<PAGE>
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[LOGO OF EXCELSIOR FUNDS]
International Equity 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
International Fund....................................................... 6
Pacific/Asia Fund........................................................ 9
Pan European Fund........................................................ 12
Latin America Fund....................................................... 15
Emerging Markets Fund.................................................... 17
NOTES TO FINANCIAL STATEMENTS............................................. 20
</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 ex-
penses 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>
Pan Latin Emerging
International Pacific/Asia European America Markets
Fund Fund Fund Fund Fund
------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at cost --
see
accompanying
portfolios............ $197,209,952 $47,977,372 $110,518,727 $15,051,929 $ 7,723,917
============ =========== ============ =========== ===========
Investments, at value
(Note 1).............. $245,691,078 $54,924,007 $126,232,756 $13,904,743 $ 7,375,264
Foreign currency (cost
$17,875, $6,355, $0,
$0, and $4,833,
respectively)......... 17,960 6,416 -- -- 4,935
Cash................... -- 1,376,818 -- -- --
Dividends receivable... 364,727 52,377 211,552 53,025 13,810
Interest receivable.... 34,398 8,963 12,269 3,693 --
Receivable for
investments sold...... 3,084,695 1,254,830 1,190,966 216,563 233,832
Receivable for fund
shares sold........... -- 418,504 -- -- --
Withholding tax
receivable............ 118,787 3,989 103,168 33,961 --
Prepaid expenses....... 1,044 -- 867 518 12
Unamortized
organization costs
(Note 5).............. -- -- -- -- 26,160
------------ ----------- ------------ ----------- -----------
Total Assets.......... 249,312,689 58,045,904 127,751,578 14,212,503 7,654,013
LIABILITIES:
Payable for investments
purchased............. 1,206,617 1,718,741 -- 217,868 --
Investment advisory
fees payable (Note 2). 340,390 90,609 201,717 21,160 4,845
Administration fees
payable (Note 2)...... 57,181 12,927 24,679 2,919 1,784
Administrative
servicing fees payable
(Note 2).............. 40,021 9,086 15,650 2,734 1,330
Directors' fees payable
(Note 2).............. 1,991 206 2,009 224 53
Foreign taxes payable.. 5,313 12,805 -- -- 2,018
Net unrealized
depreciation on open
forward foreign
currency contracts.... 241,316 74,287 -- -- --
Due to custodian bank.. 690,129 -- 611,348 159,123 209,573
Accrued expenses and
other payables........ 130,032 44,075 87,294 22,406 56,112
------------ ----------- ------------ ----------- -----------
Total Liabilities..... 2,712,990 1,962,736 942,697 426,434 275,715
------------ ----------- ------------ ----------- -----------
NET ASSETS.............. $246,599,699 $56,083,168 $126,808,881 $13,786,069 $ 7,378,298
============ =========== ============ =========== ===========
NET ASSETS consist of:
Undistributed
(distributions in
excess of) net
investment income..... $ 2,480,651 $ (585,173) $ 5,285,435 $ (207,653) $ (46,287)
Accumulated net
realized gain (loss)
on investments and
foreign currency
translations.......... 2,588,230 (23,320,143) 7,790,506 (31,232,771) (2,493,690)
Unrealized appreciation
(depreciation) of
investments and
foreign currency
translations.......... 48,242,686 7,077,041 15,723,759 (1,183,113) (350,331)
Par value (Note 4)..... 17,572 6,361 10,894 2,979 1,745
Paid-in capital in
excess of par value... 193,270,560 72,905,082 97,998,287 46,406,627 10,266,861
------------ ----------- ------------ ----------- -----------
Total Net Assets........ $246,599,699 $56,083,168 $126,808,881 $13,786,069 $ 7,378,298
============ =========== ============ =========== ===========
Shares of Common Stock
Outstanding (Note 4)... 17,571,859 6,360,605 10,893,526 2,979,213 1,745,060
NET ASSET VALUE PER
SHARE.................. $14.03 $8.82 $11.64 $4.63 $4.23
====== ===== ====== ===== =====
</TABLE>
See Notes to Financial Statements
1
<PAGE>
Excelsior Funds, Inc.
Statements of Operations
Six Months Ended September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Pan Latin Emerging
International Pacific/Asia European America Markets
Fund Fund Fund Fund Fund
------------- ------------ ------------ --------- --------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend income........... $ 4,827,874 $ 368,127 $ 6,489,736 $ 159,944 $ 50,908
Interest income........... 161,815 56,148 45,340 22,615 3,291
Less: Foreign taxes
withheld................. (189,967) (19,185) (193,831) (9,654) (2,353)
----------- ----------- ------------ --------- --------
Total Income............. 4,799,722 405,090 6,341,245 172,905 51,846
EXPENSES:
Investment advisory fees
(Note 2)................. 1,112,093 242,198 703,251 79,089 44,561
Administration fees (Note
2)....................... 222,419 48,440 140,650 15,818 7,092
Custodian fees............ 166,869 36,487 106,528 13,022 5,319
Administrative servicing
fees (Note 2)............ 117,456 23,483 51,650 10,705 4,338
Shareholder servicing
agent fees............... 21,385 15,337 33,736 16,600 4,265
Legal and audit fees...... 12,533 1,977 9,541 958 415
Shareholder reports....... 13,449 2,260 11,534 1,385 494
Registration and filing
fees..................... 6,152 6,545 11,857 5,947 5,935
Directors' fees and
expenses (Note 2)........ 3,321 475 2,472 112 93
Amortization of
organization costs
(Note 5)................. -- -- -- -- 3,262
Miscellaneous expenses.... 7,019 1,819 5,448 1,695 1,557
----------- ----------- ------------ --------- --------
Total Expenses........... 1,682,696 379,021 1,076,667 145,331 77,331
Fees waived by investment
adviser and
administrators (Note 2).. (117,456) (23,483) (51,650) (13,149) (18,355)
----------- ----------- ------------ --------- --------
Net Expenses............. 1,565,240 355,538 1,025,017 132,182 58,976
----------- ----------- ------------ --------- --------
NET INVESTMENT INCOME
(LOSS).................... 3,234,482 49,552 5,316,228 40,723 (7,130)
----------- ----------- ------------ --------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
(Note 1):
Net realized gain (loss):
Security transactions.... 8,907,203 6,555,978 4,796,373 (711,940) 152,173
Foreign currency
transactions............ (858,177) (252,713) 84,337 (18,774) (6,574)
----------- ----------- ------------ --------- --------
Total net realized gain
(loss)................... 8,049,026 6,303,265 4,880,710 (730,714) 145,599
Change in unrealized
appreciation/depreciation
of investments and
foreign currency
translations during the
period................... 14,684,015 6,427,245 (10,396,528) 484,255 (4,631)
----------- ----------- ------------ --------- --------
Net realized and unrealized
gain (loss) on
investments............... 22,733,041 12,730,510 (5,515,818) (246,459) 140,968
----------- ----------- ------------ --------- --------
Net increase (decrease) in
net assets resulting from
operations................ $25,967,523 $12,780,062 $ (199,590) $(205,736) $133,838
=========== =========== ============ ========= ========
</TABLE>
See Notes to Financial Statements
2
<PAGE>
Excelsior Funds, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Pan Latin Emerging
International Pacific/Asia European America Markets
Fund Fund Fund Fund Fund
------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Six Months Ended September
30, 1999 (Unaudited)
Net investment income
(loss)................... $ 3,234,482 $ 49,552 $ 5,316,228 $ 40,723 $ (7,130)
Net realized gain (loss)
on investments and
foreign currency
transactions............. 8,049,026 6,303,265 4,880,710 (730,714) 145,599
Change in unrealized
appreciation/depreciation
of investments and
foreign currency
translations during the
period................... 14,684,015 6,427,245 (10,396,528) 484,255 (4,631)
------------ ------------ ------------ ------------ -----------
Net increase (decrease) in
net assets resulting from
operations............... 25,967,523 12,780,062 (199,590) (205,736) 133,838
Distributions to
shareholders:
From net investment
income.................. -- -- -- (375,913) (39,421)
From net realized gain on
investments............. -- -- (7,551,673) -- --
Increase (decrease) in net
assets from fund share
transactions (Note 4).... 18,548,942 15,295,526 (23,275,656) 185,027 1,873,101
------------ ------------ ------------ ------------ -----------
Net increase (decrease) in
net assets............... 44,516,465 28,075,588 (31,026,919) (396,622) 1,967,518
NET ASSETS:
Beginning of period...... 202,083,234 28,007,580 157,835,800 14,182,691 5,410,780
------------ ------------ ------------ ------------ -----------
End of period (1)........ $246,599,699 $ 56,083,168 $126,808,881 $ 13,786,069 $ 7,378,298
============ ============ ============ ============ ===========
(1) Including
undistributed
(distributions in
excess of) net
investment income.... $ 2,480,651 $ (585,173) $ 5,285,435 $ (207,653) $ (46,287)
============ ============ ============ ============ ===========
Year Ended March 31, 1999
Net investment income..... $ 237,688 $ 1,998 $ 78,675 $ 674,520 $ 113,746
Net realized gain (loss)
on investments and
foreign currency
transactions............. (3,542,457) (13,230,471) 11,496,064 (30,484,356) (2,668,856)
Change in unrealized
appreciation/depreciation
of investments and
foreign currency
translations during the
year..................... (3,518,939) 11,212,302 (31,839,351) (9,316,819) (522,403)
------------ ------------ ------------ ------------ -----------
Net decrease in net assets
resulting from
operations............... (6,823,708) (2,016,171) (20,264,612) (39,126,655) (3,077,513)
Distributions to
shareholders:
From net investment
income.................. (453,377) (474,648) -- (877,729) (112,687)
In excess of net
investment income....... (753,831) (634,725) -- -- --
From net realized gain on
investments............. -- -- (7,074,130) -- --
In excess of net realized
gain on investments..... -- -- -- (2,935,882) --
Increase (decrease) in net
assets from fund share
transactions (Note 4).... 5,225,113 (12,675,193) (22,461,232) (31,573,405) 2,065,530
------------ ------------ ------------ ------------ -----------
Net decrease in net
assets................... (2,805,803) (15,800,737) (49,799,974) (74,513,671) (1,124,670)
NET ASSETS:
Beginning of year........ 204,889,037 43,808,317 207,635,774 88,696,362 6,535,450
------------ ------------ ------------ ------------ -----------
End of year (2).......... $202,083,234 $ 28,007,580 $157,835,800 $ 14,182,691 $ 5,410,780
============ ============ ============ ============ ===========
--------
(2) Including
undistributed
(distributions in
excess of) net
investment income.... $ (753,831) $ (634,725) $ (30,793) $ 127,537 $ 264
============ ============ ============ ============ ===========
</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>
Net Asset Net Net Realized Dividends Dividends Distributions
Value, Investment and Unrealized Total From From Net in Excess of From Net
Beginning Income Gain (Loss) on Investment Investment Net Investment Realized Gain
of Period (Loss) Investments Operations Income Income on Investments
--------- ---------- -------------- ---------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL FUND -- (7/21/87*)
Year Ended March 31,
1995................... $10.44 $0.10 $(0.29) $(0.19) -- $(0.11) $(0.32)
1996................... 9.82 0.10 1.15 1.25 $(0.08) (0.01) (0.07)
1997................... 10.91 0.09 0.63 0.72 (0.10) -- (0.19)
1998................... 11.34 0.04 2.11 2.15 (0.02) (0.04) (0.31)
1999................... 13.00 0.01 (0.42) (0.41) (0.03) (0.04) --
Six Months Ended
September 30, 1999
(Unaudited)........... 12.52 0.19 1.32 1.51 -- -- --
PACIFIC/ASIA FUND -- (12/31/92*)
Year Ended March 31,
1995................... $10.04 $0.08 $(0.58) $(0.50) $(0.03) $(0.23) $(0.83)
1996................... 8.45 0.12 1.33 1.45 (0.09) (0.01) (0.02)
1997................... 9.78 0.07 (0.53) (0.46) (0.07) -- (0.16)
1998................... 9.09 0.01 (2.52) (2.51) (0.01) (0.05) --
1999................... 6.52 -- ++ 0.29 0.29 (0.09) (0.11) --
Six Months Ended
September 30, 1999
(Unaudited)........... 6.61 0.06 2.15 2.21 -- -- --
PAN EUROPEAN FUND -- (12/31/92*)
Year Ended March 31,
1995................... $ 8.03 $0.09 $ 0.25 $ 0.34 $(0.09) -- $(0.09)
1996................... 8.19 0.11 1.35 1.46 (0.10) -- (0.36)
1997................... 9.19 0.11 2.01 2.12 (0.10) -- (0.27)
1998................... 10.94 (0.01) 4.01 4.00 -- -- (0.81)
1999................... 14.13 -- ++ (1.26) (1.26) -- -- (0.48)
Six Months Ended
September 30, 1999
(Unaudited)........... 12.39 0.49 (0.57) (0.08) -- -- (0.67)
LATIN AMERICA FUND -- (12/31/92*)
Year Ended March 31,
1995................... $ 9.30 $0.01 $(2.56) $(2.55) -- $(0.17) --
1996................... 5.86 0.10 1.49 1.59 $(0.04) (0.04) --
1997................... 7.37 0.05 2.09 2.14 (0.05) -- --
1998................... 9.46 0.10 1.22 1.32 (0.02) -- $(0.16)
1999................... 10.60 0.21 (5.29) (5.08) (0.18) -- --
Six Months Ended
September 30, 1999
(Unaudited)........... 4.77 0.01 (0.02) (0.01) (0.13) -- --
EMERGING MARKETS FUND -- (01/02/98*)
Period Ended March 31,
1998.................. $ 7.00 -- -- -- -- -- --
Year Ended March 31,
1999.................. 7.00 $0.07 $(2.95) $(2.88) $(0.08) -- --
Six Months Ended
September 30, 1999
(Unaudited)........... 4.04 -- ++ 0.21 0.21 (0.02) -- --
</TABLE>
* Commencement of operations
** Annualized
*** Not 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.
@ The annualized ratio of net operating expenses to average net assets,
excluding foreign investment taxes, is 1.65%.
++For comparative purposes per share amounts for the year ended March 31,
1999 are based on average shares outstanding.
See Notes to Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
Distributions Ratio of Net Ratio of Gross Ratio of Net
in Excess of Net Assets, Operating Operating Investment
Net Realized Net Asset End of Expenses Expenses Income (Loss) Portfolio Fee
Gain on Total Value, End Total Period to Average to Average to Average Turnover Waivers
Investments Distributions of Period Return (000) Net Assets Net Assets+ Net Assets Rate (Note 2)
------------- ------------- ---------- ------ ----------- ------------ -------------- ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- $(0.43) $ 9.82 (1.93)% $ 64,052 1.47% 1.53% 0.71 % 66% $0.01
-- (0.16) 10.91 12.77 % 97,850 1.40% 1.50% 0.82 % 39% 0.01
-- (0.29) 11.34 6.78 % 126,815 1.43% 1.51% 0.70 % 116% 0.01
$(0.12) (0.49) 13.00 19.42 % 204,889 1.44% 1.52% 0.32 % 37% 0.01
-- (0.07) 12.52 (3.18)% 202,083 1.42% 1.52% 0.11 % 50% 0.01
-- -- 14.03 12.06 %*** 246,600 1.41%** 1.51%** 2.91 %** 44%** 0.01
-- $(1.09) $ 8.45 (5.89)% $ 47,617 1.47% 1.52% 0.85 % 69% $0.01
-- (0.12) 9.78 17.22 % 76,192 1.43% 1.51% 1.12 % 29% 0.01
-- (0.23) 9.09 (4.80)% 89,945 1.45% 1.52% 0.69 % 126% 0.01
-- (0.06) 6.52 (27.56)% 43,808 1.48% 1.57% 0.22 % 52% 0.01
-- (0.20) 6.61 5.14 % 28,008 1.55% 1.64% 0.01 % 78% 0.01
-- -- 8.82 33.43 %*** 56,083 1.47%** 1.56%** 0.20 %** 105%** 0.03
-- $(0.18) $ 8.19 4.33 % $ 39,977 1.51% 1.57% 1.11 % 47% --
-- (0.46) 9.19 18.25 % 47,916 1.46% 1.55% 1.28 % 42% $0.01
-- (0.37) 10.94 23.76 % 121,991 1.45% 1.52% 1.23 % 82% 0.01
-- (0.81) 14.13 38.02 % 207,636 1.43% 1.50% (0.13)% 40% 0.01
-- (0.48) 12.39 (8.84)% 157,836 1.43% 1.50% 0.04 % 46% 0.01
-- (0.67) 11.64 (0.78)%*** 126,809 1.46%** 1.53%** 7.57 %** 30%** -- ++
$(0.72) $(0.89) $ 5.86 (30.47)% $ 27,344 1.50% 1.57% 0.06 % 69% $0.01
-- (0.08) 7.37 27.29 % 43,160 1.48% 1.57% 1.12 % 54% 0.01
-- (0.05) 9.46 29.09 % 70,900 1.48% 1.56% 0.50 % 73% 0.01
-- (0.18) 10.60 14.05 % 88,696 1.50% 1.60% 0.88 % 77% 0.01
(0.57) (0.75) 4.77 (47.19)% 14,183 1.55% 1.66% 1.63 % 29% 0.01
-- (0.13) 4.63 (0.64)%*** 13,786 1.67%** 1.84%** 0.51 %** 124%** -- ++
-- -- $ 7.00 (0.14)%*** $ 6,535 1.85%**@ 2.74%** 2.33 %** -- --
-- $(0.08) 4.04 (41.21)% 5,411 1.65% 2.48% 1.93 % 73% $0.03
-- (0.02) 4.23 5.18 %*** 7,378 1.65%** 2.17%** (0.20)%** 71%** 0.01
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
International Fund
<TABLE>
<CAPTION>
Value
Shares (Note 1)
--------- ------------
<C> <S> <C>
COMMON STOCKS -- 94.51%
JAPAN -- 20.49%
452 DDI Corp. ............................................ $ 3,388,306
34,000 Don Quijote Co., Ltd. ................................ 6,088,268
589,000 Furukawa Electric Co., Ltd. .......................... 3,504,638
25,000 NIDEC Corp. .......................................... 4,720,296
33,400 Nintendo Co., Ltd. ................................... 5,314,205
725 NTT Data Corp. ....................................... 8,152,174
17,900 Rohm Co. ............................................. 3,731,962
454,000 Sekisui Chemical Co., Ltd. ........................... 2,556,728
43,700 Sony Corp. ........................................... 6,514,871
57,900 TOKYO SEIMITSU CO., Ltd. ............................. 6,559,324
------------
50,530,772
------------
FRANCE -- 11.73%
57,842 Axa................................................... 7,312,111
30,594 Carrefour S.A. ....................................... 4,893,035
66,130 Dassault Systemes S.A. ............................... 2,603,654
32,212 Elf Aquitaine S.A. ................................... 5,864,767
2,400 L'OREAL............................................... 1,531,029
16,288 Total Fina S.A., Class B.............................. 2,045,186
66,700 Vivendi............................................... 4,680,839
------------
28,930,621
------------
UNITED KINGDOM -- 10.79%
574,254 Airtours plc.......................................... 3,657,548
133,700 Glaxo Wellcome plc.................................... 3,485,473
284,374 Granada Group plc..................................... 2,433,707
308,600 Kingfisher plc........................................ 3,306,374
186,300 Serco Group plc....................................... 4,169,912
35,500 Shell Transport & Trading Co. ADR..................... 1,615,250
306,000 Shell Transport & Trading Co. plc..................... 2,286,401
1,160,492 Siebe plc............................................. 5,653,390
------------
26,608,055
------------
GERMANY -- 8.82%
51,500 Mannesmann AG......................................... 8,066,741
62,800 Metro AG.............................................. 3,261,088
12,219 SAP AG................................................ 4,628,803
71,025 Siemens AG............................................ 5,781,702
------------
21,738,334
------------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note 1)
--------- ------------
<C> <S> <C>
COMMON STOCKS -- (continued)
NETHERLANDS -- 7.26%
48,100 +Equant N.V. ......................................... $ 3,910,403
130,080 ING Groep N.V. ....................................... 7,059,334
63,688 STMicroelectronics N.V. .............................. 4,960,800
57,664 Wolters Kluwer N.V. .................................. 1,975,803
------------
17,906,340
------------
SINGAPORE -- 4.47%
2,048,507 +Datacraft Asia Ltd. ................................. 9,013,431
539,000 Natsteel Electronics Ltd. ............................ 2,013,916
------------
11,027,347
------------
CANADA -- 4.20%
168,400 Bombardier Inc., Class B.............................. 2,790,622
111,650 +CGI Group, Inc. ..................................... 2,203,518
14,000 +JDS Uniphase Corp. .................................. 1,592,500
64,900 Nortel Networks Corp. ................................ 3,312,577
41,000 +Sierra Wireless Inc. ................................ 446,441
------------
10,345,658
------------
SWITZERLAND -- 3.47%
78 Lindt & Spruengli AG.................................. 2,021,154
566 Roche Holding AG...................................... 6,544,540
------------
8,565,694
------------
SWEDEN -- 3.33%
149,656 Celsius AB, Series B.................................. 2,321,523
190,200 Telefonaktiebolaget LM Ericsson, Class B.............. 5,900,916
------------
8,222,439
------------
AUSTRALIA -- 2.61%
171,926 Brambles Industries Ltd. ............................. 4,977,493
118,640 Lend Lease Corp., Ltd. ............................... 1,447,690
------------
6,425,183
------------
ITALY -- 2.48%
1,253,700 Unicredito Italiano S.p.A. ........................... 6,123,354
------------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
International Fund -- (continued)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
--------- ------------
<C> <S> <C>
COMMON STOCKS -- (continued)
THAILAND -- 2.45%
1,017,456 Banpu Public Co., Ltd. (Registered)................... $ 1,976,246
630,400 BEC World Public Co., Ltd. (Foreign).................. 3,419,223
425,900 Dhipaya Insurance Public Co., Ltd. ................... 634,740
------------
6,030,209
------------
HONG KONG -- 2.35%
28,300 +China Telecom (Hong Kong) Ltd. ADR................... 1,749,294
5,264,720 Hengan International Group Co., Ltd. ................. 1,341,969
557,900 Johnson Electric Holdings Ltd. ....................... 2,707,694
------------
5,798,957
------------
SPAIN -- 1.89%
352,895 Banco Bilbao Vizcaya S.A. (Registered)................ 4,648,889
------------
IRELAND -- 1.45%
318,800 Irish Life & Permanent plc............................ 3,578,935
------------
PORTUGAL -- 1.25%
114,877 Banco Comercial Portugues S.A. ....................... 3,092,692
------------
FINLAND -- 1.01%
27,800 Nokia Oy.............................................. 2,487,848
------------
SOUTH KOREA -- 0.83%
12,234 S1 Corp. ............................................. 2,057,447
------------
ISRAEL -- 0.71%
32,500 +Gilat Satellite Networks Ltd. ....................... 1,742,813
------------
TAIWAN -- 0.69%
401,000 +Taiwan Semiconductor Manufacturing Co. .............. 1,691,422
------------
NEW ZEALAND -- 0.68%
423,300 Telecom Corp. of New Zealand Ltd. .................... 1,669,473
------------
CHILE -- 0.62%
40,280 Vina Concha Y Toro S.A. ADR........................... 1,520,570
------------
EGYPT -- 0.47%
49,800 Egyptian Company for Mobile Services (MobiNil)........ 1,168,328
------------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- ------------
<C> <S> <C>
COMMON STOCKS -- (continued)
INDIA -- 0.46%
174,000 Housing Development Finance Corp., Ltd. ............ $ 1,061,536
5,700 +Hughes Software Systems............................ 82,438
------------
1,143,974
------------
TOTAL COMMON STOCKS (Cost $184,708,529)............. 233,055,354
------------
<CAPTION>
No. of
Warrants
----------
<C> <S> <C>
WARRANTS -- 0.56%
PHILIPPINES -- 0.56%
3,287,000 +QueenBee Restaurants -- Jollibee Foods Corp.
expiring 03/24/03 at $19.25 (Cost $1,255,423)....... 1,389,724
------------
<CAPTION>
Principal
Amount
---------
<C> <S> <C>
DEMAND NOTES -- 4.56%
UNITED STATES -- 4.56%
$5,700,000 Associates Corp. of North America Master Notes...... 5,700,000
5,546,000 General Electric Co. Promissory Notes............... 5,546,000
------------
TOTAL DEMAND NOTES (Cost $11,246,000)............... 11,246,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $197,209,952*).................... 99.63% $245,691,078
OTHER ASSETS & LIABILITIES (NET).......................... 0.37 908,621
------ ------------
NET ASSETS................................................ 100.00% $246,599,699
====== ============
</TABLE>
- --------
*-- Aggregate cost for Federal tax and book purposes.
+-- Non-income producing
ADR-- American Depositary Receipt
See Notes to Financial Statements
7
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
International Fund -- (continued)
FORWARD FOREIGN CURRENCY CONTRACTS
Under the terms of forward foreign currency contracts open at 9/30/99, the
International Fund is obligated to deliver currency in exchange for U.S.
dollars as indicated below:
<TABLE>
<CAPTION>
Currency In Net
to Exchange Settlement Unrealized
Deliver for Date Value (Depreciation)
----------------- ----------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Sales...... JPY 1,301,867,800 $12,032,050 11/8/99 $12,273,366 $(241,316)
</TABLE>
- --------
JPY -- Japanese Yen
At September 30, 1999, sector diversification of the Fund's investment
portfolio was as follows:
<TABLE>
<CAPTION>
% of
Net Market
Sector Diversification Assets Value
---------------------- ------ ------------
<S> <C> <C>
Information Technology.................................. 26.70% $ 65,844,832
Consumer Discretionary.................................. 17.61 43,420,851
Financials.............................................. 14.18 34,959,281
Industrials............................................. 13.77 33,964,422
Telecommunication Services.............................. 8.09 19,952,544
Energy.................................................. 4.79 11,811,604
Demand Notes............................................ 4.56 11,246,000
Health Care............................................. 4.07 10,030,012
Consumer Staples........................................ 3.16 7,804,447
Utilities............................................... 1.90 4,680,839
Materials............................................... 0.80 1,976,246
------ ------------
Total Investments....................................... 99.63% $245,691,078
Other Assets and Liabilities (Net)...................... 0.37 908,621
------ ------------
Net Assets.............................................. 100.00% $246,599,699
====== ============
</TABLE>
See Notes to Financial Statements
8
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Pacific/Asia Fund
<TABLE>
<CAPTION>
Value
Shares (Note 1)
--------- ------------
<C> <S> <C>
COMMON STOCKS -- 97.23%
JAPAN -- 40.06%
12,300 Able, Inc. ........................................... $ 1,187,125
14,450 AFLAC, Inc. .......................................... 605,094
52,500 Arisawa Mfg. Co., Ltd. ............................... 1,352,839
206 DDI Corp. ............................................ 1,544,228
10,500 Don Quijote Co., Ltd. ................................ 1,880,200
293,000 Furukawa Electric Co., Ltd. .......................... 1,743,394
7,900 NIDEC Corp. .......................................... 1,491,614
8,700 Nintendo Co., Ltd. ................................... 1,384,239
134 NTT Data Corp. ....................................... 1,506,747
7,400 Rohm Co. ............................................. 1,542,822
13,500 Ryohin Keikaku Co., Ltd. ............................. 2,719,734
113,000 Sekisui Chemical Co., Ltd. ........................... 636,366
9,900 Sony Corp. ........................................... 1,475,909
36,400 Terumo Corp. ......................................... 1,122,151
20,100 Tokyo Seimitsu Co., Ltd.. ............................ 2,277,071
------------
22,469,533
------------
HONG KONG -- 11.70%
492,000 Asia Satellite Telecommunications Holdings Ltd. ...... 1,254,100
2,357,000 Cafe de Coral Holdings, Ltd. ......................... 1,046,841
18,750 +China Telecom (Hong Kong) Ltd. ADR................... 1,158,985
3,628,000 Hengan International Group Co., Ltd. ................. 924,772
215,500 Johnson Electric Holdings Ltd. ....................... 1,045,901
2,931,000 Yanzhou Coal Mining Co., Ltd. ........................ 1,131,981
------------
6,562,580
------------
SINGAPORE -- 10.27%
504,000 Dairy Farm International Holdings Ltd. ............... 501,480
546,267 +Datacraft Asia Ltd. ................................. 2,403,575
1,446,000 +Del Monte Pacific Ltd. .............................. 672,390
273,600 Natsteel Electronics Ltd. ............................ 1,022,277
799,300 Singapore Bus Services Ltd. .......................... 1,156,974
------------
5,756,696
------------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note 1)
--------- ------------
<C> <S> <C>
COMMON STOCKS -- (continued)
TAIWAN -- 9.17%
80,000 Asustek Computer Inc. ................................ $ 798,736
186,000 +Hon Hai Precision Industry Co., Ltd. ................ 1,222,370
458,020 President Chain Store Corp. .......................... 1,302,426
30,000 Synnex Technology International Corp. GDR ............ 581,424
293,000 +Taiwan Semiconductor Manufacturing Co. .............. 1,235,877
------------
5,140,833
------------
SOUTH KOREA -- 8.39%
13,385 +Dacom Corp. ......................................... 1,172,247
91,439 Dae Duck Electronics Co. ............................. 1,015,156
268,685 Hankook Tire Co., Ltd. ............................... 952,329
69,400 Jinwoong Co. ......................................... 527,919
6,161 S1 Corp. ............................................. 1,036,136
------------
4,703,787
------------
INDIA -- 5.57%
225,700 Bharat Heavy Electricals Ltd. ........................ 1,414,511
41,600 Hero Honda Motors Ltd. ............................... 1,212,856
75,000 Housing Development Finance Corp., Ltd. .............. 457,558
2,800 +Hughes Software Systems.............................. 40,496
------------
3,125,421
------------
THAILAND -- 3.79%
452,934 Banpu Public Co., Ltd. (Registered)................... 879,752
163,500 BEC World Public Co., Ltd. (Foreign).................. 886,807
211,300 Matichon Public Co., Ltd. (Foreign)................... 358,792
------------
2,125,351
------------
INDONESIA -- 3.55%
2,967,000 +PT Daya Guna Samudera Tbk............................ 975,281
1,874,500 PT Ramayana Lestari Sentosa Tbk....................... 1,017,521
------------
1,992,802
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Pacific/Asia Fund -- (continued)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
--------- ------------
<C> <S> <C>
COMMON STOCKS -- (continued)
NEW ZEALAND -- 2.18%
813,400 Restaurant Brands New Zealand Ltd. ................... $ 546,580
170,931 Telecom Corp. of New Zealand Ltd. .................... 674,143
------------
1,220,723
------------
AUSTRALIA -- 1.96%
22,562 Brambles Industries Ltd. ............................. 653,201
36,386 Lend Lease Corp., Ltd. ............................... 443,996
------------
1,097,197
------------
PHILIPPINES -- 0.59%
1,266,300 SPI Technologies, Inc. ............................... 333,645
------------
TOTAL COMMON STOCKS (Cost $47,575,012)................ 54,528,568
------------
</TABLE>
<TABLE>
<CAPTION>
No. of Value
Warrants (Note 1)
--------- -----------
<C> <S> <C>
WARRANTS -- 0.70%
PHILIPPINES -- 0.70%
935,300 QueenBee Restaurants -- Jollibee Foods Corp., expiring
03/24/03 at $19.25 (Cost $402,360).................... $ 395,439
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $47,977,372*)....................... 97.93% $54,924,007
OTHER ASSETS & LIABILITIES (NET)............................ 2.07 1,159,161
------ -----------
NET ASSETS.................................................. 100.00% $56,083,168
====== ===========
</TABLE>
- --------
*--Aggregate cost for Federal tax and book purposes.
+--Non-income producing
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
See Notes to Financial Statements
10
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Pacific/Asia Fund -- (continued)
FORWARD FOREIGN CURRENCY CONTRACTS
Under the terms of forward foreign currency contracts open at 9/30/99, the
Pacific/Asia Fund is obligated to deliver currency in exchange for U.S. dollars
as indicated below:
<TABLE>
<CAPTION>
Currency In Net
to Exchange Settlement Unrealized
Deliver for Date Value (Depreciation)
--------------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Sales.......... JPY 399,315,000 $3,690,527 11/8/99 $3,764,544 $(74,017)
Purchases...... JPY 399,315,000 3,764,814 11/8/99 3,764,544 (270)
--------
$(74,287)
========
</TABLE>
- --------
JPY -- Japanese Yen
At September 30, 1999, sector diversification of the Fund's investment
portfolio was as follows:
<TABLE>
<CAPTION>
% of
Net Market
Sector Diversification Assets Value
---------------------- ------ -----------
<S> <C> <C>
Information Technology................................... 28.96% $16,243,224
Consumer Discretionary................................... 26.55 14,888,197
Industrials.............................................. 12.57 7,050,117
Consumer Staples......................................... 11.35 6,365,209
Telecommunication Services............................... 8.11 4,549,602
Financials............................................... 4.80 2,693,773
Materials................................................ 3.59 2,011,733
Health Care.............................................. 2.00 1,122,152
------ -----------
Total Investments........................................ 97.93% $54,924,007
Other Assets and Liabilities (Net)....................... 2.07 1,159,161
------ -----------
Net Assets............................................... 100.00% $56,083,168
====== ===========
</TABLE>
See Notes to Financial Statements
11
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Pan European Fund
<TABLE>
<CAPTION>
Value
Shares (Note 1)
----------- ------------
<C> <S> <C>
COMMON STOCKS -- 98.36%
UNITED KINGDOM -- 23.02%
552,150 Airtours plc........................................ $ 3,516,763
321,600 Capita Group plc.................................... 3,705,008
115,500 Glaxo Wellcome plc.................................. 3,011,010
279,422 Granada Group plc................................... 2,391,327
214,900 Kingfisher plc...................................... 2,302,462
330,000 +Kingston Communication (Hull) plc.................. 2,232,189
175,500 Serco Group plc..................................... 3,928,178
35,600 Shell Transport & Trading Co. ADR................... 1,619,800
235,400 Shell Transport & Trading Co. plc................... 1,758,885
969,096 Siebe plc........................................... 4,720,996
------------
29,186,618
------------
FRANCE -- 20.31%
36,289 Axa................................................. 4,587,483
33,148 Carrefour S.A. ..................................... 5,301,507
39,080 Dassault Systemes S.A. ............................. 1,538,648
34,142 Elf Aquitaine S.A. ................................. 6,216,158
5,020 L'OREAL............................................. 3,202,403
9,373 Total Fina S.A., Class B............................ 1,176,911
53,100 Vivendi............................................. 3,726,425
------------
25,749,535
------------
GERMANY -- 14.09%
38,400 +Global TeleSystems Group,
Inc. ............................................... 756,000
41,560 Mannesmann AG....................................... 6,509,781
47,400 Metro AG............................................ 2,461,394
12,180 SAP AG.............................................. 4,614,029
43,230 +Siemens AG......................................... 3,519,085
------------
17,860,289
------------
NETHERLANDS -- 10.10%
41,600 +Equant N.V. ....................................... 3,381,970
72,699 ING Groep N.V. ..................................... 3,945,315
50,400 STMicroelectronics N.V. ............................ 3,925,768
45,476 Wolters Kluwer N.V. ................................ 1,558,192
------------
12,811,245
------------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note 1)
----------- ------------
<C> <S> <C>
COMMON STOCKS -- (continued)
SWEDEN -- 6.02%
190,931 Celsius AB, Series B................................ $ 2,961,797
150,750 Telefonaktiebolaget LM Ericsson, Class B............ 4,676,988
------------
7,638,785
------------
IRELAND -- 5.56%
445,000 +Eircom plc......................................... 1,934,350
169,136 Irish Continental Group plc......................... 1,709,790
303,300 Irish Life & Permanent plc.......................... 3,404,928
------------
7,049,068
------------
SWITZERLAND -- 5.00%
86 Lindt & Spruengli AG................................ 2,228,452
356 Roche Holding AG.................................... 4,116,354
------------
6,344,806
------------
SPAIN -- 3.07%
295,800 Banco Bilbao Vizcaya S.A. (Registered).............. 3,896,744
------------
ITALY -- 3.01%
780,200 Unicredito Italiano S.p.A. ......................... 3,810,673
------------
PORTUGAL -- 2.91%
136,974 Banco Comercial Portugues S.A. ..................... 3,687,582
------------
FINLAND -- 1.78%
25,280 Nokia Oy, Class A................................... 2,262,331
------------
TURKEY -- 1.23%
270,500,000 +Global Menkul Degerler A.S. ....................... 381,325
140,670,034 +Medya Holding...................................... 533,892
60,763,275 Turk Sise ve Cam Fabrikalari A.S. .................. 645,731
------------
1,560,948
------------
CROATIA -- 1.19%
103,850 ++Pliva d.d. GDR.................................... 1,113,791
36,900 Pliva d.d. GDR (Registered)......................... 395,753
------------
1,509,544
------------
POLAND -- 1.07%
146,700 +Elektrim Spolka Akcyjna S.A. ...................... 1,360,588
------------
TOTAL COMMON STOCKS (Cost $109,014,727)............. 124,728,756
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Pan European Fund -- (continued)
<TABLE>
<CAPTION>
Principal Value
Amount (Note 1)
--------- ------------
<C> <S> <C>
DEMAND NOTES -- 1.19%
UNITED STATES -- 1.19%
$700,000 Associates Corp. of North America Master Notes........ $ 700,000
804,000 General Electric Co. Promissory Notes................. 804,000
------------
TOTAL DEMAND NOTES (Cost $1,504,000).................. 1,504,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $110,518,727*)...................................... 99.55% $126,232,756
OTHER ASSETS & LIABILITIES (NET).......................... 0.45 576,125
------ ------------
NET ASSETS................................................ 100.00% $126,808,881
====== ============
</TABLE>
- --------
*-- Aggregate cost for Federal tax and book purposes.
+-- Non-income producing
++-- 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 these securities amounted to $1,113,791 or 0.88% of net assets.
ADR-- American Depositary Receipt
GDR-- Global Depositary Receipt
See Notes to Financial Statements
13
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Pan European Fund -- (continued)
At September 30, 1999, sector diversification of the Fund's investment
portfolio was as follows:
<TABLE>
<CAPTION>
% of
Net Market
Sector Diversification Assets Value
---------------------- ------ ------------
<S> <C> <C>
Financials.............................................. 18.70% $ 23,714,049
Industrials............................................. 17.27 21,905,441
Consumer Discretionary.................................. 14.76 18,711,271
Information Technology.................................. 13.42 17,017,764
Telecommunication Services.............................. 11.68 14,814,290
Energy.................................................. 8.50 10,771,753
Health Care............................................. 6.81 8,636,908
Consumer Staples........................................ 4.28 5,430,855
Utilities............................................... 2.94 3,726,425
Demand Notes............................................ 1.19 1,504,000
------ ------------
Total Investments....................................... 99.55% $126,232,756
Other Assets and Liabilities (Net)...................... 0.45 576,125
------ ------------
Net Assets.............................................. 100.00% $126,808,881
====== ============
</TABLE>
See Notes to Financial Statements
14
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Latin America Fund
<TABLE>
<CAPTION>
Value
Shares (Note 1)
----------- -----------
<C> <S> <C>
COMMON STOCKS -- 73.82%
MEXICO -- 42.03%
150,282 Cemex S.A., CPO..................................... $ 723,592
283,200 +Cifra S.A. de C.V., Series V....................... 446,041
13,398 Fomento Economico Mexicano S.A. de C.V. ADR......... 419,525
231,200 Grupo Continental S.A. ............................. 279,538
512,600 Grupo Elektra S.A. de C.V. CPO...................... 244,618
225,200 +Grupo Financiero Banamex Accival S.A. de C.V. Class
O................................................... 405,292
19,400 Grupo Imsa S.A. de C.V. ADR......................... 307,975
184,358 Grupo Modelo S.A. de C.V. Series C.................. 467,503
33,900 +Grupo Televisa S.A. CPO............................ 673,212
101,300 Organizacion Soriana S.A. de C.V., Series B......... 406,457
19,945 Telefonos de Mexico S.A. ADR, Class L............... 1,421,081
-----------
5,794,834
-----------
BRAZIL -- 13.19%
34,000 Cia Vale do Rio Doce................................ 540,386
14,738,500 Companhia Siderurgica Nacional...................... 372,495
71,100 +Companhia Paranaense de Energia -- Copel ADR....... 466,594
135,411,400 Tele Celular Sul Participacoes S.A. ................ 169,353
15,210 Unibanco -- Uniao de Bancos Brasileiros GDR......... 269,027
-----------
1,817,855
-----------
ARGENTINA -- 7.71%
17,200 Banco de Galicia y Buenos Aires S.A. de C.V. ADR.... 357,975
59,900 Perez Companc S.A., Class B......................... 362,457
13,000 Telefonica de Argentina S.A. ADR.................... 342,875
-----------
1,063,307
-----------
CHILE -- 5.90%
17,129 Cia de Telecomunicaciones de Chile S.A. ADR......... 309,393
13,346 Vina Concha Y Toro S.A. ADR......................... 503,811
-----------
813,204
-----------
PERU -- 2.54%
33,500 Credicorp Ltd. ..................................... 349,656
-----------
VENEZUELA -- 2.45%
12,600 Compania Anonima Nacional Telefonos de Venezuela
ADR................................................. 337,837
-----------
TOTAL COMMON STOCKS (Cost $10,892,416).............. 10,176,693
-----------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note 1)
----------- -----------
<C> <S> <C>
PREFERRED STOCKS -- 21.25%
BRAZIL -- 21.25%
8,687,800 +Banco do Estado de Sao Paulo S.A. .................. $ 205,990
142,460,300 Cia Energetica do Ceara -- Coelce pref A............. 296,947
26,400,000 Eletrobras S.A. ..................................... 447,108
17,258,200 Gerdau S.A. ......................................... 278,793
3,718,500 Petrobras S.A........................................ 565,817
28,610,000 Tele Celular Sul Participacoes S.A................... 54,417
30,998,500 Tele Centro Sul Participacoes S.A.................... 345,684
23,187,000 Tele Norte Leste Participacoes S.A................... 369,735
23,555,200 +Telesp Participacoes S.A............................ 364,559
-----------
TOTAL PREFERRED STOCKS (Cost $3,360,513)............. 2,929,050
-----------
<CAPTION>
Principal
Amount
-----------
<C> <S> <C>
CONVERTIBLE BONDS -- 0.00%
BRAZIL -- 0.00%
$45,600 Cia Vale do Rio Doce
Zero Coupon, 07/01/06
(Cost $0)............................................ --
-----------
DEMAND NOTES -- 5.79%
UNITED STATES -- 5.79%
383,000 Associates Corp. of North America Master Notes....... 383,000
416,000 General Electric Co. Promissory Notes................ 416,000
-----------
TOTAL DEMAND NOTES (Cost $799,000)................... 799,000
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $15,051,929*)........................................ 100.86% $13,904,743
OTHER ASSETS & LIABILITIES (NET)........................... (0.86) (118,674)
------ -----------
NET ASSETS................................................. 100.00% $13,786,069
====== ===========
</TABLE>
- --------
*-- Aggregate cost for Federal tax and book purposes.
+-- Non-income producing
ADR-- American Depositary Receipt
GDR-- Global Depositary Receipt
See Notes to Financial Statements
15
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Latin America Fund--(continued)
At September 30, 1999, sector diversification of the Fund's investment
portfolio was as follows:
<TABLE>
<CAPTION>
% of
Net Market
Sector Diversification Assets Value
---------------------- ------ -----------
<S> <C> <C>
Telecommunication Services............................... 26.95% $ 3,714,935
Materials................................................ 16.13 2,223,240
Consumer Discretionary................................... 12.84 1,770,328
Consumer Staples......................................... 12.12 1,670,377
Financials............................................... 11.52 1,587,941
Utilities................................................ 8.78 1,210,649
Energy................................................... 6.73 928,273
Demand Notes............................................. 5.79 799,000
------ -----------
Total Investments........................................ 100.86% $13,904,743
Other Assets and Liabilities (Net)....................... (0.86) (118,674)
------ -----------
Net Assets............................................... 100.00% $13,786,069
====== ===========
</TABLE>
See Notes to Financial Statements
16
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Emerging Markets Fund
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- -----------
<C> <S> <C>
COMMON STOCKS -- 94.01%
TAIWAN -- 13.18%
221,480 +Chinatrust Commercial Bank.......................... $ 191,739
39,200 +Hon Hai Precision Industry Co., Ltd. ............... 257,618
80,080 President Chain Store Corp. ......................... 227,715
70,000 +Taiwan Semiconductor Manufacturing Co. ............. 295,261
-----------
972,333
-----------
SOUTH KOREA -- 11.53%
21,500 ++/+Hanvit Bank GDR.................................. 155,875
6,338 +Korea Telecom Corp. ADR............................. 234,506
7,900 LG Cable Ltd. ....................................... 139,679
4,560 Samsung Fire & Marine Insurance...................... 201,000
11,585 +SK Telecom Co. Ltd. ADR............................. 119,471
-----------
850,531
-----------
MEXICO -- 10.94%
106,300 +Cifra S.A. de C.V., Series V........................ 167,423
80,300 +Grupo Financiero Banamex Accival S.A. de C.V., Class
O.................................................... 144,516
6,950 +Grupo Televisa S.A. GDR............................. 277,566
3,050 Telefonos de Mexico S.A.,
Class L ADR.......................................... 217,312
-----------
806,817
-----------
SOUTH AFRICA -- 10.63%
816 Edgars Stores Ltd. .................................. 6,676
210,878 Metro Cash & Carry Ltd. ............................. 168,773
8,720 Nedcor Ltd. ......................................... 170,983
98,100 +Old Mutual plc...................................... 206,096
27,347 South African Breweries plc.......................... 232,090
-----------
784,618
-----------
INDIA -- 9.92%
20,000 +ICICI Ltd. ADR...................................... 240,000
38,200 +The India Fund, Inc. ............................... 491,825
-----------
731,825
-----------
HONG KONG -- 6.21%
83,000 Asia Satellite Telecommunications Holdings Ltd. ..... 211,566
2,550 +China Telecom (Hong Kong) Ltd. ADR.................. 157,622
350,000 Hengan International Group Co., Ltd. ................ 89,214
-----------
458,402
-----------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- -----------
<C> <S> <C>
COMMON STOCKS -- (continued)
GREECE -- 5.72%
2,800 Alpha Credit Bank..................................... $ 224,519
8,470 Hellenic Telecommunications Organization S.A. ........ 197,577
-----------
422,096
-----------
CHILE -- 4.12%
6,610 Cia de Telecomunicaciones de Chile S.A. ADR........... 119,393
4,896 Vina Concha Y Toro S.A. ADR........................... 184,824
-----------
304,217
-----------
TURKEY -- 4.09%
87,630 ++Akbank T.A.S. ADR................................... 258,509
30,750,000 Global Menkul Degerler A.S. .......................... 43,348
-----------
301,857
-----------
BRAZIL -- 3.32%
15,420 +Cia Vale do Rio Doce................................. 245,081
-----------
EGYPT -- 2.35%
7,400 +Egyptian Company for Mobile Services (MobiNil)....... 173,607
-----------
ARGENTINA -- 2.10%
5,870 Telefonica de Argentina S.A. ADR...................... 154,821
-----------
THAILAND -- 2.05%
27,900 BEC World Public Co., Ltd. (Foreign).................. 151,327
-----------
POLAND -- 1.77%
14,100 +Elektrim Spolka Akcyjna S.A. ........................ 130,772
-----------
ISRAEL -- 1.75%
71,580 +Makhteshim-Agan Industries Ltd. ..................... 128,837
-----------
MALAYSIA -- 1.62%
53,200 O.Y.L. Industries Bhd. ............................... 119,703
-----------
HUNGARY -- 1.60%
4,325 Magyar Tavkozlesi RT ADR.............................. 117,856
-----------
RUSSIA -- 1.11%
3,000 LUKoil Holding Co. ADR................................ 81,600
-----------
TOTAL COMMON STOCKS (Cost $7,067,847)................. 6,936,300
-----------
</TABLE>
See Notes to Financial Statements
17
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Emerging Markets Fund -- (continued)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- -----------
<C> <S> <C>
PREFERRED STOCKS -- 5.95%
BRAZIL -- 5.95%
5,729,000 Banco do Estado de Sao
Paulo S.A. ........................................... $ 135,836
22,663,000 Companhia Paranaense de Energia-Copel pref B.......... 149,985
9,895,000 +Telesp Participacoes S.A. ........................... 153,143
-----------
TOTAL PREFERRED STOCKS (Cost $656,070)................ 438,964
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $7,723,917*)......................................... 99.96% $ 7,375,264
OTHER ASSETS & LIABILITIES (NET)........................... 0.04 3,034
------ -----------
NET ASSETS................................................. 100.00% $ 7,378,298
------ -----------
</TABLE>
- --------
*-- Aggregate cost for Federal tax and book purposes.
+-- Non-income producing
++-- 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 these securities amounted to $414,384 or 5.62% of net assets.
ADR-- American Depositary Receipt
GDR-- Global Depositary Receipt
See Notes to Financial Statements
18
<PAGE>
Excelsior Funds, Inc.
Portfolio of Investments September 30, 1999 (Unaudited)
Emerging Markets Fund -- (continued)
At September 30, 1999, sector diversification of the Fund's investment
portfolio was as follows:
<TABLE>
<CAPTION>
% of
Net Market
Sector Diversification Assets Value
---------------------- ------ ----------
<S> <C> <C>
Financials................................................ 26.73% $1,972,421
Telecommunication Services................................ 22.30 1,645,308
Consumer Discretionary.................................... 11.92 879,225
Consumer Staples.......................................... 11.36 837,950
Information Technology.................................... 7.49 552,878
Other..................................................... 6.66 491,825
Industrials............................................... 5.29 390,155
Materials................................................. 5.07 373,918
Utilities................................................. 2.03 149,984
Energy.................................................... 1.11 81,600
------ ----------
Total Investments......................................... 99.96% $7,375,264
Other Assets and Liabilities (Net)........................ 0.04 3,034
------ ----------
Net Assets................................................ 100.00% $7,378,298
====== ==========
</TABLE>
See Notes to Financial Statements
19
<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 International
Fund, Pacific/Asia Fund, Pan European Fund, Latin America Fund and Emerging
Markets 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. are presented separately.
(a) Portfolio valuation:
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 a 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 traded on more than one exchange is valued
at the quotation on the exchange determined to be the primary market on
which the security is traded. Securities for which market quotations are
not readily available are valued at fair value, pursuant to guidelines
adopted by Excelsior Fund's Board of Directors. Investments in securities
which are primarily traded on a domestic exchange are valued at the last
sale price on that exchange or, if there was no recent sale, at the last
current bid quotation.
Investments 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. Investment
valuations, other assets, and liabilities initially expressed in foreign
currencies are converted each business day into U.S. dollars based upon
current exchange rates. Purchases and sales of foreign investments and
income and expenses are converted into U.S. dollars based upon currency
exchange rates prevailing on the respective dates of such transactions.
Gains and losses attributable to foreign currency exchange rates are
recorded for financial statement purposes as net realized gains and losses
on investments. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Forward foreign currency exchange contracts: The Portfolios'
participation in forward currency exchange contracts will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging involves the purchase or sale of foreign currency with
respect to specific receivables or payables of a Portfolio generally
arising in connection with the purchase or
20
<PAGE>
sale of its portfolio securities. Risk may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts and is generally limited to the amount of unrealized
gain on the contracts, if any, at the date of default. Risk may also arise
from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. Contracts are marked-to-market daily and the change in
market value is recorded as unrealized appreciation or depreciation.
Realized gains or losses arising from such transactions are included in net
realized gains or losses from foreign currency transactions.
(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, including, where applicable, amortization of
discount on investments, is recorded on the accrual basis. Dividend income
is recorded on the ex-dividend date, except for certain dividends from
foreign securities, which are recorded as soon as the Portfolios are
informed of the dividend.
(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.
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 and paid semi-annually.
Net realized capital gains, unless offset by any available capital loss
carryforward, are distributed to shareholders at least annually. Dividends
and distributions are recorded on the ex-dividend date.
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
foreign currency transactions, passive foreign investment companies and
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
21
<PAGE>
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, 1999, 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,
----------------------
2006 2007 Total
---------- ----------- -----------
<S> <C> <C> <C>
International Fund........................ -- $ 2,133,000 $ 2,133,000
Pacific/Asia Fund......................... $4,966,000 21,038,000 26,004,000
Pan European Fund......................... -- -- --
Latin America Fund........................ -- 13,841,000 13,841,000
Emerging Markets Fund..................... -- 303,000 303,000
</TABLE>
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 for 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>
International Fund................ $58,707,329 $(10,226,203) $48,481,126
Pacific/Asia Fund................. 11,765,347 (4,818,712) 6,946,635
Pan European Fund................. 26,796,782 (11,082,753) 15,714,029
Latin America Fund................ 628,115 (1,775,301) (1,147,186)
Emerging Markets Fund............. 715,257 (1,063,910) (348,653)
</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 rate of 1% of the average daily
net assets of each of the International Fund, Pacific/Asia Fund, Pan European
Fund and Latin America Fund and 1.25% of the average daily net assets of the
Emerging Markets 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, at the annual rate of .20% of the
22
<PAGE>
average daily net assets of each Portfolio. For the six months ended September
30, 1999, administration fees charged by U.S. Trust Company were as follows:
<TABLE>
<S> <C>
International Fund................................................... $99,460
Pacific/Asia Fund.................................................... 21,693
Pan European Fund.................................................... 62,745
Latin America Fund................................................... 7,066
Emerging Markets Fund................................................ 3,187
</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. Until further notice to Excelsior Fund, U.S. Trust intends
to voluntarily waive fees and reimburse expenses to the extent necessary for
Pacific/Asia Fund, Pan European Fund and Latin America Fund to maintain an
annual expense ratio of not more than 1.67% and for Emerging Markets Fund to
maintain an annual expense ratio of not more than 1.65%. For the six months
ended September 30, 1999, U.S. Trust voluntarily waived investment advisory
fees totaling $2,444 and $14,017 for Latin America Fund and Emerging Markets
Fund, respectively.
With regard to the International Fund, Pacific/Asia Fund and Pan European
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 1.50% of each Portfolio's average daily net
assets.
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 services fees paid to affiliates of U.S. Trust amounted to
$190,980 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>
International Fund................................... $117,130 $ 326
Pacific/Asia Fund.................................... 22,744 739
Pan European Fund.................................... 49,967 1,683
Latin America Fund................................... 9,719 986
Emerging Markets Fund................................ 4,338 --
</TABLE>
Edgewood Services, Inc. (the "Distributor"), a wholly-owned subsidiary of
Federated Investors, Inc., serves as the distributor of Excelsior Fund.
23
<PAGE>
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 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>
International Fund................................... $57,706,588 $47,597,867
Pacific/Asia Fund.................................... 39,053,335 23,897,140
Pan European Fund.................................... 20,461,032 47,847,583
Latin America Fund................................... 9,605,805 8,751,868
Emerging Markets Fund................................ 4,299,234 2,447,852
</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
International Fund and 500 million shares each of the Pacific/Asia Fund, Pan
European Fund, Latin America Fund and Emerging Markets 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>
International Fund
------------------------------------------------------
Six Months Ended Year Ended
09/30/99 03/31/99
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold.................... 12,406,798 $ 167,590,793 15,653,287 $ 188,824,967
Issued as reinvestment
of dividends........... -- -- 7,975 102,649
Redeemed................ (10,972,978) (149,041,851) (15,286,397) (183,702,503)
----------- ------------- ----------- -------------
Net Increase............ 1,433,820 $ 18,548,942 374,865 $ 5,225,113
=========== ============= =========== =============
<CAPTION>
Pacific/Asia Fund
------------------------------------------------------
Six Months Ended Year Ended
09/30/99 03/31/99
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold.................... 10,322,429 $ 86,879,237 7,320,979 $ 41,225,240
Issued as reinvestment
of dividends........... -- -- 14,626 77,077
Redeemed................ (8,198,534) (71,583,711) (9,819,963) (53,977,510)
----------- ------------- ----------- -------------
Net Increase (Decrease). 2,123,895 $ 15,295,526 (2,484,358) $ (12,675,193)
=========== ============= =========== =============
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Pan European Fund
------------------------------------------------------
Six Months Ended Year Ended
09/30/99 03/31/99
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold.................... 9,332,040 $ 111,968,583 20,254,265 $ 267,588,363
Issued as reinvestment
of dividends........... 58,570 703,430 71,063 861,284
Redeemed................ (11,234,316) (135,947,669) (22,279,568) (290,910,879)
----------- ------------- ----------- -------------
Net Decrease............ (1,843,706) $ (23,275,656) (1,954,240) $ (22,461,232)
=========== ============= =========== =============
<CAPTION>
Latin America Fund
------------------------------------------------------
Six Months Ended Year Ended
09/30/99 03/31/99
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold.................... 3,445,717 $ 17,986,606 4,637,513 $ 29,862,001
Issued as reinvestment
of dividends........... 16,775 86,729 103,826 468,733
Redeemed................ (3,457,896) (17,888,308) (10,130,927) (61,904,139)
----------- ------------- ----------- -------------
Net Increase (Decrease). 4,596 $ 185,027 (5,389,588) $ (31,573,405)
=========== ============= =========== =============
<CAPTION>
Emerging Markets Fund
------------------------------------------------------
Six Months Ended Year Ended
09/30/99 03/31/99
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold.................... 497,460 $ 2,278,866 974,643 $ 4,604,110
Issued as reinvestment
of dividends........... 104 494 124 534
Redeemed................ (92,246) (406,259) (568,849) (2,539,114)
----------- ------------- ----------- -------------
Net Increase............ 405,318 $ 1,873,101 405,918 $ 2,065,530
----------- ------------- ----------- -------------
</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 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.
25
<PAGE>
7. 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, brokers-dealers or others with which the Funds do business.
Furthermore, many foreign countries are not as prepared as the U.S. for the
year 2000 transition. As a result, computer difficulties in foreign markets
and with foreign institutions as a result of the Year 2000 Problem may add to
the possibility of losses to the Funds and their shareholders.
26
