<PAGE>
[LOGO OF EXCELSIOR FUNDS APPEARS HERE]
FIXED INCOME PORTFOLIOS
ANNUAL REPORT
MARCH 31, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LETTER TO SHAREHOLDERS.................................................... 1
ADVISER'S FIXED INCOME MARKET REVIEW...................................... 2
ADVISER'S INVESTMENT REVIEWS
Short-Term Government Securities Fund.................................... 3
Intermediate-Term Managed Income Fund.................................... 4
Managed Income Fund...................................................... 5
STATEMENTS OF ASSETS AND LIABILITIES...................................... 6
STATEMENTS OF OPERATIONS.................................................. 8
STATEMENTS OF CHANGES IN NET ASSETS....................................... 9
FINANCIAL HIGHLIGHTS--SELECTED PER SHARE DATA AND RATIOS.................. 10
PORTFOLIOS OF INVESTMENTS
Treasury Money Fund...................................................... 12
Government Money Fund.................................................... 13
Money Fund............................................................... 14
Short-Term Government Securities Fund.................................... 15
Intermediate-Term Managed Income Fund.................................... 16
Managed Income Fund...................................................... 17
NOTES TO FINANCIAL STATEMENTS............................................. 18
INDEPENDENT AUDITORS' REPORT.............................................. 26
</TABLE>
For shareholder account information, current price and yield quotations, or to
make an initial purchase or obtain a prospectus, call the appropriate telephone
number listed below:
. INITIAL PURCHASE AND PROSPECTUS INFORMATION AND SHAREHOLDER SERVICES 1-800-
446-1012
. CURRENT PRICE AND YIELD INFORMATION 1-800-233-9180
This report must be preceded or accompanied by a current prospectus.
Prospectuses containing more complete information including charges and
expenses regarding Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc.
may be obtained by contacting the Funds at 1-800-446-1012.
Investors should read the current prospectus carefully prior to investing or
sending money.
Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. are sponsored and
distributed by Edgewood Services, Inc.
You may write to Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. at
the following address:
EXCELSIOR FUNDS, INC.
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, ITS PARENT AND AFFILIATES
AND SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN THE FUNDS INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. FUND SHARES ARE NOT
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
<PAGE>
LETTER TO SHAREHOLDERS
- -------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report for the Excelsior Funds, Inc. and
Excelsior Tax-Exempt Funds, Inc. for the fiscal year ended March 31, 1996.
There were several exciting developments during this tenth anniversary year
for the funds.
On January 1, 1996 the funds changed their name from UST Master Funds to
Excelsior Funds. This was done to more clearly differentiate our funds in the
marketplace and to make the funds more attractive to other financial
institutions through which we seek to distribute them. At the same time, the
funds entered alliances with a new distributor, Edgewood Services, and another
fund company, Excelsior Institutional Trust. These strategic alliances have
expanded our fund family's product offerings to reach new markets and have
enabled the funds to consolidate service providers, thereby reducing certain
operating expenses of the funds. These cost savings are being passed on to
shareholders.
The extended Excelsior Funds Family now consists of thirteen domestic
equity, five international, ten fixed-income, and five money market funds
totalling $4.2 billion in assets. These funds have been designed to provide a
comprehensive range of investment options and offer investors, both individual
and institutional, an opportunity to allocate holdings in accordance with
their specific investment objectives.
Excelsior Fund shareholders are serviced by a dedicated team of
professionals. We recognize the importance of excellent customer service and
are committed to meeting investor needs in a responsible and efficient manner.
We appreciate your participation in the funds during our first decade of
operation and look forward to serving you in the years to come.
(ART)
Alfred C. Tannachion
Chairman of the Board and President
1
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
ADVISER'S FIXED INCOME MARKET REVIEW
- --------------------------------------------------------------------------------
Fiscal 1996 proved an uneven year for the fixed-income markets. During the
fiscal first quarter, the markets marched higher--Employment, income and
consumer spending all slowed. A higher-than-desired inventory buildup applied
a brake to economic growth. Inflation moved higher, but was interpreted by the
Federal Reserve as more cyclical than secular and no reason to hike rates. In
fact, the market was way ahead of the Fed in moving rates lower. The municipal
bond market did not match the interest rate declines of the Treasury market,
however, due to tax reform proposals which, if enacted, would threaten the tax
advantages of municipal securities.
Fiscal second quarter bond market performance, though mildly positive, was
actually quite volatile as investors waited nervously for each release of
economic data for an indication of what the Federal Reserve might do with
interest rates. Fortunately, economic data confirmed that the economy was
slowing to a more non-inflationary pace. Once the Treasury auctions were
placed, the market rallied. The municipal market behaved similarly, ending
basically unchanged, though yields on short-term municipals declined more than
those of longer-maturity issues, due largely to speculation regarding the
various flat tax proposals in Congress.
For the third fiscal quarter, yields continued to drop as expectations for
moderate economic growth and weak inflation permeated the market. A drastic
change in the dollar/yen exchange rate policy by the Bank of Japan helped
lower U.S. interest rates. In addition, consumer spending and borrowing were
adversely impacted by a wave of corporate "downsizing." Relatively high
inventory levels slowed production during the fall. Moreover, retail sales
were disappointing during the important Christmas season, and the
manufacturing sector was soft as well. As for the municipal market, it behaved
in like fashion as investors put aside fears of a flat tax and focused on
weakness in the economy and moderate inflation expectations.
The fiscal fourth quarter saw a return to volatility, and yields finished up
across the board. At the start of the quarter, continued subdued inflation,
harsh winter weather, the government shutdown, and other factors all
contributed to the sluggish economic picture. Consensus expectations called
for the Federal Reserve to ease but a number of negative factors emerged.
First, it became clear that the balanced budget wasn't going to happen. Second
came Fed Chairman Greenspan's Humphrey Hawkins testimony that the latest Fed
easing was only "insurance" as he saw a strengthening in the economy. And
third, hedge funds and speculators began to sell 5-year Treasuries. The fixed
income markets sold off in January and February as a consequence. Even then,
results weren't disastrous. All of this changed, however, and any talk of
further Fed easing ceased, with the release of higher-than-expected non-farm
payroll numbers in late February. The market took the news hard, though a
rebound on somewhat ambiguous economic data moved it up toward quarter end.
Municipal issues outperformed Treasuries during the quarter--especially
shorter maturities. The rise and eventual demise of flat-tax speculation did
not appear to be a major factor; municipal outperformance was due,
essentially, to the relative lack of supply.
2
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
ADVISER'S INVESTMENT REVIEW SHORT-TERM GOVERNMENT SECURITIES FUND
- -------------------------------------------------------------------------------
Short-term interest rates moved lower during this reporting period. Signs of
slower economic growth prompted the Federal Reserve to lower the federal funds
rate three times between the first week of July and the end of January. The
Fund achieved a 7.27%* investment return for its fiscal year ended March 31,
1996. The Lipper Short U.S. Government Funds** category's average total return
excluding sales charge was 6.88% for the same period. The portfolio was
composed of federal government and agency securities that had an average
maturity of two years. We will continue to actively manage the portfolio in a
manner consistent with the Fund's investment objective to seek a high level of
current income consistent with stability of principal.
[LINE GRAPH APPEARS HERE]
---------------------------------------------
Sort-Term Government Securities Fund+
---------------------------------------------
Average Annual Total Returns Ended on 3/31/96
Reflects Maximum Sales Charge of 4.5%
---------------------------------------------
1 year Since Inception
(12/31/92)
---------------------------------------------
2.51% 3.26%
---------------------------------------------
SHORT TERM SHORT TERM LEHMAN
GOVERNMENT GOVERNMENT BROTHERS
SEC. FUND SEC. FUND 1-3 YEAR
REFLECTS EXCLUSIVE GOVERNMENT
MAX.SALES OF SALES BOND
CHARGE CHARGE INDEX
----------- ---------- ----------
12/31/92 9,550 10,000 10,000
3/31/93 9,712 10,170 10,220
6/30/93 9,808 10,270 10,330
9/30/93 9,935 10,404 10,470
12/31/93 9,962 10,432 10,540
3/31/94 9,918 10,385 10,490
6/30/94 9,952 10,421 10,490
9/30/94 10,054 10,528 10,590
12/31/94 10,069 10,543 10,590
3/31/95 10,344 10,832 10,950
9/30/95 10,848 11,360 11,460
3/31/96 11,096 11,619 11,790
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Short-Term
Government Securities Fund on 12/31/92 (inception date) to a $10,000
investment made in the Lehman Brothers 1-3 Year Government Bond Index on that
date. All dividends and capital gain distributions are reinvested.
The Fund's performance takes into account fees and expenses. The Lehman
Brothers 1-3 Year Government Bond Index is an unmanaged total return
performance benchmark composed of U.S. Government agencies and U.S. Treasury
securities with maturities of one to three years. The Index does not take into
account charges, fees and other expenses. Further information relating to Fund
performance is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report.
- -------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lipper Analytical Services, Inc.--Lipper is an independent mutual
fund performance monitor.
*** Source: Lehman Brothers.
+ The Fund is currently waving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
3
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
ADVISER'S INVESTMENT REVIEW
INTERMEDIATE-TERM MANAGED INCOME FUND
- -------------------------------------------------------------------------------
Economic growth and inflation remained moderate during the fiscal year ended
March 31, 1996. These developments enabled the Federal Reserve to lower the
federal funds rate three times between the first week of July and the end of
January. The Fed's monetary approach continues to be one of gradualism. The
Federal Open Market Committee voted to reduce the key federal funds rate by
twenty five basis points (one quarter of one percentage point) on July 6,
December 19, and January 31. We continued to maintain a Fund composed of prime
investment grade securities. For example, at the end of fiscal year 1996, U.S.
Government and Federal Agency securities represented approximately 76% of the
Fund's holdings. The balance of the portfolio was invested in investment-grade
corporate securities with an average quality rating of A+. The average
maturity of securities held was 7.9 years. The Fund recorded a return of
11.13%* for the fiscal year ended March 31, 1996, comparing favorably with the
Lipper Intermediate Investment Grade Fund** category's average total return
excluding sales charge of 9.74% for the same period. We will continue to
actively manage the portfolio utilizing high investment grade securities that
fall within the Fund's maturity guidelines.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN INTERMEDIATE-TERM MANAGED
INCOME FUND AND THE LEHMAN BROTHERS INTERMEDIATE GOVT/CORP BOND INDEX***
[LINE GRAPH APPEARS HERE]
---------------------------------------------
Intermediate-Term Manage Income Fund+
---------------------------------------------
Average Annual Total Returns Ended on 3/31/96
Reflects Maximum Sales Charge of 4.5%
---------------------------------------------
1 year Since Inception
(12/31/92)
---------------------------------------------
6.10% 4.73%
---------------------------------------------
<TABLE>
<CAPTION>
Intermediate-Term Intermediate-Term Lehman Brothers
Managed Income Fund Managed Income Fund Intermediate
(reflects maximum (exclusive of Govt/Corp
sales charge) sales charge) Bond Index***
<S> <C> <C> <C>
12/31/92 9,550 10,000 10,000
3/31/93 9,918 10,386 10,400
6/30/93 10,153 10,632 10,620
9/30/93 10,419 10,910 10,860
12/31/93 10,355 10,844 10,880
3/31/94 9,963 10,433 10,660
6/30/94 9,921 10,389 10,590
9/30/94 9,940 10,409 10,680
12/31/94 9,971 10,441 10,670
3/31/95 10,456 10,949 11,140
9/30/95 11,393 11,930 11,880
3/31/96 11,620 12,167 12,220
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Intermediate-
Term Managed Income Fund on 12/31/92 (inception date) to a $10,000 investment
made in the Lehman Brothers Intermediate Govt/Corp Bond Index on that date.
All dividends and capital gain distributions are reinvested.
The Fund's performance takes into account fees and expenses. The Lehman
Brothers Intermediate Govt/Corp Bond Index is an unmanaged total return
performance benchmark composed of U.S. Government agencies and U.S. Treasury
securities and investment grade corporate debt, selected as representative of
the market with maturities of one to ten years. The Index does not take into
account charges, fees and other expenses. Further information relating to Fund
performance is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report.
- -------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lipper Analytical Services, Inc.--Lipper is an independent mutual
fund performance monitor.
***Source: Lehman Brothers.
+ The Fund is currently waving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
4
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
ADVISER'S INVESTMENT REVIEW MANAGED INCOME FUND
- -------------------------------------------------------------------------------
Economic growth and inflation remained moderate during the fiscal year ended
March 31, 1996. The Federal Reserve, staying with its policy of gradualism,
lowered interest rates by twenty five basis points three times during this
reporting period. Additional favorable factors helping to lower interest rates
included sizable purchases of U.S. securities by foreign central banks and
consumer concern with corporate downsizing (layoffs) and high levels of
indebtedness. High investment grade quality and very marketable security
holdings remained key characteristics of this Fund. At fiscal year end,
federal government and agency obligations represented about 75% of the
portfolio's assets. The balance was invested in high-quality investment grade
issues. The average life of the securities owned was 11 years. The Fund
achieved a 11.86%* investment return during this fiscal year. The Lipper
Corporate Debt Funds BBB Rated** category's average total return excluding
sales charge was 11.72% for the same period. The Fund will continue to be
actively managed utilizing high investment grade securities.
[LINE GRAPH APPEARS HERE]
--------------------------------------------
Managed Incom Fund+
--------------------------------------------
Average Annual Total Return Ended on 3/31/96
Reflects Maximum Sales Charge of 4.5%
--------------------------------------------
1 year 5 years 10 years Since Inception
6.77% 7.63% 9.57% 10.27%
--------------------------------------------
<TABLE>
<CAPTION>
MANAGED MANAGED LEHMAN BROS.
INCOME INCOME GOVT/CORP
FUND FUND BOND INDEX***
<S> <C> <C> <C>
01/09/86 9,550 10,000 10,000
03/31/86 10,399 10,893 10,850
03/31/87 12,319 12,904 11,730
03/31/88 13,206 13,833 12,250
03/31/89 14,154 14,826 12,860
03/31/90 15,856 16,609 14,370
03/31/91 17,975 18,829 16,160
03/31/92 19,837 20,780 18,000
03/31/93 22,960 24,050 20,580
03/31/94 23,357 24,466 21,140
03/31/95 24,305 24,559 22,110
03/31/96 27,186 28,478 24,540
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Managed Income
Fund on 1/9/86 (inception date) to a $10,000 investment made in the Lehman
Brothers Govt/Corp Bond Index on that date. For comparative purposes, the
value of the Index on 12/31/85 is used as the beginning value on 1/9/86. All
dividends and capital gain distributions are reinvested.
The Fund's performance takes into account fees and expenses. The Lehman
Brothers Govt/Corp Bond Index is an unmanaged total return performance
benchmark comprised of U.S. Government agencies and U.S. Treasury securities
and investment grade corporate debt, selected as representative of the market.
The Index does not take into account charges, fees and other expenses. Further
information relating to Fund performance is contained in the Financial
Highlights section of the Prospectus and elsewhere in this report.
- -------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lipper Analytical Services, Inc.--Lipper is an independent mutual
fund performance monitor.
***Source: Lehman Brothers.
+ The fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
5
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
STATEMENTS OF ASSETS AND LIABILITIES
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE-
SHORT-TERM TERM
TREASURY GOVERNMENT GOVERNMENT MANAGED MANAGED
MONEY MONEY MONEY SECURITIES INCOME INCOME
FUND FUND FUND FUND FUND FUND
------------ ------------ ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at cost--
see accompanying
portfolios............ $256,253,893 $461,825,938 $395,655,278 $24,601,431 $68,642,241 $88,989,417
============ ============ ============ =========== =========== ===========
Investments, at value*
(Note 1).............. $256,253,893 $461,825,938 $395,655,278 $24,719,884 $68,026,520 $88,415,283
Cash................... -- -- -- 35 537 --
Interest receivable.... 2,913,025 1,474,541 573,726 464,038 953,333 869,891
Receivable for fund
shares sold........... 148,105 634 12,322 11,086 18,581 30,208
Prepaid expenses....... 7,991 22,482 24,113 1,099 2,028 2,532
Unamortized
organization costs
(Note 5).............. -- -- -- 7,347 7,347 --
------------ ------------ ------------ ----------- ----------- -----------
TOTAL ASSETS........... 259,323,014 463,323,595 396,265,439 25,203,489 69,008,346 89,317,914
LIABILITIES:
Payable for dividends
declared.............. 904,695 1,601,429 1,529,608 109,029 317,122 325,982
Payable for fund shares
redeemed.............. 96,124 1,125 142,589 -- 2,097 9,998
Investment advisory
fees payable (Note 2). 58,038 77,936 70,057 5,378 17,559 45,267
Accrued expenses and
other payables........ 94,770 172,839 238,503 21,290 31,449 37,029
------------ ------------ ------------ ----------- ----------- -----------
TOTAL LIABILITIES...... 1,153,627 1,853,329 1,980,757 135,697 368,227 418,276
------------ ------------ ------------ ----------- ----------- -----------
NET ASSETS.............. $258,169,387 $461,470,266 $394,284,682 $25,067,792 $68,640,119 $88,899,638
============ ============ ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements
6
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
STATEMENTS OF ASSETS AND LIABILITIES--(CONTINUED)
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE-
SHORT-TERM TERM
TREASURY GOVERNMENT GOVERNMENT MANAGED MANAGED
MONEY MONEY MONEY SECURITIES INCOME INCOME
FUND FUND FUND FUND FUND FUND
------------ ------------ ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS consist of:
Undistributed/(distributions
in excess of) net
investment income ......... $ (55) $ -- $ -- $ -- $ 6,520 $ 67,767
Accumulated net realized
loss on investments........ (39,080) (62,183) (67,070) (394,292) (467,171) (3,580,305)
Unrealized appreciation
/(depreciation) on
investments................ -- -- -- 118,453 (615,721) (574,134)
Par value (Note 4).......... 258,208 461,563 394,515 3,589 9,719 10,051
Paid in capital in excess of
par value.................. 257,950,314 461,070,886 393,957,237 25,340,042 69,706,772 92,976,259
------------ ------------ ------------ ----------- ----------- -----------
TOTAL NET ASSETS............. $258,169,387 $461,470,266 $394,284,682 $25,067,792 $68,640,119 $88,899,638
============ ============ ============ =========== =========== ===========
Shares of Common Stock
Outstanding................. 258,208,424 461,562,874 394,515,540 3,589,100 9,718,927 10,050,920
NET ASSET VALUE PER SHARE.... $1.00 $1.00 $1.00 $6.98 $7.06 $8.84
===== ===== ===== ===== ===== =====
</TABLE>
* Includes repurchase agreements aggregating $13,387,835 for Government Money
Fund and $8,835,594 for Money Fund.
See Notes to Financial Statements
7
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE-
SHORT-TERM TERM
TREASURY GOVERNMENT GOVERNMENT MANAGED MANAGED
MONEY MONEY MONEY SECURITIES INCOME INCOME
FUND FUND FUND FUND FUND FUND
----------- ----------- ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income............. $12,426,426 $32,722,563 $35,839,547 $1,413,269 $4,020,314 $6,112,501
----------- ----------- ----------- ---------- ---------- ----------
EXPENSES:
Investment advisory fees
(Note 2)................... 668,875 1,396,478 1,518,959 66,923 209,968 649,769
Administration fees (Note
2)......................... 344,357 861,964 937,456 50,000 92,671 133,809
Administrative service fees
(Note 2)................... 46,887 172,980 227,463 20,504 24,893 47,693
Shareholder servicing agent
fees (Note 2).............. 8,906 19,283 47,049 7,572 19,558 38,386
Custodian fees (Note 2)..... 118,010 301,053 330,516 9,122 21,368 47,809
Registration and filing
fees....................... 8,098 11,334 2,525 8,026 8,940 9,974
Legal and audit fees........ 33,502 113,768 88,036 4,919 10,020 14,999
Directors' fees and expenses
(Note 2)................... 7,955 24,927 28,262 835 2,002 3,299
Shareholder reports......... 6,015 15,665 9,404 4,207 9,802 15,771
Amortization of organization
costs (Note 5)............. 9,770 -- -- 4,187 4,187 --
Miscellaneous expenses...... 9,882 38,888 46,937 2,201 3,121 8,619
----------- ----------- ----------- ---------- ---------- ----------
TOTAL EXPENSES.............. 1,262,257 2,956,340 3,236,607 178,496 406,530 970,128
Fees waived and reimbursed
by investment adviser and
administrators (Note 2).... (46,887) (172,980) (227,463) (41,640) (24,893) (134,353)
----------- ----------- ----------- ---------- ---------- ----------
NET EXPENSES................ 1,215,370 2,783,360 3,009,144 136,856 381,637 835,775
----------- ----------- ----------- ---------- ---------- ----------
NET INVESTMENT INCOME........ 11,211,056 29,939,203 32,830,403 1,276,413 3,638,677 5,276,726
----------- ----------- ----------- ---------- ---------- ----------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
(NOTE 1):
Net realized gain/(loss) on
security transactions...... (20,652) (1,327) (32,344) 81,016 1,200,390 2,676,993
Change in unrealized
appreciation/(depreciation)
on investments............. -- -- -- 167,006 742,513 1,730,132
----------- ----------- ----------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS. (20,652) (1,327) (32,344) 248,022 1,942,903 4,407,125
----------- ----------- ----------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.. $11,190,404 $29,937,876 $32,798,059 $1,524,435 $5,581,580 $9,683,851
=========== =========== =========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
8
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE-
SHORT-TERM TERM
TREASURY GOVERNMENT GOVERNMENT MANAGED MANAGED
MONEY MONEY MONEY SECURITIES INCOME INCOME
FUND FUND FUND FUND FUND FUND
------------ ------------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1996
Net investment income....... $ 11,211,056 $ 29,939,203 $ 32,830,403 $ 1,276,413 $ 3,638,677 $ 5,276,726
Net realized gain/(loss) on
investments................ (20,652) (1,327) (32,344) 81,016 1,200,390 2,676,993
Change in unrealized
appreciation/(depreciation)
on investments during the
year....................... -- -- -- 167,006 742,513 1,730,132
------------ ------------- ------------- ----------- ----------- -----------
Net increase in net assets
resulting from operations.. 11,190,404 29,937,876 32,798,059 1,524,435 5,581,580 9,683,851
Distributions to
shareholders:
From net investment income. (11,211,056) (29,939,203) (32,830,403) (1,276,413) (3,637,463) (5,197,594)
Increase/(decrease) in net
assets from fund share
transactions
(Note 4)................... 61,257,657 (264,302,611) (430,261,302) (395,857) 18,767,554 (1,610,864)
------------ ------------- ------------- ----------- ----------- -----------
Net increase/(decrease) in
net assets................. 61,237,005 (264,303,938) (430,293,646) (147,835) 20,711,671 2,875,393
NET ASSETS:
Beginning of year.......... 196,932,382 725,774,204 824,578,328 25,215,627 47,928,448 86,024,245
------------ ------------- ------------- ----------- ----------- -----------
End of year (1)............ $258,169,387 $ 461,470,266 $ 394,284,682 $25,067,792 $68,640,119 $88,899,638
============ ============= ============= =========== =========== ===========
YEAR ENDED MARCH 31, 1995
Net investment income....... $ 9,821,059 $ 32,245,731 $ 35,659,456 $ 1,220,767 $ 2,552,625 $ 6,138,543
Net realized gain/(loss) on
investments................ 3,816 (49,433) (20,821) (419,685) (789,710) (3,676,167)
Change in unrealized
appreciation/(depreciation)
on investments during the
year....................... -- -- -- 248,742 322,607 590,805
------------ ------------- ------------- ----------- ----------- -----------
Net increase in net assets
resulting from operations.. 9,824,875 32,196,298 35,638,635 1,049,824 2,085,522 3,053,181
Distributions to
shareholders:
From net investment income. (9,821,059) (32,245,731) (35,674,223) (1,220,767) (2,547,450) (6,113,843)
In excess of net investment
income.................... -- -- -- -- -- (11,365)
In excess of net realized
gain on investments....... -- -- -- -- (70,815) --
Increase/(decrease) in net
assets from fund share
transactions (Note 4)...... (57,754,795) (309,084,614) 88,536,475 153,493 5,897,045 (21,806,779)
------------ ------------- ------------- ----------- ----------- -----------
Net increase/(decrease) in
net assets................. (57,750,979) (309,134,047) 88,500,887 (17,450) 5,364,302 (24,878,806)
NET ASSETS:
Beginning of year.......... 254,683,361 1,034,908,251 736,077,441 25,233,077 42,564,146 110,903,051
------------ ------------- ------------- ----------- ----------- -----------
End of year (2)............ $196,932,382 $ 725,774,204 $ 824,578,328 $25,215,627 $47,928,448 $86,024,245
============ ============= ============= =========== =========== ===========
</TABLE>
(1) Including undistributed/(distributions in excess of) net investment income
of $(55) for Treasury Money Fund, $6,520 for Intermediate-Term Managed
Income Fund and $67,767 for Managed Income Fund.
(2) Including undistributed/(distributions in excess of) net investment income
of $(55) for Treasury Money Fund, $5,306 for Intermediate-Term Managed
Income Fund and $(11,365) for Managed Income Fund.
See Notes to Financial Statements
9
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
FINANCIAL HIGHLIGHTS -- SELECTED PER SHARE DATA AND RATIOS
For a Fund share outstanding throughout each year.
<TABLE>
<CAPTION>
DISTRIBUTIONS
NET ASSET NET REALIZED TOTAL DIVIDENDS FROM NET
VALUE, NET AND UNREALIZED FROM FROM NET REALIZED
BEGINNING INVESTMENT GAIN/(LOSS) INVESTMENT INVESTMENT GAIN ON
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME INVESTMENTS
--------- ---------- -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
TREASURY MONEY FUND -- (2/13/91*)
Year Ended March 31,
1992................... $1.00 $0.04731 $0.00036 $0.04767 $(0.04731) $(0.00011)
1993................... 1.00 0.02987 0.00000 0.02987 (0.02987) (0.00030)
1994................... 1.00 0.02590 0.00000 0.02590 (0.02590) 0.00000
1995................... 1.00 0.04165 0.00000 0.04165 (0.04165) 0.00000
1996................... 1.00 0.05043 0.00000 0.05043 (0.05043) 0.00000
GOVERNMENT MONEY FUND -- (5/8/85*)
Year Ended March 31,
1992................... $1.00 $0.05069 $0.00002 $0.05071 $(0.05069) $(0.00005)
1993................... 1.00 0.03205 0.00000 0.03205 (0.03205) 0.00000
1994................... 1.00 0.02736 0.00000 0.02736 (0.02736) 0.00000
1995................... 1.00 0.04397 0.00000 0.04397 (0.04397) 0.00000
1996................... 1.00 0.05296 0.00000 0.05296 (0.05296) 0.00000
MONEY FUND -- (5/3/85*)
Year Ended March 31,
1992................... $1.00 $0.05165 $0.00017 $0.05182 $(0.05165) $(0.00019)
1993................... 1.00 0.03234 0.00000 0.03234 (0.03234) 0.00000
1994................... 1.00 0.02780 0.00000 0.02780 (0.02780) 0.00000
1995................... 1.00 0.04494 0.00002 0.04496 (0.04496) 0.00000
1996................... 1.00 0.05336 0.00000 0.05336 (0.05336) 0.00000
SHORT-TERM GOVERNMENT SECURITIES FUND -- (12/31/92*)
Year Ended March 31,
1993................... $7.00 $ 0.06 $ 0.06 $ 0.12 $ (0.06) $ 0.00
1994................... 7.06 0.24 (0.09) 0.15 (0.24) (0.02)
1995................... 6.93 0.33 (0.04) 0.29 (0.33) 0.00
1996................... 6.89 0.40 0.09 0.49 (0.40) 0.00
INTERMEDIATE-TERM MANAGED INCOME FUND -- (12/31/92*)
Year Ended March 31,
1993................... $7.00 $ 0.08 $ 0.19 $ 0.27 $ (0.08) $ 0.00
1994................... 7.19 0.31 (0.27) 0.04 (0.31) 0.00
1995................... 6.83 0.39 (0.07) 0.32 (0.39) 0.00
1996................... 6.75 0.43 0.31 0.74 (0.43) 0.00
MANAGED INCOME FUND -- (1/9/86*)
Year Ended March 31,
1992................... $9.12 $ 0.65 $ 0.27 $ 0.92 $ (0.65) $ (0.24)
1993................... 9.15 0.58 0.79 1.37 (0.58) (0.30)
1994................... 9.64 0.47 (0.26) 0.21 (0.47) (0.31)
1995................... 8.57 0.51 (0.18) 0.33 (0.51) 0.00
1996................... 8.39 0.55 0.44 0.99 (0.54) 0.00
</TABLE>
* Commencement of operations.
** Annualized.
+ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
++ Total return data does not reflect sales load payable on purchase of Fund
shares.
See Notes to Financial Statements
10
<PAGE>
<TABLE>
<CAPTION>
RATIO OF RATIO OF RATIO OF
DISTRIBUTIONS NET GROSS NET
IN EXCESS OF NET ASSET NET ASSETS, OPERATING OPERATING INVESTMENT
NET REALIZED VALUE, END EXPENSES EXPENSES INCOME PORTFOLIO FEE
GAIN ON TOTAL END TOTAL OF PERIOD TO AVERAGE TO AVERAGE TO AVERAGE TURNOVER WAIVERS
INVESTMENTS DISTRIBUTIONS OF PERIOD RETURN++ (000'S) NET ASSETS NET ASSETS+ NET ASSETS RATE (NOTE 2)
------------- ------------- --------- -------- ----------- ---------- ----------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $(0.04742) $1.00 4.85% $ 172,293 0.52% 0.57% 4.60% -- $0.00048
0.00 (0.03017) 1.00 3.06% 227,794 0.58% 0.58% 2.97% -- 0.00000
0.00 (0.02590) 1.00 2.62% 254,683 0.58% 0.58% 2.59% -- 0.00001
0.00 (0.04165) 1.00 4.25% 196,932 0.55% 0.57% 4.09% -- 0.00019
0.00 (0.05043) 1.00 5.16% 258,169 0.55% 0.57% 5.03% -- 0.00021
$ 0.00 $(0.05074) $1.00 5.09% $ 740,689 0.50% 0.50% 5.09% -- $0.00000
0.00 (0.03205) 1.00 3.20% 710,491 0.50% 0.50% 3.20% -- 0.00000
0.00 (0.02736) 1.00 2.77% 1,034,908 0.50% 0.50% 2.74% -- 0.00003
0.00 (0.04397) 1.00 4.49% 725,774 0.50% 0.53% 4.38% -- 0.00024
0.00 (0.05296) 1.00 5.43% 461,470 0.50% 0.53% 5.36% -- 0.00031
$ 0.00 $(0.05184) $1.00 5.19% $ 574,274 0.51% 0.51% 5.11% -- $0.00000
0.00 (0.03234) 1.00 3.25% 784,016 0.51% 0.51% 3.21% -- 0.00000
0.00 (0.02780) 1.00 2.82% 736,077 0.51% 0.51% 2.78% -- 0.00002
0.00 (0.04496) 1.00 4.59% 824,578 0.49% 0.52% 4.49% -- 0.00026
0.00 (0.05336) 1.00 5.47% 394,285 0.50% 0.53% 5.40% -- 0.00037
$ 0.00 $ (0.06) $7.06 1.70% $ 13,367 0.62%** 0.82%** 3.62%** 93%** $ 0.00
(0.02) (0.28) 6.93 2.12% 25,233 0.62% 0.65% 3.42% 267% 0.00
0.00 (0.33) 6.89 4.30% 25,216 0.61% 0.67% 4.80% 198% 0.00
0.00 (0.40) 6.98 7.27% 25,068 0.61% 0.80% 5.72% 77% 0.01
$ 0.00 $ (0.08) $7.19 3.86% $ 19,478 0.72%** 0.98%** 4.69%** 66%** $ 0.01
(0.09) (0.40) 6.83 0.45% 42,564 0.69% 0.69% 4.31% 385% 0.00
(0.01) (0.40) 6.75 4.95% 47,928 0.66% 0.68% 5.91% 682% 0.00
0.00 (0.43) 7.06 11.13% 68,640 0.64% 0.68% 6.06% 129% 0.00
$ 0.00 $ (0.89) $9.15 10.36% $ 99,956 1.05% 1.05% 6.97% 369% $ 0.00
0.00 (0.88) 9.64 15.74% 110,620 0.89% 1.04% 6.19% 455% 0.02
(0.50) (1.28) 8.57 1.73% 110,903 0.90% 1.06% 4.89% 459% 0.02
0.00 (0.51) 8.39 4.06% 86,024 1.00% 1.12% 6.09% 492% 0.01
0.00 (0.54) 8.84 11.86% 88,900 0.96% 1.12% 6.09% 165% 0.01
</TABLE>
See Notes to Financial Statements
11
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
TREASURY MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- ------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 96.74%
Federal Farm Credit Bank
$25,000,000 02/13/97............................ 5.19%+++ $ 24,987,384
Federal Home Loan Bank
11,000,000 04/16/96............................ 5.27 10,975,846
15,000,000 06/12/96............................ 5.16 14,845,200
U.S. Treasury Bills
91,000,000 04/18/96............................ 5.13 90,779,720
10,000,000 05/02/95............................ 5.22 9,955,093
U.S. Treasury Notes
25,000,000 04/15/96............................ 9.38# 25,038,382
48,000,000 04/30/96............................ 5.50# 48,008,375
25,000,000 06/30/96............................ 7.88# 25,149,689
------------
TOTAL U.S. GOVERNMENT
& AGENCY OBLIGATIONS
(Cost $249,739,689)................. 249,739,689
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ------------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 2.52%
4,519,783 Dreyfus Government Cash Management Fund... $ 4,519,783
1,994,421 Fidelity U.S. Treasury Income Fund........ 1,994,421
------------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $6,514,204)......................... 6,514,204
------------
TOTAL INVESTMENTS
(Cost $256,253,893*)................................. 99.26% $256,253,893
OTHER ASSETS & LIABILITIES (NET)..................... 0.74 1,915,494
------ ------------
NET ASSETS........................................... 100.00% $258,169,387
====== ============
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$256,257,830.
# Coupon Rate.
+++ Variable or floating rate securities--rate disclosed is as of March 31,
1996.
See Notes to Financial Statements
12
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
GOVERNMENT MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- ------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 97.18%
Federal Farm Credit Bank
$100,000,000 02/13/97............................... 5.19%+++ $ 99,949,537
Federal Home Loan Bank
50,000,000 04/03/96............................... 5.30 49,985,278
35,000,000 06/12/96............................... 5.16 34,638,800
Federal Home Loan Mortgage Corporation
25,000,000 05/16/96............................... 5.24 24,836,250
36,905,000 05/28/96............................... 5.18 36,602,318
Federal National Mortgage Association
44,000,000 04/11/96............................... 5.23 43,936,078
45,000,000 04/24/96............................... 5.18 44,851,139
Student Loan Marketing Association
35,000,000 07/11/96............................... 5.42+++ 35,000,000
18,270,000 07/19/96............................... 5.27+++ 18,264,677
24,000,000 08/08/96............................... 5.32+++ 23,995,288
Tennessee Valley Authority
36,500,000 04/24/96............................... 5.20 36,378,738
------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $448,438,103).................... 448,438,103
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- ------------
<C> <S> <C> <C>
REPURCHASE AGREEMENT -- 2.90%
$ 13,387,835 Agreement with Dillon Read & Co.,
5.35%, dated 3/29/96, due 4/01/96
to be repurchased at $13,393,812,
collateralized by $7,235,003
Federal National Mortgage
Association, 7.00%, due 10/02/00,
valued at $7,235,799, $7,379,704
U.S. Treasury Strips, due
11/15/03, valued at $4,569,512
and $3,429,392 U.S. Treasury
Strips, due 5/15/05, valued at
$1,905,027
(Cost $13,387,835)............... $ 13,387,835
------------
TOTAL INVESTMENTS
(Cost $461,825,938*)........................... 100.08% $461,825,938
OTHER ASSETS & LIABILITIES (NET)............... (0.08) (355,672)
------ ------------
NET ASSETS..................................... 100.00% $461,470,266
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
+++ Variable or floating rate securities--rate disclosed is as of March 31,
1996.
See Notes to Financial Statements
13
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
--------- -------- -------- ------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 25.33%
$75,000,000 Federal Farm Credit
Bank.................... 5.19%+++ 2/13/97 $ 74,962,153
25,000,000 Federal National
Mortgage Association.... 5.30 4/24/96 24,915,347
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $99,877,500)............................... 99,877,500
------------
COMMERCIAL PAPER -- 64.27%
5,350,000 Asset Securitization
Corp. .................. 5.30 5/14/96 5,316,131
10,000,000 Asset Securitization
Corp ................... 5.40 5/6/96 9,947,500
15,000,000 CIT Financial........... 5.17 5/3/96 14,931,067
17,000,000 E.I. Du Pont de Nemours. 5.30 4/17/96 16,959,956
17,000,000 Emerson Electric........ 5.30 4/18/96 16,957,453
15,000,000 Ford Motor Credit Corp.. 5.16 5/3/96 14,931,200
18,000,000 General Electric Capital
Corp. .................. 5.28 5/17/96 17,878,560
17,000,000 Hewlett Packard......... 5.23 6/18/96 16,807,362
17,000,000 IBM Corp. .............. 5.29 5/17/96 16,885,090
17,000,000 Merrill Lynch & Co.,
Inc. ................... 5.25 6/28/96 16,781,833
15,000,000 Met Life Funding........ 5.24 6/13/96 14,840,617
15,000,000 Monsanto Co. ........... 5.25 6/17/96 14,831,563
15,000,000 Motorola, Inc. ......... 5.33 4/25/96 14,946,700
17,000,000 Shell Oil Co. .......... 5.28 5/24/96 16,867,852
17,000,000 Southwestern Bell....... 5.28 6/6/96 16,835,440
11,000,000 Stanley Works........... 5.29 5/29/96 10,906,249
17,000,000 Xerox Corp. ............ 5.25 6/20/96 16,801,667
------------
TOTAL COMMERCIAL PAPER
(Cost $253,426,240).............................. 253,426,240
------------
BANKERS ACCEPTANCE -- 3.94%
15,650,000 Bank of Tokyo
(Cost $15,515,944)...... 5.41 5/28/96 15,515,944
------------
CERTIFICATE OF DEPOSIT -- 4.57%
18,000,000 CIBC Australia
(Cost $18,000,000)...... 5.32# 6/10/96 18,000,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- ------------
<C> <S> <C> <C>
REPURCHASE AGREEMENT -- 2.24%
$ 8,835,594 Agreement with Dillon Read & Co., 5.35%,
dated 3/29/96, due 4/01/96 to be
repurchased at $8,839,533, collateralized
by $4,774,898 Federal National Mortgage
Association, 7.00%, due 10/02/00, valued
at $4,775,424, $4,870,396 U.S. Treasury
Strips, due 11/15/03, valued at
$3,105,749, and $2,263,302 U.S. Treasury
Strips, due 5/15/05, valued at $1,257,264
(Cost $8,835,594)......................... $ 8,835,594
------------
TOTAL INVESTMENTS
(Cost $395,655,278*)................................... 100.35% $395,655,278
OTHER ASSETS & LIABILITIES (NET)....................... (0.35) (1,370,596)
------ ------------
NET ASSETS............................................. 100.00% $394,284,682
====== ============
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregate
$395,657,722.
# Coupon Rate.
+++ Variable or floating rate securities--rate disclosed is as of March 31,
1996.
See Notes to Financial Statements
14
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
SHORT-TERM GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
PRINCIPAL COUPON VALUE
AMOUNT RATE (NOTE 1)
--------- ------ -----------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 97.44%
Federal Home Loan Bank
$1,000,000 03/28/97................ 5.58% $ 999,750
Private Export Funding
320,000 03/15/01................ 5.50 309,628
Student Loan Marketing
Association
1,200,000 03/03/98................ 7.00 1,224,851
U.S. Treasury Notes
4,500,000 04/30/96................ 5.50 4,501,404
2,500,000 09/30/96................ 6.50 2,514,842
2,500,000 08/15/97................ 6.50 2,529,687
2,250,000 11/15/97................ 7.38 2,305,546
700,000 11/30/97................ 5.38 695,843
1,000,000 05/15/98................ 6.13 1,006,562
2,000,000 02/15/99................ 5.00 1,953,750
415,000 10/31/99................ 7.50 434,064
870,000 01/31/00................ 7.75 919,209
1,740,000 05/31/00................ 6.25 1,750,330
790,000 07/31/00................ 6.13 790,987
420,000 09/30/00................ 6.13 420,394
2,100,000 10/31/00................ 5.75 2,069,813
-----------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $24,308,207)...... 24,426,660
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 1.17%
182,000 Fidelity U.S. Treasury II Fund.................... $ 182,000
111,224 Dreyfus Government Cash Management Fund........... 111,224
-----------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $293,224)................................... 293,224
-----------
TOTAL INVESTMENTS
(Cost 24,601,431*)......................................... 98.61% $24,719,884
OTHER ASSETS & LIABILITIES (NET)........................... 1.39 347,908
------ -----------
NET ASSETS................................................. 100.00% $25,067,792
====== ===========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$24,602,434.
See Notes to Financial Statements
15
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
INTERMEDIATE-TERM MANAGED INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
--------- ------ -------- -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 75.42%
$ 4,000,000 Federal Home Loan Bank............. 5.25%+ 4/01/96 $ 4,000,000
76,407 Federal Home Loan Mortgage
Corporation
Pool #218374....................... 10.50 7/01/02 80,805
2,000,000 Federal Home Loan Mortgage
Corporation Series 16, Class PH.... 6.75 4/25/21 1,952,740
3,000,000 Federal National Mortgage
Association........................ 7.25 6/01/05 3,037,566
5,000,000 Federal National Mortgage
Association........................ 7.43 8/03/05 5,029,335
Government National Mortgage
Association
231,819 Pool #195801....................... 8.50 1/15/17 242,033
291,308 Pool #195833....................... 8.50 4/15/17 304,143
231,707 Pool #212760....................... 8.50 4/15/17 241,916
129,522 Pool #334299....................... 8.00 5/15/23 132,476
1,984,641 Pool #348190....................... 7.00 8/15/23 1,936,876
4,448,157 Pool #366379....................... 6.50 12/15/23 4,221,559
1,888,821 Pool #367412....................... 6.00 11/15/23 1,744,789
2,750,000 U.S. Treasury Note................. 7.25 2/15/98 2,820,469
3,500,000 U.S. Treasury Note................. 7.00 4/15/99 3,597,345
4,000,000 U.S. Treasury Note................. 7.13 9/30/99 4,137,500
2,000,000 U.S. Treasury Note................. 6.00 10/15/99 2,000,624
4,000,000 U.S. Treasury Note................. 7.50 10/31/99 4,183,748
2,500,000 U.S. Treasury Note................. 5.25 1/31/01 2,417,187
4,400,000 U.S. Treasury Note................. 5.75 8/15/03 4,247,373
5,734,000 U.S. Treasury Note................. 5.63 2/15/06 5,438,338
-----------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $52,043,772).................................. 51,766,822
-----------
CORPORATE BONDS -- 19.16%
2,500,000 Anheuser-Busch Co., Inc. .......... 7.00 9/01/05 2,527,850
3,000,000 Emerson Electric Co. .............. 6.30 11/01/05 2,921,943
3,000,000 Ford Motor Credit.................. 6.13 1/09/06 2,807,736
3,000,000 Mellon Bank, N.A. ................. 7.00 3/15/06 2,997,882
2,000,000 Texas Instrument, Inc. ............ 6.13 2/01/06 1,893,942
-----------
TOTAL CORPORATE BONDS
(Cost $13,432,629).................................. 13,149,353
-----------
FOREIGN GOVERNMENT BOND -- 2.05%
1,500,000 Province of Ontario (Cost
$1,462,840)........................ 6.00 2/21/06 1,407,345
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 2.48%
916,050 Dreyfus Government Cash Management Fund....... $ 916,050
786,950 Fidelity U.S. Treasury II Fund................ 786,950
-----------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $1,703,000)............................. 1,703,000
-----------
TOTAL INVESTMENTS
(Cost $68,642,241*)................................... 99.11% $68,026,520
OTHER ASSETS & LIABILITIES (NET)....................... 0.89 613,599
------ -----------
NET ASSETS............................................. 100.00% $68,640,119
====== ===========
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
+ Discount Rate.
See Notes to Financial Statements
16
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
MANAGED INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
----------- ------ -------- -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 74.50%
Government National
Mortgage Association
$ 2,976,961 Pool #348190........................ 7.00% 8/15/23 $ 2,905,315
9,452,105 Pool #366782........................ 7.00 5/15/24 9,224,621
13,812,182 Pool #376533........................ 7.50 6/15/24 13,820,746
7,626,936 Pool #385985........................ 8.50 12/15/24 7,962,963
1,000,000 Federal Home Loan Bank.............. 5.25+ 4/01/96 1,000,000
10,500,000 U.S. Treasury Bond.................. 7.25 5/15/16 10,969,213
6,000,000 U.S. Treasury Bond.................. 6.25 8/15/23 5,551,872
5,000,000 U.S. Treasury Note.................. 5.25 1/31/01 4,834,375
10,500,000 U.S. Treasury Note.................. 5.63 2/15/06 9,958,588
-----------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $66,627,782)................................... 66,227,693
-----------
CORPORATE BONDS -- 21.71%
4,000,000 Central Illinois Public Service
Co. ................................ 7.50 7/01/07 4,121,928
5,000,000 Ford Motor Credit................... 6.13 1/09/06 4,679,560
4,000,000 Mellon Bank, N.A. .................. 7.00 3/15/06 3,997,176
5,000,000 Republic NY Corp. .................. 7.00 3/22/11 4,971,200
1,500,000 Wisconsin Electric Power Co. ....... 7.25 8/01/04 1,534,916
-----------
TOTAL CORPORATE BONDS
(Cost $19,404,833)................................... 19,304,780
-----------
FOREIGN GOVERNMENT BOND -- 2.11%
2,000,000 Province of Ontario (Cost
$1,950,452)......................... 6.00 2/21/06 1,876,460
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- -----------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 1.13%
409,450 Dreyfus Government Cash Management Fund...... $ 409,450
596,900 Fidelity U.S. Treasury II Fund............... 596,900
-----------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $1,006,350)............................ 1,006,350
-----------
TOTAL INVESTMENTS
(Cost $88,989,417*)................................... 99.45% $88,415,283
OTHER ASSETS & LIABILITIES (NET)...................... 0.55 484,355
------ -----------
NET ASSETS............................................ 100.00% $88,899,638
====== ===========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$89,279,160.
+ Discount Rate.
See Notes to Financial Statements
17
<PAGE>
EXCELSIOR FUNDS, INC.
(FORMERLY UST MASTER FUNDS, INC.)
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Excelsior Funds, Inc. ("Excelsior Fund") (formerly UST Master Funds, Inc.)
was incorporated under the laws of the State of Maryland on August 2, 1984 and
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
Excelsior Fund currently offers shares in twenty managed investment
portfolios, each having its own investment objectives and policies.
The following is a summary of significant accounting policies for Treasury
Money Fund, Government Money Fund, Money Fund, Short-Term Government
Securities Fund, Intermediate-Term Managed Income Fund and Managed Income Fund
(the "Portfolios"). Such policies are in conformity with generally accepted
accounting principles for investment companies and are consistently followed
by Excelsior Fund in the preparation of the financial statements. Generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from these estimates. The financial
statements for the remaining portfolios of Excelsior Fund and Excelsior Tax-
Exempt Funds, Inc. ("Excelsior Tax-Exempt Fund") are presented separately.
With regard to Treasury Money Fund, Government Money Fund and Money Fund, it
is Excelsior Fund's policy, to the extent possible, to maintain a continuous
net asset value per share of $1.00. Each of these Portfolios has adopted
certain investment portfolio, valuation and dividend distribution policies to
enable it to do so. However, there can be no assurance that the net asset
value per share of these Portfolios will not vary. The net asset values of the
shares in Short-Term Government Securities Fund, Intermediate-Term Managed
Income Fund and Managed Income Fund will fluctuate as the market values of
their portfolio securities change in response to changing market rates of
interest and other factors.
(A) PORTFOLIO VALUATION:
Treasury Money Fund, Government Money Fund and Money Fund: Securities are
valued at amortized cost, which has been determined by the Fund's Board of
Directors to represent the fair value of the Fund's investments. Amortized
cost valuation involves valuing an instrument at its cost initially and,
thereafter, assuming a constant amortization to maturity of any discount or
premium.
Short-Term Government Securities Fund, Intermediate-Term Managed Income
Fund and Managed Income Fund: Investments in securities that are traded on
a recognized stock exchange are valued at the last sale price on the
exchange on which such securities are primarily traded or at the last sale
price on the national securities market. Securities traded over-the-counter
are valued each business day on the basis of closing over-the-counter bid
prices. Securities for which there were no transactions are valued at the
average of the most recent bid prices (as calculated by an independent
pricing service (the "Service") based upon its evaluation of the market for
such securities) when, in the judgement of the Service, quoted bid prices
for securities are readily available and are representative of the bid side
of the market. Short-term debt instruments with remaining maturities
18
<PAGE>
of 60 days or less are valued at amortized cost, which approximates market
value. Securities and other assets for which market quotations are not
readily available are valued at fair value pursuant to guidelines adopted
by Excelsior Fund's Board of Directors.
Portfolio securities held by Intermediate-Term Managed Income and Managed
Income Funds which are primarily traded on foreign securities exchanges are
generally valued at the preceding closing values of such securities on
their respective exchanges, except that when an occurrence subsequent to
the time a value was so established is likely to have changed such value,
then the fair value of those securities will be determined by consideration
of other factors under the direction of the Board of Directors. A security
which is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such
security.
Investment in foreign debt securities having maturities of 60 days or
less are valued at amortized cost. All other foreign securities are valued
at the last current bid quotation if market quotations are available, or at
fair value as determined in accordance with policies established by the
Board of Directors. For valuation purposes, quotations of foreign
securities in foreign currency are converted to United States dollars
equivalent at the prevailing market rate on the day of conversion.
(B) SECURITY TRANSACTIONS AND INVESTMENT INCOME:
Security transactions are recorded on a trade date basis. Realized gains
and losses on investments sold are recorded on the basis of identified
cost. Interest income, adjusted for amortization of premiums and, when
appropriate, discounts on investments, is earned from settlement date and
is recorded on the accrual basis.
(C) REPURCHASE AGREEMENTS:
Excelsior Fund may purchase portfolio securities from financial
institutions deemed to be creditworthy by the investment adviser subject to
the seller's agreement to repurchase and Excelsior Fund's agreement to
resell such securities at mutually agreed upon prices. Securities purchased
subject to such repurchase agreements are deposited with Excelsior Fund's
custodian or sub-custodian or are maintained in the Federal
Reserve/Treasury book-entry system and must have, at all times, an
aggregate market value of not less than 102% of the repurchase price
(including accrued interest).
If the value of the underlying security, including accrued interest,
falls below the value of 102% of the repurchase price plus accrued
interest, Excelsior Fund will require the seller to deposit additional
collateral by the next business day. Default or bankruptcy of the seller
may, however, expose the applicable Portfolio of Excelsior Fund to possible
delay in connection with the disposition of the underlying securities or
loss to the extent that proceeds from a sale of the underlying securities
were less than the repurchase price under the agreement.
(D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Treasury Money Fund, Government Money Fund and Money Fund: Net investment
income dividends are declared daily and paid monthly. Net realized capital
gains, unless offset by any available capital loss carryforward, are
distributed to shareholders annually or more frequently to maintain a net
asset value of $1.00 per share.
19
<PAGE>
Short-Term Government Securities Fund, Intermediate-Term Managed Income
Fund and Managed Income Fund: Dividends from net investment income are
declared daily and paid monthly. Net realized capital gains, unless offset
by any available capital loss carryforward, are distributed to shareholders
at least annually.
Dividends and distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
deferral of losses on wash sales and post-October losses.
In order to avoid a Federal excise tax, each Portfolio is required to
distribute certain minimum amounts of net realized capital gain and net
investment income for the respective periods ending October 31 and December
31 in each calendar year.
(E) FEDERAL TAXES:
It is the policy of Excelsior Fund that each Portfolio continue to
qualify as a regulated investment company, if such qualification is in the
best interest of the shareholders, by complying with the requirements of
the Internal Revenue Code applicable to regulated investment companies, and
by distributing substantially all of its taxable earnings to its
shareholders.
At March 31, 1996, the following Portfolios had approximate capital loss
carryforwards for Federal tax purposes available to offset future net
capital gains through the indicated expiration dates:
<TABLE>
<CAPTION>
EXPIRATION DATE MARCH 31,
---------------------------------
2001 2002 2003 2004 TOTAL
------- ------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C>
Treasury Money Fund............. -- $15,000 -- $4,000 $ 19,000
Government Money Fund........... $12,000 -- $ 48,000 1,000 61,000
Money Fund...................... 14,000 -- 21,000 20,000 55,000
Short-Term Government Securities
Fund........................... -- -- 393,000 -- 393,000
Intermediate-Term Managed Income
Fund........................... 20,000 2,000 467,000 -- 489,000
Managed Income Fund............. -- -- 3,291,000 -- 3,291,000
</TABLE>
To the extent that such carryforwards are utilized, no capital gain
distributions will be made. During the year ended March 31, 1996, Short-
Term Government Securities Fund, Intermediate-Term Managed Income Fund and
Managed Income Fund utilized capital loss carryforwards for Federal tax
purposes totaling approximately $51,000, $794,000 and $1,694,000,
respectively.
Net capital losses incurred after October 31 and within the taxable year
are deemed to arise on the first business day of a Portfolio's next taxable
year. Treasury Money Fund, Government Money Fund and Money Fund incurred,
and elected to defer, net capital losses of approximately $17,000, $1,000
and $9,000, respectively, for the year ended March 31, 1996.
20
<PAGE>
At March 31, 1996, aggregate gross unrealized appreciation/(depreciation)
for all securities for which there was an excess of value over tax cost and
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over value were as follows:
<TABLE>
<CAPTION>
NET
TAX BASIS TAX BASIS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ -------------- --------------
<S> <C> <C> <C>
Treasury Money Fund.............. $ -- $ (3,937) $ (3,937)
Money Fund....................... -- (2,444) (2,444)
Short-Term Government Securities
Fund............................ 224,217 (106,767) 117,450
Intermediate-Term Managed Income
Fund............................ 684,225 (1,299,946) (615,721)
Managed Income Fund.............. 909,100 (1,772,977) (863,877)
</TABLE>
(F) EXPENSE ALLOCATION:
Expenses directly attributable to a Portfolio are charged to that
Portfolio. Other expenses are allocated to the respective Portfolios based
on average daily net assets.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS
United States Trust Company of New York ("U.S. Trust") serves as the
investment adviser to the Fund. For the services provided pursuant to the
Investment Advisory Agreements, U.S. Trust is entitled to receive a fee,
computed daily and paid monthly, at the annual rates of .25% of the average
daily net assets of Government Money Fund and Money Fund, .30% of the average
daily net assets of Treasury Money Fund and Short-Term Government Securities
Fund, .35% of the average daily net assets of Intermediate-Term Managed Income
Fund and .75% of the average daily net assets of Managed Income Fund.
Effective January 1, 1996, U.S. Trust, Chase Global Funds Services Company
("CGFSC"), a subsidiary of The Chase Manhattan Bank, N.A. (formerly, Mutual
Funds Service Company ("MFSC") which was a subsidiary of U.S. Trust), and
Federated Administrative Services (collectively, the "Administrators") provide
administrative services to Excelsior Fund. For the services provided to the
Portfolios, the Administrators are entitled jointly to annual fees, computed
daily and paid monthly, based on the combined aggregate average daily net
assets of Excelsior Fund (excluding Excelsior Fund's international equity
portfolios), Excelsior Tax-Exempt Fund and Excelsior Institutional Trust, all
of which are affiliated investment companies, as follows: .200% of the first
$200 million, .175% of the next $200 million, and .150% over $400 million.
Administration fees payable by each Portfolio of the three investment
companies are determined in proportion to the relative average daily net
assets of the respective Portfolios for the period paid. After such allocation
has been made, the Administrators are entitled jointly to an annual minimum
fee of $50,000 from Short-Term Government Securities Fund and Intermediate-
Term Managed Income Fund. From September 1, 1995 through December 31, 1995,
CGFSC and Federated Administrative Services served as administrators to
Excelsior Fund; from August 1, 1995 through August 31, 1995, MFSC and
Federated Administrative Services served as administrators to Excelsior Fund;
and prior to August 1, 1995, MFSC and Concord Holding Corporation served as
21
<PAGE>
administrators to Excelsior Fund all under the same terms, conditions and fees
as stated above. For the period from April 1, 1995 through August 31, 1995,
administration fees charged by MFSC were as follows:
<TABLE>
<S> <C>
Treasury Money Fund.............................................. $128,402
Government Money Fund............................................ 463,545
Money Fund....................................................... 527,695
Short-Term Government Securities Fund............................ 13,051
Intermediate-Term Managed Income Fund............................ 32,158
Managed Income Fund.............................................. 51,015
</TABLE>
From time to time, as they may deem appropriate in their sole discretion, or
pursuant to applicable state expense limitations, U.S. Trust and the
Administrators may undertake to waive a portion or all of the fees payable to
them and also may reimburse the Portfolios for a portion of other expenses.
Until further notice to Excelsior Fund, U.S. Trust and/or the Administrators
intend to voluntarily waive fees and reimburse expenses to the extent
necessary for Short-Term Government Securities Fund and Intermediate-Term
Managed Income Fund to maintain an annual expense ratio of not more than .62%
and .72%, respectively. For the year ended March 31, 1996, U.S. Trust and the
Administrators voluntarily waived fees totalling $21,136 for Short-Term
Government Securities Fund.
In addition, currently, U.S. Trust is voluntarily limiting its investment
advisory fee to .65% of the average daily net assets for Managed Income Fund.
For the year ended March 31, 1996, U.S. Trust waived investment advisory fees
totaling $86,660 for Managed Income Fund.
Excelsior Fund has also entered into shareholder servicing agreements with
various service organizations (which may include affiliates of U.S. Trust)
requiring them to provide administrative support services to their customers
owning shares of the Portfolios. As a consideration for the administrative
services provided by each service organization to its customers, each
Portfolio will pay the service organizations an administrative service fee at
the annual rate of up to .40% of the average daily net asset value of its
shares held by the service organizations' 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. Until
further notice to Excelsior Fund, U.S. Trust and the Administrators have
voluntarily agreed to waive investment advisory and administration fees
payable by each Portfolio in an amount equal to the administrative service
fees payable by such Portfolio. For the year ended March 31, 1996, U.S. Trust
and the Administrators waived investment advisory and administration fees in
amounts equal to the administrative service fees for the Portfolios as set
forth below:
<TABLE>
<CAPTION>
U.S. TRUST ADMINISTRATORS
---------- --------------
<S> <C> <C>
Treasury Money Fund............................. $ 46,887 $ --
Government Money Fund........................... 172,140 840
Money Fund...................................... 227,463 --
Short-Term Government Securities Fund........... 20,410 94
Intermediate-Term Managed Income Fund........... 22,783 2,110
Managed Income Fund............................. 46,807 886
</TABLE>
Effective August 1, 1995, Edgewood Services, Inc. (the "Distributor"), a
wholly-owned subsidiary of Federated Investors, replaced UST Distributors,
Inc. as the sponsor and distributor of Excelsior Fund.
22
<PAGE>
Certain sales of Excelsior Fund's shares are subject to a maximum sales charge
of 4 1/2% of the offering price. Shares of each Portfolio are sold on a
continual basis by the Distributor.
Each Director of Excelsior Fund receives an annual fee of $9,000, plus a
meeting fee of $1,500 for each meeting attended, and is reimbursed for
expenses incurred for attending meetings. The Chairman receives an additional
annual fee of $5,000. No person who is an officer, director or employee of
U.S. Trust or the Administrators, or of any parent or subsidiary thereof, who
serves as an officer, director or employee of Excelsior Fund receives any
compensation from Excelsior Fund.
U.S. Trust serves as the shareholder servicing and dividend disbursing agent
to Excelsior Fund and effective September 1, 1995, CGFSC serves as sub-
shareholder servicing agent. Prior to September 1, 1995, MFSC served as the
sub-shareholder servicing agent. For the period from April 1, 1995 through
August 31, 1995, shareholder servicing fees charged by U.S. Trust and MFSC
were as follows:
<TABLE>
<S> <C>
Treasury Money Fund.............................................. $ 3,850
Government Money Fund............................................ 8,223
Money Fund....................................................... 15,991
Short-Term Government Securities Fund............................ 2,453
Intermediate-Term Managed Income Fund............................ 7,570
Managed Income Fund.............................................. 15,439
</TABLE>
Effective September 1, 1995, The Chase Manhattan Bank, N.A. ("Chase") serves
as custodian of Excelsior Fund's assets. Prior to September 1, 1995, U.S.
Trust served as the custodian of Excelsior Fund's assets. For the period from
April 1, 1995 through August 31, 1995, custody fees charged by U.S. Trust were
as follows:
<TABLE>
<S> <C>
Treasury Money Fund............................................. $ 46,293
Government Money Fund........................................... 172,329
Money Fund...................................................... 193,819
Short-Term Government Securities Fund........................... 4,729
Intermediate-Term Managed Income Fund........................... 9,909
Managed Income Fund............................................. 20,050
</TABLE>
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities, excluding short-term investments, for the
portfolios aggregated:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Short-Term Government Securities Fund.......... $ 15,402,760 $ 17,601,282
Intermediate-Term Managed Income Fund.......... 86,846,220 70,460,819
Managed Income Fund............................ 135,956,351 134,124,578
</TABLE>
4. COMMON STOCK:
Excelsior Fund currently has authorized capital classified into forty
classes of shares, each representing interests in one of twenty separate
portfolios. Authorized capital for each Portfolio is as follows: with respect
to each of the Money and Government Money Funds, 1,500 million shares of
Common Stock and 1,000 million shares of Common Stock--Special Series 1; with
respect to the
23
<PAGE>
Managed Income Fund, 375 million shares of Common Stock and 375 million shares
of Common Stock--Special Series 1; with respect to the Treasury Money Fund, 375
million shares of Common Stock and 500 million shares of Common Stock--Special
Series 1; and with respect to each of the Short-Term Government Securities and
Intermediate-Term Managed Income Funds, 500 million shares of Common Stock and
500 million shares of Common Stock--Special Series 1. At March 31, 1996, no
shares of Common Stock--Special Series 1 (Trust Shares) of any Fund were
outstanding.
Each share (irrespective of series designation) has a par value of $.001 and
represents an equal proportionate interest in the particular Portfolio with
other shares of the same Portfolio, and is entitled to such dividends and
distributions of taxable earnings on the assets belonging to such Portfolio as
are declared at the discretion of Excelsior Fund's Board of Directors. Since
Treasury Money Fund, Government Money Fund and Money Fund have sold, reinvested
and redeemed shares only at a constant net asset value of $1.00 per share, the
number of shares represented by such sales, reinvestments and redemptions is
the same as the amounts shown below for such transactions.
<TABLE>
<CAPTION>
TREASURY MONEY FUND
--------------------------------
YEAR ENDED YEAR ENDED
03/31/96 03/31/95
--------------- ---------------
<S> <C> <C>
Sold......................................... $ 1,701,110,327 $ 1,799,954,618
Issued as reinvestment of dividends.......... 1,034,118 821,226
Redeemed..................................... (1,640,886,788) (1,858,530,639)
--------------- ---------------
Net Increase/(Decrease)...................... $ 61,257,657 $ (57,754,795)
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT MONEY FUND
--------------------------------
YEAR ENDED YEAR ENDED
03/31/96 03/31/95
--------------- ---------------
<S> <C> <C>
Sold......................................... $ 4,873,484,821 $ 7,717,589,470
Issued in connection with USAffinity acquisi-
tion (Note 6)............................... -- 3,793,021
Issued as reinvestment of dividends.......... 1,809,066 2,308,837
Redeemed..................................... (5,139,596,498) (8,032,775,942)
--------------- ---------------
Net Decrease................................. $ (264,302,611) $ (309,084,614)
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
MONEY FUND
--------------------------------
YEAR ENDED YEAR ENDED
03/31/96 03/31/95
--------------- ---------------
<S> <C> <C>
Sold.......................................... $ 5,492,501,117 $ 9,613,086,830
Issued as reinvestment of dividends........... 1,645,902 1,141,513
Redeemed...................................... (5,924,408,321) (9,525,691,868)
--------------- ---------------
Net Increase/(Decrease)....................... $ (430,261,302) $ 88,536,475
=============== ===============
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT SECURITIES FUND
--------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/96 03/31/95
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 2,308,143 $ 16,241,605 1,490,831 $ 10,254,964
Issued as reinvestment of
dividends................. 15,812 111,089 13,755 94,544
Redeemed................... (2,392,113) (16,748,551) (1,486,088) (10,196,015)
---------- ------------ ---------- ------------
Net Increase/(Decrease).... (68,158) $ (395,857) 18,498 $ 153,493
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE-TERM MANAGED INCOME FUND
--------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/96 03/31/95
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 4,190,183 $ 29,937,528 2,850,920 $ 19,063,074
Issued in connection with
USAffinity
acquisition (Note 6)...... -- -- 337,729 2,265,302
Issued as reinvestment of
dividends................. 44,834 319,660 26,709 178,294
Redeemed................... (1,611,428) (11,489,634) (2,348,448) (15,609,625)
---------- ------------ ---------- ------------
Net Increase............... 2,623,589 $ 18,767,554 866,910 $ 5,897,045
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
MANAGED INCOME FUND
--------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/96 03/31/95
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 2,916,607 $ 26,267,294 2,677,985 $ 22,223,163
Issued as reinvestment of
dividends................. 159,018 1,426,218 197,556 1,636,719
Redeemed................... (3,276,024) (29,304,376) (5,561,986) (45,666,661)
---------- ------------ ---------- ------------
Net Decrease............... (200,399) $ (1,610,864) (2,686,445) $(21,806,779)
========== ============ ========== ============
</TABLE>
5. ORGANIZATION COSTS
Excelsior Fund has borne all costs in connection with the initial
organization of new portfolios, including the fees for registering and
qualifying its shares for distribution under Federal and state securities
regulations. All such costs are being amortized on the straight-line basis
over periods of five years from the dates on which each Portfolio commenced
operations.
6. ASSET ACQUISITION
On March 10, 1995, Government Money Fund acquired certain assets (net of
liabilities) of $3,793,021 (excluding unamortized organization costs) from
USAffinity Treasury Money Fund in a tax-free exchange for 3,793,021 shares of
Government Money Fund. On the same date Intermediate-Term Managed Income Fund
acquired certain assets (net of liabilities) of $2,265,302 (excluding
unamortized organization costs) from USAffinity Government Income Fund in a
tax-free exchange for 337,729 shares of Intermediate-Term Managed Income Fund.
25
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders
and Board of Directors
Excelsior Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Treasury Money, Government
Money, Money, Short-Term Government Securities, Intermediate-Term Managed
Income and Managed Income Portfolios (six of the portfolios constituting the
Excelsior Funds, Inc. (formerly UST Master Funds, Inc.)) as of March 31, 1996,
and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1996, by correspondence with the custodian and brokers, or other
appropriate auditing procedures where replies from brokers were not received.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned Portfolios of Excelsior Funds, Inc. at March 31, 1996,
the results of their operations for the year then ended, the changes in their
net assets for each of the two years in the period then ended and financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 13, 1996
USTFXIA396
26
