<PAGE>
[LOGO OF EXCELSIOR FUNDS APPEARS HERE]
FIXED INCOME PORTFOLIOS
ANNUAL REPORT
MARCH 31, 1997
<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.............................................. 25
FEDERAL TAX INFORMATION................................................... 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 Excelsior Funds, Inc. The 1997
fiscal year was another year of growth for the fund complex, highlighted by
strong financial markets and new fund offerings which helped push the assets
of the funds over the $5 billion milestone.
In our on-going efforts to provide you with investment opportunities that
are best suited to meet your investment needs in the ever-evolving financial
marketplace, we continually evaluate the current Excelsior fund offerings. In
the coming year, we may make recommendations to you which we believe can
achieve this goal. These recommendations may include, among other things, the
establishment of new funds and possibly the consolidation of certain equity
funds. We will keep you apprised of these developments as our assessment of
these matters progresses.
The coming year promises to be both interesting and exciting. We are
cautiously optimistic regarding the domestic equity markets, international
equity markets continue to look attractive, and fiscal policy has been
effective in keeping inflation under control. With this in mind, I am
confident that the Excelsior fund family will continue to provide you with the
appropriate investment vehicles and dedicated service staff to help you meet
your investment objectives.
/s/ Frederick S. Wonham
Frederick S. Wonham
Chairman of the Board and President
1
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S FIXED INCOME MARKET REVIEW
- -------------------------------------------------------------------------------
Interest rates continued to spiral higher during the fiscal first quarter.
The main culprit, once again, was the fear that economic growth would lead to
higher inflation, the bane of fixed-income securities. The upsweep in interest
rates had a negative impact on fixed-income security investment results.
Municipal issues continued to outperform Treasuries -- especially shorter
maturities. Municipal outperformance can be attributed to an overall lack of
supply. Selling was light, refundings were few, and many deals that were
scheduled were cancelled.
A surprisingly robust economy at the start of the second quarter continued
to worry the bond market. Market participants remained concerned that a strong
economy and tight labor market would eventually set the stage for higher wages
and inflation. As a result, the long bond quickly jumped over the 7% level
early in July. Still, despite relatively strong economic data through August,
much of the negative sentiment was offset by a stronger U.S. dollar and
continued foreign buying of U.S. securities. In addition, retail sales and
consumer spending remained soft, and the market continued to witness only
moderate inflation through September. As a result, the Federal Reserve chose
not to raise rates at its September meeting, and the long bond dropped below
7% by quarter end. In fact, interest rates ended the quarter just about where
they were at the start. Municipals, again, slightly outperformed the
government market.
From the end of the second quarter through November, longer-term interest
rates declined. The driving forces remained much the same as in the previous
quarter: moderate economic growth and inflation combined with good foreign
buying of U.S. securities pushed rates down. Specifically, low interest rates
in Japan, a strong U.S. dollar, and high real rates of return in the U.S.
encouraged Japanese investors to be big buyers of U.S. debt. In addition,
improving fundamentals caused domestic portfolio managers to extend the
maturities of their portfolios, and the reelection of President Clinton and
the return of a Republican majority to Congress seemed to promise stability on
the political front.
Unfortunately, perceptions regarding interest rates turned negative in early
December following remarks by Federal Reserve Chairman Alan Greenspan that
were interpreted by some as a prelude to a Federal Reserve interest rate hike;
both the stock and bond markets plummeted the next day. Concerns that the
Japanese might stop or slow their buying of U.S. debt also helped to push
rates higher. Still, apart from the three-month Treasury, where the yield
increased slightly during the quarter, yields on U.S. government securities
managed to finish the quarter lower. Municipal issues outperformed taxable
bonds, becoming richly priced vis-a-vis Treasuries short to intermediate term.
Given the tightness of spreads, attractive opportunities became increasingly
scarce.
During the fiscal fourth quarter, interest rates jumped higher across the
yield curve. The reasons? As usual, stronger-than-expected U.S. economy and
the consequent fear that tight labor markets would eventually lead to more
inflation. Once again, municipal bond yields rose less than Treasury yields
during the period due to generally strong demand and relatively low levels of
supply.
2
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
SHORT-TERM GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Interest rates continued to spiral higher during the fiscal first quarter.
The main culprit, once again, was the fear that economic growth would lead to
higher inflation. The upsweep in interest rates had a negative impact on fixed-
income security investment results, but shorter-maturity issues still managed
to provide a slightly positive result for the quarter. Rates seesawed somewhat
in the second fiscal quarter, ending basically where they began, and then,
during the third fiscal quarter, began to trend lower through November '96, at
which point negative market sentiment swelled again. Nevertheless, short-term
rates did manage to finish the third quarter slightly lower on a sequential
basis. Regarding portfolio strategy, at least through November, we adopted an
essentially neutral stance, which proved effective. In December, we began to
turn more cautious. Anticipating continued economic strength and Federal
Reserve tightening, we adopted a more conservative posture, shortening
maturities; in fact, rates did move higher in the fiscal fourth quarter, and
the Federal Reserve elected to raise the federal funds rate at its March 25
meeting. For the twelve months ended March 31, 1997, the Fund achieved a total
return of 4.77%*. As always, we will continue to actively manage the Fund with
a combination of Federal government and agency securities in a manner
consistent with the Fund's investment objective to seek a high level of current
income consistent with stability of principal.
----------------------------------------------
Short-Term Government Securities Fund+
----------------------------------------------
Average Annual Total Return Ended on 3/31/97*
----------------------------------------------
1 year Since Inception (12/31/92)
----------------------------------------------
4.77% 4.73%
----------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Short-Term Government Securties Fund Short-Term Government Securties Fund Lehman Brothers 1-3 Year
(reflects prior maximum sales charge)++ (exclusive of sales charge) Government Bond Index**
<S> <C> <C> <C>
12/31/92 9,550 10,000 10,000
3/31/93 9,712 10,170 10,220
3/31/94 9,918 10,385 10,490
3/31/95 10,344 10,832 10,950
3/31/96 11,096 11,619 11,790
3/31/97 11,625 12,173 12,420
</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 Short-Term
Government Securities Fund and a broad-based index since 12/31/92 (inception
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 4.5%
maximum initial sales charge which was eliminated effective 2/14/97.
** 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.
++ Reflects 4.5% maximum sales charge on initial investment. The sales charge
was eliminated effective 2/14/97.
3
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
INTERMEDIATE-TERM MANAGED INCOME FUND
- -------------------------------------------------------------------------------
The fiscal year ended March 31, 1997 was challenging for fixed income
portfolio managers. Stronger than expected economic growth during the opening
quarter of this fiscal year created the impression that inflation, the bane of
fixed income securities, would eventually emerge. Contrary to expectations,
inflation remained subdued as a strong dollar, improved corporate productivity
and a surge in imports helped keep it under control. The strong dollar coupled
with attractive interest rates in the U.S. precipitated huge foreign buying of
our securities. Yield differentials between Treasury securities and corporate
issues were unusually narrow, so we maintained a portfolio of investments that
was overweighted in Federal securities during this reporting period. The Fund
recorded a total return of 3.25%* for the fiscal year ended March 31, 1997. We
will continue to actively manage the Fund utilizing high investment grade
securities that fall within the Fund's investment guidelines.
-----------------------------------------------------------
Intermediate-Term Managed Income Fund+
-----------------------------------------------------------
Average Annual Total Return Ended on 3/31/97*
-----------------------------------------------------------
1 year Since Inception
(12/31/92)
-----------------------------------------------------------
3.25% 5.51%
-----------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Intermediate-Term Managed Income Fund Intermediate-Term Managed Income Fund Lehman Brothers Intermediate
(reflects prior maximum sales charge)++ (exclusive of sales charge) Govt/Corp Bond Index**
<S> <C> <C> <C>
12/31/92 9,550 10,000 10,000
3/31/93 9,918 10,386 10,400
3/31/94 9,963 10,433 10,660
3/31/95 10,456 10,949 11,140
3/31/96 11,620 12,167 12,220
3/31/97 11,998 12,562 12,790
</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 and a broad-based index since 12/31/92 (inception
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 4.5%
maximum initial sales charge which was eliminated effective 2/14/97.
** 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.
++ Reflects 4.5% maximum sales charge on initial investment. The sales charge
was eliminated effective 2/14/97.
4
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
MANAGED INCOME FUND
- -------------------------------------------------------------------------------
During the first fiscal quarter, widespread concern regarding the economy's
better than expected growth and consequent inflation pushed interest rates
higher and depressed the fixed income markets. However, a strong U.S. dollar,
improved productivity, and increased imports all combined to keep inflation
from mounting as the fiscal year unfolded. In addition, foreign purchases of
U.S. securities increased during the year given attractive interest rates and
the strong dollar. Regarding portfolio strategy, as the spreads between
Treasury securities and corporate issues narrowed, we adopted and maintained
an overweight position in U.S. government securities. High investment-grade
quality and very marketable security holdings were other key characteristics
of the Fund during this period. We will continue to actively manage the Fund
utilizing high investment-grade securities that fall within the Fund's
investment guidelines. For the twelve months ended March 31, 1997, the Fund
posted a total return of 3.17%*. For the five and ten year periods ending
March 31, 1997, the Fund posted cumulative total returns of 41.38%* and
127.68%*, respectively.
----------------------------------------------
Managed Income Fund+
----------------------------------------------
Average Annual Total Return Ended on 3/31/97*
----------------------------------------------
1 year 5 years 10 years
----------------------------------------------
3.17% 7.16% 8.57%
----------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Managed Income Fund Managed Income Fund Lehman Brothers Govt/Corp
(reflects prior maximum sales charge)++ (exclusive of sales charge) Bond Index**
<S> <C> <C> <C>
3/31/87 9,550 10,000 10,000
3/31/88 10,238 10,720 10,440
3/31/89 10,972 11,489 10,970
3/31/90 12,292 12,871 12,250
3/31/91 13,868 14,522 13,780
3/31/92 15,379 16,103 15,350
3/31/93 17,799 18,638 17,540
3/31/94 18,107 18,960 18,030
3/31/95 18,842 19,730 18,850
3/31/96 21,076 22,069 20,910
3/31/97 21,743 22,768 21,840
</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 and a broad-based index over the past ten fiscal years. 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 4.5%
maximum initial sales charge which was eliminated effective 2/14/97.
** 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.
++ Reflects 4.5% maximum sales charge on initial investment. The sales charge
was eliminated effective 2/14/97.
5
<PAGE>
EXCELSIOR FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1997
<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............ $350,277,231 $534,109,626 $498,790,236 $30,806,102 $77,238,974 $187,385,437
============ ============ ============ =========== =========== ============
Investments, at value*
(Note 1).............. $350,277,231 $534,109,626 $498,790,236 $30,723,321 $74,890,874 $185,164,463
Cash................... -- -- -- 341 140 3
Interest receivable.... 295,722 2,329,491 1,475,512 196,161 812,569 1,731,075
Receivable for fund
shares sold........... -- -- -- 70,776 69,332 149,465
Receivable for
investments sold...... -- -- -- -- 3,142,509 --
Prepaid expenses....... 11,508 17,023 9,886 1,510 2,754 7,300
Unamortized
organization costs
(Note 5).............. -- -- -- 3,171 3,171 --
------------ ------------ ------------ ----------- ----------- ------------
TOTAL ASSETS........... 350,584,461 536,456,140 500,275,634 30,995,280 78,921,349 187,052,306
LIABILITIES:
Payable for dividends
declared.............. 1,307,285 2,319,972 1,952,754 108,818 376,775 764,847
Payable for fund shares
redeemed.............. -- -- -- 55,943 42,051 225,847
Investment advisory
fees payable (Note 2). 78,886 101,756 75,585 2,506 19,880 100,638
Due to custodian bank.. -- -- 852 -- -- --
Accrued expenses and
other payables........ 110,917 200,407 180,276 24,234 41,204 64,806
------------ ------------ ------------ ----------- ----------- ------------
TOTAL LIABILITIES...... 1,497,088 2,622,135 2,209,467 191,501 479,910 1,156,138
------------ ------------ ------------ ----------- ----------- ------------
NET ASSETS.............. $349,087,373 $533,834,005 $498,066,167 $30,803,779 $78,441,439 $185,896,168
============ ============ ============ =========== =========== ============
</TABLE>
See Notes to Financial Statements
6
<PAGE>
EXCELSIOR FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES--(CONTINUED)
MARCH 31, 1997
<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) $ -- $ -- $ 6,654 $ 2,631 $ 151,806
Accumulated net
realized loss on
investments........... (16,514) (59,712) (70,602) (414,347) (883,854) (4,837,783)
Unrealized depreciation
of investments........ -- -- -- (82,781) (2,348,100) (2,220,974)
Par value (Note 4)..... 349,104 533,924 498,294 4,446 11,424 21,624
Paid in capital in
excess of par value... 348,754,838 533,359,793 497,638,475 31,289,807 81,659,338 192,781,495
------------ ------------ ------------ ----------- ----------- ------------
TOTAL NET ASSETS........ $349,087,373 $533,834,005 $498,066,167 $30,803,779 $78,441,439 $185,896,168
============ ============ ============ =========== =========== ============
Shares of Common Stock
Outstanding............ 349,103,844 533,923,570 498,300,557 4,446,414 11,423,699 21,623,892
NET ASSET VALUE PER
SHARE.................. $1.00 $1.00 $1.00 $6.93 $6.87 $8.60
===== ===== ===== ===== ===== =====
</TABLE>
* Includes repurchase agreements aggregating $14,127,127 for Government Money
Fund and $13,804,749 for Money Fund.
See Notes to Financial Statements
7
<PAGE>
EXCELSIOR FUNDS, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 1997
<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........... $15,712,129 $28,194,722 $22,018,480 $1,713,733 $ 4,724,416 $11,446,212
----------- ----------- ----------- ---------- ----------- -----------
EXPENSES:
Investment advisory fees
(Note 2)................. 907,285 1,320,915 1,025,233 85,191 252,840 1,263,178
Administrators' fees (Note
2)....................... 464,931 812,244 630,631 43,657 111,055 258,906
Administrative servicing
fees (Note 2)............ 79,008 184,235 215,140 21,479 36,495 78,219
Shareholder servicing
agent fees............... 9,587 16,745 47,098 9,565 20,729 34,783
Custodian fees............ 100,147 176,987 135,402 13,351 25,555 58,786
Registration and filing
fees..................... 12,345 13,873 9,532 12,102 12,481 13,489
Legal and audit fees...... 37,615 82,401 37,258 4,327 11,028 23,633
Directors' fees and
expenses (Note 2)........ 13,337 23,343 17,751 1,284 3,158 6,633
Shareholder reports....... 9,458 15,399 5,990 2,493 6,484 13,174
Amortization of
organization costs
(Note 5)................. -- -- -- 4,176 4,176 --
Miscellaneous expenses.... 13,007 34,718 37,044 1,289 4,184 5,274
----------- ----------- ----------- ---------- ----------- -----------
TOTAL EXPENSES............ 1,646,720 2,680,860 2,161,079 198,914 488,185 1,756,075
Fees waived and reimbursed
by investment advisor and
administrators (Note 2).. (79,008) (184,235) (215,140) (25,375) (36,495) (246,643)
----------- ----------- ----------- ---------- ----------- -----------
NET EXPENSES.............. 1,567,712 2,496,625 1,945,939 173,539 451,690 1,509,432
----------- ----------- ----------- ---------- ----------- -----------
NET INVESTMENT INCOME...... 14,144,417 25,698,097 20,072,541 1,540,194 4,272,726 9,936,780
----------- ----------- ----------- ---------- ----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
(NOTE 1):
Net realized gain (loss)
on security transactions. 22,566 3,043 (3,532) (20,055) (394,734) (1,257,478)
Change in unrealized
appreciation/depreciation
of investments........... -- -- -- (201,234) (1,732,379) (1,646,840)
----------- ----------- ----------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS............... 22,566 3,043 (3,532) (221,289) (2,127,113) (2,904,318)
----------- ----------- ----------- ---------- ----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS. $14,166,983 $25,701,140 $20,069,009 $1,318,905 $ 2,145,613 $ 7,032,462
=========== =========== =========== ========== =========== ===========
</TABLE>
See Notes to Financial Statements
8
<PAGE>
EXCELSIOR 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, 1997
Net investment income..... $ 14,144,417 $ 25,698,097 $ 20,072,541 $ 1,540,194 $ 4,272,726 $ 9,936,780
Net realized gain (loss)
on investments........... 22,566 3,043 (3,532) (20,055) (394,734) (1,257,478)
Change in unrealized
appreciation/depreciation
of investments during the
year..................... -- -- -- (201,234) (1,732,379) (1,646,840)
------------ ------------- ------------- ----------- ----------- ------------
Net increase in net assets
resulting from
operations............... 14,166,983 25,701,140 20,069,009 1,318,905 2,145,613 7,032,462
Distributions to
shareholders:
From net investment
income.................. (14,144,362) (25,698,097) (20,072,541) (1,533,540) (4,276,615) (9,852,741)
In excess of net
investment income....... (55) -- -- -- -- --
Increase in net assets
from fund share
transactions (Note 4).... 90,895,420 72,360,696 103,785,017 5,950,622 11,932,322 99,816,809
------------ ------------- ------------- ----------- ----------- ------------
Net increase in net
assets................... 90,917,986 72,363,739 103,781,485 5,735,987 9,801,320 96,996,530
NET ASSETS:
Beginning of year........ 258,169,387 461,470,266 394,284,682 25,067,792 68,640,119 88,899,638
------------ ------------- ------------- ----------- ----------- ------------
End of year (1).......... $349,087,373 $ 533,834,005 $ 498,066,167 $30,803,779 $78,441,439 $185,896,168
============ ============= ============= =========== =========== ============
--------
(1) Including undistrib-
uted
(distributions in ex-
cess of) net invest-
ment income.......... $ (55) $ -- $ -- $ 6,654 $ 2,631 $ 151,806
============ ============= ============= =========== =========== ============
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
of 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 (2).......... $258,169,387 $ 461,470,266 $ 394,284,682 $25,067,792 $68,640,119 $ 88,899,638
============ ============= ============= =========== =========== ============
--------
(2) Including undistrib-
uted
(distributions in ex-
cess of)
net investment in-
come................. $ (55) $ -- $ -- $ -- $ 6,520 $ 67,767
============ ============= ============= =========== =========== ============
</TABLE>
See Notes to Financial Statements
9
<PAGE>
EXCELSIOR FUNDS, INC.
FINANCIAL HIGHLIGHTS-SELECTED PER SHARE DATA AND RATIOS
For a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
DISTRIBUTIONS
NET ASSET NET REALIZED TOTAL DIVIDENDS DIVIDENDS FROM NET
VALUE, NET AND UNREALIZED FROM FROM NET IN EXCESS OF REALIZED
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT NET INVESTMENT GAIN ON
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME INCOME INVESTMENTS
--------- ---------- -------------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
TREASURY MONEY FUND -- (2/13/91*)
Year Ended March 31,
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
1997................... 1.00 0.04676 0.00000 0.04676 (0.04676) 0.00000+++ 0.00000
GOVERNMENT MONEY FUND -- (5/8/85*)
Year Ended March 31,
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
1997................... 1.00 0.04862 0.00000 0.04862 (0.04862) -- 0.00000
MONEY FUND -- (5/3/85*)
Year Ended March 31,
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
1997................... 1.00 0.04888 0.00000 0.04888 (0.04888) -- 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
1997................... 6.98 0.38 (0.06) 0.32 (0.37) -- 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
1997................... 7.06 0.41 (0.19) 0.22 (0.41) -- 0.00
MANAGED INCOME FUND -- (1/9/86*)
Year Ended March 31,
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
1997................... 8.84 0.51 (0.24) 0.27 (0.51) -- 0.00
</TABLE>
* Commencement of operations.
** Annualized.
*** Not Annualized.
+ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by adviser and administrators.
++ Total return data, for periods prior to March 31, 1997, does not reflect
the sales load payable on purchase of shares. The sales load was eliminated
effective February 14, 1997.
+++ Amount represents less than $0.01 per share.
See Notes to Financial Statements
10
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
DISTRIBUTIONS NET RATIO OF GROSS RATIO OF 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>
$ -- $(0.03017) $1.00 3.06% $ 227,794 0.58% 0.58% 2.97% -- $0.00000
-- (0.02590) 1.00 2.62% 254,683 0.58% 0.58% 2.59% -- 0.00001
-- (0.04165) 1.00 4.25% 196,932 0.55% 0.57% 4.09% -- 0.00019
-- (0.05043) 1.00 5.16% 258,169 0.55% 0.57% 5.03% -- 0.00021
-- (0.04676) 1.00 4.78% 349,087 0.52% 0.54% 4.68% -- 0.00026
$ -- $(0.03205) $1.00 3.20% $ 710,491 0.50% 0.50% 3.20% -- $0.00000
-- (0.02736) 1.00 2.77% 1,034,908 0.50% 0.50% 2.74% -- 0.00003
-- (0.04397) 1.00 4.49% 725,774 0.50% 0.53% 4.38% -- 0.00024
-- (0.05296) 1.00 5.43% 461,470 0.50% 0.53% 5.36% -- 0.00031
-- (0.04862) 1.00 4.97% 533,834 0.47% 0.51% 4.86% -- 0.00035
$ -- $(0.03234) $1.00 3.25% $ 784,016 0.51% 0.51% 3.21% -- $0.00000
-- (0.02780) 1.00 2.82% 736,077 0.51% 0.51% 2.78% -- 0.00002
-- (0.04496) 1.00 4.59% 824,578 0.49% 0.52% 4.49% -- 0.00026
-- (0.05336) 1.00 5.47% 394,285 0.50% 0.53% 5.40% -- 0.00037
-- (0.04888) 1.00 5.00% 498,066 0.47% 0.53% 4.89% -- 0.00052
$ -- $ (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
-- (0.33) 6.89 4.30% 25,216 0.61% 0.67% 4.80% 198% 0.00
-- (0.40) 6.98 7.27% 25,068 0.61% 0.80% 5.72% 77% 0.01
-- (0.37) 6.93 4.77% 30,804 0.61% 0.70% 5.42% 82% 0.01
$ -- $ (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
-- (0.43) 7.06 11.13% 68,640 0.64% 0.68% 6.06% 129% 0.00
-- (0.41) 6.87 3.25% 78,441 0.63% 0.68% 5.91% 129% 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
-- (0.51) 8.39 4.06% 86,024 1.00% 1.12% 6.09% 492% 0.01
-- (0.54) 8.84 11.86% 88,900 0.96% 1.12% 6.09% 165% 0.01
-- (0.51) 8.60 3.17% 185,896 0.90% 1.04% 5.90% 238% 0.01
</TABLE>
See Notes to Financial Statements
11
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
TREASURY MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- ------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 98.93%
Federal Home Loan Bank
$ 40,000,000 04/01/97................................... 6.45% $ 40,000,000
Student Loan Marketing Association
21,500,000 07/17/97................................... 5.60## 21,500,000
U.S. Treasury Bills
250,000,000 04/03/97................................... 5.24 249,927,222
34,000,000 04/17/97................................... 5.13 33,922,522
------------
TOTAL U.S. GOVERNMENT
& AGENCY OBLIGATIONS
(Cost $345,349,744)........................ 345,349,744
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ------------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 1.41%
4,927,487 Dreyfus Government Cash Management Fund
(Cost $4,927,487)............................. $ 4,927,487
------------
TOTAL INVESTMENTS
(Cost $350,277,231*)..................................... 100.34% $350,277,231
OTHER ASSETS & LIABILITIES (NET)......................... (0.34) (1,189,858)
------ ------------
NET ASSETS............................................... 100.00% $349,087,373
====== ============
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$350,277,256.
## Variable or floating rate securities--rate disclosed is as of March 31,
1997.
See Notes to Financial Statements
12
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
GOVERNMENT MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- ------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 97.40%
Federal Home Loan Bank
$ 15,000,000 04/01/97................................. 6.45% $ 15,000,000
Federal Home Loan Mortgage Corp.
275,000,000 04/01/97................................. 6.50 275,000,000
Federal National Mortgage Association
35,000,000 07/16/97................................. 5.59## 34,997,011
20,000,000 11/14/97................................. 5.61## 19,993,968
Student Loan Marketing Association
125,000,000 07/17/97................................. 5.60## 125,000,000
50,000,000 08/21/97................................. 5.61## 49,991,520
------------
TOTAL U.S. GOVERNMENT
& AGENCY OBLIGATIONS
(Cost $519,982,499)...................... 519,982,499
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- ------------
<C> <S> <C> <C>
REPURCHASE AGREEMENT -- 2.65%
$ 14,127,127 Agreement with Dillon Read & Co., 6.25%,
dated 03/31/97, due 04/01/97, to be
repurchased at $14,129,580,
collateralized by $2,559,379 U.S.
Treasury Notes, 7.50%, due 11/15/16,
valued at $2,713,281, $2,064,015 U.S.
Treasury Notes, 8.75%, due 11/15/08,
valued at $2,320,295, and $9,672,860 U.S.
Treasury Bills, 5.39%, due 10/16/97,
valued at $9,384,660 (Cost $14,127,127).. $ 14,127,127
------------
TOTAL INVESTMENTS
(Cost $534,109,626*)................................... 100.05% $534,109,626
OTHER ASSETS & LIABILITIES (NET)....................... (0.05) (275,621)
------ ------------
NET ASSETS............................................. 100.00% $533,834,005
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
## Variable or floating rate securities--rate disclosed is as of March 31,
1997.
See Notes to Financial Statements
13
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- ------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 87.34%
Federal Home Loan Bank
$ 15,000,000 04/01/97................................. 6.45% $ 15,000,000
Federal Home Loan Mortgage Corp.
275,000,000 04/01/97................................. 6.50 275,000,000
Federal National Mortgage Association
20,000,000 11/14/97................................. 5.61## 19,993,968
Student Loan Marketing Association
75,000,000 07/17/97................................. 5.60## 75,000,000
50,000,000 08/21/97................................. 5.61## 49,991,519
------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $434,985,487)...................... 434,985,487
------------
COMMERCIAL PAPER -- 10.04%
15,000,000 Bear Stearns Co., Inc., 02/20/98......... 5.72## 15,000,000
15,000,000 Chevron Corp., 04/18/97.................. 5.33 15,000,000
20,000,000 General Electric Capital Corp., 04/09/97. 5.65 20,000,000
------------
TOTAL COMMERCIAL PAPER
(Cost $50,000,000)....................... 50,000,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- ------------
<C> <S> <C> <C>
REPURCHASE AGREEMENT -- 2.77%
$ 13,804,749 Agreement with Dillon Read & Co., 6.25%,
dated 03/31/97, due 04/01/97, to be
repurchased at $13,807,146,
collateralized by $2,500,974 U.S.
Treasury Notes, 7.50%, due 11/15/16,
valued at $2,651,364, $2,016,915 U.S.
Treasury Notes, 8.75%, due 11/15/08,
valued at $2,267,346, and $9,452,127 U.S.
Treasury Bills, 5.39%, due 10/16/97,
valued at $9,170,504
(Cost $13,804,749)....................... $ 13,804,749
------------
TOTAL INVESTMENTS
(Cost $498,790,236*)................................... 100.15% $498,790,236
OTHER ASSETS & LIABILITIES (NET)....................... (0.15) (724,069)
------ ------------
NET ASSETS............................................. 100.00% $498,066,167
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
## Variable or floating rate securities--rate disclosed is as of March 31,
1997.
See Notes to Financial Statements
14
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
SHORT-TERM GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
PRINCIPAL COUPON VALUE
AMOUNT RATE (NOTE 1)
--------- ------ -----------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 95.01%
Federal Home Loan Bank
$6,000,000 04/01/97...................................... 6.45%+ $ 6,000,000
Federal National Mortgage Association
1,760,952 04/01/01...................................... 5.50 1,690,602
Private Export Funding
320,000 03/15/01...................................... 5.50 305,564
Student Loan Marketing Association
1,475,000 03/03/98...................................... 7.00 1,485,821
U.S. Treasury Notes
6,430,000 08/15/97...................................... 6.50 6,450,100
1,000,000 05/15/98...................................... 6.13 999,376
2,000,000 02/15/99...................................... 5.00 1,950,626
4,055,000 01/31/00...................................... 7.75 4,172,851
6,285,000 08/31/00...................................... 6.25 6,210,372
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $29,348,093)............................ 29,265,312
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 4.73%
782,633 Dreyfus Government Cash Management Fund.......... $ 782,633
675,376 Fidelity U.S. Treasury II Fund................... 675,376
-----------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $1,458,009)................................ 1,458,009
-----------
TOTAL INVESTMENTS
(Cost $30,806,102*)....................................... 99.74% $30,723,321
OTHER ASSETS & LIABILITIES (NET).......................... 0.26 80,458
------ -----------
NET ASSETS................................................ 100.00% $30,803,779
====== ===========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$30,813,167.
+ Discount Rate.
See Notes to Financial Statements
15
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
INTERMEDIATE-TERM MANAGED INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL COUPON VALUE
AMOUNT RATE (NOTE 1)
--------- ------ -----------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 86.69%
$ 46,351 Federal Home Loan Mortgage Corp.
Pool #218374, 07/01/02..................... 10.50% $ 48,874
2,000,000 Series 16, Class PH, 04/25/21............... 6.75 1,928,320
6,000,000 Federal National Mortgage Association,
11/23/01.................................... 6.35 5,866,500
Government National Mortgage Association
210,516 Pool #195801, 01/15/17...................... 8.50 216,174
245,697 Pool #195833, 04/15/17...................... 8.50 252,300
185,787 Pool #212760, 04/15/17...................... 8.50 190,780
112,885 Pool #334299, 05/15/23...................... 8.00 113,556
1,884,472 Pool #348190, 08/15/23...................... 7.00 1,798,508
4,058,681 Pool #366379, 12/15/23...................... 6.50 3,761,922
1,832,586 Pool #367412, 11/15/23...................... 6.00 1,646,478
Small Business Administration,
1,500,000 02/10/07.................................... 7.08 1,456,875
U.S. Treasury Notes
1,000,000 11/30/97.................................... 5.38 996,563
4,000,000 09/30/99.................................... 7.13 4,053,752
2,000,000 10/15/99.................................... 6.00 1,977,502
4,000,000 10/31/99.................................... 7.50 4,087,504
2,000,000 08/15/02.................................... 6.38 1,963,752
29,625,000 08/15/03.................................... 5.75 27,958,623
1,500,000 10/15/06.................................... 6.50 1,452,657
8,640,000 02/15/07.................................... 6.25 8,232,304
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $70,058,693).......................... 68,002,944
-----------
CORPORATE BONDS -- 6.62%
2,500,000 Anheuser-Busch Co., Inc., 09/01/05.......... 7.00 2,447,545
3,000,000 Ford Motor Credit, 01/09/06................. 6.13 2,741,826
-----------
TOTAL CORPORATE BONDS
(Cost $5,481,722)........................... 5,189,371
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 2.16%
884,662 Dreyfus Government Cash Management Fund.......... $ 884,662
813,897 Fidelity U.S. Treasury II Fund................... 813,897
-----------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $1,698,559)................................ 1,698,559
-----------
TOTAL INVESTMENTS
(Cost $77,238,974*)....................................... 95.47% $74,890,874
OTHER ASSETS & LIABILITIES (NET).......................... 4.53 3,550,565
------ -----------
NET ASSETS................................................ 100.00% $78,441,439
====== ===========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$77,253,970.
See Notes to Financial Statements
16
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
MANAGED INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL COUPON VALUE
AMOUNT RATE (NOTE 1)
--------- ------ ------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 89.05%
Government National Mortgage Association
$ 2,826,709 Pool #348190, 08/15/23...................... 7.00% $ 2,697,763
8,899,409 Pool #366782, 05/15/24...................... 7.00 8,493,444
12,523,677 Pool #376533, 06/15/24...................... 7.50 12,285,039
6,141,094 Pool #385985, 12/15/24...................... 8.50 6,306,135
Small Business Administration
5,000,000 08/10/06.................................... 7.35 5,018,750
U.S. Treasury Bill
33,167,000 04/03/97.................................... 4.90# 33,157,972
U.S. Treasury Bond
5,000,000 05/15/16.................................... 7.25 5,018,755
U.S. Treasury Notes
50,000,000 02/15/06.................................... 5.63 45,671,900
9,500,000 10/15/06.................................... 6.50 9,200,161
39,550,000 02/15/07.................................... 6.25 37,683,754
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $167,617,898)......................... 165,533,673
------------
CORPORATE BONDS -- 8.96%
4,000,000 Central Illinois Public Service Co.,
07/01/07.................................... 7.50 4,011,796
5,000,000 Ford Motor Credit, 10/01/08................. 7.25 4,881,250
7,200,000 Procter & Gamble Co., 01/15/26.............. 6.45 6,259,421
1,500,000 Wisconsin Electric Power Co., 08/01/04...... 7.25 1,495,844
------------
TOTAL CORPORATE BONDS
(Cost $16,785,060).......................... 16,648,311
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ------------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 1.60%
1,416,118 Dreyfus Government Cash Management Fund....... $ 1,416,118
1,566,361 Fidelity U.S. Treasury II Fund................ 1,566,361
------------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $2,982,479)............................. 2,982,479
------------
TOTAL INVESTMENTS
(Cost $187,385,437*)..................................... 99.61% $185,164,463
OTHER ASSETS & LIABILITIES (NET)......................... 0.39 731,705
------ ------------
NET ASSETS............................................... 100.00% $185,896,168
====== ============
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$188,090,596.
# Discount Rate.
See Notes to Financial Statements
17
<PAGE>
EXCELSIOR FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Excelsior Funds, Inc. ("Excelsior Fund") 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 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 judgment 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 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.
18
<PAGE>
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, which approximates market value. 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.
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.
19
<PAGE>
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, 1997, 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 2005 TOTAL
------- ------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Treasury Money Fund..... $ -- $13,000 $ -- $ 4,000 $ -- $ 17,000
Government Money Fund... 10,000 -- 48,000 1,000 -- 59,000
Money Fund.............. 14,000 -- 21,000 20,000 12,000 67,000
Short-Term Government
Securities Fund........ -- -- 393,000 -- 14,000 407,000
Intermediate-Term
Managed Income Fund.... 20,000 2,000 467,000 -- 374,000 863,000
Managed Income Fund..... -- -- 3,291,000 -- 842,000 4,133,000
</TABLE>
To the extent that such carryforwards are utilized, no capital gain
distributions will be made. During the year ended March 31, 1997, Treasury
Money Fund and Government Money Fund utilized capital loss carryforwards
for Federal tax purposes totaling approximately $2,000 and $2,000,
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. Government Money Fund, Money Fund and Intermediate-Term Managed
Income Fund incurred, and elected to defer, net capital losses of
approximately $1,000, $3,000 and $6,000, respectively, for the year ended
March 31, 1997.
At March 31, 1997, 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.............. $ -- $ (25) $ (25)
Short-Term Government Securities
Fund............................ 33,339 (123,185) (89,846)
Intermediate-Term Managed Income
Fund............................ 182,057 (2,545,153) (2,363,096)
Managed Income Fund.............. 299,645 (3,225,778) (2,926,133)
</TABLE>
20
<PAGE>
(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 Agreement, 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.
U.S. Trust, Chase Global Funds Services Company ("CGFSC"), a subsidiary of
The Chase Manhattan Bank, 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 the
international equity portfolios of Excelsior Fund and Excelsior Institutional
Trust), 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. For the year ended
March 31, 1997, Administration fees charged by U.S. Trust were as follows:
<TABLE>
<S> <C>
Treasury Money Fund............................................... $51,259
Government Money Fund............................................. 90,515
Money Fund........................................................ 69,548
Short-Term Government Securities Fund............................. 4,864
Intermediate-Term Managed Income Fund............................. 12,282
Managed Income Fund............................................... 30,845
</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. In
addition, until further notice to Excelsior Fund, U.S. Trust intends 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, 1997, U.S. Trust voluntarily waived
investment advisory fees totaling $3,896 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, 1997, U.S. Trust waived investment
advisory fees totaling $168,424 for Managed Income Fund.
Excelsior Fund has also entered into administrative servicing agreements
with various service organizations (which may include affiliates of U.S.
Trust) requiring them to provide administrative
21
<PAGE>
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
organization 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, 1997, 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............................. $ 79,008 $--
Government Money Fund........................... 183,979 256
Money Fund...................................... 215,132 8
Short-Term Government Securities Fund........... 21,478 1
Intermediate-Term Managed Income Fund........... 35,586 909
Managed Income Fund............................. 77,751 468
</TABLE>
Edgewood Services, Inc. (the "Distributor"), a wholly-owned subsidiary of
Federated Investors, serves as the sponsor and distributor of Excelsior Fund.
Effective February 14, 1997, shares of each Portfolio are sold without a sales
charge. Prior to February 14, 1997, certain sales of Excelsior Fund's shares
were subject to a maximum sales charge of 4.50% of the offering price.
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.
3. PURCHASES AND SALES OF SECURITIES:
For the year ended March 31, 1997, purchases and sales of securities,
excluding short-term investments, for the Portfolios aggregated:
<TABLE>
<CAPTION>
CONTRIBUTIONS
PURCHASES IN-KIND SALES
------------ ------------- ------------
<S> <C> <C> <C>
Short-Term Government Securities
Fund.............................. $ 14,893,691 $ 4,941,525 $ 19,093,118
Intermediate-Term Managed Income
Fund.............................. 98,378,796 -- 85,483,262
Managed Income Fund................ 320,740,753 94,076,172 349,641,163
</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 (Trust
Shares); with
22
<PAGE>
respect to the Managed Income Fund, 375 million shares of Common Stock and 375
million shares of Common Stock--Special Series 1 (Trust Shares); with respect
to the Treasury Money Fund, 375 million shares of Common Stock and 500 million
shares of Common Stock--Special Series 1 (Trust Shares); 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 (Trust Shares). At March 31, 1997, no shares of
Common Stock--Special Series 1 (Trust Shares) of any Portfolio 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
03/31/97 03/31/96
--------------- ---------------
<S> <C> <C>
Sold......................................... $ 1,727,536,995 $ 1,701,110,327
Issued as reinvestment of dividends.......... 1,153,005 1,034,118
Redeemed..................................... (1,637,794,580) (1,640,886,788)
--------------- ---------------
Net Increase................................. $ 90,895,420 $ 61,257,657
=============== ===============
<CAPTION>
GOVERNMENT MONEY FUND
--------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
--------------- ---------------
<S> <C> <C>
Sold......................................... $ 3,287,998,018 $ 4,873,484,821
Issued as reinvestment of dividends.......... 1,121,860 1,809,066
Redeemed..................................... (3,216,759,182) (5,139,596,498)
--------------- ---------------
Net Increase (Decrease)...................... $ 72,360,696 $ (264,302,611)
=============== ===============
<CAPTION>
MONEY FUND
--------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
--------------- ---------------
<S> <C> <C>
Sold......................................... $ 2,009,777,544 $ 5,492,501,117
Issued as reinvestment of dividends.......... 2,417,509 1,645,902
Redeemed..................................... (1,908,410,036) (5,924,408,321)
--------------- ---------------
Net Increase (Decrease)...................... $ 103,785,017 $ (430,261,302)
=============== ===============
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT SECURITIES FUND
--------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 1,838,725 $ 12,799,856 2,308,143 $ 16,241,605
Contribution in-kind....... 713,062 4,941,525 -- --
Issued as reinvestment of
dividends................. 49,084 341,488 15,812 111,089
Redeemed................... (1,743,557) (12,132,247) (2,392,113) (16,748,551)
---------- ------------ ---------- ------------
Net Increase (Decrease).... 857,314 $ 5,950,622 (68,158) $ (395,857)
========== ============ ========== ============
<CAPTION>
INTERMEDIATE-TERM MANAGED INCOME FUND
--------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 4,173,471 $ 29,210,056 4,190,183 $ 29,937,528
Issued as reinvestment of
dividends................. 36,494 254,679 44,834 319,660
Redeemed................... (2,505,193) (17,532,413) (1,611,428) (11,489,634)
---------- ------------ ---------- ------------
Net Increase............... 1,704,772 $ 11,932,322 2,623,589 $ 18,767,554
========== ============ ========== ============
<CAPTION>
MANAGED INCOME FUND
--------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/97 03/31/96
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 3,991,365 $ 34,928,291 2,916,607 $ 26,267,294
Contribution in-kind....... 10,913,709 94,076,172 -- --
Issued as reinvestment of
dividends................. 208,603 1,822,296 159,018 1,426,218
Redeemed................... (3,540,705) (31,009,950) (3,276,024) (29,304,376)
---------- ------------ ---------- ------------
Net Increase (Decrease).... 11,572,972 $ 99,816,809 (200,399) $ (1,610,864)
========== ============ ========== ============
</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.
24
<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.) as of March 31, 1997, 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, 1997, 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, 1997,
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 9, 1997
USTFXIA397
25
<PAGE>
FEDERAL TAX INFORMATION (UNAUDITED):
For the year ended March 31, 1997, the percentage of income earned from
direct treasury obligations was as follows:
<TABLE>
<CAPTION>
INTEREST
EARNED
--------
<S> <C>
Treasury Money Fund.................................................... 100.00%
Government Money Fund.................................................. 57.56%
Money Fund............................................................. 31.67%
Short-Term Government Securities Fund.................................. 91.41%
Intermediate-Term Managed Income Fund.................................. 61.33%
Managed Income Fund.................................................... 48.32%
</TABLE>
26
