SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant toss.240.14a-12
EXCELSIOR INCOME SHARES, INC.
-----------------------------
(Name of Registrant as Specified In Its Charter)
______________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[LOGO]
Excelsior Income Shares, Inc.
114 West 47th Street
New York, New York 10036
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 17, 2001
The Annual Meeting of Shareholders (the "Meeting") of Excelsior Income
Shares, Inc. (the "Fund") will be held at the offices of U.S. Trust Company of
New York at 114 West 47th Street, Conference Room 14B, New York, N.Y. 10036, on
Tuesday, April 17, 2001, at 11:00 a.m., New York City time, for the following
purposes:
(1) To elect five Directors to hold office until the next Annual Meeting and
until their respective successors have been duly elected and qualified;
(2) To consider and approve a new Investment Advisory Agreement between the
Fund and Rafferty Capital Markets, LLC;
(3) To ratify the appointment of PricewaterhouseCoopers LLP as the
independent certified public accountants of the Fund for the fiscal year
ending December 31, 2001; and
(4) To transact such other business as may properly come before the Meeting
or any adjournments thereof.
The Board of Directors of the Fund recommends that you vote in favor of all
items.
The Board of Directors has fixed the close of business on February 20,
2001 as the record date (the "Record Date") for determining the shareholders who
are entitled to receive notice of the Meeting and to vote their shares at the
Meeting or any adjournments or postponements thereof. You are entitled to cast
one vote for each full share and a fractional vote for each fractional share
that you own on the Record Date.
The Board of Directors has also approved a resolution changing the name
of the Fund to EIS Fund, Ltd. Shareholder approval of this change is not
required. This new name will be effective as of April 17, 2001.
ROBERT D. CUMMINGS
Secretary
New York, New York
March 7, 2001
Your vote is important. Whether or not you intend to attend the
Meeting, please fill in, date, sign and promptly return the enclosed WHITE proxy
card in the postage paid return envelope provided in order to avoid the
additional expense of further proxy solicitation and to ensure that a quorum
will be present at the meeting. Your proxy is revocable at any time before its
use.
Questions and Answers
What proposals am I being asked to vote on?
You are being asked to vote on the following proposals:
1. The election of five Directors
2. To approve a new Investment Advisory Agreement
3. To ratify the appointment of independent public accountants
Have the Directors approved the Proposals?
Yes. The Board of Directors unanimously approved these proposals on
February 6, 2001, and recommends that you vote to approve each
proposal.
Why is the Fund having a Shareholder Meeting?
The Fund is a New York corporation, and under New York law, the Fund
must elect Directors annually. In addition, shareholders must approve
the appointment of independent public accountants and investment
advisory agreements.
Why does the Fund need a new investment advisory agreement?
The Investment Company Act of 1940, as amended (the "1940 Act"),
requires that shareholders approve investment advisory agreements. The
Fund's current investment adviser, U.S. Trust Company of New York, was
recently acquired by another financial services company. U.S. Trust
Company of New York has decided that it does not want to serve as
investment adviser to the Fund. It asked the Fund to find a new
adviser, and the Fund has selected Rafferty Capital Markets, LLC. If
the selection of Rafferty Capital Markets, LLC is approved, the Fund
will terminate its existing agreement with U.S. Trust Company of New
York. If the selection of Rafferty Capital Markets, LLC is not
approved, then the Fund will evaluate alternatives, including seeking a
new investment adviser or internally managing the Fund's investments.
Will the Fund pay greater fees to the new adviser?
No. The new investment advisory agreement is identical to the old
investment advisory agreement, except for the name of the adviser and
the date. There is no change in the fee payable for investment advisory
services. However, the new adviser will waive its fees up to 25 basis
points to permit the Fund to enter into separate administrative
agreements for fund administration, compliance, fund accounting,
custody and other services with Firstar Mutual Fund Services, LLC.
Why am I being asked to ratify the selection of the Fund's independent public
accountants?
The 1940 Act requires that shareholders approve independent public
accountants, unless the Fund has adopted an audit committee charter and
filed that charter as an exhibit to its registration statement. The
Fund has adopted an audit committee charter, and the Fund intends to
file the charter as an exhibit to its next filed annual or semi-annual
report. However, under the 1940 Act, the Fund must obtain shareholder
approval for the appointment of accountants for the fiscal year
beginning January 1, 2001. In future years, the Fund will rely on a new
rule under the 1940 Act that permits the Fund to appoint independent
public accountants without shareholder approval.
How do I vote my shares?
You can vote your shares by completing and signing the enclosed WHITE
proxy card, and mailing it in the enclosed postage paid envelope. If
you need assistance, or have any questions regarding the proposals or
how to vote your shares, please call the Fund at 1-800-840-1208 or
Georgeson Shareholder Communications, Inc. ("Georgeson"), the Fund's
proxy solicitor, at 1-800-223-2064.
EXCELSIOR INCOME SHARES, INC.
114 West 47th Street
New York, New York 10036
PROXY STATEMENT
GENERAL INFORMATION
The Directors of Excelsior Income Shares, Inc., a New York corporation
(the "Fund"), are soliciting your proxy for use at an Annual Meeting of
Shareholders or any adjournment thereof (the "Meeting"), to be held at the
offices of U.S. Trust Company of New York, at 114 West 47th Street, Conference
Room 14B, New York, N.Y. 10036, on Tuesday, April 17, 2001, at 11:00 a.m., New
York City time, to approve proposals that have already been approved by the
Fund's Board of Directors. For your convenience, we have divided this proxy
statement into four parts:
Part 1-- An Overview
Part 2-- The Proposals
Part 3-- More on Proxy Voting
Part 4-- Additional Information
Your vote is important! You should read the entire proxy statement
before voting. If you have any questions, please call the Fund at 1-800-840-1208
or Georgeson at 1-800-223-2064. Even if you sign and return the accompanying
WHITE proxy card, you may revoke it by giving written notice of such revocation
to the Secretary of the Fund prior to the Meeting or by delivering a
subsequently dated proxy card or by attending and voting at the Meeting in
person. Management expects to solicit proxies principally by mail, but
Management, or agents appointed by Management, may also solicit proxies by
telephone, telegraph or personal interview. Georgeson has been retained to serve
as the Fund's proxy solicitor. If solicitation is required, Georgeson will be
paid proxy solicitation fees of approximately $25,000. The costs of solicitation
will be borne by the Fund.
We began mailing this Notice of Annual Meeting, Proxy Statement and
Proxy Card to shareholders on or about March 7, 2001.
The Fund is required by federal law to file reports, proxy statements
and other information with the Securities and Exchange Commission (the "SEC").
The SEC maintains a Web site that contains information about the Fund
(www.sec.gov). Any such proxy material, reports and other information can be
inspected and copied at the public reference facilities of the SEC, 450 Fifth
Street, N.W., Washington DC 20549 and at the SEC's New York Regional Office,
Seven World Trade Center, New York, NY 10048. Copies of such materials can be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services of the SEC at 450 Fifth Street, N.W., Washington DC 20549,
at prescribed rates.
The Fund's most recent annual, semi-annual and quarterly reports to
shareholders are available at no cost. To request a report, please call the Fund
toll-free at 1-800-840-1208 or write to the Fund at 114 West 47th Street, New
York, N.Y. 10036. Effective April 17, 2001, the Fund's name will be changed to
EIS Fund, Ltd.
PART 1 - AN OVERVIEW
This Proxy Statement is being furnished by the Board of Directors of
the Fund in connection with the solicitation of proxies by the Board of
Directors for use at the Annual Meeting of its shareholders, or any adjournment
thereof, to be held at the offices of U.S. Trust Company of New York, at 114
West 47th Street, Conference Room 14B, New York, N.Y. 10036, on Tuesday, April
17, 2001, at 11:00 a.m., New York City time.
1
The Board of Directors has fixed the close of business on February 20,
2001 as the record date (the "Record Date") for determining the shareholders who
are entitled to notice of the Meeting and to vote their shares at the Meeting or
any adjournments or postponements thereof. Shareholders are entitled to cast one
vote for each full share and a fractional vote for each fractional share they
own on the Record Date.
The Fund is a registered investment company organized as a corporation
under the Business Corporation Law of the State of New York. The Fund's mailing
address is 114 West 47th Street, New York, New York 10036. The Fund commenced
operations on May 15, 1973.
PART 2 - THE PROPOSALS
PROPOSAL 1
THE ELECTION OF DIRECTORS
The persons named as proxies on the WHITE proxy card enclosed with this
Proxy Statement intend to vote at the Meeting for the election of the nominees
named below (the "Nominees") to serve as Directors of the Fund until the next
Annual Meeting and until their successors are duly elected and qualified. Each
Nominee was previously elected as a Director of the Fund by the Fund's
shareholders at the meeting of shareholders held on May 9, 2000. Each Nominee
has consented to be named in this Proxy Statement and has agreed to serve if
elected. If any Nominee should be unable to serve, an event not now anticipated,
the persons named as proxies will vote for such other Nominee as may be proposed
by Management.
Information Concerning Nominees
The following table sets forth the age, positions and offices with the
Fund, principal occupation or employment during the past five years and other
directorships, if any, of each Nominee.
----------------------------- -------- --------------------------- ---------------------------------------------------
Name Age Positions and Offices Principal Occupation or Employment; Other
with the Fund Directorships
----------------------------- -------- --------------------------- ---------------------------------------------------
Townsend Brown, II* 70 Chairman, President President and CEO of the Fund since 1992;
and Chief Executive Attorney; Senior Vice President of U.S. Trust
Officer since 1992 Company of New York (investment management
company), 1978 to 1992.
----------------------------- -------- --------------------------- ---------------------------------------------------
Geoffrey J. O'Connor 54 Director since 1999 Attorney, private practice.
----------------------------- -------- --------------------------- ---------------------------------------------------
John H. Reilly 73 Director since 1996 Attorney, Member of Dickerson & Reilly (law firm).
----------------------------- -------- --------------------------- ---------------------------------------------------
Perry W. Skjelbred 53 Director since 1993 Founder, CEO, Enterprise Capital Inc. (financial
services firm), since 1993; Founder, CEO,
American Infrastructure, Inc. (construction
services), 1989 to 1993; Senior Vice President
and Chief Investment Officer, NATIONAR, Inc.
(financial services), 1986 to 1989; Director:
Enterprise Capital, Inc., Medical Marketing
Group, Inc. (medical billing consultants)
----------------------------- -------- --------------------------- ---------------------------------------------------
Philip J. Tilearcio 47 Director since 1993 Investor
----------------------------- -------- --------------------------- ---------------------------------------------------
----------------
*An "interested person" of the Fund within the meaning of the 1940 Act.
The Board of Directors has a standing Audit Committee consisting of Mr.
Geoffrey J. O'Connor, Mr. John H. Reilly, Mr. Perry W. Skjelbred and Mr. Philip
J. Tilearcio, none of whom is an "interested person" of the Fund within the
meaning of the 1940 Act. The Audit Committee held one meeting during the year
ended December 31, 2000. The functions performed by the Audit Committee include
making recommendations with respect to engaging and discharging the Fund's
independent auditors, reviewing with the Fund's independent auditors the plan
and results of the annual examination of the Fund's financial statements,
reviewing the scope and results of the Fund's procedures for internal auditing,
2
reviewing the independence of the Fund's auditors, considering the range of
audit fees and reviewing the adequacy of the Fund's system of internal
accounting controls.
The Fund's Board of Directors held six meetings during the year ended
December 31, 2000.
The By-Laws of the Fund provide that the Fund will indemnify its
officers and Directors on the terms, to the extent and subject to the conditions
prescribed by the Business Corporation Law of the State of New York, the 1940
Act, and the rules and regulations thereunder, and subject to such other
conditions as the Board of Directors may in its discretion impose.
To the extent permitted by the Business Corporation Law of the State of
New York, the 1940 Act, and the rules and regulations thereunder, the Fund may
purchase and maintain on behalf of any person who may be indemnified under the
By-Laws, insurance covering any risks in respect of which he may be indemnified
by the Fund.
Information Concerning Executive Officers
The following table sets forth the age, positions and offices with the
Fund and principal occupation or employment during the past five years of each
of the Fund's executive officers.
----------------------------- -------- --------------------------- -------------------------------------------------
Name Age Positions and Offices Principal Occupation or Employment
with the Fund
----------------------------- -------- --------------------------- -------------------------------------------------
Townsend Brown, II 70 Chairman, President and Chairman, President and Chief Executive Officer
Chief Executive Officer of the Fund.
since April 9, 1992
----------------------------- -------- --------------------------- -------------------------------------------------
Robert D. Cummings 56 Secretary and Treasurer Manager of the Common Trust Funds Department of
since April 9, 1992 U.S. Trust Company of New York since 1980; Vice
President since April 1987.
----------------------------- -------- --------------------------- -------------------------------------------------
The Fund's executive officers were re-elected by the Board of Directors
on May 9, 2000, to serve until the meeting of the Board of Directors scheduled
to take place immediately after the Annual Meeting of the Fund's shareholders on
April 17, 2001, and until their successors are duly elected and qualified.
Compensation of and Transactions with Executive Officers and Directors
The following table describes the compensation paid during the last
fiscal year to each Director and Nominee.
----------------------------- --------------------- --------------------------------- --------------------------------
Name of Person Total Compensation Pension or Retirement Benefits Estimated Annual Benefit Upon
From Fund Accrued as Part of Fund Expenses Retirement
----------------------------- --------------------- --------------------------------- --------------------------------
Townsend Brown, II $53,603 None None
----------------------------- --------------------- --------------------------------- --------------------------------
Edwin A. Heard $1,950* None None
----------------------------- --------------------- --------------------------------- --------------------------------
Geoffrey J. O'Connor $-0- None None
----------------------------- --------------------- --------------------------------- --------------------------------
John H. Reilly $6,900 None None
----------------------------- --------------------- --------------------------------- --------------------------------
Perry W. Skjelbred $6,900 None None
----------------------------- --------------------- --------------------------------- --------------------------------
Philip J. Tilearcio $6,900 None None
----------------------------- --------------------- --------------------------------- --------------------------------
-------------------
*Edwin A. Heard resigned as a Director on March 10, 2000 and thus was only
compensated up until that date.
Townsend Brown, II has an employment agreement (the "Employment
Agreement") with the Fund which took effect on May 4, 1994, continuing through
May 3, 2004. Pursuant to the Employment Agreement, Mr. Brown acts as President
and Chief Executive Officer of the Fund, and has such duties as are assigned to
him by the Fund. The Employment Agreement provides that Mr. Brown is not
required to spend any specific amount of time on the business of the Fund,
subject to the performance of his duties to the Fund.
The Employment Agreement provides Mr. Brown with an annual base salary,
payable in equal monthly installments, of not less than $40,000, subject to
adjustments on each January 1 to reflect
3
increases in the Urban Consumer Price Index for the New York Metropolitan Area
from the prior January
1. The Employment Agreement may be terminated by the Fund or Mr. Brown upon
proper notice, pursuant to the terms of the Employment Agreement.
Under the Employment Agreement, in the event of a termination of Mr.
Brown by the Fund without "Cause" or by Mr. Brown for "Good Reason" (as each
such term is defined in the Employment Agreement), the Fund must pay Mr. Brown a
lump sum payment equal to his current salary for the remainder of the employment
term and an annualized 3% compound interest on such amount. In the event of a
termination of Mr. Brown's employment by reason of his death or disability, or
termination by the Fund for Cause or voluntary termination by Mr. Brown without
Good Reason, the Fund must pay Mr. Brown (or, in the case of his death, to his
estate), all accrued but unpaid salary as of the termination date. The
Employment Agreement provides that the Fund will make Mr. Brown whole for any
excise taxes imposed upon him under Section 4999 of the Internal Revenue Code
due to payments made to him in connection with his termination.
Security Ownership of Officers and Directors and Nominees
The following table sets forth information as of December 31, 2000,
with respect to beneficial ownership of the Fund's Common Stock, par value $.01
per share, by Directors individually and officers and Directors as a group.
---------------------------------------- ---------------------------------- -----------------------------------------
Name of Individual or Number of Number of Shares and Nature of Percentage of Total Outstanding Shares
Persons in Group Beneficial Ownership of Common Stock
---------------------------------------- ---------------------------------- -----------------------------------------
Townsend Brown, II 1,100 (1) (2)
---------------------------------------- ---------------------------------- -----------------------------------------
Geoffrey J. O'Connor 100 (1) (2)
---------------------------------------- ---------------------------------- -----------------------------------------
John H. Reilly 100 (1) (2)
---------------------------------------- ---------------------------------- -----------------------------------------
Perry W. Skjelbred 1,000 (1) (2)
---------------------------------------- ---------------------------------- -----------------------------------------
Philip J. Tilearcio 100 (1) (2)
---------------------------------------- ---------------------------------- -----------------------------------------
Robert D. Cummings -0- (2)
---------------------------------------- ---------------------------------- -----------------------------------------
All Officers and Directors of the Fund 2,400 (of record) (1) (2)
as a group (six)
---------------------------------------- ---------------------------------- -----------------------------------------
-------------------
(1) Sole voting and sole investment power.
(2) Amount does not exceed 1%.
Directors are elected by the affirmative vote of a plurality of the
shares present in person or by proxy at the Meeting.
The Board of Directors recommends that you vote FOR
election of the Nominees as Directors of the Fund.
PROPOSAL 2
THE APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT
General Information
U.S. Trust Company of New York ("U.S. Trust"), the Fund's current
investment adviser, no longer wants to provide investment management services to
the Fund. The Fund believes that this decision is not related to any particular
Fund activity, including performance, but represents a business decision on the
part of U.S. Trust to focus on different areas of the financial services
industry. The Directors seek shareholder approval of a new investment advisory
agreement with Rafferty Capital Markets, LLC ("Rafferty"). If approved, the Fund
will terminate its current advisory agreement with U.S. Trust and execute a new
investment advisory agreement with Rafferty. If the new investment advisory
4
agreement is not approved by shareholders, the Directors will consider other
alternatives, including seeking other investment advisers or internally managing
the Fund's investments. The Directors anticipate that U.S. Trust will elect to
terminate its existing investment advisory agreement upon notice, regardless of
whether shareholders approve the new investment advisory agreement.
In order to change investment advisors, a new investment advisory
agreement must be approved by shareholder vote. Importantly, at the Meeting,
shareholders are being asked to approve a proposed new advisory agreement
between the Fund and Rafferty (the "Proposed Advisory Agreement"). The Board of
Directors, including a majority of the independent Directors, approved the
Proposed Advisory Agreement at a meeting held on February 6, 2001. A form of the
Proposed Advisory Agreement is attached as Appendix A. The Fund will not pay any
additional advisory fees under the Proposed Advisory Agreement.
The Current Advisory Agreement
The Fund's current investment adviser, U.S. Trust, has provided
investment advisory and administrative services to the Fund since the Fund's
commencement of operations on May 15, 1973. The current advisory agreement was
approved by the Board of Directors on March 14, 2000 and ratified by the
shareholders of the Fund on May 9, 2000 ("Current Advisory Agreement") and by
its terms expires on May 9, 2002, unless it is renewed.
Under the Current Advisory Agreement, U.S. Trust formulates a
continuing program for the management of the assets and resources of the Fund,
provides a full range of advice and recommendations, including recommendations
regarding specific securities to be purchased or sold by the Fund, and obtains
and evaluates statistical, economic and other research information with respect
to the economy, business, securities markets and types of securities, all in
conformity with the Fund's investment objectives and policies. In addition to
providing investment advisory services, U.S. Trust, at its own expense, provides
portfolio trading facilities and makes available to the Fund appropriate
executive, investment, clerical and other personnel as well as computer and
other services for the conduct of its investment business and the administration
of its affairs. U.S. Trust compensates all Fund personnel and officers (other
than the President) and those Fund Directors who are officers or employees of
U.S. Trust. U.S. Trust at its expense also provides the Fund with office space
and facilities and business equipment and pays the cost of keeping the Fund's
books and records.
For the services rendered and the expenses assumed by U.S. Trust under
the Current Advisory Agreement, the Fund pays U.S. Trust an annual fee at the
rate of 0.50% of the Fund's net asset value up to and including $100,000,000,
0.40% of such net asset value over $100,000,000 up to and including $200,000,000
and 0.30% of such asset value over $200,000,000. The investment advisory fee is
computed quarterly on the basis of the net asset value as of last day of each
quarter.
The Fund is responsible for the payment of all its expenses that are
not specifically assumed by U.S. Trust under the Current Advisory Agreement.
However, in the event in any year the sum of the Fund's expenses (including U.S.
Trust's investment advisory fee but excluding interest, taxes and brokerage
commissions relating to the purchase or sale of portfolio securities, the Fund's
expenses of future public offerings of its shares and extraordinary expenses
beyond U.S. Trust's control) exceeds 1 1/2% of the average value of the Fund's
net assets during such year up to $30,000,000, plus 1% of the average value of
the Fund's net assets during such year in excess of $30,000,000, U.S. Trust is
obligated to reimburse the Fund promptly for such excess expenses. In addition,
under the Current Advisory Agreement, U.S. Trust is not responsible for any
mistake in judgment or in any event whatsoever except for lack of good faith or
for any conduct on U.S. Trust's part constituting a breach of fiduciary duty
involving personal misconduct in respect of the Fund, so long as such judgment
or other event does not constitute willful malfeasance, bad faith, gross
negligence in the performance of U.S. Trust's duties or reckless disregard of
its obligations and duties under the Current Advisory Agreement.
Under the Current Advisory Agreement, U.S. Trust is not liable to the
Fund for any error of judgment by U.S. Trust or any loss sustained by the Fund
except in the case of a breach of fiduciary duty
5
with respect to the receipt of compensation for services (in which case any
award of damages will be limited as provided in the 1940 Act) or of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
The terms of the Proposed Advisory Agreement (including the investment
advisory fee) are identical to the terms of the Current Advisory Agreement,
except for the name of the investment adviser and the voluntary waiver of a
portion of the fees to permit the Fund to obtain administrative services from
another party.
Description of the Proposed Advisory Agreement
A copy of the Proposed Advisory Agreement is attached to this Proxy
Statement as Appendix A. The description of the Proposed Advisory Agreement that
follows is qualified in its entirety by reference to Appendix A. If adopted, the
Proposed Advisory Agreement will continue in effect for two years after its
first approval by shareholders, and thereafter from year to year, subject to its
annual approval by the Board of Directors.
Under the Proposed Advisory Agreement, Rafferty would formulate a
continuing program for the management of the assets and resources of the Fund,
provide a full range of advice and recommendations, including recommendations
regarding specific securities to be purchased or sold by the Fund, and obtain
and evaluate statistical, economic and other research information with respect
to the economy, business, securities markets and types of securities, all in
conformity with the Fund's investment objectives and policies. In addition to
providing investment advisory services, Rafferty, at its own expense, would
provide portfolio trading facilities and make available to the Fund appropriate
executive, investment, clerical and other personnel as well as computer and
other services for the conduct of its investment business and the administration
of its affairs. Rafferty would compensate all Fund personnel and officers (other
than the President) and those Fund Directors who are officers or employees of
Rafferty. Rafferty at its expense would also provide the Fund with office space
and facilities and business equipment.
For the services rendered and the expenses assumed by Rafferty under
the Proposed Advisory Agreement, the Fund would pay Rafferty an annual fee at
the rate of 0.5% of the Fund's net asset value up to and including $100,000,000,
0.4% of such net asset value over $100,000,000 up to and including $200,000,000
and 0.3% of such asset value over $200,000,000. The investment advisory fee
would be computed quarterly on the basis of the net asset value as of last day
of each quarter.
Rafferty has voluntarily agreed to waive 0.25% of its fee on the first
$100,000,000 of assets of the Fund. This voluntary waiver by Rafferty was
arranged with Firstar Mutual Fund Services, LLC ("Firstar") so that Firstar can
be compensated for fund administration and compliance, fund accounting, custody,
and transfer agency services, services that were formerly provided by U.S.
Trust. There is no compensation or other monetary benefit from Firstar in its
capacity as an administrative service provider to Rafferty in its capacity as
investment adviser to the Fund resulting from this waiver. Firstar will enter
separate service agreements for each of the above-mentioned services with the
Fund.
The Fund would be responsible for the payment of all its expenses,
which are not specifically assumed by Rafferty under the Proposed Advisory
Agreement. However, in the event in any year the sum of the Fund's expenses
(including Rafferty's investment advisory fee but excluding interest, taxes and
brokerage commissions relating to the purchase or sale of portfolio securities,
the Fund's expenses of future public offerings of its shares and extraordinary
expenses beyond Rafferty's control) were to exceed 1 1/2% of the average value
of the Fund's net assets during such year up to $30,000,000, plus 1% of the
average value of the Fund's net assets during such year in excess of
$30,000,000, Rafferty would be obligated to reimburse the Fund promptly for such
excess expenses. In addition, under the Proposed Advisory Agreement, Rafferty
would not be responsible for any mistake in judgment or in any event whatsoever
except for lack of good faith or for any conduct on Rafferty's part constituting
a breach of fiduciary duty involving personal misconduct in respect of the Fund,
so long as such judgment or other event does not constitute willful malfeasance,
bad faith, gross negligence in the performance of Rafferty's duties or reckless
disregard of its obligations and duties under the Proposed Advisory Agreement.
6
The Proposed Advisory Agreement will be dated April 18, 2001 (or the
next day after receipt of shareholder approval). The Proposed Advisory Agreement
would continue in effect for two years from April 18, 2001 and thereafter would
continue from year to year provided such continuance is specifically approved at
least annually (i) by the vote of a majority of the Fund's outstanding voting
securities, as defined in the 1940 Act, entitled to vote at the Annual Meeting
or by its Board of Directors and (ii) by the vote of a majority of the Directors
of the Fund who are not parties to the contract or "interested persons" (as
defined in the 1940 Act) of the Fund, or Rafferty. The Proposed Advisory
Agreement is terminable on 60 days' written notice by either party thereto and
will terminate automatically if assigned.
The Proposed Advisory Agreement would reserve to Rafferty all rights to
the use of the term "EIS" and the symbol used by the Fund, which appears on the
Notice of Annual Meeting. The Proposed Advisory Agreement further provides that
if Rafferty (or an organization which has succeeded to the business of Rafferty)
ceases to be the investment adviser to the Fund, the Fund will cease to use in
its name the term "EIS" or any name suggesting that the Fund is or has been
advised by Rafferty, and the use of such symbol.
The foregoing description of the Proposed Advisory Agreement does not
purport to be complete but contains a summary of the material provisions
thereof. The complete Proposed Advisory Agreement is attached as Appendix A.
Information Regarding the Proposed New Adviser
Rafferty Capital Markets, LLC, the New Adviser, has its principal
offices at 1311 Mamaroneck Avenue, Suite 140, White Plains, New York. Rafferty
is a New York limited liability company and a wholly owned subsidiary of
Rafferty Holdings, LLC, a holding company comprised of several service-oriented
businesses. As of December 31, 2000, Rafferty had approximately $150,000,000 in
aggregate assets under management. Rafferty is also a registered broker-dealer
providing mutual fund distribution services to mutual fund companies around the
country. The principals of Rafferty and their principal occupations are as
follows:
--------------------------- ------------------------------------------------ ---------------------------------------
Name Position with Rafferty Capital Markets, LLC Position with Rafferty Holdings, LLC
--------------------------- ------------------------------------------------ ---------------------------------------
Thomas A. Mulrooney President and Manager None
--------------------------- ------------------------------------------------ ---------------------------------------
Stephen P. Sprague Secretary, Treasurer, and Chief Financial Chief Financial Officer and Secretary
Officer
--------------------------- ------------------------------------------------ ---------------------------------------
Lawrence C. Rafferty None Chief Executive Officer
--------------------------- ------------------------------------------------ ---------------------------------------
No officer or director of the Fund is an officer, employee or
shareholder of Rafferty or owns securities or has any other material direct or
indirect interest in Rafferty or any other person controlling, controlled by or
under common control with Rafferty. Rafferty renders investment advisory and
related services to clients other than the Fund with similar or different
investment objectives and policies.
The Evaluation by the Board of Directors
At a meeting held on February 6, 2001, the Directors of the Fund
considered information with respect to whether the Proposed Advisory Agreement
with Rafferty was in the best interests of the Fund and its shareholders. After
consideration, the Directors decided to recommend that the Fund's shareholders
vote to approve the Proposed Advisory Agreement.
In coming to this recommendation, the Directors considered a wide range
of information about Rafferty and the Fund, of the type normally considered when
determining whether to continue a Fund's advisory agreement as in effect from
year to year. The Directors considered information about, among other things:
7
o Rafferty, its business organization, financial resources,
personnel (including particularly those personnel with
responsibilities for providing services to the Funds), and
investment process;
o the terms of the Proposed Advisory Agreement;
o the scope and quality of the services that Rafferty can
provide to the Fund;
o the Fund's investment performance and the performance of
similar funds managed by other advisers;
o the advisory fee rates payable to Rafferty by the Fund and by
other client accounts managed by Rafferty, and payable by
similar funds managed by other advisers;
o the total expense ratio of the Fund and of similar funds
managed by other advisers; and
o Rafferty's practices regarding the selection and compensation
of broker-dealers that execute portfolio transactions for the
Fund, and the allocation of transactions among the Fund and
other investment accounts managed by Rafferty.
In addition to reviewing these kinds of information, which the
Directors regularly consider on an annual or more frequent basis, the Directors
gave particular consideration to matters relating to certain aspects of the
Fund, including:
o that the Fund has essentially had a single investment adviser
since inception;
o that, based on its investment objective and investment
strategies, the Fund does not need many of the services
typically provided by many other investment advisers;
o that Rafferty has agreed to waive a portion of its fees and
the Fund's existing expense limitation structure would remain
in place; and
o that the Fund generally seeks to maintain low portfolio
turnover.
The Directors considered the nature and quality of services expected to
be provided by Rafferty and information regarding fees, expense ratios and
performance. In evaluating Rafferty's ability to provide services to the Fund,
the Directors specifically considered Rafferty's management experience and
information concerning Rafferty's business organization, financial resources and
personnel. The Directors noted that the parent holding company of Rafferty has
another subsidiary that provides mutual fund advisory services to another family
of funds utilizing different investment strategies. The Directors noted that
Rafferty has sufficient depth and experience in the relevant market to provide
advisory services of the type required by the Fund. The Directors noted that
Rafferty has a substantial amount of assets under management and is affiliated
with a broker-dealer. The Directors also concluded that in view of the Fund's
low portfolio turnover, Rafferty would be able to provide the necessary
qualitative advisory services commensurate with the Fund's investment objectives
and strategies, including controlling portfolio turnover and brokerage costs.
The Directors also considered that Rafferty also provides mutual fund
distribution services to open-end mutual fund companies around the country.
In considering the level of fees to be paid by the Fund, the Directors
specifically noted that the Proposed Advisory Agreement is substantially the
same as the Current Advisory Agreement (except as noted above) and that the
contractual advisory fee rate payable by the Fund under the Proposed Advisory
Agreement would be identical to that payable under the Current Advisory
Agreement.
In addition, the Directors considered that Rafferty has voluntarily
agreed to waive 0.25% of its fee on the first $100,000,000 of assets of the
Fund. The voluntary waiver effectively reduces by half the amount of fees
payable for investment advisory services and guarantees that the Fund will pay
no greater aggregate costs than it currently pays to receive investment advisory
and administration services.
Based upon its review, the Directors concluded that the Proposed
Advisory Agreement with Rafferty is reasonable, fair and in the best interests
of the Fund and its shareholders, and that the fees
8
provided in the Proposed Advisory Agreement are fair and reasonable in light of
the usual and customary charges made by others for services of the same nature
and quality.
Approval of the Proposed Advisory Agreement requires the affirmative
vote of the holders of (i) 67% of the Fund's voting securities, as defined in
the 1940 Act, present and entitled to vote at the Annual Meeting, if the holders
of more than 50% of the Fund's outstanding voting securities are present or
represented by proxy at the Annual Meeting or (ii) a majority of the Fund's
outstanding voting securities, whichever is less.
The Board of Directors of the Fund recommends that you vote FOR
approval of the new investment advisory agreement.
PROPOSAL 3
TO RATIFY THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board of Directors recommends, and the Board
of Directors of the Fund, including a majority of those Directors who are not
"interested persons" of the Fund, has selected PricewaterhouseCoopers LLP to act
as the independent certified public accountants of the Fund for the fiscal year
ending December 31, 2001. PricewaterhouseCoopers LLP has no material direct or
indirect financial interest in the Fund. Management expects that representatives
of PricewaterhouseCoopers LLP will be present at the Meeting with the
opportunity to make a statement if they desire to do so and to respond to
appropriate questions.
PricewaterhouseCoopers LLP has served as auditors since April of 1995.
During the year ended December 31, 2000, PricewaterhouseCoopers LLP was engaged
by the Fund: (1) to examine its financial statements as of December 31, 2000;
(2) to assist and consult with the Fund in connection with the preparation of
the Fund's reports on Forms N-SAR and N-2 for filing with the Securities and
Exchange Commission; and (3) to assist and consult with the Fund on tax matters.
For audit services rendered in connection with the Fund,
PricewaterhouseCoopers LLP has been paid $19,751. Audit services included
auditing the Fund's year-end financial statements and review of financial
statements. PricewaterhouseCoopers LLP has not performed financial information
systems design and implementation services, or any other services, other than
audit services for the Fund.
The ratification of the selection of PricewaterhouseCoopers LLP as
auditors of the Fund requires the affirmative vote of the holders of (i) 67% of
the Fund's voting securities, as defined in the 1940 Act, present and entitled
to vote at the Annual Meeting, if the holders of more than 50% of the Fund's
outstanding voting securities are present or represented by proxy at the Annual
Meeting or (ii) a majority of the Fund's outstanding voting securities,
whichever is less.
The Board of Directors recommends that you vote FOR
ratification of PricewaterhouseCoopers LLP as the independent certified public
accountants of the Fund.
PROPOSAL 4
OTHER MATTERS
The Board of Directors knows of no other matters to be presented at the
Meeting other than those set forth in this Proxy Statement. If, however, any
other business should properly come before the Meeting, the persons named on the
accompanying proxy card will vote on such matters in accordance with their best
judgment.
9
Part 3 - More on Proxy Voting
Record Date
Only shareholders of record of the Fund at the close of business on the
Record Date, February 20, 2001, are entitled to receive notice of the Meeting
and may vote at the Meeting. As of the close of business on February 20, 2001,
2,169,091 shares of Common Stock, par value $.01 per share, of the Fund were
issued and outstanding. Each share is entitled to one vote at the Meeting and
each fractional share is entitled to a fractional vote. To the knowledge of the
Fund, the following persons are beneficial owners of more than 5% of the Fund's
outstanding shares:
---------------------------------------- -------------------------------------- ------------------------
Amount and nature of beneficial
Name and Address of Shareholder ownership* Percent of Fund
---------------------------------------- -------------------------------------- ------------------------
Deep Discount Advisors, Inc. 558,700 25.8%
One West Pack Square Investment Adviser
Suite 777
Asheville, NC 28801
---------------------------------------- -------------------------------------- ------------------------
First Union Corporation 193,380** 8.9%
One First Union Center
Charlotte, NC 28288-0137
---------------------------------------- -------------------------------------- ------------------------
Ron Olin Investment Management Company 349,900*** 16.1%
One West Pack Square Investment Adviser
Suite 777
Asheville, NC 28801
---------------------------------------- -------------------------------------- ------------------------
* This table summarizes information contained in Schedules 13G and
amendments thereto filed via EDGAR by Deep Discount Advisors, Inc. (filed
February 5, 2001, Accession No.0000938077-01-000005) (incorporating Schedule 13G
filed by Ron Olin Investment Management Company) and First Union Corporation
(filed February 14, 2001, Accession No. 0001074683-01-500034). The Fund has no
knowledge of the ultimate beneficial interest holders of these securities.
** First Union Corporation filed in its capacity as a parent
corporation upon behalf of its subsidiaries First Union Securities, Inc. and
Tattersall Advisory Group, Inc., both of which are investment advisers for
mutual funds and other clients and the shares are beneficially owned by such
mutual funds or other clients, and on behalf of First Union National Bank, which
holds shares in a fiduciary capacity for its customers.
*** Includes 191,500 shares held by Ronald G. Olin, individually,
according to Schedule 13G/A filed by Ronald G. Olin (filed February 5, 2001,
Accession No. 0001109742-01-000003).
Quorum
At least 51% of the Fund's shareholders must be present at the Meeting
in person or by proxy to constitute a quorum for the transaction of business by
the Fund. If a quorum of shareholders is not present, the persons named as
proxies will have the power to adjourn the Meeting. The Meeting shall be
reconvened without additional notice within a period not to exceed 60 days from
April 17, 2001, the date originally set for the Meeting. If a quorum is present,
but sufficient votes to approve a proposal are not received, the persons named
as proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares voted at the Meeting. A shareholder vote may be
taken on one or more of the proposals in this Proxy Statement prior to any
adjournment if a quorum is present and sufficient votes have been received.
If a proxy represents a broker "non-vote" (that is, a proxy from a
broker or nominee indicating that such person has not received instructions from
the beneficial owner or other person entitled to vote
10
shares on a particular matter with respect to which the broker or nominee does
not have discretionary power) or if a proxy is marked with an abstention, the
shares represented thereby will be considered to be present at the Meeting for
purposes of determining the existence of a quorum for the transaction of
business but will not be voted. For this reason, abstentions and broker
"non-votes" will have the effect of a "no" vote for purposes of obtaining the
requisite approval of some of the proposals.
How Proxies Will Be Voted
If the accompanying WHITE proxy card is executed properly and returned,
shares represented by it will be voted at the Meeting in accordance with the
instructions on the proxy card. If no instructions are specified, shares will be
voted for proposed Items 1, 2 and 3. Even if the enclosed proxy card is executed
and returned, it may be revoked prior to its exercise. You may revoke your proxy
at any time before it is exercised by submitting to the Fund a written notice of
revocation, by submitting a new proxy card or by attending the shareholder
meeting and casting your vote in person.
When voting on a proposed adjournment, the persons named as proxies
will vote all shares that they are entitled to vote with respect to each Item
for the proposed adjournment, unless directed to disapprove the Item, in which
case such shares will be voted against the proposed adjournment.
Proxy Solicitation
The Company has retained Georgeson to assist in the solicitation of
proxies, for which Georgeson will receive a fee of $25,000 plus reasonable
out-of-pocket expenses. The Company has also agreed to indemnify Georgeson
against certain liabilities and expenses in connection with this solicitation.
Approximately 20 persons will be employed by Georgeson to solicit shareholders.
The Fund's officers and investment adviser and administrators may also solicit
proxies.
Proxies may be solicited by mail, e-mail, telephone, telecopier, other
forms of electronic communication and in person. Banks, brokers, custodians,
nominees and fiduciaries will be requested to forward the solicitation materials
to the beneficial owners of shares of the Company's common stock and the Company
will reimburse them for their reasonable expenses for sending solicitation
materials to the beneficial owners.
The entire cost of soliciting proxies will be borne by the Fund.
Customarily, the Fund's cost of soliciting proxies for the Fund's annual meeting
of shareholders would be approximately $6,000. The Fund recently received notice
from a shareholder indicating its intention to solicit proxies to nominate
directors in opposition to the directors proposed by the Fund. In the event that
such an election contest occurs, the Fund estimates that the costs of soliciting
proxies will be approximately $60,000. To date, no fees have been paid by the
Company in connection with its solicitation of proxies.
If a proxy represents a broker "non-vote" (that is, a proxy from a
broker or nominee indicating that such person has not received instructions from
the beneficial owner or other person entitled to vote shares on a particular
matter with respect to which the broker or nominee does not have discretionary
power) or if a proxy is marked with an abstention, the shares represented
thereby will be considered to be present at the Meeting for purposes of
determining the existence of a quorum for the transaction of business but will
not be voted. For this reason, abstentions and broker "non-votes" will have the
effect of a "no" vote for purposes of obtaining the requisite approval of some
of the proposals.
IF YOU DO NOT EXPECT TO ATTEND THE MEETING,
PLEASE SIGN YOUR WHITE PROXY CARD PROMPTLY AND RETURN IT IN THE
ENCLOSED ENVELOPE TO AVOID UNNECESSARY EXPENSE AND DELAY.
NO POSTAGE IS NECESSARY.
11
PART 4 - ADDITIONAL INFORMATION
Name Change
The Board of Directors of the Fund has approved a proposal to change
the name of the Fund to EIS Fund, Ltd. Shareholder approval is not required for
this change. The change will become effective April 17, 2001.
Brokerage Commissions On Portfolio Transactions
In accordance with the Fund's investment policies, its investments are
in debt securities, which are generally traded through dealers acting for their
own account as principals and not as brokers; no brokerage commissions are
payable in such transactions. During the year ended December 31, 2000, all
portfolio transactions were with principals. During 2000, the Fund's portfolio
turnover rate was 15.87%.
Deadline for Shareholder Proposals
Proposals of shareholders intended to be presented at the Fund's Annual
Meeting of Shareholders to be held in April 2002, must be received by the Fund,
at its principal executive offices, by January 5, 2002, for inclusion in the
Fund's Proxy Statement and proxy card relating to that meeting.
Your vote is important. Whether or not you intend to attend the Meeting, please
fill in, date, sign and promptly return the enclosed WHITE proxy card in the
postage paid, return envelope provided in order to avoid the additional expense
of further proxy solicitation and to ensure that a quorum will be present at the
meeting. Your proxy is revocable at any time before its use.
By Order of the Board of Directors,
Robert D. Cummings, Secretary
March 7, 2001
12
APPENDIX A
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made this ______ day of ________________, 2001, by and
between EIS FUND, LTD., a New York corporation ( the "Company"), and Rafferty
Capital Markets, LLC, a New York limited liability company ( the "Adviser").
In consideration of the mutual promises hereinafter set forth, the
parties hereto agree as follows:
1. The Adviser shall act as investment adviser for and shall make
available trading desk facilities to the Company, subject to and upon the terms
and conditions set forth in this Agreement. The Adviser may, in its discretion,
provide such services through its own employees or the employees of one or more
affiliated companies that are qualified to act as investment adviser to the
Company under applicable law provided (i) that all persons, when providing
services hereunder, are functioning as part of an organized group of persons;
(ii) the use of an affiliate's employees does not result in a change in control
or management of the Adviser under the Investment Company Act of 1940 (the "1940
Act"); and (iii) the use of an affiliate's employees has been approved by the
Board of Directors of the Company.
2. In acting as investment adviser to the Company, the Adviser shall,
on a non-discretionary basis, (a) formulate a continuing program to provide
advice and recommendations for the management of the assets and resources of the
Company in a manner consistent with the Company's investment objectives,
policies and restrictions and the provisions of the 1940 Act and other
applicable laws, and in this connection make specific recommendations and
furnish advice to the Company regarding securities proposed for purchase and
sale by the Company and the portion of its assets to be held in cash or cash
equivalents in order to carry out such a program; (b) obtain and evaluate such
research information relating to the economy, industries, businesses, securities
markets and types of securities as it may deem necessary or useful in the
discharge of its obligations hereunder or as may be reasonably requested by the
Company; (c) generally take such other steps as the Adviser may deem necessary
or appropriate in assisting in the implementation by the Company of such
program, recommendations, advice and research information; and (d) make
available to the Company, upon reasonable notice, officers or investment
personnel of the Adviser for consultation with the officers and directors of the
Company in connection with the Company's investment objectives and policies and
also furnish to or place at the disposal of the Company such of the information,
reports, evaluations, analyses and opinions formulated or obtained by the
Adviser in the discharge of its duties hereunder as the Company may, at any time
or from time to time, reasonably request or as the Adviser may deem helpful to
the Company.
3. In making available trading-desk facilities to the Company for the
placement of purchase and sale orders to carry out portfolio transactions of the
Company or for the clearance of transactions placed on behalf of the Company,
orders acted upon by the Adviser will be done on a non-discretionary basis, and
will be placed through such facilities consistent with the statements set forth
under "Brokerage Commissions on Portfolio Transactions" in the Company's proxy
statement dated April 5, 2000 (the "Proxy Statement"), receipt of a copy of
which is hereby acknowledged by the Adviser. In accordance with the Company's
investment policies, and as stated in the Proxy Statement, the Company's
investments are in debt securities, which are generally traded through dealers
acting for their own account, as principals and not as brokers; no brokerage
commissions are payable in such transactions.
4. The Adviser shall permit the Company to use the Adviser's corporate
address as the Company's address of record. From time to time, the Adviser
agrees to provide office space for the Company, as reasonably requested, for
such events as Company board meetings.
5. The Company shall pay or provide for the payment for its own account
of all its expenses not specifically assumed by the Adviser as hereinbefore
provided, which expenses shall include, without limitation, interest, taxes,
brokerage commissions, compensation and expenses of directors of the Company,
out-of-pocket expenses of officers of the Company in connection with any travel
or other activities carried out on behalf of the Company other than in its
office, legal and auditing expenses, fees and expenses of the custodian,
transfer agent or other institutional agents, all expenses in connection with
maintaining the registration of the Company under the 1940 Act and making
reports thereunder and registering and qualifying the shares of common stock of
the Company for issuance and sale under the Securities Act of 1933 and under
"Blue Sky" laws of the various states, costs of
13
engraving or printing the Company's stock certificates, the expenses of
shareholders' meetings and of printing and mailing proxy materials, reports and
notices to its shareholders, corporate filing fees, dues, fees and expenses
relative to stock exchange listings and for membership in trade associations and
costs of fidelity bonds and other bonding or insurance coverage requisite to the
operations of the Company.
6. For the services rendered and expenses assumed by the Adviser for
the Company pursuant to this Agreement, the Company shall pay to the Adviser an
annual fee at the rate of (a) 0.5% of the Company's net assets up to and
including $100,000,000; plus (b) 0.4% of the Company's net assets over
$100,000,000 up to and including $200,000,000; plus (c) 0.3% of the Company's
net assets over and above $200,000,000 ( see attached Advisory Fee Schedule).
The Adviser agrees to a voluntary waiver of .25% (25 basis points on
the first $100,000,000 of the Company's assets). The voluntary waiver by the
Adviser has been arranged with Firstar Mutual Fund Services, LLC ("Firstar") so
that Firstar can be compensated for fund administration and compliance, fund
accounting, custody and transfer agency services. Firstar will arrange separate
service agreements for each of the above-mentioned services with the Company.
Said fees shall be computed by the Company, with the assistance of the
Adviser and Firstar, quarterly on the basis of the net asset value as of the
last day of each quarter, provided, however, that for the initial quarterly
period and upon any termination of this Agreement before the end of any quarter
the amount of the annual fee which shall be accrued by the Company for payment
to the Adviser at the end of the initial quarter or date of termination shall be
prorated according to the proportion such period bears to the full quarterly
period. For the purpose of computing the annual fee, the Adviser and Firstar
shall determine the value of the Company's net assets on the same basis as such
net assets are determined for the Company's annual report to the Securities and
Exchange Commission.
7. If, in any calendar year, the sum of the expenses to be paid by the
Company as provided in Section 5 hereof (other than interest, taxes and
brokerage commissions relating to the purchase or sale of portfolio securities,
expenses of any public offerings of the Company's Common Stock and extraordinary
expenses beyond the control of the Adviser) plus the Adviser's fee as provided
under Section 6 hereof shall exceed 11/2% of the average of the closing value of
the Company's net assets, computed each week on the last day on which the New
York Stock Exchange is open during such year (or portion thereof, if applicable,
as to the years during which the Agreement is commenced and terminated) up to
and including $30,000,000 plus 1% of the average of the closing value of the
Company's net assets (computed on the same basis) over $30,000,000, the Adviser
shall promptly reimburse the Company for the amount of such excess expenses
prior to the publication of the Company's annual report to shareholders in the
next succeeding calendar year.
8. The Adviser shall at all times maintain a staff of officers and
other trained personnel in order to enable it to perform its obligations under
this Agreement. The Adviser agrees to use its best efforts to achieve the
Company's objectives in acting as the non-discretionary investment adviser and
to provide trading desk facilities and render administrative services to the
Company as provided in this Agreement; but nothing herein contained shall be
deemed to preclude the Adviser, at its expense and at no additional expense to
the Company, from employing, retaining or otherwise availing itself of the
services of other persons or organizations for the purpose of providing the
Adviser or the Company with such services, advice or assistance as the Adviser
may deem necessary, appropriate or convenient for the discharge of its
obligations hereunder or, in its opinion, otherwise helpful to the Company.
The services of the Adviser to the Company are not to be deemed to be
exclusive, and the Adviser shall be free to render investment-advisory,
management, administrative or other services to others, including, without
limitation, other investment companies with the same or different investment
objectives and policies and to engage in other activities without limitation. It
is understood and agreed that, to the extent permitted by law, officers or
directors of the Adviser may serve as officers or directors of the Company, and
that officers or directors of the Company may serve as officers or directors of
the Adviser, and that, to the extent permitted by law, the officers and
directors of the Adviser are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving as
partners, officers, or directors of any other firm or corporation, including
other investment companies with the same or different investment objectives and
policies.
A-2
9. The Adviser shall be held harmless by the Company and shall not be
subject to liability to the Company or to any shareholder of the Company for any
mistake in judgment or in any event whatsoever except for the lack of good faith
on the part of the Adviser or for any conduct on the part of the Adviser
constituting a breach of fiduciary duty involving personal misconduct in respect
of the Company, provided that nothing herein shall be deemed to protect or
purport to protect the Adviser against any liability to the Company or to any
shareholder of the Company to which the Adviser would otherwise be subject by
reasons of an act or practice by the Adviser constituting willful malfeasance,
bad faith, gross negligence in the performance of its duties, or reckless
disregard to its obligations and duties hereunder.
No provisions of this Agreement shall be deemed to protect any director
or officer of the Company against any such liability to which he might otherwise
be subject by reason of any willful malfeasance, bad faith or gross negligence
in the performance of his duties or the reckless disregard of the duties
involved in the conduct of his affairs.
10. This Agreement (unless terminated as hereinafter provided) shall
continue in effect until the second anniversary of the date hereof, and
thereafter from year to year; provided, however, that this Agreement shall be
specifically approved at least annually by (a) a majority of the Board of
Directors of the Company or the vote of a majority of the outstanding voting
securities (as such term is used in the 1940 Act and the rules and regulations
thereunder) of the Company and (b) the vote of a majority of such directors who
are not interested persons (as such term is used in the 1940 Act and the rules
and regulations thereunder) of any party of this Agreement, cast in person at a
meeting called for the purpose of voting on such approval. If approval of the
continuation of this Agreement is not obtained pursuant to the foregoing, this
Agreement shall expire by its terms twelve (12) months after the date of the
last approval.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought, and no
amendment of this Agreement shall be effective until approved by a majority of
the Company's outstanding voting securities, if such vote is required by the
1940 Act, or by a majority of the Board of Directors of the Company who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such amendment.
In each event that the stockholders of the Company are asked to approve
the continuation or amendment of this Agreement, the prior approval of a
majority of the Board of Directors who are not interested persons (as such term
is used in the 1940 Act and the rules and regulations thereunder) of any party
to this Agreement shall also be required.
11. This Agreement may be terminated at any time without the payment of
any penalty (a) by the Company, upon sixty (60) days' notice in writing to the
Adviser, provided such termination shall be authorized by resolution of the
Board of Directors of the Company or by a vote of the majority of the
outstanding voting securities (as such term is used in the 1940 Act and the
rules and regulations thereunder) of the Company; or (b) by the Adviser upon
sixty (60) days' notice in writing to the Company. (An affiliate of the Adviser
may assume the Adviser's obligations under this Agreement provided that (i) the
affiliate is qualified to act as an investment adviser to the Company under
applicable law; (ii) the assumption will not result in a change of actual
control or management of the Adviser under the 1940 Act; and (iii) the
assumption of the Adviser's obligations by the affiliate is approved by the
Board of Directors of the Company.)
12. This Agreement shall automatically and immediately terminate in the
event of its assignment (as such term is used in the 1940 Act and the rules and
regulations thereunder).
A-3
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day and year first above written.
EIS Fund, LTD.
by: _________________________________
Authorized Officer
Title: ______________________________
Date: _______________________________
ATTEST:
----------------------------------
Rafferty Capital Markets, LLC
by: ________________________________
Authorized Officer
Title: _____________________________
Date: ______________________________
ATTEST:
----------------------------------
RAFFERTY CAPITAL MARKETS, LLC
ADVISORY FEE SCHEDULE
For
EIS FUND, LTD.
Advisory Fee:
------------
Adviser's Annual Fee is 50 basis points on the first $100,000,000 with
a voluntary waiver of .25% (25 basis points on the first $100,000,000
of assets of the Fund). The voluntary waiver of .25% by Rafferty
Capital Markets, LLC has been arranged with Firstar Mutual Fund
Services, LLC ("Firstar") so that Firstar can be compensated for fund
administration and compliance, fund accounting, custody, and transfer
agency services. Firstar will arrange separate service agreements for
each of the above-mentioned services with EIS Fund Ltd.
Advisory Fee Schedule:
---------------------
.5% (50 bps) of the Company's net assets up to and including
$100,000,000 (less the voluntary waiver of 25 BPS); plus .4% (40 bps)
of the Company's net assets over $100,000,000 up to and including
$200,000,000; plus .3% (30 bps) of the Company's net assets over and
above $200,000,000 plus any out-of-pocket expenses.
Excelsior Income Shares, Inc.
114 West 47th Street
New York, New York 10036
MEETING: April 17, 2001 AT 11:00 AM
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned holder of shares of Excelsior Income Shares, Inc. (the "Fund")
hereby appoints Townsend Brown, II, Robert D. Cummings and Robert R. Johnson,
attorneys with full powers of substitution and revocation, to represent the
undersigned and to vote on behalf of the undersigned all shares of the Fund that
the undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Fund to be held at 114 West 47th Street, Conference Room 14B, New York, New York
at the date and time indicated above and at any postponements or adjournments
thereof. The undersigned hereby acknowledges receipt of the enclosed Notice of
Annual Meeting and Proxy Statement and hereby instructs said attorneys and
proxies to vote said shares as indicated herein. Every properly signed proxy
will be voted in the manner specified thereon and, in the absence of
specification, will be treated as GRANTING authority to vote FOR all of the
items. In their discretion, the proxies are authorized to vote on such other
business as may properly come before the Annual Meeting. A majority of the
proxies present and acting at the Annual Meeting in person or by substitute (or,
if only one shall be so present, then that one) shall have and may exercise all
of the power and authority of said attorneys or proxies hereunder. The
undersigned hereby revokes any proxy previously given.
^FOLD AND DETACH HERE^
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X]
------------------------------------------------------------------------
THIS PROXY IS VALID ONLY WHEN SIGNED AND DATED.
1. To elect Directors to hold office until the next Annual Meeting.
01) Townsend Brown, II, 02) Geoffrey J. O'Connor, 03) John H. Reilly,
04) Perry W. Skjelbred, 05) Philip J. Tilearcio
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
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To withhold authority to vote, mark "For All Except" and write the
Nominee's number on the line below:
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Vote on Proposals
2. To approve a new Investment Advisory Agreement between the Fund and
Rafferty Capital Markets, LLC.
FOR AGAINST ABSTAIN
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3. To ratify the selection of PricewaterhouseCoopers LLP as the Fund's
independent public accountants for the fiscal year ending December 31,
2001.
FOR AGAINST ABSTAIN
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4. To transact such other business as may properly come before the Annual
Meeting or any adjournment(s) thereof.
FOR AGAINST ABSTAIN
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PLEASE SIGN IN THE BOX BELOW
Please sign exactly as your name appears on this Proxy. If Joint owners, EITHER
may sign this Proxy. When signing as attorney, executor, administrator, trustee,
guardian or corporate officer, please give title.
X______________________________________________
Signature (PLEASE SIGN WITHIN BOX) (Date)
X______________________________________________
Signature (JOINT OWNERS) (Date)