<PAGE>
As filed with the Securities and Exchange Commission on December 30, 1996
File Nos. 33-71306, 811-8132
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 5
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 6
Excelsior Funds
(Exact Name of Registrant as Specified in Charter)
6 St. James Avenue, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 617-423-0800
W. Bruce McConnel, III, Esq.
Drinker Biddle & Reath
Philadelphia National Bank Building, 1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[X] Immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
Proposed Proposed Amount of
Maximum Maximum Registration
Title of Securities Amount Offering Aggregate Fee (1)
Being Registered Being Price/Unit Offering
Registered Price
<S> <C> <C> <C> <C>
Shares of
Beneficial
Interest 345,151,345 NAV $345,151,345 $100
</TABLE>
(1) Registrant had actual aggregate redemptions of $7,931,293,122 for its
previous fiscal year; had used $7,586,471,777 of available redemptions for
reductions pursuant to Rule 24f-2(c) under the 1940 Act; and has previously used
no available redemptions for reductions pursuant to Rule 24e-2(a) of the 1940
Act during the current year. Registrant elects to use redemptions in the
aggregate amount of $344,821,345 for reductions in its current amendment.
----------------------------
Registrant has previously registered an indefinite number of
shares of beneficial interest under the Securities Act of 1933, as amended,
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended.
Registrant's initial 24f-2 notice for the fiscal year ended August 31, 1996 was
filed on October 29, 1996.
This Registration Statement has also been executed by Cash Reserves Portfolio.
<PAGE>
EXCELSIOR FUNDS
CROSS-REFERENCE SHEET
(As Required by Rule 495)
Institutional Money Fund
<TABLE>
<CAPTION>
PART A
ITEM NUMBER Prospectus Headings
- ----------- -------------------
<S> <C>
1. COVER PAGE Cover Page.
2. SYNOPSIS Summary of Expenses.
3. CONDENSED FINANCIAL INFORMATION Financial Highlights.
4. GENERAL DESCRIPTION OF REGISTRANT Cover Page;
Investment Objective
and Policies; Special
Information Concerning
Hub and Spoke(R)
Structure
5. MANAGEMENT OF THE FUND Management of the Trust
and the Portfolio.
5A. MANAGEMENT'S DISCUSSION
OF FUND PERFORMANCE Not applicable.
6. CAPITAL STOCK AND OTHER SECURITIES Cover Page;
Pricing of Shares;
How to Purchase and
Redeem Shares; Net
Income, Dividends and
Distributions; Taxes;
Management of the Trust
and the Portfolio;
Description of Shares,
Voting Rights and
Liabilities.
7. PURCHASE OF SECURITIES BEING OFFERED How to Purchase
and Redeem Shares;
Investor Programs.
8. REDEMPTION OR REPURCHASE How to Purchase
and Redeem Shares;
Investor Programs.
9. PENDING LEGAL PROCEEDINGS Not applicable.
</TABLE>
<PAGE>
EXCELSIOR INSTITUTIONAL MONEY FUND
- -----------------------------------------------------------------------------
Excelsior Funds
6 St. James Avenue, Boston, Massachusetts 02116
For initial purchase or existing account information, call (800) 909-1989
(from overseas, call (617) 557-1755)
- -----------------------------------------------------------------------------
This Prospectus describes Excelsior Institutional Money Fund (the "Fund"),
a mutual fund offered to institutional investors. The Fund is a separate
series of Excelsior Funds (the "Trust"), an open-end diversified management
investment company.
The investment objective of the Fund is to provide shareholders with
liquidity and as high a level of current income as is consistent with the
preservation of capital. The Trust seeks to achieve the investment objective
of the Fund by investing all of the investable assets of the Fund in Cash
Reserves Portfolio (the "Portfolio"), a diversified open-end management
investment company with the same investment objective as the Fund. Cash
Reserves Portfolio seeks to achieve this investment objective by investing in
U.S. dollar-denominated money market obligations with maturities of 397 days
or less issued by U.S. and non-U.S. issuers.
SHARES OF THE FUND ("SHARES") ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK 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 BE ABLE TO DO SO ON A
CONTINUING 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.
Unlike other mutual funds which directly acquire and manage their own
portfolios of securities, the Trust seeks to achieve the Fund's investment
objective by investing all of the Fund's investable assets in the Portfolio.
Consequently, the investment experience of the Fund will correspond directly
with the investment experience of the Portfolio. The Fund invests in the
Portfolio through Signature Financial Group, Inc.'s two-tier structure known
as the Hub and Spoke(R) financial services method. The Hub and Spoke(R)
investment fund structure employs a two-tier master/feeder fund structure and
is a registered service mark of Signature Financial Group, Inc. See "Special
Information Concerning Hub and Spoke(R) Structure" on page __.
The Fund is distributed by Signature Broker-Dealer Services, Inc.
("SBDS"). The Portfolio is advised by Citibank, N.A. (the "Investment
Adviser"). The Fund receives supplemental investment management services from
United States Trust Company of New York ("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 carefully and retain it for future reference. Additional
information about the Fund is contained in a Statement of Additional
Information, which has been filed with the Securities and Exchange Commission
and is available without charge upon request by writing to the Trust at its
address shown above or by calling (617) 423-0800. The Statement of Additional
Information bears the same date as this Prospectus and is incorporated by
reference in its entirety into this Prospectus.
Prospectus dated January 1, 1997
<PAGE>
SUMMARY OF EXPENSES
The following tables provide (i) a summary of expenses relating to
purchases and sales of Shares of the Fund, and the aggregate annual operating
expenses for the Fund and the Portfolio for the fiscal year ended August 31,
1996, expressed as a percentage of the average net assets of the Fund, and
(ii) an example illustrating the dollar cost of such expenses on a $1,000
investment in the Fund.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses .................................. None
Advisory Fees(1) (after fee waivers) .............................. .07%
12b-1 Fees ........................................................ None
Other Expenses
Administration Fees (after fee waivers) ......................... .01%
Administrative Servicing Fees ................................... .09%
Other Operating Expenses (after expense reimbursements)((2)) .... .08%
---------
Total Fund Operating Expenses (after fee waivers and expense
reimbursements) ................................................. .25%
=========
</TABLE>
- ------
(1)Reflects fees incurred by the Portfolio for advisory services rendered by
the Investment Adviser. U.S. Trust receives no additional fee for
providing supplemental investment management services to the Fund. See
"Management of the Trust and the Portfolio" below.
(2)Includes the other operating expenses of the Portfolio that are allocable
to the Fund. See "Management of the Trust and the Portfolio" below.
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:
<TABLE>
<CAPTION>
<S> <C>
1 Year .................................................... $ 3
3 Years ................................................... $ 8
5 Years ................................................... $14
10 Years ................................................... $32
</TABLE>
The purpose of the foregoing tables is to assist investors in understanding
the various costs and expenses that shareholders of the Fund will bear directly
or indirectly. The Fund's administrator has voluntarily agreed to reimburse the
Fund for certain expenses, and the Investment Adviser and the Portfolio's
administrator have each voluntarily agreed to waive a portion of their fees such
that, following such waivers and reimbursements, the total operating expenses
for the current fiscal year (including amortization of organization costs and
the Fund's allocated portion of the Portfolio's expenses, but exclusive of
taxes, interest, brokerage commissions, and extraordinary expenses) of the Fund
on an annual basis would be equal to .25% of the average daily net assets of the
Fund. These fee waivers and expense reimbursements are reflected in the expense
table and example. These fee waivers may be changed or terminated at any time.
Without such waivers and reimbursements, the advisory fee of the Portfolio would
be equal on an annual basis to 0.15% of the Portfolio's average daily net
assets, the administration fee of the Fund would be equal on an annual basis to
0.01% of the average daily net assets of the Fund, "Other operating expenses" of
the Fund would be equal on an annual basis to 0.63% of the average daily net
assets of the Fund, and total aggregate operating expenses of the Fund,
including its share of Portfolio expenses, would be equal on an annual basis to
0.79% of the average daily net assets of the Fund. For more information about
the expenses of the Fund and the Portfolio, see "Management of the Trust and the
Portfolio."
1
<PAGE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR
LESS THAN THOSE SHOWN IN THE EXPENSE SUMMARY AND EXAMPLE.
The trustees of the Trust believe that the aggregate per share expenses of
the Fund and the Portfolio will be less than or approximately equal to the
expenses which the Fund would incur if the Trust paid directly for the
services of an investment adviser and the assets of the Fund were invested
directly in the kinds of securities being held by the Portfolio.
FINANCIAL HIGHLIGHTS
The following selected data for a Share of the Fund outstanding for the
indicated periods should be read in conjunction with the financial statements
appearing in the Fund's annual report to shareholders, which are incorporated
by reference into the Statement of Additional Information. The financial
statements and notes, as well as the table below, have been audited by Price
Waterhouse LLP, independent accountants. Copies of the annual report may be
obtained from the Trust free of charge by calling the number on the front
cover of this Prospectus.
<TABLE>
<CAPTION>
For the period
November 8, 1993
For the Year For the Year (Commencement of
Ended Ended Operations) to
August 31, 1996 August 31, 1995 August 31, 1994
------------------ ----------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period .......... $ 1.00 $ 1.00 $ 1.00
Net investment income from operations ......... 0.0547 0.0579 0.0308
Dividends from net investment income .......... (0.0547) (0.0579) (0.0308)
------------------ ----------------- ----------------
Net asset value, end of period ................ $ 1.00 $ 1.00 $ 1.00
================== ================= ================
Total return .................................. 5.61% 5.95% 3.87%(2)
Ratios:
Net investment income to average net
assets(1) ................................ 5.55% 5.59% 4.39%(2)
Expenses to average net assets(1) ........... 0.25% 0.25% 0.19%(2)
Total net assets, end of period (000's omitted) $293,290 $638,111 $770,658
</TABLE>
- ------
(1)Reflects the Fund's proportionate share of the Portfolio's expenses as
well as voluntary fee waivers. If the voluntary fee waivers had not been
in place, the ratios of net investment income and expenses to average net
assets would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net investment income to average net assets ...... 5.11% 5.16% 4.28%(2)
Expenses to average net assets .................. 0.69% 0.68% 0.31%(2)
</TABLE>
(2)Annualized.
2
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
INTRODUCTION
The Trust was organized as a business trust under the laws of the State of
Delaware, with the Fund established as separate series of the Trust, on
October 25, 1993. Shares of the Fund are continuously sold only to
institutional investors.
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide shareholders with
liquidity and as high a level of current income as is consistent with the
preservation of capital. The Trust seeks to achieve the investment objective
of the Fund by investing all of the investable assets of the Fund in Cash
Reserves Portfolio, a diversified open-end management investment company with
the same investment objective as the Fund. Cash Reserves Portfolio seeks to
achieve its investment objective by investing in U.S. dollar-denominated
money market obligations with maturities of 397 days or less issued by U.S.
and non-U.S. issuers. The approval of the Fund's shareholders is not required
to change its investment objective and investment policies, and the approval
of the investors in the Portfolio is not required to change the Portfolio's
investment objective or any of the Portfolio's investment policies discussed
below, except that the concentration policy with respect to bank obligations
described in paragraph (1) below is fundamental. Any changes in the Fund's or
the Portfolio's non-fundamental investment objective or policies could result
in the Fund having investment objectives and policies different from those
applicable at the time of a shareholder's investment in the Fund.
INVESTMENT POLICIES AND STRATEGIES
Since the investment characteristics of the Fund are the same as those of
the Portfolio, the following is a discussion of the various investment
policies and strategies employed by the Portfolio. The Portfolio uses the
amortized cost method to value its securities, and has a dollar-weighted
portfolio maturity not exceeding 90 days.
Cash Reserves Portfolio seeks to achieve its investment objective through
investments limited to the following types of U.S. dollar-denominated money
market instruments. All investments by Cash Reserves Portfolio mature or are
deemed to mature within 397 days from the date of acquisition, and the
average maturity of the investments held by Cash Reserves Portfolio (on a
dollar-weighted basis) is 90 days or less. All investments by Cash Reserves
Portfolio are in securities of high quality (i.e., rated in the highest
rating category for short-term obligations by at least two nationally
recognized statistical rating organizations (each an "NRSRO") assigning a
rating to the security or issuer or, if only one NRSRO assigns a rating, that
NRSRO, or, in the case of an investment which is not rated, of comparable
quality as determined by the Investment Adviser) and are determined by the
Investment Adviser to present minimal credit risks. Investments in high
quality, short-term instruments may, in many circumstances, result in lower
yield than would be available from investments in instruments with a lower
quality or a longer term. Under the 1940 Act, the Fund and Cash Reserves
Portfolio are each classified as "diversified," although in the case of the
Fund, all of its investable assets are invested in the Portfolio. In
accordance with the portfolio diversification requirements of the 1940 Act,
Cash Reserves Portfolio must
3
<PAGE>
invest all of its assets in cash and cash items, U.S. Government securities,
investment company securities and other securities limited as to any one
issuer to not more than 5% of the total assets of the investment company and
not more than 10% of the voting securities of the issuer.
The Portfolio will limit its investments to the types of instruments
described below:
(1) Bank obligations. Cash Reserves Portfolio invests at least 25% of its
assets, and may invest up to 100% of its assets, in bank obligations. This
concentration policy is fundamental and may not be changed without the
approval of the investors in Cash Reserves Portfolio. These obligations
include, but are not limited to, negotiable certificates of deposit, banker's
acceptances and fixed time deposits. Cash Reserves Portfolio limits its
investments in U.S. bank obligations (including their non-U.S. branches) to
banks having total assets in excess of $1 billion and which are subject to
regulation by an agency of the U.S. Government. Cash Reserves Portfolio may
also invest in certificates of deposit issued by banks the deposits in which
are insured by the Federal Deposit Insurance Corporation ("FDIC"), through
either the Bank Insurance Fund or the Savings Association Insurance Fund,
having total assets of less than $1 billion, provided that Cash Reserves
Portfolio at no time owns more than $100,000 principal amount of certificates
of deposit (or any higher principal amount which in the future may be fully
insured by FDIC insurance) of any one of those issuers. Fixed time deposits
are obligations which are payable at a stated maturity date and bear a fixed
rate of interest. Generally, fixed time deposits may be withdrawn on demand
by Cash Reserves Portfolio, but they may be subject to early withdrawal
penalties which vary depending upon market conditions and the remaining
maturity of the obligation. Although fixed time deposits do not have a
market, there are no contractual restrictions on Cash Reserves Portfolio's
right to transfer a beneficial interest in the deposit to a third party.
Cash Reserves Portfolio limits its investments in non-U.S. bank
obligations (i.e., obligations of non-U.S. branches and subsidiaries of U.S.
banks, and U.S. and non-U.S. branches of non-U.S. banks) to U.S.
dollar-denominated obligations of banks which at the time of investment are
branches or subsidiaries of U.S. banks which meet the criteria in the
preceding paragraph or are branches of non-U.S. banks which (i) have more
than $10 billion, or the equivalent in other currencies, in total assets;
(ii) in terms of assets are among the 75 largest non-U.S. banks in the world;
(iii) have branches or agencies in the United States; and (iv) in the opinion
of the Investment Adviser, are of an investment quality comparable to
obligations of U.S. banks which may be purchased by Cash Reserves Portfolio.
These obligations may be general obligations of the parent bank, in addition
to the issuing branch or subsidiary, but the parent bank's obligations may be
limited by the terms of the specific obligation or by governmental
regulation. Cash Reserves Portfolio also limits its investments in non-U.S.
bank obligations to banks, branches and subsidiaries located in Western
Europe (United Kingdom, France, Germany, Belgium, the Netherlands, Italy,
Switzerland), Scandinavia (Denmark, Norway, Sweden), Australia, Japan, the
Cayman Islands, the Bahamas and Canada. Cash Reserves Portfolio does not
purchase any bank obligation issued by the Investment Adviser or any of its
affiliates.
Since Cash Reserves Portfolio invests at least 25% of its assets, and may
invest up to 100% of its assets, in bank obligations, an investment in the
Fund should be made with an understanding of the characteristics of the
banking industry and the risks which such an investment may entail. Banks are
subject to extensive governmental regulation which may limit both the amounts
and types of loans and other financial commitments which may be made and
interest rates and fees which may be charged. The profitability of this
industry is largely dependent on the availability and cost of capital funds
for the purpose of financing lending operations under prevailing money market
conditions. Also, general eco-
4
<PAGE>
nomic conditions play an important part in the operation of this industry,
and exposure to credit losses arising from possible financial difficulties of
borrowing might affect a bank's ability to meet its obligations.
Since Cash Reserves Portfolio may hold obligations of non-U.S. branches
and subsidiaries of U.S. banks, and U.S. and non-U.S. branches of non-U.S.
banks, an investment in the Fund involves certain additional risks. Such
investment risks include future political and economic developments, the
possible imposition of non-U.S. withholding taxes on interest income payable
on such obligations held by Cash Reserves Portfolio, the possible seizure or
nationalization of non-U.S. deposits, and the possible establishment of
exchange controls or other non-U.S. governmental laws or restrictions
applicable to the payment of the principal of and interest on certificates of
deposit or time deposits that might affect adversely such payment on such
obligations held by Cash Reserves Portfolio. In addition, there may be less
publicly-available information about a non-U.S. branch or subsidiary of a
U.S. bank or a U.S. or non-U.S. branch of a non-U.S. bank than about a U.S.
bank, and such branches and subsidiaries may not be subject to the same or
similar regulatory requirements that apply to U.S. banks, such as mandatory
reserve requirements, loan limitations, and accounting, auditing and
financial record keeping standards and requirements. The Statement of
Additional Information includes more detailed information concerning U.S. and
non-U.S. bank obligations under the caption "Investment Objective, Policies
and Restrictions -- Cash Reserves Portfolio."
(2) Obligations of, or guaranteed by, non-U.S. governments. Cash Reserves
Portfolio limits its investments in non-U.S. government obligations to
obligations or guaranteed by the governments of Western Europe (United
Kingdom, France, Germany, Belgium, the Netherlands, Italy, Switzerland),
Scandinavia (Denmark, Norway, Sweden), Australia, Japan and Canada.
Generally, such obligations may be subject to the additional risks described
in paragraph 1 above in connection with the purchase of non-U.S. bank
obligations.
(3) Commercial paper or other short-term instruments rated Prime-1 by
Moody's Investors Service, Inc. ("Moody's") or A-1 by Standard & Poor's
Ratings Group ("Standard & Poor's") or, if not rated, determined to be of
comparable quality by the Investment Adviser, such as unrated commercial
paper issued by corporations having an outstanding unsecured debt issue
currently rated Aaa by Moody's or AAA by Standard & Poor's. For a description
of these ratings see the Appendix to this Prospectus.
(4) Obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. These include issues of the U.S. Treasury, such as bills,
certificates of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an Act of Congress. Some
of the latter category of obligations are supported by the "full faith and
credit" of the United States, others are supported by the right of the issuer
to borrow from the U.S. Treasury, and still others are supported only by the
credit of the agency or instrumentality. Examples of each of the three types
of obligations described in the preceding sentence are (i) obligations
guaranteed by the Export-Import Bank of the United States, (ii) obligations
of the Federal Home Loan Mortgage Corporation, and (iii) obligations of the
Student Loan Marketing Association, respectively. Issues of the U.S. Treasury
in which the Portfolio may invest include Treasury Receipts, which are
unmatured interest coupons of U.S. Treasury bonds and notes which have been
separated and resold in a custodial receipt program administered by the U.S.
Treasury.
(5) Repurchase agreements, providing for resale within 397 days or less,
covering obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities which may have maturities in
5
<PAGE>
excess of 397 days. A repurchase agreement arises when a buyer purchases an
obligation and simultaneously agrees with the vendor to resell the obligation
to the vendor at an agreed-upon price and time, which is usually not more
than seven days from the date of purchase. The resale price of a repurchase
agreement is greater than the purchase price, reflecting an agreed-upon
market rate which is effective for the period of time the buyer's funds are
invested in the obligation and which is not related to the coupon rate on the
purchased obligation. Obligations serving as collateral for each repurchase
agreement are delivered to Cash Reserves Portfolio's custodian either
physically or in book entry form and the collateral is marked to market daily
to ensure that each repurchase agreement is fully collateralized at all
times. A buyer of a repurchase agreement runs a risk of loss if, at the time
of default by the vendor, the value of the collateral securing the agreement
is less than the price paid for the repurchase agreement. If the vendor of a
repurchase agreement becomes bankrupt, Cash Reserves Portfolio might be
delayed, or may incur costs or possible losses of principal and income, in
selling the collateral. Cash Reserves Portfolio may enter into repurchase
agreements only with a vendor which is a member bank of the Federal Reserve
System or which is a "primary dealer" (as designated by the Federal Reserve
Bank of New York) in U.S. Government obligations. The restrictions and
procedures described above which govern Cash Reserves Portfolio's investment
in repurchase obligations are designed to minimize Cash Reserves Portfolio's
risk of losses in making those investments.
(6) Asset-backed securities, which may include securities such as
Certificates for Automobile Receivables ("CARS") and Credit Card Receivable
Securities ("CARDS"), as well as other asset-backed securities that may be
developed in the future. CARS represent fractional interests in pools of car
installment loans, and CARDS represent fractional interests in pools of
revolving credit card receivables. The rate of return on asset-backed
securities may be affected by early prepayment of principal on the underlying
loans or receivables. Prepayment rates vary widely and may be affected by
changes in market interest rates. It is not possible to accurately predict
the average life of a particular pool of loans or receivables. Reinvestment
of principal may occur at higher or lower rates than the original yield.
Therefore, the actual maturity and realized yield on asset-backed securities
will vary based upon the prepayment experience of the underlying pool of
loans or receivables.
Cash Reserves Portfolio does not purchase securities which it believes, at
the time of purchase, will be subject to exchange controls or non-U.S.
withholding taxes; however, there can be no assurance that such laws may not
become applicable to certain of Cash Reserves Portfolio's investments. In the
event exchange controls or non-U.S. withholding taxes are imposed with
respect to any of Cash Reserves Portfolio's investments, the effect may be to
reduce the income received by Cash Reserves Portfolio on such investments.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements and in order to generate additional income, Cash Reserves
Portfolio may lend its portfolio securities to broker-dealers and other
institutional borrowers. Such loans must be callable at any time and
continuously secured by collateral (cash or U.S. Government securities) in an
amount not less than the market value, determined daily, of the securities
loaned. It is intended that the value of securities loaned by Cash Reserves
Portfolio would not exceed 33 1/3% of the Portfolio's assets.
In the event of the bankruptcy of the other party to a securities loan,
Cash Reserves Portfolio could experience delays in recovering the securities
loaned. To the extent that, in the meantime, the value of the securities
loaned has increased, Cash Reserves Portfolio could experience a loss.
Private Placements and Illiquid Investments. The Portfolio may invest up
to 10% of its net assets in securities for which there is no readily
available market. These illiquid securities may include privately
6
<PAGE>
placed restricted securities for which no institutional market exists. The
absence of a trading market can make it difficult to ascertain a market value
for illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for the Portfolio to sell them promptly at an acceptable price.
* * *
The Statement of Additional Information includes further discussion of
investment policies and a listing of investment restrictions which govern the
investment activities of the Fund and Portfolio. Certain of these investment
restrictions may not be changed, in the case of the Fund, without the
approval of the Fund's shareholders or, in the case of the Portfolio, without
the approval of the investors in the Portfolio. If a percentage restriction
(other than a restriction as to borrowing) or a rating restriction on
investment or utilization of assets is adhered to at the time an investment
is made or assets are so utilized, a later change in percentage resulting
from changes in the value of the securities held by a Portfolio or a later
change in the rating of a security held by a Portfolio is not considered a
violation of the policy or restriction.
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R) STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Trust seeks to achieve the investment objective of
the Fund by investing all of the investable assets of the Fund in the
Portfolio, a separate registered investment company with the same investment
objective. In addition to selling a beneficial interest to the Fund, the
Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to issue their shares at the same public offering price as
the Fund due to variations in sales commissions and other operating expenses.
Investors in the Fund should be aware that these differences may result in
differences in returns experienced by investors in the different funds that
invest in the Portfolio. Such differences in returns are also present in
other mutual fund structures. Information concerning other holders of
interests in the Portfolio is available from SBDS at (617) 423-0800. The Hub
and Spoke investment fund structure has been developed relatively recently,
so shareholders should carefully consider this investment approach.
The investment objective of the Fund may be changed without the approval
of the Fund's shareholders, but not without written notice thereof to the
Fund's shareholders thirty days prior to implementing the change. If there
were a change in the Fund's investment objective, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then- current financial position and needs. The investment objective of the
Portfolio may be changed without the approval of the investors in the
Portfolio, but not without written notice thereof to the investors in the
Portfolio (and notice by the Trust to Fund shareholders) thirty days prior to
implementing the change. There can, of course, be no assurance that the
investment objective of either the Fund or the Portfolio will be achieved.
See "Investment Restrictions" in the Statement of Additional Information for
a description of the fundamental investment policies and restrictions of the
Portfolio that cannot be changed without approval by the holders of a
"majority of the outstanding voting securities" (as defined in the 1940 Act)
of the Portfolio. Except as stated otherwise, all investment objectives,
policies and restrictions described herein and in the Statement of Additional
Information are non-fundamental.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining
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<PAGE>
funds may experience higher pro rata operating expenses, thereby producing
lower returns. Additionally, the Portfolio may become less diverse, resulting
in increased portfolio risk. (However, this possibility also exists for
traditionally structured funds which have large or institutional investors.)
Also, funds with a greater pro rata ownership in the Portfolio could have
effective voting control of the operations of the Portfolio. Subject to
exceptions that are not inconsistent with applicable rules or policies of the
Securities and Exchange Commission, whenever the Trust is requested to vote
on matters pertaining to the Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same
proportion as the votes of the Fund's shareholders. Fund shareholders who do
not vote will not affect the Trust's votes at the Portfolio meeting. The
percentage of the Trust's votes representing Fund shareholders not voting
will be voted by the trustees or officers of the Trust in the same proportion
as Fund shareholders who do, in fact, vote. Certain changes in the
Portfolio's investment objective, policies or restrictions may require the
Trust to withdraw the Fund's investment in the Portfolio. Any such withdrawal
could result in a distribution in kind of portfolio securities (as opposed to
a cash distribution from the Portfolio). If securities are distributed, the
Fund could incur brokerage, tax or other charges in converting the securities
to cash. In addition, the distribution in kind may result in a less
diversified portfolio of investments or adversely affect the liquidity of the
Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Trust may withdraw the investment of the Fund from the Portfolio at
any time, if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including
the investment of all the assets of the Fund in another pooled investment
entity having the same investment objective as the Fund or the retaining of
an investment adviser to manage the Fund's assets in accordance with the
investment policies described above with respect to the Portfolio.
For descriptions of the investment objective, policies and restrictions of
the Portfolio, see "Investment Objective and Policies" herein and in the
Statement of Additional Information. For descriptions of the management of
the Portfolio, see "Management of the Trust and the Portfolio" herein and in
the Statement of Additional Information. For description of the expenses of
the Portfolio, see "Management of the Trust and the Portfolio" below.
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 3 P.M. (Eastern time) on each
day the New York Stock Exchange is open for trading (a "Business Day").
Currently, the days on which the Fund is closed (other than weekends) are New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. 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 Shares of the Fund
outstanding at the time the determination is made.
The assets in the Portfolio are valued based upon the amortized cost
method. The Trust seeks to maintain a net asset value per Share of $1.00 for
the Fund, although there can be no assurance the net asset value will not
vary. See "Net Income, Dividends and Distributions" below.
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<PAGE>
HOW TO PURCHASE AND REDEEM SHARES
PURCHASE OF SHARES
Shares of the Fund may be purchased without a sales charge on any Business
Day at the net asset value next determined after an order is transmitted to
and accepted by the Distributor. Except as provided under "Investor Programs"
below, the minimum initial investment is $1,000. There is no minimum for
subsequent investments. Purchases will be effected on the same day provided
the order is received by 3 P.M. (Eastern time). The Distributor, Signature
Broker-Dealer Services, Inc. ("SBDS"), has established procedures for
purchasing Shares in order to accommodate different types of investors (see
"Purchase Procedures" below).
Shares of the Fund may be purchased only in those states where they may be
lawfully sold. The Trust reserves the right to cease offering Shares for sale
at any time and the Distributor and the Trust each reserve the right to
reject any order for the purchase of Shares.
PURCHASE PROCEDURES
Shares may be purchased directly only by institutional investors
("Institutional Investors"). Certain Institutional Investors (each a
"Shareholder Organization") may elect to hold of record Shares for their
customers ("Customers") and to record beneficial ownership of Shares on the
account statements provided to their Customers. In that case, it is each
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
sub-transfer agent, in accordance with the procedures agreed to by the
Shareholder Organization and the Distributor. Confirmations of all such
purchases and redemptions by Shareholder Organizations for the benefit of
their Customers will be sent by CGFSC to the particular Shareholder
Organization. In the 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 Fund, CGFSC will send confirmations of such
transactions and periodic account statements directly to the Customers.
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. Customers should contact their Shareholder Organization directly
for further information.
The Trust enters into shareholder servicing agreements with Shareholder
Organizations which agree to provide their Customers various shareholder
administrative services with respect to their Shares (hereinafter referred to
as "Service Organizations"). Shares in the Fund bear the expense of fees
payable to Service Organizations for such services. See "Management of the
Trust and the Portfolio -- Service Organizations."
PURCHASES BY WIRE
Investors may purchase Shares by wiring federal funds to CGFSC. Prior to
making an initial investment by wire, an investor must telephone CGFSC at
(809) 909-1989 (from overseas, please call (617) 557-1755) for instructions,
including a wire control number. Federal funds and registration instructions
should be wired through the Federal Reserve System to:
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The Chase Manhattan Bank, N.A.
ABA #021000021
Excelsior Funds
Credit DDA #910-2-733046
[Account Registration]
[Account Number]
[Wire Control Number] *See Above*
It is intended that the Fund and the Portfolio will be as fully invested
at all times as is reasonably practicable in order to enhance the yield on
their respective assets. Accordingly, in order to make investments which will
immediately generate income, the Fund must have federal funds available.
Shares purchased by federal funds wire will be effected at the net asset
value per share next determined after acceptance of the order. Orders for
Shares received and accepted no later than 3 P.M. (Eastern time) will be
entitled to dividends on that Business Day, provided the federal funds wire
has been received by the Fund's bank on that Business Day. Purchase orders
received and accepted after 3 P.M. (Eastern time) will be effected at the net
asset value next determined and will not receive the dividend declared that
day even if the Fund receives federal funds on that day.
Investors making initial investments by wire must promptly complete the
application accompanying this Prospectus and forward it to CGFSC. No account
application is required for subsequent purchases. Completed applications
should be directed to:
Excelsior Funds
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
The application may also be sent via facsimile. Please contact CGFSC at
(800) 909-1989 for complete instructions. Redemptions by investors will not
be processed until the completed application for purchase of Shares has been
received and accepted by CGFSC. Investors making subsequent investments by
wire should follow the above instructions.
PURCHASES BY TELEPHONE
For investors who have previously selected the telephone purchase option,
a purchase order may be placed by calling CGFSC at (800) 909-1989 (from
overseas, please call (617) 557-1755). The purchase by telephone will be
effected at the net asset value per Share next determined after acceptance of
the order. Orders for Shares properly received and accepted no later than 3
P.M. (Eastern time) will be entitled to dividends on that Business Day
provided that the Fund's bank has received federal funds on that Business
Day.
By establishing the telephone purchase option, the investor authorizes
CGFSC and the Distributor to act upon telephone instructions believed to be
genuine. Excelsior Funds, CGFSC and the Distributor will not be held liable
for any loss, liability, cost or expense for acting upon such instructions.
Accordingly, investors will bear the risk of loss. The Trust will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine, including, without limitation, recording telephonic instructions
and/or requiring the caller to provide some form of personal identification.
This service may be modified or terminated at any time. The Trust
currently does not charge a fee for this service, although some Shareholder
Organizations may charge their Customers additional fees. Customers should
contact their Shareholder Organization directly for further information.
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<PAGE>
PURCHASES BY MAIL
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
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.
Shares purchased by check will be effected at the net asset value next
determined after receipt and acceptance of the order by the Distributor. Such
Shares are entitled to earn dividends on that Business Day. Shares paid for
by check cannot be redeemed until the funds have been collected, which may
take up to fifteen days. Redemption delays may be avoided by purchasing
Shares by federal funds wire.
REDEMPTION PROCEDURES
Investors may redeem all or any portion of the Shares in their account at
the net asset value next determined after prior receipt in good form and
acceptance of an order for redemption. Proceeds from redemption orders
received and accepted by 3 P.M. (Eastern time) will normally be sent the next
Business Day; proceeds are sent in any event within five Business Days.
Shares redeemed will be entitled to dividends up to and including the
Business Day prior to the day of redemption.
It is necessary for investors to have on file appropriate documentation
authorizing redemptions by the institution or entity before a redemption
request is considered in proper form.
Customers of Shareholder Organizations holding Shares of record may redeem
all or part of their investments in the Fund in accordance with the
procedures governing their accounts at their Shareholder Organization. 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.
An investor redeeming Shares through a registered investment adviser or
certified financial planner may incur transaction charges in connection with
such redemptions. Such investors should contact their registered investment
adviser or certified financial planner for further information on transaction
fees.
Investors may redeem all or part of their Shares in accordance with any of
the procedures described below. These procedures only apply to Customers of
Shareholders Organizations for whom individual accounts have been established
with CGFSC. Customers whose individual accounts are maintained by Shareholder
Organizations must contact their Shareholder Organization directly to redeem
Shares.
If any portion of the Shares to be redeemed represents an investment made
by check, the Trust 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; such collection process
may
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<PAGE>
take up to fifteen days. An investor who anticipates the need for more
immediate access to its 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 purchase check is not collected, the
purchase will be cancelled and CGFSC will charge a fee of $25.00 to the
investor's account.
REDEMPTION BY WIRE OR TELEPHONE
Investors who maintain an account at CGFSC and have so indicated on their
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 investor's predesignated bank account at any
commercial bank in the United States. Investors may have their Shares
redeemed by wire by instructing CGFSC at (800) 909-1989 (from overseas,
please call (617) 557-1755). No charge is imposed by Excelsior Funds for
wiring redemption payments to investors, although Shareholder Organizations
may charge their Customers for wiring or crediting such redemption payments
to their accounts. Information relating to such redemption services and
charges, if any, is available to Customers directly from their Shareholder
Organizations.
In order to arrange for redemption by wire or telephone after an account
has been opened or to change the bank account designated to receive
redemption proceeds, an investor must send a written request to Excelsior
Funds at the address listed below under "Redemption by Mail." Such requests
must be signed by the investor, with signatures guaranteed (see "Redemption
by Mail" below for details regarding signature guarantees). Further
documentation may be requested.
CGFSC and the Distributor reserve the right to refuse a wire or telephone
redemption. Procedures for redeeming Shares by wire or telephone may be
modified or terminated at any time by the Trust or the Distributor. Excelsior
Funds, CGFSC and the Distributor will not be liable for any loss, liability,
cost or expense for acting upon telephone instructions believed to be
genuine. See "Purchases by Telephone" above.
REDEMPTION BY MAIL
Shares may be redeemed 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 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 for each registered owned by its authorized
officer exactly as the Shares are registered.
A redemption request for an amount in excess of $5,000, or for any amount
if the proceeds are to be sent elsewhere than the address of record, must be
accompanied by signature guarantees from any eligible guarantor institution
approved by CGFSC in accordance with its Standards, Procedures and Guidelines
for the Acceptance of Signature Guarantees ("Signature Guarantee
Guidelines"). Eligible guarantor institutions generally include banks,
broker-dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. All
eligible guarantor institutions must participate in the Securities Transfer
Agents Medallion Program ("STAMP") in
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<PAGE>
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) 909-1989 or at the address given above. CGFSC
may require additional supporting documents. A redemption request will not be
deemed to be properly received in good form until CGFSC receives all required
documents in proper form.
Questions with respect to the proper form for redemption requests should
be directed to CGFSC at (800) 909-1989 (from overseas, please call (617)
557-1755).
OTHER REDEMPTION INFORMATION
Except as described in "Investor Programs" below, investors may be
required to redeem Shares in the Fund after 60 days written notice if due to
investor redemptions the balance in the particular account with respect to
the Fund remains below $500. If a Customer has agreed with a particular
Shareholder Organization to maintain a minimum balance with respect to Shares
of the Fund and the balance in such account falls below that minimum, the
Customer may be required by the Shareholder Organization to redeem all or
part of its Shares to the extent necessary to maintain the required minimum
balance.
INVESTOR PROGRAMS
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged without payment of any exchange fee
for Institutional Shares of any investment portfolio of Excelsior
Institutional Trust at their respective net asset values, provided that such
other shares may legally be sold in the state of the investor's residence.
Excelsior Institutional Trust currently offers Institutional Shares in
nine investment portfolios as follows:
Equity Fund, a fund seeking long-term capital appreciation through
investments in companies believed to represent good long-term values not
currently recognized in the market prices of their securities;
Income Fund, a fund seeking to provide as high a level of current interest
income as is consistent with moderate risk of capital and maintenance of
liquidity through investments in a broad range of investment grade
securities;
Total Return Bond Fund, a fund seeking to maximize the total rate of
return consistent with moderate risk of capital and maintenance of liquidity
by investing principally in a broad range of investment grade fixed income
securities;
Bond Index Fund, a fund that seeks to provide investment results that
correspond to the investment performance of the Lehman Brothers Aggregate
Bond Index;
Balanced Fund, a fund that seeks to provide a high total return from a
diversified portfolio of equity and fixed income securities;
Equity Growth Fund, a fund seeking to provide a high level of capital
appreciation through investment in a diversified portfolio of common stocks
of primarily medium and large capitalization companies which are believed to
have potential for above-average growth in earnings and dividends;
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<PAGE>
International Equity Fund, a fund seeking to provide long-term capital
appreciation through investment in a diversified portfolio of marketable
foreign securities;
Optimum Growth Fund, a fund seeking superior, risk-adjusted total return
through investments in a diversified portfolio of equity securities whose
growth prospects, in the opinion of its investment adviser, appear to exceed
that of the overall market; and
Value Equity Fund, a fund seeking long-term capital appreciation through
investments in a diversified portfolio of equity securities whose market
value, in the opinion of its investment adviser, appears to be undervalued
relative to the marketplace.
An exchange of shares is treated for federal and state income tax purposes
as a redemption (sale) of shares given in exchange by the shareholder, and
the exchanging shareholder may, therefore, realize a taxable gain or loss in
connection with the exchange. Shareholders exchanging shares of the Fund for
Institutional Shares of an investment portfolio of Excelsior Institutional
Trust should carefully review the prospectus for such shares prior to making
an exchange.
The exchange option may be changed, modified or terminated at any time.
The Trust currently does not charge a fee for this service, although some
Shareholder Organizations may charge their customers fees. Customers should
contact their Shareholder Organizations directly for further information.
RETIREMENT PLANS
Shares are available for purchase by investors in connection with the
following tax-deferred prototype retirement plans offered by U.S. Trust:
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.
Institutional Investors or Customers of Shareholder Organizations
investing in Shares pursuant to a retirement plan are not subject to the
minimum investment and forced redemption provisions described above. Detailed
information concerning eligibility, service fees and other matters related to
these plans is available from the Trust by calling CGFSC at (800) 909-1989
(from overseas, please call (617) 557-1755). Customers of Shareholder
Organizations may purchase Shares pursuant to retirement plans if such plans
are offered by their Shareholder Organizations.
UNIT INVESTMENT TRUST AUTOMATIC DIVIDEND REINVESTMENT PLANS
Shares are available for purchase by unitholders in unit investment trusts
sponsored by certain broker-dealers through automatic reinvestment of the
dividends paid by such trusts.
Institutional Investors or Customers of Shareholder Organizations
purchasing Shares pursuant to these plans are not subject to the minimum
investment and forced redemption provisions. Information concerning purchases
of Shares through the automatic reinvestment of such dividends is available
from CGFSC by calling (800) 909-1989 (from overseas, please call (617)
557-1755).
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<PAGE>
AUTOMATIC INVESTMENT PROGRAM
The Automatic Investment Program permits Institutional Investors or
Customers of Shareholder Organizations to purchase Shares (minimum of $100
per transaction) at regular intervals selected by the investor. Provided the
purchaser's financial institution allows automatic withdrawals, Shares are
purchased by transferring funds from a checking, bank money market or NOW
account designated by the purchaser. At the purchaser'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 its participation in this Program (or a
Shareholder Organization may cancel the participation of a Customer) or
change the amount of purchase at any time, by mailing written notification to
CGFSC, P.O. Box 2798, Boston, Massachusetts 02208-2798, and notification will
be effective three Business Days following receipt. The Trust may modify or
terminate this privilege at any time or charge a service fee, although no
such fee currently is contemplated.
NET INCOME, DIVIDENDS AND DISTRIBUTIONS
The net income of the Portfolio is determined each Business Day (and on
such other days as are deemed necessary in order to comply with Rule 22c-1
under the 1940 Act). This determination is made once during each such day as
of 3 P.M. (Eastern time). All the net income of the Portfolio, as defined
below, so determined is allocated pro rata among the Fund and the other
investors in the Portfolio at the time of such determination.
For this purpose the net income of the Portfolio (from the time of the
immediately preceding determination thereof) consists of (i) all income
accrued, less the amortization of any premium, on the assets of the
Portfolio, less (ii) all actual and accrued expenses of the Portfolio
determined in accordance with generally accepted accounting principles.
Interest income includes discount earned (including both original issue and
market discount) accrued ratably to the date of maturity and any net realized
gains or losses on the assets of the Portfolio. Securities are valued at
amortized cost, which the trustees of the Portfolio have determined in good
faith constitutes fair value for the purpose of complying with the 1940 Act.
This method provides certainty in valuation, but may result in periods during
which the stated value of a security held by the Portfolio is higher or lower
than the price the Portfolio would receive if the security were sold. This
valuation method will continue to be used until such time as the trustees of
the Portfolio determine that it does not constitute fair value for such
purposes.
The net income of the Fund is determined at the same time and on the same
days as the net income of the Portfolio is determined. Substantially all of
the net income of the Fund, as defined below, so determined is declared in
Shares as a dividend to shareholders of record at the time of such
determination. Shares begin accruing dividends on the Business Day they are
purchased. Dividends are distributed monthly on or about the last Business
Day of each month. Unless a shareholder elects to receive dividends in cash,
dividends are distributed in the form of additional full and fractional
Shares at the rate of one Share for each one dollar of dividends.
For this purpose the net income of the Fund (from the time of the
immediately preceding determination thereof) consists of (i) all income
accrued on the assets of the Fund (i.e., the Fund's pro rata share of the net
income of the Portfolio), less (ii) all actual and accrued expenses of the
Fund determined in accordance with generally accepted accounting principles.
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<PAGE>
Since substantially all of the net income of the Fund is declared as a
dividend each time net income is determined, the net asset value per Share of
the Fund (i.e., the value of the net assets of the Fund divided by the number
of Shares of the Fund outstanding) is expected to remain at $1.00 per Share
immediately after each such determination and dividend declaration. Any
increase in the value of a shareholder's investment in the Fund, representing
the reinvestment of dividends, is reflected by an increase in the number of
Shares of the Fund in its account.
It is expected that the Fund will have a positive net income at the time
of each determination thereof. If for any reason the net income of the Fund
is a negative amount, which could occur, for instance, upon default by an
issuer of a security held by the Portfolio, the Trust would first offset the
negative amount with respect to each shareholder account from the dividends
declared during the month with respect to each such account. If and to the
extent that such negative amount exceeds such declared dividends at the end
of the month, the Trust would reduce the number of outstanding Shares of the
Fund by treating each shareholder as having contributed to the capital of the
Fund that number of full and fractional Shares in the account of such
shareholder which represents such shareholder's proportion of the amount of
such excess. Each shareholder would be deemed to have agreed to such
contribution in these circumstances by its investment in the Fund. Thus, the
net asset value per Share of the Fund will, to the extent possible, be
maintained at a constant $1.00.
TAXES
Each year, the Trust intends to qualify the Fund as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Because the Fund intends to distribute all of its net investment
income and net realized capital gains to its shareholders in accordance with
the timing requirements imposed by the Code, it is not expected that the Fund
will be required to pay any federal income or excise taxes, although the
Fund's non-U.S. source income may be subject to non-U.S. withholding taxes.
If the Fund fails to qualify as a "regulated investment company" in any year,
the Fund would incur a regular corporate federal income tax upon its taxable
income and the Fund's distributions would continue to be taxable as ordinary
dividend income to shareholders. The Portfolio believes that it will not be
required to pay any federal income or excise taxes.
Shareholders of the Fund normally will have to pay federal income taxes,
and any state or local taxes, on the dividends and realized net capital gains
distributions, if any, they receive from the Fund. Dividends from income and
any distributions from net short-term capital gains are taxable to
shareholders as ordinary income for federal income tax purposes.
Distributions of net capital gains, if any, are taxable to shareholders as
long-term capital gains without regard to the length of time the shareholders
have held their shares. Dividends declared in October, November or December
of any year payable to shareholders of record on a specified date in such
month 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. Dividends and capital gain
distributions, if any, paid to shareholders will be treated in the same
manner for federal income tax purposes whether received in cash or reinvested
in additional shares of the Fund. After the end of each calendar year, each
shareholder will receive information for tax purposes on the dividends and
any realized net capital gains distributions received during that calendar
year including the portion taxable as ordinary income and the portion taxable
as capital gain.
The Trust may be required to withhold federal income tax at the rate of
31% from all taxable distributions payable to shareholders who do not provide
the Trust with their correct taxpayer identifica-
16
<PAGE>
tion number or make required certifications, or who have been notified by the
Internal Revenue Service that they are subject to backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against the shareholder's federal income tax liability.
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 situation.
Foreign Shareholders. The Funds will withhold tax payments at a rate of
30% (or any lower applicable tax treaty rate) on taxable dividends and other
payments subject to withholding taxes that are made to persons who are not
citizens or residents of the United States. Distributions received from the
Funds by non-U.S. persons also may be subject to tax under the laws of their
own jurisdiction.
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
The Trust has retained the services of SBDS as administrator. Cash
Reserves Portfolio has retained the services of Signature Financial Group
(Cayman), Ltd. as administrator. Citibank is the investment adviser for the
Portfolio. The Trust seeks to achieve the investment objectives of the Fund
by investing all of the investable assets of the Fund in the Portfolio.
Therefore, the Trust relies primarily on the investment advice which Citibank
provides to the Portfolio. The Trust has retained the services of U.S. Trust
at no additional fee to perform certain investment management functions. For
biographical information relating to each of the trustees and officers of the
Trust and the Portfolios, see "Management of the Trust and the Portfolio" in
the Statement of Additional Information.
INVESTMENT ADVISER
The Investment Adviser manages the assets of the Portfolio pursuant to an
Investment Advisory Agreement with the Portfolio. Subject to such policies as
the trustees of the Portfolio may determine, the Investment Adviser manages
the Portfolio, makes decisions with respect to and places orders for all
purchases and sales of portfolio securities, and maintains records relating
to such purchases and sales. The Investment Adviser maintains its principal
offices at 153 East 53rd Street, New York, New York 10043, and is a wholly-
owned subsidiary of Citicorp, a registered bank holding company. The
Investment Adviser offers a wide range of banking and investment services to
customers, and together with its affiliates currently manages more than $83
billion in assets.
The Portfolio paid advisory fees to the Investment Adviser at the annual
rate of 0.06% of the Portfolio's average daily net assets, and the Investment
Adviser voluntary waived fees at the annual rate of __% of the Portfolio's
average daily net assets, during the fiscal year ended August 31, 1996.
SUPPLEMENTAL INVESTMENT MANAGEMENT SERVICES
The Fund receives supplemental investment management services from U.S.
Trust pursuant to an investment advisory agreement between the Trust and U.S.
Trust (the "Supplemental Advisory Agreement"). U.S. Trust receives no
additional fee or other compensation for its services under the Supplemental
Advisory Agreement. U.S. Trust makes no investment decisions with respect to
the Fund or the Portfolio. Under the Supplemental Advisory Agreement, U.S.
Trust reviews certain investment management and custody processes.
For its services under the Investment Advisory Agreement, the Investment
Adviser is entitled to receive investment advisory fees, which are accrued
daily and paid monthly, of 0.15% of the Portfolio's average daily net assets
on an annualized basis for the Portfolio's then-current fiscal year. The
Investment Adviser may waiver portions of this fee.
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<PAGE>
U.S. Trust is a state-chartered bank and trust company which 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, and
personal and corporate banking. U.S. Trust is a member bank of the Federal
Reserve System and the Federal Deposit Insurance Corporation and is one of
the twelve members of the New York Clearing House Association. On _______,
1996, U.S. Trust's Asset Management Group had approximately $_____ billion in
assets under management. U.S. Trust, which has its principal offices at 114
W. 47th Street, New York, New York 10036-1532, is a subsidiary of U.S. Trust
Corporation, a registered bank holding company.
U.S. Trust also serves an investment adviser to Excelsior Funds, Inc. and
Excelsior Tax-Exempt Funds, Inc., which are registered investment companies
consisting of the following funds: Equity Fund; Income and Growth Fund;
Long-Term Supply of Energy Fund; Productivity Enhancers Fund;
Environmentally-Related Products and Services Fund; Aging of America Fund;
Communication and Entertainment Fund; Business and Industrial Restructuring
Fund; Global Competitors Fund; Early Life Cycle Fund; International Fund;
Emerging Americas Fund; Pan European Fund; Pacific/Asia Fund; Money Fund;
Government Money Fund; Treasury Money Fund; Short-Term Government Securities
Fund; Intermediate-Term Managed Income Fund; Managed Income Fund; Tax-Exempt
Money Fund; Short-Term Tax-Exempt Securities Fund; New York Intermediate-Term
Tax-Exempt Fund; California Tax-Exempt Income Fund; Intermediate-Term
Tax-Exempt Fund and Long-Term Tax-Exempt Fund. U.S. Trust also serves as
investment adviser to the Excelsior Institutional Trust family of funds.
ADMINISTRATORS
The Portfolio has an Administrative Services Plan which provides that the
Portfolio may obtain the services of an administrator, a transfer agent, a
custodian and a fund accountant, and may enter into agreements providing for
the payment of fees for such services. Under the Portfolio's Administrative
Services Plan, fees paid to the Portfolio's Administrator may not exceed
0.05% of the Portfolio's average daily net assets on an annualized basis for
the Portfolio's then-current fiscal year.
Pursuant to Administrative Services Agreements, SBDS and Signature
Financial Group (Cayman), Ltd. (together with SBDS, the "Administrators")
provide the Trust and Cash Reserves Portfolio, respectively, with general
office facilities and supervise the overall administration of the Trust and
the Portfolio, respectively, including, among other responsibilities, the
negotiation of contracts and fees with, and the monitoring of performance and
billings of, the independent contractors and agents of the Trust and the
Portfolio; the preparation and filing of all documents required for
compliance by the Trust and the Portfolio with applicable laws and
regulations; the preparation and distribution of materials in connection with
meetings of trustees and investors; and arranging for the maintenance of
books and records of the Trust and the Portfolio. The Administrators provide
persons satisfactory to the Board of Trustees of the Trust and the Portfolio
to serve as trustees and officers of the Trust and the Portfolio. Such
officers and trustees of the Trust or the Portfolio may be directors,
officers or employees of the Administrators or their affiliates. For its
services and facilities, SBDS receives from the Trust a fee accrued daily and
paid monthly at an annual rate equal to 0.01% of the average daily net assets
of the Fund, with an annual minimum payment of $20,000, and Signature
Financial Group (Cayman), Ltd. receives from Cash Reserves Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.05% of the
aggregate average daily net assets of the Portfolio. However, the
Administrator for the Portfolio has voluntarily agreed to waive the fee
payable from the Portfolio on a month-to-month basis, and the Administrator
for the Fund has voluntarily agreed to reimburse the Fund for certain
expenses. SBDS is a registered broker-dealer. Each of the Administrators is a
subsidiary of Signature Financial Group, Inc. For the year ended August 31,
1996, the Fund paid SBDS administration fees at the annual rate of 0.01% of
the Fund's average daily net assets, and Signature Financial Group (Cayman),
Ltd. waived all administration fees with respect to the Portfolio.
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<PAGE>
SUB-ADMINISTRATOR
Pursuant to a Sub-Administrative Services Agreement, Citibank performs
such sub-administrative duties for the Portfolio as are from time to time
agreed upon by Citibank and Signature Financial Group (Cayman), Ltd.
Citibank's sub-administrative duties may include providing equipment and
clerical personnel necessary for maintaining the organization of the
Portfolio, participation in the preparation of documents required for
compliance by the Portfolio with applicable laws and regulations, preparation
of certain documents in connection with meetings of Trustees of, and
investors in, the Portfolio, and other functions which would otherwise be
performed by Signature Financial Group (Cayman), Ltd. as set forth above. For
its services as sub-administrator, Citibank receives such compensation as
from time to time is agreed upon by Signature Financial Group (Cayman), Ltd.
and Citibank, but not more than 0.05% per annum of the average daily net
assets of the Portfolio. All such compensation is paid by Signature Financial
Group (Cayman), Ltd. For the year ended August 31, 1996, Citibank received
sub- administration fees at the annual rate of % of the Portfolio's average
daily net assets.
SERVICE ORGANIZATIONS
The Trust enters into an agreement ("Servicing Agreement") with each
Service Organization requiring it to provide administrative support services
to its Customers beneficially owning Shares. As a consideration for the
administrative services provided to Customers, the Fund will pay the Service
Organization an administrative service fee at an annual rate of up to .40% of
the average daily net asset value of its Shares held by the Service
Organization's Customers. Such services 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. Under the terms of the Servicing
Agreement, Service Organizations will be required to provide to Customers a
schedule of any fees that they may charge in connection with a Customer's
investment.
CUSTODIANS AND TRANSFER AGENTS
U.S. Trust serves as custodian of the Fund's assets. Communications to the
custodian should be directed to United States Trust Company of New York, 114
West 47th Street, New York, NY 10036. CGFSC provides transfer agency,
dividend disbursement and registrar services to the Fund. CGFSC has its
principal offices at 73 Tremont Street, Boston, MA 02108-3913.
Cash Reserves Portfolio has entered into a Transfer Agency and Service
Agreement with State Street Bank & Trust Company ("State Street"), pursuant
to which State Street (or its affiliate, State Street Canada, Inc.) acts as
transfer agent for Cash Reserves Portfolio. The transfer agent maintains an
account for each investor in the Portfolio and performs other transfer agency
functions. Pursuant to a Custodian Contract, State Street also acts as
custodian of the Portfolio's assets. See "Management of the Trust and the
Portfolio -- Transfer Agents and Custodians" in the Statement of Additional
Information.
DISTRIBUTOR
Pursuant to a Distribution Agreement, SBDS acts as principal underwriter
for the Shares. SBDS and its affiliated entities serve as underwriters and
administrators to other mutual funds. SBDS receives no compensation for its
services under the Distribution Agreement.
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<PAGE>
EXPENSES
The respective expenses of the Trust and the Portfolio include the
compensation of their respective trustees who are not affiliated with the
Investment Adviser or the Administrators; governmental fees; interest
charges; taxes; fees and expenses of independent auditors, of legal counsel
and of any transfer agent, custodian, registrar or dividend disbursing agent
of the Trust or the Portfolio; insurance premiums; and expenses of
calculating the net asset value of, and the net income on, interests in the
Portfolio and Shares of the Fund.
Expenses of the Trust also include all fees under its Administrative
Services Agreement; expenses of distributing and redeeming shares and
servicing shareholder accounts; expenses of preparing, printing and mailing
prospectuses, reports, notices, proxy statements and reports to shareholders
and to governmental officers and commissions; expenses of shareholder and
trustee meetings; expenses relating to the issuance, registration and
qualification of shares of the Fund and the preparation, printing and mailing
of prospectuses for such purposes; and membership dues in the Investment
Company Institute allocable to the Trust.
Expenses of the Portfolio also include all fees under the Portfolio's
Administrative Services Agreement; the expenses connected with the execution,
recording and settlement of security transactions; fees and expenses of the
Portfolio's custodian for all services to the Portfolio, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
governmental officers and commissions; expenses of meetings of investors and
trustees; and the advisory fees payable to the Investment Adviser under the
Advisory Agreement.
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. U.S. Trust, Citibank 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 U.S. Trust, Citibank or other Shareholder
Organizations in connection with purchases of Fund Shares, U.S. Trust,
Citibank 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 SHARES, VOTING RIGHTS AND LIABILITIES
The Trust Instrument of the Trust permits its trustees to issue an
unlimited number of full and fractional shares of beneficial interest (par
value $0.00001 per share) and to divide or combine the
20
<PAGE>
shares into a greater or lesser number of shares without thereby changing the
proportionate beneficial interests in the Fund. The Trust reserves the right
to create and issue any number of series, in which case investments in each
series would participate equally in the earnings, dividends and assets of the
particular series. Currently, the Trust has one active series: Excelsior
Institutional Money Fund.
Each Share of the Fund represents an interest in the Fund that is
proportionate with the interest represented by each other Share. Shares have
no preference, preemptive, conversion or similar rights. Shares are fully
paid and nonassessable when issued, except as set forth below. Shareholders
are entitled to one vote for each Share held on matters on which they are
entitled to vote. The Trust is not required to and has no current intention
to hold annual meetings of shareholders, although the Trust will hold special
meetings of shareholders when in the judgment of the Board of Trustees of the
Trust it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have the right to remove one or more trustees of the Trust at a
shareholders meeting by vote of two-thirds of the outstanding shares of the
Trust. Shareholders also have the right to remove one or more Trustees of the
Trust without a meeting by a declaration in writing by a specified number of
shareholders. Upon liquidation or dissolution of the Fund, shareholders of
the Fund would be entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders.
Excelsior Funds is a business trust organized under the laws of the State
of Delaware. Under Delaware law, shareholders of Delaware business trusts are
entitled to the same limitation on personal liability extended to
shareholders of private for-profit corporations organized under the General
Corporation Law of the State of Delaware; the courts of other states may not
apply Delaware law, however, and shareholders may, under certain
circumstances, be held personally liable for the obligations of the Trust.
The Trust Instrument contains an express disclaimer of shareholder liability
for acts or obligations of the Trust and provides for indemnification and
reimbursement of expenses out of Fund property for any shareholder held
personally liable for the obligations of the Fund solely by reason of his
being or having been a shareholder. The Trust Instrument also provides for
the maintenance, by or on behalf of the Trust and the Fund, of appropriate
insurance (for example, fidelity bond and errors and omissions insurance) for
the protection of the Trust and the Fund, their shareholders, trustees,
officers, employees and agents, covering possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss as a result of
shareholder liability is limited to circumstances in which Delaware law did
not apply, inadequate insurance existed and the Fund itself was unable to
meet its obligations.
Shareholders of all series of the Trust will vote together to elect
trustees of the Trust and for certain other matters. Under certain
circumstances, the shareholders of one or more series of the Trust could
control the outcome of these votes.
The Portfolio is organized as a trust under the laws of the State of New
York. The Portfolio's Declaration of Trust provides that the Fund and other
entities investing in the Portfolio (e.g., other investment companies,
insurance company separate accounts and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, it is not
expected that the liabilities of the Portfolio would ever exceed its assets.
For more information regarding the trustees of the Trust and the Portfolio,
see "Management of the Trust and the Portfolio" in the Statement of
Additional Information.
21
<PAGE>
YIELD INFORMATION
From time to time, in advertisements or in reports to shareholders, the
yield of the Fund may be quoted and compared to those of other mutual funds
with similar investment objectives and to relevant indices or to rankings
prepared by independent services or other financial or industry publications
that monitor the performance of mutual funds. For example, the yield of the
Fund may be compared to the applicable averages compiled by Donaghue's Money
Fund Report, a widely recognized independent publication that monitors the
performance of money market funds. The yield of the Fund may also be compared
to the average yields reported by the Bank Rate Monitor for money market
deposit accounts offered by the 50 leading banks and thrift institutions in
the top five standard metropolitan statistical areas.
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 yield of the Fund.
The Fund may advertise a 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
fifty-two week period, and is then shown as a percentage of the investment.
The Fund may also advertise its "effective yield," which is calculated
similarly except that, when annualized, income is assumed to be reinvested,
thereby making the effective yield slightly higher because of the compounding
effect of the assumed reinvestment. See "Yield Information" in the Statement
of Additional Information.
Yields will fluctuate and any quotation of yield should not be considered
as representative of the future performance of the Fund. 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
performance.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants.
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APPENDIX - DESCRIPTION OF RATINGS
DESCRIPTION OF THE HIGHEST COMMERCIAL PAPER RATINGS
A commercial paper rating by Moody's Investors Service, Inc. ("Moody's")
is an opinion of the ability of issuers to repay punctually promissory
obligations not having an original maturity in excess of nine months. Prime-1
is the highest commercial paper rating employed by Moody's. Issuers rated
Prime-1 (or related supporting institutions) have a superior capacity for
repayment of short-term promissory obligations. Prime-1 repayment capacity
will normally be evidenced by the following characteristics. (1) leading
market positions in well established industries; (2) high rates of return on
funds employed; (3) conservative capitalization structures with moderate
reliance on debt and ample asset protection; (4) broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
(5) well established access to a range of financial markets and assured
sources of alternate liquidity.
A commercial paper rating by Standard & Poor's Ratings Group ("Standard &
Poor's") is a current assessment of the likelihood of timely payment of debt
considered short-term in the relevant market. A-1 is the highest commercial
paper rating employed by Standard & Poor's. Issues assigned an "A" rating are
regarded as having the greatest capacity for timely payment, and an issue
designated with an A-1 rating is regarded as having a strong degree of safety
with regard to timely payment. Those issues determined to possess extremely
strong safety characteristics are rated A-1+.
DESCRIPTION OF THE HIGHEST CORPORATE BOND RATINGS
Bonds rated Aaa by Moody's are judged by Moody's to be of the best quality
by all standards. Together with bonds rated Aa (Moody's second highest
rating) they comprise what are generally known as high-grade bonds.
Debt rated AAA by Standard & Poor's represents the highest rating assigned
by Standard & Poor's to be the highest grade obligation and to have an
extremely strong capacity to pay interest and repay principal.
A-23
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TABLE OF CONTENTS
Page
----
SUMMARY OF EXPENSES .................... 1
FINANCIAL HIGHLIGHTS ................... 2
INVESTMENT OBJECTIVE AND POLICIES ...... 3
SPECIAL INFORMATION CONCERNING HUB AND
SPOKE(R) STRUCTURE .................... 7
PRICING OF SHARES ...................... 8
HOW TO PURCHASE AND REDEEM SHARES ...... 9
INVESTOR PROGRAMS ...................... 13
NET INCOME, DIVIDENDS AND DISTRIBUTIONS 15
TAXES .................................. 16
MANAGEMENT OF THE TRUST AND THE
PORTFOLIO ............................. 17
DESCRIPTION OF SHARES, VOTING RIGHTS AND
LIABILITIES ........................... 20
YIELD INFORMATION ...................... 22
MISCELLANEOUS .......................... 22
APPENDIX - DESCRIPTION OF RATINGS ...... A-1
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in Excelsior Funds'
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 Funds or its Distributor. This Prospectus does not
constitute an offer by Excelsior Funds or its Distributor in any jurisdiction
in which, or to any person to whom, such offer may not lawfully be made.
EIMFP__97
<PAGE>
EXCELSIOR FUNDS
INSTITUTIONAL
MONEY FUND
PROSPECTUS
JANUARY 1, 1997
24
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 1997
Excelsior Institutional Money Fund
Excelsior Institutional Money Fund (the "Fund") is a series of
Excelsior Funds (the "Trust"). This Statement of Additional Information
describes the Fund only and no other series of the Trust.
Table of Contents Page
- ----------------- ----
The Trust.................................................. 3
Investment Objective, Policies and Restrictions............ 3
Securities Transactions.................................... 14
Yield Information.......................................... 15
Determination of Net Asset Value; Valuation of
Securities; Redemption in Kind........................... 16
Additional Purchase and Redemption Information............. 18
Management of the Trust and the Portfolio.................. 19
Independent Accountants.................................... 32
Taxation................................................... 32
Description of the Trust; Fund Shares...................... 35
Miscellaneous.............................................. 37
Financial Statements....................................... 37
Excelsior Funds
6 St. James Avenue, Boston, Massachusetts 02116
(617) 423-0800
This Statement of Additional Information sets forth information which
may be of interest to investors but which is not necessarily included in the
Fund's Prospectus, dated January 1, 1997 (the "Prospectus"), as the same may be
amended from time to time. This Statement of Additional Information should be
read only in conjunction with the Prospectus, a copy of which may be obtained by
an investor without charge by contacting the Fund's Distributor at the address
and telephone number shown above. Terms used but not defined herein, which are
defined in the Prospectus, are used herein as defined in the Prospectus.
SHARES OF THE FUND ("SHARES") ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK 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 BE ABLE TO DO SO ON A CONTINUING BASIS. INVESTMENT IN
THE FUND INVOLVES INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus.
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<PAGE>
THE TRUST
The Trust is an open-end diversified management investment company
which was organized as a business trust under the laws of the State of Delaware
on October 25, 1993. Shares of the Trust have been divided into separate series.
This Statement of Additional Information describes the Excelsior Institutional
Money Fund (the "Fund" or "Institutional Money Fund"). As of the date hereof,
there are no other active series of the Trust, although new series may be added
from time to time.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The investment objective of the Institutional Money Fund is to provide
shareholders with liquidity and as high a level of current income as is
consistent with the preservation of capital. The Trust seeks to achieve the
investment objective of the Institutional Money Fund by investing all the
investable assets of the Fund in Cash Reserves Portfolio, a diversified open-end
management investment company with the same investment objective as the
Institutional Money Fund. Cash Reserves Portfolio seeks to achieve this
investment objective by investing in U.S. dollar-denominated money market
obligations with maturities of 397 days or less issued by U.S. and non-U.S.
issuers.
Citibank, N.A. ("Citibank") is the investment adviser (the "Adviser")
of the Portfolio. The Adviser manages the investments of the Portfolio from day
to day in accordance with the Portfolio's investment objective and policies. The
selection and management of investments for the Portfolio and the way it is
managed depend on the conditions and trends in the economy and the financial
marketplaces.
The following discussion supplements the information contained in the
Prospectus concerning the investment objectives, policies and restrictions of
the Fund. Since the investment characteristics of the Fund correspond directly
to those of the Portfolio, references below to the Portfolio's investment
objective, strategies and techniques also include the Fund.
The Trust may withdraw the Fund's investment from the Portfolio at any
time, if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Fund's assets
would be invested in accordance with the investment objective, policies and
restrictions described below and in the Prospectus with respect to the
Portfolio. The approval of the Institutional Money Fund's shareholders is not
required to change the Fund's investment objective or any of its investment
policies.
-3-
<PAGE>
Cash Reserves Portfolio
The approval of the investors in Cash Reserves Portfolio is not
required to change Cash Reserves Portfolio's investment objective or any of the
Portfolio's investment policies discussed below, including those concerning
security transactions, other than the Portfolio's concentration policy with
respect to bank obligations described in paragraph (1) below, which is
fundamental and may not be changed without investor approval.
Cash Reserves Portfolio seeks to achieve its investment objective
through investments limited to the following types of U.S. dollar-denominated
money market instruments. All investments by Cash Reserves Portfolio mature or
will be deemed to mature within 397 days from the date of acquisition, and the
average maturity of the investments held by Cash Reserves Portfolio (on a
dollar-weighted basis) will be 90 days or less. All investments by Cash Reserves
Portfolio are in high quality securities (i.e., rated in the highest rating
category for short-term obligations by at least two nationally recognized
statistical rating organizations (each, an "NRSRO") assigning a rating to the
security or issuer, or if only one NRSRO assigned a rating, that NRSRO, or, in
the case of an investment which is not rated, of comparable quality as
determined by the Adviser, and are determined by the Adviser to present minimal
credit risks. Investments in high quality, short-term instruments may, in many
circumstances, result in a lower yield than would be available from investments
in instruments with a lower quality or a longer term. Under the Investment
Company Act of 1940 (the "1940 Act") the Institutional Money Fund and Cash
Reserves Portfolio are each classified as "diversified", although in the case of
the Fund, all of its assets are invested in the Portfolio. A "diversified
investment company" must invest at least 75% of its assets in cash and cash
items, U.S. Government securities, investment company securities and other
securities limited as to any one issuer to not more than 5% of the total assets
of the investment company and not more than 10% of the voting securities of the
issuer.
Cash Reserves Portfolio will limit its investments to the types of
instruments described below:
(1) Bank obligations. Cash Reserves Portfolio invests at least 25% of its
assets, and may invest up to 100% of its assets, in bank obligations. These
obligations include, but are not limited to, negotiable certificates of deposit,
bankers' acceptances and fixed time deposits. This concentration policy is
fundamental and may not be changed without the approval of the investors in Cash
Reserves Portfolio. Cash Reserves Portfolio limits its investments in U.S. bank
obligations (including their non-U.S. branches) to banks having total assets in
excess of $1 billion and which are subject to regulation by an agency of the
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<PAGE>
U.S. Government. Cash Reserves Portfolio may also invest in certificates of
deposit issued by banks the deposits in which are insured by the Federal Deposit
Insurance Corporation ("FDIC"), through either the Bank Insurance Fund or the
Savings Association Insurance Fund, having total assets of less than $1 billion,
provided that Cash Reserves Portfolio at no time owns more than $100,000
principal amount of certificates of deposit (or any higher principal amount
which in the future may be fully insured by FDIC insurance) of any one of those
issuers. Fixed time deposits are obligations which are payable at a stated
maturity date and bear a fixed rate of interest. Generally, fixed time deposits
may be withdrawn on demand by Cash Reserves Portfolio, but they may be subject
to early withdrawal penalties which vary depending upon market conditions and
the remaining maturity of the obligation. Although fixed time deposits do not
have a market, there are no contractual restrictions on Cash Reserves
Portfolio's right to transfer a beneficial interest in the deposit to a third
party.
U.S. banks organized under federal law are supervised and examined by
the Comptroller of the Currency and are required to be members of the Federal
Reserve System and to be insured by the FDIC. U.S. banks organized under state
law are supervised and examined by state banking authorities and are members of
the Federal Reserve System only if they elect to join. However, state banks
which are insured by the FDIC are subject to federal examination and to a
substantial body of federal law and regulation. As a result of federal and state
laws and regulations, U.S. branches of U.S. banks, among other things, are
generally required to maintain specified levels of reserves, and are subject to
other supervision and regulation designed to promote financial soundness.
Cash Reserves Portfolio limits its investments in non-U.S. bank
obligations (i.e., obligations of non-U.S. branches and subsidiaries of U.S.
banks, and U.S. and non-U.S. branches of non-U.S. banks) to U.S.
dollar-denominated obligations of banks which at the time of investment are
branches or subsidiaries of U.S. banks which meet the criteria in the preceding
paragraphs or are branches of non-U.S. banks which (i) have more than $10
billion, or the equivalent in other currencies, in total assets; (ii) in terms
of assets are among the 75 largest non-U.S. banks in the world; (iii) have
branches or agencies in the United States; and (iv) in the opinion of the
Adviser, are of an investment quality comparable with obligations of U.S. banks
which may be purchased by Cash Reserves Portfolio. These obligations may be
general obligations of the parent bank, in addition to the issuing branch or
subsidiary, but the parent bank's obligations may be limited by the terms of the
specific obligation or by governmental regulation. Cash Reserves Portfolio also
limits its investments in non-U.S. bank obligations to banks, branches and
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subsidiaries located in Western Europe (United Kingdom, France, Germany,
Belgium, the Netherlands, Italy, Switzerland), Scandinavia (Denmark, Norway,
Sweden), Australia, Japan, the Cayman Islands, the Bahamas and Canada. Cash
Reserves Portfolio does not purchase any bank obligation of the Adviser or an
affiliate of the Adviser.
Since Cash Reserves Portfolio may hold obligations of non-U.S.
branches and subsidiaries of U.S. banks, and U.S. and non-U.S. branches of
non-U.S. banks, an investment in the Institutional Money Fund involves certain
additional risks. Such investment risks include future political and economic
developments, the possible imposition of non-U.S. withholding taxes on interest
income payable on such obligations held by Cash Reserves Portfolio, the possible
seizure or nationalization of non-U.S. deposits and the possible establishment
of exchange controls or other non-U.S. governmental laws or restrictions
applicable to the payment of the principal of and interest on certificates of
deposit or time deposits that might affect adversely such payment on such
obligations held by Cash Reserves Portfolio. In addition, there may be less
publicly-available information about a non-U.S. branch or subsidiary of a U.S.
bank or a U.S. or non-U.S. branch of a non-U.S. bank than about a U.S. bank and
such branches and subsidiaries may not be subject to the same or similar
regulatory requirements that apply to U.S. banks, such as mandatory reserve
requirements, loan limitations and accounting, auditing and financial
record-keeping standards and requirements.
The provisions of federal law governing the establishment and operation
of U.S. branches do not apply to non-U.S. branches of U.S. banks. However, Cash
Reserves Portfolio will purchase obligations only of those non-U.S. branches of
U.S. banks which were established with the approval of the Board of Governors of
the Federal Reserve System (the "Board of Governors"). As a result of such
approval, these branches are subject to examination by the Board of Governors
and the Comptroller of the Currency. In addition, such non-U.S. branches of U.S.
banks are subject to the supervision of the U.S. bank, and creditors of the
non-U.S. branch are considered general creditors of the U.S. bank subject to
whatever defenses may be available under the governing non-U.S. law and to the
terms of the specific obligation. Nonetheless, Cash Reserves Portfolio generally
will be subject to whatever risk may exist that the non-U.S. country may impose
restrictions on payment of certificates of deposit or time deposits.
U.S. branches of non-U.S. banks are subject to the laws of the state in
which the branch is located or to the laws of the United States. Such branches
are therefore subject to many of the regulations, including reserve
requirements, to which U.S. banks are subject. In addition, Cash Reserves
Portfolio will purchase obligations only of those U.S. branches of non-U.S.
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banks which are located in states which impose the additional requirement that
the branch pledge to a designated bank within the state an amount of its assets
equal to 5% of its total liabilities.
Non-U.S. banks in whose obligations Cash Reserves Portfolio may invest may not
be subject to the laws and regulations referred to in the preceding two
paragraphs.
(2) Obligations of, or guaranteed by, non-U.S. governments. Cash Reserves
Portfolio limits its investments in non-U.S. government obligations to
obligations issued or guaranteed by the governments of Western Europe (United
Kingdom, France, Germany, Belgium, the Netherlands, Italy, Switzerland),
Scandinavia (Denmark, Norway, Sweden), Australia, Japan and Canada. Generally,
such obligations may be subject to the additional risks described in paragraph 1
above in connection with the purchase of non-U.S. bank obligations.
(3) Commercial Paper rated Prime-1 by Moody's Investors Service, Inc.
("Moody's") or A-1 by Standard & Poor's Ratings Group ("Standard & Poor's") or,
if not rated, determined to be of comparable quality by or on behalf of the
Board of Trustees of Cash Reserves Portfolio, such as unrated commercial paper
issued by corporations having an outstanding unsecured debt issue currently
rated Aaa by Moody's or AAA by Standard & Poor's. (For a description of these
ratings see the Appendix to the Prospectus.)
(4) Obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. These include issues of the U.S. Treasury, such as bills,
certificates of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an Act of Congress. Some of
the latter category of obligations are supported by the full faith and credit of
the United States, others are supported by the right of the issuer to borrow
from the U.S. Treasury, and still others are supported only by the credit of the
agency or instrumentality. Examples of each of the three types of obligations
described in the preceding sentence are (i) obligations guaranteed by the
Export-Import Bank of the United States, (ii) obligations of the Federal
National Mortgage Association, and (iii) obligations of the Student Loan
Marketing Association, respectively.
(5) Repurchase agreements, providing for resale within 397 days or less,
covering obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities which may have maturities in excess of 397 days. A repurchase
agreement arises when a buyer purchases an obligation and simultaneously agrees
with the vendor to resell the obligation to the vendor at an agreed-upon price
and time, which is usually not more than seven days from the date of purchase.
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The resale price of a repurchase agreement is greater than the purchase price,
reflecting an agreed-upon market rate which is effective for the period of time
the buyer's funds are invested in the obligation and which is not related to the
coupon rate on the purchased obligation. Obligations serving as collateral for
each repurchase agreement are delivered to Cash Reserves Portfolio's custodian
either physically or in book entry form and the collateral is marked to the
market daily to ensure that each repurchase agreement is fully collateralized at
all times. A buyer of a repurchase agreement runs a risk of loss if, at the time
of default by the issuer, the value of the collateral securing the agreement is
less than the price paid for the repurchase agreement. If the vendor of a
repurchase agreement becomes bankrupt, Cash Reserves Portfolio might be delayed,
or may incur costs or possible losses of principal and income, in selling the
collateral. Cash Reserves Portfolio may enter into repurchase agreements only
with a vendor which is a member bank of the Federal Reserve System or which is a
"primary dealer" (as designated by the Federal Reserve Bank of New York) in U.S.
Government obligations. Cash Reserves Portfolio will not enter into any
repurchase agreements with the Adviser or an affiliate of the Adviser. The
restrictions and procedures described above which govern Cash Reserves
Portfolio's investment in repurchase agreements are designed to minimize Cash
Reserves Portfolio's risk of losses in making those investments.
(6) Asset-backed securities, which may include securities such as Certificates
for Automobile Receivables ("CARS") and Credit Card Receivable Securities
("CARDS"), as well as other asset-backed securities that may be developed in
the future. CARS represent fractional interests in pools of car installment
loans, and CARDS represent fractional interests in pools of revolving credit
card receivables. The rate of return on asset-backed securities may be affected
by early prepayment of principal on the underlying loans or receivables.
Prepayment rates vary widely and may be affected by changes in market interest
rates. It is not possible to accurately predict the average life of a particular
pool of loans or receivables. Reinvestment of principal may occur at higher or
lower rates than the original yield. Therefore, the actual maturity and realized
yield on asset-backed securities will vary based upon the prepayment experience
of the underlying pool of loans or receivables.
(See "Asset-Backed Securities" below.)
Cash Reserves Portfolio does not purchase securities which the
Portfolio believes, at the time of purchase, will be subject to exchange
controls or non-U.S. withholding taxes; however, there can be no assurance that
such laws may not become applicable to certain of Cash Reserves Portfolio's
investments. In the event exchange controls or non-U.S. withholding taxes are
imposed with respect to any of Cash Reserves Portfolio's investments, the effect
may be to reduce the income received by the Portfolio on such investments.
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Asset-Backed Securities. As set forth above, Cash Reserves Portfolio
may purchase asset-backed securities that represent fractional interests in
pools of retail installment loans, both secured (such as CARS) and unsecured, or
leases or revolving credit receivables, both secured and unsecured (such as
CARDS). These assets are generally held by a trust and payments of principal and
interest or interest only are passed through monthly or quarterly to certificate
holders and may be guaranteed up to certain amounts by letters of credit issued
by a financial institution affiliated or unaffiliated with the trustee or
originator of the trust.
Underlying automobile sales contracts, leases or credit card
receivables are subject to prepayment, which may reduce the overall return to
certificate holders. Nevertheless, principal repayment rates tend not to vary
much with interest rates and the short-term nature of the underlying loans,
leases or receivables tends to dampen the impact of any change in the prepayment
level. Certificate holders may also experience delays in payment on the
certificates if the full amounts due on underlying loans, leases or receivables
are not realized by Cash Reserves Portfolio because of unanticipated legal or
administrative costs of enforcing the contracts or because of depreciation or
damage to the collateral (usually automobiles) securing certain contracts, or
other factors. If consistent with its investment objectives and policies, Cash
Reserves Portfolio may invest in other asset- backed securities that may be
developed in the future.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements and in order to generate income, Cash Reserves Portfolio may lend
its securities to broker-dealers and other institutional borrowers. Such loans
will usually be made only to member banks of the Federal Reserve System and to
member firms of the New York Stock Exchange (and subsidiaries thereof). Loans of
securities would be secured continuously by collateral in cash, cash equivalents
or U.S. Treasury obligations maintained on a current basis at an amount at least
equal to the market value of the securities loaned. The cash collateral would be
invested in high quality short-term instruments. The Portfolio would have the
right to call a loan and obtain the securities loaned at any time on customary
industry settlement notice (which will not usually exceed five days). During the
existence of a loan, the Portfolio would continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities loaned and would
also receive compensation based on investment of the collateral. The Portfolio
would not, however, have the right to vote any securities having voting rights
during the existence of the loan, but would call the loan in anticipation of an
important vote to be taken among holders of the securities or of the giving or
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withholding of their consent on a material matter affecting the investment. As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the collateral should the borrower fail financially. However,
the loans would be made only to entities deemed by the Adviser to be of good
standing, and when, in the judgment of the Adviser, the consideration which can
be earned currently from loans of this type justifies the attendant risk. If the
Adviser determines to make loans, it is intended that the value of the
securities loaned by the Portfolio would not exceed 33 1/3% of the value of its
net assets.
Investment Restrictions
The Trust, on behalf of the Fund, and the Portfolio have each adopted
the following policies which may not be changed without approval by holders of a
"majority of the outstanding shares" of the Fund or the Portfolio, which as used
in this Statement of Additional Information means the vote of the lesser of (i)
67% or more of the outstanding "voting securities" of the Fund or the Portfolio,
respectively, present at a meeting, if the holders of more than 50% of the
outstanding "voting securities" of the Fund or the Portfolio, respectively, are
present or represented by proxy, or (ii) more than 50% of the outstanding
"voting securities" of the Fund or the Portfolio, respectively. The term "voting
securities" as used in this paragraph has the same meaning as in the 1940 Act.
Except as described below, whenever the Fund is requested to vote on a
change in the investment restrictions of the Portfolio (or the concentration
policy described in paragraph (1) above), the Fund will hold a meeting of its
shareholders and will cast its vote proportionately as instructed by its
shareholders. However, subject to applicable statutory and regulatory
requirements, the Fund would not request a vote of its shareholders with respect
to (a) any proposal relating to the Portfolio, which proposal, if made with
respect to the Fund, would not require the vote of the shareholders of the Fund,
or (b) any proposal with respect to the Portfolio that is identical in all
material respects to a proposal that has previously been approved by
shareholders of the Fund. Any proposal submitted to holders in the Portfolio,
and that is not required to be voted on by shareholders of the Fund, would
nevertheless be voted on by the trustees of the Trust on behalf of the Fund.
The Trust, on behalf of the Institutional Money Fund, and Cash Reserves
Portfolio may not:
(1) borrow money, except that as a temporary measure for extraordinary
or emergency purposes either the Trust or the Portfolio may borrow from
banks in an amount not to exceed one third of the value of the net
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assets of the Fund or the Portfolio, respectively, including the amount
borrowed. Moreover, neither the Trust (on behalf of the Fund) nor the
Portfolio may purchase any securities at any time at which borrowings
exceed 5% of the total assets of the Fund or the Portfolio,
respectively (taken in each case at market value). It is intended that
the Portfolio would borrow money only from banks and only to
accommodate requests for the withdrawal of all or a portion of a
beneficial interest in the Portfolio while effecting an orderly
liquidation of securities); for additional related restrictions, see
clause (i) under the caption "Non-Fundamental Restrictions" below;
(2) purchase any security or evidence of interest therein on margin,
except that either the Trust, on behalf of the Fund, or the Portfolio
may obtain such short-term credit as may be necessary for the clearance
of purchases and sales of securities;
(3) underwrite securities issued by other persons, except that all the
assets of the Fund may be invested in the Portfolio and except insofar
as either the Trust or the Portfolio may technically be deemed an
underwriter under the Securities Act of 1933 in selling a security;
(4) make loans to other persons except (a) through the lending of
securities held by either the Fund or the Portfolio, but not in excess
of 33 1/3% of the Fund's or the Portfolio's net assets, as the case may
be, (b) through the use of fixed time deposits or repurchase agreements
or the purchase of short-term obligations, or (c) by purchasing all or
a portion of an issue of debt securities of types commonly distributed
privately to financial institutions; for purposes of this paragraph 4
the purchase of short-term commercial paper or a portion of an issue of
debt securities which are part of an issue to the public shall not be
considered the making of a loan; for additional related restrictions,
see clause (x) under the caption "Non-Fundamental Restrictions" below;
(5) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or
commodity contracts in the ordinary course of business (the Fund and
the Portfolio reserve the freedom of action to hold and to sell real
estate acquired as a result of the ownership of securities by the Fund
or the Portfolio);
(6) concentrate its investments in any particular industry, but if it
is deemed appropriate for the achievement of its investment objective,
up to 25% of the assets of the Fund or the Portfolio, respectively
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(taken at market value at the time of each investment) may be invested
in any one industry, except that the Portfolio will invest at least 25%
of its assets and may invest up to 100% of its assets in bank
obligations; provided that, if the Trust withdraws the investment of
the Fund from the Portfolio, the Trust will invest the assets of the
Fund in bank obligations to the same extent and with the same
reservation as the Portfolio; and provided further, that nothing in
this investment restriction is intended to affect the Fund's ability to
invest 100% of its assets in the Portfolio; or
(7) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the
rules and regulations promulgated thereunder, except as appropriate to
evidence a debt incurred without violating Investment Restriction (1)
above.
Non-Fundamental Restrictions
The Trust, on behalf of the Fund, and the Portfolio will not, as a
matter of operating policy:
(i) borrow money for any purpose in excess of 10% of the total assets
of the Fund or the Portfolio, respectively (taken in each case at
cost);
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10%
of the net assets of the Fund or the Portfolio, respectively (taken in
each case at market value);
(iii) sell any security which it does not own unless by virtue of its
ownership of other securities it has at the time of sale a right to
obtain securities, without payment of further consideration, equivalent
in kind and amount to the securities sold; and provided, that if such
right is conditional the sale is made upon the same conditions;
(iv) invest for the purpose of exercising control or
management, except that all of the assets of the Fund may be
invested in the Portfolio;
(v) purchase securities issued by any registered investment company,
except that all of the assets of the Fund may be invested in the
Portfolio, and except by purchase in the open market where no
commission or profit to a sponsor or dealer results from such purchase
other than the customary broker's commission, and except when such
purchase, though not made in the open market, is part of a plan of
merger or consolidation; provided, however, that the Trust (on behalf
of the Fund) and the Portfolio will not purchase the securities of any
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registered investment company if such purchase at the time thereof
would cause more than 10% of the total assets of the Fund or the
Portfolio, respectively (taken in each case at the greater of cost or
market value), to be invested in the securities of such issuers or
would cause more than 3% of the outstanding voting securities of any
such issuer to be held by the Portfolio; and provided further, that the
Portfolio shall not purchase securities issued by any open-end
investment company;
(vi) taken together with any investments described in clause (x) below,
invest more than 10% of the net assets of the Fund or the Portfolio,
respectively, in securities that are not readily marketable, including
debt securities for which there is no established market (and fixed
time deposits and repurchase agreements maturing in more than seven
days), except that all the assets of the Fund may be invested in the
Portfolio;
(vii) purchase securities of any issuer if such purchase at the time
thereof would cause it to hold more than 10% of any class of securities
of such issuer, for which purposes all indebtedness of an issuer shall
be deemed a single class, except that all the assets of the Fund may be
invested in the Portfolio;
(viii) purchase or retain any securities issued by an issuer any of
whose officers, directors, trustees or security holders is an officer
or Trustee of the Trust or the Portfolio, or is an officer or director
of the Adviser, if after the purchase of the securities of such issuer
by the Trust, on behalf of the Fund, or the Portfolio one or more of
such persons owns beneficially more than 1/2 of 1% of the shares or
securities, or both, all taken at market value, of such issuer, and
such persons owning more than 1/2 of 1% of such shares or securities
together own beneficially more than 5% of such shares or securities, or
both, all taken at market value;
(ix) write, purchase or sell any put or call option or any
combination thereof;
(x) taken together with any investments described in clause (vi) above,
invest in securities which are subject to legal or contractual
restrictions on resale (other than fixed time deposits and repurchase
agreements maturing in not more than seven days) if, as a result
thereof, more than 10% of the net assets of the Fund or the Portfolio,
respectively (in each case taken at market value), would be so invested
(including fixed time deposits and repurchase agreements maturing in
more than seven days), except that all the assets of the Fund may be
invested in the Portfolio;
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(xi) purchase securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of such
issuer to be held by the Fund or the Portfolio, respectively, except
that all the assets of the Fund may be invested in the Portfolio;
(xii) make short sales of securities or maintain a short position,
unless at all times when a short position is open it owns an equal
amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities
sold short, and unless not more than 10% of the net assets of the Fund
or the Portfolio, respectively (in each case taken at market value), is
held as collateral for such sales at any one time (the Portfolio does
not presently intend to make such sales); or
(xiii) purchase any security if as a result, the Fund would then have
more than 5% of its total assets invested in the securities of
companies (including predecessors) that have been in continuous
operation for fewer than three years.
These policies are not fundamental and may be changed by the Trust with
respect to the Fund without approval by the Fund's shareholders or by the
Portfolio without approval by the Fund or the Portfolio's other investors.
Percentage and Rating Restrictions. If a percentage restriction or a
rating restriction on investment or utilization of assets set forth above or
referred to in the Prospectus is adhered to at the time an investment is made or
assets are so utilized, a later change in percentage resulting from changes in
the value of the securities held by the Fund or the Portfolio or a later change
in the rating of a security held by the Fund or the Portfolio will not be
considered a violation of policy.
SECURITIES TRANSACTIONS
The Portfolio's purchases and sales of portfolio securities usually are
principal transactions. Portfolio securities are normally purchased directly
from the issuer or from an underwriter or market maker for the securities. There
usually are no brokerage commissions paid for such purchases. The Portfolio does
not anticipate paying brokerage commissions. Any transaction for which the
Portfolio pays a brokerage commission will be effected at the best price and
execution available. Purchases from underwriters of securities include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market makers include the spread between the bid and
asked price.
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Allocation of transactions, including their frequency, to various
dealers is determined by the Adviser in its best judgment and in a manner deemed
to be in the best interest of investors in the Portfolio, rather than by any
formula. The primary consideration is prompt execution of orders in an effective
manner at the most favorable price.
Investment decisions for the Portfolio will be made independently from
those for any other account or investment company that is or may in the future
become managed by the Adviser or its affiliates. If, however, the Portfolio and
other investment companies or accounts managed by the Adviser are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by the Portfolio or the size of the position obtainable for the
Portfolio. In addition, when purchases or sales of the same security for the
Portfolio and for other investment companies managed by the Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.
No transactions are executed with the Adviser, or with any affiliate of
the Adviser, acting either as principal or as broker.
YIELD INFORMATION
Yield is computed in accordance with a standardized method which
involves determining the net change in the value of a hypothetical pre-existing
Fund account having a balance of one share at the beginning of a seven calendar
day period for which yield is to be quoted, dividing the net change by the value
of the account at the beginning of the period to obtain the base period return,
and annualizing the results (i.e., multiplying the base period return by 365/7).
The net change in the value of the account reflects the value of additional
shares purchased with dividends declared on the original share and any such
additional shares and fees that may be charged to shareholder accounts, in
proportion to the length of the base period and the Fund's average account size,
but does not include realized gains and losses or unrealized appreciation and
depreciation. Effective annualized yield is computed by adding 1 to the base
period return (calculated as described above), raising that sum to a power equal
to 365 divided by 7, and subtracting 1 from the result.
Yields will fluctuate and are not necessarily representative of future
results. The investor should remember that yield is a function of the type and
quality of the instruments held by the Portfolio, portfolio maturity and
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operating expenses. An investor's principal in the Fund is not guaranteed. See
"Determination of Net Asset Value" for a discussion of the manner in which the
Fund's price per share is determined.
From time to time, the Trust in its advertising and sales literature
for the Fund may refer to the growth of assets managed or administered by the
Adviser over certain time periods. Comparative performance information may be
used from time to time in advertising or marketing the Fund's shares, including
data from Lipper Analytical Services, Inc., IBC/Donoghue's Money Fund Report and
other publications.
The annualized current seven-day yield of the Institutional Money Fund
for the period ended August 31, 1996 was 5.27%. For the same period, the
annualized effective seven-day yield of the Institutional Money Fund, based upon
dividends declared daily and reinvested monthly, was 5.40%.
DETERMINATION OF NET ASSET VALUE; VALUATION
OF SECURITIES; REDEMPTION IN KIND
The Prospectus discusses when the net asset value of the Fund is
determined for purposes of sales and redemptions. The net asset value of the
Fund's investment in the Portfolio is equal to the Fund's pro rata share of the
total assets of the Portfolio less the Fund's pro rata share of the Portfolio's
liabilities. The following is a description of the procedures used by the
Portfolio in valuing its assets.
The valuation of the Portfolio's securities is based on their amortized
cost, which does not take into account unrealized capital gains or losses.
Amortized cost valuation involves initially valuing an instrument at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium, generally without regard to the impact of fluctuating interest rates on
the market value of the instrument. Although this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Portfolio would receive if
it sold the instrument.
The Portfolio's use of the amortized cost method of valuing its
securities is permitted by Rule 2a-7 under the 1940 Act ("Rule 2a-7"). The
Portfolio will also maintain a dollar-weighted average portfolio maturity of 90
days or less, purchase only instruments having or deemed to have remaining
maturities of 397 days or less (or instruments subject to a repurchase agreement
having a duration of 397 days or less), and invest only in securities determined
by or under the supervision of its Board of Trustees to be of high quality and
to present minimal credit risks.
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Pursuant to Rule 2a-7, the Board of Trustees of the Portfolio also has
established procedures designed to allow the Fund (and other investors in the
Portfolio) to stabilize, to the extent reasonably possible, the Fund's price per
share at $1.00, as computed for the purpose of sales and redemptions. These
procedures include review of the Portfolio's holdings by its Board of Trustees,
at such intervals as each Board deems appropriate, to determine whether the
value of the Portfolio's assets calculated by using available market quotations
or market equivalents deviates from such valuation based on amortized cost.
Rule 2a-7 also provides that the extent of any deviation between the
value of the Portfolio's assets based on available market quotations or market
equivalents and such valuation based on amortized cost must be examined by the
Portfolio's Board of Trustees. In the event the Portfolio's Board of Trustees
determines that a deviation exists that may result in material dilution or other
unfair results to new or existing investors, pursuant to the rule, the
Portfolio's Board of Trustees must cause the Portfolio to take such corrective
action as the Board of Trustees regards as necessary and appropriate, including:
selling portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity; or valuing the Portfolio's
assets by using available market quotations.
The Trust, on behalf of the Fund, and the Portfolio reserve the right,
if conditions exist which make cash payments undesirable, to honor any request
for redemption or repurchase order by making payment in whole or in part in
readily marketable securities chosen by the Trust or the Portfolio, as the case
may be, and valued as they are for purposes of computing the Fund's or the
Portfolio's net asset value, as the case may be (a redemption in kind). If
payment is made in securities by the Portfolio or the Fund, an investor,
including the Fund, may incur transaction expenses in converting these
securities into cash. The Trust will redeem in kind Fund shares only if it has
received a redemption in kind from the Portfolio and therefore shareholders of
the Fund that receive redemptions in kind will receive portfolio securities of
the Portfolio. The Portfolio has advised the Trust that it will not redeem in
kind except in circumstances in which the Fund is permitted to redeem in kind.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day that the New York Stock Exchange
(the "Exchange") is open for business. As of 3:00 P.M. (Eastern time) on each
such day, the value of each investor's interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the percentage
representing that investor's share of the aggregate beneficial interests in the
Portfolio. Any additions or reductions which are to be effected on that day will
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then be effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio will then be recomputed as the percentage equal to
the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of such time of valuation on such day plus or
minus, as the case may be, the amount of net additions to or reductions in the
investor's investment in the Portfolio effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
such time of valuation on such day plus or minus, as the case may be, the amount
of the net additions to or reductions in the aggregate investments in the
Portfolio by all investors in the Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest in the
Portfolio as of the time of valuation on the following day the Exchange is open
for trading.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares are continuously offered for sale by Signature Broker-Dealer
Services, Inc. ("SBDS" or the "Distributor"), a wholly-owned subsidiary of
Signature Financial Group, Inc. ("Signature"). As described in the Prospectus,
Shares are offered for sale directly only to institutional investors
("Institutional Investors"). Different types of customer accounts at certain
Institutional Investors (a "Shareholder Organization") may be used to purchase
Shares, including eligible agency and trust accounts. In addition, a Shareholder
Organization may automatically "sweep" the accounts of its customers
("Customers") not less frequently than weekly and invest amounts in excess of a
minimum balance agreed to by the Shareholder Organization and its Customers in
shares selected by its Customers. Investors purchasing shares may include
officers, directors, or employees of the particular Shareholder Organization.
Check writing privileges are available to investors upon request to the Trust.
As stated in the Prospectus, no sales charge is imposed by the Trust on
the purchase of shares or reinvestment of dividends or distributions.
The Trust 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 Exchange is restricted by applicable rules and regulations of the Securities
and Exchange Commission (the "SEC"); (b) the Exchange is closed for other than
customary weekend and holiday closings; (c) the SEC has by order permitted such
suspension; or (d) an emergency exists as determined by the SEC.
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 the shareholder's original investment due to changes in the market
prices of the portfolio securities of the Fund or the Portfolio.
-18-
<PAGE>
Other Investor Programs
As described in the Prospectus, shares of the Fund may be exchanged for
Institutional Shares of any investment portfolio of Excelsior Institutional
Trust. Shares of the Fund may be purchased in connection with Unit Investment
Trust Automatic Dividend Reinvestment Plans, the Automatic Investment Program,
and certain Retirement Programs.
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
The trustees and officers of the Trust and the Portfolio and their
principal occupations during the past five years are set forth below. Unless
otherwise indicated below, the address of each trustee and officer is 6 St.
James Avenue, Boston, Massachusetts.
Trustees and Officers of the Trust
Trustees and Officers
The trustees and officers of the Trust, their addresses, ages,
principal occupations during the past five years, and other affiliations are as
follows:
<TABLE>
<CAPTION>
Position Principal Occupation
with the During Past 5 Years and
Name and Address Trust Other Affiliations
- ---------------- --------- -----------------------
<S> <C> <C>
Rodman L. Drake Trustee Director, Excelsior Funds,
c/o KMR Power Corp. Inc. and Excelsior Tax-Exempt
30 Rockefeller Plaza Funds, Inc. (since 1996);
Suite 5425 Trustee, Excelsior
New York, NY 10112 Institutional Trust (since
Age: 53 1994); Director, Parsons
Brinkerhoff, Inc. (engineering
firm) (since 1995); President,
Mandrake Group (investment and
consulting firm) (since 1994);
Director, Hyperion Total
Return Fund, Inc. and four
other funds for which Hyperion
Capital Management, Inc.
serves as investment adviser
(since 1991); Co-chairman, KMR
Power Corporation (power
plants) (since 1993);
Director, The Latin American
Growth Fund (since 1993);
Member of Advisory Board,
Argentina Private Equity Fund
L.P. (from 1992 to 1996)and
Garantia L.P (Brazil) (from
1993 to 1996); and Director,
Mueller Industries, Inc. (from
1992 to 1994).
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupation
with the During Past 5 Years and
Name and Address Trust Other Affiliations
- ---------------- --------- -----------------------
<S> <C> <C>
W. Wallace McDowell Trustee Director, Excelsior Funds,
c/o Prospect Capital Inc. and Excelsior Tax-Exempt
Corp. Funds, Inc. (since 1996);
43 Arch Street Trustee, Excelsior
Greenwich, CT 06830 Institutional Trust (since
Age: 60 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 Trustee Director, Excelsior Funds,
558 E. 87th Street Inc. and Excelsior Tax-Exempt
New York, NY 10128 Funds, Inc. (since 1996); Vice
Age: 58 President and Editor,
Scientific American, Inc.
(from 1986 to 1994); Director,
Group for The South Fork,
Bridgehampton, New York (since
1993); and Member, Advisory
Committee, Knight Journalism
Fellowships, Massachusetts
Institute of Technology (since
1984).
Frederick S. Wonham* Trustee Retired; Director of Excelsior
238 June Road Funds, Inc. and Excelsior Tax-
Stamford, CT 06903 Exempt Funds, Inc. and
Age: Excelsior Institutional Trust
(since 1995); Vice Chairman of
U.S. Trust Corporation and
U.S. Trust Company of New York
(until 1995); Chairman, U.S.
Trust of Connecticut.
</TABLE>
- ----------------------
* This trustee is considered to be an "interested person" of the Trust as
defined in the 1940 Act.
20
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupation
with the During Past 5 Years and
Name and Address Trust Other Affiliations
- ---------------- --------- -----------------------
<S> <C> <C>
W. Bruce McConnel, III Secretary Partner of the law firm of
Philadelphia National Drinker Biddle & Reath.
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Age:
Linda T. Gibson Assistant Legal Counsel and Assistant
Age: 31 Secretary Secretary, Signature (since
June 1991); Assistant
Secretary, SBDS (since
November 1992); law student,
Boston University School of
Law (prior to May 1992).
John R. Elder Treasurer Vice President, Signature
Age: 48 (since April 1995); Treasurer,
Phoenix Family of Mutual Funds
(Phoenix Home Life Mutual
Insurance Company) (from 1983
to March 1995).
Molly S. Mugler Assistant Legal Counsel and Assistant
Age: Secretary Secretary of Signature since
December 1988; Assitant
Secretary of SBDS since April
1989.
</TABLE>
Each trustee receives an annual fee of $_______ plus a meeting fee of
$__________ for each meeting attended and is reimbursed for expenses incurred in
attending meetings. The Chairman of the Board is entitled to receive an
additional $_________ per annum for his services in such capacity. Drinker
Biddle & Reath, of which Mr. McConnel is a partner, receives legal fees as
counsel to the Trust. The employees of SBDS do not receive my compensation from
the Trust for acting as officers of the Trust. As of December __, 1996, U.S.
Trust held of record approximately ____% of the outstanding shares of the
Institutional Money Fund, but did not own such shares beneficially and did not
have discretion to vote or invest such shares. As of December __, 1996, all
trustees and officers of the Trust and the Portfolio as a group owned less than
1% of the outstanding shares of the Fund.
The compensation paid to the trustees for the fiscal year ended August
31, 1996 is set forth in the chart below.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS TOTAL COMPENSATION
AGGREGATE ACCRUED AS PART ESTIMATED ANNUAL FROM THE TRUST AND
COMPENSATION OF TRUST BENEFITS UPON FUND COMPLEX* PAID
FROM THE TRUST EXPENSES RETIREMENT TO TRUSTEES
-------------- --------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Rodman L. Drake $10,000 None None (4)**$10,000
W. Wallace McDowell $10,000 None None (4)**$10,000
Jonathan Piel $10,000 None None (4)**$10,000
Frederick S. Wonham*** $_____ None None (4)**$14,424
</TABLE>
* The "Fund Complex" consists of the Trust, Excelsior Funds, Inc.,
Excelsior Tax-Exempt Funds, Inc., Excelsior Institutional Trust and UST Master
Variable Series, Inc. The Trust has no pension plan.
** Number of investment companies in the Fund Complex for which trustee
serves as director or trustee.
*** Mr. Wonham was elected to the Board of Trustees of the Trust on December 15,
1995.
21
<PAGE>
Trustees and Officers of the Portfolio
The trustees and officers of Cash Reserves Portfolio, their ages and
principal occupations during the past five years are set forth below.
Trustees of the Portfolio
The Trustees of Cash Reserves Portfolio are:
ELLIOTT J. BERV - Chairman and Director, Catalyst, Inc. (Management
Consultants) (since August 1992); President, Chief Operating Officer and
Director, Deven International, Inc. (International Consultants) (June 1991 to
July 1992); President and Director, Elliott J. Berv & Associates (Management
Consultants) (since May 1984). His address is 15 Stornoway Drive, Cumberland
Foreside, Maine 04110. His age is 53.
WALTER E. ROBB, III - President, Benchmark Advisors, Inc. (Corporate
Financial Advisors) (since 1989); Trustee of certain registered investment
companies in the Landmark and MFS families of funds. His address is 35 Farm
Road, Sherborn, Massachusetts 01770. His age is 70.
22
<PAGE>
MARK T. FINN - President and Director, Delta Financial, Inc.
(since June 1983); Chairman of the Board and Chief Executive
Officer, FX 500 Ltd. (Commodity Trading Advisory Firm) (since
April 1990); Director, Vantage Consulting Group, Inc. (since
October 1988). His address is 3500 Pacific Avenue, P.O. Box 539,
Virginia Beach, Virginia 23451. His age is 53.
PHILIP W. COOLIDGE* - President of the Portfolio; Chairman,
Chief Executive Officer and President, Signature (since December
1988) and SBDS (since April 1989). His age is 45.
- --------------------------
* This Trustee is considered to be an "interested person" of the Portfolio as
defined in the 1940 Act.
Officers of the Portfolio
In addition to Messrs. Coolidge and Elder, who hold similar positions with
the Portfolio, the following are officers of Cash Reserves Portfolio:
SAMANTHA M. BURGESS; 27* -- Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolios; Assistant Vice
President, Signature Financial Group, Inc. (since November 1995);
Graduate Student, Loyola University (prior to August 1995).
PHILIP W. COOLIDGE; 45* -- President of the Trust and the
Portfolios; Chairman, Chief Executive Officer and President,
Signature Financial Group, Inc., and The Landmark Funds Broker-
Dealer Services, Inc. (since December, 1988).
CHRISTINE A. DRAPEAU; 26* -- Assistant Secretary and Assistant Treasurer;
Assistant Vice President, Signature Financial Group, Inc. (since January 1996);
Paralegal and Compliance Officer, various financial companies (July 1992 to
January 1996); Graduate Student, Bentley College (prior to December 1994).
JOHN R. ELDER; 48* -- Treasurer of the Trust and the
Portfolios; Vice President, Signature Financial Group, Inc.
(since April 1995); Treasurer, The Landmark Funds Broker-Dealer
Services, Inc. (since April 1995); Treasurer, Phoenix Family of
Mutual Funds (Phoenix Home Life Mutual Insurance Company) (from
1983 to March 1995).
LINDA T. GIBSON; 31* -- Secretary of the Trust and the
Portfolios; Vice President, Signature Financial Group, Inc.
(since May 1992); Assistant Secretary, The Landmark Funds Broker-
Dealer Services, Inc. (since October 1992); law student, Boston
University School of Law (from September 1989 to May 1992).
23
<PAGE>
JOAN A. GULINELLO; 41* -- Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolios; Vice President,
Signature Financial Group, Inc. (since October 1993); Secretary,
The Landmark Funds Broker-Dealer Services, Inc. (since October
1995); Vice President and Assistant General Counsel,
Massachusetts Financial Services Company (prior to October 1993).
JAMES E. HOOLAHAN; 49* -- Vice President, Assistant Secretary
and Assistant Treasurer of the Trust and the Portfolios; Senior
Vice President, Signature Financial Group, Inc.
SUSAN JAKUBOSKI; 32* -- Vice President, Assistant Treasurer and Assistant
Secretary of Cash Reserves Portfolio and Assistant Secretary of the Trust (since
August, 1994); Vice President, Signature Financial Group (Cayman) Ltd. (since
August, 1994); Senior Fund Administrator, Signature Financial Group, Inc. (since
August, 1994); Assistant Treasurer, Signature Broker-Dealer Services, Inc.
(since September, 1994); Fund Compliance Administrator, Concord Financial Group
(November, 1990 to August, 1994) Her address is Elizabethan Square, George Town,
Grand Cayman Islands, BWI.
MOLLY S. MUGLER; 45* -- Assistant Secretary of the Trust and
the Portfolios; Vice President, Signature Financial Group, Inc.;
Assistant Secretary, The Landmark Funds Broker-Dealer Services,
Inc. (since December, 1988).
KARYN A. NOKE; 25* -- Vice President, Assistant Secretary and
Assistant Treasurer of the Trust and the Portfolios; Vice
President, Signature Financial Group (Cayman) Ltd. (since
September, 1996); Assistant Vice President, Signature Financial
Group, Inc. (May 1993 to August 1996); Student, University of
Massachusetts (prior to May, 1993).
SHARON M. WHITSON; 48* -- Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolios; Assistant Vice
President, Signature Financial Group, Inc. (since November,
1992); Associate Trader, Massachusetts Financial Services Company
(prior to November, 1992).
JULIE J. WYETZNER; 37* -- Vice President, Assistant Secretary
and Assistant Treasurer of the Trust and the Portfolios; Vice
President, Signature Financial Group, Inc.
Mesdames. Gibson, Mugler and Jakuboski and Messrs. Coolidge
and Elder and Lenz may also hold similar positions for other
investment companies for which SBDS or an affiliate serves as the
principal underwriter.
24
<PAGE>
The compensation paid to the trustees of Cash Reserves Portfolio for the
year ended August 31, 1996 is set forth in the table below.
<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS FROM CASH
AGGREGATE ACCRUED AS ESTIMATED RESERVES
COMPENSATION PART OF CASH ANNUAL PORTFOLIO AND
FROM CASH RESERVES BENEFITS FUND COMPLEX
RESERVES PORTFOLIO'S UPON PAID TO
PORTFOLIO EXPENSES RETIREMENT TRUSTEES*
------------ ------------- ---------- --------------
<S> <C> <C> <C> <C>
Elliott J. Berv $4,820.78 None None $42,000
Philip W. Coolidge None None None $
Mark T. Finn $4,072.98 None None $42,000
Walter E. Robb, III $7,495.67 None None $46,500
</TABLE>
- ------------------
* Messrs. Coolidge, Berv, Finn and Robb are trustees of 28, 12, 14 and 12
funds, respectively, of the Landmark Family of Funds.
25
<PAGE>
Indemnification
The Trust's Trust Instrument provides that it will indemnify its trustees
and officers against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with the Trust
unless it is finally adjudicated that they engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in their
offices, or unless it is finally adjudicated that they did not act in good faith
in the reasonable belief that their actions were in the best interests of the
Trust. In the case of settlement, such indemnification will not be provided
unless it has been determined by a court or other body approving the settlement
or other disposition, or by a reasonable determination, based upon a review of
readily available facts, by vote of a majority of disinterested trustees, or in
a written opinion of independent counsel , that such officers or trustees have
not engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties. The Declaration of Trust of the Portfolio provides
for similar indemnification of the trustees and officers of the Portfolio.
Investment Advisers
Citibank manages the assets of the Portfolio pursuant to an investment
advisory agreement (the "Advisory Agreement"). Subject to such policies as the
Portfolio's Board of Trustees may determine, the Adviser manages the securities
of the Portfolio and makes investment decisions for the Portfolio. The Adviser
furnishes at its own expense all services, facilities and personnel necessary in
connection with managing the Portfolio's investments and effecting securities
transactions for the Portfolio. The Advisory Agreement will continue in effect
as long as such continuance is specifically approved at least annually by the
Portfolio's Board of Trustees or by a vote of a majority of the outstanding
voting securities of the Portfolio, and, in either case, by a majority of the
trustees of the Portfolio who are not parties to the Advisory Agreement or
interested persons of any such party, at a meeting called for the purpose of
voting on the Advisory Agreement.
The Advisory Agreement provides that the Adviser may render services to
others. The Advisory Agreement is terminable without penalty on not more than 60
days' nor less than 30 days' written notice by the Portfolio when authorized
either by vote of a majority of the outstanding voting securities of the
Portfolio or by a vote of a majority of the Portfolio's Board of Trustees, or by
the Adviser on not more than 60 days' nor less than 30 days' written notice, and
will automatically terminate in the event of its assignment. The Advisory
Agreement provides that neither the Adviser nor its personnel shall be liable
26
<PAGE>
for any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution of security transactions
for the Portfolio, except for willful misfeasance, bad faith, gross negligence
or reckless disregard of its or their obligations and duties under the Advisory
Agreement.
Cash Reserves Portfolio commenced investment operations on May 3, 1990. The
Institutional Money Fund commenced investment operations (and its investments in
the Portfolio) on November 8, 1993.
The Prospectus contains a description of the fees payable to the Adviser
under the Advisory Agreement. For the fiscal years ended August 31, 1994, 1995
and 1996 the fees paid to the Adviser under the Advisory Agreement were
$1,806,314, $4,097,854 and $6,140,512, respectively (of which $943,419,
$2,306,161 and $3,426,821 was voluntarily waived for the fiscal years ended
August 31, 1994, 1995 and 1996, respectively).
The Glass-Steagall Act prohibits certain financial institutions, such as
Citibank or U.S. Trust, from engaging in the business of underwriting securities
of open-end investment companies, such as the Trust or the Portfolio. Based on
advice of counsel, it is the position of Citibank that the investment advisory
services and the sub-administrative activities performed by Citibank with
respect to the Portfolio do not constitute underwriting activities and are
consistent with the requirements of the Glass-Steagall Act. In addition, counsel
for Citibank has advised Citibank that the combination of individually
permissible activities by Citibank is consistent with the Glass-Steagall Act and
other relevant federal or state legal and regulatory precedent. It is the
position of U.S. Trust that (a) the investment advisory services performed by
U.S. Trust with respect to the Trust do not constitute underwriting activities
and are consistent with the requirements of the Glass-Steagall Act, and (b) the
combination of individually permissible activities by U.S. Trust is consistent
with the Glass-Steagall Act and other relevant federal or state legal and
regulatory precedent. There is presently no controlling precedent regarding the
performance of the combination of investment advisory and sub-administrative
activities by banks. State laws on this issue may differ from applicable federal
laws and banks and financial institutions may be required to register as dealers
pursuant to state securities laws. Future changes in either federal or state
statutes or regulations relating to the permissible activities of banks, as well
as future judicial or administrative decisions and interpretations of present
and future federal or state statutes and regulations, could prevent Citibank or
U.S. Trust from continuing to perform such services for the Trust or the
Portfolio. If Citibank were to be prevented from acting as the Adviser or
sub-administrator for the Portfolio, or if U.S. Trust were to be similarly
27
<PAGE>
prevented from providing supplemental investment advice to the Trust with
respect to the Fund, the Trust and the Portfolio would seek alternative means
for providing such services. The Trust does not expect that the Fund's
shareholders would suffer any adverse financial consequences as a result of any
such occurrence.
Administrators
The Portfolio has adopted an Administrative Services Plan (the
"Administrative Plan") which provides that the Portfolio may obtain the services
of an administrator, a transfer agent and a custodian, and may enter into
agreements providing for the payment of fees for such services. Under the
Administrative Plan, the administrative services fee payable to SFG may not
exceed 0.05% of the Portfolio's average daily net assets on an annualized basis
for its then-current fiscal year. The Administrative Plan continues in effect if
such continuance is specifically approved at least annually by a vote of both a
majority of the Portfolio's Trustees and a majority of the Portfolio's Trustees
who are not "interested persons" of the Portfolio and who have no direct or
indirect financial interest in the operation of the Administrative Plan or in
any agreement related to such Plan ("Qualified Trustees"). The Administrative
Plan requires that the Portfolio provide to its Board of Trustees and the Board
of Trustees review, at least quarterly, a written report of the amounts expended
(and the purposes therefor) under the Administrative Plan. The Administrative
Plan may be terminated at any time by a vote of a majority of the outstanding
voting securities of the Portfolio. The Administrative Plan may not be amended
to increase materially the amount of permitted expenses thereunder without the
approval of a majority of the outstanding voting securities of the Portfolio and
may not be materially amended in any case without a vote of the majority of both
the Trustees and the Qualified Trustees.
SBDS provides the Trust, and Signature Financial Group (Cayman), Ltd. ("SFG
Cayman"; together with SBDS, the "Administrators") provides the Portfolio, with
general office facilities, equipment and clerical personnel. The Administrators
supervise the overall administration of the Trust and the Portfolio. These
administrative services include, among other responsibilities, the negotiation
of contracts and fees with, and the monitoring of performance and billings of,
the independent contractors and agents of the Trust and the Portfolio; the
preparation and filing of all documents required for compliance by the Trust and
the Portfolio with applicable laws and regulations; the preparation and
distribution of materials in connection with meetings of trustees and investors;
and arranging for the maintenance of books and records of the Trust and the
Portfolio. The Administrators provide persons satisfactory to the Boards of
Trustees to serve as officers of the Trust and the Portfolio. Such officers, as
well as certain other employees and trustees of the Trust and the Portfolio, may
be directors, officers or employees of the Administrators or their affiliates.
28
<PAGE>
Each Administrative Services Agreement provides that the Administrator may
render administrative services to others. Each Agreement terminates
automatically if it is assigned and may be terminated without penalty by vote of
a majority of the outstanding voting securities of the Trust or the Portfolios,
or by either party on not more than 60 days' nor less than 30 days' written
notice. Each Administrative Services Agreement also provides that neither the
Administrator nor its personnel shall be liable for any error of judgment or
mistake of law or for any act or omission in the administration or management of
the Trust or the Portfolio, except for willful misfeasance, bad faith or gross
negligence in the performance of its or their duties or by reason of reckless
disregard of its or their obligations and duties under said Administrative
Services Agreements.
The Administrators are wholly-owned subsidiaries of Signature.
The Prospectus contains a description of the fees payable to the
Administrators under the Administrative Services Agreements. For the period
ended August 31, 1994, the Fund accrued administration fees totalling $22,578,
and for the fiscal years ended August 31, 1995 and 1996, the Fund accrued
administration fees totalling $47,453 and $44,937, respectively.
For the fiscal years ended August 31, 1994, 1995 and 1996, the
administration fee payable to Signature Financial Group (Cayman), Ltd. under the
Administrative Services Agreement were $602,105, $1,365,951 and $2,046,838,
respectively. All such administration fees payable by the Portfolio for the
fiscal years ended August 31, 1994, 1995 and 1996 were voluntarily waived.
Sub-Administrator
Pursuant to a Sub-Administrative Services Agreement, Citibank performs such
subadministrative duties for the Portfolio, as may from time to time be agreed
upon by The Landmark Funds Broker-Dealer Services, Inc. with respect to or by
Citibank and Signature Cayman. The terms of the Sub-Administrative Services
Agreements are described in the Prospectus.
Service Organizations
As stated in the Prospectus, the Trust will enter into agreements with
Service Organizations. Such shareholder servicing agreements will require the
Service Organizations to provide shareholder administrative services to their
Customers who beneficially own Shares in consideration for the Fund's payment
29
<PAGE>
(on an annualized basis) of up to .40% of the average daily net assets of the
Fund's shares beneficially owned by Customers of the Service Organization. Such
services may include: (a) assisting Customers in designating and changing
dividend options, account designations and addresses; (b) providing necessary
personnel and facilities to establish and maintain certain shareholder accounts
and records, as may reasonably be requested from time to time by the Trust; (c)
assisting in processing purchases, exchange and redemption transactions; (d)
arranging for the wiring of funds; (e) transmitting and receiving funds in
connection with Customer orders to purchase, exchange or redeem Shares; (f)
verifying and guaranteeing Customer signatures in connection with redemption
orders, transfers among and changes in Customer-designated accounts; (g)
providing periodic statements showing a Customer's account balances and, to the
extent practicable, integrating such information with information concerning
other client transactions otherwise effected with or through the Service
Organization; (h) furnishing on behalf of the Trust's distributor (either
separately or on an integrated basis with other reports sent to a Customer by
the Service Organization) periodic statements and confirmations of all
purchases, exchanges and redemptions of shares in a Customer's account required
by applicable federal or state law; (i) transmitting proxy statements, annual
reports, updating prospectuses and other communications from the Trust to
Customers; (j) receiving, tabulating and transmitting to the Trust proxies
executed by Customers with respect to annual and special meetings of
shareholders of the Trust; (k) providing reports (at least monthly, but more
frequently if so requested by the Trust'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 Trust or a Customer may reasonably request.
The Trust's agreements with Service Organizations are governed by an
Administrative Services Plan (the "Plan") adopted by the Trust. Pursuant to the
Plan, the Trust's Board of Trustees will review, at least quarterly, a written
report of the amounts expended under the Trust's agreements with Service
Organizations and the purpose for which the expenditures were made. In addition,
the arrangements with Service Organizations will be approved annually by a
majority of the Trust's trustees, including a majority of the trustees who are
not "interested persons" of the Trust as defined in the 1940 Act and have no
direct or indirect financial interest in such arrangements (the "Disinterested
Trustees").
Any material amendment to the Trust's arrangements with Service
Organizations must be approved by a majority of the Trust's Board of Trustees
(including a majority of the Disinterested Trustees). So long as the Trust's
arrangements with Service Organizations are in effect, the selection and
30
<PAGE>
nomination of the members of the Trust's Board of Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust will be committed
to the discretion of such non-interested Trustees.
For the period November 8, 1993 (commencement of operations) through August
31, 1994, and for the fiscal years ended August 31, 1995 and 1996, payments to
Service Organizations under the Plan and a predecessor administrative services
plan totalled $70,263, $444,522 and $421,706, respectively.
Transfer Agents and Custodians
U.S. Trust serves as custodian of the Fund's assets. U.S. Trust is a
subsidiary of U.S. Trust Corporation, a registered bank holding company. CGFSC
serves as the Trust's transfer and dividend disbursing agent. CGFSC is a
wholly-owned subsidiary of The Chase Manhattan Bank, N.A.
Under such agreement and as the Fund's custodian, U.S. Trust has agreed to
(i) maintain a separate account or accounts for the Fund; (ii) make receipts and
disbursements of money on behalf of the Fund; (iii) collect and receive income
and other payments and distributions on account of the Fund's portfolio
securities; (iv) respond to correspondence from securities brokers and others
relating to its duties; (v) maintain certain financial accounts and records; and
(vi) make periodic reports to the Trust concerning the Fund's operations. As the
Fund's transfer agent and dividend disbursement agent, CGFSC has agreed to (i)
issue and redeem shares of the Fund; (ii) address and mail all communications by
the Fund to its shareholders, including reports to shareholders, dividend and
distribution notices, and proxy materials for their meetings of shareholders;
(iii) respond to correspondence by shareholders and others relating to its
duties; (iv) maintain shareholder accounts; and (v) make periodic reports to the
Trust concerning the Fund's operations. For their custody, transfer agency and
dividend disbursement services, U.S. Trust and CGFSC are entitled to receive
from the Trust such compensation as may be agreed upon from time to time by the
Trust, U.S. Trust and CGFSC. In addition, U.S. Trust and CGFSC are entitled to
be reimbursed for their out-of-pocket expenses for the cost of forms, postage,
processing purchase and redemption orders, handling of proxies, and other
similar expenses in connection with the above services.
U.S. Trust may, at its own expense, open and maintain custody accounts with
respect to the Fund with other banks or trust companies, provided that U.S.
Trust shall remain liable for the performance of all of its custodial duties
under the Custody Agreement, notwithstanding any delegation.
31
<PAGE>
Cash Reserves Portfolio has entered into a Transfer Agency and Service
Agreement with State Street Bank & Trust Company ("State Street"), pursuant to
which State Street (or its affiliate State Street Canada, Inc.) acts as transfer
agent for Cash Reserves Portfolio. The transfer agent maintains an account for
each investor in the Portfolio and performs other transfer agency functions.
Pursuant to Custodian Contracts, State Street also acts as custodian (the
"Portfolio Custodian") of the Portfolio's assets. The Portfolio Custodian's
responsibilities include safeguarding and controlling the Portfolio's cash and
securities, handling the receipt and delivery of securities, determining income
and collecting interest on the Portfolio's investments, maintaining books of
original entry for Portfolio accounting and other required books and accounts,
and calculating the daily net asset value of beneficial interests in the
Portfolio. Securities held by the Portfolio may be deposited into the Federal
Reserve-Treasury Department Book Entry System or the Depositary Trust Company
and may be held by a sub-custodian bank if such arrangements are reviewed and
approved by the Trustees of the Portfolio. The Portfolio Custodian does not
determine the investment policies of the Portfolio or decide which securities
the Portfolio will buy or sell. The Portfolio may, however, invest in securities
of the Portfolio Custodian and may deal with the Portfolio Custodian as
principal in securities transactions. For its services to the Portfolio, State
Street receives such compensation as may from time to time be agreed upon by
State Street and the Portfolio. The principal business address of State Street
is 225 Franklin Street, Boston, Massachusetts 02110.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP and Price Waterhouse are the independent accountants
and chartered accountants for the Fund and Cash Reserves Portfolio,
respectively. Price Waterhouse LLP provides audit services and assistance and
consultation with respect to the preparation of filings with the SEC. The
principal business address of Price Waterhouse LLP is 160 Federal Street,
Boston, Massachusetts 02110. The principal business address of Price Waterhouse
is Suite 3000, Box 190, 1 First Canadian Place, Toronto, Ontario M5X1H7.
TAXATION
Taxation of the Fund
Each series of the Trust is treated as a separate entity for federal income
tax purposes under the Internal Revenue Code of 1986, as amended (the "Code").
The Fund has elected and intends to qualify each year as a "regulated investment
company" under Subchapter M of the Code (a "RIC") by meeting all applicable
requirements of Subchapter M, including requirements as to the nature of the
32
<PAGE>
Fund's gross income, the amount of the Fund's distributions, and the composition
and holding period of the Fund's portfolio assets. Because the Fund intends to
distribute all of its net investment income and net realized capital gains to
its shareholders in accordance with the timing requirements imposed by the Code,
it is not expected that the Fund will be required to pay any federal income or
excise taxes. If the Fund fails to qualify as a RIC in any year, the Fund would
incur a regular corporate federal income tax upon its taxable income, and the
Fund's distributions would continue to be taxable as ordinary dividend income to
shareholders.
Investment income received by the Fund from non-U.S. investments may be
subject to foreign income taxes withheld at the source; the Fund does not expect
to be able to pass through to shareholders any foreign tax credits with respect
to those foreign taxes. The United States has entered into tax treaties with
many foreign countries that may entitle the Fund to a reduced rate of tax or an
exemption from tax on these investments. It is not possible to determine the
Fund's effective rate of foreign tax in advance since that rate depends upon the
proportion of the Portfolio's assets ultimately invested within various
countries.
Under interpretations of the Internal Revenue Service, (1) the Portfolio
will be treated for federal income tax purposes as a partnership and (2) for
purposes of determining whether the Fund satisfies the income and
diversification requirements to maintain its status as a RIC, the Fund, as an
investor in the Portfolio, will be deemed to own a proportionate share of the
Portfolio's assets and will be deemed to be entitled to the Portfolio's income
attributable to that share. The Portfolio has advised the Trust that it intends
to conduct its operations so as to enable its investors, including the Fund, to
satisfy those requirements.
Taxation of the Portfolio
The Trust anticipates that the Portfolio will be treated as a partnership
for federal income tax purposes. As such, the Portfolio is not subject to
federal income taxation. Instead, the Fund must take into account, in computing
its federal income tax liability, its share of the Portfolio's income, gains,
losses, deductions, credits and tax preference items, without regard to whether
it has received any cash distributions from the Portfolio.
Taxation of Distributions
Dividends from income and any distributions from net short-term capital
gains are taxable to shareholders as ordinary income for federal income tax
purposes. Distributions of net capital gains (the excess of net long-term
capital gain over net short-term capital loss), if any, are taxable to
33
<PAGE>
shareholders as long-term capital gains without regard to the length of time the
shareholders have held their shares. The Fund's distributions are not expected
to qualify for the dividends-received deduction available to corporations.
Distributions are taxable as described above whether paid in cash or in
additional shares. Shareholders will be notified annually as to the federal tax
status of distributions.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax. To
prevent imposition of the excise tax, the Trust must, and intends to, distribute
during each calendar year substantially all of the Fund's ordinary income for
that year and substantially all of its capital gain in excess of its capital
losses for that year, plus any undistributed ordinary income and capital gains
from previous years. For this and other purposes, a distribution will be treated
as paid on December 31 if it is declared in December with a record date in such
a month and paid by the Fund during January of the following calendar year.
Accordingly, those distributions will be taxable to shareholders for the taxable
year in which that December 31 falls.
Withdrawals by the Fund from the Portfolio generally will not result in the
Fund recognizing any gain or loss for federal income tax purposes, except that
to the extent the cash proceeds of any withdrawal or distribution exceed the
Fund's adjusted tax basis in its interest in the Portfolio, the Fund will
generally realized gain for federal income tax purposes. In addition, if, upon a
complete withdrawal (i.e., a redemption of its entire interest in its
corresponding Portfolio), the Fund's adjusted tax basis in its interest in the
Portfolio exceeds the proceeds of the withdrawal, the Fund will generally
realize a loss for federal income tax purposes. The Fund's adjusted tax basis in
its interest in its corresponding Portfolio will generally be the aggregate
price paid therefor, increased by the amounts of its distributive share of items
of realized net income (including income, if any, exempt from Federal income
tax) and gain, and reduced, but not below zero, by the amounts of its
distributive share of items of net loss and the amounts of any distributions
received by the Fund.
Other Taxation
The Trust is organized as a Delaware business trust and, under current law,
neither the Trust nor the Fund are liable for any income or franchise tax in the
State of Delaware, provided that the Fund continues to qualify as a RIC for
federal income tax purposes. The investment by the Fund in the Portfolio does
not cause the Fund to be liable for any income or franchise tax in the State of
New York.
34
<PAGE>
The Portfolio is organized as a New York trust. The Portfolio is not
subject to any income or franchise tax in the State of New York or the State of
Delaware.
Fund shareholders may be subject to state and local taxes on Fund
distributions to them by the Fund. Shareholders are advised to consult their own
tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
DESCRIPTION OF THE TRUST; FUND SHARES
The Trust is a Delaware business trust established under a Trust Instrument
dated October 25, 1993. Its authorized capital consists of an unlimited number
of shares of beneficial interest of $0.00001 par value, which may be issued in
separate series. Currently, the Trust has one active and thirteen inactive
series, although additional series may be established from time to time. Each
share of each series represents an equal proportionate interest in that series
with each other share in that series.
The assets of the Trust received for the issue or sale of the shares of
each series and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are specifically allocated to such series and
constitute the underlying assets of such series. The underlying assets of each
series are segregated on the books of account, and are to be charged with the
liabilities in respect to such series and with such a share of the general
liabilities of the Trust. Expenses with respect to any two or more series are to
be allocated in proportion to the asset value of the respective series except
where allocations of direct expenses can otherwise be fairly made. The officers
of the Trust, subject to the general supervision of the trustees, have the power
to determine which liabilities are allocable to a given series, or which are
general or allocable to two or more series. In the event of the dissolution or
liquidation of the Trust or any series, the holders of the shares of any series
are entitled to receive as a class the value of the underlying assets of such
shares available for distribution to shareholders.
The Trust's trustees may amend the Trust Instrument without shareholder
approval, except shareholder approval is required for any amendment (a) which
affects the voting rights of shareholders under the Trust Instrument, (b) which
affects shareholders' rights to approve certain amendments to the Trust
Instrument, (c) required to be approved by shareholders by law or the
Registration Statement, or (d) submitted to shareholders for their approval by
the trustees in their discretion. Pursuant to Delaware business trust law and
the Trust Instrument, the trustees may, without shareholder approval, (x) cause
the Trust to merge or consolidate with one or more entities, if the surviving or
35
<PAGE>
resulting entity is the Trust or another open-end management investment company
registered under the 1940 Act, or a series thereof, that will succeed to or
assume the Trust's registration under the 1940 Act, or (y) cause the Trust to
incorporate under the laws of the State of Delaware.
Shares of the Fund entitle their holder to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series. For example, a change in investment policy for a series would be voted
upon only by shareholders of the series involved.
The Trust's Trust Instrument provides that obligations of the Trust are not
binding upon the trustees individually but only upon the property of the Trust,
that the trustees and officers will not be liable for errors of judgment or
mistakes of fact or law, and that the Trust will indemnify its trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Trust unless it
is finally adjudicated that they engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their offices,
or unless it is finally adjudicated that they did not act in good faith in the
reasonable belief that their actions were in the best interests of the Trust. In
the case of settlement, such indemnification will not be provided unless it has
been determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested trustees, or in a
written opinion of independent counsel, that such officers or trustees have not
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.
Under Delaware law, shareholders of a Delaware business trust are entitled
to the same limitation on personal liability which is extended to shareholders
of private for profit corporations organized under the general corporation law
of the State of Delaware; the courts of other states may not apply Delaware law,
however, and shareholders may, under certain circumstances, be held personally
liable for the obligations of the Trust. The Trust Instrument contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and provides for indemnification and reimbursement of expenses out of Fund
property for any shareholder held personally liable for the obligations of the
Fund solely by reason of his being or having been a shareholder. The Trust
Instrument also provides for the maintenance, by or on behalf of the Trust and
each Fund, of appropriate insurance (for example, fidelity bonding and errors
and omissions insurance) for the protection of the Trust and each Fund, their
shareholders, trustees, officers, employees and agents, covering possible tort
and other liabilities. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances in which
Delaware law did not apply, inadequate insurance existed and the Fund itself was
unable to meet its obligations.
36
<PAGE>
MISCELLANEOUS
As of December __, 1996, U.S. Trust held of record approximately _____% of
the outstanding shares of the Institutional Money Fund, but did not own such
shares beneficially and did not have discretion to vote or invest such shares.
As of the same date, the name, address and percentage ownership of each person
that beneficially owned 5% or more of the outstanding shares of the Fund were as
follows: [add data]
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Trust's Annual
Report to Shareholders for the fiscal year ended August 31, 1996 (the "1996
Annual Report") are incorporated in this Statement of Additional Information by
reference. No other parts of the 1996 Annual Report are incorporated by
reference herein. The financial statements included in the 1996 Annual Report
have been audited by the Trust's independent accountants, Price Waterhouse LLP,
whose reports thereon are incorporated herein by reference. Such financial
statements have been incorporated herein in reliance upon such reports given
upon their authority as experts in accounting and auditing. Additional copies of
the 1996 Annual Report may be obtained at no charge by telephoning the Trust at
the number appearing on the front page of this Statement of Additional
Information.
The audited financial statements and notes thereto relating to the
Portfolio and presented with the Trust's Annual Report to Shareholders for the
fiscal year ended August 31, 1996 are incorporated in this Statement of
Additional Information by reference. These financial statements have been
audited by the Portfolio's chartered accountants, Price Waterhouse, whose
reports thereon are incorporated herein by reference. Such financial statements
have been incorporated herein in reliance upon such reports given upon their
authority as experts in accounting and auditing.
37
<PAGE>
Administrator and Distributor of the Fund
Signature Broker-Dealer Services, Inc.
6 St. James Avenue
Boston, MA 02116
(617) 423-0800
Investment Adviser of the Portfolio EXCELSIOR FUNDS
Citibank, N.A. Excelsior Institutional
153 East 53rd Street Money Fund
New York, NY 10043
Supplemental Investment Manager
of the Fund
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Custodian and Transfer Agent STATEMENT OF
of the Portfolio ADDITIONAL INFORMATION
JANUARY 1, 1997
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
Transfer Agent to the Fund
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
Independent Accountants of the Fund
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
Independent Accountants of the Portfolio
Price Waterhouse
Suite 3000, Box 190
1 First Canadian Place
Toronto, Ontario M5X1H7
38
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
(1) The financial statements included in Part A are as follows:
(i) Audited financial highlights for the Excelsior
Institutional Money Fund for the period November 8,
1993 (Commencement of Operations) to August 31, 1994
and for the Years Ended August 31, 1995 and 1996
(2) The financial statements included in Part B are as follows:
(i) Excelsior Institutional Money Fund:
o Statement of Assets and Liabilities at August 31, 1996
o Statement of Operations for the fiscal year ended
August 31, 1996
o Statement of Changes in Net Assets for the fiscal years
ended August 31, 1996 and 1995
o Financial Highlights for the Excelsior Institutional
Money Fund for the period November 8, 1993
(Commencement of Operations) to August 31, 1994 and
for the Years Ended August 31, 1995 and 1996
o Notes to Financial Statements
o Report of Independent Accountants
(ii) Cash Reserves Portfolio:
o Portfolio of Investments at August 31, 1996
o Statement of Assets and Liabilities at August 31, 1996
o Statement of Operations for the fiscal year ended,
August 31, 1996
o Statement of Changes in Net Assets for the fiscal years
ended August 31, 1996 and 1995
o Financial Highlights for the fiscal years ended
August 31, 1996, 1995, 1994, 1993 and 1992
o Notes to Financial Statements
o Independent Auditors' Report
(b) Exhibits Notes
-------- -----
1. Trust Instrument of the Registrant. 3
2. By-laws of the Registrant. 3
5. Investment Advisory Agreement between the Registrant
and United States Trust Company of New York ("U.S. Trust"). 3
6(a). Distribution Agreement between the Registrant and
Signature Broker-Dealer Services, Inc. ("SBDS"). 3
8(a). Custodian Agreement dated July 1, 1994 between the
Registrant and U.S. Trust. 4
9(a). Administrative Services Agreement between the
Registrant and SBDS. 3
<PAGE>
9(b). Administrative Services Plan and Related Form of
Shareholder Servicing Agreement. 4
9(c). Mutual Funds Transfer Agency Agreement dated as
of August 9, 1994 between Registrant and Chase Global
Funds Services Company. 4
10(a). Opinion of Counsel.(1)
(b). Opinion of Counsel. 4
11. Consents of Independent Accountants. 4
13. Investor Representation Letter of Initial Shareholder. 2
16. Schedule for Computation of Performance Information. 3
17. Financial Data Schedule. 4
24(a). Registrant's Annual Report dated August 31, 1996 is
incorporated herein by reference to Registrant's
filing including such Annual Report and filed with
the SEC on December 20, 1996 (Accession No. 0000950116-96-001466).
24(b). Cash Reserve Portfolio's Annual Report dated August 31, 1996 is
incorporated herein by reference to Cash Reserves Portfolio's filing
including such Annual Report and filed with the SEC on October 29,
1996 (Accession No. 0000950156-96-000851).
Notes:
1 Incorporated herein by reference to the Registrant's Registration
Statement on Form N-1A (the "Registration Statement") under the
Investment Company Act of 1940, as amended (the "1940 Act") (File
No. 811-8132), as filed with the Securities and Exchange Commission
(the "SEC") on November 4, 1993.
2 Incorporated herein by reference from Post-Effective Amendment No. 1
("Amendment No. 1") to the Registration Statement under the 1940 Act
and Registrant's initial filing under the Securities Act of 1933, as
amended (File No. 33-71306), as filed with the SEC on November 5,
1993.
3 Incorporated herein by reference to Post-Effective Amendment No. 4
("Amendment No. 4") to Registrant's Registration Statement on Form
N-1A, as filed with the SEC on December 21, 1995.
4 Filed herewith.
- --------------------------
1. Filed on October 29, 1996 under Rule 24f-2 as part of Registrant's
Rule 24f-2 Notice.
-2-
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant.
Registrant is controlled by its Board of Trustees.
Item 26. Number of Holders of Securities.
As of December 18, 1996:
Title of Class Number of Record Holders
- -------------- ------------------------
Shares of Beneficial
Interest (par value $.00001)
Excelsior Institutional Money Fund 445
Item 27. Indemnification.
Reference is hereby made to Article IX of the Registrant's
Trust Instrument, filed as an exhibit to the Registration Statement.
The trustees and officers of the Registrant and the personnel
of the Registrant's administrator are insured under an errors and omissions
liability insurance policy. The Registrant, its trustees and its officers are
also insured under the fidelity bond required by Rule 17g-1 under the 1940 Act.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be permitted to
directors, trustees, officers and controlling persons of the Registrant and the
principal underwriter pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, trustee, officer, or controlling person of the Registrant
and the principal underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such director,
trustee, officer or controlling person or principal underwriter in connection
with the shares being registered, the 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 1933 Act and will be governed by
the final adjudication of such issue.
-3-
<PAGE>
Item 28. Business and Other Connections of Investment Adviser.
(a) United States Trust Company of New York.
United States Trust Company of New York ("U.S. Trust") is a
full-service state-chartered bank located in New York, New York. The name,
position with U.S. Trust, address, principal occupation and type of business are
set forth below for the trustees and certain senior executive officers of U.S.
Trust, including those who are engaged in any other business, profession,
vocation, or employment of a substantial nature.
-4-
<PAGE>
Position
with U.S. Principal Type of
Trust Name Occupation Business
- --------- ---- ---------- --------
Director Eleanor Baum Dean of School Academic
Cooper Union for the of Engineering
Advancement of Science
and Art
51 Astor Place
New York, NY 10003
Director Samuel C. Butler Partner in Cravath, Law Firm
Cravath, Swaine Swaine & Moore
& Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Director Peter O. Crisp Chairman of Venture
Venrock Inc. Venrock Inc. Capital
Room 5600
30 Rockefeller Plaza
New York, NY 10112
Director Antonia M. Grumbach Partner in Patter- Law Firm
Patterson, Belknap, son, Belknap, Webb
Webb & Tyler & Tyler
1133 Avenue of the
Americas
New York, NY 10036
Director, H. Marshall Schwarz Chairman of the Bank
Chairman of United States Trust Board & Chief Exe-
the Board Co. of New York cutive Officer of
and Chief 114 West 47th Street U.S. Trust Corp. and
Executive New York, NY 10036 U.S. Trust Company of
Officer N.Y.
Director Philippe de Montebello Director of the Art Museum
Metropolitan Museum of Metropolitan
Art Museum of Art
1000 Fifth Avenue
New York, NY 10028-0198
Director Paul W. Douglas Retired Chairman Coal Mining,
250 Park Avenue of the Pittston Transportation
Room 1900 Company and Security
New York, NY 10117 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
Landmark Volunteers Director and
749 A Main Street Trustee
Route 7, Box 455
Sheffield, MA 01257
-5-
<PAGE>
Position
with U.S. Principal Type of
Trust Name Occupation Business
- --------- ---- ---------- --------
Director Robert N. Wilson Vice Chairman of Health Care
Johnson & Johnson the Board of Johnson Products
One Johnson & & Johnson
Johnson Plaza
New Brunswick, NJ 08933
Director Peter L. Malkin Chairman of Wein, Law Firm
Wein, Malkin & Bettex Malkin & Bettex
Lincoln Building
60 East 42nd Street
New York, NY 10165
Director Richard F. Tucker Retired Vice Petroleum and
11 Over Rock Lane Chairman of Mobil Chemicals
Westport, CT 06880 Oil Corporation
Director Carroll L. Wainright, Jr. Consulting Partner Law Firm
Milbank, Tweed, Hadley of Milbank, Tweed,
& McCloy Hadley & McCloy
One Chase Manhattan Plaza
New York, NY 10005
Director Ruth A. Wooden President and Not for
The Advertising CEO Profit Public
Council, Inc. Service
261 Madison Avenue Advertising
11th Floor
New York, NY 10016
Director, Frederick B. Taylor Vice Chairman and Bank
Vice Chair- United States Trust Chief Investment Of-
man and Company of New York ficer of U.S. Trust
Chief Invest- 114 West 47th Street Corporation and United
ment Officer New York, NY 10036 States Trust Company
of New York
Director, Jeffrey S. Maurer President and Chief Bank
President United States Trust Operating Officer of
and Chief Company of New York U.S. Trust Corporation
Operating 114 West 47th Street and United States Trust
Officer New York, NY 10036 Company of New York
Director Daniel P. Davison Chairman, Christie, Fine Art
Christie, Manson Manson & Woods Auctioneer
& Woods International, International, Inc.
Inc.
502 Park Avenue
New York, NY 10021
Director Orson D. Munn Chairman and Investment
Munn, Bernhard & Director of Munn, Advisory
Associates, Inc. Bernhard & Asso- Firm
6 East 43rd Street ciates, Inc.
28th Floor
New York, NY 10017
-6-
<PAGE>
Position
with U.S. Principal Type of
Trust Name Occupation Business
- --------- ---- ---------- --------
Director Philip L. Smith Corporate Director
P.O. Box 386 and Trustee
Ponte Verde Beach,
FL 32004
Item 29. Principal Underwriters.
(a) SBDS currently serves as distributor and administrator for
Excelsior Institutional Money Fund. SBDS also serves as the principal
underwriter or placement agent for UBS Investor Portfolios Trust, UBS Private
Investor Funds, Inc., Greer Century Funds, Domini Social Equity Fund, Domini
Institutional Trust, Domini Social Index Portfolio and Devcap Trust.
(b) Set forth below are the names, principal business addresses and
positions of each director and officer of SBDS. Unless otherwise noted, the
principal business address of these individuals is Signature Broker-Dealer
Services, Inc., 6 St. James Avenue, Boston, Massachusetts 02116. Unless
otherwise specified, none of the officers and directors of SBDS serve as
officers and Trustees of the Registrant.
PHILIP W. COOLIDGE: Chief Executive Officer, President and Director of
SBDS.
JOHN R. ELDER: Assistant Treasurer of SBDS, Treasurer of the
Registrant.
LINWOOD C. DOWNS: Treasurer of SBDS.
JOAN R. GULINELLO: Secretary of SBDS.
MOLLY S. MUGLER: Assistant Secretary of SBDS, Assistant Secretary of
Registrant.
LINDA T. GIBSON: Assistant Secretary of SBDS, Assistant Secretary of
Registrant.
JULIE J. WYETZNER: Product Manager of SBDS.
LEEDS HACKETT: Director of SBDS; Hackett Associates Limited, 780 Third
Avenue, Suite 2501, New York, NY 10017.
LAURENCE B. LEVINE: Director of SBDS; Blair Corporation, 250 Royal
Palm Way, Palm Beach, FL 33480.
DONALD S. CHADWICK: Director of SBDS; 490 Union Avenue, Apartment A2,
Rutherford, NJ 07070.
ROBERT DAVIDOFF: Director of SBDS; CMNY Capital, L.P., 135 East 57th
Street, 27th Floor, New York, NY 10022.
(c) Not applicable.
-7-
<PAGE>
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules thereunder will be
maintained at the offices of:
(1) UNITED STATES TRUST COMPANY OF NEW YORK, 114 West 47th Street, New York,
New York 10036 (records relating to its function as investment adviser and
custodian/transfer agent.
(2) SIGNATURE BROKER-DEALER SERVICES, INC., 6 St. James Avenue, Boston, MA
02116 (records relating to its functions as administrator and distributor).
(3) CHASE GLOBAL FUNDS SERVICES COMPANY, 73 Tremont Street, Boston, MA
02108-3913; (records relating to its functions as sub-administrator and
sub-transfer agent).
(4) DRINKER BIDDLE & REATH, Philadelphia National Bank Building, 1345 Chestnut
Street, Philadelphia, Pennsylvania 19107-3496 (Registrant's Articles of
Incorporation, Bylaws, and Minute Books).
Item 31. Management Services.
Inapplicable.
Item 32. Undertakings.
None.
-8-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, Excelsior Funds certifies that it meets all
the requirements for effectiveness of this Post-Effective Amendment No. 5 to its
Registration Statement on Form N-1A ("Amendment No. 5") pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Amendment No. 5 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Philadelphia and the Commonwealth of Pennsylvania on the 30th day of
December, 1996.
EXCELSIOR FUNDS
By: FREDERICK S. WONHAM*
--------------------
Frederick S. Wonham
Chairman and President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment No. 5 has been signed below by the following persons in the
capacities indicated and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
FREDERICK S. WONHAM* Chairman and December 30, 1996
- ------------------- President
Frederick S. Wonham
W. WALLACE MCDOWELL* Trustee December 30, 1996
- -------------------
W. Wallace McDowell
JONATHAN PIEL* Trustee December 30, 1996
- -------------------
Jonathan Piel
RODMAN L. DRAKE* Trustee December 30, 1996
- -------------------
Rodman L. Drake
By /S/ W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III
Attorney-in-fact
-9-
<PAGE>
SIGNATURES
Cash Reserves Portfolio (the "Portfolio") has duly caused the
Registration Statement on Form N-1A ("Registration Statement") of Excelsior
Funds (the "Trust") to be signed on its behalf by the undersigned, thereto duly
authorized in George Town, Grand Cayman on the 30th day of December, 1996.
CASH RESERVES PORTFOlIO
By /S/ Susan Jakuboski
-----------------------
Susan Jakuboski
Assistant Secretary and Assistant Treasurer
Pursuant to the requirements of the Securities Act of 1933,
the Trust's Registration Statement has been signed below by the following
persons in the capacities indicated on December 30, 1996.
SIGNATURE TITLE DATE
- --------- ----- ----
PHILIP W. COOLIDGE* President and December 30, 1996
- ------------------------- Trustee of the
Philip W. Coolidge Portfolio
SUSAN JAKUBOSKI
- ------------------------- Assistant Secretary December 30, 1996
Susan Jakuboski and Assistant Treasurer
WALTER E. ROBB III* Trustee of December 30, 1996
- ------------------------- the Portfolio
Walter E. Robb III
MARK T. FINN* Trustee of December 30, 1996
- ------------------------- the Portfolio
Mark T. Finn
ELLIOTT J. BERV* Trustee of December 30, 1996
- ------------------------- the Portfolio
Elliott J. Berv
*By /Susan Jakuboski
- --------------------
Susan Jakuboski
As attorney-in-fact pursuant to a power of attorney previously filed.
-10-
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
8(a). Custodian Agreement dated July 1, 1994
between the Registrant and U.S. Trust
9(b). Administrative Services Plan and Related Form
of Shareholder Servicing Agreement.
9(c). Mutual Funds Transfer Agency Agreement dated
as of August 9, 1994 between Registrant and
Chase Global Funds Services Company.
10(b). Opinion of Counsel.
11(a). Consent of Counsel.
11(b). Consent of Price Waterhouse LLP.
11(c). Consent of Price Waterhouse.
27 Financial Data Schedule.
<PAGE>
CUSTODIAN AGREEMENT
BETWEEN
EXCELSIOR FUNDS
and
UNITED STATES TRUST COMPANY OF NEW YORK
<PAGE>
TABLE OF CONTENTS
Page
1. Bank Appointed Custodian...........................................1
2. Definitions 1
2.1 Authorized Person..................................1
2.2 Board..............................................1
2.3 Security...........................................1
2.4 Portfolio Security.................................1
2.5 Officers' Certificate..............................2
2.6 Book-Entry System..................................2
2.7 Depository.........................................2
2.8 Proper Instructions................................2
3. Separate Accounts..................................................2
4. Certification as to Authorized Persons.............................3
5. Custody of Cash....................................................3
5.1 Purchase of Securities.............................3
5.2 Redemptions........................................3
5.3 Distributions and Expenses of Fund.................3
5.4 Payment in Respect of Securities...................4
5.5 Repayment of Loans.................................4
5.6 Repayment of Cash..................................4
5.7 Foreign Exchange Transactions......................4
5.8 Other Authorized Payments..........................4
5.9 Termination........................................4
6. Securities 4
6.1 Segregation and Registration.......................4
6.2 Voting and Proxies.................................5
6.3 Book-Entry System..................................5
6.4 Use of a Depository................................6
6.5 Use of Book-Entry System for Commercial Paper......7
6.6 Use of Immobilization Programs.....................8
6.7 Eurodollar CDs.....................................8
<PAGE>
Page
6.8 Options and Futures Transactions...................9
(a) Puts and Calls Traded on Securities
Exchanges, NASDAQ or Over-the-Counter......9
(b) Puts, Calls, and Futures Traded
on Commodities Exchanges...................9
6.9 Segregated Account.................................9
6.10 Interest Bearing Call or Time Deposits.............11
6.11 Transfer of Securities.............................11
7. Redemptions........................................................13
8. Merger, Dissolution, etc. of Fund..................................13
9. Actions of Bank Without Prior Authorization........................13
10. Collection; Defaults...............................................14
11. Maintenance of Records.............................................14
12. Reserved...........................................................14
13. Concerning the Bank................................................14
13.1 Performance of Duties; Standard of Care............14
13.2 Agents and Sub-Custodians..........................16
13.3 Duties of the Bank with Respect to Property
Held Outside of the United States..................16
13.4 Insurance..........................................19
13.5 Fees and Expenses of Bank..........................19
13.6 Advances by Bank...................................19
14. Termination 20
15. Confidentiality....................................................20
16. Notices ...................................................21
17. Amendments 21
18. Parties ...................................................21
19. Governing Law 21
20. Counterparts 21
21. Limitation of Liability............................................21
<PAGE>
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CUSTODIAN AGREEMENT
AGREEMENT made as of this 1st day of July, 1994, between EXCELSIOR
FUNDS, a trust organized under the laws of the State of Delaware (the "Fund"),
and UNITED STATES TRUST COMPANY OF NEW YORK (the "Bank").
The Fund, an open-end management investment company, desires to place
and maintain all of its portfolio securities and cash in the custody of the
Bank. The Bank has at least the minimum qualifications required by Section
17(f)(1) of the Investment Company Act of 1940, as amended (the "1940 Act"), to
act as custodian of the portfolio securities and cash of the Fund, and has
indicated its willingness to so act, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described, and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below
will have the following meaning:
2.1 Authorized Person. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on behalf
of the Fund by appropriate resolution of its Board, and set forth in a
certificate as required by Section 4 hereof.
2.2 Board. Board will mean the Board of Directors or the Board of
Trustees of the Fund, as the case may be.
2.3 Security. The term security as used herein will have the same
meaning as when such term is used in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
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any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 Portfolio Security. Portfolio Security will mean any security
owned by the Fund.
2.5 Officers' Certificate. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
2.6 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 Depository. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 Proper Instructions. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person
as shall have been designated in an Officers' Certificate, such instructions to
be given in such form and manner as the Bank and the Fund shall agree upon from
time to time, and (ii) instructions (which may be continuing instructions)
regarding other matters signed or initialed by such one or more persons from
time to time designated in an Officers' Certificate as having been authorized by
the Board. Oral instructions will be considered Proper Instructions if the Bank
reasonably believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall cause all
<PAGE>
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oral instructions to be promptly confirmed in writing. The Bank shall act upon
and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-up or
confirmatory instruction shall be to make reasonable efforts to detect any
discrepancy between the original instruction and such confirmation and to report
such discrepancy to the Fund. The Fund shall be responsible, at the Fund's
expense, for taking any action, including any reprocessing, necessary to correct
any such discrepancy or error, and to the extent such action requires the Bank
to act the Fund shall give the Bank specific Proper Instructions as to the
action required. Upon receipt of an Officers' Certificate as to the
authorization by the Board accompanied by a detailed description of procedures
approved by the Fund, Proper Instructions may include communication effected
directly between electro-mechanical or electronic devices provided that the
Board and the Bank are satisfied that such procedures afford adequate safeguards
for the Fund's assets.
3. Separate Accounts. If the Fund has more than one series or
portfolio, the Bank will segregate the assets of each series or portfolio to
which this Agreement relates into a separate account for each such series or
portfolio containing the assets of such series or portfolio (and all investment
earnings thereon). Unless the context otherwise requires, any reference in this
Agreement to any actions to be taken by the Fund shall be deemed to refer to the
Fund acting on behalf of one or more of its series, any reference in this
Agreement to any assets of the Fund, including, without limitation, any
portfolio securities and cash and earnings thereon, shall be deemed to refer
only to assets of the applicable series, any duty or obligation of the Bank
hereunder to the Fund shall be deemed to refer to duties and obligations with
respect to the individual series and any obligation or liability of the Fund
hereunder shall be binding only with respect to the individual series, and shall
be discharged only out of the assets of such series.
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
members of the Board, it being understood that upon the occurrence of any change
in the information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Fund, will sign a new or amended certification setting forth
the
<PAGE>
-5-
change and the new, additional or omitted names or signatures. The Bank will be
entitled to rely and act upon any Officers' Certificate given to it by the Fund
which has been signed by Authorized Persons named in the most recent
certification.
5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Sections 13.2 or 13.3 hereof, including borrowed funds,
delivered to the Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Upon receipt by the Bank of Proper
Instructions (which may be continuing instructions) or in the case of payments
for redemptions and repurchases of outstanding shares of common stock of the
Fund, notification from the Fund's transfer agent as provided in Section 7,
requesting such payment, designating the payee or the account or accounts to
which the Bank will release funds for deposit, and stating that it is for a
purpose permitted under the terms of this Section 5, specifying the applicable
subsection, the Bank will make payments of cash held for the accounts of the
Fund, insofar as funds are available for that purpose, only as permitted in
subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the
Fund, against contemporaneous receipt of such securities by the Bank registered
in the name of the Fund or in the name of, or properly endorsed and in form for
transfer to, the Bank, or a nominee of the Bank, or receipt for the account of
the Bank pursuant to the provisions of Section 6 below, each such payment to be
made at the purchase price shown on a broker's confirmation (or transaction
report in the case of Book Entry Paper) of purchase of the securities received
by the Bank before such payment is made, as confirmed in the Proper Instructions
received by the Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the
repurchase or redemption of common shares of the Fund offered for repurchase or
redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the
account of the Fund of dividends or other distributions to shareholders as may
from time to time be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, fees of the Bank for its services hereunder
and reimbursement of the expenses and liabilities of the Bank as provided
hereunder, fees of any transfer agent, fees for legal, accounting, and
<PAGE>
-6-
auditing services, or other operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in connection
with the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Fund,
but, in the case of final payment, only upon redelivery to the Bank of any
Portfolio Securities pledged or hypothecated therefor and upon surrender of
documents evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Fund for
the purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions. For payments in connection with
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery which may be entered into by the Bank on behalf of
the Fund upon the receipt of Proper Instructions, such Proper Instructions to
specify the currency broker or banking institution (which may be the Bank, or
any other subcustodian or agent hereunder, acting as principal) with which the
contract or option is made, and the Bank shall have no duty with respect to the
selection of such currency brokers or banking institutions with which the Fund
deals or for their failure to comply with the terms of any contract or option.
5.8 Other Authorized Payments. For other authorized transactions of
the Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 Termination: upon the termination of this Agreement
as hereinafter set forth pursuant to Section 8 and Section 14 of
this Agreement.
<PAGE>
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6. Securities.
6.1 Segregation and Registration. Except as otherwise provided
herein, and except for securities to be delivered to any subcustodian appointed
pursuant to Sections 13.2 or 13.3 hereof, the Bank as custodian, will receive
and hold pursuant to the provisions hereof, in a separate account or accounts
and physically segregated at all times from those of other persons, any and all
Portfolio Securities which may now or hereafter be delivered to it by or for the
account of the Fund. All such Portfolio Securities will be held or disposed of
by the Bank for, and subject at all times to, the instructions of the Fund
pursuant to the terms of this Agreement. Subject to the specific provisions
herein relating to Portfolio Securities that are not physically held by the
Bank, the Bank will register all Portfolio Securities (unless otherwise directed
by Proper Instructions or an Officers' Certificate), in the name of a registered
nominee of the Bank as defined in the Internal Revenue Code and any Regulations
of the Treasury Department issued thereunder, and will execute and deliver all
such certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state. The Bank will use its best efforts
to the end that the specific Portfolio Securities held by it hereunder will be
at all times identifiable.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered in the name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices, proxies
and proxy soliciting materials with respect to such Securities, such proxies to
be executed by the registered holder of such Securities (if registered otherwise
than in the name of the Fund), but without indicating the manner in which such
proxies are to be voted.
6.3 Book-Entry System. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits of
Fund assets in the Book-Entry System, and (ii) for any subsequent changes to
such arrangements following such approval, the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
<PAGE>
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(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect
to the Fund's participation in the Book- Entry System through the Bank (or any
such agent) will identify by book entry Portfolio Securities which are included
with other securities deposited in the Account and shall at all times during the
regular business hours of the Bank (or such agent) be open for inspection by
duly authorized officers, employees or agents of the Fund. Where securities are
transferred to the Fund's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Fund a quantity of securities in
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities
purchased for the account of the Fund or shall pay cash collateral against the
return of Portfolio Securities loaned by the Fund upon (i) receipt of advice
from the Book-Entry System that such Securities have been transferred to the
Account, and (ii) the making of an entry on the records of the Bank (or its
agent) to reflect such payment and transfer for the account of the Fund. The
Bank (or its agent) shall transfer securities sold or loaned for the account of
the Fund upon
(i) receipt of advice from the Book-Entry System
that payment for securities sold or payment of the initial cash collateral
against the delivery of securities loaned by the Fund has been transferred to
the Account; and
(ii) the making of an entry on the records of
the Bank (or its agent) to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Book-Entry System of transfers of
securities for the account of the Fund shall identify the Fund, be maintained
for the Fund by the Bank and shall be provided to the Fund at its request. The
Bank shall send the Fund a confirmation, as defined by Rule 17f-4 of the 1940
Act, of any transfers to or from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System;
<PAGE>
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(e) The Bank shall be liable to the Fund for any loss or damage to the
Fund resulting from use of the Book-Entry System by reason of any gross
negligence, willful misfeasance or bad faith of the Bank or any of its agents or
of any of its or their employees or from any reckless disregard by the Bank or
any such agent of its duty to use its best efforts to enforce such rights as it
may have against the Book-Entry System; at the election of the Fund, it shall be
entitled to be subrogated for the Bank in any claim against the Book-Entry
System or any other person which the Bank or its agent may have as a consequence
of any such loss or damage if and to the extent that the Fund has not been made
whole for any loss or damage;
6.4 Use of a Depository. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits in
DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of the Fund all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in
the name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made
through the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the securities to or for the account
of the Fund and the Fund shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund only upon delivery of the Securities to
or for the account of the Fund; and upon any sale of Portfolio Securities,
delivery of the Securities will be made only against payment thereof or, in the
event Portfolio Securities are loaned, delivery of Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Fund; and
(d) The Bank shall be liable to the Fund for any loss or
damage to the Fund resulting from use of a Depository by reason of any gross
negligence, willful misfeasance or bad faith of the Bank or its employees or
from any reckless disregard by the Bank of
<PAGE>
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its duty to use its best efforts to enforce such rights as it may have against a
Depository. In this connection, the Bank shall use its best efforts to ensure
that:
(i) The Depository obtains replacement of any
certificated Portfolio Security deposited with it in the event such Security is
lost, destroyed, wrongfully taken or otherwise not available to be returned to
the Bank upon its request;
(ii) Any proxy materials received by a
Depository with respect to Portfolio Securities deposited with such Depository
are forwarded immediately to the Bank for prompt transmittal to the Fund;
(iii) Such Depository immediately forwards to
the Bank confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to
the Bank such records with respect to the performance of the Bank's obligations
and duties hereunder as may be necessary for the Fund to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and Rule 31(a)
thereunder; and
(v) Such Depository delivers to the Bank and the
Fund all internal accounting control reports, whether or not audited by an
independent public accountant, as well as such other reports as the Fund may
reasonably request in order to verify the Portfolio Securities held by such
Depository.
6.5 Use of Book-Entry System for Commercial Paper. Provided (i) the
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Fund,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining its Book-entry Paper
System, the Bank agrees that:
(a) the Bank will maintain all Book-Entry Paper held by
the Fund in an account of the Bank that includes only assets held
by it for customers;
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(b) the records of the Bank with respect to the Fund's
purchase of Book-entry Paper through the Bank will identify, by book-entry,
Commercial Paper belonging to the Fund which is included in the Book-entry Paper
System and shall at all times during the regular business hours of the Bank be
open for inspection by duly authorized officers, employees or agents of the
Fund;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation
upon the maturity thereof upon contemporaneous (i) receipt of advice that
payment for such Book-Entry Paper has been transferred to the Fund, and (ii) the
making of an entry on the records of the Bank to reflect such payment for the
account of the Fund;
(e) the Bank shall transmit to the Fund a transaction journal
confirming each transaction in Book-Entry Paper for the account of the Fund on
the next business day following the transaction; and
(f) the Bank will send to the Fund such reports on its system
of internal accounting control with respect to the Book-Entry Paper System as
the Fund may reasonably request from time to time.
6.6 Use of Immobilization Programs. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated by
a bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and
(ii) for each year following such approval the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.7 Eurodollar CDs. Any Portfolio Securities which are Eurodollar
CDs may be physically held by the European branch of the U.S. banking
institution that is the issuer of such Eurodollar CD (a "European Branch"),
provided that such Securities are identified on the books of the Bank as
belonging to the Fund and that the
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books of the Bank identify the European Branch holding such Securities.
Notwithstanding any other provision of this Agreement to the contrary, except as
stated in the first sentence of this subsection 6.7, the Bank shall be under no
other duty with respect to such Eurodollar CDs belonging to the Fund, and shall
have no liability to the Fund or its shareholders with respect to the actions,
inactions, whether negligent or otherwise of such European Branch in connection
with such Eurodollar CDs, except for any loss or damage to the Fund resulting
from the Bank's own gross negligence, willful misfeasance or bad faith in the
performance of its duties hereunder.
6.8 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter.
1. The Bank shall take action as to put options ("puts") and
call options ("calls") purchased or sold (written) by the Fund regarding escrow
or other arrangements (i) in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions between the Bank, any
broker-dealer registered under the Exchange Act and a member of the National
Association of Securities Dealers, Inc. (the "NASD"), and, if necessary, the
Fund relating to the compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange, or of any
similar organization or organizations.
2. Unless another agreement requires it to do so, the Bank
shall be under no duty or obligation to see that the Fund has deposited or is
maintaining adequate margin, if required, with any broker in connection with any
option, nor shall the Bank be under duty or obligation to present such option to
the broker for exercise unless it receives Proper Instructions from the Fund.
The Bank shall have no responsibility for the legality of any put or call
purchased or sold on behalf of the Fund, the propriety of any such purchase or
sale, or the adequacy of any collateral delivered to a broker in connection with
an option or deposited to or withdrawn from a Segregated Account (as defined in
subsection 6.9 below). The Bank specifically, but not by way of limitation,
shall not be under any duty or obligation to: (i) periodically check or notify
the Fund that the amount of such collateral held by a broker or held in a
Segregated Account is sufficient to protect such broker of the Fund against any
loss; (ii) effect the return of any collateral delivered to a broker; or (iii)
advise the Fund that any option it holds, has expired or is about to expire.
Such duties or obligations shall be the sole responsibility of the Fund.
<PAGE>
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(b) Puts, Calls and Futures Traded on Commodities
Exchanges
1. The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance with the
provisions of any agreement among the Fund, the Bank and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding account deposits
in connection with transactions by the Fund.
2. The responsibilities and liabilities of the Bank as to
futures, puts and calls traded on commodities exchanges, any Futures Commission
Merchant account and the Segregated Account shall be limited as set forth in
subparagraph (a)(2) of this Section 6.8 as if such subparagraph referred to
Futures Commission Merchants rather than brokers, and Futures and puts and calls
thereon instead of options.
6.9 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund, into which Account or Accounts may be transferred upon
receipt of Proper Instructions cash and/or Portfolio Securities:
(a) in accordance with the provisions of any agreement among
the Fund, the Bank and a broker-dealer registered under the Exchange Act and a
member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange or the
Commodity Futures Trading Commission or any registered Contract Market, or of
any similar organizations regarding escrow or other arrangements in connection
with transactions by the Fund;
(b) for the purpose of segregating cash or securities
in connection with options purchased or written by the Fund or
commodity futures purchased or written by the Fund;
(c) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Fund's then
outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Fund's then outstanding commitments
under reverse repurchase agreements entered into with
<PAGE>
-14-
broker-dealer firms;
(d) for the deposit of any Portfolio Securities which
the Fund has agreed to sell on a forward commitment basis, all in
accordance with Investment Company Act Release No. 10666;
(e) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or
any subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of Segregated Accounts by
registered investment companies;
(f) for other proper corporate purposes, but only, in the
case of this clause (f), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such Segregated Account and
declaring such purposes to be proper corporate purposes.
(g) Assets may be withdrawn from the Segregated Account
pursuant to Proper Instructions only
(i) in accordance with the provisions of any
agreements referenced in (a) or (b) above;
(ii) for sale or delivery to meet the Fund's
obligations under outstanding firm commitment or when- issued
agreements for the purchase of Portfolio Securities and under
reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal
or greater value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding
forward commitment or when-issued agreements for the purchase of portfolio
securities or reverse repurchase agreements are sold to other parties or the
Fund's obligations thereunder are met from assets of the Fund other than those
in the Segregated Account; or
(v) for delivery upon settlement of a forward
commitment agreement for the sale of Portfolio Securities.
6.10 Interest Bearing Call or Time Deposits. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions.
<PAGE>
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The Bank shall include in its records with respect to the assets of the Fund
appropriate notation as to the amount of each such deposit, the banking
institution with which such deposit is made (the "Deposit Bank"), and shall
retain such forms of advice or receipt evidencing the deposit, if any, as may be
forwarded to the Bank by the Deposit Bank. Such deposits shall be deemed
Portfolio Securities of the Fund and the responsibility of the Bank therefor
shall be the same as and no greater than the Bank's responsibility in respect of
other Portfolio Securities of the Fund.
6.11 Transfer of Securities. The Bank will transfer, exchange,
deliver or release Portfolio Securities held by it hereunder, insofar as such
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section the Bank will receive
Proper Instructions requesting such transfer, exchange or delivery stating that
it is for a purpose permitted under the terms of this Section 6.11, specifying
the applicable subsection, or describing the purpose of the transaction with
sufficient particularity to permit the Bank to ascertain the applicable
subsection, only
(a) upon sales of Portfolio Securities for the account of the
Fund, against contemporaneous receipt by the Bank of payment therefor in full,
each such payment to be in the amount of the sale price shown in a broker's
confirmation of sale of the Portfolio Securities received by the Bank before
such payment is made, as confirmed in the Proper Instructions received by the
Bank before such payment is made;
(b) in exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided however that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for failure
to so tender in a timely manner unless such Proper Instructions are received by
the Bank at least two business days prior to the date required for tender, and
unless the Bank (or its agent or subcustodian hereunder) has actual possession
of such Security at least two business days prior to the date of tender;
(c) upon conversion of Portfolio Securities pursuant to
their terms into other securities;
<PAGE>
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(d) for the purpose of redeeming in kind shares of the
Fund upon authorization from the Fund;
(e) in the case of option contracts owned by the Fund,
for presentation to the endorsing broker;
(f) when such Portfolio Securities are called, redeemed
or retired or otherwise become payable;
(g) for the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund by
any bank, including the Bank; provided, however, that such Portfolio Securities
will be released only upon payment to the Bank for the account of the Fund of
the moneys borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, and such fact is made to appear in
the Proper Instructions, further Portfolio Securities may be released for that
purpose without any such payment. In the event that any such pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender, that an event of deficiency or default on the
loan has occurred, the Bank may deliver such pledged Portfolio Securities to or
for the account of the lender;
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions received
by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Fund
to a bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Fund and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Fund;
(j) for other authorized transactions of the Fund or for
other proper corporate purposes; provided that before making such transfer, the
Bank will also receive a certified copy of resolutions of the Board, signed by
an authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such
<PAGE>
-17-
purpose to be a proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made; and
(k) upon termination of this Agreement as hereinafter set
forth pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections
(a), (b), (c), (e), (f), (g), (h) and (i) securities or cash receivable in
exchange therefor shall be delivered to the Bank.
7. Redemptions. In the case of payment of assets of the Fund held by
the Bank in connection with redemptions and repurchases by the Fund of
outstanding common shares, the Bank will rely on notification by the Fund's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment shall
be made in accordance with the Trust Instrument and By-Laws of the Fund, from
assets available for said purpose.
8. Merger, Dissolution, etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company, the
sale by the Fund of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Fund set
forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees,
disbursements and expenses of the Bank, this Agreement will terminate.
9. Actions of Bank Without Prior Authorization. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, it will without prior authorization or instruction
of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name
of the Fund all checks, drafts, or other negotiable or transferable instruments
or other orders for the payment of money received by it for the account of the
Fund and hold for the account of the Fund all income, dividends, interest and
other payments or distribution of cash with respect to the Portfolio Securities
held thereunder;
<PAGE>
-18-
9.2 Present for payment all coupons and other income items held by
it for the account of the Fund which call for payment upon presentation and hold
the cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary ownership
and other certificates and affidavits required by the Internal Revenue Code or
the regulations of the Treasury Department issued thereunder, or by the laws of
any state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for
definitive securities.
10. Collections and Defaults. The Bank will use all reasonable efforts
to collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon which such income is
payable are in default or payment is refused after due demand or presentation,
the Bank will notify the Fund in writing of any default or refusal to pay within
two business days from the day on which it receives knowledge of such default or
refusal. In addition, the Bank will send the Fund a written report once each
month showing any income on any Portfolio Security held by it which is more than
ten days overdue on the date of such report and which has not previously been
reported.
<PAGE>
-19-
11. Maintenance of Records. The Bank will maintain records with respect
to transactions for which the Bank is responsible pursuant to the terms and
conditions of this Agreement, and in compliance with the applicable rules and
regulations of the 1940 Act and will furnish the Fund daily with a statement of
condition of the Fund. The Bank will furnish to the Fund at the end of every
month, and at the close of each quarter of the Fund's fiscal year, a list of the
Portfolio Securities and the aggregate amount of cash held by it for the Fund.
The books and records of the Bank pertaining to its actions under this Agreement
and reports by the Bank or its independent accountants concerning its accounting
system, procedures for safeguarding securities and internal accounting controls
will be open to inspection and audit at reasonable times by officers of or
auditors employed by the Fund and will be preserved by the Bank in the manner
and in accordance with the applicable rules and regulations under the 1940 Act.
The Bank shall keep the books of account and render statements or
copies from time to time as reasonably requested by the Treasurer or any
executive officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
12. Reserved.
13. Concerning the Bank.
13.1 Performance of Duties and Standard of Care. In performing its
duties hereunder and any other duties listed on any Schedule hereto, if any, the
Bank will be entitled to receive and act upon the advice of independent counsel
of its own selection, which may be counsel for the Fund, and will be without
liability for any action taken or thing done or omitted to be done in accordance
with this Agreement in good faith in conformity with such advice. In the
performance of its duties hereunder, the Bank will be protected and not be
liable, and will be indemnified and held harmless for any action taken or
omitted to be taken by it in good faith reliance upon the terms of this
Agreement, any Officers' Certificate, Proper Instructions, resolution of the
Board, telegram, notice, request, certificate or other instrument reasonably
believed by the Bank to be genuine and for any other loss to the Fund except in
the case of its gross negligence, willful misfeasance or bad faith in the
performance of its duties or reckless disregard of its obligations and duties
hereunder.
The Bank will be under no duty or obligation to inquire into
<PAGE>
-20-
and will not be liable for:
(a) the validity of the issue of any Portfolio
Securities purchased by or for the Fund, the legality of the
purchases thereof or the propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio
Securities by or for the Fund or the propriety of the amount for
which the same are sold;
(c) the legality of an issue or sale of any common
shares of the Fund or the sufficiency of the amount to be received
therefor;
(d) the legality of the repurchase of any common shares
of the Fund or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by
the Fund or the legality of the distribution of any Portfolio
Securities as payment in kind of such dividend; and
(f) any property or moneys of the Fund unless and until
received by it, and any such property or moneys delivered or paid
by it pursuant to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio Securities at any time delivered to or held by
it for the account of the Fund are such as may properly be held by the Fund
under the provisions of its Trust Instrument, By-Laws, any federal or state
statutes or any rule or regulation of any governmental agency.
Notwithstanding anything in this Agreement to the contrary, in no event
shall the Bank be liable hereunder or to any third party:
(a) for any losses or damages of any kind resulting from acts
of God, earthquakes, fires, floods, storms or other disturbances of nature,
epidemics, strikes, riots, nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, nuclear fusion,
fission or radiation, the interruption, loss or malfunction of utilities,
transportation, or computers (hardware or software) and computer facilities, the
unavailability of energy sources and other similar happenings or events except
as results from the Bank's own gross negligence; or
(b) for special, punitive or consequential damages arising
from the provision of services hereunder, even if the Bank has been advised of
the possibility of such damages.
<PAGE>
-21-
13.2 Agents and Sub-Custodians with Respect to Property of the Fund
Held in the United States. The Bank may employ agents in the performance of its
duties hereunder and shall be responsible for the acts and omissions of such
agents as if performed by the Bank hereunder.
Upon receipt of Proper Instructions, the Bank may employ
sub-custodians, provided that any such sub-custodian meets at least the minimum
qualifications required by Section 17(f)(1) of the 1940 Act to act as a
custodian of the Fund's assets with respect to property of the Fund held in the
United States. The Bank shall have no liability to the Fund or any other person
by reason of any act or omission of any sub-custodian and the Fund shall
indemnify the Bank and hold it harmless from and against any and all actions,
suits and claims, arising directly or indirectly out of the performance of any
sub-custodian. Upon request of the Bank, the Fund shall assume the entire
defense of any action, suit, or claim subject to the foregoing indemnity. The
Fund shall pay all fees and expenses of any sub-custodian.
13.3 Duties of the Bank with Respect to Property of the Fund Held
Outside of the United States.
(a) Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Bank (or any sub-custodian appointed pursuant to
Section 13.2 above) to employ as sub-custodians for the Fund's Portfolio
Securities and other assets maintained outside the United States the foreign
banking institutions and foreign securities depositories designated on the
Schedule attached hereto (each, a "Selected Foreign Sub-Custodian"). Upon
receipt of Proper Instructions, together with a certified resolution of the
Fund's Board of Trustees, the Bank and the Fund may agree to designate
additional foreign banking institutions and foreign securities depositories to
act as Selected Foreign Sub-Custodians hereunder. Upon receipt of Proper
Instructions, the Fund may instruct the Bank to cease the employment of any one
or more such Selected Foreign Sub-Custodians for maintaining custody of the
Fund's assets, and the Bank shall so cease to employ such sub-custodian as soon
as alternate custodial arrangements have been implemented.
(b) Foreign Securities Depositories. Except as may otherwise
be agreed upon in writing by the Bank and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Selected Foreign
Sub-Custodians pursuant to the terms hereof. Where possible, such arrangements
shall include entry into agreements containing the provisions set
<PAGE>
-22-
forth in subparagraph (d) hereof. Notwithstanding the foregoing, except as may
otherwise be agreed upon in writing by the Bank and the Fund, the Fund
authorizes the deposit in Euro-clear, the securities clearance and depository
facilities operated by Morgan Guaranty Trust Company of New York in Brussels,
Belgium, of Foreign Portfolio Securities eligible for deposit therein and to
utilize such securities depository in connection with settlements of purchases
and sales of securities and deliveries and returns of securities, until notified
to the contrary pursuant to subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify on its
books as belonging to the Fund the Foreign Portfolio Securities held by each
Selected Foreign Sub-Custodian. Each agreement pursuant to which the Bank
employs a foreign banking institution shall require that such institution
establish a custody account for the Bank and hold in that account, Foreign
Portfolio Securities and other assets of the Fund, and, in the event that such
institution deposits Foreign Portfolio Securities in a foreign securities
depository, that it shall identify on its books as belonging to the Bank the
securities so deposited.
(d) Agreements with Foreign Banking Institutions. Each of the
agreements pursuant to which a foreign banking institution holds assets of the
Fund (each, a "Foreign Sub-Custodian Agreement") shall be substantially in the
form previously made available to the Fund and shall provide that: (a) the
Fund's assets will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration (including, without limitation, any fees or taxes payable upon
transfers or reregistration of securities); (b) beneficial ownership of the
Fund's assets will be freely transferable without the payment of money or value
other than for custody or administration (including, without limitation, any
fees or taxes payable upon transfers or reregistration of securities); (c)
adequate records will be maintained identifying the assets as belonging to Bank;
(d) officers of or auditors employed by, or other representatives of the Bank,
including to the extent permitted under applicable law, the independent public
accountants for the Fund, will be given access to the books and records of the
foreign banking institution relating to its actions under its agreement with the
Bank; and (e) assets of the Fund held by the Selected Foreign Sub-Custodian will
be subject only to the instructions of the Bank or its agents.
(e) Access of Independent Accountants of the Fund. Upon
request of the Fund, the Bank will use its best efforts to
<PAGE>
-23-
arrange for the independent accountants of the Fund to be afforded access to the
books and records of any foreign banking institution employed as a Selected
Foreign Sub-Custodian insofar as such books and records relate to the
performance of such foreign banking institution under its Foreign Sub-Custodian
Agreement.
(f) Reports by Bank. The Bank will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of the securities
and other assets of the Fund held by Selected Foreign Sub-Custodians, including
but not limited to an identification of entities having possession of the
Foreign Portfolio Securities and other assets of the Fund.
(g) Transactions in Foreign Custody Account. Transactions
with respect to the assets of the Fund held by a Selected Foreign Sub-Custodian
shall be effected pursuant to Proper Instructions from the Fund to the Bank and
shall be effected in accordance with the applicable Foreign Sub-Custodian
Agreement. If at any time any Foreign Portfolio Securities shall be registered
in the name of the nominee of the Selected Foreign Sub-Custodian, the Fund
agrees to hold any such nominee harmless from any liability by reason of the
registration of such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for Foreign Portfolio Securities received for
the account of the Fund and delivery of Foreign Portfolio Securities maintained
for the account of the Fund may be effected in accordance with the customary
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the 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.
In connection with any action to be taken with respect to the Foreign
Portfolio Securities held hereunder, including, without limitation, the exercise
of any voting rights, subscription rights, redemption rights, exchange rights,
conversion rights or tender rights, or any other action in connection with any
other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Fund such
information in connection therewith as is made available to the Bank by the
Foreign Sub-Custodian, and shall promptly forward to the applicable Foreign
Sub-Custodian any instructions, forms or certifications with respect to such
Rights, and any instructions relating to the actions to be taken in
<PAGE>
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connection therewith, as the Bank shall receive from the Fund pursuant to Proper
Instructions. Notwithstanding the foregoing, the Bank shall have no further duty
or obligation with respect to such Rights, including, without limitation, the
determination of whether the Fund is entitled to participate in such Rights
under applicable U.S. and foreign laws, or the determination of whether any
action proposed to be taken with respect to such Rights by the Fund or by the
applicable Foreign Sub-Custodian will comply with all applicable terms and
conditions of any such Rights or any applicable laws or regulations, or market
practices within the market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-Custodians. Each
Foreign Sub-Custodian Agreement with a foreign banking institution shall require
the institution to exercise reasonable care in the performance of its duties and
to indemnify, and hold harmless, the Bank and each Fund from and against certain
losses, damages, costs, expenses, liabilities or claims arising out of or in
connection with the institution's performance of such obligations, all as set
forth in the applicable Foreign Sub- Custodian Agreement. The Fund acknowledges
that the Bank, as a participant in Euro-clear, is subject to the Terms and
Conditions Governing the Euro-Clear System, a copy of which has been made
available to the Fund. The Fund acknowledges that pursuant to such Terms and
Conditions, Morgan Guaranty Brussels shall have the sole right to exercise or
assert any and all rights or claims in respect of actions or omissions of, or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euro-clear in connection with the Fund's securities and
other assets.
(i) Liability of Bank. The Bank shall have no more or less
responsibility or liability on account of the acts or omissions of any Selected
Foreign Sub-Custodian employed hereunder than any such Selected Foreign
Sub-Custodian has to the Bank and, without limiting the foregoing, the Bank
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions, or acts of
war or terrorism, political risk (including, but not limited to, exchange
control restrictions, confiscation, insurrection, civil strife or armed
hostilities) other losses due to Acts of God, nuclear incident or any loss where
the Selected Foreign Sub-Custodian has otherwise exercised reasonable care.
(j) Monitoring Responsibilities. The Bank shall furnish
annually to the Fund, information concerning the Selected Foreign Sub-Custodians
employed hereunder for use by the Fund in evaluating such Selected Foreign
Sub-Custodians to ensure compliance with the requirements of Rule 17f-5 of the
Act. In
<PAGE>
-25-
addition, the Bank will promptly inform the Fund in the event that the Bank is
notified by a Selected Foreign Sub-Custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles) or any other capital adequacy
test applicable to it by exemptive order, or if the Bank has actual knowledge of
any material loss of the assets of the Fund held by a Foreign Sub-Custodian.
(k) Tax Law. The Bank shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or the Bank
as custodian of the Fund by the tax laws of any jurisdiction, and it shall be
the responsibility of the Fund to notify the Bank of the obligations imposed on
the Fund or the Bank as the custodian of the Fund by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Bank with regard to such tax law shall
be to use reasonable efforts to assist the Fund with respect to any claim for
exemption or refund under the tax law of jurisdictions for which the Fund has
provided such information.
13.4 Insurance. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund.
13.5. Fees and Expenses of Bank. The Fund will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of Portfolio
Securities made hereunder, and for all necessary proper disbursements, expenses
and charges made or incurred by the Bank in the performance of this Agreement
(including any duties listed on any Schedule hereto, if any) including any
indemnities for any loss, liabilities or expense to the Bank as provided above.
For the services rendered by the Bank hereunder, the Fund will pay to the Bank
such compensation or fees at such rate and at such times as shall be agreed upon
in writing by the parties from time to time. The Bank will also be entitled to
reimbursement by the Fund for all reasonable expenses incurred in conjunction
with termination of this Agreement by the Fund.
13.6 Advances by Bank. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this Agreement upon
receipt of any proper
<PAGE>
-26-
authorization required by this Agreement for such payments by the Fund. Should
such a payment or payments, with advanced funds, result in an overdraft (due to
insufficiencies of the Fund's account with the Bank, or for any other reason)
this Agreement deems any such overdraft or related indebtedness, a loan made by
the Bank to the Fund payable on demand and bearing interest at the current rate
charged by the Bank for such loans unless the Fund shall provide the Bank with
agreed upon compensating balances. The Fund agrees that the Bank shall have a
continuing lien and security interest to the extent of any overdraft or
indebtedness, in and to any property at any time held by it for the Fund's
benefit or in which the Fund has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party acting
on the Bank's behalf). The Fund authorizes the Bank, in its sole discretion, at
any time to charge any overdraft or indebtedness, together with interest due
thereon against any balance of account standing to the credit of the Fund on the
Bank's books.
14. Termination.
14.1 This Agreement may be terminated at any time without penalty
upon sixty days written notice delivered by either party to the other by means
of registered mail, and upon the expiration of such sixty days this Agreement
will terminate; provided, however, that the effective date of such termination
may be postponed to a date not more than ninety days from the date of delivery
of such notice (i) by the Bank in order to prepare for the transfer by the Bank
of all of the assets of the Fund held hereunder, and (ii) by the Fund in order
to give the Fund an opportunity to make suitable arrangements for a successor
custodian. At any time after the termination of this Agreement, the Fund will,
at its request, have access to the records of the Bank relating to the
performance of its duties as custodian.
14.2 In the event of the termination of this Agreement, the Bank
will immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Fund. The obligation of the Bank to deliver and transfer over the assets of the
Fund held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Fund does not select a successor custodian within ninety (90) days from the
date of delivery of notice of termination the Bank may, subject to the
provisions of subsection (14.3), deliver the Portfolio Securities
<PAGE>
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and cash of the Fund held by the Bank to a bank or trust company of its own
selection which meets the requirements of Section 17(f)(1) of the 1940 Act and
has a reported capital, surplus and undivided profits aggregating not less than
$2,000,000, to be held as the property of the Fund under terms similar to those
on which they were held by the Bank, whereupon such bank or trust company so
selected by the Bank will become the successor custodian of such assets of the
Fund with the same effect as though selected by the Board.
14.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
Fund held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which action was taken, certified by the Fund's Secretary and an opinion of
counsel to the Fund in form and content satisfactory to the Bank.
15. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of a governmental
agency. The parties further agree that a breach of this provision would
irreparably damage the other party and accordingly agree that each of them is
entitled, without bond or other security, to an injunction or injunctions to
prevent breaches of this provision.
16. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below; namely:
<PAGE>
-28-
(a) In the case of notices sent to the Fund to:
Excelsior Funds
6 St. James Avenue
9th Floor
Boston, Massachusetts 02116
Attention: Philip W. Coolidge
(b) In the case of notices sent to the Bank to:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Anastasia McLaughlin
or at such other place as such party may from time to time designate in writing.
17. Amendments. This Agreement may not be altered or amended, except by
an instrument in writing, executed by both parties, and in the case of the Fund,
such alteration or amendment will be authorized and approved by its Board.
18. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 14 hereof will not be deemed to
be an assignment within the meaning of this provision.
19. Governing Law. This Agreement and all performance
hereunder will be governed by the laws of the Commonwealth of
Massachusetts.
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
21. Limitation of Liability. A copy of the Trust Instrument of the Fund
is on file with the Secretary of State of the state of Delaware and notice is
hereby given that this Agreement has been executed on behalf of the Fund by an
officer of the Fund as an officer and not individually and the obligations of
the Fund arising out of this Agreement are not binding upon any of the trustees,
officers or shareholders of the Fund individually but are
<PAGE>
-29-
binding only upon the assets and property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
Excelsior Funds
ATTEST: /s/ Andres Saladana By: /s/ James B. (signature illegible)
----------------------- ----------------------------------
Name:
Title:
United States Trust Company of New York
ATTEST: /s/Anastasia McLaughlin By: /s/ Peter C. Arrighetti
------------------------ -----------------------------------
Name: Peter C. Arrighetti
Title: Senior Vice President
<PAGE>
EXCELSIOR FUNDS
ADMINISTRATIVE SERVICES PLAN
Section 1. Upon the recommendation of Signature Broker-Dealer
Services, Inc. (the "Administrator") as Administrator of Excelsior Funds (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 Trustees ("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 Administrator shall monitor the arrangements
pertaining to the Company's Servicing Agreements with Service Organizations in
accordance with the terms of the Administration Agreement by and between the
Administrator and the Company. The Administrator 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
Administrator shall provide to the Company's Board of Trustees, and the Trustees
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 Trustees, including a majority of the trustees 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 Trustees"), 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 Trustees, 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 Trustees.
Section 8. While this Plan is in effect, the selection and
nomination of the new trustees 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 Trustees.
Section 9. The Company initially adopted this Plan as of
February 9, 1996.
-2-
<PAGE>
SHAREHOLDER SERVICING AGREEMENT
THIS AGREEMENT, by and between Excelsior Funds (the "Trust")
and the shareholder service organization (the "Organization") listed on the
signature page hereof;
WITNESSETH:
WHEREAS, certain transactions in shares of beneficial
interest, $0.00001 par value, of the Trust or of any series now existing or
later created of the Trust ("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 Trust; 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 Trust; and
WHEREAS, it is in the interest of the Trust to make the
services of the Organization available to Customers who are or may become
beneficial owners of Shares of the Trust;
NOW, THEREFORE, the Trust 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
Trust 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
Trust'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 limitation1: (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 Trust; (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 Trust'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 Trust to
Customers; (j) receiving, tabulating and transmitting to the Trust proxies
executed by Customers with respect to annual and special meetings of
shareholders of the Trust; (k) providing reports (at least monthly, but more
frequently if so requested by the Trust'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 Trust 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.
- --------
1 Services may be modified or omitted in a particular case and
items relettered or renumbered.
-2-
<PAGE>
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 of the services described above shall be determined from
time to time by agreement between the Organization and the Trust. The Trust
acknowledges that the Organization's ability to perform on a timely basis
certain of its obligations under this Agreement depends upon the Trust's timely
delivery of certain materials and/or information to the Organization. The Trust
agrees to use its best efforts to provide such materials to the Organization in
a timely manner.
3. Fees.
3.1 Fees from the Trust. 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 Trust'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 Trust's net assets shall
be computed in the manner specified in the Trust's then-current prospectus for
computation of the net asset value of the Trust's Shares. The above fees
constitute all fees to be paid to the Organization by the Trust with respect to
the transactions contemplated hereby. The Trust 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 Trust, 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 Trust or generally cover services
not limited to those with respect to the Trust). The Organization shall bill
Customers directly for such fees. In the event the Organization charges
Customers such fees, it shall notify the Trust 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 Trust shall make written disclosure of the fees paid or
to be paid to the Organization pursuant to Section 3.1 of
-3-
<PAGE>
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
Trust except to the extent expressly authorized by law or by such shareholder,
or to any assets of the Trust, 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 Trust 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 Trust or any factual
information contained in the then-current prospectus relating to the Trust or to
any series of the Trust. In furnishing such information regarding the Trust or
the Shares, the Organization shall act as agent for the Customer only and shall
have no authority to act as agent for the Trust. 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 Trust shall be
provided to the Trust at least 10 days prior to such circulation or
dissemination (unless the Trust 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 Trust 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 Trust
liable for the use (or accuracy unless prepared by the Trust for the specific
use) of any information about the Trust which is disseminated by the
Organization.
5. Use of the Organization's Name. The Trust 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 Trust 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 Trust's Name. The Organization shall not use the name of
the Trust on any checks, bank drafts, bank statements or forms for other than
internal use in a manner not
-4-
<PAGE>
approved by the Trust prior thereto in writing; provided, however, that the
approval of the Trust shall not be required for the use of the Trust'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 of the Trust's
name which merely refers in accurate and factual terms to the Trust 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 Trust'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 Trust shall from time to time specify the types of
records and other data of the Trust 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 Trust 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 Trust 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 Trust from time to time, the Organization agrees
that it will provide the administrator of the Trust 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 Trust and shall supply all information
-5-
<PAGE>
necessary for the Trust to discharge its responsibilities under
applicable laws and regulations.
10. Record Keeping.
10.1 Section 31. The Organization shall maintain records in a form
reasonably acceptable to the Trust 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 Trust and
will be made available at the Trust's request for inspection and use by the
Trust, representatives of the Trust and governmental authorities. The
Organization agrees that, for so long as it retains any records of the Trust, 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 Trust all
books and records maintained by the Organization and deemed to be the Trust'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 Trust 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 Trust 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 Trust and any such dealer copies of, all reports
and undertakings as may be reasonably requested by the Trust 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 Trust may direct a certified list of the
shareholders of the Trust 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
-6-
<PAGE>
relevant books, records, correspondence, and other data established or
maintained by the Organization under this Agreement. In the event this Agreement
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 Trust 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 Trust 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 Trust's Prospectus. Notwithstanding
anything herein to the contrary, the Trust 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
-7-
<PAGE>
executed by any person duly authorized by the Trust, 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 executed by a
person duly authorized by the Trust, excepting only the negligence or bad faith
of the Organization.
In any case in which the Trust may be asked to indemnify or
hold the Organization harmless, the Trust shall be advised of all pertinent
facts concerning the situation in question and the Organization shall use
reasonable care to identify and notify the Trust promptly concerning any
situation which presents or appears likely to present a claim for
indemnification against the Trust. The Trust shall have the option to defend the
Organization against any Claim which may be the subject of indemnification
hereunder. In the event that the Trust elects to defend against such Claim, the
defense shall be conducted by counsel chosen by the Trust and satisfactory to
the Organization. The Organization may retain additional counsel at its expense.
Except with the prior written consent of the Trust, the Organization shall not
confess any Claim or make any compromise in any case in which the Trust will be
asked to indemnify the Organization.
12.2 Indemnification of the Trust. Without limiting the rights of the
Trust under applicable law, the Organization will indemnify and hold the Trust
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 Trust's
verification or guarantee of any Customer signature.
In any case in which the Organization may be asked to
indemnify or hold the Trust harmless, the Organization shall be advised of all
pertinent facts concerning the situation in question and the Trust 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 Trust 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
-8-
<PAGE>
conducted by counsel chosen by the Organization and satisfactory to the Trust.
The Trust may retain additional counsel at its expense. Except with the prior
written consent of the Organization, the Trust shall not confess any Claim or
make any compromise in any case in which the Organization will be asked to
indemnify the Trust.
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 February 9, 1997 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 Trustees of the Trust and
(ii) those Trustees who are not "interested persons" (as defined in the 1940
Act) of the Trust and have no direct or indirect financial interest in the
operation of the Trust'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 Trustees"). This Agreement is terminable, without
penalty, at any time by the Trust (which termination may be by a vote of a
majority of the Disinterested Trustees) or by you upon notice to the Trust.
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 Trust (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 Trust for the acts and
omissions of any subcontractor as it would be for its own acts or omissions.
-9-
<PAGE>
18. Compliance with Laws and Policies; Cooperation. The Trust 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 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 Trust shall
send to the record owners of its Shares the Trust's audited financial
statements.
18.2 Annual Certification. At least once a year, the Organization shall
certify to the Trust 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 the Trust 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 Trust 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 Delaware. 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 or
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.
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.
-10-
<PAGE>
Dated as of: ___________________
Excelsior Funds Address for Notices:
--------------------------------
--------------------------------
--------------------------------
By:
------------------------------- --------------------------------
(Authorized Officer)
- ----------------------------------- Address for Notices:
[Service Organization]
--------------------------------
--------------------------------
--------------------------------
By:
--------------------------------
(Authorized Officer)
-11-
<PAGE>
APPENDIX A
EXCELSIOR FUNDS
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
=============================================================================
Institutional Money Fund __ BP
=============================================================================
-12-
<PAGE>
MUTUAL FUNDS TRANSFER AGENCY AGREEMENT
AGREEMENT made as of August 9, 1994 by and between The
Excelsior Funds (the "Fund"), an open-end diversified management investment
company and Mutual Funds Service Company (the "Transfer Agent"), a Delaware
Corporation.
WITNESSETH
WHEREAS, the Fund is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund wishes to retain the Transfer Agent to
provide certain transfer agent services with respect to the Fund, and the
Transfer Agent 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. APPOINTMENT. The Fund hereby appoints the Transfer Agent to
provide transfer agent services for the Fund, subject to the supervision of the
Board of Trustees of the Fund (the "Board"), for the period and on the terms set
forth in this Agreement. The Transfer Agent accepts such appointment and agrees
to furnish the services set forth herein in return for the compensation as
provided in Schedule A to this Agreement. The Fund will initially consist of the
portfolios, funds and/or classes of shares (each an "Investment Fund";
collectively the
<PAGE>
"Investment Funds") listed in Schedule B, attached hereto. The Fund shall notify
the Transfer Agent in writing of each additional Investment Fund established by
the Fund. Each new Investment Fund shall be subject to the provisions of this
Agreement, except to the extent that the provisions (including those relating to
the compensation and expenses payable by the Fund and its Investment Funds) may
be modified with respect to each new Investment Fund in writing by the Fund and
the Transfer Agent at the time of the addition of the new Investment Fund.
2. REPRESENTATIONS AND WARRANTIES.
(a) The Transfer Agent represents and warrants to the
Fund that:
(i) the Transfer Agent is a corporation
organized and existing and in good
standing under the laws of the State of
Delaware;
(ii) the Transfer Agent is duly qualified to
carry on its business in the State of
New York;
(iii) the Transfer Agent is empowered under
applicable laws and by its Charter
Document and By-Laws to enter into and
perform this Agreement;
(iv) all requisite corporate proceedings have
been taken to authorize the Transfer
Agent to enter into and perform this
Agreement;
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<PAGE>
(v) the Transfer Agent 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 the Transfer Agent's ability
to perform its duties and obligations
under this Agreement; and
(vii) the Transfer Agent's entrance into this
Agreement shall not cause a material
breach or be in material conflict with
any other agreement or obligation of the
Transfer Agent or any law or regulation
applicable to the Transfer Agent;
(b) The Fund represents and warrants to the Transfer
Agent that:
(i) the Fund is an open-end diversified
management investment company duly
organized as a business trust under the
laws of the State of Delaware;
(ii) the Fund is empowered under applicable
laws and by its Charter Document and
By-Laws to enter into and perform this
Agreement;
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(iii) all requisite proceedings have been taken
to authorize the Fund to enter into and
perform this Agreement;
(iv) the Fund is an investment company
properly registered under the 1940 Act;
(v) a registration statement under the
Securities Act of 1933, as amended ("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 Fund's ability to
perform its duties and obligations under
this Agreement; and
(vii) the Fund's entrance into this Agreement
shall not cause a material breach or be
in material conflict with any other
agreement or obligation of the Fund or
any law or regulation applicable to it.
3. DELIVERY OF DOCUMENTS. The Fund will promptly
furnish to the Transfer Agent such copies, properly certified or
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<PAGE>
authenticated, of contracts, documents and other related information that the
Transfer Agent may request or requires to properly discharge its duties. Such
documents may include but are not limited to the following:
(a) Resolutions of the Board authorizing the
appointment of the Transfer Agent to provide
certain transfer agency services to the Fund and
approving this Agreement;
(b) The Fund's Charter Document;
(c) The Fund's By-Laws;
(d) The Fund's Notification of Registration on Form
N-8A under the 1940 Act as filed with the
Securities and Exchange Commission ("SEC");
(e) The Fund's registration statement including exhibits,
as amended, on Form N-1A (the "Registration
Statement") under the 1933 Act and the 1940 Act, as
filed with the SEC;
(f) Copies of the Investment Advisory Agreement
between the Fund and its investment adviser (the
"Advisory Agreement");
(g) Opinions of counsel and auditors' reports;
(h) The Fund's Prospectus(es) and Statement(s) of
Additional Information relating to all Investment
Funds and all amendments and supplements thereto
(such Prospectus(es) and Statement(s) of Additional
Information and supplements thereto, as
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<PAGE>
presently in effect and as from time to time
hereafter amended and supplemented, herein called
the "Prospectuses"); and
(i) Such other agreements as the Fund may enter into from
time to time including securities lending agreements,
futures and commodities account agreements, brokerage
agreements, and options agreements.
4. SERVICES PROVIDED BY THE TRANSFER AGENT.
(a) The Transfer Agent will provide the following
services subject to the control, direction and supervision of the Board and in
compliance with the objectives, policies and limitations set forth in the Fund's
Registration Statement, Charter Document and By-Laws; applicable laws and
regulations; and all resolutions and policies implemented by the Board;
(i) Transfer Agency
A detailed description of the above service is contained in Schedule C to this
Agreement.
(ii) Dividend Disbursing. The Transfer Agent
will serve as the Fund's dividend disbursing agent. The Transfer Agent will
prepare and mail checks, place wire transfers of credit income and capital gain
payments to shareholders. The Fund will advise the 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. The Transfer Agent
will, on or before the payment date of any such dividend or
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<PAGE>
distribution, notify the Fund'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 Fund will instruct its
Custodian to make available to the 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 and/or certificates delivered where requested. A
shareholder not electing issuance of certificates will receive a confirmation
from the Transfer Agent indicating the number of shares credited to his/her
account. (b) The 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 the Transfer Agent or a
corporate affiliate of the Transfer
Agent);
(ii) provide the services of individuals to
serve as officers of the Fund who will be
designated by the Transfer Agent and
elected by the Board subject to
reasonable Board approval;
(iii) provide or otherwise obtain personnel
sufficient, in the Transfer Agent's sole
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<PAGE>
discretion, for provision of the services
contemplated herein;
(iv) furnish equipment and other materials,
which the 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 such form and
manner as set forth in Schedule C, and as
the Transfer Agent may otherwise deem
appropriate or advisable, all in
accordance with the 1940 Act. To the
extent required by Section 31 of the 1940
Act and the rules thereunder, the
Transfer Agent agrees that all such
records prepared or maintained by the
Transfer Agent relating to the services
provided hereunder are the property of
the Fund and will be preserved for the
periods prescribed under Rule 31a-2 under
the 1940 Act, maintained at the Fund's
expense, and made available in accordance
with such Section and rules. The Transfer
Agent further agrees to surrender
promptly to the Fund upon its request and
cease to retain in its records and files
those records and
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<PAGE>
documents created and maintained by the
Transfer Agent pursuant to this Agreement.
5. FEES; EXPENSES; EXPENSE REIMBURSEMENT.
(a) As compensation for the services rendered to the
Fund pursuant to this Agreement, the Fund shall pay the Transfer Agent monthly
fees determined as set forth in Schedule A to this Agreement. 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 Fund's assets, the value of the Fund's assets and net assets
shall be computed as required by its Prospectuses, generally accepted accounting
principles and resolutions of the Board.
(c) The Transfer Agent will from time to time employ or
associate with such person or persons as may be appropriate to assist the
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 the
Transfer Agent and the Fund. The compensation of such person or persons for such
employment shall be paid by the Transfer Agent and no obligation will be
incurred by or on behalf of the Fund in such respect.
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<PAGE>
(d) The 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. The Fund agrees to promptly reimburse the
Transfer Agent for any equipment and supplies specially ordered by or for the
Fund through the Transfer Agent and for any other expenses not contemplated by
this Agreement that the Transfer Agent may incur on the Fund's behalf at the
Fund's request or as consented to by the Fund. Such other expenses to be
incurred in the operation of the Fund and to be borne by the Fund, 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 the Service Agent, or the Fund's investment adviser or
distributor; SEC and state Blue Sky registration and qualification fees, levies,
fines and other charges; advisory and administration fees; charges and expenses
of custodians; insurance premiums including fidelity bond premiums; auditing and
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 Fund (the Fund's distributor to bear
the expense of all other printing, production, and distribution of prospectuses,
statements of additional information, and marketing materials); expenses of
printing and production costs of shareholders' reports and proxy statements and
materials; costs and expenses of Fund stationery and forms; costs and
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<PAGE>
expenses of special telephone and data lines and devices; costs associated with
corporate, shareholder, and Board meetings; and any extraordinary expenses and
other customary Fund expenses. In addition, the Service 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 Fund, and the Fund
will reimburse the Service Agent for the Fund'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 Fund.
(e) The Fund may request additional services, additional
processing, or special reports. Such requests may be provided by the Transfer
Agent at additional charges. In this event, the Fund shall submit such requests
in writing together with such specifications as may be reasonably required by
the Transfer Agent, and the Transfer Agent shall respond to such requests in the
form of a price quotation. The Fund's written acceptance of the quotation must
be received prior to implementation of such request. Additional services will be
charged at the Transfer Agent's standard rates.
(f) All fees, out-of-pocket expenses, or additional charges of
the Transfer Agent shall be billed on a monthly basis and shall be due and
payable upon receipt of the invoice.
The Transfer Agent will render, after the close of each month
in which services have been furnished, a statement
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<PAGE>
reflecting all of the charges for such month. Charges remaining unpaid after
thirty (30) days shall bear interest in finance charges equivalent to, in the
aggregate, the Prime Rate (as determined by U.S. Trust Company of New York) plus
two (2) points per year and all costs and expenses of effecting collection of
any such sums, including reasonable attorneys' fees, shall be paid by the Fund
to the Transfer Agent.
In the event that the Fund is more than sixty (60) days
delinquent in its payments of monthly billings in connection with this Agreement
(with the exception of specific amounts which may be contested in good faith by
the Fund), this Agreement may be terminated upon thirty days' written notice to
the Fund by the Transfer Agent. The Fund must notify the Transfer Agent in
writing of any contested amounts within thirty (30) days of receipt of a billing
for such amounts. Disputed amounts are not due and payable while they are being
investigated.
6. PROPRIETARY AND CONFIDENTIAL INFORMATION. The Transfer
Agent agrees on behalf of itself and its employees to treat confidentially and
as proprietary information of the Fund, all records and other information
relative to the Fund's prior, present or potential shareholders, and to not use
such records and information for any purpose other than performance of the
Transfer Agent's responsibilities and duties hereunder. The Transfer Agent may
seek a waiver of such confidentiality provisions by furnishing reasonable prior
notice to the Fund and obtaining approval in writing from the Fund, which
approval shall
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<PAGE>
not be unreasonably withheld and may not be withheld where the 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
the Transfer Agent with respect to Internal Revenue Service levies, subpoenas
and similar actions, or with respect to any request by the Fund.
7. DUTIES, RESPONSIBILITIES, AND LIMITATION OF LIABILITY.
(a) In the performance of its duties hereunder, the Transfer
Agent shall be obligated to exercise due care and diligence, and to act in good
faith in performing the services provided for under this Agreement. In
performing its services hereunder, the Transfer Agent shall be entitled to rely
on any oral or written instructions, notices or other communications from the
Fund and its custodians, officers and directors, investors, agents and other
service providers which the Transfer Agent reasonably believes to be genuine,
valid and authorized. The Transfer Agent shall also be entitled to consult with
and rely on the advice and opinions of outside legal counsel retained by the
Fund, as necessary or appropriate.
(b) The Transfer Agent shall not be liable for any error of
judgment or mistake of law or for any loss or expense suffered by the Fund, in
connection with the matters to which this Agreement relates, except for a loss
or expense solely
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<PAGE>
caused by or resulting from willful misfeasance, bad faith or gross negligence
on the Transfer Agent's part in the performance of its duties or from reckless
disregard by the Transfer Agent of its obligations and duties under this
Agreement. The Transfer Agent's liability under this Agreement for any cause
whatsoever shall be limited to the total amount of fees paid to the Transfer
Agent under this Agreement for the prior year. Any person, even though also an
officer, director, partner, employee or agent of the Transfer Agent, who may be
or become an officer, director, partner, employee, or agent of the Fund, shall
be deemed when rendering services to the Fund or acting on any business of the
Fund (other than services or business in connection with the Transfer Agent's
duties hereunder) to be rendering such services to or acting solely for the Fund
and not as an officer, director, partner, employee or agent or person under the
control or direction of the Transfer Agent even though paid by the Transfer
Agent.
(c) Subject to Paragraph 7(b) above, the Transfer Agent shall
not be responsible for, and the Fund shall indemnify and hold the 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 the Transfer Agent or its
officers or agents required to be taken
pursuant to this Agreement;
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<PAGE>
(ii) the reliance on or use by the Transfer
Agent or its officers or agents of
information, records, or documents which
are received by the Transfer Agent or its
officers or agents and furnished to it or
them by or on behalf of the Fund, and
which have been prepared or maintained by
the Fund or any third party on behalf of
the Fund;
(iii) the Fund's refusal or failure to comply
with the terms of this Agreement or the
Fund's lack of good faith, or its
actions, or lack thereof, involving
negligence or willful misfeasance;
(iv) the breach of any representation or
warranty of the Fund hereunder;
(v) the taping or other form of recording of
telephone conversations or other forms of
electronic communications with investors
and shareholders, or reliance by the
Transfer Agent 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;
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<PAGE>
(vi) the reliance on or the carrying out by
the Transfer Agent or its officers or
agents of any proper instructions
reasonably believed to be duty
authorized, or requests of the Fund or
recognition by the Transfer Agent of any
share certificates which are reasonably
believed to bear the proper signatures of
the officers of the Fund and the proper
countersignature of any transfer agent or
registrar of the Fund;
(vii) any delays, inaccuracies, errors in or
omissions from data provided to the
Transfer Agent by data and pricing
services;
(viii) the offer or sale of shares by the Fund
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 resulting from
activities, actions, or omissions by the
Fund's distributor or existing or arising
out of activities, actions or omissions
by or on
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<PAGE>
behalf of the Fund prior to the effective
date of this Agreement; and
(ix) the compliance by the Fund, its
investment adviser, and its distributor
with applicable securities, tax,
commodities and other laws, rules and
regulations.
8. TERM. This Agreement shall become effective on the date
first herein above 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 90 days' prior notice.
Upon termination of this Agreement, the Fund shall pay to the Transfer Agent
such compensation and any reimbursable expenses as may be due under the terms
hereof as of the date of termination or the date that the provision of services
ceases, whichever is later.
9. HIRING OF EMPLOYEES. The Fund and the Transfer Agent agree
that they will not enter into discussions of employment or make offers of
employment to each others' employees without written approval from the other.
10. 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):
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<PAGE>
If to the Fund:
Excelsior Funds
6 St. James Avenue
Boston, Massachusetts 02116
Attn: Philip W. Coolidge
Fax: (617) 542-5815
If to the Transfer Agent:
Mutual Funds Service Company
73 Tremont Street
Boston, MA 02108-3913
Attention: Karl Hartmann, General Counsel
Fax: (617) 557-8816
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.
11. ASSIGNABILITY. This Agreement shall not be assigned by any
of the parties hereto without the prior consent in writing of the other party;
provided, however, that the Transfer Agent may in its own discretion and without
limitation or prior consent of the Fund, whenever and on such terms and
conditions as the Transfer Agent deems necessary or appropriate, subcontract,
delegate or assign its rights, duties, obligations and liabilities to
subsidiaries or affiliates of the Transfer Agent; provided, further, that any
such subcontract, agreement or understanding shall not discharge the Transfer
Agent or its affiliates or subsidiaries, as the case may be, from its
obligations hereunder. Similarly, the Transfer Agent or its affiliated
subcontractor, designee, or assignee may at its discretion, without notice to
the Fund, enter into such
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<PAGE>
subcontracts, agreements and understandings, whenever and on such terms and
conditions as the Transfer Agent or they deem necessary or appropriate to
perform services hereunder, with non-affiliated third parties; provided, that
such subcontract, agreement or understanding shall not discharge the Transfer
Agent, or its subcontractor, designee, or assignee, as the case may be, from the
Transfer Agent's obligations hereunder. The Transfer Agent or its affiliated
subcontractor, designee, or assignee shall, however, be discharged from the
Transfer Agent's obligations hereunder, if the Fund or its sponsor, investment
adviser or distributor require the Transfer Agent or its affiliated
subcontractor, designee, or assignee to enter into any subcontract, agreement or
understanding to perform services hereunder with any non-affiliated third party;
and the Fund shall indemnify and hold harmless the Transfer Agent and its
affiliated subcontractor, designee, or assignee from and against, any and all
losses, damages, costs, reasonable attorneys' fees and expenses, payments,
expenses and liabilities arising out of or attributable to such subcontract,
agreement or understanding.
12. 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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<PAGE>
13. FORCE MAJEURE. The 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 governmental
actions, nor shall say such failure or delay give the Fund the right to
terminate this Agreement.
14. USE OF NAME. The Fund and the Transfer Agent agree not to
use the other's name nor the names of such other's affiliates, designees, or
assignees in any prospectus, sales literature, or other printed material written
in a manner not previously, expressly approved in writing by the other or such
other's affiliates, designees, or assignees except where required by the SEC or
any state agency responsible for securities regulation.
15. 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.
16. 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
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person or circumstance it shall nevertheless remain applicable to
all other persons and circumstances.
17. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of New York.
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.
EXCELSIOR FUNDS
Attest: By:
----------------------- ------------------------------
Name: Name:
----------------------- ------------------------------
Title:
-----------------
MUTUAL FUNDS SERVICE COMPANY
Attest: By:
----------------------- ------------------------------
Name: Name:
----------------------- ------------------------------
Title:
-----------------
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MUTUAL FUNDS TRANSFER AGENCY AGREEMENT
EXCELSIOR FUNDS
SCHEDULE A
FEES AND EXPENSES
$18,000 per annum/per Fund.
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<PAGE>
MUTUAL FUNDS TRANSFER AGENCY AGREEMENT
EXCELSIOR FUNDS
SCHEDULE B
LISTING OF INVESTMENT FUNDS SUBJECT TO THIS AGREEMENT
Excelsior Equity Index Fund
Excelsior Bond Index Fund
Excelsior Small Capitalization Fund
Excelsior Balanced Fund
Excelsior Equity Growth Fund
Excelsior Value Equity Income Fund
Excelsior Income Fund
Excelsior Equity Fund
Excelsior Total Return Bond Fund
Excelsior International Equity Fund
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MUTUAL FUNDS TRANSFER AGENCY AGREEMENT
EXCELSIOR FUNDS
SCHEDULE C
DESCRIPTION OF TRANSFER AGENCY SERVICES
The following is a general description of the transfer agency
services the Transfer Agent shall provide to the Fund.
A. Shareholder Recordkeeping. Maintain records showing for each Fund shareholder
the following: (i) name, address and tax identifying number; (ii) number of
shares of each Investment Fund; (iii) historical information including, but not
limited to, dividends paid and date and price of all transactions including
individual purchases and redemptions; and (iv) any dividend reinvestment order,
application, dividend address and correspondence relating to the current
maintenance of the account.
B. Shareholder Issuance. Record the issuance of shares of each Investment Fund.
Except as specifically agreed in writing between the Transfer Agent and the
Fund, the 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.
C. Purchase Orders. Process all orders for the purchase of shares of the Fund in
accordance with the Fund's current registration statement. Upon receipt of any
check or other
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payment for purchase of shares of the Fund from an investor, the Transfer Agent
will (i) stamp the envelope with the date of receipt, (ii) forthwith process the
same for collection, (iii) determine the amounts thereof due the Fund, and
notify the Fund of such determination and deposit, such notification to be given
on a daily basis of the total amounts determined and deposited to the Fund's
custodian bank account during such day. The Transfer Agent shall then credit the
share account of the investor with the number of Investment Fund shares to be
purchased made on the date such payment is received by the Transfer Agent, as
set forth in the Fund's current prospectus and shall promptly mail a
confirmation of said purchase to the investor, all subject to any instructions
which the Fund may give to the Transfer Agent with respect to the timing or
manner of acceptance of orders for shares relating to payments so received by
it.
D. Redemption Orders. Receive and stamp with the date 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 Fund, the Transfer Agent shall on each
business day notify the Fund of the total number of shares presented and covered
by such requests received by the Transfer Agent on such day; (ii) on or prior to
the seventh calendar day succeeding any such requests received by the Transfer
Agent shall notify the
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<PAGE>
Custodian, subject to instructions from the Fund, to transfer moneys to such
account as designated by the 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 or repurchase does not comply with
applicable standards, the Transfer Agent shall promptly notify the investor of
such fact, together with the reason therefor, and shall effect such redemption
at the Fund's price next determined after receipt of documents complying with
said standards of, at such other time as the Fund shall so direct.
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 Fund's current prospectus. The Transfer Agent shall
be permitted to redeem, exchange and/or transfer Fund shares from any account
for which such services have been authorized.
F. Transfer for Shares. Upon receipt by the 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, the Transfer Agent will register such transfer on the Fund's
shareholder record maintained by the 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 mail by first
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class mail new certificates for the same or a smaller whole number of shares.
G. Shareholder Communications and Meeting. Address and mail all communications
by the Fund to its shareholders promptly following the delivery by the Fund of
the material to be mailed. Prepare shareholder lists, mail and certify as to the
mailing of proxy materials, receive the tabulated proxy cards, render periodic
reports to the Fund on the progress of such tabulation, and provide the Fund
with inspectors of election at any meeting of shareholders.
H. Share Certificates. If a shareholder of the Fund requests a certificate
representing his shares, the Transfer Agent will countersign and mail by first
class mail with receipt confirmed, a share certificate to the investor at
his/her address as it appears on the Fund's transfer books. The Transfer Agent
shall supply, at the expense of the Fund, a supply of blank share certificates.
The certificates shall be properly signed, manually or by facsimile, as
authorized by the Fund, and shall bear the Fund's seal or facsimile; and
notwithstanding the death, resignation or removal of any officers of the Fund
authorized to sign certificates, the Transfer Agent may, until otherwise
directed by the Fund, continue to countersign certificates which bear the manual
or facsimile signature of such officer.
I. Returned Checks. In the event that any check or other order for the payment
of money is returned unpaid for any reason, the Transfer Agent will take such
steps, including redepositing the
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check for collection or returning the check to the investor, as the Transfer
Agent may, at its discretion, deem appropriate and notify the Fund of such
action, or as the Fund may instruct.
J. 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.
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<PAGE>
December 30, 1996
Excelsior Funds
6 St. James Avenue
Boston, Massachusetts 02116
RE: Shares Registered by Post-Effective Amendment No. 5 to
Registration Statement on Form N-1A (File No. 33-71306)
Ladies and Gentlemen:
We acted as counsel to Excelsior Funds (the "Trust"), a
Delaware business trust, in connection with the preparation and filing with the
Securities and Exchange Commission of Post-Effective Amendment No. 5 to the
Trust's Registration Statement on Form N-1A under the Securities Act of 1933, as
amended, registering 345,151,345 shares of the Trust's Institutional Money Fund7
to be issued and sold by the Trust (the "Shares"). The registration of such
Shares has been made in reliance upon Rule 24e-2 under the Investment Company
Act of 1940, as amended.
In giving the opinion stated below, we have reviewed originals or
copies, certified or otherwise identified to our satisfaction, of the Trust's
Certificate of Trust, By-Laws, resolutions of its Board of Trustees and such
other documents and legal and factual matters as we have deemed appropriate.
In giving the opinion stated below, we have assumed:
(i) the valid existence of each party to the documents
examined by us under the laws of the jurisdiction governing
its organization;
(ii) that each party has the power and authority to
execute and deliver, and to perform its obligations under,
the documents examined by us;
(iii) that each party has duly authorized, executed
and delivered the documents examined by us;
<PAGE>
Excelsior Funds
December 30, 1996
Page 2
(iv) that the Trust Instrument constitutes the entire
agreement among the parties thereto with respect to the subject matter
thereof, including, without limitation, the creation, operation and
termination of the Trust, and that the Trust Instrument and the
Certificate of Trust are in full force and effect and have not been
amended;
(v) that all signatures on documents examined by us are
genuine, that all documents submitted to us as originals are authentic,
and that all documents submitted to us as copies conform with the
originals, which facts we have not independently verified; and
(vi) that the Shares will be issued and paid for in accordance
with authorizations of the Trustees of the Trust under the Trust
Instrument and as contemplated by the Prospectus.
We have relied on an opinion of Richards, Layton & Finger, special
Delaware counsel to the Trust, insofar as our opinion below relates to matters
arising under the laws of the State of Delaware. This opinion is based
exclusively on the Delaware Business Trust Act and the Federal law of the United
States of America.
Based upon the foregoing, it is our opinion that the
above-referenced Shares, when issued for payment as described in the Trust's
Prospectus, will be legally issued, fully paid and non-assessable by the Trust.
We hereby consent to the filing of this opinion as an exhibit
to Post-Effective Amendment No. 5 to the Trust's Registration Statement.
Very truly yours,
/s/ DRINKER BIDDLE & REATH
------------------------------
DRINKER BIDDLE & REATH
<PAGE>
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. 5 to the
Registration Statement (No. 33-71306) on Form N-1A under the Securities Act of
1933 and the Investment Company Act of 1940, as amended, of Excelsior Funds.
This consent does not constitute a consent under section 7 of the Securities Act
of 1933, and in consenting to the use of our name and the references to our Firm
under such caption we have not certified any part of the Registration Statement
and do not otherwise come within the categories of persons whose consent is
required under said section 7 or the rules and regulations of the Securities and
Exchange Commission thereunder.
/s/ Drinker Biddle & Reath
------------------------------
DRINKER BIDDLE & REATH
Philadelphia, Pennsylvania
December 30, 1996
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 5 to the registration
statement on Form N-1A (the "Registration Statement") of Excelsior Funds of our
reports dated October 18, 1996, relating to the financial statements and
financial highlights of Excelsior Institutional Money Fund, and to the
incorporation by reference of our report into the Prospectus which constitutes
part of this Registration Statement. We also consent to the references to us
under the heading "Independent Accountants" in the Statement of Additional
Information.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 27, 1996
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 5 to the registration
statement on Form N-1A (the "Registration Statement") of Excelsior Funds of our
report dated October 18, 1996, relating to the financial statements and
financial highlights of the Cash Reserves Portfolio, which appears in such
Statement of Additional Information. We also consent to the reference to us
under the heading "Independent Accountants" in the Statement of Additional
Information.
Chartered Accountants
Toronto, Ontario
December 27, 1996
