<PAGE>
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[LOGO OF EXCELSIOR FUNDS APPEARS HERE]
Fixed Income
Portfolios
SEMI-ANNUAL REPORT
September 30, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
STATEMENTS OF ASSETS AND LIABILITIES...................................... 1
STATEMENTS OF OPERATIONS.................................................. 2
STATEMENTS OF CHANGES IN NET ASSETS....................................... 3
FINANCIAL HIGHLIGHTS--SELECTED PER SHARE DATA AND RATIOS.................. 4
PORTFOLIOS OF INVESTMENTS
Short-Term Government Securities Fund.................................... 6
Intermediate-Term Managed Income Fund.................................... 7
Managed Income Fund...................................................... 8
NOTES TO FINANCIAL STATEMENTS............................................. 9
</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 (From overseas, call 617-557-8280)
. Current Price and Yield Information 1-800-446-1012
. Internet Address: http://www.excelsiorfunds.com
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 distributed by
Edgewood Services, Inc.
You may write to Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. at
the following address:
Excelsior Funds
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, THEIR 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>
Excelsior Funds, Inc.
Statements of Assets and Liabilities
September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Intermediate-
Short-Term Term
Government Managed Managed
Securities Income Income
Fund Fund Fund
----------- ------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments, at cost--see
accompanying portfolios......... $65,849,607 $153,309,626 $223,564,450
=========== ============ ============
Investments, at value (Note 1)... $65,437,721 $149,315,432 $217,410,534
Cash............................. 15,725 43,849 127,324
Interest receivable.............. 980,832 1,712,382 1,586,429
Receivable for fund shares sold.. 62 -- 2,500
Prepaid expenses................. -- 667 837
----------- ------------ ------------
Total Assets..................... 66,434,340 151,072,330 219,127,624
LIABILITIES:
Payable for dividends declared... 271,338 701,212 956,196
Investment advisory fees payable
(Note 2)........................ 20,656 65,678 225,794
Administration fees payable
(Note 2)........................ 8,579 25,112 34,228
Administrative servicing fees
payable (Note 2)................ 7,743 15,490 11,183
Directors' fees payable (Note 2). 360 1,038 1,542
Accrued expenses and other
payables........................ 26,469 43,296 61,264
----------- ------------ ------------
Total Liabilities................ 335,145 851,826 1,290,207
----------- ------------ ------------
NET ASSETS........................ $66,099,195 $150,220,504 $217,837,417
=========== ============ ============
NET ASSETS consist of:
Undistributed net investment
income.......................... $ 19,896 $ 6,430 $ 91,559
Accumulated net realized loss on
investments..................... (227,404) (1,953,831) (1,284,505)
Unrealized depreciation of
investments..................... (411,886) (3,994,194) (6,153,916)
Par value (Note 4)............... 9,503 21,822 25,169
Paid-in capital in excess of par
value........................... 66,709,086 156,140,277 225,159,110
----------- ------------ ------------
Total Net Assets.................. $66,099,195 $150,220,504 $217,837,417
=========== ============ ============
Shares of Common Stock Outstanding
(Note 4)......................... 9,503,102 21,822,219 25,169,463
NET ASSET VALUE PER SHARE......... $6.96 $6.88 $8.65
===== ===== =====
</TABLE>
See Notes to Financial Statements
1
<PAGE>
Excelsior Funds, Inc.
Statements of Operations
Six Months Ended September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Intermediate-
Short-Term Term
Government Managed Managed
Securities Income Income
Fund Fund Fund
---------- ------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income...................... $1,602,255 $4,328,323 $ 6,567,352
---------- ---------- -----------
EXPENSES:
Investment advisory fees (Note 2).... 88,078 245,098 813,691
Administration fees (Note 2)......... 44,721 106,777 165,433
Administrative servicing fees (Note
2).................................. 24,402 47,140 34,493
Custodian fees....................... 7,709 18,784 28,585
Registration and filing fees......... 6,093 6,852 6,727
Shareholder servicing agent fees..... 4,822 8,310 14,528
Legal and audit fees................. 3,178 7,665 11,744
Shareholder reports.................. 2,274 5,984 8,926
Directors' fees and expenses (Note
2).................................. 836 2,049 3,221
Miscellaneous expenses............... 1,532 5,136 8,225
---------- ---------- -----------
Total Expenses....................... 183,645 453,795 1,095,573
Fees waived and reimbursed by
investment adviser
and administrators (Note 2)......... (24,402) (47,140) (143,597)
---------- ---------- -----------
Net Expenses......................... 159,243 406,655 951,976
---------- ---------- -----------
NET INVESTMENT INCOME................. 1,443,012 3,921,668 5,615,376
---------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 1):
Net realized loss on security trans-
actions............................. (391,863) (1,687,707) (2,396,127)
Change in unrealized
appreciation/depreciation of
investments during the period....... (220,253) (3,226,247) (5,907,216)
---------- ---------- -----------
Net realized and unrealized loss on
investments.......................... (612,116) (4,913,954) (8,303,343)
---------- ---------- -----------
Net increase (decrease) in net assets
resulting from operations............ $ 830,896 $ (992,286) $(2,687,967)
========== ========== ===========
</TABLE>
See Notes to Financial Statements
2
<PAGE>
Excelsior Funds, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Intermediate-
Short-Term Term
Government Managed Managed
Securities Income Income
Fund Fund Fund
----------- ------------- ------------
<S> <C> <C> <C>
Six Months Ended September 30, 1999
(Unaudited)
Net investment income............... $ 1,443,012 $ 3,921,668 $ 5,615,376
Net realized loss on investments.... (391,863) (1,687,707) (2,396,127)
Change in unrealized
appreciation/depreciation of
investments during the period...... (220,253) (3,226,247) (5,907,216)
----------- ------------ ------------
Net increase (decrease) in net
assets resulting from operations... 830,896 (992,286) (2,687,967)
Distributions to shareholders:
From net investment income......... (1,443,012) (3,921,668) (5,615,376)
Increase in net assets from fund
share transactions (Note 4)........ 14,122,037 27,391,073 10,372,588
----------- ------------ ------------
Net increase in net assets.......... 13,509,921 22,477,119 2,069,245
NET ASSETS:
Beginning of period................ 52,589,274 127,743,385 215,768,172
----------- ------------ ------------
End of period (1).................. $66,099,195 $150,220,504 $217,837,417
=========== ============ ============
(1) Including undistributed net
investment income................ $ 19,896 $ 6,430 $ 91,559
=========== ============ ============
Year Ended March 31, 1999
Net investment income............... $ 2,218,571 $ 5,917,776 $ 10,315,995
Net realized gain on investments.... 593,923 2,456,793 3,569,699
Change in unrealized
appreciation/depreciation of
investments during the year........ (422,604) (2,155,194) (1,914,414)
----------- ------------ ------------
Net increase in net assets resulting
from operations.................... 2,389,890 6,219,375 11,971,280
Distributions to shareholders:
From net investment income......... (2,233,996) (5,917,776) (10,412,635)
From net realized gain on
investments....................... -- (2,092,147) (5,832,403)
In excess of net realized gain on
investments....................... -- (266,124) --
Increase in net assets from fund
share transactions (Note 4)........ 19,886,756 34,864,828 23,945,143
----------- ------------ ------------
Net increase in net assets.......... 20,042,650 32,808,156 19,671,385
NET ASSETS:
Beginning of year.................. 32,546,624 94,935,229 196,096,787
----------- ------------ ------------
End of year (2).................... $52,589,274 $127,743,385 $215,768,172
=========== ============ ============
--------
(2) Including undistributed net
investment income................ $ 19,896 $ 6,430 $ 91,559
=========== ============ ============
</TABLE>
--------
See Notes to Financial Statements
3
<PAGE>
Excelsior Funds, Inc.
Financial Highlights-Selected Per Share Data and Ratios
For a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
Distributions Distributions
Net Asset Net Realized Total Dividends From Net in Excess of
Value, Net and Unrealized From From Net Realized Net Realized
Beginning Investment Gain (Loss) Investment Investment Gain on Gain on
of Period Income on Investments Operations Income Investments Investments
--------- ---------- -------------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM GOVERNMENT SECURITIES FUND -- (12/31/92*)
Year Ended March 31,
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) -- --
1999................... 7.00 0.34 0.04 0.38 (0.34) -- --
Six Months Ended Sep-
tember 30, 1999 (Unau-
dited)................ 7.04 0.17 (0.08) 0.09 (0.17) -- --
INTERMEDIATE-TERM MANAGED INCOME FUND -- (12/31/92*)
Year Ended March 31,
1995................... $6.83 $0.39 $(0.07) $0.32 $(0.39) -- $(0.01)
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) -- --
1999................... 7.23 0.39 0.04 0.43 (0.39) $(0.13) (0.01)
Six Months Ended Sep-
tember 30, 1999 (Unau-
dited)................ 7.13 0.19 (0.25) (0.06) (0.19) -- --
MANAGED INCOME FUND -- (1/9/86*)
Year Ended March 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) --
1999................... 9.17 0.46 0.08 0.54 (0.46) (0.26) --
Six Months Ended Sep-
tember 30, 1999 (Unau-
dited)................ 8.99 0.23 (0.34) (0.11) (0.23) -- --
</TABLE>
* Commencement of operations
** Annualized
+ 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
4
<PAGE>
<TABLE>
<CAPTION>
Ratio of Ratio of Ratio of
Net Gross Net
Net Asset Net Assets, Operating Operating Investment
Value, End Expenses Expenses Income Portfolio Fee
Total End Total of Period to Average to Average to Average Turnover Waivers
Distributions of Period Return (000's) Net Assets Net Assets+ Net Assets Rate (Note 2)
------------- --------- ------ ----------- ---------- ----------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$(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% --
(0.34) 7.04 5.54% 52,589 0.58% 0.67% 4.79% 114% 0.01
(0.17) 6.96 2.60%** 66,099 0.54%** 0.63%** 4.92%** 100%** -- ++
$(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% --
(0.53) 7.13 6.02% 127,743 0.60% 0.67% 5.29% 229% -- ++
(0.19) 6.88 (1.54)%** 150,221 0.58%** 0.65%** 5.60%** 123%** -- ++
$(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
(0.72) 8.99 5.95% 215,768 0.90% 1.03% 4.96% 268% 0.01
(0.23) 8.65 (2.50)%** 217,837 0.88%** 1.01%** 5.18%** 120%** 0.01
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Short-Term Government Securities Fund
<TABLE>
<CAPTION>
Principal Coupon Value
Amount Rate (Note 1)
--------- ------ -----------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 93.77%
Federal Home Loan Bank
$10,750,000 06/02/00..................................... 5.63% $10,745,377
3,000,000 02/26/02..................................... 5.13 2,934,729
Federal Home Loan Mortgage Corp.
6,580,000 05/15/02..................................... 5.50 6,480,227
Federal National Mortgage Association
6,000,000 10/05/99..................................... 5.12+ 5,996,587
4,000,000 06/12/00..................................... 5.65 4,000,708
2,500,000 08/10/00..................................... 5.55 2,495,580
5,150,000 12/26/02..................................... 6.15 5,088,936
3,000,000 07/23/03..................................... 5.96 2,946,378
2,000,000 08/06/03..................................... 5.94 1,962,554
2,500,000 05/06/04..................................... 5.74 2,424,383
Government National Mortgage Association
2,274,367 Pool #781036, 10/15/17....................... 8.00 2,328,187
Private Export Funding Corp.
320,000 03/15/01..................................... 5.50 317,844
U.S. Treasury Notes
3,500,000 11/15/00..................................... 5.75 3,512,033
6,000,000 03/31/01..................................... 6.38 6,063,750
4,650,000 07/31/02..................................... 6.00 4,684,875
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $62,394,034)........................... 61,982,148
-----------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ -----------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 5.23%
1,728,131 Dreyfus Government Cash Management Fund........ $ 1,728,131
1,727,442 Fidelity U.S. Treasury II Fund................. 1,727,442
-----------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $3,455,573).............................. 3,455,573
-----------
TOTAL INVESTMENTS
(Cost $65,849,607*)....................................... 99.00% $65,437,721
OTHER ASSETS & LIABILITIES (NET).......................... 1.00 661,474
------ -----------
NET ASSETS................................................ 100.00% $66,099,195
====== ===========
</TABLE>
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* Aggregate cost for Federal tax and book purposes.
+ Discount Rate
See Notes to Financial Statements
6
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Intermediate-Term Managed Income Fund
<TABLE>
<CAPTION>
Principal Coupon Value
Amount Rate (Note 1)
--------- ------ -----------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 49.50%
Federal Home Loan Bank
$ 1,825,000 11/25/08.................................... 5.88% $ 1,701,011
Federal Home Loan Mortgage Corp.
8,140 Pool #218374, 07/01/02...................... 10.50 8,299
9,985,000 04/29/09.................................... 6.45 9,525,570
2,000,000 04/25/21.................................... 6.75 1,972,130
Federal National Mortgage Association
1,483,499 Pool #190748, 04/01/01...................... 5.50 1,414,535
5,436,561 Pool #380542, 08/01/08...................... 6.15 5,223,426
5,585,771 Pool #437416, 09/01/28...................... 6.00 5,211,619
1,271,019 Pool #439102, 09/01/28...................... 6.00 1,185,882
5,009,743 Pool #459648, 01/01/29...................... 5.50 4,521,668
Government National Mortgage Association
60,351 Pool #195801, 01/15/17...................... 8.50 62,862
127,626 Pool #195833, 04/15/17...................... 8.50 132,936
50,194 Pool #212760, 04/15/17...................... 8.50 52,282
3,183,451 Pool #781036, 10/15/17...................... 8.00 3,258,784
60,444 Pool #334299, 05/15/23...................... 8.00 61,875
1,440,340 Pool #367412, 11/15/23...................... 6.00 1,337,375
2,913,707 Pool #366379, 12/15/23...................... 6.50 2,787,739
2,922,503 Pool #353454, 05/15/27...................... 7.50 2,934,815
2,744,763 Pool #460827, 06/15/28...................... 6.50 2,626,099
4,890,972 Pool #2699, 01/20/29........................ 6.00 4,529,104
U.S. Treasury Notes
4,300,000 08/15/03.................................... 5.75 4,287,909
18,000,000 05/15/04.................................... 5.25 17,595,000
3,885,000 08/15/04.................................... 6.00 3,923,850
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $76,775,070).......................... 74,354,770
-----------
CORPORATE BONDS -- 25.95%
5,000,000 Appalachian Power Co., 05/01/09............. 6.60 4,769,580
2,650,000 Associates Corp. of North America, 07/15/02. 6.38 2,637,113
2,000,000 AT&T Corp., 03/01/07........................ 7.75 2,080,538
3,690,000 +Baker Hughes, Inc., 01/15/09............... 6.25 3,462,423
2,340,000 Bank of America Corp., 06/15/04............. 6.63 2,323,381
3,550,000 BB&T Corp., 06/30/05........................ 6.38 3,356,894
1,500,000 Comerica Bank, 10/15/02..................... 7.25 1,523,340
400,000 Countrywide Home Loans, Inc., 06/15/04...... 6.85 398,982
5,000,000 Countrywide Home Loans, Inc., Series F,
10/08/02.................................... 6.38 4,923,780
4,000,000 Ford Motor Credit Co., 02/23/04............. 5.75 3,842,300
3,600,000 General Motors Corp., 05/01/05.............. 6.25 3,479,789
2,230,000 McDonald's Corp., 05/11/01.................. 5.90 2,221,901
1,450,000 PPG Industries, Inc., 08/15/04.............. 6.75 1,450,829
2,500,000 Procter & Gamble Co., 09/15/09.............. 6.88 2,510,395
-----------
TOTAL CORPORATE BONDS (Cost $39,918,371).... 38,981,245
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Coupon Value
Amount Rate (Note 1)
--------- ------ ------------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 8.77%
$ 2,000,000 Commercial Mortgage Asset Trust, 1999-C1 B,
07/17/13................................... 7.23% $ 1,938,890
1,900,000 Fanniemae-Aces, 1997-M5 C, 08/25/07........ 6.74 1,864,803
3,163,469 Morgan Stanley Capital I, 1999-CAM1 A1,
04/15/04................................... 6.54 3,149,913
1,672,883 Mortgage Capital Funding, Inc., 1998-MC1
A1, 06/18/07............................... 6.42 1,644,820
4,750,000 Nomura Asset Securities Corp., 1998-D6 A1B,
03/17/28................................... 6.59 4,574,274
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $13,580,855)......................... 13,172,700
------------
ASSET-BACKED SECURITIES -- 7.84%
2,125,000 Capital Auto Receivables Asset Trust, 1999-
1 A3, 08/15/04............................. 5.68 2,098,555
3,340,000 First USA Credit Card Master Trust, 1998-9
A, 09/18/06................................ 5.28 3,180,999
5,000,000 Ford Credit Auto Owner Trust, 1999-C A4,
09/16/02................................... 6.08 4,987,525
1,500,000 MBNA Master Credit Card Trust, 1999-J A,
02/15/12................................... 7.00 1,507,031
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $11,956,348)......................... 11,774,110
------------
CERTIFICATE OF DEPOSIT -- 1.73%
2,650,000 Mercantile Safe Deposit & Trust, 02/15/01
(Cost $2,650,000).......................... 5.23 2,603,625
------------
<CAPTION>
Shares
------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 5.61%
4,212,528 Dreyfus Government Cash Management Fund.... 4,212,528
4,216,454 Fidelity U.S. Treasury II Fund............. 4,216,454
------------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $8,428,982).......................... 8,428,982
------------
TOTAL INVESTMENTS (Cost $153,309,626*).................. 99.40% $149,315,432
OTHER ASSETS & LIABILITIES (NET)........................ 0.60 905,072
------ ------------
NET ASSETS.............................................. 100.00% $150,220,504
====== ============
</TABLE>
- --------
*Aggregate cost for Federal tax and book purposes.
+ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At September 30, 1999, this
security amounted to $3,462,423 or 2.30% of net assets.
See Notes to Financial Statements
7
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Managed Income Fund
<TABLE>
<CAPTION>
Principal Coupon Value
Amount Rate (Note 1)
--------- ------ ------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 47.03%
Federal Home Loan Bank
$ 8,000,000 10/07/99................................... 5.15%+ $ 7,993,133
Federal National Mortgage Association
5,400,000 02/13/04................................... 5.13 5,143,122
4,117,602 Pool #323854, 06/01/09..................... 6.03 3,877,423
6,200,000 Pool #481466, 02/01/29..................... 5.50 5,578,062
4,937,108 Pool #252379, 04/01/29..................... 5.50 4,456,110
2,970,516 Pool #498551, 05/01/29..................... 5.50 2,681,113
Government National Mortgage Association
4,736,480 Pool #2562, 03/20/28....................... 6.00 4,386,042
5,572,350 Pool #2576, 04/20/28....................... 6.00 5,160,069
2,925,624 Pool #2687, 12/20/28....................... 6.00 2,709,166
4,725,414 Pool #457999, 01/15/29..................... 6.00 4,387,608
3,467,150 Pool #507735, 04/15/29..................... 7.00 3,406,551
129,794 Pool #505668, 05/15/29..................... 7.00 127,444
2,998,013 Pool #504536, 08/15/29..................... 7.00 2,945,614
6,991,936 Pool #80311, 08/20/29...................... 5.50 6,869,731
U.S. Treasury Bond
32,040,000 08/15/17................................... 8.88 40,150,125
U.S. Treasury Inflation Index Bond
2,676,775 04/15/29................................... 3.88 2,587,272
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $105,977,067)........................ 102,458,585
------------
ASSET-BACKED SECURITIES -- 20.04%
3,000,000 California Infrastructure SDG&E, 1997-1 A5,
09/25/05................................... 6.19 2,965,695
4,000,000 Caterpillar Financial Asset Trust, 1998-A
A3, 04/25/03............................... 5.85 3,978,260
6,965,000 Citibank Credit Card Master Trust I, 1998-9
A, 01/09/06................................ 5.30 6,617,621
3,500,000 ContiMortgage Home Equity Loan Trust, 1998-
2 A5, 09/15/16............................. 6.28 3,433,448
5,580,000 First USA Credit Card Master Trust, 1998-9
A, 09/18/06................................ 5.28 5,314,364
6,550,000 Green Tree Home Equity Loan Trust, 1999-A
A2, 02/15/14............................... 5.78 6,499,991
6,000,000 MBNA Master Credit Card Trust, 1999-J A,
02/15/12................................... 7.00 6,028,125
5,000,000 Peco Energy Transition Trust, 1999-A A4,
03/01/07................................... 5.80 4,827,075
3,975,000 PP&L Transition Bond Co. LLC, 1999-1 A6,
12/26/07................................... 6.96 3,993,205
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $44,579,535)......................... 43,657,784
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Coupon Value
Amount Rate (Note 1)
--------- ------ ------------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 12.63%
$ 6,000,000 Commercial Mortgage Asset Trust, 1999-C1 B,
07/17/13................................... 7.23% $ 5,816,670
6,329,387 Government National Mortgage Association,
1999-19 A, 08/16/25........................ 6.50 6,145,340
3,961,280 LB Commercial Conduit Mortgage Trust, 1999-
C1 A1, 08/15/07............................ 6.41 3,879,618
5,000,000 Morgan Stanley Capital I, 1999-WF1 B,
10/15/08................................... 6.32 4,774,175
2,703,050 Mortgage Capital Funding, Inc., 1998-MC1
A1, 06/18/07............................... 6.42 2,657,706
4,400,000 Nomura Asset Securities Corp., 1998-D6 A1B,
03/17/28................................... 6.59 4,237,222
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $28,581,474)......................... 27,510,731
------------
CORPORATE BONDS -- 12.02%
5,000,000 Associates Corp. of North America,
04/20/04................................... 5.80 4,807,495
5,000,000 Associates Corp. of North America, Series
H, 09/27/02................................ 6.71 4,998,215
8,000,000 Ford Motor Credit Co., 02/23/04............ 5.75 7,684,600
5,000,000 Morgan Stanley Dean Witter & Co., 08/01/02. 6.38 4,961,740
3,735,000 PPG Industries, Inc., 08/15/04............. 6.75 3,733,319
------------
TOTAL CORPORATE BONDS
(Cost $26,615,009)......................... 26,185,369
------------
CERTIFICATE OF DEPOSIT -- 2.66%
6,000,000 Mercantile Safe Deposit & Trust, 05/17/04
(Cost $6,000,000).......................... 6.10 5,786,700
------------
<CAPTION>
Shares
------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 5.42%
5,903,131 Dreyfus Government Cash Management Fund.... 5,903,131
5,908,234 Fidelity U.S. Treasury II Fund............. 5,908,234
------------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $11,811,365)......................... 11,811,365
------------
TOTAL INVESTMENTS (Cost $223,564,450*).................. 99.80% $217,410,534
OTHER ASSETS & LIABILITIES (NET)........................ 0.20 426,883
------ ------------
NET ASSETS.............................................. 100.00% $217,837,417
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
+ Discount Rate
See Notes to Financial Statements
8
<PAGE>
EXCELSIOR FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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 seventeen managed investment
portfolios, each having its own investment objectives and policies. The
following is a summary of significant accounting policies for 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.
(a) Portfolio Valuation:
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.
Portfolio securities that 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.
9
<PAGE>
(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:
Dividends from net investment income are declared daily and paid monthly.
Net realized capital gains, unless offset by any available capital loss
carryforward, are distributed to shareholders at least annually.
Dividends and distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
deferral of losses on wash sales and 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.
10
<PAGE>
At September 30, 1999, 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>
Net
Tax Basis Tax Basis Unrealized
Unrealized Unrealized Appreciation
Appreciation (Depreciation) (Depreciation)
------------ -------------- --------------
<S> <C> <C> <C>
Short-Term Government
Securities Fund.............. $22,182 $ (434,068) $ (411,886)
Intermediate-Term Managed
Income Fund.................. 76,182 (4,070,376) (3,994,194)
Managed Income Fund........... 87,055 (6,240,971) (6,153,916)
</TABLE>
(f) Expense Allocation:
Expenses directly attributable to a Portfolio are charged to that
Portfolio. Other expenses are allocated to the respective Portfolios based
on average daily net assets.
2. Investment Advisory Fee, Administration Fee and Related Party Transactions
United States Trust Company of New York ("U.S. Trust NY") and U.S. Trust
Company (collectively with U.S. Trust NY, "U.S. Trust") serve as the
investment adviser 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 .30% of the average
daily net assets of the Short-Term Government Securities Fund, .35% of the
average daily net assets of the Intermediate-Term Managed Income Fund and .75%
of the average daily net assets of the Managed Income Fund. U.S. Trust NY is a
state-chartered bank and trust company and a member bank of the Federal
Reserve System. U.S. Trust Company is a Connecticut state bank and trust
company. Each is a wholly-owned subsidiary of U.S. Trust Corporation, a
registered bank holding company.
U.S. Trust Company, Chase Global Funds Services Company, a corporate
affiliate 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, 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. For
the six months ended September 30, 1999, administration fees charged by U.S.
Trust Company were as follows:
<TABLE>
<S> <C>
Short-Term Government Securities Fund............................. $12,134
Intermediate-Term Managed Income Fund............................. 28,426
Managed Income Fund............................................... 44,799
</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
11
<PAGE>
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 six months ended September
30, 1999, no expenses were reimbursed pursuant to these voluntary actions. 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 six months ended September 30, 1999, U.S. Trust waived investment
advisory fees totaling $109,104 for Managed Income Fund.
Effective November 19, 1999, U.S. Trust has contractually agreed to waive
investment advisory fees and to reimburse other ordinary operating expenses
through March 31, 2000 to the extent necessary to keep total operating
expenses from exceeding the following annual percentages of each Portfolio's
average daily net assets:
<TABLE>
<S> <C>
Short-Term Government Securities Fund................................ 0.60%
Intermediate-Term Managed Income Fund................................ 0.65%
Managed Income Fund.................................................. 0.90%
</TABLE>
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
$104,232 for the six months ended September 30, 1999. 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 six months ended
September 30, 1999, 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>
Short-Term Government Securities Fund............ $24,172 $230
Intermediate-Term Managed Income Fund............ 46,988 152
Managed Income Fund.............................. 34,352 141
</TABLE>
Edgewood Services, Inc. ("the Distributor"), a wholly-owned subsidiary of
Federated Investors, Inc., serves as the 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.
12
<PAGE>
3. Purchases and Sales of Securities:
For the six months ended September 30, 1999, 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........... $ 35,510,143 $ 26,116,156
Intermediate-Term Managed Income Fund........... 107,377,560 81,985,569
Managed Income Fund............................. 124,467,614 129,148,315
</TABLE>
4. Common Stock:
Excelsior Fund has authorized capital of 35 billion shares of Common Stock,
26.375 billion of which is currently classified to represent interests in one
of seventeen separate investment portfolios. Authorized capital currently
classified for each Portfolio is as follows: 375 million shares of the Managed
Income Fund, and 500 million shares each of the Short-Term Government
Securities Fund and the Intermediate-Term Managed Income Fund.
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.
<TABLE>
<CAPTION>
Short-Term Government Securities Fund
----------------------------------------------------
Six Months Ended 09/30/99 Year Ended 03/31/99
-------------------------- ------------------------
Shares Amount Shares Amount
------------ ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 5,075,863 $ 35,403,214 4,313,755 $ 30,390,997
Issued as reinvestment of
dividends............... 35,015 244,287 77,059 543,382
Redeemed................. (3,081,568) (21,525,464) (1,565,745) (11,047,623)
----------- ------------- ---------- ------------
Net Increase............. 2,029,310 $ 14,122,037 2,825,069 $ 19,886,756
=========== ============= ========== ============
<CAPTION>
Intermediate-Term Managed Income Fund
----------------------------------------------------
Six Months Ended 09/30/99 Year Ended 03/31/99
-------------------------- ------------------------
Shares Amount Shares Amount
------------ ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 6,130,770 $ 42,806,249 7,225,482 $ 52,716,314
Issued as reinvestment of
dividends............... 24,731 172,479 60,786 444,096
Redeemed................. (2,245,246) (15,587,655) (2,507,271) (18,295,582)
----------- ------------- ---------- ------------
Net Increase............. 3,910,255 $ 27,391,073 4,778,997 $ 34,864,828
=========== ============= ========== ============
<CAPTION>
Managed Income Fund
----------------------------------------------------
Six Months Ended 09/30/99 Year Ended 03/31/99
-------------------------- ------------------------
Shares Amount Shares Amount
------------ ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 4,536,296 $ 39,909,794 6,445,954 $ 59,579,168
Issued as reinvestment of
dividends............... 85,257 746,197 308,474 2,850,516
Redeemed................. (3,457,861) (30,283,403) (4,143,351) (38,484,541)
----------- ------------- ---------- ------------
Net Increase............. 1,163,692 $ 10,372,588 2,611,077 $ 23,945,143
=========== ============= ========== ============
</TABLE>
13
<PAGE>
5. 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 temporarily 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 six months ended September 30, 1999, the Portfolios had
no borrowings under the agreement.
6. Year 2000 Risk:
The Funds depend on the smooth functioning of computer systems in almost
every aspect of their business. Like other mutual funds, businesses and
individuals around the world, the Funds could be adversely affected if the
computer systems used by their service providers do not properly process dates
on and after January 1, 2000, and distinguish between the year 2000 and the
year 1900. This is commonly known as the "Year 2000 Problem." The investment
adviser and the Funds' other service providers advise that they are taking
steps to address the Year 2000 Problem with respect to the computer systems
that they use. Currently, they do not anticipate that the transition to the
21st Century will have any material impact on their ability to continue to
service the Funds at current levels. At this time, however, there can be no
assurance that their efforts will be sufficient to avoid any adverse impact on
the Funds as a result of the Year 2000 Problem. In addition, the Funds and
their shareholders may experience losses as a result of computer difficulties
experienced by issuers of portfolio securities or third parties, such as
custodians, banks, broker-dealers or others with which the Funds do business.
14
