 17f-5.
14. Corporate Actions.
(a) With respect to domestic U.S. and Canadian Securities
(the latter only when held with DTC), the Bank will send to the Fund or the
Authorized Person for a Custody Account such proxies (signed in blank, if
issued in the name of the Bank's nominee or the nominee of a central
depository) and communications with respect to Securities in the Custody
Account as call for voting or relate to legal proceedings within a reasonable
time after sufficient copies are received by the Bank for forwarding to its
customers. In addition, the Bank will follow coupon payments, redemptions,
exchanges or similar matters with
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<PAGE>
respect to Securities in the Custody Account and advise the Fund or the
Authorized Person for such account of rights issued, tender offers or any
other discretionary rights with respect to such Securities, in each case, of
which the Bank has received notice from the issuer of the Securities, or as to
which notice is published in publications routinely utilized by the Bank for
this purpose.
(b) With respect to proxies and Corporate Actions (as
defined below) not covered by paragraph (a) of this Section 14:
(i) Whenever the Bank or its subcustodian receives information
concerning the Securities which requires discretionary action
by the beneficial owner of the Securities (other than a proxy),
such as subscription rights, bonus issues, stock repurchase
plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate
Actions"), the Bank will give the Fund notice of such Corporate
Actions to the extent that the Bank's central corporate actions
department has actual knowledge of a Corporate Action in time
to notify its customers.
(ii) When a rights entitlement or a fractional interest resulting
from a rights issue, stock dividend, stock split or similar
Corporate Action is received which bears an expiration date, the
Bank or its subcustodians will endeavor to obtain Instructions
from the Fund or its Authorized Persons, but if Instructions are
not received in time for the Bank to take timely action, or
actual notice of such Corporate Action was
-22-
<PAGE>
received too late to seek Instructions, the Bank is authorized to sell
such rights entitlement or fractional interest and to credit the
applicable Deposit Account with the proceeds and to take any other action
it deems in good faith to be appropriate in which case, provided it has
met the standard of care in Section 12 hereof, it shall be held harmless
by the particular Portfolio of the Fund involved for any such action.
(iii) Proxies will only be voted pursuant to special arrangements which
may have been agreed to in writing between the parties hereto.
15. Fees and Expenses. The Fund agrees to pay the Bank from time to time
such compensation for its services pursuant to this Agreement as may be
mutually agreed upon in writing from time to time and the Bank's out-of-pocket
or incidental expenses, including (but without limitation) reasonable legal
fees. The Fund hereby agrees on behalf of its respective Portfolios to cause
the particular Portfolio of the Fund involved to hold the Bank harmless from
any liability or loss resulting from any taxes or other governmental charges,
and any expenses related thereto, which may be imposed or assessed with
respect to such Portfolio's Custody Account and also agrees on behalf of its
respective Portfolios to cause the particular Portfolio of the Fund involved
to hold the Bank, its subcustodians, and their respective nominees harmless
from any liability as a record holder of Securities in such Portfolio's
Custody Account. The Bank is authorized to charge any account of the
particular Portfolio of the Fund involved for such items specified in the
previous sentence and the Bank shall have a lien on Securities in such
Portfolio's Custody Account and on cash in such Portfolio's
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<PAGE>
Deposit Account for any amount owing to the Bank in connection with such
Portfolio from time to time under this Agreement.
16. Effectiveness. This Agreement shall be effective on the date first
noted above.
17. Termination. This Agreement may be terminated by the Fund or the Bank
by 60 days' written notice to the other, sent by registered mail. If notice of
termination is given by the Bank, the Fund shall, within 60 days following the
giving of such notice, deliver to the Bank a certified copy of a resolution of
the Board of Directors of the Fund specifying the names of the persons to whom
the Bank shall deliver such Securities and cash, after deducting therefrom any
amounts which the Bank determines to be owed to it under Section 15 hereof. If
within 60 days following the giving of a notice of termination by the Bank,
the Bank does not receive from the Fund a certified copy of a resolution of
the Board of Directors of the Fund specifying the names of the persons to whom
the cash in each Deposit Account shall be paid and to whom the Securities in
each Custody Account shall be delivered, the Bank, at its election, may
deliver such Securities and pay such cash to a bank or trust company doing
business in the State of New York and qualified as a custodian under the
Investment Company Act of 1940 and other applicable rules and regulations to
be held and disposed of pursuant to the provisions of this Agreement, or to
Authorized Persons, or may continue to hold such Securities and cash until a
certified copy of one or more resolutions as aforesaid is delivered to the
Bank. The obligations of the parties hereto regarding the use of reasonable
care, indemnities and payment of fees and expenses shall survive the
termination of this Agreement, and the obligations of each Portfolio of the
Fund
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<PAGE>
to indemnify and/or hold harmless other persons or entities under this
Agreement shall be the several (and not the joint or joint and several)
obligation of each Portfolio of the Fund.
18. Notices. Any notice or other communication from the Fund to the Bank
is to be sent to the office of the Bank at:
The Chase Manhattan Bank
Mutual Funds Service Division
3 Chase MetroTech Center
Brooklyn, New York 11245
or such other address as may hereafter be given to the Fund in accordance with
the notice provisions hereunder, and any notice from the Bank to the Fund is
to be mailed postage prepaid, addressed to the Fund at the addresses appearing
below, or as the same may hereafter be changed on the Bank's records in
accordance with notice hereunder from the Fund.
19. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
any party without the prior written consent of the other party, and shall bind
the successors and assigns of the Fund and the Bank.
20. Names. The names "Excelsior Tax-Exempt Funds, Inc." and "Board of
Directors of Excelsior Tax-Exempt Funds, Inc." refer respectively to the
corporation created and the Directors, as directors but not individually or
personally, acting from time to time under Articles of Incorporation dated
August 8, 1984, which is hereby referred to and a copy of which is on file at
the office of the State Department of Assessments and Taxation of the State of
Maryland and at the principal office of the Fund. The obligations of
"Excelsior
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<PAGE>
Tax-Exempt Funds, Inc." entered into in the name or on behalf thereof by any
of its Directors, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Directors, shareholders
or representatives of the Fund personally, but bind only the Fund's Property,
and all persons dealing with any Portfolio of the Fund must look solely to the
Property belonging to such Portfolio for the enforcement of any claims against
the Portfolio.
21. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
22. Counterpart Execution. This Agreement may be executed in any
number of counterparts with the same effect as if all parties hereto had
signed the same document. All counterparts shall be construed together and
shall constitute one agreement.
23. Confidentiality. Bank agrees on behalf of itself and its
employees to treat confidentially all records and other information relative
to the Fund and its prior, present, or potential shareholders, except, after
prior notification to and approval in writing by the Fund (which approval
shall not be unreasonably withheld and may not be withheld where Bank may be
exposed to civil or criminal contempt proceedings for failure to comply) when
requested to divulge such information by duly constituted authorities, or when
so requested by the Fund.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below effective as of the day and year
first above written.
THE CHASE MANHATTAN BANK
By: [Signature Illegible]
-------------------------------
Address for record:
3 Chase MetroTech Center
Brooklyn, New York 11245
EXCELSIOR TAX-EXEMPT FUNDS, INC.
By: /s/ F. S. Wonham
-------------------------------
Address for record:
73 Tremont Street
Boston, Massachusetts 02108
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<PAGE>
AMENDED EXHIBIT A
Portfolios covered by the Custody Agreement effective as of September 1,
1995 (as amended and restated on August 1, 1997) between The Chase Manhattan
Bank and Excelsior Tax-Exempt Funds, Inc.
Tax-Exempt Money Fund
Short-Term Tax-Exempt Securities Fund
Intermediate-Term Tax-Exempt Fund
Long-Term Tax-Exempt Fund
New York Intermediate-Term Tax-Exempt Fund
California Tax-Exempt Income Fund
New York Tax-Exempt Money Fund
THE CHASE MANHATTAN BANK, N.A.
By: ___________________________________
EXCELSIOR TAX-EXEMPT FUNDS, INC.
By: ___________________________________
Frederick S. Wonham
Dated May __, 1998
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
AMENDED AND RESTATED ADMINISTRATIVE SERVICES PLAN
Section 1. Upon the recommendation of Chase Global Funds
Services Company, Federated Administrative Services or U.S. Trust Company of
Connecticut (each a "Co-Administrator") as Co-Administrator of Excelsior
Tax-Exempt Funds, Inc. (the "Company"), any officer of the Company (or any other
person authorized by the Company's Board) is authorized to execute and deliver,
in the name and on behalf of the Company, written agreements in substantially
the form attached hereto or in any other form duly approved by the Board of
Directors ("Servicing Agreements") with institutions that are shareholders of
record or that have clients that are shareholders of record or beneficial owners
of any of the Funds of the Company, including without limitation the Company's
service providers and their affiliates ("Service Organizations"). Such Servicing
Agreements shall require the Service Organizations to provide or arrange for the
provision of support services as set forth therein to their clients who
beneficially own Shares of any Fund offered by the Company in consideration of a
fee, computed and paid in the manner set forth in the Servicing Agreements, at
the annual rate of up to .40% of the applicable net asset value of Shares
beneficially owned by such clients. Among other institutions, any bank, trust
company, thrift institution or broker-dealer is eligible to become a Service
Organization and to receive fees under this Plan. All expenses incurred by the
Company with respect to a particular class or series of Shares of a particular
Fund in connection with Servicing Agreements and the implementation of this Plan
shall be borne entirely by the holders of that class or series.
Section 2. The Co-Administrators shall monitor the
arrangements pertaining to the Company's Servicing Agreements with Service
Organizations in accordance with the terms of the Co-Administration Agreement by
and among the Co-Administrators and the Company. The Co-Administrators shall
not, however, be obliged by this Plan to recommend, and the Company shall not be
obliged to execute, any Servicing Agreement with any qualifying Service
Organization.
Section 3. So long as this Plan is in effect, the
Co-Administrators shall provide to the Company's Boards of Directors, and the
Directors shall review, at least quarterly, a written report of the amounts
expended pursuant to this Plan and the purposes for which such expenditures were
made.
<PAGE>
Section 4. This Plan shall become effective immediately upon
the approval of the Plan (and the form of Servicing Agreement attached hereto)
by a majority of the Board of Directors, including a majority of the Directors
who are not "interested persons" as defined in the Investment Company Act of
1940 (the "Act") of the Company and have no direct or indirect financial
interest in the operation of this Plan or in any Servicing Agreement or other
agreements related to this Plan (the "Disinterested Directors"), pursuant to a
vote cast in person at a meeting called for the purpose of voting on the
approval of this Plan (or form of Servicing Agreement).
Section 5. Unless sooner terminated, this Plan shall continue
until July 31, 1996 and thereafter shall continue automatically for successive
annual periods provided such continuance is approved at least annually in the
manner set forth in Section 4.
Section 6. This Plan may be amended at any time by the Board
of Directors, provided that any material amendments of the terms of this Plan
shall become effective only upon the approvals set forth in Section 4.
Section 7. This Plan is terminable at any time by vote of a
majority of the Disinterested Directors.
Section 8. While this Plan is in effect, the selection and
nomination of the new Directors of the Company who are not "interested persons"
(as defined in the Act) of the Company shall be committed to the discretion of
the existing Disinterested Directors.
Section 9. The Company initially adopted this Plan as of
February 21, 1994, and amended this Plan as of February 10, 1995, July 27, 1995,
November 17, 1995 and May 16, 1997.
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<PAGE>
SHAREHOLDER SERVICING AGREEMENT
THIS AGREEMENT, by and between Excelsior Tax-Exempt Funds,
Inc. (the "Corporation") and the shareholder service organization (the
"Organization") listed on the signature page hereof;
WITNESSETH:
WHEREAS, certain transactions in Shares of Common Stock, $.001
par value, of the Corporation or of any series now existing or later created of
the Corporations ("Shares") may be made by investors who are customers of, and
using the services of or arranged by, an Organization, including without
limitation the Company's service providers and their affiliates, that has
entered into a shareholder servicing agreement with the Corporation; and
WHEREAS, the Organization wishes to make it possible for its
customers (the "Customers") to purchase Shares and wishes to act as the
Customers' agent in performing or arranging for the performance of certain
administrative functions in connection with purchases, exchanges and redemptions
of Shares from time to time upon the order and for the account of Customers and
to provide related services to its Customers in connection with their
investments in the Corporation; and
WHEREAS, it is in the interest of the Corporation to make the
services of the Organization available to Customers who are or may become
beneficial owners of Shares of the Corporation;
NOW, THEREFORE, the Corporation and the Organization hereby
agree as follows:
1. Appointment. The Organization, as an independent contractor, hereby
agrees to perform or to have performed certain services for Customers as
hereinafter set forth. The Organization's appointment hereunder is
non-exclusive, and the parties recognize and agree that, from time to time, the
Corporation may enter into other shareholder servicing agreements, with others
without the Organization's consent. For the purposes of this Agreement, the
Organization is deemed an independent contractor and will have no authority to
act as the Corporation's agent in any respect.
<PAGE>
2. Service to be Performed.
2.1 Type of Service. The Organization shall be responsible for
performing or having performed shareholder account administrative and servicing
functions, which shall include without limitation(1): (a) assisting Customers in
designating and changing dividend options, account designations and addresses;
(b) providing necessary personnel and facilities to establish and maintain
certain shareholder accounts and records, as may reasonably be requested from
time to time by the Corporation; (c) assisting in processing purchases, exchange
and redemption transactions; (d) arranging for the wiring of funds; (e)
transmitting and receiving funds in connection with Customer orders to purchase,
exchange or redeem Shares; (f) verifying and guaranteeing Customer signatures in
connection with redemption orders, transfers among and changes in
Customer-designated accounts; (g) providing periodic statements showing a
Customer's account balances and, to the extent practicable, integration of such
information with information concerning other client transactions otherwise
effected with or through the Organization; (h) furnishing on behalf of the
Corporation's distributor (either separately or on an integrated basis with
other reports sent to a Customer by the Organization) periodic statements and
confirmations of all purchases, exchanges and redemptions of Shares in a
Customer's account required by applicable federal or state law, all such
confirmations and statements to conform to Rule 10b-10 under the Securities
Exchange Act of 1934 and other applicable federal or state law; (i) transmitting
proxy statements, annual reports, updating prospectuses and other communications
from the Corporation to Customers; (j) receiving, tabulating and transmitting to
the Corporation proxies executed by Customers with respect to annual and special
meetings of shareholders of the Corporation; (k) providing reports (at least
monthly, but more frequently if so requested by the Corporation's distributor)
containing state-by-state listings of the principal residences of the beneficial
owners of the Shares; and (l) providing or arranging for the provision of such
other related services as the Corporation or a Customer may reasonably request.
The Organization shall provide or arrange for all personnel and facilities to
perform the functions described in this paragraph with respect to its Customers.
2.2 Standard of Services. All services to be rendered or arranged for
by the Organization hereunder shall be performed in a professional, competent
and timely manner. The details of the operating standards and procedures to be
followed in performance
- --------
(1) Services may be modified or omitted in a particular case and items
relettered or renumbered.
-2-
<PAGE>
of the services described above shall be determined from time to time by
agreement between the Organization and the Corporation. The Corporation
acknowledges that the Organization's ability to perform on a timely basis
certain of its obligations under this Agreement depends upon the Corporation's
timely delivery of certain materials and/or information to the Organization. The
Corporation agrees to use its best efforts to provide such materials to the
Organization in a timely manner.
3. Fees.
3.1 Fees from the Corporation. In consideration for the services
described in Section 2 hereof and the incurring of expenses in connection
therewith, the Organization shall receive fees set forth in Appendix A hereto,
such fees to be paid in arrears periodically (but in no event less frequently
than semi-annually) at annual rates of up to .40% of the average daily net
assets of the Corporation's Shares owned during the period for which payment has
been made by Customers for whom the Organization is the holder or agent of
record or with whom it maintains a servicing relationship. For purposes of
determining the fees payable to the Organization hereunder, the value of the
Corporation's net assets shall be computed in the manner specified in the
Corporation's then-current prospectus for computation of the net asset value of
the Corporation's Shares. The above fees constitute all fees to be paid to the
Organization by the Corporation with respect to the transactions contemplated
hereby. The Corporation may at any time in its discretion suspend or withdraw
the sale of its Shares.
3.2 Fees from Customers. It is agreed that the Organization may impose
certain conditions on Customers, in addition to or different from those imposed
by the Corporation, such as requiring a minimum initial investment or charging
Customers direct fees for the same or similar services as are provided hereunder
by the Organization (which fees may either relate specifically to the
Organization's services with respect to the Corporation or generally cover
services not limited to those with respect to the Corporation). The Organization
shall bill Customers directly for such fees. In the event the Organization
charges Customers such fees, it shall notify the Corporation in advance and make
appropriate prior written disclosure (such disclosure to be in accordance with
all applicable laws) to Customers of any such fees charged to the Customer. To
the extent required by applicable rules and regulations of the Securities and
Exchange Commission, the Corporation shall make written disclosure of the fees
paid or to be paid to the Organization pursuant to Section 3.1 of this
Agreement. It is understood, however, that in no event shall the Organization
have recourse or access to the account of any shareholder of the Corporation
except to the extent expressly authorized by law or by such shareholder, or to
any assets of the
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<PAGE>
Corporation, for payment of any direct fees referred to in this Section 3.2.
4. Information Pertaining to the Shares. The Organization and its
officers, employees and agents are not authorized to make any representations
concerning the Corporation or the Shares to Customers or prospective Customers,
excepting only accurate communication of any information provided by or on
behalf of any administrator or distributor of the Corporation or any factual
information contained in the then-current prospectus relating to the Corporation
or to any series of the Corporation. In furnishing such information regarding
the Corporation or the Shares, the Organization shall act as agent for the
Customer only and shall have no authority to act as agent for the Corporation.
Advance copies or proofs of all materials which are generally circulated or
disseminated by the Organization to Customers or prospective Customers which
identify or describe the Corporation shall be provided to the Corporation at
least 10 days prior to such circulation or dissemination (unless the Corporation
consents in writing to a shorter period), and such materials shall not be
circulated or disseminated or further circulated or disseminated at any time
after the Corporation shall have given written notice within such 10 day period
to the Organization of any objection thereto.
Nothing in this Section 4 shall be construed to make the
Corporation liable for the use (or accuracy unless prepared by the Corporation
for the specific use) of any information about the Corporation which is
disseminated by the Organization.
5. Use of the Organization's Name. The Corporation shall not use the
name of the Organization (or any of its affiliates or subsidiaries) in any
prospectus, sales literature or other material relating to the Corporation in a
manner not approved by the Organization prior thereto in writing; provided,
however, that the approval of the Organization shall not be required for any use
of its name which merely refers in accurate and factual terms to its appointment
hereunder and the terms hereof or which is required by law, including without
limitation, by the Securities and Exchange Commission or any state securities
authority or any other appropriate regulatory, governmental or judicial
authority; provided, further, that in no event shall such approval be
unreasonably withheld or delayed.
6. Use of the Corporation's Name. The Organization shall not use the
name of the Corporation on any checks, bank drafts, bank statements or forms for
other than internal use in a manner not approved by the Corporation prior
thereto in writing; provided, however, that the approval of the Corporation
shall not be required for the use of the Corporation's name in connection with
communications permitted by Section 4 hereof or (subject to Section 4, to the
extent the same may be applicable) for any use
-4-
<PAGE>
of the Corporation's name which merely refers in accurate and factual terms to
the Corporation in connection with the Organization's role hereunder or which is
required by law, including without limitations, by the Securities and Exchange
Commission or any state securities authority or any other appropriate
regulatory, governmental or judicial authority; provided, further, that in no
event shall such approval be unreasonably withheld or delayed.
7. Security. The Organization represents and warrants that to the best
of its knowledge, the various procedures and systems which it has implemented
(including provision for twenty-four hours a day restricted access) with regard
to safeguarding from loss or damage attributable to fire, theft or any other
cause the Corporation's records and other data and the Organization's records,
data, equipment, facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as in its judgment are required for the secure performance of
its obligations hereunder. The parties shall review such systems and procedures
on a periodic basis, and the Corporation shall from time to time specify the
types of records and other data of the Corporation to be safeguarded in
accordance with this Section 7.
8. Compliance with Laws. The Organization shall comply with all
applicable federal and state laws and regulations, including without limitation
securities laws. The Organization represents and warrants to the Corporation
that the performance of all its obligations hereunder will comply with all
applicable laws and regulations, the provisions of its charter documents and
by-laws and all material contractual obligations binding upon the Organization.
The Organization furthermore undertakes that it will promptly, after the
Organization becomes so aware, inform the Corporation of any change in
applicable laws or regulations (or interpretations thereof) or in its charter or
by-laws or material contracts which would prevent or impair full performance of
any of its obligations hereunder.
9. Reports. Quarterly, and more frequently to the extent requested by
the Corporation from time to time, the Organization agrees that it will provide
the administrator of the Corporation with a written report of the amounts
expended by the Organization pursuant to this Agreement and the purposes for
which such expenditures were made. Such written reports shall be in a form
satisfactory to the Corporation and shall supply all information necessary for
the Corporation to discharge its responsibilities under applicable laws and
regulations.
-5-
<PAGE>
10. Record Keeping.
10.1 Section 31. The Organization shall maintain records in a form
reasonably acceptable to the Corporation and in compliance with applicable laws
and the rules and regulations of the Securities and Exchange Commission,
including but not limited to the record-keeping requirements of Section 31 of
the Investment Company Act of 1940, as amended (the "1940 Act") and the rules
thereunder. Such records shall be deemed to be the property of the Corporation
and will be made available at the Corporation's request for inspection and use
by the Corporation, representatives of the Corporation and governmental
authorities. The Organization agrees that, for so long as it retains any records
of the Corporation, it will meet all reporting requirements pursuant to the 1940
Act and applicable to the Organization with respect to such records. Upon
termination of this Agreement, the Organization shall deliver to the
administrator of the Corporation all books and records maintained by the
Organization and deemed to be the Corporation's property hereunder.
10.2 Rules 17a-3 and 17a-4. The Organization shall maintain accurate
and complete records with respect to services performed by the Organization in
connection with the purchase and redemption of Shares. Such records shall be
maintained in form reasonably acceptable to the Corporation and in compliance
with the requirements of all applicable laws, rules and regulations, including
without limitation, Rules 17a-3 and 17a-4 under the Securities Exchange Act of
1934, as amended, pursuant to which any dealer of the Shares must maintain
certain records. All such records maintained by the Organization shall be the
property of such dealer and will be made available for inspection and use by the
Corporation or such dealer upon the request of either. The Organization shall
file with the Securities and Exchange Commission and other appropriate
governmental authorities, and furnish to the Corporation and any such dealer
copies of, all reports and undertakings as may be reasonably requested by the
Corporation or such dealer in order to comply with the said rules. If so
requested by any such dealer, the Organization shall confirm to such dealer its
obligations under this Section 10.2 by a writing reasonably satisfactory to such
dealer.
10.3 Transfer of Customer Data. In the event this Agreement is
terminated or a successor to the Organization is appointed, the Organization
shall transfer to such designee as the Corporation may direct a certified list
of the shareholders of the Corporation serviced by the Organization (with name,
address and tax identification or Social Security number, if any), a complete
record of the account of each such shareholder and the status thereof, and all
other relevant books, records, correspondence, and other data established or
maintained by the Organization under this Agreement. In the event this Agreement
-6-
<PAGE>
is terminated, the Organization will use its best efforts to cooperate in the
orderly transfer of such duties and responsibilities, including assistance in
the establishment of books, records and other data by the successor.
10.4 Survival of Record-Keeping Obligations. The record-keeping
obligations imposed in this Section 10 shall survive the termination of this
Agreement for a period of three years.
10.5 Obligations Pursuant to Agreement Only. Nothing in this Section 10
shall be construed so that the Organization would, by virtue of its role
hereunder, be required under applicable law to maintain the records required to
be maintained by it under this Section 10, but is understood that the
Organization has agreed to do so in order to enable the Corporation and its
dealer or dealers to comply with laws and regulations applicable to them.
10.6 Organization's Rights to Copy Records. Anything in this Section 10
to the contrary notwithstanding, except to the extent otherwise prohibited by
law, the Organization shall have the right to copy, maintain and use any records
maintained by the Organization pursuant to this Section 10, except as otherwise
prohibited by Sections 4 and 6 hereof.
11. Force Majeure. The Organization shall not be liable or responsible
for delays or errors by reason of circumstances beyond its reasonable control,
including, but not limited to, acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdown, flood or
catastrophe, Acts of God, insurrection, war, riots or failure of communication
or power supply.
12. Indemnification.
12.1 Indemnification of the Organization. The Corporation will
indemnify and hold the Organization harmless from all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses) from
any claim, demand, action or suit (collectively, "Claims") arising in connection
with material misstatements or omissions in the Corporation's Prospectus.
Notwithstanding anything herein to the contrary, the Corporation will indemnify
and hold the Organization harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from any Claim as a result of its acting in accordance with any
written instructions reasonably believed by the Organization to have been
executed by any person duly authorized by the Corporation, or as a result of
acting in reliance upon any instrument or stock certificate reasonably believed
by the Organization to have been genuine and signed, countersigned or
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<PAGE>
executed by a person duly authorized by the Corporation, excepting only the
negligence or bad faith of the Organization.
In any case in which the Corporation may be asked to indemnify
or hold the Organization harmless, the Corporation shall be advised of all
pertinent facts concerning the situation in question and the Organization shall
use reasonable care to identify and notify the Corporation promptly concerning
any situation which presents or appears likely to present a claim for
indemnification against the Corporation. The Corporation shall have the option
to defend the Organization against any Claim which may be the subject of
indemnification hereunder. In the event that the Corporation elects to defend
against such Claim, the defense shall be conducted by counsel chosen by the
Corporation and satisfactory to the Organization. The Organization may retain
additional counsel at its expense. Except with the prior written consent of the
Corporation, the Organization shall not confess any Claim or make any compromise
in any case in which the Corporation will be asked to indemnify the
Organization.
12.2 Indemnification of the Corporation. Without limiting the rights of
the Corporation under applicable law, the Organization will indemnify and hold
the Corporation harmless from all losses, claims, damages, liabilities or
expenses (including reasonable counsel fees and expenses) from any Claim (a)
arising from (i) the bad faith or negligence of the Organization, its officers,
employees or agents, (ii) any breach of applicable law by the Organization, its
officers, employees or agents, (iii) any action of the Organization, its
officers, employees or agents which exceeds the legal authority of the
Organization or its authority hereunder, or (iv) any actions, inactions, errors
or omissions of the Organization, its officers, employees or agents with respect
to the purchase, redemption, transfer and registration of Customers' Shares or
the Corporation's verification or guarantee of any Customer signature.
In any case in which the Organization may be asked to
indemnify or hold the Corporation harmless, the Organization shall be advised of
all pertinent facts concerning the situation in question and the Corporation
shall use reasonable care to identify and notify the Organization promptly
concerning any situation which presents or appears likely to present a claim for
indemnification against the Organization. The Organization shall have the option
to defend the Corporation against any Claim which may be the subject of
indemnification hereunder. In the event that the Organization elects to defend
against such Claim, the defense shall be conducted by counsel chosen by the
Organization and satisfactory to the Corporation. The Corporation may retain
additional counsel at its expense. Except with the prior written consent of the
Organization, the Corporation shall not confess
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any Claim or make any compromise in any case in which the Organization will be
asked to indemnify the Corporation.
12.3 Survival of Indemnities. The indemnities granted by the parties in
this Section 12 shall survive the termination of this Agreement.
13. Notices. All notices or other communications hereunder to either
party shall be in writing and shall be deemed sufficient if mailed to such party
at the address of such party set forth on the signature page of this Agreement
or at such other address as such party may have designated by written notice to
the other.
14. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
15. Termination. Unless sooner terminated, this Agreement will continue
until July 31, 1996 and thereafter will continue automatically for successive
annual periods provided such continuance is specifically approved at least
annually by vote of a majority of (i) the Board of Directors of the Corporation
and (ii) those Directors who are not "interested persons" (as defined in the
1940 Act) of the Corporation and have no direct or indirect financial interest
in the operation of the Corporation's Administrative Services Plan or in any
agreement related thereto cast in person at a meeting called for the purpose of
voting on such approval ("Disinterested Directors"). This Agreement is
terminable, without penalty, at any time by the Corporation (which termination
may be by a vote of a majority of the Disinterested Directors) or by you upon
notice to the Corporation.
16. Changes; Amendments. This Agreement may be changed or amended only
by written instrument signed by both parties hereto.
17. Subcontracting By Organization. The Organization may, with the
written approval of the Corporation (such approval not to be unreasonably
withheld), subcontract for the performance of the Organization's obligations
hereunder with any one or more persons, including but not limited to any one or
more persons which is an affiliate of the Organization; provided, however, that
the Organization shall be as fully responsible to the Corporation for the acts
and omissions of any subcontractor as it would be for its own acts or omissions.
18. Compliance with Laws and Policies; Cooperation. The Corporation
hereby agrees that it will comply with all laws and regulations applicable to
its operations and the Organization agrees that it will comply with all laws and
regulations applicable to its operations hereunder. Each party understands
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that the other may from time to time adopt or modify policies relating to the
subject matter of this Agreement, in which case the party adopting or modifying
such a policy shall notify the other thereof and the parties shall consider the
applicability thereof and endeavor to comply therewith to the extent not
impracticable or unreasonably burdensome. Each of the parties agrees to
cooperate with the other in connection with the performance of this Agreement
and the resolution of any problems, questions or disagreements in connection
herewith.
18.1 Annual Financial Reports. At least once a year, the Corporation
shall send to the record owners of its shares the Corporation's audited
financial statements.
18.2 Annual Certification. At least once a year, the Organization shall
certify to the Corporation that it is conducting its business in accordance with
the terms and conditions of the Agreement.
19. Single Portfolio. Notwithstanding anything in this Agreement to the
contrary, any amount owed by Corporation to the Organization under this
Agreement or otherwise with respect to any matter hereunder shall be paid only
from and shall be limited to the assets and property of the particular
investment portfolio of the Corporation to which the matter relates.
20. Miscellaneous. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland. The captions
in this Agreement are included for convenience of reference only and in no way
define or limit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed simultaneously in two ore
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument. The terms of this
Agreement shall become effective as of the date set forth below.
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IN WITNESS WHEREOF, intending to be legally bound hereby, the
parties hereto have caused this Agreement to be executed and delivered in their
names and on their behalf by the undersigned, thereunto duly authorized, all as
of the day and year set forth below.
Dated as of: ______________________
Excelsior Tax-Exempt Funds, Inc. Address for Notices:
________________________
________________________
________________________
________________________
By: ______________________________ _______________________
(Authorized Officer)
_______________________________________
[Service Organization]
By: _______________________________ Address for Notices:
(Authorized Officer)
________________________
________________________
________________________
________________________
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APPENDIX A
EXCELSIOR TAX-EXEMPT 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):
=========================================================================
FUND Shareholder
Servicing
Fee
=========================================================================
Tax-Exempt Money Fund __ BP
=========================================================================
Short-Term Tax-Exempt Securities
Fund __ BP
Intermediate-Term Tax-Exempt Fund __ BP
Long-Term Tax-Exempt Fund __ BP
New York Intermediate-Term Tax-
Exempt Fund __ BP
California Tax-Exempt Income Fund __ BP
=========================================================================
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Exhibit 9(c)
MUTUAL FUNDS TRANSFER AGENCY AGREEMENT
AGREEMENT made as of September 1, 1995 by and between UST
Master Tax-Exempt Funds, Inc. (the "Company") a Maryland corporation, and
United States Trust Company of New York ("U.S.
Trust"), a New York corporation.
W I T N E S S E T H:
WHEREAS, the Company is registered as an open-end investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Company is authorized to issue shares of Common Stock in
separate series and classes representing interests in separate portfolios of
securities and other assets;
WHEREAS, the Company wishes to retain U.S. Trust to serve as the Company's
transfer agent, registrar and dividend disbursing agent;
WHEREAS, U.S. Trust desires to assign its duties and obligations with
respect to the provision of such services to Chase Global Funds Services Company
("CGFSC"), and the Company acknowledges the right of U.S. Trust to make such
assignment provided U.S. Trust shall be as fully responsible to the Company for
the acts and omissions of CGFSC as U.S. Trust is for its own acts and omissions;
<PAGE>
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Company hereby appoints U.S. Trust to serve as transfer
agent, registrar and dividend disbursing agent for each class and/or series of
Common Stock of the Company with respect to its existing Funds (as hereinafter
defined) for the period and on the terms set forth in this Agreement. In the
event that the Company establishes additional classes or series other than the
Common Stock of the Funds covered by this Agreement with respect to which it
desires to retain U.S. Trust to serve as transfer agent, registrar and dividend
disbursing agent hereunder, the Company shall notify U.S. Trust in writing,
whereupon such fund shall become a Fund hereunder and shall be subject to the
provisions of this Agreement to the same extent as the Funds (except to the
extent that said provisions, including the compensation payable on behalf of
such new Fund, may be modified in writing by the Company and U.S. Trust at the
time). U.S. Trust accepts such appointment and agrees to furnish the services
herein set forth in return for the compensation as provided in Paragraph 5 of
this Agreement.
2. REPRESENTATIONS AND WARRANTIES. (a) U.S. Trust represents and warrants
to the Company that:
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(i) U.S. Trust is a state chartered bank and
trust company organized and existing under the laws of the State of New York;
(ii) U.S. Trust is empowered under applicable
laws and by its charter and by-laws to enter into and perform this Agreement;
(iii) all requisite corporate proceedings have
been taken to authorize U.S. Trust to enter into and perform this Agreement;
(iv) U.S. Trust is duly registered as a transfer
agent under Section 17A of the Securities Exchange Act of 1934, as amended (the
"1934 Act"). U.S. Trust shall promptly give written notice to the Company in the
event that its registration is revoked or a proceeding is commenced that could
result in such revocation;
(v) U.S. Trust has been in, and shall continue
to be in, compliance with all provisions of law, including Section 17A(c) of the
1934 Act, required in connection with the performance of its duties under this
Agreement;
(vi) U.S. Trust has, and will continue to have,
access to the facilities, personnel and equipment required to fully perform its
duties and obligations hereunder;
(vii) no legal or administrative proceedings
have been instituted or threatened which would impair U.S. Trust's ability to
perform its duties and obligations under this Agreement; and
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(viii) U.S. Trust's entrance into this Agreement
shall not cause a material breach or be in material conflict with any other
agreement or obligation of U.S. Trust or any law or regulation applicable to
U.S. Trust;
(b) The Company represents and warrants to U.S. Trust that:
(i) the Company is a Maryland corporation, duly
organized and existing and in good standing under the laws of Maryland;
(ii) the Company is empowered under applicable
laws and by its Articles of Incorporation, as supplemented ("Charter"), and
By-Laws, as amended ("By-Laws"), to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken
to authorize the Company to enter into and perform this Agreement;
(iv) the Company is an investment company
properly registered under the 1940 Act;
(v) a registration statement under the
Securities Act of 1933, as amended (the "1933 Act") and the 1940 Act on Form
N-1A has been filed and will be effective and will remain effective during the
term of this Agreement, and all necessary filings under the laws of the states
will have been made and will be current during the term of this Agreement;
(vi) no legal or administrative proceedings have
been instituted or threatened which would impair the Company's
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<PAGE>
ability to perform its duties and obligations under this Agreement;
(vii) the Company's registration statement
complies in all material respects with the 1933 Act and the 1940 Act (including
the rules and regulations thereunder) and none of the Company's prospectuses
contain any untrue statement of material fact or omit to state a material fact
necessary to make the statements therein not misleading; and
(viii) the Company's entrance into this
Agreement shall not cause a material breach or be in material conflict with any
other agreement or obligation of the Company or any law or regulation applicable
to it.
3. DELIVERY OF DOCUMENTS. The Company has furnished U.S. Trust with
copies properly certified or authenticated of each of the following:
(a) Resolutions of the Company's Board of Directors
authorizing the appointment of U.S. Trust as transfer agent, registrar and
dividend disbursing agent for each class and/or series of Common Stock of the
Company and approving this Agreement;
(b) Incumbency and signature certificates identifying and
containing the signatures of the Company's officers and/or the persons
authorized to sign Written Instructions, as hereafter defined, on behalf of the
Company;
(c) The Company's Charter;
(d) The Company's By-Laws;
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<PAGE>
(e) Resolutions of the Company's Board of Directors appointing
U.S. Trust as the investment adviser to the Company's Tax-Exempt Money,
Intermediate-Term Tax-Exempt, Long-Term Tax-Exempt, New York Intermediate-Term
Tax-Exempt, California Intermediate-Term Tax-Exempt and Short-Term Tax-Exempt
Securities Funds (herein "the Funds") and resolutions of the Company's Board of
Directors and Fund shareholders ("Shareholders") approving an Investment
Advisory Agreement between U.S. Trust and the Company dated as of February 6,
1985, as amended; and an Investment Advisory Agreement between U.S. Trust and
the Company dated as of May 11, 1990, as amended (the "Advisory Agreements");
(f) Resolutions of the Company's Board of Directors appointing
Edgewood Services, Inc. (the "Distributor") as the Company's distributor for the
Funds and approving a Distribution Agreement between the Distributor and the
Company dated as of August 1, 1995 (the "Distribution Agreement");
(g) Resolutions of the Company's Board of Directors appointing
Federated Administrative Services ("Federated") and Mutual Funds Service Company
("MFSC") as the administrators for the Funds and approving an Administration
Agreement among Federated, MFSC and the Company dated as of August 1, 1995 (the
"Administration Agreement");
(h) The Advisory Agreements, the Distribution Agreement and
the Administration Agreement;
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<PAGE>
(i) The Company's Notification of Registration filed
pursuant to Section 8(a) of the 1940 Act on Form N-8A with the Securities and
Exchange Commission ("SEC") on August 31, 1984;
(j) Post-Effective Amendment No. 18 to the Company's
Registration Statement on Form N-1A under the 1940 Act and the 1933 Act, as
filed with the SEC on August 1, 1995 (File No. 2-93068) relating to shares of
the Company's Class A Common Stock, $.001 par value per share, which represent
interests in the Tax-Exempt Money Fund; Class B Common Stock, $.001 par value
per share, which represent interests in the Intermediate-Term Tax-Exempt Fund;
Class C Common Stock, $.001 par value per share, which represent interests in
the Long-Term Tax-Exempt Fund; Class D Common Stock, $.001 par value per
share, which represent interests in the New York Intermediate-Term Tax-Exempt
Fund; Class E Common Stock, $.001 par value per share, which represent
interests in the California Intermediate-Term Tax-Exempt Fund; and Class F
Common Stock, $.001 par value per share, which represent interests in the
Short-Term Tax-Exempt Securities Fund; (such shares and shares of the Company
hereafter classified by the Company's Board of Directors are hereinafter
collectively called "Shares"), and all amendments thereto; and
(k) The Company's most recent prospectuses (such
prospectuses, as currently in effect, and all amendments and supplements
thereto and future versions thereof are herein called the "Prospectuses").
The Company will furnish U.S. Trust from time to time
with copies of all amendments of or supplements to the foregoing,
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<PAGE>
if any, and with comparable documents with respect to any Fund of the Company
organized after the date of this Agreement that is covered by this Agreement.
The Company shall also deliver to U.S. Trust the following documents on or
before the effective date of any increase or decrease in the total number of
Shares authorized to be issued by the Company: (a) a certified copy of the
amendment of the Articles of Incorporation giving effect to such increase or
decrease, and (b) in the case of an increase, if the appointment of U.S. Trust
was theretofore expressly limited, a certified copy of a resolution of the
Board of Directors of the Company increasing the authority of U.S. Trust.
4. SERVICES PROVIDED
(a) U.S. Trust will provide the following services subject
to the control, direction and supervision of the Board of Directors and in
compliance with the objectives, policies and limitations set forth in the
Company's Registration Statement, Charter and By-Laws; applicable laws and
regulations; and all resolutions and policies implemented by the Board of
Directors.
The following is a general description of the transfer
agency services U.S. Trust shall provide to the Company.
A. SHAREHOLDER RECORDKEEPING. Maintain records
showing for each Fund shareholder the following:
(i) name, address, appropriate tax certification
and tax identifying number; (ii) number of shares
of each Fund; (iii) historical information
including, but not limited to, dividends paid and
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<PAGE>
date and price of all transactions including
individual purchase and redemptions and appropriate
supporting documents; and (iv) any dividend
reinvestment order, application, dividend to a
specific address and correspondence relating to the
current maintenance of the account.
B. SHARE ISSUANCE. Record the issuance of shares of
each Fund. Except as specifically agreed in writing
between U.S. Trust and the Company, U.S. Trust
shall have no obligation when countersigning and
issuing and/or crediting shares to take cognizance
of any other laws relating to the issue and sale of
such shares except insofar as policies and
procedures of the Stock Transfer Association
recognize such laws. U.S. Trust shall notify the
Company in case any proposed issue of shares by the
Company shall result in an over-issuance. In case
any issue of shares would result in such an
over-issue, U.S. Trust shall refuse to issue said
shares and shall not countersign and issue
certificates (if any) for such shares.
C. PURCHASE ORDERS. Process all orders for the purchase
of shares of the Company in accordance with the
Company's Prospectuses, including electronic
transmissions, which the Company acknowledges it
has authorized. Upon receipt of
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<PAGE>
any check or other payment for purchase of shares
of the Company from an investor, U.S. Trust will
(i) stamp the order or other documentation with the
date and time of receipt, (ii) forthwith process
the same for collection, (iii) determine the
amounts thereof due the Company, and notify the
Company of such determination and deposit, such
notification to be given on a daily basis of the
total amounts determined and deposited to the
Company's custodian bank account during such day.
U.S. Trust shall then credit the share account of
the investor with the number of Fund shares to be
purchased made on the date such payment is received
by U.S. Trust, as set forth in the Company's
Prospectus and shall promptly mail a confirmation
of said purchase to the investor, all subject to
any instructions which the Company may give to U.S.
Trust with respect to the timing or manner of
acceptance of orders for shares relating to
payments so received by it. Any purchase order
received by U.S. Trust, which is not in good order
will be rejected immediately.
D. REDEMPTION ORDERS. Receive and stamp with the
date and time of receipt all requests for
redemptions or repurchase of shares held in
certificate or non-certificate form, and process
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redemptions and repurchase requests as follows: (i)
if such certificate or redemption request complies
with the applicable standards approved by the
Company, U.S. Trust shall on each business day
notify the Company of the total number of shares
presented and covered by such requests received by
U.S. Trust on such day; (ii) within the time
specified in the Prospectus and if not so specified
on or prior to the seventh calendar day succeeding
any such requests received by U.S. Trust, shall
notify The Chase Manhattan Bank, N.A. (the
"Custodian"), subject to instructions from the
Company, to transfer monies to such account as
designated by U.S. Trust for such payment to the
redeeming shareholder of the applicable redemption
or repurchase price; (iii) if any such certificate
or request for redemption of repurchase does not
comply with applicable standards, U.S. Trust shall
promptly notify the investor of such fact, together
with the reason therefor, and shall effect such
redemption at the Company's price next determined
after receipt of documents complying with said
standards.
E. TELEPHONE ORDERS. Process redemptions, exchanges
and transfers of Fund shares upon telephone
instructions from qualified shareholders in
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accordance with the procedures set forth in the
Company's Prospectuses. The administrator shall be
permitted to redeem, exchange and/or transfer Fund
shares from any account for which such services
have been authorized, including electronic
transmissions.
F. TRANSFER OF SHARES. Upon receipt by U.S. Trust of
documentation in proper form to effect a transfer
of shares, including in the case of shares for
which certificates have been issued the share
certificates in proper form for transfer, U.S.
Trust will register such transfer on the Company's
shareholder records maintained by U.S. Trust
pursuant to instructions received from the
transferor, cancel the certificates representing
such shares, if any, and if so requested,
countersign, register, issue and mail by first
class mail new certificates for the same or a
smaller whole number of shares.
G. SHAREHOLDER COMMUNICATIONS. Address and mail all
communications by the Company to its shareholders
promptly following the delivery by the Company of
the material to be mailed.
H. PROXY MATERIALS. Prepare shareholder lists, mail
and certify as to the mailing of proxy materials,
receive the tabulated proxy cards, render periodic
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reports to the Company on the progress of such
tabulation, and provide the Company with inspectors
of election at any meeting of shareholders.
I. SHARE CERTIFICATES. If a shareholder of the
Company requests a certificate representing his
shares, U.S. Trust as Transfer Agent or CGFSC as
sub-transfer agent, will countersign and mail, a
share certificate to the investor at his/her
address as it appears on the Company's transfer
books. U.S. Trust shall supply, at the expense of
the Company a supply of blank share certificates.
The certificates shall be properly signed,
manually or by facsimile, as authorized by the
Company, and shall bear the Company's seal or
facsimile; and notwithstanding the death,
resignation or removal of any officers of the
Company authorized to sign certificates, U.S.
Trust and/or CGFSC may, until otherwise directed
by the Company, continue to countersign
certificates which bear the manual or facsimile
signature of such officer.
J. RETURNED CHECKS. In the event that any check or
other order for the payment of money is returned
unpaid for any reason, U.S. Trust will take such
steps, including redepositing the check for
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collection or returning the check to the investor,
as U.S. Trust may, at its discretion, deem
appropriate and notify the Company of such action,
or as the Company may instruct. However, subject to
Paragraph 7(b) below, the Company remains
ultimately liable for any returned checks of its
shareholders.
K. SHAREHOLDER CORRESPONDENCE. Acknowledge all
correspondence from shareholders relating to their
share accounts and undertake such other shareholder
correspondence as may from time to time be mutually
agreed upon.
L. TAX REPORTING. U.S. Trust shall issue appropriate
shareholder tax forms on an annual basis.
M. DIVIDEND DISBURSING. U.S. Trust will serve as the
Company's dividend disbursing agent. U.S. Trust
will prepare and mail checks, place wire transfers
of credit income and capital gain payments to
shareholders. The Company will advise U.S. Trust of
the declaration of any dividend or distribution and
the record and payable date thereof at least five
(5) days prior to the record date. U.S. Trust will,
on or before the payment date of any such dividend
or distribution, notify the Company's Custodian of
the estimated amount required to pay any portion of
such dividend or
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<PAGE>
distribution payable in cash, and on or before the
payment date of such distribution, the Company will
instruct its Custodian to make available to U.S.
Trust sufficient funds for the cash amount to be
paid out. If a shareholder is entitled to receive
additional shares by virtue of any such
distribution or dividend, appropriate credits will
be made to each shareholder's account.
(b) U.S. Trust will also:
(i) provide office facilities with respect to
the provision of the services contemplated herein (which may be in the offices
of U.S. Trust or a corporate affiliate of U.S. Trust);
(ii) provide the services of individuals to serve
as officers of the Company who will be designated by U.S. Trust and elected by
the Board of Directors subject to reasonable Board approval;
(iii) provide or otherwise obtain personnel
sufficient, in U.S. Trust's sole discretion, for provision of the
services contemplated herein;
(iv) furnish equipment and other materials, which
U.S. Trust, in its sole discretion, believes are necessary or desirable for
provision of the services contemplated herein; and
(v) keep records relating to the services
provided hereunder in accordance with the 1940 Act and the rules thereunder.
To the extent required by the 1940 Act and the rules
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<PAGE>
thereunder, U.S. Trust agrees that all such records prepared or maintained by
U.S. Trust relating to the services provided hereunder are the property of the
Company and will be preserved for the periods prescribed under the 1940 Act
and the rules thereunder, maintained at the Company's expense, and made
available in accordance with such Act and rules. U.S. Trust further agrees to
surrender promptly to the Company upon its request and cease to retain in its
records and files those records and documents created and maintained by U.S.
Trust pursuant to this Agreement.
5. FEES; EXPENSES; EXPENSE REIMBURSEMENT.
(a) As compensation for the services rendered to the
Company pursuant to this Agreement, the Company shall pay U.S. Trust monthly
$15.00 per account and subaccount of each Fund of the Company per year or for
any portion of a year plus U.S. Trust's out-of-pocket expenses relating to
such services, including, but not limited to, expenses of postage, telephone,
TWX rental and line charges, communication forms, and checks and check
processing. Such fees are to be billed monthly and shall be due and payable
upon receipt of the invoice. The Company shall also pay U.S. Trust monthly any
fees and expenses charged by any sub-transfer agent other than CGFSC provided
that the sub-transfer agent and the fees and expenses charged by that
sub-transfer agent have been approved by the Company's Board of Directors.
Upon any termination of this Agreement before the end of any month, the fee
for the part of the month before such
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termination shall be prorated according to the proportion which such part
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.
(b) For the purpose of determining fees calculated as a
function of the Company's assets, the value of the Company's assets and net
assets shall be computed as required by its Prospectuses, generally accepted
accounting principles, and resolutions of the Board of Directors.
(c) U.S. Trust may, in its sole discretion, from time to
time employ or associate with such person or persons as may be appropriate to
assist U.S. Trust in the performance of this Agreement. Such person or persons
may be officers and employees who are employed or designated as officers by
both U.S. Trust and the Company. The compensation of such person or persons
for such employment shall be paid by U.S. Trust and no obligation will be
incurred by or on behalf of the Company in such respect.
(d) The Company may request additional services, additional
processing, or special reports. The Company shall submit such requests in
writing together with such specifications and documentation as may be
reasonably required by U.S. Trust. If U.S. Trust elects to provide such
services or arrange for their provision, it shall be entitled to additional
fees and expenses at its customary rates and charges as approved by the
Company's Board of Directors.
(e) U.S. Trust will bear all of it own expenses in
connection with the performance of the services under this
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Agreement except as otherwise expressly provided herein. The Company agrees to
promptly reimburse U.S. Trust for any equipment and supplies specially ordered
by or for the Company through U.S. Trust, and for any other expenses not
contemplated by this Agreement that U.S. Trust may incur on the Company's
behalf, as consented to by the Company from time to time. Expenses to be
incurred in the operation of the Company and to be borne by the Company,
include, but are not limited to: taxes; interest; brokerage fees and
commissions, salaries and fees of officers and directors who are not officers,
directors, shareholders or employees of U.S. Trust, or the Company's
investment adviser, or distributor or other service providers; SEC and state
Blue Sky registration and qualification fees, levies, fines and other charges;
EDGAR filing fees, processing services and related fees; advisory and
administration fees; charges and expenses of pricing and data services,
independent public accountants and custodians; insurance premiums including
fidelity bond premiums; legal expenses; costs of maintenance of corporate
existence; expenses of typesetting and printing of prospectuses for regulatory
purposes and for distribution to current shareholders of the Company (the
Company's distributor to bear the expense of all other printing, production,
and distribution of prospectuses, statements of additional information, and
marketing materials except as otherwise approved by the Board of Directors of
the Company); expenses of printing and production costs of shareholders'
reports and proxy statements and materials; costs
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and expenses of Fund stationery and forms; costs and expenses of special
telephone and data lines and devices; costs associated with corporate,
shareholder, and Board meetings; trade association dues and expenses; and any
extraordinary expenses and other customary Fund expenses. In addition, U.S.
Trust may utilize one or more independent pricing services, approved from time
to time by the Board, to obtain securities prices and to act as backup to the
primary pricing services, in connection with determining the net asset values
of the Company, and the Company will reimburse U.S. Trust for the Company's
share of the cost of such services based upon the actual usage, or a pro rata
estimate of the use, of the services for the benefit of the Company.
(f) All fees, out-of-pocket expenses, or additional charges
of U.S. Trust shall be billed on a monthly basis and shall be due and payable
upon receipt of the invoice.
U.S. Trust will render, after the close of each month in
which services have been furnished, a statement reflecting all of the charges
for such month.
6. PROPRIETARY AND CONFIDENTIAL INFORMATION. U.S. Trust agrees on
behalf of itself and its employees to treat confidentially and as proprietary
information of the Company, all records and other information relative to the
Company's prior, present or potential shareholders, and to not use such
records and information for any purpose other than performance of U.S. Trust's
responsibilities and duties hereunder. U.S. Trust may seek a waiver of such
confidentiality provisions by furnishing
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reasonable prior notice to the Company and obtaining approval in writing from
the Company, which approval shall not be unreasonably withheld and may not be
withheld where U.S. Trust may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information
by duly constituted authorities. Waivers of confidentiality are automatically
effective without further action by U.S. Trust with respect to Internal
Revenue Service levies, subpoenas and similar actions, or with respect to any
request by the Company.
7. DUTIES, RESPONSIBILITIES, AND LIMITATION OF LIABILITY.
(a) In the performance of its duties hereunder, U.S.
Trust shall be obligated to act in good faith in performing the services
provided for under this Agreement. In performing its services hereunder, U.S.
Trust shall be entitled to rely on any oral or written instructions, notices
or other communications, including electronic transmissions, from the Company
and its custodians, officers and directors, investors, agents and other
service providers which U.S. Trust reasonably believes to be genuine, valid
and authorized. U.S. Trust shall also be entitled to consult with and rely on
the advice and opinions of outside legal counsel retained by the Company, as
necessary or appropriate.
(b) Except as provided herein, U.S. Trust shall not be
liable for any error of judgment or mistake of law or for any loss or expense
suffered by the Company, in connection with the matters to which this
Agreement relates, except for a loss or
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expense caused by or resulting from willful misfeasance, bad faith or
negligence on U.S. Trust's part in the performance of its duties or from
reckless disregard by U.S. Trust of its obligations and duties under this
Agreement. Any person, even though also an officer, director, partner,
employee or agent of U.S. Trust, who may be or become an officer, director,
partner, employee or agent of the Company, shall be deemed when rendering
services to the Company in that capacity or acting on any business of the
Company in that capacity (other than services or business in connection with
U.S. Trust's duties hereunder) to be rendering such services to or acting
solely for the Company and not as an officer, director, partner, employee or
agent or person under the control or direction of U.S. Trust even though paid
by U.S. Trust.
(c) Subject to Paragraphs 7(b) and (d), U.S. Trust shall not
be responsible for, and the Company shall indemnify and hold U.S. Trust
harmless from and against, any and all losses, damages, costs, reasonable
attorneys' fees and expenses, payments, expenses and liabilities arising out
of or attributable to:
(i) all actions of U.S. Trust or its officers
or agents required to be taken pursuant to this Agreement;
(ii) the reliance on or use by U.S. Trust or its
officers or agents of information, records, or documents which are received by
U.S. Trust or its officers or agents and furnished to it or them by or on
behalf of the Company, and which
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have been prepared or maintained by the Company or any third party on behalf
of the Company other than U.S. Trust or any of its affiliates;
(iii) the Company's refusal or failure to comply
with the terms of this Agreement or the Company's lack of good faith, or its
actions, or lack thereof, involving gross negligence or willful misfeasance;
(iv) the material breach of any representation
or warranty of the Company hereunder;
(v) the legal taping or other form of legal
recording of telephone conversations or other legal forms of electronic
communications with investors and shareholders, or reliance by U.S. Trust or
its officers or agents on telephone or other electronic instructions of any
person acting on behalf of a shareholder or shareholder account for which
telephone or other electronic services have been authorized;
(vi) the reliance on or the carrying out by
U.S. Trust or its officers or agents of any proper instructions reasonably
believed to be duly authorized, or requests of the Company or recognition by
U.S. Trust or its officers or agents of any share certificates which are
reasonably believed to bear the proper signatures of the officers of the
Company and the proper countersignature of any transfer agent or registrar of
the Company;
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(vii) any delays, inaccuracies, errors in or
omissions from data provided to U.S. Trust or its officers or agents by data
and pricing services;
(viii) the offer or sale of shares by the Company
in violation of any requirement under the Federal securities laws or
regulations or the securities laws or regulations of any state, or in
violation of any stop order or other determination or ruling by any Federal
agency or any state agency with respect to the offer or sale of such shares in
such state (1) resulting from activities, actions, or omissions by the Company
or its other service providers and agents other than U.S. Trust or its
officers or agents or any of their affiliates, or (2) existing or arising out
of activities, actions or omissions by or on behalf of the Company other than
by U.S. Trust or its officers or agents or any of their affiliates prior to
the effective date of this Agreement;
(ix) any failure of the Company's registration
statement to comply with the 1933 Act and the 1940 Act (including the rules
and regulations thereunder) and any other applicable laws, or any untrue
statement of a material fact or omission of a material fact necessary to make
any statement therein not misleading in a Fund's prospectus, unless such
failure, misstatement or omission relates to, results from or otherwise arises
in connection with, actions, inactions and/or information provided by U.S.
Trust or its officers or agents; and
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(x) the actions taken by the Company, its
investment adviser (other than U.S. Trust or its officers or agents or any of
their affiliates), and its distributor in compliance with applicable
securities, tax, commodities and other laws, rules and regulations, or the
failure to so comply.
(d) Notwithstanding anything herein to the contrary, U.S.
Trust shall be as fully responsible to the Company for the acts and omissions
of any sub-transfer agent as U.S. Trust is for its own acts and omissions.
8. TERM. This Agreement shall become effective on the date first
hereinabove written. This Agreement may be modified or amended from time to
time by mutual agreement between the parties hereto. This Agreement shall
continue in effect unless terminated by either party on 120 days' prior
written notice provided that should U.S. Trust fail to be registered pursuant
to Section 17A of the 1934 Act as a transfer agent at any time, the Company
may, on written notice to U.S. Trust, immediately terminate this Agreement.
Upon termination of this Agreement, the Company shall pay to U.S. Trust such
compensation and any out-of-pocket or other reimbursable expenses which may
become due or payable under the terms hereof as of the date of termination or
after the date that the provision of services ceases, whichever is later.
9. NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be deemed to have been given when delivered in person or by
certified mail, return receipt
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requested, to the parties at the following address (or such other address as a
party may specify by notice to the other):
If to the Company:
Drinker Biddle & Reath
1345 Chestnut Street, Suite 1100
Philadelphia, PA 19107
Attn: W. Bruce McConnel, III
Fax: (215) 988-2757
If to U.S. Trust:
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Attention: Maureen Scannell Bateman
Fax: (212) 852-1310
Notice shall be effective upon receipt if by mail, on the date of personal
delivery (by private messenger, courier service or otherwise) or upon
confirmed receipt of telex or facsimile, whichever occurs first.
10. ASSIGNMENT AND DELEGATION. This Agreement shall not be assigned
and the rights, duties and obligations of the parties hereunder may not be
subcontracted or delegated by either of the parties hereto without the prior
consent in writing of the other party.
11. WAIVER. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver
nor shall it deprive such party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver must be in
writing signed by the waiving party.
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12. FORCE MAJEURE. U.S. Trust shall not be responsible or liable for
any failure or delay in performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
control, including without limitation, acts of God, earthquakes, fires,
floods, wars, acts of civil or military authorities, or governmental actions,
nor shall any such failure or delay give the Company the right to terminate
this Agreement. During the term of this Agreement, at no additional cost to
the Company, U.S. Trust shall provide a facility capable of safeguarding the
transfer agency and dividend disbursing records of the Company in case of
damage to the primary facility providing those services (the "Back-Up
Facility"). Transfer of the transfer agency and dividend records of the
Company to the Back-Up Facility shall be at U.S. Trust's expense, shall
commence immediately after damage to the primary facility results in an
inability to provide the transfer agency and dividend disbursing services, and
shall be completed within 72 hours of commencement. After the primary facility
has recovered, U.S. Trust shall again utilize it to provide the transfer
agency and dividend disbursing services to the Company at no additional cost
to the Company. U.S. Trust shall use reasonable efforts to provide the
services described in this Agreement from the Back-Up Facility.
13. USE OF NAME. The Company and U.S. Trust agree not to use the
other's name nor the names of such other's affiliates, designees, or assignees
in any prospectus, sales literature, or
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other printed material written in a manner not previously approved by the
other or such other's affiliates, designees, or assignees except where
required by the SEC or other regulatory authorities.
14. AMENDMENTS. This Agreement may be modified or amended from time
to time by mutual written agreement between the parties. No provision of this
Agreement may be changed, discharged, or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, discharge or termination is sought.
15. SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance it shall nevertheless
remain applicable to all other persons and circumstances.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF NEW YORK, INCLUDING THE DETERMINATION OF WHEN
AN "ASSIGNMENT" HAS OCCURRED.
This Agreement may be executed in one or more counterparts
and all such counterparts will constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below as of the date
first written above.
UST MASTER TAX-EXEMPT FUNDS, INC.
By: /s/ Alfred Tannachion
-------------------------
Name: Alfred Tannachion
Title: President
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Kenneth G. Walsh
------------------------
Name: Kenneth G. Walsh
Title: Executive Vice President
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Exhibit 9 (d)
MUTUAL FUNDS SUB-TRANSFER AGENCY AGREEMENT
AGREEMENT made as of September 1, 1995 by and between United States
Trust Company of New York ("U.S. Trust"), and Chase Global Funds
Services Company ("Sub-Transfer Agent").
W I T N E S S E T H:
WHEREAS, UST Master Tax-Exempt Funds, Inc. (the "Company") a Maryland
corporation, is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the 1940 Act");
WHEREAS, the Company is authorized to issue shares of Common Stock in
separate series and classes representing interests in separate portfolios of
securities and other assets;
WHEREAS, the Company has retained U.S. Trust to serve as the Company's
transfer agent, registrar and dividend disbursing agent;
WHEREAS, U.S. Trust desires to assign its duties and obligations with
respect to the provision of such services to Sub-Transfer Agent, and the Company
has acknowledged the right of U.S. Trust to make such assignment provided U.S.
Trust shall be as fully responsible to the Company for the acts and omissions of
Sub-Transfer Agent as U.S. Trust is for its own acts and omissions;
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NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. U.S. Trust hereby appoints Sub-Transfer Agent 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 its existing
Funds (as hereinafter defined) for the period and on the terms set forth in this
Agreement. In the event that the Company establishes additional classes or
series other than the Common Stock of the Funds covered by this Agreement with
respect to which U.S. Trust desires to retain Sub-Transfer Agent to serve as
sub-transfer agent, sub-registrar and sub-dividend disbursing agent hereunder,
U.S. Trust shall notify Sub-Transfer Agent in writing, whereupon such fund shall
become a Fund hereunder and shall be subject to the provisions of this Agreement
to the same extent as the Funds (except to the extent that said provisions,
including the compensation payable on behalf of such new Fund, may be modified
in writing by U.S. Trust and Sub-Transfer Agent at the time). Sub-Transfer Agent
accepts such appointment and agrees to furnish the services herein set forth in
return for the compensation as provided in Paragraph 5 of this Agreement.
2. REPRESENTATIONS AND WARRANTIES.
(a) U.S. Trust and Sub-Transfer Agent represent and warrant to each
other that:
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(i) it is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement;
(ii) all requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement;
(iii) it is duly registered as a transfer agent under Section
17A of the Securities Exchange Act of 1934, as amended (the 1934 Act"). Each
shall promptly give written notice to the other and the Company in the event
that its registration is revoked or a proceeding is commenced that could result
in such revocation;
(iv) it has been in, and shall continue to be in, compliance
with all provisions of law, including Section 17A(c) of the 1934 Act, required
in connection with the performance of its duties under this Agreement;
(v) it has, and will continue to have, access to the facilities,
personnel and equipment required to fully perform its duties and obligations
hereunder;
(vi) no legal or administrative proceedings have been instituted
or threatened which would impair its ability to perform its duties and
obligations under this Agreement; and
(vii) its entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligation of it or any law or regulation applicable to it;
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U.S. Trust represents and warrants to Sub-Transfer
Agent that:
(i) U.S. Trust is a state chartered bank and trust company organized
and existing under the laws of the State of New York;
(c) Sub-Transfer Agent represents and warrants to U.S. Trust that:
(i) Sub-Transfer Agent is a Delaware corporation, duly organized and
existing and in good standing under the laws of Delaware;
3. DELIVERY OF DOCUMENTS. U.S. Trust has furnished Sub-Transfer Agent with
copies properly certified or authenticated of each of the following:
(a) Resolutions of the Company's Board of Directors authorizing the
appointment of U.S. Trust as transfer agent, registrar and dividend disbursing
agent for each class and/or series of Common Stock of the Company and approving
the Mutual Funds Transfer Agency Agreement made as of September 1, 1995 by and
between the Company and U.S. Trust;
(b) Incumbency and signature certificates identifying and containing
the signatures of the Company's officers and/or the persons authorized to sign
Written Instructions, as hereafter defined, on behalf of the Company;
(c) The Company's Charter;
(d) The Company's By-Laws;
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(e) Resolutions of the Company's Board of Directors appointing U.S.
Trust as the investment adviser to the Company's Tax-Exempt Money,
Intermediate-Term Tax-Exempt, Long-Term Tax-Exempt, New York Intermediate-Term
Tax-Exempt, California Intermediate-Term Tax-Exempt and Short-Term Tax-Exempt
Securities Funds (herein "the Funds") and resolutions of the Company's Board of
Directors and Fund shareholders ("Shareholders") approving an Investment
Advisory Agreement between U.S. Trust and the Company dated as of February 6,
1985, as amended; and an Investment Advisory Agreement between U.S. Trust and
the Company dated as of May 11, 1990, as amended (the "Advisory Agreements");
(f) Resolutions of the Company's Board of Directors appointing
Edgewood Services, Inc. (the "Distributor") as the Company's distributor for the
Funds and approving a proposed Distribution Agreement between the Distributor
and the Company dated as of August 1, 1995 (the "Distribution Agreement");
(g) Resolutions of the Company's Board of Directors appointing
Federated Administrative Services ("Federated") and Mutual Funds Service Company
("MFSC") as the administrators for the Funds and approving a proposed
Administration Agreement among Federated, MFSC and the Company dated as of
August 1, 1995 (the "Administration Agreement");
(h) The Advisory Agreements, the Distribution Agreement and the
Administration Agreement;
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(i) The Company's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A with the Securities and Exchange
Commission ("SEC") on August 31, 1984;
(j) Post-Effective Amendment No. 18 to the Company's Registration
Statement on Form N-1A under the 1940 Act and the 1933 Act, as filed with the
SEC on August 1, 1995 (File No. 2-93068) relating to shares of the Company's
Class A Common Stock, $.001 par value per share, which represent interests in
the Tax-Exempt Money Fund; Class B Common Stock, $.001 par value per share,
which represent interests in the Intermediate-Term Tax-Exempt Fund; Class C
Common Stock, $.001 par value per share, which represent interests in the
Long-Term Tax-Exempt Fund; Class D Common Stock, $.001 par value per share,
which represent interests in the New York Intermediate-Term Tax-Exempt Fund;
Class E Common Stock, $.001 par value per share, which represent interests in
the California Intermediate-Term Tax-Exempt Fund; and Class F Common Stock,
$.001 par value per share, which represent interests in the Short-Term
Tax-Exempt Securities Fund; (such shares and shares of the Company hereafter
classified by the Company's Board of Directors are hereinafter collectively
called "Shares"), and all amendments thereto; and
(k) The Company's most recent prospectuses (such prospectuses, as
currently in effect, and all amendments and supplements thereto and future
versions thereof are herein called the "Prospectuses").
U.S. Trust will furnish Sub-Transfer Agent from time to time with
copies of all amendments of or supplements to the
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foregoing, if any, and with comparable documents with respect to any Fund of the
Company organized after the date of this Agreement that is covered by this
Agreement. U.S. Trust shall also deliver to Sub-Transfer Agent the following
documents on or before the effective date of any increase or decrease in the
total number of Shares authorized to be issued by the Company:
(a) a certified copy of the amendment of the Articles of
Incorporation giving effect to such increase or decrease, and (b) in the case of
an increase, if the appointment of U.S. Trust was theretofore expressly limited,
a certified copy of a resolution of the Board of Directors of the Company
increasing the authority of U.S. Trust.
4. SERVICES PROVIDED
(a) Sub-Transfer Agent will provide the following services subject
to the control, direction and supervision of U.S. Trust and in compliance with
the objectives, policies and limitations set forth in the Company's Registration
Statement, Charter and By-Laws; applicable laws and regulations; and all
resolutions and policies implemented by the Board of Directors.
The following is a general description of the transfer
agency services Sub-Transfer Agent shall provide to the Company.
A. SHAREHOLDER RECORDKEEPING. Maintain records showing for each
Fund shareholder the following: (i) name, address, appropriate
tax certification and tax identifying number; (ii) number of
shares of each Fund; (iii) historical information
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including, but not limited to, dividends paid and date and price
of all transactions including individual purchase and
redemptions and appropriate supporting documents; and (iv) any
dividend reinvestment order, application, dividend to a specific
address and correspondence relating to the current maintenance
of the account.
B. SHARE ISSUANCE. Record the issuance of shares of each Fund.
Except as specifically agreed in writing between U.S. Trust and
Sub-Transfer Agent, Sub-Transfer Agent shall have no obligation
when countersigning and issuing and/or crediting shares to take
cognizance of any other laws relating to the issue and sale of
such shares except insofar as policies and procedures of the
Stock Transfer Association recognize such laws. Sub-Transfer
Agent shall notify U.S. Trust and the Company in case any
proposed issue of shares by the Company shall result in an
over-issuance. In case any issue of shares would result in such
an over-issue, Sub-Transfer Agent shall refuse to issue said
shares and shall not countersign and issue certificates (if any)
for such shares.
C. PURCHASE ORDERS. Process all orders for the purchase of shares
of the Company in accordance with the Company's Prospectuses,
including
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electronic transmissions, which the Company has acknowledged it
has authorized. Upon receipt of any check or other payment for
purchase of shares of the Company from an investor, Sub-Transfer
Agent will (i) stamp the order or other documentation with the
date and time of receipt, (ii) forthwith process the same for
collection, (iii) determine the amounts thereof due the Company,
and notify U.S. Trust and the Company of such determination and
deposit, such notification to be given on a daily basis of the
total amounts determined and deposited to the Company's
custodian bank account during such day. Sub-Transfer Agent
shall then credit the share account of the investor with the
number of Fund shares to be purchased made on the date such
payment is received by Sub-Transfer Agent, as set forth in the
Company's Prospectus and shall promptly mail a confirmation of
said purchase to the investor, all subject to any instructions
which the Company or U.S. Trust may give to Sub-Transfer Agent
with respect to the timing or manner of acceptance of orders for
shares relating to payments so received by it. Any purchase
order received by Sub-
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Transfer Agent, which is not in good order will be rejected
immediately.
D. REDEMPTION ORDERS. Receive and stamp with the date and time of
receipt all requests for redemptions or repurchase of shares
held in certificate or non-certificate form, and process
redemptions and repurchase requests as follows: (i) if such
certificate or redemption request complies with the applicable
standards approved by the Company, Sub-Transfer Agent shall on
each business day notify the Company of the total number of
shares presented and covered by such requests received by
Sub-Transfer Agent on such day; (ii) within the time specified
in the Prospectus and if not so specified on or prior to the
seventh calendar day succeeding any such requests received by
Sub-Transfer Agent, shall notify The Chase Manhattan Bank, N.A.
(the "Custodian"), subject to instructions from the Company or
U.S. Trust, to transfer monies to such account as designated by
Sub-Transfer Agent for such payment to the redeeming shareholder
of the applicable redemption or repurchase price; (iii) if any
such certificate or request for redemption of repurchase does
not comply with applicable standards, Sub-Transfer Agent shall
promptly
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notify the investor of such fact, together with the reason
therefor, and shall effect such redemption at the Company's
price next determined after receipt of documents complying with
said standards.
E. TELEPHONE ORDERS. Process redemptions, exchanges and transfers
of Fund shares upon telephone instructions from qualified
shareholders in accordance with the procedures set forth in the
Company's Prospectuses. The administrator shall be permitted to
redeem, exchange and/or transfer Fund shares from any account
for which such services have been authorized, including
electronic transmissions.
F. TRANSFER OF SHARES. Upon receipt by Sub-Transfer Agent of
documentation in proper form to effect a transfer of shares,
including in the case of shares for which certificates have been
issued the share certificates in proper form for transfer,
Sub-Transfer Agent will register such transfer on the Company's
shareholder records maintained by Sub-Transfer Agent pursuant to
instructions received from the transferor, cancel the
certificates representing such shares, if any, and if so
requested, countersign, register, issue and
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mail by first class mail new certificates for the same or a
smaller whole number of shares.
G. SHAREHOLDER COMMUNICATIONS. Address and mail all communications
by the Company to its shareholders promptly following the
delivery by the Company or U.S. Trust of the material to be
mailed.
H. PROXY MATERIALS. Prepare shareholder lists, mail and certify as
to the mailing of proxy materials, receive the tabulated proxy
cards, render periodic reports to the Company and U.S. Trust on
the progress of such tabulation, and provide the Company with
inspectors of election at any meeting of shareholders.
I. SHARE CERTIFICATES. If a shareholder of the Company requests a
certificate representing his shares, Sub-Transfer Agent as
sub-transfer agent will countersign and mail, a share
certificate to the investor at his/her address as it appears on
the Company's transfer books. Sub-Transfer Agent shall supply,
at the expense of the Company a supply of blank share
certificates. The certificates shall be properly signed,
manually or by facsimile, as authorized by the Company, and
shall bear the Company's seal or facsimile; and notwithstanding
the death, resignation or removal of any officers of the Company
authorized to sign
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certificates, Sub-Transfer Agent may, until otherwise directed
by the Company or U.S. Trust, continue to countersign
certificates which bear the manual or facsimile signature of
such officer.
J. RETURNED CHECKS. In the event that any check or other order for
the payment of money is returned unpaid for any reason,
Sub-Transfer Agent will take such steps, including redepositing
the check for collection or returning the check to the investor,
as Sub-Transfer Agent may, at its discretion, deem appropriate
and notify the Company and U.S. Trust of such action, or as the
Company or U.S. Trust may instruct. However, subject to
Paragraph 7(b) below, the Company remains ultimately liable for
any returned checks of its shareholders.
K. SHAREHOLDER CORRESPONDENCE. Acknowledge all correspondence from
shareholders relating to their share accounts and undertake such
other shareholder correspondence as may from time to time be
mutually agreed upon.
L. TAX REPORTING. Sub-Transfer Agent shall issue appropriate
shareholder tax forms on an annual basis.
M. DIVIDEND DISBURSING. Sub-Transfer Agent will serve as the
Company's dividend disbursing agent.
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Sub-Transfer Agent will prepare and mail checks, place wire
transfers of credit income and capital gain payments to
shareholders. The Company or U.S. Trust will advise Sub-Transfer
Agent of the declaration of any dividend or distribution and the
record and payable date thereof at least five (5) days prior to
the record date. Sub-Transfer Agent will, on or before the
payment date of any such dividend or distribution, notify the
Company's Custodian of the estimated amount required to pay any
portion of such dividend or distribution payable in cash, and on
or before the payment date of such distribution, the Company
will instruct its Custodian to make available to Sub-Transfer
Agent sufficient funds for the cash amount to be paid out. If a
shareholder is entitled to receive additional shares by virtue
of any such distribution or dividend, appropriate credits will
be made to each shareholder's account.
(b) Sub-Transfer Agent will also:
(i) provide office facilities with respect to the provision of
the services contemplated herein (which may be in the offices of Sub-Transfer
Agent or a corporate affiliate of Sub-Transfer Agent);
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(ii) provide the services of individuals to serve as officers of
the Company who will be designated by Sub-Transfer Agent and elected by the
Company's Board of Directors subject to reasonable Board approval;
(iii) provide or otherwise obtain personnel sufficient, in
Sub-Transfer Agent's sole discretion, for provision of the services contemplated
herein;
(iv) furnish equipment and other materials, which Sub-Transfer
Agent, in its sole discretion, believes are necessary or desirable for provision
of the services contemplated herein; and
(v) keep records relating to the services provided hereunder in
accordance with the 1940 Act and the rules thereunder. To the extent required by
the 1940 Act and the rules thereunder, Sub-Transfer Agent agrees that all such
records prepared or maintained by Sub-Transfer Agent relating to the services
provided hereunder are the property of the Company and will be preserved for the
periods prescribed under the 1940 Act and the rules thereunder, maintained at
the Company's expense, and made available in accordance with such Act and rules.
Sub-Transfer Agent further agrees to surrender promptly to the Company upon its
request and cease to retain in its records and files those records and documents
created and maintained by Sub-Transfer Agent pursuant to this Agreement.
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<PAGE>
5. FEES; EXPENSES; EXPENSE REIMBURSEMENT.
(a) As compensation for the services rendered to the Company for
U.S. Trust pursuant to this Agreement, U.S. Trust shall pay Sub-Transfer Agent
monthly $15.00 per account and subaccount of each Fund of the Company per year
or for any portion of a year plus Sub-Transfer Agent's out-of-pocket expenses
relating to such services, including, but not limited to, expenses of postage,
telephone, TWX rental and line charges, communication forms, and checks and
check processing. Such fees are to be billed monthly and shall be due and
payable upon receipt of the invoice. Upon any termination of this Agreement
before the end of any month, the fee for the part of the month before such
termination shall be prorated according to the proportion which such part bears
to the full monthly period and shall be payable upon the date of termination of
this Agreement.
(b) For the purpose of determining fees calculated as a function of
the Company's assets, the value of the Company's assets and net assets shall be
computed as required by its Prospectuses, generally accepted accounting
principles, and resolutions of the Board of Directors.
(c) Sub-Transfer Agent may, in its sole discretion, from time to
time employ or associate with such person or persons as may be appropriate to
assist Sub-Transfer Agent in the performance of this Agreement. Such person or
persons may be officers and employees who are employed or designated as officers
by both Sub-Transfer Agent and the Company. The compensation of such person or
persons for such employment shall be paid by
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<PAGE>
Sub-Transfer Agent and no obligation will be incurred by or on behalf of the
Company or U.S. Trust in such respect.
(d) U.S. Trust may request additional services, additional
processing, or special reports. U.S. Trust shall submit such requests in writing
together with such specifications and documentation as may be reasonably
required by Sub-Transfer Agent. If Sub-Transfer Agent elects to provide such
services or arrange for their provision, it shall be entitled to additional fees
and expenses at its customary rates and charges as approved by U.S. Trust.
(e) Sub-Transfer Agent will bear all of its own expenses in
connection with the performance of the services under this Agreement except as
otherwise expressly provided herein. U.S. Trust agrees to promptly reimburse
Sub-Transfer Agent for any equipment and supplies specially ordered by or for
the Company through Sub-Transfer Agent, and for any other expenses not
contemplated by this Agreement that Sub-Transfer Agent may incur on the
Company's behalf, as consented to by U.S. Trust and the Company from time to
time. Expenses to be incurred in the operation of the Company and to be borne by
the Company, include, but are not limited to: taxes; interest; brokerage fees
and commissions, salaries and fees of officers and directors who are not
officers, directors, shareholders or employees of U.S. Trust, or the Company's
investment adviser, or distributor or other service providers; SEC and state
Blue Sky registration and qualification fees, levies, fines and other charges;
EDGAR filing
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<PAGE>
fees, processing services and related fees; advisory and administration fees;
charges and expenses of pricing and data services, independent public
accountants and custodians; insurance premiums including fidelity bond premiums;
legal expenses; costs of maintenance of corporate existence; expenses of
typesetting and printing of prospectuses for regulatory purposes and for
distribution to current shareholders of the Company (the Company's distributor
to bear the expense of all other printing, production, and distribution of
prospectuses, statements of additional information, and marketing materials
except as otherwise approved by the Board of Directors of the Company); expenses
of printing and production costs of shareholders' reports and proxy statements
and materials; costs and expenses of Fund stationery and forms; costs and
expenses of special telephone and data lines and devices; costs associated with
corporate, shareholder, and Board meetings; trade association dues and expenses;
and any extraordinary expenses and other customary Fund expenses. In addition,
Sub-Transfer Agent may utilize one or more independent pricing services,
approved from time to time by the Board, to obtain securities prices and to act
as backup to the primary pricing services, in connection with determining the
net asset values of the Company, and U.S. Trust will reimburse Sub-Transfer
Agent for the Company's share of the cost of such services based upon the actual
usage, or a pro rata estimate of the use, of the services for the benefit of the
Company.
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<PAGE>
(f) All fees, out-of-pocket expenses, or additional charges of
Sub-Transfer Agent shall be billed on a monthly basis and shall be due and
payable upon receipt of the invoice.
Sub-Transfer Agent will render, after the close of each month in
which services have been furnished, a statement reflecting all of the charges
for such month.
6. PROPRIETARY AND CONFIDENTIAL INFORMATION. Sub-Transfer Agent agrees
on behalf of itself and its employees to treat confidentially and as proprietary
information of the Company, all records and other information relative to the
Company's prior, present or potential shareholders, and to not use such records
and information for any purpose other than performance of Sub-Transfer Agent's
responsibilities and duties hereunder. Sub-Transfer Agent may seek a waiver of
such confidentiality provisions by furnishing reasonable prior notice to the
Company and obtaining approval in writing from the Company, which approval shall
not be unreasonably withheld and may not be withheld where Sub-Transfer Agent
may be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities.
Waivers of confidentiality are automatically effective without further action by
Sub-Transfer Agent with respect to Internal Revenue Service levies, subpoenas
and similar actions, or with respect to any request by the Company.
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<PAGE>
7. DUTIES, RESPONSIBILITIES, AND LIMITATION OF LIABILITY.
(a) In the performance of its duties hereunder, Sub-Transfer Agent
shall be obligated to act in good faith in performing the services provided for
under this Agreement. In performing its services hereunder, Sub-Transfer Agent
shall be entitled to rely on any oral or written instructions, notices or other
communications, including electronic transmissions, from the Company and its
custodians, officers and directors, investors, agents and other service
providers which Sub-Transfer Agent reasonably believes to be genuine, valid and
authorized. Sub-Transfer Agent shall also be entitled to consult with and rely
on the advice and opinions of outside legal counsel retained by the Company, as
necessary or appropriate.
(b) Sub-Transfer Agent shall not be liable for any error of judgment
or mistake of law or for any loss or expense suffered by the Company or U.S.
Trust, in connection with the matters to which this Agreement relates, except
for a loss or expense caused by or resulting from willful misfeasance, bad faith
or negligence on Sub-Transfer Agent's part in the performance of its duties or
from reckless disregard by Sub-Transfer Agent of its obligations and duties
under this Agreement. Any person, even though also an officer, director,
partner, employee or agent of Sub-Transfer Agent, who may be or become an
officer, director, partner, employee or agent of the Company, shall be deemed
when rendering services to the Company in that capacity or acting on any
business of the Company in that capacity (other than services or business in
connection with Sub-
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<PAGE>
Transfer Agent's duties hereunder) to be rendering such services to or acting
solely for the Company and not as an officer, director, partner, employee or
agent or person under the control or direction of Sub-Transfer Agent even though
paid by Sub-Transfer Agent.
(c) Subject to Paragraphs 7(b) and (d), Sub-Transfer Agent shall not
be responsible for, and U.S. Trust shall indemnify and hold Sub-Transfer Agent
harmless from and against, any and all losses, damages, costs, reasonable
attorneys' fees and expenses, payments, expenses and liabilities arising out of
or attributable to:
(i) all actions of Sub-Transfer Agent or its officers or agents
required to be taken pursuant to this Agreement;
(ii) the reliance on or use by Sub-Transfer Agent or its
officers or agents of information, records, or documents which are received by
Sub-Transfer Agent or its officers or agents and furnished to it or them by or
on behalf of the Company, and which have been prepared or maintained by the
Company or any third party on behalf of the Company other than Sub-Transfer
Agent or any of its affiliates;
(iii) U.S. Trust's refusal or failure to comply with the terms
of this Agreement or U.S. Trust's lack of good faith, or its actions, or lack
thereof, involving gross negligence or willful misfeasance;
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<PAGE>
(iv) the material breach of any representation or warranty of
U.S. Trust hereunder;
(v) the legal taping or other form of legal recording of
telephone conversations or other legal forms of electronic communications with
investors and shareholders, or reliance by Sub-Transfer Agent or its officers or
agents on telephone or other electronic instructions of any person acting on
behalf of a shareholder or shareholder account for which telephone or other
electronic services have been authorized;
(vi) the reliance on or the carrying out by Sub-Transfer Agent
or its officers or agents of any proper instructions reasonably believed to be
duly authorized, or requests of U.S. Trust or the Company or recognition by Sub-
Transfer Agent or its officers or agents of any share certificates which are
reasonably believed to bear the proper signatures of the officers of the Company
and the proper countersignature of any transfer agent or registrar of the
Company;
(vii) any delays, inaccuracies, errors in or omissions from data
provided to Sub-Transfer Agent or its officers or agents by data and pricing
services;
(viii) the offer or sale of shares by the Company in violation
of any requirement under the Federal securities laws or regulations or the
securities laws or regulations of any state, or in violation of any stop order
or other determination or ruling by any Federal agency or any state agency with
respect
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<PAGE>
to the offer or sale of such shares in such state (1) resulting from activities,
actions, or omissions by the Company or its other service providers and agents
other than Sub-Transfer Agent or its officers or agents or any of their
affiliates, or (2) existing or arising out of activities, actions or omissions
by or on behalf of the Company other than by Sub-Transfer Agent or its officers
or agents or any of their affiliates prior to the effective date of this
Agreement;
(ix) any failure of the Company's registration statement to
comply with the 1933 Act and the 1940 Act (including the rules and regulations
thereunder) and any other applicable laws, or any untrue statement of a material
fact or omission of a material fact necessary to make any statement therein not
misleading in a Fund's prospectus, unless such failure, misstatement or omission
relates to, results from or otherwise arises in connection with, actions,
inactions and/or information provided by Sub-Transfer Agent or its officers or
agents; and
(x) the actions taken by the Company, its investment adviser,
and its distributor in compliance with applicable securities, tax, commodities
and other laws, rules and regulations, or the failure to so comply.
(d) Notwithstanding anything herein to the contrary, U.S. Trust
shall be as fully responsible to the Company for the acts and omissions of any
sub-transfer agent as U.S. Trust is for its own acts and omissions.
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<PAGE>
8. TERM. This Agreement shall become effective on the date first
hereinabove written. This Agreement may be modified or amended from time to time
by mutual agreement between the parties hereto. This Agreement shall continue in
effect unless terminated by either party on 120 days' prior written notice
provided that should Sub-Transfer Agent fail to be registered pursuant to
Section 17A of the 1934 Act as a transfer agent at any time, the Company or U.S.
Trust may, on written notice to Sub-Transfer Agent, immediately terminate this
Agreement. Upon termination of this Agreement, U.S. Trust shall pay to Sub-
Transfer Agent such compensation and any out-of-pocket or other reimbursable
expenses which may become due or payable under the terms hereof as of the date
of termination or after the date that the provision of services ceases,
whichever is later.
9. NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be deemed to have been given when delivered in person or by
certified mail, return receipt requested, to the parties at the following
address (or such other address as a party may specify by notice to the other):
If to the Company:
Drinker Biddle & Reath
1345 Chestnut Street, Suite 1100
Philadelphia, PA 19107
Attn: W. Bruce McConnel, III
Fax: (215) 988-2757
If to U.S. Trust:
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Attention: Maureen Scannell Bateman
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<PAGE>
Fax: 212) 852-1310
If to Sub-Transfer Agent:
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108-3913
Attention: Karl O. Hartmann
Fax: (617) 557-8616
Notice shall be effective upon receipt if by mail, on the date of personal
delivery (by private messenger, courier service or otherwise) or upon confirmed
receipt of telex or facsimile, whichever occurs first.
10. ASSIGNMENT AND DELEGATION. This Agreement shall not be assigned and
the rights, duties and obligations of the parties hereunder may not be
subcontracted or delegated by either of the parties hereto without the prior
consent in writing of the other party.
11. WAIVER. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver nor
shall it deprive such party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver must be in
writing signed by the waiving party.
12. FORCE MAJEURE. Sub-Transfer Agent shall not be responsible or
liable for any failure or delay in performance of its obligations under this
Agreement arising out of or caused, directly or indirectly, by circumstances
beyond its control, including without limitation, acts of God, earthquakes,
fires, floods, wars, acts of civil or military authorities, or
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<PAGE>
governmental actions, nor shall any such failure or delay give the Company the
right to terminate this Agreement. During the term of this Agreement, at no
additional cost to the Company or U.S. Trust, Sub-Transfer Agent shall provide a
facility capable of safeguarding the transfer agency and dividend disbursing
records of the Company in case of damage to the primary facility providing those
services (the "Back-Up Facility"). Transfer of the transfer agency and dividend
records of the Company to the Back-Up Facility shall be at Sub-Transfer Agent's
expense, shall commence immediately after damage to the primary facility results
in an inability to provide the transfer agency and dividend disbursing services,
and shall be completed within 72 hours of commencement. After the primary
facility has recovered, Sub-Transfer Agent shall again utilize it to provide
the transfer agency and dividend disbursing services to the Company at no
additional cost to the Company. Sub-Transfer Agent shall use reasonable efforts
to provide the services described in this Agreement from the Back-Up Facility.
13. USE OF NAME. Sub-Transfer Agent and U.S. Trust agree not to use the
other's name nor the name of the Company nor the names of such other's nor the
Company's affiliates, designees, or assignees in any prospectus, sales
literature, or other printed material written in a manner not previously
approved by the other or the Company or such other's or the Company's
affiliates, designees, or assignees except where required by the SEC or other
regulatory authorities.
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<PAGE>
14. AMENDMENTS. This Agreement may be modified or amended from time to
time by mutual written agreement between the parties. No provision of this
Agreement may be changed, discharged, or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, discharge or termination is sought.
15. SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance it shall nevertheless
remain applicable to all other persons and circumstances.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK, INCLUDING THE DETERMINATION OF WHEN AN
"ASSIGNMENT" HAS OCCURRED.
17. THIRD PARTY BENEFICIARY. U.S. Trust and Sub-Transfer Agent
expressly agree that the Company is a third party beneficiary hereof and
expressly agree that the Company may enforce the provisions hereof.
This Agreement may be executed in one or more counterparts and all
such counterparts will constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
CHASE GLOBAL FUNDS SERVICES
COMPANY
By: /s/ Donald P. Hearn
--------------------------------
Name: Donald P. Hearn
Title: Chairman & CEO
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Kenneth G. Walsh
--------------------------------
Name: Kenneth G. Walsh
Title: Executive Vice President
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<PAGE>
Exhibit 10
LAW OFFICES
DRINKER BIDDLE & REATH LLP
PHILADELPHIA NATIONAL BANK BUILDING
1345 CHESTNUT STREET
PHILADELPHIA, PA 19107-3496
Telephone: (215) 988-2700
Fax: (215) 988-2757
May 15, 1998
Excelsior Tax-Exempt Funds, Inc.
73 Tremont Street
Boston, MA 02108
Re: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A of Excelsior Tax-Exempt Funds, Inc.
----------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for Excelsior Tax-Exempt Funds, Inc. (the
"Company"), a Maryland corporation, in connection with the registration by the
Company of its shares of common stock, par value $.001 per share. The Articles
of Incorporation of the Company authorize the issuance of 14,000,000,000 shares
of common stock. We have assumed that, prior to the effectiveness of
Post-Effective Amendment No. 24 under the Securities Act of 1933 and prior to
the issuance of shares of common stock ("Class G Common Stock") representing
interests in the New York Tax-Exempt Money Fund, the Board of Directors of the
Company (the "Board") will adopt resolutions designating, classifying,
establishing and authorizing the issuance and sale of Class G Common Stock to
the public, and that all necessary filings and actions will be made and taken
under Maryland law. You have asked for our opinion on certain matters relating
to the Class G Common Stock.
We have reviewed the Company's Articles of Incorporation and Bylaws,
resolutions and proposed resolutions of the Company's Board, certificates of
public officials 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 Securities Act of 1933 (the "Registration Statement"), as amended
through Post-Effective Amendment No. 24 thereto. This
<PAGE>
Excelsior Tax-Exempt Funds, Inc.
May 15, 1998
Page 2
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 purposes of this opinion:
1. The shares of Class G Common Stock will be issued in accordance with
the Articles of Incorporation and Bylaws of the Company and the proposed
resolutions of the Company's Board and shareholders relating to the creation,
authorization, classification and issuance of Class G Common Stock.
2. The Board will not change the number of shares of Class G Common
Stock, or the preferences, limitations or relative rights of the Class G Common
Stock after such shares are issued.
Based on the foregoing, and subject to the adoption of the aforesaid
resolutions by the Board, we are of the opinion that the shares of Class G
Common Stock will be, when issued in accordance with, and sold for the
consideration described in, the Registration Statement (provided that (i) the
price of such shares is not less than the par value thereof and (ii) the number
of shares of each of the Class G Common Stock issued does not exceed the
authorized number of shares of Class G Common Stock as of the date of issuance
of the shares), validly issued, fully paid and non-assessable by the Company.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as part of Post-Effective Amendment No. 24 to the Company's
Registration Statement on Form N- 1A.
Very truly yours,
/s/ DRINKER BIDDLE & REATH LLP
------------------------------
DRINKER BIDDLE & REATH LLP
<PAGE>
Exhibit 11
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference
to our Firm under the caption "Counsel" in the Statement of Additional
Information that is included in Post-Effective Amendment No. 24 and Amendment
No. 26 to the Registration Statement (Nos. 2-93068; 811-4101) on Form N-1A of
Excelsior Tax-Exempt Funds, Inc. under the Securities Act of 1933 and the
Investment Company Act of 1940, respectively. This consent does not constitute a
consent under Section 7 of the Securities Act of 1933, and in consenting to the
use of our name and the reference to our Firm under such caption we have not
certified any part of the Registration Statement and do not otherwise come
within the categories of persons whose consent is required under Section 7 or
the rules and regulations of the Securities and Exchange Commission thereunder.
/s/ DRINKER BIDDLE & REATH LLP
------------------------------
DRINKER BIDDLE & REATH LLP
Philadelphia, Pennsylvania
May 15, 1998
<PAGE>
Exhibit 13(a)
PURCHASE AGREEMENT
U.S.T. Master Tax-Exempt Funds, Inc. (the "Fund"), a
Maryland corporation, and Shearson Lehman Brothers Inc.
("Shearson"), a Delaware corporation, hereby agree with each
other as follows:
1. The Fund hereby offers Shearson and Shearson hereby
purchases 90,000 shares of Class A Common Stock (par value $.001 per share) of
the Fund (the "Class A Shares") at a price of $1.00 per share, 625 shares of
Class B Common Stock (par value $.001 per share) at a price of $1.00 per share
and 625 shares of Class C Common Stock (par value $.001 per share) of the Fund
at a price of $8.00 per share; Shearson hereby acknowledges receipt of one
certificate representing the Class A Shares, one certificate representing the
Class B Shares and one certificate representing the Class C Shares (the
"Shares"), and the Fund hereby acknowledges receipt from Shearson of funds in
the amount of $100,000 in full payment for the Shares.
2. Shearson represents and warrants to the Fund that the
Shares are being acquired for investment purposes and not with a view to the
distribution thereof.
3. Shearson agrees that if it or any direct or indirect
transferee of any of the Shares redeems any of the Shares prior to the fifth
anniversary of the date the Fund begins its investment activities, Shearson
will pay to the Fund an amount equal to the number resulting from multiplying
the Fund's total unamortized organizational expenses by a fraction, the
numerator of which is equal to the number of Shares redeemed by Shearson or
such transferee and the denominator of which is equal to the number of Shares
outstanding as of the date of such redemption, as long as the administrative
position of the staff of the Securities and Exchange Commission requires such
reimbursement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 6th day of February, 1985.
(SEAL) U.S.T. MASTER TAX-EXEMPT FUNDS, INC.
Attest:
/s/ W. Bruce McConnel, III By: /s/ Karen A.G. Loud
- -------------------------------- ------------------------
(SEAL) SHEARSON LEHMAN BROTHERS INC.
Attest:
/s/ W. Bruce McConnel, III By: /s/ William B. Blundin
- -------------------------------- ------------------------
-2-
