<PAGE>
[LOGO OF EXCELSIOR FUNDS, INC. APPEARS HERE]
FIXED INCOME
PORTFOLIOS
ANNUAL REPORT
March 31, 1998
<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.................................................. 7
STATEMENTS OF CHANGES IN NET ASSETS....................................... 8
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, U.S. TRUST COMPANY OF
CONNECTICUT, 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. Fiscal
1998 was an exciting year in the financial markets as a whole and for the fund
family. Highlights included exceptional performance by many of the funds, the
reconfiguration of some of our existing equity funds, and the commencement of
several new fund offerings.
During the year, we introduced the Large Cap Growth Fund, Real Estate Fund and
Emerging Markets Fund. These funds provide access to important asset classes
and subclasses not previously offered by Excelsior. As always, we will
continue to evaluate the current Excelsior funds and will consider expanding
our offerings to help you meet your financial goals.
Buoyed by low interest rates and the lack of inflationary pressures, corporate
profits continued to grow. These factors combined to produce another year of
extraordinary returns on domestic equity investments. They also combined to
constrain returns on fixed-income investments to modest levels. International
markets were mixed, with strong returns in Europe, moderate Latin American
returns and down markets in Asia, brought on by a weakened economic
environment and currency devaluations in several countries.
The financial markets will present many challenges and opportunities during
the coming year. Fiscal policy has continued to be effective in keeping
inflation under control. We remain cautiously optimistic regarding the
domestic equity markets. International markets, as a whole, remain attractive.
A close watch will be required in Asia, as efforts are made to right their
recent economic woes. I am confident that the Excelsior fund family will
continue to provide you with the appropriate investment vehicles to respond to
economic environment and to 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
- --------------------------------------------------------------------------------
Through much of the fiscal year ended March 31, 1998, the market was divided
between two camps--one believing in a new paradigm of low inflation and the
other suspecting that the traditional business cycle would once again reassert
itself.
The bond market actually began fiscal 1998 on a down note due to a monthly
economic report which registered a greater-than-expected rise in wages and a
drop in the unemployment rate. Upon news of stronger-than-anticipated retail
sales a week later, the 30-year Treasury bond's yield quickly shot up to 7.125%
as market participants began to expect that strong demand would force the
Federal Reserve to raise rates.
The release of the Consumer Price Index in mid-April, however, rallied the
market. Contrary to expectations, strong demand was not pushing up inflation.
Price increases were smaller than anticipated. Continued gains in productivity
and some economic weakness overseas appeared to be helping to keep domestic and
worldwide inflation at bay. U.S. workers continued to seek job security more
than wage increases during this period. Through April, inflation had yet to
appear, and the long Treasury bond's yield finally dropped below 7%.
The market received more good news at the beginning of May when it was
announced that the President and Congress had come to an agreement to balance
the federal budget by the year 2002. More good news came about a week later
when Federal Reserve Chairman Greenspan hinted that the Federal Open Market
Committee (FOMC) might not raise rates soon. This became a reality when the
FOMC left rates unchanged following their meeting later that month.
Despite their volatility, yields continued to decline quite substantially
through the first half of the fiscal year, and seemed about to head higher
until the fiscal third quarter, when attention shifted to mounting economic
crisis in Asia. Concern then turned away from the specter of inflation toward
the deflation that could result from the Asian crisis.
In fact, in the early weeks of the fiscal fourth quarter, rates declined
sharply as the Asian economic crisis took a turn for the worse and talk of
global recession mounted. Suspicions that the Federal Reserve might ease grew,
and yields tumbled in response. The 30-year T-bond yield fell to 5.66%, a
twenty-year low, amid expectations that the economy would slow. But as the
quarter progressed, the U.S. economy's undiminished strength appeared to
dominate investors' thinking, and interest rates edged upward again. By early
March, the 30-year T-bond yield had climbed as high as 6.07%, before drifting
lower. In fact, had it not been for the Asian crisis, the Fed might actually
have been prompted to raise rates in the period.
As a result, bond yields finished the fiscal fourth quarter essentially where
they began it. At the long end of the spectrum, U.S. bond yields were flat or
slightly higher; the yield on the 30-year Treasury bond, for example, ended the
quarter at 5.97%, up slightly from 5.92% at the start of the quarter. Most
investors in these issues had to be content to earn their returns solely from
the coupon--which, in any event, proved a better option than owning cash.
Yields on shorter-term U.S. securities, however, generally ended the quarter
marginally lower, with the one-year Treasury note at 5.43%, down from 5.55% at
the beginning of the quarter.
2
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
SHORT-TERM GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
During fiscal 1998, given continued uncertainty regarding the outlook for the
economy and inflation, we maintained an essentially neutral stance regarding
portfolio strategy. Attractive opportunities remained few, and the Fund focused
on maintaining a high-grade portfolio composed of federal government and agency
securities. Throughout this year of uncertainty we positioned the Fund in line
with its Lehman benchmark, or slightly longer. With this strategy the Fund
posted a total return of 6.47%* for the fiscal year ended March 31, 1998. For
the five year period ended March 31, 1998, the Fund's cumulative total return
was 27.44%*.
------------------------------------------------
Short-Term Government Securities Fund+
------------------------------------------------
Average Annual Total Returns Ended on 3/31/98*
------------------------------------------------
1 year 5 years
------------------------------------------------
6.47% 4.96%
------------------------------------------------
[LINE GRAPH APPEARS HERE]
Short Term Government Lehman Bros. Government
Date Securities Fund 1-3 Yr. Bond Index
---- --------------- ------------------
12/31/92 10000 10000
3/31/93 10170 10220
3/31/94 10385 10490
3/31/95 10832 10950
3/31/96 11619 11790
3/31/97 12173 12420
3/31/98 12961 13350
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.
** 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.
3
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
INTERMEDIATE-TERM MANAGED INCOME FUND
- --------------------------------------------------------------------------------
Reflecting our neutral view of the market throughout the fiscal year, given the
uncertain outlook for the economy and inflation, we focused on maintaining a
well diversified portfolio of high investment grade securities. Positioning in
line with the Fund's Lehman benchmark, or slightly longer, we feel allowed for
satisfactory performance during this year of uncertainty. Our strategy allowed
the Fund to achieve a total return of 11.37%* for the fiscal year ended March
31, 1998. For the five year period ended March 31, 1998, the Fund's cumulative
total return was 34.72%*.
-----------------------------------------------
Intermediate-Term Managed Income Fund+
-----------------------------------------------
Average Annual Total Return Ended on 3/31/98*
-----------------------------------------------
1 year 5 years
-----------------------------------------------
11.37% 6.13%
-----------------------------------------------
[LINE GRAPH APPEARS HERE]
Intermediate Term Lehman Bros. Government/
Date MNGD Income Fund Corporate Bond Index
---- ---------------- --------------------
12/31/92 10000 10000
3/31/93 10386 10400
3/31/94 10433 10660
3/31/95 10949 11140
3/31/96 12167 12220
3/31/97 12562 12790
3/31/98 13990 14020
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.
** 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.
4
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
MANAGED INCOME FUND
- --------------------------------------------------------------------------------
Through much of Fiscal 1998, we overweighted the portfolio in longer maturities
while maintaining an emphasis on high credit quality investments. The strategy
proved effective, particularly in the third fiscal quarter, as long maturities
outperformed intermediates and corporate spreads widened substantially due to
the crisis in Asia. In the fourth fiscal quarter, we sold into the rally of
early January and then settled back for the balance of the quarter, slightly
shorter than the Fund's Lehman benchmark, before beginning to lengthen again
toward the end of the quarter. We also added to our mortgage-backed securities
due to reduced bond market volatility. This strategy worked well for the fiscal
year ended March 31, 1998, with the Fund achieving a total return of 12.79%,*
and ranking 15 out of 139 funds, based on total return, in the Lipper Corporate
Debt A-Rated category,** for the same period. The Fund has also performed well
long-term, ranking 27 and 8 among 63 and 35 funds, respectively, in the same
Lipper category for the five and ten years ended March 31, 1998, with
cumulative total returns of 37.79%* and 139%,* respectively.
-----------------------------------------------
Managed Income Fund+
-----------------------------------------------
Average Annual Total Return Ended on 3/31/98*
-----------------------------------------------
1 year 5 years 10 years
-----------------------------------------------
12.79% 6.61% 9.12%
-----------------------------------------------
[LINE GRAPH APPEARS HERE]
Lehman Bros. Government/
Date Managed Income Fund Corporate Bond Index
---- ------------------- --------------------
3/31/88 10000 10000
3/31/89 10718 10500
3/31/90 12007 11730
3/31/91 13612 13190
3/31/92 15022 14700
3/31/93 17386 16800
3/31/94 17687 17260
3/31/95 18405 18050
3/31/96 20633 20200
3/31/97 21239 20920
3/31/98 23956 23510
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.
** 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.
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1998
<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............ $471,498,806 $601,645,914 $660,610,366 $32,627,588 $93,302,350 $193,349,196
============ ============ ============ =========== =========== ============
Investments, at value
(Note 1).............. $471,498,806 $601,645,914 $660,610,366 $32,858,559 $94,689,597 $195,016,910
Cash................... -- -- -- 74,322 -- 13,226
Interest receivable.... 322,098 1,480,359 1,299,140 281,789 745,643 2,092,646
Receivable for fund
shares sold........... -- -- -- -- 183 6,402
Prepaid expenses....... 17,819 29,988 24,930 622 4,136 8,460
------------ ------------ ------------ ----------- ----------- ------------
TOTAL ASSETS........... 471,838,723 603,156,261 661,934,436 33,215,292 95,439,559 197,137,644
LIABILITIES:
Payable for dividends
declared.............. 1,961,478 2,717,488 2,768,826 140,206 440,537 861,765
Payable for fund shares
redeemed.............. -- -- -- 501,725 -- 15,983
Investment advisory
fees payable (Note 2). 107,474 133,562 109,480 4,700 23,008 105,428
Administration fees
payable (Note 2)...... 62,897 72,518 80,497 1,990 12,429 26,364
Administrative service
fees payable (Note 2). 10,674 14,896 19,833 1,963 4,319 4,803
Directors' fees payable
(Note 2).............. 2,606 5,445 3,719 348 602 1,489
Due to custodian bank.. 4,211 -- -- -- -- --
Accrued expenses and
other payables........ 48,930 95,410 79,923 17,736 23,435 25,025
------------ ------------ ------------ ----------- ----------- ------------
TOTAL LIABILITIES...... 2,198,270 3,039,319 3,062,278 668,668 504,330 1,040,857
------------ ------------ ------------ ----------- ----------- ------------
NET ASSETS.............. $469,640,453 $600,116,942 $658,872,158 $32,546,624 $94,935,229 $196,096,787
============ ============ ============ =========== =========== ============
NET ASSETS consist of
Undistributed
(distributions in
excess of) net
investment income..... $ (126) $ -- $ -- $ 20,454 $ 1,212 $ 182,630
Accumulated net
realized gain (loss)
on investments........ (9,378) (68,683) (58,076) (414,597) (359,428) 3,379,895
Unrealized appreciation
of investments........ -- -- -- 230,971 1,387,247 1,667,714
Par value (Note 4)..... 469,651 600,215 659,093 4,649 13,133 21,395
Paid-in capital in
excess of par value... 469,180,306 599,585,410 658,271,141 32,705,147 93,893,065 190,845,153
------------ ------------ ------------ ----------- ----------- ------------
TOTAL NET ASSETS........ $469,640,453 $600,116,942 $658,872,158 $32,546,624 $94,935,229 $196,096,787
============ ============ ============ =========== =========== ============
Shares of Common Stock
Outstanding............ 469,651,471 600,215,482 659,092,916 4,648,723 13,132,967 21,394,694
NET ASSET VALUE PER
SHARE.................. $1.00 $1.00 $1.00 $7.00 $7.23 $9.17
===== ===== ===== ===== ===== =====
</TABLE>
See Notes to Financial Statements
6
<PAGE>
EXCELSIOR FUNDS, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 1998
<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........... $21,353,221 $30,771,064 $28,486,414 $1,856,533 $5,450,093 $12,378,216
----------- ----------- ----------- ---------- ---------- -----------
EXPENSES:
Investment advisory fees
(Note 2)................. 1,191,094 1,385,002 1,267,434 94,409 302,968 1,447,724
Administration fees (Note
2)....................... 607,458 847,622 775,670 48,149 132,440 295,336
Custodian fees............ 105,262 152,501 143,686 14,247 28,129 57,883
Administrative servicing
fees (Note 2)............ 82,614 168,833 231,371 19,835 42,650 51,215
Legal and audit fees...... 63,493 87,926 80,559 5,238 13,996 33,444
Directors' fees and ex-
penses (Note 2).......... 17,994 27,967 23,751 1,601 4,186 9,632
Registration and filing
fees..................... 11,569 15,289 25,695 13,271 11,810 11,420
Shareholder reports....... 9,397 13,694 12,479 3,110 7,938 16,374
Shareholder servicing
agent fees............... 10,164 16,742 47,903 7,290 16,955 31,683
Amortization of organiza-
tion costs (Note 5)...... -- -- -- 3,171 3,171 --
Miscellaneous expenses.... 39,690 76,304 48,301 5,514 10,506 22,015
----------- ----------- ----------- ---------- ---------- -----------
TOTAL EXPENSES............ 2,138,735 2,791,880 2,656,849 215,835 574,749 1,976,726
Fees waived and reimbursed
by investment adviser and
administrators (Note 2).. (82,614) (168,833) (231,371) (21,560) (42,650) (244,254)
----------- ----------- ----------- ---------- ---------- -----------
NET EXPENSES.............. 2,056,121 2,623,047 2,425,478 194,275 532,099 1,732,472
----------- ----------- ----------- ---------- ---------- -----------
NET INVESTMENT INCOME...... 19,297,100 28,148,017 26,060,936 1,662,258 4,917,994 10,645,744
----------- ----------- ----------- ---------- ---------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
(NOTE 1):
Net realized gain (loss)
on security transactions. 7,136 (8,971) 12,526 13,550 523,007 8,505,576
Change in unrealized
appreciation/depreciation
of investments during the
year..................... -- -- -- 313,752 3,735,347 3,888,688
----------- ----------- ----------- ---------- ---------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVEST-
MENTS..................... 7,136 (8,971) 12,526 327,302 4,258,354 12,394,264
----------- ----------- ----------- ---------- ---------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS. $19,304,236 $28,139,046 $26,073,462 $1,989,560 $9,176,348 $23,040,008
=========== =========== =========== ========== ========== ===========
</TABLE>
See Notes to Financial Statements
7
<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, 1998
Net investment income..... $ 19,297,100 $ 28,148,017 $ 26,060,936 $ 1,662,258 $ 4,917,994 $ 10,645,744
Net realized gain (loss)
on investments........... 7,136 (8,971) 12,526 13,550 523,007 8,505,576
Change in unrealized
appreciation/depreciation
of investments during the
year..................... -- -- -- 313,752 3,735,347 3,888,688
------------ ------------ ------------ ----------- ----------- ------------
Net increase in net assets
resulting from
operations............... 19,304,236 28,139,046 26,073,462 1,989,560 9,176,348 23,040,008
Distributions to
shareholders:
From net investment
income.................. (19,297,045) (28,148,017) (26,060,936) (1,662,258) (4,917,994) (10,645,744)
In excess of net
investment income....... (126) -- -- -- -- --
From net realized gain on
investments............. -- -- -- -- -- (257,074)
Increase (decrease) in net
assets from fund share
transactions (Note 4).... 120,546,015 66,291,908 160,793,465 1,415,543 12,235,436 (1,936,571)
------------ ------------ ------------ ----------- ----------- ------------
Net increase in net
assets................... 120,553,080 66,282,937 160,805,991 1,742,845 16,493,790 10,200,619
NET ASSETS:
Beginning of year........ 349,087,373 533,834,005 498,066,167 30,803,779 78,441,439 185,896,168
------------ ------------ ------------ ----------- ----------- ------------
End of year (1).......... $469,640,453 $600,116,942 $658,872,158 $32,546,624 $94,935,229 $196,096,787
============ ============ ============ =========== =========== ============
(1) Including
undistributed
(distributions in
excess of) net
investment income...... $ (126) $ -- $ -- $ 20,454 $ 1,212 $ 182,630
============ ============ ============ =========== =========== ============
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 (2).......... $349,087,373 $533,834,005 $498,066,167 $30,803,779 $78,441,439 $185,896,168
============ ============ ============ =========== =========== ============
--------
(2) Including
undistributed
(distributions in
excess of) net
investment income...... $ (55) $ -- $ -- $ 6,654 $ 2,631 $ 151,806
============ ============ ============ =========== =========== ============
</TABLE>
See Notes to Financial Statements
8
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
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,
1994................... $1.00 $0.02590 -- $0.02590 $(0.02590) -- --
1995................... 1.00 0.04165 -- 0.04165 (0.04165) -- --
1996................... 1.00 0.05043 -- 0.05043 (0.05043) -- --
1997................... 1.00 0.04676 -- 0.04676 (0.04676) -- ++ --
1998................... 1.00 0.04853 -- 0.04853 (0.04853) -- ++ --
GOVERNMENT MONEY FUND -- (5/8/85*)
Year Ended March 31,
1994................... $1.00 $0.02736 -- $0.02736 $(0.02736) -- --
1995................... 1.00 0.04397 -- 0.04397 (0.04397) -- --
1996................... 1.00 0.05296 -- 0.05296 (0.05296) -- --
1997................... 1.00 0.04862 -- 0.04862 (0.04862) -- --
1998................... 1.00 0.05082 -- 0.05082 (0.05082) -- --
MONEY FUND -- (5/3/85*)
Year Ended March 31,
1994................... $1.00 $0.02780 -- $0.02780 $(0.02780) -- --
1995................... 1.00 0.04494 $0.00002 0.04496 (0.04496) -- --
1996................... 1.00 0.05336 -- 0.05336 (0.05336) -- --
1997................... 1.00 0.04888 -- 0.04888 (0.04888) -- --
1998................... 1.00 0.05139 -- 0.05139 (0.05139) -- --
SHORT-TERM GOVERNMENT SECURITIES FUND -- (12/31/92*)
Year Ended March 31,
1994................... $7.06 $ 0.24 $ (0.09) $ 0.15 $ (0.24) -- $(0.02)
1995................... 6.93 0.33 (0.04) 0.29 (0.33) -- --
1996................... 6.89 0.40 0.09 0.49 (0.40) -- --
1997................... 6.98 0.38 (0.06) 0.32 (0.37) -- --
1998................... 6.93 0.37 0.07 0.44 (0.37) -- --
INTERMEDIATE-TERM MANAGED INCOME FUND -- (12/31/92*)
Year Ended March 31,
1994................... $7.19 $ 0.31 $ (0.27) $ 0.04 $ (0.31) -- --
1995................... 6.83 0.39 (0.07) 0.32 (0.39) -- --
1996................... 6.75 0.43 0.31 0.74 (0.43) -- --
1997................... 7.06 0.41 (0.19) 0.22 (0.41) -- --
1998................... 6.87 0.41 0.36 0.77 (0.41) -- --
MANAGED INCOME FUND -- (1/9/86*)
Year Ended March 31,
1994................... $9.64 $ 0.47 $ (0.26) $ 0.21 $ (0.47) -- $(0.31)
1995................... 8.57 0.51 (0.18) 0.33 (0.51) -- --
1996................... 8.39 0.55 0.44 0.99 (0.54) -- --
1997................... 8.84 0.51 (0.24) 0.27 (0.51) -- --
1998................... 8.60 0.49 0.58 1.07 (0.49) -- (0.01)
</TABLE>
* Commencement of operations.
+ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by adviser and administrators.
++ Amount represents less than $0.01 per share.
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 PORTFOLIOS 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>
-- $(0.02590) $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
-- (0.04853) 1.00 4.96% 469,640 0.52% 0.54% 4.86% -- 0.00021
-- $(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
-- (0.05082) 1.00 5.20% 600,117 0.47% 0.50% 5.09% -- 0.00030
-- $(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
-- (0.05139) 1.00 5.26% 658,872 0.48% 0.52% 5.14% -- 0.00046
$(0.02) $ (0.28) $6.93 2.12% $ 25,233 0.62% 0.65% 3.42% 267% --
-- (0.33) 6.89 4.30% 25,216 0.61% 0.67% 4.80% 198% --
-- (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
-- (0.37) 7.00 6.47% 32,547 0.62% 0.69% 5.28% 35% -- ++
$(0.09) $ (0.40) $6.83 0.45% $ 42,564 0.69% 0.69% 4.31% 385% --
(0.01) (0.40) 6.75 4.95% 47,928 0.66% 0.68% 5.91% 682% --
-- (0.43) 7.06 11.13% 68,640 0.64% 0.68% 6.06% 129% --
-- (0.41) 6.87 3.25% 78,441 0.63% 0.68% 5.91% 129% -- ++
-- (0.41) 7.23 11.37% 94,935 0.61% 0.66% 5.68% 86% -- ++
$(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
-- (0.50) 9.17 12.79% 196,097 0.90% 1.02% 5.51% 538% 0.01
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
TREASURY MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- -----------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 100.10%
Federal Home Loan Bank
$ 40,000,000 04/01/98.................................. 5.90% $40,000,000
25,000,000 11/06/98.................................. 5.67# 24,994,150
U.S. Treasury Bills.......................
406,000,000 04/16/98.................................. 5.31 405,102,379
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $470,096,529)....................... 470,096,529
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ------------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 0.30%
1,402,277 Dreyfus Government Cash Management Fund
(Cost $1,402,277)............................ $ 1,402,277
------------
TOTAL INVESTMENTS
(Cost $471,498,806*).................................... 100.40% $471,498,806
OTHER ASSETS & LIABILITIES (NET)........................ (0.40) (1,858,353)
------ ------------
NET ASSETS.............................................. 100.00% $469,640,453
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
# Variable or floating rate securities-rate disclosed is as of March 31, 1998.
See Notes to Financial Statements
12
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
GOVERNMENT MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- ------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 100.00%
Federal Home Loan Bank
$ 13,000,000 04/01/98................................. 5.90% $ 13,000,000
50,000,000 04/08/98................................. 5.58 49,945,799
25,000,000 04/22/98................................. 5.40 24,921,250
50,000,000 05/01/98................................. 5.39 49,775,417
121,000,000 11/06/98................................. 5.67# 120,971,686
Federal Home Loan Mortgage Corp.
100,000,000 04/02/98................................. 5.44 99,984,889
25,000,000 04/06/98................................. 5.43 24,981,146
Federal National Mortgage Association
100,000,000 04/13/98................................. 5.58 99,814,167
25,000,000 04/21/98................................. 5.43 24,924,583
Student Loan Marketing Association
25,000,000 06/18/98................................. 5.65 24,993,070
U.S. Treasury Bills
67,000,000 04/16/98................................. 5.33 66,851,204
------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (Cost $600,163,211).......... $600,163,211
------------
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ------------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 0.25%
1,482,703 Dreyfus Government Cash Management Fund
(Cost $1,482,703) $ 1,482,703
------------
TOTAL INVESTMENTS
(Cost $601,645,914*).............................. 100.25% $601,645,914
OTHER ASSETS & LIABILITIES (NET).................. (0.25) (1,528,972)
------ ------------
NET ASSETS........................................ 100.00% $600,116,942
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
# Variable or floating rate securities-rate disclosed is as of March 31, 1998.
See Notes to Financial Statements
13
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- ------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 63.05%
Federal Home Loan Bank
$122,000,000 04/01/98................................. 5.89% $122,000,000
43,819,000 04/13/98................................. 5.40 43,740,126
25,000,000 04/22/98................................. 5.40 24,921,250
25,000,000 11/06/98................................. 5.67# 24,994,150
Federal Home Loan Mortgage Corp.
50,000,000 04/02/98................................. 5.44 49,992,445
100,000,000 04/06/98................................. 5.44 99,924,444
Federal National Mortgage Association
25,000,000 04/14/98................................. 5.38 24,951,430
25,000,000 04/21/98................................. 5.43 24,924,583
------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $415,448,428)...................... 415,448,428
------------
COMMERCIAL PAPER -- 36.17%
25,000,000 American Express Co.,
04/02/98................................. 5.57 25,000,000
25,000,000 Associates Corp.,
05/04/98................................. 5.52 25,000,000
20,000,000 Barclays Bank PLC NY,
06/30/98................................. 6.02 19,996,231
25,000,000 Campbell Soup Co.,
04/28/98................................. 5.50 24,896,875
25,000,000 Chevron Corp.,
04/23/98................................. 5.53 25,000,000
25,000,000 Dupont Instruments Corp.,
04/23/98................................. 5.51 24,915,820
25,000,000 General Electric Capital Corp.,
04/02/98................................. 5.57 25,000,000
25,000,000 Goldman, Sachs & Co.,
04/01/98................................. 5.55 25,000,000
25,000,000 Metlife Funding, Inc.,
04/28/98................................. 5.52 24,896,500
18,666,000 Motorola, Inc.,
04/20/98................................. 5.51 18,611,718
------------
TOTAL COMMERCIAL PAPER
(Cost $238,317,144)...................... 238,317,144
------------
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ------------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 1.04%
6,844,794 Dreyfus Government Cash Management Fund
(Cost $6,844,794)............................ $ 6,844,794
------------
TOTAL INVESTMENTS
(Cost $660,610,366*).................................... 100.26% $660,610,366
OTHER ASSETS & LIABILITIES (NET)........................ (0.26) (1,738,208)
------ ------------
NET ASSETS.............................................. 100.00% $658,872,158
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
# Variable or floating rate securities-rate disclosed is as of March 31, 1998.
See Notes to Financial Statements
14
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
SHORT-TERM GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
PRINCIPAL COUPON VALUE
AMOUNT RATE (NOTE 1)
--------- ------ -----------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 96.68%
Federal Home Loan Bank
$6,445,000 04/01/98...................................... 5.65%+ $ 6,445,000
7,700,000 12/17/98...................................... 5.83 7,704,297
Federal National Mortgage Association
1,442,116 04/01/01...................................... 5.50 1,421,119
Private Export Funding Corp.
320,000 03/15/01...................................... 5.50 317,550
U.S. Treasury Notes
1,000,000 05/15/98...................................... 6.13 1,000,938
2,000,000 02/15/99...................................... 5.00 1,990,626
2,000,000 07/31/99...................................... 5.88 2,007,502
4,055,000 01/31/00...................................... 7.75 4,204,532
6,285,000 08/31/00...................................... 6.25 6,373,386
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $31,233,979)............................ 31,464,950
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 4.28%
517,125 Dreyfus Government Cash Management Fund......... $ 517,125
876,484 Fidelity U.S. Treasury II Fund.................. 876,484
-----------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $1,393,609)............................... 1,393,609
-----------
TOTAL INVESTMENTS
(Cost $32,627,588*)...................................... 100.96% $32,858,559
OTHER ASSETS & LIABILITIES (NET)......................... (0.96) (311,935)
------ -----------
NET ASSETS............................................... 100.00% $32,546,624
====== ===========
</TABLE>
- --------
* For Federal income tax purposes, the tax basis of investments aggregates
$32,634,652.
+ Discount Rate
See Notes to Financial Statements
15
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
INTERMEDIATE-TERM MANAGED INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL COUPON VALUE
AMOUNT RATE (NOTE 1)
--------- ------ -----------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 77.32%
$ 26,209 Federal Home Loan
Mortgage Corp.
Pool #218374, 07/01/02.. 10.50% $ 27,816
2,000,000 07/30/07................ 3.67+ 1,039,782
2,000,000 04/25/21................ 6.75 2,033,086
10,000,000 Federal National
Mortgage Association
04/01/98................ 5.46+ 10,000,000
6,000,000 11/23/01................ 6.35 6,033,504
Government National
Mortgage Association
184,261 Pool #195801, 01/15/17.. 8.50 194,510
217,569 Pool #195833, 04/15/17.. 8.50 229,672
112,803 Pool #212760, 04/15/17.. 8.50 119,078
96,958 Pool #334299, 05/15/23.. 8.00 100,503
1,717,938 Pool #367412, 11/15/23.. 6.00 1,664,790
3,518,598 Pool #366379, 12/15/23.. 6.50 3,485,628
4,834,915 Pool #353454, 05/15/27.. 7.50 4,963,344
U.S. Treasury Notes
1,000,000 10/31/01................ 6.25 1,018,438
26,000,000 08/15/03................ 5.75 26,089,388
5,000,000 02/15/06................ 5.63 4,960,940
1,500,000 10/15/06................ 6.50 1,573,595
6,000,000 02/15/07................ 6.25 6,206,256
3,450,000 05/15/07................ 6.63 3,661,316
-----------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $72,126,823)...... 73,401,646
-----------
ASSET BACKED SECURITIES -- 9.57%
5,000,000 California
Infrastructure PG&E,
Series, 1997-1, A3,
06/25/02................ 6.15 5,018,625
4,000,000 Nomura Asset Securities
Corp., 98-D6 A1B,
03/17/28................ 6.59 4,063,750
-----------
TOTAL ASSET-BACKED
SECURITIES
(Cost $9,060,460)....... 9,082,375
-----------
CORPORATE BONDS -- 6.03%
2,500,000 Anheuser-Busch Co.,
Inc., 09/01/05.......... 7.00 2,557,250
3,000,000 Ford Motor Credit,
06/15/07................ 7.20 3,170,913
-----------
TOTAL CORPORATE BONDS
(Cost $5,637,654)....... 5,728,163
-----------
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 6.82%
3,239,376 Dreyfus Government Cash
Management Fund......... $ 3,239,376
3,238,037 Fidelity U.S. Treasury
II Fund................. 3,238,037
-----------
TOTAL OTHER SHORT-TERM
INVESTMENTS
(Cost $6,477,413)....... 6,477,413
-----------
TOTAL INVESTMENTS
(Cost $93,302,350*)................ 99.74% $94,689,597
OTHER ASSETS & LIABILITIES (NET)... 0.26 245,632
------ -----------
NET ASSETS......................... 100.00% $94,935,229
====== ===========
</TABLE>
- --------
* For Federal income tax purposes, the tax basis of investments aggregates
$93,326,302.
+ Discount Rate
See Notes to Financial Statements
16
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
MANAGED INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL COUPON VALUE
AMOUNT RATE (NOTE 1)
--------- ------ -----------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 46.65%
Federal Home Loan Bank....
$27,000,000 04/01/98.................. 5.45%+ $27,000,000
8,000,000 04/09/98.................. 5.45+ 7,990,311
U.S. Treasury Bonds.......
12,885,000 05/15/16.................. 7.25 14,664,754
U.S. Treasury Notes.......
37,700,000 08/15/00.................. 6.00 38,018,113
2,500,000 05/15/07.................. 6.63 2,653,127
1,160,000 02/15/08.................. 5.50 1,145,501
-----------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $91,697,925).......... 91,471,806
-----------
CORPORATE BONDS -- 37.40%
5,000,000 Amgen, Inc., 04/01/2097... 8.13 5,802,975
5,000,000 Associates Corp. of North
America, 09/27/02......... 6.71 5,102,540
4,000,000 BellSouth Capital Funding,
07/15/2097................ 7.12 4,273,924
5,000,000 Chrysler Corp.,
08/01/2097................ 7.40 5,195,690
5,000,000 First Union Corp.,
11/15/02.................. 8.00 5,365,130
9,500,000 General Electric Capital
Services, 08/21/35........ 7.50 10,642,489
5,000,000 ++Goldman Sachs Group,
07/15/02.................. 6.60 5,051,195
4,000,000 International Business
Machines Corp., 08/01/27.. 6.22 4,083,288
5,000,000 Lehman Brothers Holdings,
10/15/03.................. 7.25 5,190,445
5,000,000 Morgan Stanley, Dean
Witter & Co., 08/01/02.... 6.38 5,022,825
5,000,000 Motorola, Inc.,
10/01/2097................ 5.22 3,872,450
7,962,000 New Jersey Economic and
Development Authority,
Series A, 02/15/29........ 7.43 8,760,668
5,000,000 Wachovia Corp., 02/01/09.. 6.38 4,972,350
-----------
TOTAL CORPORATE BONDS
(Cost $71,463,219).......... 73,335,969
-----------
<CAPTION>
PRINCIPAL COUPON VALUE
AMOUNT RATE (NOTE 1)
--------- ------ ------------
<C> <S> <C> <C>
ASSET-BACKED SECURITIES -- 9.78%
$ 3,000,000 California Infrastructure
SDG&E, Series 1997-1 A5,
09/25/05.................. 6.19% $ 3,020,445
8,970,000 IMC Home Equity Loan
Trust, 1997-5 A5,
06/20/13.................. 6.61 9,039,562
7,000,000 Nomura Asset Securities
Corp. 98-D6 A1B, 03/17/28. 6.59 7,111,563
------------
TOTAL ASSET BACKED
SECURITIES
(Cost $19,098,143).......... 19,171,570
------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.61%
5,000,000 Merrill Lynch Mortgage
Investors, 1996-C2 B,
11/21/28 (Cost $5,177,344).. 6.96 5,125,000
------------
<CAPTION>
SHARES
------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 3.01%
2,959,498 Dreyfus Government Cash
Management Fund........... 2,959,498
2,953,067 Fidelity U.S. Treasury II
Fund...................... 2,953,067
------------
TOTAL OTHER SHORT-TERM
INVESTMENTS
(Cost $5,912,565)......... 5,912,565
------------
TOTAL INVESTMENTS
(Cost $193,349,196*)................... 99.45% $195,016,910
OTHER ASSETS & LIABILITIES (NET)....... 0.55 1,079,877
------ ------------
NET ASSETS............................. 100.00% $196,096,787
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
+ Discount Rate
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At March 31,
1998, these securities amounted to $5,051,195 at 2.58% of net assets.
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 eighteen 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 Excelsior Fund's
Board of Directors to represent the fair value of the Funds' 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 not less than the repurchase price (including
accrued interest).
If the value of the underlying security falls below the value of the
repurchase price, 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 net capital losses incurred after
October 31 and within the taxable year ("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, 1998, 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 2006 TOTAL
------- ---- -------- ------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Government Money Fund... $10,000 -- $ 48,000 $ 1,000 -- $6,000 $ 65,000
Money Fund.............. 4,000 -- 21,000 21,000 $ 12,000 -- 58,000
Short-Term Government
Securities Fund........ -- -- 393,000 -- 14,000 -- 407,000
Intermediate-Term
Managed Income Fund.... -- -- -- -- 335,000 -- 335,000
</TABLE>
To the extent that such carryforwards are utilized, no capital gain
distributions will be made. During the year ended March 31, 1998, Treasury
Money Fund, Money Fund, Intermediate-Term Managed Income Fund and Managed
Income Fund utilized capital loss carryforwards for Federal tax purposes
totaling approximately $17,000, $9,000, $528,000 and $4,133,000,
respectively.
Post-October losses are deemed to arise on the first business day of a
Portfolio's next taxable year. Treasury Money Fund and Government Money
Fund incurred, and elected to defer, net capital losses of approximately
$25,000 and $4,000, respectively, for the year ended March 31, 1998.
At March 31, 1998, aggregate gross unrealized appreciation 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>
TAX BASIS TAX BASIS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION (DEPRECIATION) APPRECIATION
------------ -------------- ------------
<S> <C> <C> <C>
Short-Term Government Securities
Fund............................. $ 235,171 $ (11,264) $ 223,907
Intermediate-Term Managed Income
Fund............................. 1,426,801 (63,506) 1,363,295
Managed Income Fund............... 1,977,249 (309,535) 1,667,714
</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.
20
<PAGE>
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS
United States Trust Company of New York ("U.S. Trust NY") and U.S. Trust
Company of Connecticut ("U.S. Trust CT" and collectively with U.S. Trust NY,
"U.S. Trust") serve as the investment advisers to the Portfolios. 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. Prior to May 15, 1997, U.S. Trust NY served as the
Portfolios' investment adviser pursuant to investment advisory agreements
substantially similar to those currently in effect for the Portfolios. U.S.
Trust NY and U.S. Trust CT are wholly-owned subsidiaries of U.S. Trust
Corporation, a registered bank holding company.
U.S. Trust CT, Chase Global Funds Services Company ("CGFSC"), a corporate
affiliate of The Chase Manhattan Bank, and Federated Administrative Services
("FAS") (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, Excelsior Tax-Exempt Fund and Excelsior Institutional Trust (excluding
the international equity portfolios of Excelsior 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.
Prior to May 15, 1997, U.S. Trust NY, CGFSC and FAS served as the Portfolios'
administrators pursuant to administration agreements substantially similar to
those currently in effect for the Portfolios. For the year ended March 31,
1998, administration fees charged by U.S. Trust were as follows:
<TABLE>
<S> <C>
Treasury Money Fund.............................................. $113,057
Government Money Fund............................................ 157,296
Money Fund....................................................... 144,052
Short-Term Government Securities Fund............................ 8,893
Intermediate-Term Managed Income Fund............................ 24,567
Managed Income Fund.............................................. 54,578
</TABLE>
From time to time, as they may deem appropriate in their sole discretion,
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, 1998, U.S. Trust
voluntarily waived investment advisory fees totaling $1,725 for Short-Term
Government Securities Fund. In addition, currently, U.S. Trust is voluntarily
limiting advisory fee to .65% of the average daily net assets for Managed
Income Fund. For the year ended March 31, 1998, U.S. Trust waived investment
advisory fees totaling $193,039 for Managed Income Fund.
21
<PAGE>
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 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 organization's customers. Such
services may include assisting in processing purchase, exchange and redemption
requests; transmitting and receiving funds in connection with customer orders
to purchase, exchange or redeem shares; and providing periodic statements.
Administrative service fees paid to affiliates of U.S. Trust amounted to
$591,409, for the year ended March 31, 1998. 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 (including fees paid
to affiliates of U.S. Trust) by such Portfolio. For the year ended March 31,
1998, 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................................ $ 82,614 $--
Government Money Fund.............................. 168,737 96
Money Fund......................................... 231,368 3
Short-Term Government Securities Fund.............. 19,824 11
Intermediate-Term Managed Income Fund.............. 42,260 390
Managed Income Fund................................ 50,834 381
</TABLE>
Edgewood Services, Inc. (the "Distributor"), a wholly-owned subsidiary of
Federated Investors, serves as the sponsor and distributor of Excelsior Fund.
Shares of each Portfolio are sold without a sales charge on a continuous 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.
3. PURCHASES AND SALES OF SECURITIES:
For the year ended March 31, 1998, 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........... $ 9,691,927 $ 8,223,837
Intermediate-Term Managed Income Fund........... 65,821,109 65,221,580
Managed Income Fund............................. 881,894,372 889,168,875
</TABLE>
4. COMMON STOCK:
Excelsior Fund has authorized capital of 35 billion shares of Common Stock,
23,875 of which is currently classified to represent interests in one of
eighteen separate investment portfolios. Authorized capital currently
classified for each Portfolio is as follows: 375 million shares each of the
Treasury Money Fund and the Managed Income Fund, 1,500 million shares each of
the Government Money Fund and the Money Fund, and 500 million shares each of
the Short-Term Government Securities Fund and the Intermediate-Term Managed
Income Fund.
22
<PAGE>
Each share 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
03/31/98 03/31/97
--------------- ---------------
<S> <C> <C>
Sold.......................................... $ 2,515,769,963 $ 1,727,536,995
Issued as reinvestment of dividends........... 1,959,784 1,153,005
Redeemed...................................... (2,397,183,732) (1,637,794,580)
--------------- ---------------
Net Increase.................................. $ 120,546,015 $ 90,895,420
=============== ===============
<CAPTION>
GOVERNMENT MONEY FUND
--------------------------------
YEAR ENDED YEAR ENDED
03/31/98 03/31/97
--------------- ---------------
<S> <C> <C>
Sold.......................................... $ 4,837,865,828 $ 3,287,998,018
Issued as reinvestment of dividends........... 1,392,643 1,121,860
Redeemed...................................... (4,772,966,563) (3,216,759,182)
--------------- ---------------
Net Increase.................................. $ 66,291,908 $ 72,360,696
=============== ===============
<CAPTION>
MONEY FUND
--------------------------------
YEAR ENDED YEAR ENDED
03/31/98 03/31/97
--------------- ---------------
<S> <C> <C>
Sold.......................................... $ 2,611,474,493 $ 2,009,777,544
Issued as reinvestment of dividends........... 4,120,591 2,417,509
Redeemed...................................... (2,454,801,619) (1,908,410,036)
--------------- ---------------
Net Increase.................................. $ 160,793,465 $ 103,785,017
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT SECURITIES FUND
-------------------------------------------------
YEAR ENDED 03/31/98 YEAR ENDED 03/31/97
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold........................ 1,570,677 $10,975,144 1,838,725 $ 12,799,856
Contribution in-kind........ -- -- 713,062 4,941,525
Issued as reinvestment of
dividends.................. 44,519 311,065 49,084 341,488
Redeemed.................... (1,412,887) (9,870,666) (1,743,557) (12,132,247)
---------- ----------- ---------- ------------
Net Increase................ 202,309 $ 1,415,543 857,314 $ 5,950,622
========== =========== ========== ============
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE-TERM MANAGED INCOME FUND
--------------------------------------------------
YEAR ENDED 03/31/98 YEAR ENDED 03/31/97
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 4,118,110 $ 29,395,499 4,173,471 $ 29,210,056
Issued as reinvestment of
dividends................. 35,038 249,767 36,494 254,679
Redeemed................... (2,443,880) (17,409,830) (2,505,193) (17,532,413)
---------- ------------ ---------- ------------
Net Increase............... 1,709,268 $ 12,235,436 1,704,772 $ 11,932,322
========== ============ ========== ============
<CAPTION>
MANAGED INCOME FUND
--------------------------------------------------
YEAR ENDED 03/31/98 YEAR ENDED 03/31/97
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 3,432,506 $ 30,874,198 3,991,365 $ 34,928,291
Contribution in-kind....... -- -- 10,913,709 94,076,172
Issued as reinvestment of
dividends................. 185,721 1,667,354 208,603 1,822,296
Redeemed................... (3,847,425) (34,478,123) (3,540,705) (31,009,950)
---------- ------------ ---------- ------------
Net Increase (Decrease).... (229,198) $ (1,936,571) 11,572,972 $ 99,816,809
========== ============ ========== ============
</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. LINE OF CREDIT:
The Portfolios and other affiliated funds participate in a $250 million
unsecured line of credit provided by a syndication of banks under a line of
credit agreement. Borrowings may be made to termporarily finance the
repurchase of Portfolio shares. Interest is charged to each Portfolio, based
on its borrowings, at a rate equal to the Federal Funds Rate plus 2% per year.
In addition a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating Portfolios at the end of
each quarter. For the year ended March 31, 1998, the Portfolios had no
borrowings under the agreement.
24
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders
and Board of Directors of
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. (the "Fund")) as of March 31, 1998, 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, 1998, by correspondence with the custodian and brokers, and other
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 the
above mentioned Portfolios of Excelsior Funds, Inc. at March 31, 1998, the
results of its operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 8, 1998
25
<PAGE>
FEDERAL TAX INFORMATION: (UNAUDITED)
For the year ended March 31, 1998, the designation for the Managed Income
Fund of 20% long-term capital gains are approximately $257,000.
For the year ended March 31, 1998, 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............................................... 62.35%
Money Fund.......................................................... 19.95%
Short-Term Government Securities Fund............................... 88.90%
Intermediate-Term Managed Income Fund............................... 70.27%
Managed Income Fund................................................. 54.41%
</TABLE>
26
