<PAGE>
[LOGO OF EXCELSIOR APPEARS HERE]
TAX-EXEMPT FIXED INCOME PORTFOLIOS
ANNUAL REPORT
MARCH 31, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LETTER TO SHAREHOLDERS..................................................... 1
ADVISER'S FIXED INCOME MARKET REVIEW....................................... 2
ADVISER'S INVESTMENT REVIEWS
Short-Term Tax-Exempt Securities Fund.................................... 3
Intermediate-Term Tax-Exempt Fund........................................ 4
New York Intermediate-Term Tax-Exempt Fund............................... 5
Long-Term Tax-Exempt Fund................................................ 6
STATEMENTS OF ASSETS AND LIABILITIES....................................... 7
STATEMENTS OF OPERATIONS................................................... 8
STATEMENTS OF CHANGES IN NET ASSETS........................................ 9
FINANCIAL HIGHLIGHTS -- SELECTED PER SHARE DATA AND RATIOS................. 10
PORTFOLIOS OF INVESTMENTS
Tax-Exempt Money Fund.................................................... 12
Short-Term Tax-Exempt Securities Fund.................................... 18
Intermediate-Term Tax-Exempt Fund........................................ 19
New York Intermediate-Term Tax-Exempt Fund............................... 21
Long-Term Tax-Exempt Fund................................................ 23
NOTES TO FINANCIAL STATEMENTS.............................................. 24
INDEPENDENT AUDITORS' REPORT............................................... 31
FEDERAL TAX INFORMATION.................................................... 32
</TABLE>
For shareholder account information, current price and yield quotations, or to
make an initial purchase or obtain a prospectus, call the appropriate telephone
number listed below:
. INITIAL PURCHASE AND PROSPECTUS INFORMATION AND SHAREHOLDER SERVICES 1-800-
446-1012
. CURRENT PRICE AND YIELD INFORMATION 1-800-233-9180
This report must be preceded or accompanied by a current prospectus.
Prospectuses containing more complete information including charges and
expenses regarding Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc.
may be obtained by contacting the Funds at 1-800-446-1012
Investors should read the current prospectus carefully prior to investing or
sending money.
Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. are sponsored and
distributed by Edgewood Services, Inc.
You may write to Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. at
the following address:
EXCELSIOR FUNDS, INC.
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, ITS PARENT OR AFFILIATES
AND SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN THE FUNDS INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. FUND SHARES ARE NOT
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
<PAGE>
LETTER TO SHAREHOLDERS
- -------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report for the Excelsior Funds, Inc. and
Excelsior Tax-Exempt Funds, Inc. for the fiscal year ended March 31, 1996.
There were several exciting developments during this tenth anniversary year
for the funds.
On January 1, 1996 the funds changed their name from UST Master Funds to
Excelsior Funds. This was done to more clearly differentiate our funds in the
marketplace and to make the funds more attractive to other financial
institutions through which we seek to distribute them. At the same time, the
funds entered alliances with a new distributor, Edgewood Services, and another
fund company, Excelsior Institutional Trust. These strategic alliances have
expanded our fund family's product offerings to reach new markets and have
enabled the funds to consolidate service providers, thereby reducing certain
operating expenses of the funds. These cost savings are being passed on to
shareholders.
The extended Excelsior Funds Family now consists of thirteen domestic
equity, five international, ten fixed-income, and five money market funds
totalling $4.2 billion in assets. These funds have been designed to provide a
comprehensive range of investment options and offer investors, both individual
and institutional, an opportunity to allocate holdings in accordance with
their specific investment objectives.
Excelsior Fund shareholders are serviced by a dedicated team of
professionals. We recognize the importance of excellent customer service and
are committed to meeting investor needs in a responsible and efficient manner.
We appreciate your participation in the funds during our first decade of
operation and look forward to serving you in the years to come.
(ART)
Alfred C. Tannachion
Chairman of the Board and President
1
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
ADVISER'S FIXED INCOME MARKET REVIEW
- -------------------------------------------------------------------------------
Fiscal 1996 proved an uneven year for the fixed-income markets. During the
fiscal first quarter, the markets marched higher--Employment, income and
consumer spending all slowed. A higher-than-desired inventory buildup applied
a brake to economic growth. Inflation moved higher, but was interpreted by the
Federal Reserve as more cyclical than secular and no reason to hike rates. In
fact, the market was way ahead of the Fed in moving rates lower. The municipal
bond market did not match the interest rate declines of the Treasury market,
however, due to tax reform proposals which, if enacted, would threaten the tax
advantages of municipal securities.
Fiscal second quarter bond market performance, though mildly positive, was
actually quite volatile as investors waited nervously for each release of
economic data for an indication of what the Federal Reserve might do with
interest rates. Fortunately, economic data confirmed that the economy was
slowing to a more non-inflationary pace. Once the Treasury auctions were
placed, the market rallied. The municipal market behaved similarly, ending
basically unchanged, though yields on short-term municipals declined more than
those of longer-maturity issues, due largely to speculation regarding the
various flat tax proposals in Congress.
For the third fiscal quarter, yields continued to drop as expectations for
moderate economic growth and weak inflation permeated the market. A drastic
change in the dollar/yen exchange rate policy by the Bank of Japan helped
lower U.S. interest rates. In addition, consumer spending and borrowing were
adversely impacted by a wave of corporate "downsizing." Relatively high
inventory levels slowed production during the fall. Moreover, retail sales
were disappointing during the important Christmas season, and the
manufacturing sector was soft as well. As for the municipal market, it behaved
in like fashion as investors put aside fears of a flat tax and focused on
weakness in the economy and moderate inflation expectations.
The fiscal fourth quarter saw a return to volatility, and yields finished up
across the board. At the start of the quarter, continued subdued inflation,
harsh winter weather, the government shutdown, and other factors all
contributed to the sluggish economic picture. Consensus expectations called
for the Federal Reserve to ease but a number of negative factors emerged.
First, it became clear that the balanced budget wasn't going to happen. Second
came Fed Chairman Greenspan's Humphrey Hawkins testimony that the latest Fed
easing was only "insurance" as he saw a strengthening in the economy. And
third, hedge funds and speculators began to sell 5-year Treasuries. The fixed
income markets sold off in January and February as a consequence. Even then,
results weren't disastrous. All of this changed, however, and any talk of
further Fed easing ceased, with the release of higher-than-expected non-farm
payroll numbers in late February. The market took the news hard, though a
rebound on somewhat ambiguous economic data moved it up toward quarter end.
Municipal issues outperformed Treasuries during the quarter--especially
shorter maturities. The rise and eventual demise of flat-tax speculation did
not appear to be a major factor; municipal outperformance was due,
essentially, to the relative lack of supply.
2
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(formerly UST Master Tax-Exempt Funds, Inc.)
ADVISER'S INVESTMENT REVIEW
SHORT-TERM TAX-EXEMPT SECURITIES FUND
- -------------------------------------------------------------------------------
Fiscal year 1996 proved to be a good year for the short-end of the municipal
market--particularly within five years. The municipal yield curve steepened
with the treasury yield curve as the Federal Reserve lowered the federal funds
rate three times. In addition, demand for short-term municipals increased as
profitable insurance companies entered the market and cautious investors
limited their maturities. Throughout fiscal year 1996, we maintained a
portfolio of high quality general obligation and revenue bonds with laddered
maturities ranging from one to six years. The average life was consistently at
three years (the maximum allowable average maturity) and cash equivalents were
steadily decreased from 17% at the start to 9.5% at fiscal year-end. This
strategy worked well producing a total rate of return of 5.42%,* ranking
eleventh of thirty one funds in the Lipper Short Municipal Debt Fund
category** for the twelve months ended March 31, 1996.
----------------------------------------------
Short-Term Tax-Exempt Securities Fund+
----------------------------------------------
Average Annual Total Return Ended on 3/31/96
Reflects Maximum Sales Charge of 4.5%
----------------------------------------------
1 year Since Inception (12/31/92)
----------------------------------------------
0.65% 2.57%
----------------------------------------------
<TABLE>
<CAPTION>
Short-Term Tax-Exempt Securties Fund Short-Term Tax-Exempt Securties Fund Lehman Brothers 3 Year
(reflects maximum sales charge) (exclusive of sales charge) Municipal Bond Index**
<S> <C> <C> <C>
12/31/92 9,550 10,000 10,000
3/31/93 9,708 10,165 10,203
9/30/93 9,992 10,463 10,503
3/31/94 9,955 10,425 10,480
9/30/94 10,093 10,569 10,690
3/31/95 10,299 10,784 11,000
9/30/95 10,667 11,170 11,470
3/31/96 10,857 11,369 11,710
</TABLE>
Past performance is not predictive of future performance. Investment returns
and principal values will vary and shares may be worth more or less at
redemption than their original cost. A portion of the Fund's income may be
subject to the Alternative Minimum Tax and some investors may be subject to
certain state and local taxes.
The above illustration compares a $10,000 investment made in Short-Term Tax-
Exempt Securities Fund on 12/31/92 (inception date) to a $10,000 investment
made in the Lehman Brothers 3 Year Municipal Bond Index on that date. All
dividends and capital gain distributions are reinvested.
The Fund's performance takes into account fees and expenses. The Lehman
Brothers 3 Year Municipal Bond Index is an unmanaged total return performance
benchmark for investment-grade tax exempt bonds maturing in three years,
calculated by using municipal bonds selected as representative of the market.
The Index does not take into account charges, fees and other expenses. Further
information relating to Fund performance is contained in the Financial
Highlights section of the Prospectus and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lipper Analytical Services, Inc.--Lipper is an independent mutual
fund performance monitor.
*** Source: Lehman Brothers.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
3
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(formerly UST Master Tax-Exempt Funds, Inc.)
ADVISER'S INVESTMENT REVIEW
INTERMEDIATE-TERM TAX-EXEMPT FUND
- -------------------------------------------------------------------------------
Fiscal 1996 proved to be a very good year for the Intermediate-Term Tax-
Exempt Fund. Interest rates declined precipitously in calendar year 1995 as
the Federal Reserve lowered interest rates three times to stimulate weak
economic conditions.
The Fund began the year fully invested in a diverse number of high quality
"essential services" revenue bonds and State general obligation bonds. During
the second fiscal quarter, interest rates rose abruptly after a "temporary"
inflation scare. Recognizing that this was an aberration given otherwise
moderate economic growth and inflation, the Fund was restructured moderately
with lower coupon issues to enhance investment results. As interest rates
declined sharply for the balance of 1995, the Fund performed exceptionally
well.
The final fiscal quarter saw interest rates rise unexpectedly as market
participants anticipated stronger economic growth and inflation. The average
maturity of the Fund was reduced slightly during the quarter to enhance its
performance.
With a total return of 8.30%* the Fund completed an excellent fiscal year
ended March 31, 1996, ranking number six among 135 funds in the Lipper
Intermediate Municipal Debt Fund category.** The Fund's long term performance
has also been excellent, ranking seventh and third among 31 and 14 funds,
respectively in the same Lipper category for the five and ten years ended
March 31, 1996, with total returns of 42.45%* and 103.68%,* respectively.
-----------------------------------------------------------
Intermediate-Term Tax-Exempt Fund+
-----------------------------------------------------------
Average Annual Total Return Ended on 3/31/96
Reflects Maximum Sales Charge of 4.5%
-----------------------------------------------------------
1 year 5 years 10 years Since Inception (12/31/85)
-----------------------------------------------------------
3.48% 6.34% 6.88% 7.75%
-----------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate-Term Tax-Exempt Fund Intermediate-Term Tax-Exempt Fund Lehman Brothers 5 Year
(reflects maximum sales charge) (exclusive of sales charge) Municipal G.O. Bond Index**
<S> <C> <C> <C>
12/3/85 9,550 10,000 10,000
3/31/86 10,615 11,119 10,517
3/31/87 11,689 12,244 11,588
3/31/88 12,316 12,901 12,037
3/31/89 13,003 13,621 12,265
3/31/90 13,971 14,635 13,438
3/31/91 15,178 15,899 14,653
3/31/92 16,385 17,163 15,945
3/31/93 18,302 19,171 17,577
3/31/94 18,774 19,666 18,018
3/31/95 19,964 20,912 19,100
3/31/96 21,621 22,648 20,550
</TABLE>
Past performance is not predictive of future performance. Investment returns
and principal values will vary and shares may be worth more or less at
redemption than their original cost. A portion of the Fund's income may be
subject to the Alternative Minimum Tax and some investors may be subject to
certain state and local taxes.
The above illustration compares a $10,000 investment made in Intermediate-
Term Tax-Exempt Securities Fund on 12/3/85 (inception date) to a $10,000
investment made in the Lehman Brothers 5 Year Municipal G.O. Bond Index on
that date. For comparative purposes, the value of the Index on 11/30/85 is
used as the beginning value on 12/3/85. All dividends and capital gain
distributions are reinvested.
The Fund's performance takes into account fees and expenses. The Lehman
Brothers 5 year Municipal G.O. Bond Index is an unmanaged total return
performance benchmark for investment-grade tax-exempt government obligation
bonds maturing in five years, calculated by using municipal bonds selected as
representative of the market. The Index does not take into account charges,
fees and other expenses. Further information relating to Fund performance is
contained in the Financial Highlights section of the Prospectus and elsewhere
in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lipper Analytical Services, Inc.--Lipper is an independent mutual
fund performance monitor.
*** Source: Lehman Brothers.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
4
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(formerly UST Master Tax-Exempt Funds, Inc.)
ADVISER'S INVESTMENT REVIEW
NEW YORK INTERMEDIATE-TERM TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
High quality New York Tax-Exempt securities that are appropriate for the Fund
were in short supply during fiscal year 1996. As a result, a modest amount of
non-New York issues were added to the portfolio during the year.
The Fund ended the first fiscal quarter defensively, with 15% of its assets
in cash. Early in the second fiscal quarter, prior to interest rates rising
abruptly, much of the cash was invested in intermediate term U.S. Treasury-
backed, pre-refunded bonds. Late in the fiscal third quarter the Fund was
restructured, as additional cash was committed to the market and pre-refunded
bonds were sold in favor of lower coupon issues with slightly longer
maturities. Although interest rates rose unexpectedly in the final fiscal
quarter, as stronger economic growth and inflation were anticipated, the Fund
completed its fiscal year ended March 31, 1996, with a respectable return of
6.77%.* For the five year period ended March 31, 1996, the Fund produced a
return of 35.39%.*
----------------------------------------------
New York Intermediate-Term Tax-Exempt Fund+
----------------------------------------------
Average Annual Total Return Ended on 3/31/96
Reflects Maximum Sales Charge of 4.5%
----------------------------------------------
1 year 5 years Since Inception (5/31/90)
----------------------------------------------
1.94% 5.26% 5.81%
----------------------------------------------
<TABLE>
<CAPTION>
New York Intermediate-Term New York Intermediate-Term
Tax-Exempt Fund Tax-Exempt Fund Lehman Brothers 5 Year
(reflects maximum sales charge) (exclusive of sales charge) Municipal Bond Index**
<S> <C> <C> <C>
5/31/90 9,550 10,000 10,000
3/31/91 10,267 10,754 10,797
3/31/92 11,028 11,552 11,775
3/31/93 12,050 12,623 12,997
3/31/94 12,399 12,988 13,660
3/31/95 13,019 13,638 14,150
3/31/96 13,900 14,561 15,180
</TABLE>
Past performance is not predictive of future performance. Investment returns
and principal values will vary and shares may be worth more or less at
redemption than their original cost. A portion of the Fund's income may be
subject to the Alternative Minimum Tax.
The above illustration compares a $10,000 investment made in New York
Intermediate-Term Tax-Exempt Fund on 5/31/90 (inception date) to a $10,000
investment made in the Lehman Brothers 5 Year Municipal Bond Index on that
date. All dividends and capital gain distributions are reinvested.
The Fund invests primarily in New York municipal securities and its
performance takes into account fees and expenses. The Lehman Brothers 5 Year
Municipal Bond Index is an unmanaged total return performance benchmark for
investment-grade tax exempt bonds maturing in five years, calculated by using
municipal bonds selected as representative of the market. The Index does not
take into account charges, fees and other expenses. Further information
relating to Fund performance is contained in the Financial Highlights section
of the Prospectus and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lehman Brothers.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
5
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(formerly UST Master Tax-Exempt Funds, Inc.)
ADVISER'S INVESTMENT REVIEW
LONG-TERM TAX-EXEMPT FUND
- -------------------------------------------------------------------------------
Fiscal 1996 proved to be a very good year for the Long-Term Tax-Exempt Fund.
Long-term interest rates declined precipitously in calendar year 1995 as the
Federal Reserve lowered interest rates three times to stimulate weak economic
conditions.
The Fund began the year fully invested in a diverse number of high quality
"essential services" revenue bonds and State general obligation bonds. During
the second fiscal quarter, interest rates rose abruptly after a "temporary"
inflation scare. Recognizing that this was an aberration given otherwise
moderate economic growth and inflation, the Fund was restructured moderately
with lower coupon issues to enhance investment results. As interest rates
declined sharply for the balance of 1995, the Fund performed exceptionally
well.
The final fiscal quarter saw interest rates rise unexpectedly as market
participants anticipated stronger economic growth and inflation. Since the
Fund remained intact from the previous quarter, its performance was somewhat
below average.
However, with a total return of 9.35%*, the Fund completed an excellent
fiscal year ended March 31, 1996, ranking number two among 228 funds in the
Lipper General Municipal Debt Fund category.** The Fund's long term
performance has also been excellent, ranking second and first among 100 and 57
funds, respectively, in the same Lipper category for the five and ten years
ended March 31, 1996, with total returns of 57.90%* and 164.84%*,
respectively.
-----------------------------------------------------------
Long-Term Tax-Exempt Fund+
-----------------------------------------------------------
Average Annual Total Return Ended on 3/31/96
Reflects Maximum Sales Charge of 4.5%
-----------------------------------------------------------
1 year 5 years 10 years Since Inception (2/5/86)
-----------------------------------------------------------
4.40% 8.56% 9.72% 10.54%
-----------------------------------------------------------
<TABLE>
<CAPTION>
Long-Term Tax-Exempt Fund Long-Term Tax-Exempt Fund Lehman Brothers Current
(reflects maximum sales charge) (exclusive of sales charge) Municipal Bond Index**
<S> <C> <C> <C>
2/5/86 9,550 10,000 10,000
3/31/86 10,443 10,939 10,365
3/31/87 11,848 12,411 11,442
3/31/88 13,051 13,671 11,712
3/31/89 14,374 15,057 12,505
3/31/90 15,908 16,663 13,729
3/31/91 17,516 18,348 15,037
3/31/92 19,126 20,034 16,524
3/31/93 22,253 23,310 18,683
3/31/94 22,783 23,865 18,947
3/31/95 25,291 26,493 20,111
3/31/96 27,657 28,970 21,621
</TABLE>
Past performance is not predictive of future performance. Investment returns
and principal values will vary and shares may be worth more or less at
redemption than their original cost. A portion of the Fund's income may be
subject to the Alternative Minimum Tax and some investors may be subject to
certain state and local taxes.
The above illustration compares a $10,000 investment made in Long-Term Tax-
Exempt Fund on 2/5/86 (inception date) to a $10,000 investment made in the
Lehman Brothers Current Municipal Bond Index on that date. For comparative
purposes, the value of the Index on 1/31/86 is used as the beginning value on
2/5/86. All dividends and capital gain distributions are reinvested.
The Fund's performance takes into account fees and expenses. The Lehman
Brothers Current Municipal Bond Index is an unmanaged total return performance
benchmark for the long-term, investment-grade tax exempt bond market,
calculated by using municipal bonds selected as representative of the market.
The Index does not take into account charges, fees and other expenses.
Further, information relating to Fund performance is contained in the
Financial Highlights section of the Prospectus and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lipper Analytical Services, Inc.--Lipper is an independent mutual
fund performance monitor.
*** Source: Lehman Brothers.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
6
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
STATEMENTS OF ASSETS AND LIABILITIES
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
NEW YORK
SHORT-TERM INTERMEDIATE- INTERMEDIATE-
TAX-EXEMPT TAX-EXEMPT TERM TERM LONG-TERM
MONEY SECURITIES TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND* FUND FUND FUND FUND
------------ ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at cost--
see accompanying
portfolios............ $962,148,642 $42,384,305 $243,881,768 $94,128,210 $88,631,566
============ =========== ============ =========== ===========
Investments, at value
(Note 1).............. $962,148,642 $42,466,226 $253,248,700 $95,515,533 $90,730,900
Cash................... -- 365 169 249 --
Interest receivable.... 7,319,139 625,307 3,645,869 1,421,046 1,511,149
Receivable for
investments sold...... 250,000 -- -- -- --
Receivable for fund
shares sold........... 3,377 28,442 32,356 -- 6,001
Prepaid expenses....... 28,571 1,567 7,827 3,016 2,848
Unamortized
organization costs
(Note 5).............. -- 7,347 -- -- --
------------ ----------- ------------ ----------- -----------
TOTAL ASSETS........... 969,749,729 43,129,254 256,934,921 96,939,844 92,250,898
LIABILITIES:
Payable for dividends
declared.............. 2,265,884 125,192 874,844 317,236 342,517
Payable for fund shares
redeemed.............. 5,000 -- 705,352 80,340 710,986
Investment advisory
fees payable (Note
2).................... 167,899 7,927 63,992 39,027 34,552
Due to custodian bank.. 139,924 -- -- -- 459
Accrued expenses and
other payables........ 459,529 26,297 112,457 96,459 103,928
------------ ----------- ------------ ----------- -----------
TOTAL LIABILITIES...... 3,038,236 159,416 1,756,645 533,062 1,192,442
------------ ----------- ------------ ----------- -----------
NET ASSETS.............. $966,711,493 $42,969,838 $255,178,276 $96,406,782 $91,058,456
============ =========== ============ =========== ===========
NET ASSETS consist of:
Undistributed net
investment income..... $ -- $ 19,015 $ 77,113 $ -- $ 76,391
Accumulated net
realized gain/(loss)
on investments........ (68,646) (644,454) (7,420,271) (1,543,563) 139,774
Unrealized appreciation
on investments........ -- 81,921 9,366,932 1,387,323 2,099,334
Par value (Note 4)..... 967,030 6,099 27,966 11,419 9,558
Paid in capital in
excess of par value... 965,813,109 43,507,257 253,126,536 96,551,603 88,733,399
------------ ----------- ------------ ----------- -----------
TOTAL NET ASSETS........ $966,711,493 $42,969,838 $255,178,276 $96,406,782 $91,058,456
============ =========== ============ =========== ===========
Shares of Common Stock
Outstanding............ 967,030,200 6,098,765 27,966,055 11,418,683 9,557,695
NET ASSET VALUE PER
SHARE.................. $1.00 $7.05 $9.12 $8.44 $9.53
===== ===== ===== ===== =====
</TABLE>
* Formerly Short-Term Tax-Exempt Fund.
See Notes to Financial Statements
7
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
NEW YORK
SHORT-TERM INTERMEDIATE- INTERMEDIATE-
TAX EXEMPT TAX-EXEMPT TERM TERM LONG-TERM
MONEY SECURITIES TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND* FUND FUND FUND FUND
----------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income........ $32,200,270 $2,201,882 $12,556,019 $4,633,113 $4,934,302
----------- ---------- ----------- ---------- ----------
EXPENSES:
Investment advisory
fees (Note 2)......... 2,099,068 142,772 871,072 472,593 439,515
Administration fees
(Note 2).............. 1,296,836 73,505 384,390 145,987 135,781
Administrative service
fees (Note 2)......... 353,419 26,684 118,114 22,586 50,393
Shareholder servicing
agent fees (Note 2)... 28,642 9,676 22,349 10,693 28,688
Custodian fees (Note
2).................... 440,303 15,456 125,964 48,135 46,955
Registration and filing
fees.................. 6,927 11,001 7,496 319 3,072
Legal and audit fees... 108,210 9,725 41,311 8,475 8,316
Directors' fees and
expenses (Note 2)..... 56,513 3,666 18,189 6,746 3,833
Shareholder reports.... 15,272 3,155 11,242 5,413 2,882
Amortization of
organization costs
(Note 5).............. -- 4,187 -- 1,448 --
Miscellaneous
expenses.............. 43,761 4,316 16,770 6,161 5,195
----------- ---------- ----------- ---------- ----------
TOTAL EXPENSES........ 4,448,951 304,143 1,616,897 728,556 724,630
Fees waived by
investment adviser and
administrators
(Note 2).............. (353,419) (26,684) (118,114) (22,586) (50,393)
----------- ---------- ----------- ---------- ----------
NET EXPENSES.......... 4,095,532 277,459 1,498,783 705,970 674,237
----------- ---------- ----------- ---------- ----------
NET INVESTMENT INCOME... 28,104,738 1,924,423 11,057,236 3,927,143 4,260,065
----------- ---------- ----------- ---------- ----------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS (NOTE 1):
Net realized
gain/(loss) on
security transactions.. (3,032) 882,628 3,726,746 1,897,037 3,728,907
Change in unrealized
appreciation/
(depreciation) on
investments during the
year.................. -- (268,919) 4,779,461 280,648 (152,514)
----------- ---------- ----------- ---------- ----------
NET REALIZED AND
UNREALIZED GAIN/(LOSS)
ON INVESTMENTS......... (3,032) 613,709 8,506,207 2,177,685 3,576,393
----------- ---------- ----------- ---------- ----------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS........ $28,101,706 $2,538,132 $19,563,443 $6,104,828 $7,836,458
=========== ========== =========== ========== ==========
</TABLE>
* Formerly Short-Term Tax-Exempt Fund.
See Notes to Financial Statements
8
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NEW YORK
SHORT-TERM INTERMEDIATE- INTERMEDIATE-
TAX-EXEMPT TAX-EXEMPT TERM TERM LONG-TERM
MONEY SECURITIES TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND* FUND FUND FUND FUND
------------ ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31,
1996
Net investment income... $ 28,104,738 $ 1,924,423 $ 11,057,236 $ 3,927,143 $ 4,260,065
Net realized gain/(loss)
on investments......... (3,032) 882,628 3,726,746 1,897,037 3,728,907
Change in unrealized
appreciation/
(depreciation) on
investments during the
year................... -- (268,919) 4,779,461 280,648 (152,514)
------------ ----------- ------------ ------------ -----------
Net increase in net
assets resulting
from operations........ 28,101,706 2,538,132 19,563,443 6,104,828 7,836,458
Distributions to
shareholders:
From net investment
income................ (28,104,738) (1,905,408) (10,980,123) (3,927,143) (4,185,190)
From net realized gain
on investments........ -- -- -- -- (1,314,007)
Increase/(decrease) in
net assets from fund
share transactions
(Note 4)............... 151,824,779 (5,850,429) 11,604,736 7,065,566 9,840,745
------------ ----------- ------------ ------------ -----------
Net increase/(decrease)
in net assets.......... 151,821,747 (5,217,705) 20,188,056 9,243,251 12,178,006
NET ASSETS:
Beginning of year...... 814,889,746 48,187,543 234,990,220 87,163,531 78,880,450
------------ ----------- ------------ ------------ -----------
End of year (1)........ $966,711,493 $42,969,838 $255,178,276 $ 96,406,782 $91,058,456
============ =========== ============ ============ ===========
YEAR ENDED MARCH 31,
1995
Net investment income... $ 22,096,467 $ 1,942,218 $ 10,837,080 $ 3,790,054 $ 3,891,872
Net realized gain/(loss)
on investments......... 6,384 (1,527,080) (10,580,690) (3,440,595) (2,250,004)
Change in unrealized
appreciation/
(depreciation) on
investments during the
year................... -- 1,273,807 14,115,147 4,729,153 5,825,370
------------ ----------- ------------ ------------ -----------
Net increase in net
assets resulting
from operations........ 22,102,851 1,688,945 14,371,537 5,078,612 7,467,238
Distributions to
shareholders:
From net investment
income................ (22,096,467) (1,942,218) (10,837,080) (3,790,054) (3,891,872)
From net realized gain
on investments........ -- (106,754) -- (1,095,691) (904,671)
Increase/(decrease) in
net assets from fund
share transactions
(Note 4)............... 120,302,035 (9,180,054) (66,805,438) (20,518,090) (5,941,615)
------------ ----------- ------------ ------------ -----------
Net increase/(decrease)
in net assets.......... 120,308,419 (9,540,081) (63,270,981) (20,325,223) (3,270,920)
NET ASSETS:
Beginning of year...... 694,581,327 57,727,624 298,261,201 107,488,754 82,151,370
------------ ----------- ------------ ------------ -----------
End of year (2)........ $814,889,746 $48,187,543 $234,990,220 $ 87,163,531 $78,880,450
============ =========== ============ ============ ===========
</TABLE>
* Formerly Short-Term Tax-Exempt Fund.
(1) Including undistributed net investment income of $19,015 for Short-Term
Tax-Exempt Securities Fund, $77,113 for Intermediate-Term Tax-Exempt Fund
and $76,391 for Long-Term Tax-Exempt Fund.
(2) Including undistributed/(distributions in excess of) net investment income
of ($137,774) for Intermediate-Term Tax-Exempt Fund and $1,516 for Long-
Term Tax-Exempt Fund.
See Notes to Financial Statements
9
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
FINANCIAL HIGHLIGHTS -- SELECTED PER SHARE DATA AND RATIOS
For a Fund share outstanding throughout each year.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DIVIDENDS DISTRIBUTIONS
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT REALIZED GAIN
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME ON INVESTMENTS
--------- ---------- -------------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
TAX-EXEMPT MONEY FUND -- (5/24/85*)
(formerly Short-Term
Tax-Exempt Fund)
Year Ended March 31,
1992................... $1.00 $0.03849 $0.00000 $0.03849 $(0.03849) $0.00000
1993................... 1.00 0.02395 0.00000 0.02395 (0.02395) 0.00000
1994................... 1.00 0.01938 0.00000 0.01938 (0.01938) 0.00000
1995................... 1.00 0.02825 0.00000 0.02825 (0.02825) 0.00000
1996................... 1.00 0.03362 0.00000 0.03362 (0.03362) 0.00000
SHORT-TERM TAX-EXEMPT SECURITIES FUND -- (12/31/92*)
Year Ended March 31,
1993................... $7.00 $ 0.05 $ 0.07 $ 0.12 $ (0.05) $ 0.00
1994................... 7.07 0.21 (0.03) 0.18 (0.21) (0.05)
1995................... 6.99 0.25 (0.02) 0.23 (0.25) (0.01)
1996................... 6.96 0.28 0.09 0.37 (0.28) 0.00
INTERMEDIATE-TERM TAX-EXEMPT FUND -- (12/3/85*)
Year Ended March 31,
1992................... $8.83 $ 0.49 $ 0.19 $ 0.68 $ (0.49) $ (0.07)
1993................... 8.95 0.42 0.59 1.01 (0.42) (0.30)
1994................... 9.24 0.34 (0.09) 0.25 (0.34) (0.26)
1995................... 8.64 0.37 0.16 0.53 (0.37) 0.00
1996................... 8.80 0.40 0.32 0.72 (0.40) 0.00
N.Y. INTERMEDIATE-TERM TAX-EXEMPT FUND -- (5/31/90*)
Year Ended March 31,
1992................... $8.20 $ 0.41 $ 0.19 $ 0.60 $ (0.41) $ (0.08)
1993................... 8.31 0.34 0.41 0.75 (0.34) (0.11)
1994................... 8.61 0.31 (0.13) 0.18 (0.31) (0.22)
1995................... 8.18 0.33 0.15 0.48 (0.33) (0.09)
1996................... 8.24 0.35 0.20 0.55 (0.35) 0.00
LONG-TERM TAX-EXEMPT FUND -- (2/5/86*)
Year Ended March 31,
1992................... $9.15 $ 0.51 $ 0.30 $ 0.81 $ (0.51) $ (0.20)
1993................... 9.25 0.46 0.99 1.45 (0.46) (0.48)
1994................... 9.76 0.42 (0.12) 0.30 (0.42) (0.50)
1995................... 8.87 0.43 0.50 0.93 (0.43) (0.10)
1996................... 9.27 0.47 0.39 0.86 (0.46) (0.14)
</TABLE>
* Commencement of operations
** Annualized
+ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by adviser and administrators.
++ Total return data does not reflect the sales load payable on purchases of
Fund shares.
See Notes to Financial Statements
10
<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 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>
$0.00000 $(0.03849) $1.00 3.92% $666,351 0.52% 0.52% 3.84% -- $0.00000
0.00000 (0.02395) 1.00 2.42% 659,327 0.52% 0.52% 2.39% -- 0.00000
0.00000 (0.01938) 1.00 1.96% 694,581 0.52% 0.52% 1.94% -- 0.00003
0.00000 (0.02825) 1.00 2.86% 814,890 0.49% 0.52% 2.85% -- 0.00030
0.00000 (0.03362) 1.00 3.41% 966,711 0.49% 0.53% 3.35% -- 0.00042
$ 0.00 $ (0.05) $7.07 1.65% $ 28,598 0.60%** 0.84%** 2.80%** -- $ 0.00
0.00 (0.26) 6.99 2.55% 57,728 0.59% 0.60% 2.94% 539% 0.00
0.00 (0.26) 6.96 3.45% 48,188 0.59% 0.61% 3.60% 565% 0.00
0.00 (0.28) 7.05 5.42% 42,970 0.58% 0.64% 4.05% 124% 0.00
$ 0.00 $ (0.56) $8.95 7.95% $223,201 0.64% 0.64% 5.48% 276% $ 0.00
0.00 (0.72) 9.24 11.70% 285,317 0.64% 0.64% 4.57% 429% 0.00
(0.25) (0.85) 8.64 2.58% 298,261 0.64% 0.64% 3.74% 379% 0.00
0.00 (0.37) 8.80 6.34% 234,990 0.61% 0.64% 4.28% 362% 0.00
0.00 (0.40) 9.12 8.30% 255,178 0.60% 0.65% 4.44% 50% 0.00
$ 0.00 $ (0.49) $8.31 7.42% $ 52,238 0.88% 0.88% 4.82% 106% $ 0.00
0.00 (0.45) 8.61 9.27% 88,249 0.89% 0.89% 3.94% 339% 0.00
(0.08) (0.61) 8.18 1.87% 107,489 0.87% 0.87% 3.55% 326% 0.00
0.00 (0.42) 8.24 6.05% 87,164 0.78% 0.80% 4.06% 563% 0.00
0.00 (0.35) 8.44 6.77% 96,407 0.75% 0.77% 4.15% 154% 0.00
$ 0.00 $ (0.71) $9.25 9.19% $ 62,732 0.85% 0.85% 5.52% 218% $ 0.00
0.00 (0.94) 9.76 16.35% 85,520 0.86% 0.86% 4.73% 300% 0.00
(0.27) (1.19) 8.87 2.38% 82,151 0.85% 0.86% 4.25% 252% 0.00
0.00 (0.53) 9.27 11.01% 78,880 0.80% 0.83% 4.86% 214% 0.00
0.00 (0.60) 9.53 9.35% 91,058 0.77% 0.82% 4.85% 185% 0.01
</TABLE>
See Notes to Financial Statements
11
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
TAX-EXEMPT MONEY FUND
(FORMERLY SHORT-TERM TAX-EXEMPT FUND)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- 42.30%
$ 8,400,000 Becker, Minnesota, Pollution Control Revenue Bonds
Northern State Power Co. Project, Series A
3.350%, 05/28/1996.................................. $ 8,400,000
13,800,000 Becker, Minnesota, Pollution Control Revenue Bonds
Northern State Power Co. Project, Series B,
3.300%, 05/24/1996.................................. 13,800,000
5,500,000 Dallas, Texas, Waterworks & Sewer System Revenue
Bonds,
3.700%, 04/02/1996.................................. 5,500,000
3,000,000 Dallas, Texas, Waterworks & Sewer System Revenue
Bonds,
3.200%, 05/29/1996.................................. 3,000,000
11,722,000 Dallas, Texas, Waterworks & Sewer System Revenue
Bonds,
3.350%, 08/08/1996.................................. 11,722,000
3,000,000 Dallas, Texas, Waterworks & Sewer System Revenue
Bonds,
3.250%, 08/09/1996.................................. 3,000,000
5,500,000 Dallas, Texas, Waterworks & Sewer System Revenue
Bonds,
3.400%, 08/16/1996.................................. 5,500,000
2,303,000 Dallas, Texas, Waterworks & Sewer System Revenue
Bonds,
3.450%, 08/16/1996.................................. 2,303,000
10,000,000 Houston, Texas, General Obligation Revenue Bonds,
Series A,
3.100%, 04/16/1996.................................. 10,000,000
5,400,000 Houston, Texas, General Obligation Revenue Bonds,
Series A,
3.350%, 05/07/1996.................................. 5,400,000
3,000,000 Houston, Texas, General Obligation Revenue Bonds,
Series A,
3.150%, 07/23/1996.................................. 3,000,000
7,000,000 Houston, Texas, General Obligation Revenue Bonds,
Series A,
3.300%, 04/01/1998+................................. 7,000,000
10,000,000 Jacksonville, Florida, Electric Authority Revenue
Bonds, Series D-3,
3.150%, 08/01/1996.................................. 10,000,000
3,900,000 Lower Neches Valley Authority, Texas, Pollution
Control Revenue Bonds, Chevron Corp. Project,
3.100%, 02/15/2017.................................. 3,900,000
7,100,000 Intermountain Power Agency, Utah, Power Supply
Revenue Bonds, Series E,
3.300%, 05/13/1996.................................. 7,100,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- (CONTINUED)
$10,000,000 Intermountain Power Agency, Utah, Power Supply
Revenue Bonds, Series F,
3.700%, 04/09/1996.................................. $ 10,000,000
10,000,000 Intermountain Power Agency, Utah, Power Supply
Revenue Bonds, Series F,
3.200%, 08/07/1996.................................. 10,000,000
3,600,000 Jasper County, Indiana, Pollution Control Refunding
Revenue Bonds, Northern Indiana Public Service Co.,
3.650%, 04/04/1996.................................. 3,600,000
15,000,000 Michigan State General Obligation Bonds,
4.000%, 09/30/1996.................................. 15,062,655
11,000,000 Michigan Municipal Bond Authority,
4.500%, 07/03/1996.................................. 11,022,619
5,150,000 Mount Vernon, Indiana, Pollution Control Revenue
Bonds, Series A,
3.400%, 07/17/1996 (2).............................. 5,150,000
3,000,000 New York City, New York, General Obligation Bonds,
Subseries E6, (FGIC),
3.850%, 08/01/2019+................................. 3,000,000
19,105,000 New York City, New York, Revenue Anticipation Notes,
Series A,
4.500%, 04/11/1996.................................. 19,108,444
12,900,000 New Jersey State Tax & Revenue Anticipation Notes,
3.450%, 04/11/1996.................................. 12,900,000
13,500,000 Nueces River, Texas, Industrial Development
Authority, Pollution Control Refunding Revenue
Bonds,
3.550%, 04/03/1996 (3).............................. 13,500,000
10,000,000 Nueces River, Texas, Industrial Development
Authority, Pollution Control Refunding Revenue
Bonds,
3.300%, 04/10/1996 (3).............................. 10,000,000
7,500,000 Oklahoma State Water Resources Board State Loan
Program Revenue Bonds,
3.100%, 09/01/2024+................................. 7,500,000
13,725,000 Oklahoma State Water Resources Board State Loan
Program Revenue Bonds, Series A,
3.250%, 09/01/2023++................................ 13,725,000
</TABLE>
See Notes to Financial Statements
12
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
TAX-EXEMPT MONEY FUND -- (CONTINUED)
(FORMERLY SHORT-TERM TAX-EXEMPT FUND)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- (CONTINUED)
$ 4,100,000 Plaquemines, Louisiana, Port Harbor and Terminal,
Marine Terminal Facilities, Electro-Coal Transfer
Revenue Bonds, Series B,
3.450%, 04/04/1996.................................. $ 4,100,000
7,000,000 Plaquemines, Louisiana, Port Harbor and Terminal,
Marine Terminal Facilities, Electro-Coal Transfer
Revenue Bonds, Series B,
3.100%, 04/22/1996.................................. 7,000,000
4,000,000 Plaquemines, Louisiana, Port Harbor and Terminal,
Marine Terminal Facilities, Electro-Coal Transfer
Revenue Bonds, Series B,
3.150%, 06/11/1996.................................. 4,000,000
6,500,000 Pleasant Prairie, Wisconsin, Pollution Control
Revenue Bonds, Wisconsin Electric Power Co., Series
A,
3.350%, 09/01/2030+................................. 6,500,000
5,000,000 Pleasant Prairie, Wisconsin, Pollution Control
Revenue Bonds, Wisconsin Electric Power Co., Series
C,
3.350%, 09/01/2030+................................. 5,000,000
2,000,000 Salt River Project, Arizona, Agricultural
Improvement & Power District,
3.150%, 05/22/1996.................................. 2,000,000
5,000,000 Salt River Project, Arizona, Agricultural
Improvement & Power District,
3.250%, 05/22/1996.................................. 5,000,000
10,000,000 Salt River Project, Arizona, Agricultural
Improvement & Power District,
3.300%, 08/08/1996.................................. 10,000,000
10,000,000 Salt River Project, Arizona, Agricultural
Improvement & Power District,
3.450%, 08/22/1996.................................. 10,000,000
4,000,000 San Antonio, Texas, Electric & Gas Revenue Bonds,
3.250%, 04/09/1996.................................. 4,000,000
5,600,000 San Antonio, Texas, Electric & Gas Revenue Bonds,
3.250%, 05/23/1996.................................. 5,600,000
5,000,000 San Antonio, Texas, Electric & Gas Revenue Bonds,
3.200%, 06/12/1996.................................. 5,000,000
4,500,000 San Antonio, Texas, Electric & Gas Revenue Bonds,
3.050%, 08/12/1996.................................. 4,500,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- (CONTINUED)
$13,300,000 San Antonio, Texas, Electric & Gas Revenue Bonds,
3.400%, 08/14/1996................................. $ 13,300,000
17,400,000 South Carolina State, Public Service Authority
Revenue Bonds,
3.100%, 04/08/1996................................. 17,400,000
8,120,000 South Carolina State, Public Service Authority
Revenue Bonds,
3.400%, 07/17/1996................................. 8,120,000
1,000,000 Sullivan, Indiana, Pollution Control Revenue Bonds,
3.250%, 05/21/1996 (3)............................. 1,000,000
9,200,000 Texas Municipal Power Agency,
3.250%, 04/24/1996................................. 9,200,000
5,000,000 Texas State, Tax & Revenue Anticipation Notes,
Series A,
3.650%, 08/20/1996................................. 5,000,000
5,660,000 Texas State Tax & Revenue Anticipation Notes,
Series A,
4.750%, 08/30/1996................................. 5,688,952
6,500,000 University of Minnesota, Series B,
3.250%, 05/17/1996................................. 6,500,000
8,000,000 University of Texas Permanent University Fund,
Series A,
3.150%, 05/22/1996................................. 8,000,000
3,300,000 University of Texas Permanent University Fund,
Series A,
3.150%, 08/08/1996................................. 3,300,000
5,800,000 Valdez, Alaska, Marine Terminal Refunding Revenue
Bonds, Exxon Pipeline Co., Project A,
3.800%, 12/01/2033+................................ 5,800,000
5,000,000 Virginia State Housing Development Authority,
Commonwealth Mortgage Revenue Bonds, Series D,
3.350%, 01/01/2019+................................ 5,000,000
6,000,000 Virginia General Obligation Bonds,
3.150%, 08/06/1996................................. 6,000,000
7,700,000 Wisconsin State Operating Notes,
4.500%, 06/17/1996................................. 7,718,966
------------
408,921,636
------------
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- 57.23%
BANK OF AMERICA
28,650,000 California State Revenue Anticipation Warrants,
Series C,
5.750%, 04/25/1996 (1)............................. 28,683,488
</TABLE>
See Notes to Financial Statements
13
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
TAX-EXEMPT MONEY FUND--(CONTINUED)
(FORMERLY SHORT-TERM TAX-EXEMPT FUND)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- (CONTINUED)
BANK OF NEW YORK
$10,000,000 Ohio County, Kentucky, Pollution Control Revenue
Bonds, Big Rivers Electric Corp., Series 1983,
3.800%, 06/01/2013+................................ $ 10,000,000
BANK OF NOVA SCOTIA
2,600,000 Delta County, Michigan, Economic Development Corp.,
Environmental Impact Revenue Bonds, Escabana Paper
Co., Series E
3.600%, 12/01/2023+................................ 2,600,000
4,300,000 Delta County, Michigan, Economic Development Corp.,
Environmental Impact Revenue Bonds, Escabana Paper
Co., Series F,
3.600%, 12/01/2013+................................ 4,300,000
10,200,000 Gary, Indiana, Environmental Improvement Revenue
Notes, U.S. Steel Corp. Project, Series 1984,
3.500%, 07/15/2002+................................ 10,200,000
3,400,000 New Hampshire State Industrial Development
Authority, Pollution Control Revenue Bonds, Bangor
Hydro-Electric Co. Project, Series 1983,
3.500%, 01/01/2009+................................ 3,400,000
4,900,000 Toledo Lucas County, Ohio Port Authority Revenue
Bonds,
3.200%, 05/02/1996................................. 4,900,000
BANK OF TOKYO
10,400,000 University of Iowa, Facilities Revenue Bonds, Human
Biology Research, Series A,
3.550%, 06/01/2005+................................ 10,400,000
BARCLAYS BANK
2,505,000 Beaver County, Pennsylvania, Industrial Development
Authority, Pollution Control Revenue Bonds, Series
C,
3.150%, 05/22/1996................................. 2,505,000
3,870,000 Beaver County, Pennsylvania, Industrial Development
Authority, Pollution Control Revenue Bonds, Series
C,
3.250%, 05/22/1996................................. 3,870,000
7,700,000 Bucks County, Pennsylvania, Industrial Development
Authority Revenue Bonds, Tru Realty--Toys R Us
Project,
3.350%, 12/01/2018+................................ 7,700,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- (CONTINUED)
$ 4,500,000 Jasper County, Indiana, Pollution Control Refunding
Revenue Bonds, Northern Indiana Public Service Co.,
Series D
3.150%, 08/09/1996................................. $ 4,500,000
CANADIAN IMPERIAL BANK
11,000,000 Illinois, Finance Authority, Pollution Control
Revenue Bonds,
3.150%, 08/06/1996................................. 11,000,000
4,500,000 Maricopa County, Arizona, Pollution Control
Refunding Revenue Bonds, Public Service Co., New
Mexico, Series A,
3.350%, 11/01/2022+................................ 4,500,000
CITIBANK
2,260,000 La Crosse, Wisconsin, Industrial Development
Authority Revenue Bonds, Dairyland Power Corp.
Project,
3.650%, 02/01/2015+................................ 2,260,000
CREDIT SUISSE
6,500,000 Burke County, Georgia, Industrial Development
Authority, Pollution Control Revenue Bonds,
Oglethorpe Power Corp. Project, Series A,
3.150%, 06/11/1996................................. 6,500,000
6,900,000 Garden City, Kansas, Industrial Development Revenue
Bonds, Inland Container Corp. Project, Temple
Series 1983,
3.400%, 01/01/2008+................................ 6,900,000
41,950,000 Los Angeles County, California, Tax Revenue
Anticipation Notes,
4.500%, 07/01/1996................................. 42,037,358
10,440,000 Marshall County, West Virginia, Pollution Control
Revenue Bonds, Mobay Chemical Corp. Project,
3.350%, 12/01/2000+................................ 10,440,000
3,300,000 South Louisiana Port Commission, Marine Terminal
Facilities Refunding Revenue Bonds, Occidental
Petroleum,
3.350%, 07/01/2021+................................ 3,300,000
FIRST NATIONAL BANK OF CHICAGO
8,500,000 Illinois Health Facilities Authority Revenue Bonds,
Evangelical Hospitals Corp., Series A,
3.350%, 01/01/2016+................................ 8,500,000
</TABLE>
See Notes to Financial Statements
14
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
TAX-EXEMPT MONEY FUND -- (CONTINUED)
(FORMERLY SHORT-TERM TAX-EXEMPT FUND)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- (CONTINUED)
$11,150,000 Illinois Health Facilities Authority Revenue Bonds,
Evangelical Hospitals Corp., Series B,
3.350%, 01/01/2016+................................ $ 11,150,000
FUJI BANK
1,400,000 Des Moines, Iowa, Hospital Facilities Revenue
Bonds, Iowa Methodist Medical Center Project,
3.350%, 08/01/2015+................................ 1,400,000
24,800,000 Illinois Health Facilities Authority Revenue Bonds,
Healthcorp Affiliates, Series A,
3.550%, 11/01/2015+................................ 24,800,000
2,200,000 Illinois Health Facilities Authority Revenue Bonds,
Healthcorp Affiliates, Series B,
3.550%, 11/01/2015+................................ 2,200,000
11,200,000 Oregon State General Obligation Bonds, Series 73G,
3.200%, 12/01/2018+................................ 11,200,000
INDUSTRIAL BANK OF JAPAN
3,000,000 New York City, New York, General Obligation Bonds,
Subseries E2,
3.850%, 08/01/2020+................................ 3,000,000
3,600,000 New York City, New York, General Obligation Bonds,
Subseries E2,
3.850%, 08/01/2021+................................ 3,600,000
KREDIETBANK
2,475,000 Illinois Health Facilities Authority Revenue Bonds,
Memorial Medical Center, Series C,
3.350%, 01/01/2016+................................ 2,475,000
LASALLE NATIONAL BANK
9,580,000 Illinois Health Facilities Authority Revenue Bonds,
Ingalls Memorial Hospital, Series B,
3.350%, 01/01/2016+................................ 9,580,000
MITSUBISHI BANK
37,200,000 Connecticut State Special Assessment, Unemployment
Compensation, Advanced Fund Revenue Bonds, Series
B,
3.600%, 11/15/2001+................................ 37,200,000
MORGAN GUARANTY TRUST CO.
26,000,000 Baltimore, Maryland, Port Facilities Revenue Bonds,
Occidental Petroleum, Series 1981,
3.350%, 10/14/2011+................................ 26,000,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- (CONTINUED)
$ 6,000,000 Florida Municipal Power Agency Revenue Bonds, Series
A,
3.250%, 05/20/1996.................................. $ 6,000,000
5,300,000 Kenton County, Kentucky, Industrial Building Revenue
Bonds, Redken Labs, Inc. Project,
3.350%, 12/01/2014+................................. 5,300,000
NATIONAL WESTMINSTER BANK
25,000,000 Suffolk County, New York, Tax Anticipation Notes,
Series 1,
4.000%, 08/15/1996+................................. 25,071,160
NORDEUTSCHE LANDESBANK
9,900,000 Brazos, Texas, Harbor Industrial Development Corp.
Revenue Bonds, Badische Corp.,
3.350%, 12/01/2013+................................. 9,900,000
SANWA BANK
4,900,000 Chicago, Illinois, O'Hare International Airport,
Revenue Bonds, American Airlines, Series C,
3.950%, 12/01/2017+................................. 4,900,000
6,600,000 Chicago, Illinois, O'Hare International Airport
Revenue Bonds, American Airlines, Series D,
3.950%, 12/01/2017+................................. 6,600,000
2,725,000 District of Columbia Aces, Georgetown University
Revenue Bonds, Series 1988-B,
3.850%, 04/01/2004+................................. 2,725,000
6,500,000 District of Columbia Aces, Georgetown University
Revenue Bonds, Series 1988-C,
3.850%, 04/01/2012+................................. 6,500,000
5,600,000 Illinois Health Facilities Authority Revenue Bonds,
Elmhurst Memorial Hospital, Series B,
4.050%, 01/01/2020+................................. 5,600,000
30,400,000 Indiana Health Facilities Financing Authority
Revenue Bonds, St. Anthony's Medical Center Project,
3.550%, 12/01/2014+................................. 30,400,000
4,600,000 Michigan State Job Development Authority Revenue
Bonds, Hitachi Metals International Project,
3.800%, 01/01/2004+................................. 4,600,000
2,615,000 Mississippi Hospital Equipment & Facilities
Authority Revenue Bonds, Mississippi Baptist Medical
Center,
3.550%, 07/01/2012+................................. 2,615,000
</TABLE>
See Notes to Financial Statements
15
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
TAX-EXEMPT MONEY FUND -- (CONTINUED)
(FORMERLY SHORT-TERM TAX-EXEMPT FUND)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- (CONTINUED)
$17,400,000 Missouri State Environmental Improvement & Energy
Resources Authority, Pollution Control Refunding
Revenue Bonds, Noranda Aluminum, Inc. Project,
3.550%, 10/01/2002+................................. $ 17,400,000
SUMITOMO BANK
2,750,000 District of Columbia, Revenue Bonds, George
Washington University,
3.650%, 03/01/2006+................................. 2,750,000
6,400,000 New York City, New York, General Obligation Bonds,
Subseries E5,
3.850%, 08/01/2017+................................. 6,400,000
10,200,000 Wake County, North Carolina, Industrial Facilities &
Pollution Control Financing Authority Revenue Bonds,
Carolina Power & Light Co. Project, Series 1985-B,
3.650%, 09/01/2015+................................. 10,200,000
12,900,000 Wake County, North Carolina, Industrial Facilities &
Pollution Control Financing Authority Revenue Bonds,
Carolina Power & Light Co. Project, Series 1985-C,
3.650%, 10/01/2015+................................. 12,900,000
SWISS BANK
9,000,000 Austin, Texas, Utilities Systems Revenue Bonds,
3.400%, 04/04/1996.................................. 9,000,000
2,500,000 Austin, Texas, Utilities Systems Revenue Bonds,
3.250%, 05/16/1996.................................. 2,500,000
4,000,000 Austin, Texas, Utilities Systems Revenue Bonds,
Series A,
3.350%, 05/16/1996.................................. 4,000,000
7,900,000 Louisiana Public Facilities Authority, Pollution
Control Revenue Bonds, Ciba-Geigy Corp. Project,
3.350%, 12/01/2004+................................. 7,900,000
TORONTO DOMINION BANK
2,500,000 Brownsville, Texas, Utilities System Revenue Bonds,
Series A,
3.150%, 05/21/1996.................................. 2,500,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- (CONTINUED)
$ 3,500,000 Brownsville, Texas, Utilities System Revenue Bonds,
3.350%, 05/21/1996................................. $ 3,500,000
3,930,000 Illinois Health Facilities Authority, Revenue
Bonds, Palos Community Hospital, Series B,
3.300%, 12/01/2015+................................ 3,930,000
4,800,000 Maricopa County, Arizona, Pollution Control
Refunding Revenue Bonds, Arizona Public Service
Co., Series 94-C,
3.750%, 05/01/2029+................................ 4,800,000
2,335,000 Wisconsin State Health Facilities Authority Revenue
Bonds Refunding, Franciscan Health Care, Series A2,
3.250%, 01/01/2016+................................ 2,335,000
UNION BANK OF SWITZERLAND
6,000,000 Louisiana State Offshore Terminal Authority,
Deepwater Port Refunding Revenue Bonds, 1st Stage,
LOOP, Inc., Series A,
3.100%, 09/01/2008+................................ 6,000,000
1,100,000 Louisiana State Offshore Terminal Authority,
Deepwater Port Refunding Revenue Bonds, 1st Stage,
LOOP, Inc., Series A,
3.850%, 09/01/2008+................................ 1,100,000
WESTDEUTSCHE LANDESBANK
4,500,000 Chicago, Illinois, O'Hare International Airport
Revenue Bonds, American Airlines, Series A,
3.850%, 12/01/2017+................................ 4,500,000
20,200,000 Chicago, Illinois, O'Hare
International Airport Revenue Bonds, American
Airlines, Series B,
3.850%, 12/01/2017+................................ 20,200,000
------------
553,227,006
------------
</TABLE>
See Notes to Financial Statements
16
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
TAX-EXEMPT MONEY FUND -- (CONTINUED)
(FORMERLY SHORT-TERM TAX-EXEMPT FUND)
<TABLE>
<CAPTION>
VALUE
(NOTE 1)
--- ------------
<C> <S> <C>
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $962,148,642*).................... 99.53% $962,148,642
OTHER ASSETS & LIABILITIES (NET).......................... 0.47 4,562,851
------ ------------
NET ASSETS................................................ 100.00% $966,711,493
====== ============
</TABLE>
- --------
* For Federal income tax purposes, the tax basis of investments aggregates
$962,166,644.
+ Variable rate demand bonds and notes are payable upon not more than seven
business days notice.
++ Variable rate put bonds and notes with demand features to mature within one
year.
(1) Secured by irrevocable warrant purchase agreement between the state and
certain banks.
(2) Secured in part by General Electric.
(3) Secured in part by CFC (National Rural Utilities Cooperative Corp.)
Guarantee.
FGIC--Financial Guaranty Insurance Corp.
Note:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Investment Adviser, under the supervision of the
Board of Directors, to be of comparable quality at the time of purchase to
rated instruments that may be acquired by the Fund.
At March 31, 1996, approximately, 44% of the net assets are invested in
municipal securities that have letter of credit enhancement features or
escrows in U.S. Government securities backing them, which the Fund relies on.
Without such features, the securities may or may not meet the quality
standards of securities purchased by the Fund.
At March 31, 1996, approximately, 16% of the net assets are invested in Texas
municipal securities. Economic changes affecting the state and certain of its
public bodies and municipalities may affect the ability of issuers to pay the
required principal and interest payments of the municipal securities.
See Notes to Financial Statements
17
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
SHORT-TERM TAX-EXEMPT SECURITIES FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- -----------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- 89.62%
$2,000,000 Alabama State Refunding General Obligation Bonds,
5.900%, 03/01/1999................................... $ 2,091,940
5,000,000 Connecticut State Special Tax Obligation Refunding
Revenue Bonds, Transportation Infrastructure
Purposes, Series C, (FGIC),
5.500%, 10/01/2000................................... 5,226,700
2,000,000 Connecticut State Special Assessment Unemployment
Compensation Revenue Bonds, Series A,
4.200%, 05/15/1997................................... 2,006,700
2,000,000 Contra Costa, California, Transportation Authority,
Sales Tax Revenue Bonds, Series A, (FGIC),
5.000%, 03/01/2000................................... 2,044,900
1,700,000 Fairfax County, Virginia, General Obligation Bonds,
Series A,
5.000%, 06/01/1999................................... 1,737,366
2,000,000 Harris County, Texas, Refunding Bonds,
5.750%, 10/01/1998................................... 2,071,060
2,000,000 Hawaii State, Public Improvements General Obligation
Bonds, Series CK,
5.000%, 09/01/1998................................... 2,042,880
1,500,000 Houston, Texas, Refunding General Obligation Bonds,
Series C,
5.500%, 03/01/1999................................... 1,548,465
2,000,000 Massachusetts State Turnpike Authority, Anticipation
Notes, Series A,
5.000%, 06/01/1999................................... 2,045,160
1,900,000 Mississippi State General Obligation Bonds, Series B,
5.000%, 08/01/1999................................... 1,945,011
4,000,000 New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Bonds, Series B,
5.000%, 06/15/1999................................... 4,075,680
2,000,000 New York State Environmental Facilities Corp.
Pollution Control Revenue Bonds, New York City
Municipal Water, Revolving Fund,
5.500%, 06/15/1999................................... 2,062,660
2,200,000 New York State Local Government Assistance Corp.,
Revenue Bonds, Series B,
5.100%, 04/01/1999................................... 2,244,154
2,000,000 Port of Seattle Washington, Refunding Revenue Bonds,
Series B, (AMBAC),
5.000%, 11/01/2000................................... 2,036,820
2,000,000 Seattle, Washington, Municipal Light & Power
Refunding Revenue Bonds,
4.600%, 05/01/2000................................... 2,008,060
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- -----------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- (CONTINUED)
$2,000,000 Virginia Beach, Virginia, Refunding General
Obligation Bonds,
5.250%, 02/01/1999................................... $ 2,046,920
1,250,000 Washington State General Obligation Bonds, Series
1995C, AT-8 and R-95B,
5.500%, 07/01/1997................................... 1,276,350
-----------
38,510,826
-----------
</TABLE>
<TABLE>
<C> <S> <C>
TAX-EXEMPT SECURITIES --
BACKED BY LETTERS OF CREDIT -- 7.45%
FUJI BANK
2,000,000 Illinois Health Facilities Authority Revenue Bonds,
Healthcorp Affiliates, Series B,
3.550%, 11/01/2015+..................................... 2,000,000
SUMITOMO BANK
1,200,000 New York City, New York, General Obligation Bonds,
Subseries E5,
3.850%, 08/01/2016+..................................... 1,200,000
---------
3,200,000
---------
<CAPTION>
SHARES
---------
<C> <S> <C>
OTHER INVESTMENTS -- 1.76%
755,400 Dreyfus Tax-Exempt Cash Management Fund................. 755,400
---------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $42,384,305*).........................98.83%.$42,466,226
OTHER ASSETS & LIABILITIES (NET)............................ 1.17 503,612
------ -----------
NET ASSETS.................................................. 100.00% $42,969,838
====== ===========
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
+ Variable rate demand bonds and notes are payable upon not more than seven
business days notice.
AMBAC--American Municipal Bond Assurance Corp.
FGIC--Financial Guaranty Insurance Corp.
Note:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Investment Adviser, under the supervision of the
Board of Directors, to be of comparable quality at the time of purchase to
rated instruments that may be acquired by the Fund.
At March 31, 1996, approximately 7% of the net assets are invested in
municipal securities that have letter of credit enhancement features or
escrows in U.S. Government securities backing them, which the Fund relies on.
Without such features, the securities may or may not meet the quality
standards of securities purchased by the Fund.
At March 31, 1996, approximately 17% of the net assets are invested in
Connecticut municipal securities. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers to pay the required principal and interest payments of the municipal
securities.
See Notes to Financial Statements
18
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
INTERMEDIATE-TERM TAX-EXEMPT FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- 76.53%
$10,000,000 California State Public Improvements General
Obligation Bonds, (FGIC),
7.500%, 11/01/2003.................................. $ 11,748,400
10,000,000 Cobb County, Georgia School District, General
Obligation Bonds,
4.750%, 02/01/2005.................................. 9,935,300
10,000,000 Connecticut State General Obligation Bonds, Series
D,
6.250%, 11/15/2009.................................. 10,736,200
10,000,000 Fairfax County, Virginia, Refunding General
Obligation Bonds, Series C,
5.250%, 05/01/2008.................................. 10,056,900
10,000,000 Florida State Board of Education Refunding General
Obligation Bonds, Series B,
5.125%, 06/01/2008.................................. 9,936,700
10,000,000 Georgia State General Obligation Bonds, Series C,
6.500%, 07/01/2004.................................. 11,153,800
10,000,000 Hawaii State General Obligation Bonds, Series CJ,
5.900%, 01/01/2006.................................. 10,580,100
10,000,000 Hawaii State Refunding General Obligation Bonds,
Series CI,
4.500%, 11/01/2005.................................. 9,644,500
10,000,000 Maryland State & Local Facilities, Public
Improvements Correctional Facilities, 3rd Series,
5.700%, 10/15/2006.................................. 10,521,600
10,000,000 Maryland State & Local Facilities Loan, Refunding
General Obligation Bonds, 3rd Series,
4.400%, 07/15/2004.................................. 9,735,000
10,000,000 Maryland State Department of Transportation,
Consolidated Transportation Bonds, Second Issue,
4.375%, 12/15/2003.................................. 9,656,200
10,000,000 Massachusetts State Public Improvements, General
Obligation Bonds, Series C, (MBIA),
5.625%, 08/01/2011.................................. 10,107,800
10,000,000 New Jersey State Refunding General Obligation Bonds,
Series D,
5.625%, 02/15/2005.................................. 10,520,000
10,000,000 New Jersey State, Transportation Trust Fund Revenue
Bonds, Transportation System, Series A,
5.250%, 06/15/2008.................................. 9,901,500
10,000,000 Ohio State Public Facilities Commission Revenue
Bonds, Series II-B, (MBIA),
5.000%, 11/01/2007 9,878,400
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- (CONTINUED)
$10,000,000 Philadelphia, Pennsylvania, Water & Waste
Management Revenue Bonds, (FGIC),
5.500%, 06/15/2003................................. $ 10,452,600
10,000,000 Puerto Rico Telephone Authority Revenue Bonds,
(AMBAC),
4.950%, 01/01/2003................................. 10,125,200
10,000,000 Texas State Refunding Bonds, Series A,
5.800%, 10/01/2004................................. 10,662,800
10,000,000 Wisconsin State Refunding General Obligation Bonds,
Series 3,
4.875%, 11/01/2005................................. 9,924,000
------------
195,277,000
------------
TAX-EXEMPT SECURITIES -- ESCROWED
IN U.S. GOVERNMENTS -- 8.79%
10,000,000 Fairfax County, Virginia, Industrial Development
Authority Revenue Bonds, Fairfax Hospital System,
6.801%, 08/29/2023
(Prerefunded 08/15/2001)........................... 11,224,100
10,000,000 South Carolina State Public Service Authority,
Santee-Cooper Project, Revenue Bonds, Series D,
(MBIA),
6.625%, 07/01/2031
(Prerefunded 07/01/2002)........................... 11,213,600
------------
22,437,700
------------
TAX-EXEMPT SECURITIES -- BACKED BY
LETTERS OF CREDIT -- 11.75%
CANADIAN IMPERIAL BANK
10,000,000 West Feliciana Parish, Louisiana, Pollution Control
Revenue Bonds, Gulf State Utility Co. Project,
Revenue Bonds,
3.800%, 04/01/2016+................................ 10,000,000
SANWA BANK
10,000,000 Missouri State Environmental Impact & Energy
Reserve Authority, Pollution Control Revenue Bonds,
3.550%, 10/01/2002+................................ 10,000,000
TORONTO DOMINION BANK, LTD.
10,000,000 Wisconsin State Health Facilities Authority,
Franciscan Health Care, Revenue Bonds, Series A-2,
3.250%, 01/01/2016+................................ 10,000,000
------------
30,000,000
------------
</TABLE>
See Notes to Financial Statements
19
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
INTERMEDIATE-TERM TAX-EXEMPT FUND -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
----------- ------------
<C> <S> <C>
OTHER INVESTMENTS -- 2.17%
5,534,000 Dreyfus Tax-Exempt Cash Management Fund............. $ 5,534,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $243,881,768*).................... 99.24% $253,248,700
OTHER ASSETS & LIABILITIES (NET).......................... 0.76 1,929,576
------ ------------
NET ASSETS................................................ 100.00% $255,178,276
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
+ Variable rate demand bonds and notes are payable upon not more than seven
business days notice.
AMBAC--American Municipal Bond Assurance Corp.
FGIC--Financial Guaranty Insurance Corp.
MBIA--Municipal Bond Insurance Assoc.
Note:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Investment Adviser, under the supervision of the
Board of Directors, to be of comparable quality at the time of purchase to
rated instruments that may be acquired by the Fund.
At March 31, 1996, approximately 21% of the net assets are invested in
municipal securities that have letter of credit enhancement features or
escrows in U.S. Government securities backing them, which the Fund relies on.
Without such features, the securities may or may not meet the quality
standards of securities purchased by the Fund.
At March 31, 1996, approximately 12% of the net assets are invested in
Maryland municipal securities. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers to pay the required principal and interest payments of the municipal
securities.
See Notes to Financial Statements
20
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
NEW YORK INTERMEDIATE-TERM TAX-EXEMPT FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- -----------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- 88.52%
$3,825,000 Metropolitan Transportation
Authority of New York,
Commuter Facilities Revenue Bonds, Series A, (MBIA),
7.000%, 07/01/2006.................................... $ 4,402,690
4,000,000 Municipal Assistance Corp.,
City of New York,
Series C, (AMBAC)
5.000%, 07/01/2006.................................... 3,987,000
2,300,000 Municipal Assistance Corp.,
City of New York,
Series D, (AMBAC),
5.000%, 07/01/2003.................................... 2,333,373
3,900,000 Nassau County, New York,
Combined Sewer Districts Refunding General Obligation
Bonds, Series G, (MBIA),
5.100%, 01/15/2003.................................... 3,975,933
3,000,000 New York City, New York,
Municipal Water Finance Authority, Water & Sewer
System Revenue Bonds, Series B, (AMBAC),
5.125%, 06/15/2004.................................... 3,035,850
3,500,000 New York State Dormitory Authority, City University
System
Revenue Bonds, Series A, (FGIC),
5.600%, 07/01/2004.................................... 3,654,770
4,750,000 New York State Dormitory Authority, Columbia
University Refunding Revenue Bonds, Series A,
4.500%, 07/01/2005.................................... 4,595,910
7,500,000 New York State Environmental
Facilities Corp., Pollution Control Revenue Bonds,
State Water Revolving Fund, Series, A,
7.250%, 06/15/2010.................................... 8,395,650
2,500,000 New York State Housing Finance
Agency Special Obligation Bonds,
New York City Health Facilities,
Series A,
6.900%, 05/01/2003.................................... 2,834,650
4,000,000 New York State Local Government
Assistance Corp. Revenue Bonds,
Series A,
5.400%, 04/01/2005.................................... 4,091,560
4,000,000 New York State Local Government
Assistance Corp. Revenue Bonds,
Series D,
4.800%, 04/01/2005.................................... 3,942,560
4,000,000 New York State Refunding General
Obligation Bonds, Series B,
5.500%, 08/15/2006.................................... 4,088,600
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- -----------
<C> <S> <C> <C>
TAX-EXEMPT SECURITIES -- (CONTINUED)
$4,000,000 New York State Thruway Authority
General Revenue Bonds,
Series C, (FGIC),
5.400%, 01/01/2005............................... $ 4,129,200
4,450,000 New York State Thruway Authority,
Highway & Bridge Revenue Bonds,
Series B, (MBIA),
5.750%, 04/01/2006............................... 4,695,907
1,000,000 Oyster Bay, New York,
General Obligation Revenue Bonds,
5.000%, 12/01/2004............................... 1,012,570
1,000,000 Oyster Bay, New York,
General Obligation Revenue Bonds,
5.000%, 12/01/2005............................... 1,006,030
3,500,000 Port Authority of New York & New Jersey,
Refunding Revenue Bonds,
Series 91,
4.900%, 11/15/2006............................... 3,445,715
5,000,000 Puerto Rico Telephone Authority
Revenue Bonds, Reserve 1, (AMBAC),
5.050%, 01/01/2004............................... 5,079,800
4,000,000 Puerto Rico Telephone Authority
Revenue Bonds, (MBIA),
5.250%, 01/01/2005............................... 4,086,960
4,000,000 Triborough Bridge & Tunnel Authority, New York,
Revenue
and General Purpose Bonds,
Series A,
5.000%, 01/01/2008............................... 3,905,920
4,500,000 University of Texas, Revenue Bonds, Series B,
5.250%, 08/15/2004............................... 4,634,955
4,000,000 Virginia State Public Building Authority
Refunding Revenue Bonds, Series A,
4.750%, 08/01/2004............................... 4,000,000
-----------
85,335,603
-----------
TAX-EXEMPT SECURITIES -- ESCROWED
IN U.S. GOVERNMENTS -- 3.56%
3,000,000 New York State Local Government Assistance Corp.
Revenue Bonds,
Series A,
7.125%, 04/01/2021
(Prerefunded 04/01/02)........................... 3,435,030
-----------
TAX-EXEMPT SECURITIES -- BACKED BY LETTERS OF CREDIT -- 2.28%
MORGAN GUARANTY TRUST CO.
2,200,000 New York City, New York, General Obligation
Bonds, Subseries E3,
3.750%, 08/01/2023+.............................. $ 2,200,000
-----------
</TABLE>
See Notes to Financial Statements
21
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
NEW YORK INTERMEDIATE-TERM TAX-EXEMPT FUND -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES
----------
<C> <S> <C>
OTHER INVESTMENTS -- 4.72%
4,544,900 Shearson New York Tax-Exempt Money Fund............... $ 4,544,900
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $94,128,210*)......................................... 99.08% $95,515,533
OTHER ASSETS &
LIABILITIES (NET)........................................... 0.92 891,249
------ -----------
NET ASSETS.................................................. 100.00% $96,406,782
====== ===========
</TABLE>
- --------
*Aggregate cost for Federal tax and book purposes.
+ Variable rate demand bonds and notes are payable upon not more than seven
business days notice.
AMBAC--American Municipal Bond Assurance Corp.
FGIC--Financial Guaranty Insurance Corp.
MBIA--Municipal Bond Insurance Assoc.
Note:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Investment Adviser, under the supervision of the
Board of Directors, to be of comparable quality at the time of purchase to
rated instruments that may be acquired by the Fund.
At March 31, 1996, approximately 6% of the net assets are invested in
municipal securities that have letter of credit enhancement features or
escrows in U.S. Government securities backing them, which the Fund relies on.
Without such features, these securities may or may not meet the quality
standards of securities purchased by the Fund.
At March 31, 1996, approximately 76% of the net assets are invested in New
York municipal securities. Economic changes affecting the state and certain
of its public bodies and municipalities may affect the ability of issuers to
pay the required principal and interest payments of the municipal securities.
See Notes to Financial Statements
22
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
LONG-TERM TAX-EXEMPT FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- -----------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- 94.41%
$4,000,0000 Alaska State Housing Finance Agency Refunding
Revenue Bonds, Series A,
5.400%, 12/01/2013.................................. $ 3,786,160
4,000,000 Dade County, Florida, Water & Sewer Systems Revenue
Bonds, (FGIC),
5.500%, 10/01/2025.................................. 3,836,840
4,000,000 Florida State Board of Education, General Obligation
Bonds, Series C,
5.400%, 06/01/2018.................................. 3,839,960
10,000,000 Illinois State General Obligation Bonds,
5.750%, 07/01/2020.................................. 9,806,800
4,000,000 Illinois State Sales Tax Refunding Revenue Bonds,
Series Q,
5.500% 6/15/2020.................................... 3,726,640
4,000,000 Intermountain Power Agency, Utah, Power Supply
Refunding Revenue Bonds, Series A,
5.500%, 07/01/2020.................................. 3,750,560
4,500,000 Intermountain Power Agency, Utah, Power Supply
Refunding Revenue Bonds, Series D,
5.000%, 07/01/2020.................................. 3,944,520
4,000,000 Massachusetts State General Obligation Bonds, Series
C,
5.625%, 08/01/2013.................................. 3,969,040
4,000,000 Metropolitan Government of Nashville & Davidson
County, Tennessee, General Obligation Bonds,
6/150%, 6/15/2025................................... 4,128,600
4,000,000 Michigan State Trunk Line Fund Refunding Revenue
Bonds, Series A,
5.500%, 10/01/2021.................................. 3,775,280
4,000,000 Nevada State, Colorado River Commission, General
Obligation Revenue Bonds,
5.300%, 07/01/2024.................................. 3,676,640
4,000,000 New Jersey State Transportation Trust Fund Authority
Refunding Revenue Bonds, Series A,
5.250%, 06/15/2014.................................. 3,832,280
4,000,000 New York State Medical Care Facilities Finance
Agency Refunding Revenue Bonds, New York Hospital,
FHA Insured, Series A, (MBIA),
5.500%, 08/15/2024.................................. 3,780,600
4,000,000 Orlando, Florida, Utilities Commission, Water &
Electric Revenue Bonds, Series A,
5.250%, 10/01/2023.................................. 3,699,360
4,000,000 Orlando & Orange County Expressway Authority
Refunding Revenue Bonds, (AMBAC),
5.250%, 07/01/2012.................................. 3,880,560
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- ------------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- (CONTINUED)
$4,000,000 Salt River, Arizona, Agricultural Project Refunding
Revenue Bonds, Series C,
5.000%, 01/01/2013.................................. $ 3,708,120
4,000,000 San Antonio, Texas, Electric & Gas Refunding Revenue
Bonds,
5.000%, 02/01/2014.................................. 3,684,520
4,000,000 Seattle, Washington, Drain & Wastewater Utilities,
Refunding Revenue Bonds, (MBIA),
5.250%, 12/01/2025.................................. 3,637,480
4,000,000 St Petersburg, Florida, Excise Tax Refunding Revenue
Bonds, (FGIC),
5.150%, 10/01/2013.................................. 3,775,240
4,000,000 Washington State General Obligation Bonds, Series A,
5.750%, 09/01/2019.................................. 3,979,400
4,000,000 Wisconsin State Transportation Refunding Revenue
Bonds, Series B,
5.500%, 07/01/2022.................................. 3,782,240
------------
86,000,840
------------
TAX-EXEMPT SECURITIES--ESCROWED
IN U.S. GOVERNMENTS -- 4.95%
4,000,000 Nevada State, Colorado River Commission, General
Obligation Revenue Bonds, 6.500%, 07/01/2019
(Prerefunded 07/01/04).............................. 4,476,960
------------
<CAPTION>
SHARES
------
<C> <S> <C>
OTHER INVESTMENTS -- 0.28%
253,100 Dreyfus Tax-Exempt Cash Management Fund............. 253,100
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $88,631,566*)......................................... 99.64% $90,730,900
OTHER ASSETS &
LIABILITIES (NET)........................................... 0.36 327,556
------ -----------
NET ASSETS.................................................. 100.00% $91,058,456
====== ===========
</TABLE>
- --------
* For federal income tax purposes, the tax basis of investments aggregates
$88,854,171.
AMBAC--American Municipal Bond Assurance Corp.
FGIC--Financial Guaranty Insurance Corp.
MBIA--Municipal Bond Insurance Assoc.
Note:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Investment Adviser, under the supervision of the
Board of Directors, to be of comparable quality at the time of purchase to
rated instruments that may be acquired by the Fund.
At March 31, 1996, approximately, 15% of the net assets are invested in
Illinois municipal securities. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers to pay the required principal and interest payments of the municipal
securities.
See Notes to Financial Statements
23
<PAGE>
EXCELSIOR TAX-EXEMPT FUNDS, INC.
(FORMERLY UST MASTER TAX-EXEMPT FUNDS, INC.)
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Excelsior Tax-Exempt Funds, Inc. ("Excelsior Tax-Exempt Fund") (formerly UST
Master Tax-Exempt Funds, Inc.) was incorporated under the laws of the State of
Maryland on August 8, 1984 and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
Excelsior Tax-Exempt Fund currently offers shares in five managed investment
portfolios, each having its own investment objectives and policies. Such
policies are in conformity with generally accepted accounting principles for
investment companies and are consistently followed by Excelsior Tax-Exempt 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 Excelsior
Funds, Inc. ("Excelsior Fund") are presented separately.
With regard to Tax-Exempt Money Fund (formerly Short-Term Tax-Exempt Fund),
it is Excelsior Tax-Exempt Fund's policy, to the extent possible, to maintain a
continuous net asset value per share of $1.00. The Portfolio has adopted
certain investment, portfolio valuation and dividend and distribution policies
to enable it to do so. However, there can be no assurance that the net asset
value per share of the Portfolio will not vary.
(A) PORTFOLIO VALUATION:
Tax-Exempt Money Fund: Securities are valued at amortized cost, which has
been determined by the Fund's Board of Directors to represent the fair value
of the Fund's investments. Amortized cost valuation involves valuing an
instrument at its cost initially and, thereafter, assuming a constant
amortization to maturity of any discount or premium.
Short-Term Tax-Exempt Securities Fund, Intermediate-Term Tax-Exempt Fund,
New York Intermediate-Term Tax-Exempt Fund and Long-Term Tax-Exempt
Fund: Securities are valued each business day as of the close of the New
York Stock Exchange after consultation with an independent pricing service
(the "Service"). When in the judgement of the Service, quoted bid prices for
securities are readily available and are representative of the bid side of
the market, these investments are valued at the mean between the quoted bid
prices (as obtained by the Service from dealers in such securities) and ask
prices (as calculated by the Service based upon its evaluation of the market
for such securities). Short-term debt instruments with remaining maturities
of 60 days or less, and variable rate demand notes and securities with put
options exercisable within one year, 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 Tax-Exempt Fund's Board of Directors.
The net asset value of the shares in Short-Term Tax-Exempt Securities
Fund, Intermediate-Term Tax-Exempt Fund, New York Intermediate-Term Tax-
Exempt Fund, and Long-Term Tax-Exempt Fund will fluctuate as the market
values of their portfolio securities change in response to changing market
rates of interest and other factors.
24
<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) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Tax-Exempt Money Fund: Net investment income dividends are declared daily
and paid monthly. Net realized capital gains, unless offset by any available
capital loss carryforward, are distributed to shareholders annually or more
frequently to maintain a net asset value of $1.00 per share.
Short-Term Tax-Exempt Securities Fund, Intermediate-Term Tax-Exempt Fund,
New York Intermediate-Term Tax-Exempt Fund and Long-Term Tax-Exempt
Fund: Dividends from net investment income are declared daily and paid
monthly. Net realized capital gains, unless offset by any available capital
loss carryforward, are distributed to shareholders at least annually.
Dividends and distributions are 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
deferral of losses on wash sales and post-October losses.
In order to avoid a Federal excise tax, each Portfolio is required to
distribute certain minimum amounts of net realized capital gain and net
investment income for the respective periods ending October 31 and December
31 in each calendar year.
(D) FEDERAL TAXES:
It is the policy of Excelsior Tax-Exempt Fund that each Portfolio continue
to qualify as a regulated investment company, if such qualification is in
the best interest of the shareholders, by complying with the requirements of
the Internal Revenue Code applicable to regulated investment companies, and
by distributing substantially all of its taxable earnings to its
shareholders.
At March 31, 1996, the following Portfolios had approximate capital loss
carryforwards for Federal tax purposes available to offset future net
capital gains as follows:
<TABLE>
<CAPTION>
EXPIRATION DATE MARCH 31,
-------------------------------------
2001 2002 2003 TOTAL
------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Tax-Exempt Money Fund................ $18,000 $31,000 -- $ 49,000
Short-Term Tax-Exempt Securities
Fund................................ -- -- $ 644,000 644,000
Intermediate-Term Tax-Exempt Fund.... -- -- 7,420,000 7,420,000
New York Intermediate-Term Tax-Exempt
Fund................................ -- -- 1,544,000 1,544,000
</TABLE>
To the extent that such carryforwards are utilized, no capital gains
distributions will be made. During the year ended March 31, 1996, Tax-Exempt
Money Fund, Short-Term Tax-Exempt Securities Fund, Intermediate-Term Tax-
Exempt Fund, New York Intermediate-Term Tax-Exempt Fund and Long-Term Tax-
Exempt Fund utilized capital loss carryforwards for Federal Tax purposes
totaling approximately $8,000, $14,000, $1,005,000, $1,073,000 and $833,000,
respectively.
25
<PAGE>
Net capital losses incurred after October 31 and within the taxable year
are deemed to arise on the first business day of a Portfolio's next taxable
year. Tax-Exempt Money Fund incurred, and elected to defer, net capital
losses of approximately $2,000 for the year ended March 31, 1996.
At March 31, 1996, aggregate gross unrealized appreciation for all
securities for which there was an excess of value over tax cost and
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over value were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ -------------- --------------
<S> <C> <C> <C>
Tax-Exempt Money Fund........... $ -- $(18,002) $ (18,002)
Short-Term Tax-Exempt Securities
Fund........................... 165,349 (83,428) 81,921
Intermediate-Term Tax-Exempt
Fund........................... 9,978,282 (611,350) 9,366,932
New York Intermediate-Term Tax-
Exempt Fund.................... 1,992,272 (604,949) 1,387,323
Long-Term Tax-Exempt Fund....... 1,919,816 (43,087) 1,876,729
</TABLE>
(E) EXPENSE ALLOCATION:
Expenses directly attributable to a Portfolio are charged to that
Portfolio. Other expenses are allocated to the respective Portfolios based
on average net assets.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS
United States Trust Company of New York ("U.S. Trust") serves as the
investment adviser to Excelsior Tax-Exempt Fund. For the services provided
pursuant to the Investment Advisory Agreements, U.S. Trust is entitled to
receive a fee, computed daily and paid monthly, at the annual rates of .25% of
the average daily net assets of Tax-Exempt Money Fund, .30% of the average
daily net assets of Short-Term Tax-Exempt Securities Fund, .35% of the average
daily net assets of Intermediate-Term Tax-Exempt Fund and .50% of the average
daily net assets of New York Intermediate-Term Tax-Exempt Fund and Long-Term
Tax-Exempt Fund.
Effective January 1, 1996, U.S. Trust, Chase Global Funds Services Company
("CGFSC"), a subsidiary of The Chase Manhattan Bank, N.A., (formerly, Mutual
Funds Service Company ("MFSC") which was a subsidiary of U.S. Trust), and
Federated Administrative Services (collectively, the "Administrators") provide
administrative services to Excelsior Tax-Exempt 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 Tax-Exempt Fund, Excelsior Fund (excluding Excelsior
Fund's international equity portfolios), and Excelsior Institutional Trust, all
of which are affiliated investment companies, as follows: .200% of the first
$200 million, .175% of the next $200 million, and .150% over $400 million.
Administration fees payable by each Portfolio of the three investment companies
are determined in proportion to the relative average daily net assets of the
respective Portfolios for the period paid. After such allocation has been made,
the Administrators are entitled jointly to an annual minimum fee of $50,000
from Short-Term Tax-Exempt Securities Fund. From September 1, 1995 through
December 31, 1995, CGFSC and Federated Administrative Services served as
administrators to Excelsior Tax-Exempt Fund; from August 1, 1995 through August
31, 1995, MFSC and Federated Administrative Services served as administrators
to Excelsior Tax-Exempt Fund; and prior to August 1, 1995, MFSC and Concord
Holding Corporation served as administrators to
26
<PAGE>
Excelsior Tax-Exempt Fund all under the same terms, conditions and fees as
stated above. For the period April 1, 1995 through August 31, 1995,
administration fees charged by MFSC were as follows:
<TABLE>
<S> <C>
Tax-Exempt Money Fund.................................................. $475,645
Short-Term Tax-Exempt Securities Fund.................................. 28,638
Intermediate-Term Tax-Exempt Fund...................................... 146,288
New York Intermediate-Term Tax-Exempt Fund............................. 55,112
Long-Term Tax-Exempt Fund.............................................. 49,454
</TABLE>
From time to time, as they may deem appropriate in their sole discretion, or
pursuant to applicable state expense limitations, U.S. Trust and the
Administrators may undertake to waive a portion or all of the fees payable to
them and also may reimburse the Portfolios for a portion of other expenses.
Until further notice to Excelsior Tax-Exempt Fund, U.S. Trust and/or the
Administrators intend to voluntarily waive fees and reimburse expenses to the
extent necessary for Short-Term Tax-Exempt Securities Fund to maintain an
annual expense ratio of not more than .60%.
Excelsior Tax-Exempt Fund has also entered into shareholder servicing
agreements with various service organizations (which may include affiliates of
U.S. Trust) requiring them to provide administrative support services to their
customers owning shares of the Portfolios. As a consideration for the
administrative services provided by each service organization to its customers,
each Portfolio will pay the service organizations an administrative service fee
at the annual rate of up to .40% of the average daily net asset value of its
shares held by the service organizations' customers. Such services may include
assisting in processing purchase, exchange and redemption requests;
transmitting and receiving funds in connection with customer orders to
purchase, exchange or redeem shares; and providing periodic statements. Until
further notice to Excelsior Tax-Exempt Fund, U.S. Trust and the Administrators
have voluntarily agreed to waive investment advisory and administration fees
payable by each Portfolio in an amount equal to the administrative service fees
payable by such Portfolio. For the year ended March 31, 1996, U.S. Trust and
the Administrators waived investment advisory and administration fees in
amounts equal to the administrative service fees for the Portfolios as set
forth below:
<TABLE>
<CAPTION>
U.S. TRUST ADMINISTRATORS
---------- --------------
<S> <C> <C>
Tax-Exempt Money Fund................................. $353,419 $ --
Short-Term Tax-Exempt Securities Fund................. 26,523 161
Intermediate-Term Tax-Exempt Fund..................... 117,024 1,090
New York Intermediate-Term Tax-Exempt Fund............ 22,385 201
Long-Term Tax-Exempt Fund............................. 47,791 2,602
</TABLE>
Effective August 1, 1995, Edgewood Services, Inc. (the "Distributor"), a
wholly-owned subsidiary of Federated Investors, replaced UST Distributors, Inc.
as the sponsor and distributor of Excelsior Tax-Exempt Fund. Certain sales of
Excelsior Tax-Exempt Fund's shares are subject to a maximum sales charge of 4
1/2% of the offering price. Shares of each Portfolio are sold on a continuous
basis by the Distributor.
Each Director of Excelsior Tax-Exempt Fund receives an annual fee of $9,000,
plus a meeting fee of $1,500 for each meeting attended, and is reimbursed for
expenses incurred for attending meetings. The Chairman receives an additional
annual fee of $5,000. No person who is an officer, director or employee of U.S.
Trust or the Administrators, or of any parent or subsidiary thereof, who serves
as an officer, director or employee of Excelsior Tax-Exempt Fund receives any
compensation from Excelsior Tax-Exempt Fund.
27
<PAGE>
U.S. Trust serves as the shareholder servicing and dividend disbursing agent
to Excelsior Tax-Exempt Fund and effective September 1, 1995, CGFSC serves as
the sub-shareholder servicing agent. Prior to September 1, 1995, MFSC served as
the sub-shareholder servicing agent. For the period April 1, 1995 through
August 31, 1995, shareholder servicing fees charged by U.S. Trust and MFSC were
as follows:
<TABLE>
<S> <C>
Tax-Exempt Money Fund.................................................. $11,707
Short-Term Tax-Exempt Securities Fund.................................. 3,754
Intermediate-Term Tax-Exempt Fund...................................... 10,329
New York Intermediate-Term Tax-Exempt Fund............................. 4,313
Long-Term Tax-Exempt Fund.............................................. 11,311
</TABLE>
Effective September 1, 1995, The Chase Manhattan Bank, N.A. ("Chase") serves
as custodian of Excelsior Tax-Exempt Fund's assets. Prior to September 1, 1995,
U.S. Trust served as the custodian of Excelsior Tax-Exempt Fund's assets. For
the period April 1, 1995 through August 31, 1995, custody fees charged by U.S.
Trust were as follows:
<TABLE>
<S> <C>
Tax-Exempt Money Fund.................................................. $175,440
Short-Term Tax-Exempt Securities Fund.................................. 6,851
Intermediate-Term Tax-Exempt Fund...................................... 52,322
New York Intermediate-Term Tax-Exempt Fund............................. 20,107
Long-Term Tax-Exempt Fund.............................................. 18,621
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales and maturities of securities, excluding short-term
investments, for the Portfolios aggregated:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Short-Term Tax-Exempt Securities Fund.................. $52,388,131 $53,707,161
Intermediate-Term Tax-Exempt Fund...................... 108,891,500 131,454,321
New York Intermediate-Term Tax-Exempt Fund............. 133,381,702 129,779,404
Long-Term Tax-Exempt Fund.............................. 167,265,015 147,042,003
</TABLE>
4. COMMON STOCK:
Excelsior Tax-Exempt Fund currently offers five classes of shares, each
representing interests in one of five separate Portfolios. Authorized capital
for each Portfolio is as follows: 1,500 million shares of Tax-Exempt Money Fund
and 500 million shares each of Short-Term Tax-Exempt Securities Fund,
Intermediate-Term Tax-Exempt Fund, New York Intermediate-Term Tax-Exempt Fund
and Long-Term Tax-Exempt 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 and tax-exempt
earnings on the assets belonging to such Portfolio as are declared at the
discretion of Excelsior Tax-Exempt Fund's Board of Directors. Since Tax-Exempt
Money Fund has sold, reinvested and redeemed shares only at a constant net
asset value of $1.00 per share, the number of
28
<PAGE>
shares represented by such sales, reinvestments and redemptions is the same as
the amount shown below for such transactions.
<TABLE>
<CAPTION>
TAX-EXEMPT MONEY FUND
--------------------------------
YEAR ENDED YEAR ENDED
03/31/96 03/31/95
--------------- ---------------
<S> <C> <C>
Sold.......................................... $ 3,563,760,620 $ 3,360,809,326
Issued as reinvestment of dividends........... 1,453,070 1,153,926
Redeemed...................................... (3,413,388,911) (3,241,661,217)
--------------- ---------------
Net Increase.................................. $ 151,824,779 $ 120,302,035
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM TAX-EXEMPT SECURITIES FUND
----------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/96 03/31/95
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Sold.................... 4,138,581 $ 29,147,090 5,191,784 $ 36,086,132
Issued as reinvestment
of dividends........... 22,472 158,308 36,054 250,323
Redeemed................ (4,989,971) (35,155,827) (6,560,697) (45,516,509)
---------- ------------ ----------- -------------
Net Decrease............ (828,918) $ (5,850,429) (1,332,859) $ (9,180,054)
========== ============ =========== =============
<CAPTION>
INTERMEDIATE-TERM TAX-EXEMPT FUND
----------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/96 03/31/95
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Sold.................... 7,022,612 $ 64,053,421 8,364,943 $ 71,548,913
Issued as reinvestment
of dividends........... 72,517 662,041 86,329 742,840
Redeemed................ (5,819,486) (53,110,726) (16,301,349) (139,097,191)
---------- ------------ ----------- -------------
Net
Increase/(Decrease).... 1,275,643 $ 11,604,736 (7,850,077) $ (66,805,438)
========== ============ =========== =============
<CAPTION>
NEW YORK INTERMEDIATE-TERM TAX-EXEMPT FUND
----------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/96 03/31/95
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Sold.................... 3,519,848 $ 29,757,136 5,744,893 $ 45,807,741
Issued as reinvestment
of dividends........... 28,744 243,592 31,117 250,999
Redeemed................ (2,708,124) (22,935,162) (8,346,243) (66,576,830)
---------- ------------ ----------- -------------
Net
Increase/(Decrease).... 840,468 $ 7,065,566 (2,570,233) $ (20,518,090)
========== ============ =========== =============
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM TAX-EXEMPT FUND
--------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/96 03/31/95
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 5,294,884 $ 50,924,332 6,687,768 $ 58,879,514
Issues in connection with
US Affinity Acquisition
(Note 6)................. -- -- 217,206 2,050,770
Issued as reinvestment of
dividends................ 60,003 582,920 59,438 522,710
Redeemed.................. (4,308,376) (41,666,507) (7,715,183) (67,394,609)
---------- ------------ ---------- ------------
Net Increase/(Decrease)... 1,046,511 $ 9,840,745 (750,771) $ (5,941,615)
========== ============ ========== ============
</TABLE>
5. ORGANIZATION COSTS:
Excelsior Tax-Exempt Fund has borne all costs in connection with the initial
organization of new portfolios, including the fees for registering and
qualifying its shares for distribution under Federal and state securities
regulations. All such costs are being amortized on the straight-line basis over
periods of five years from the dates on which each Portfolio commenced
operations.
6. ASSET ACQUISITION:
On March 10, 1995, the Long-Term Tax-Exempt Fund acquired certain assets (net
of liabilities) of $2,050,770 (excluding unamortized organization costs) from
USAffinity Tax-Free Municipal Fund in a tax-free exchange for 217,206 shares of
the Long-Term Tax-Exempt Fund.
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<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders
and Board of Directors
Excelsior Tax-Exempt Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Tax-Exempt Money, Short-Term
Tax-Exempt Securities, Intermediate-Term Tax-Exempt, New York Intermediate-Term
Tax-Exempt and the Long-Term Tax-Exempt Portfolios (the five portfolios
constituting the Excelsior Tax-Exempt Funds, Inc. (formerly UST Master Tax-
Exempt Funds, Inc.)) as of March 31, 1996, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1996 by correspondence with the custodian and brokers, or other
appropriate auditing procedures where replies from brokers were not received.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned Portfolios of Excelsior Tax-Exempt Funds, Inc. at March
31, 1996, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended and
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 13, 1996
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FEDERAL TAX INFORMATION (UNAUDITED):
For the year ended March 31, 1996, the percentage of exempt interest
dividends paid and the designation of long-term capital gain are approximated
as follows:
<TABLE>
<CAPTION>
EXEMPT LONG-TERM
INTEREST DIVIDENDS CAPITAL GAIN
------------------- ------------
<S> <C> <C>
Tax-Exempt Money Fund......................... 100% --
Short-Term Tax-Exempt Securities Fund......... 99% --
Intermediate-Term Tax-Exempt Fund............. 99% --
New York Intermediate-Term Tax-Exempt Fund.... 100% --
Long-Term Tax-Exempt Fund..................... 98% --
</TABLE>
32
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USTEFXA396
