<PAGE>
INVESTMENT ADVISOR
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
TRANSFER AGENT
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
(800) 909-1989
LOGO
DISTRIBUTOR
Edgewood Services, Inc.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230
OPTIMUM GROWTH FUND
VALUE EQUITY FUND
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1996
SHARES OF THE FUNDS ARE NOT DEPOSITS
OR OBLIGATIONS OF, OR GUARANTEED OR EN-
DORSED BY, ANY BANK, AND THE SHARES
ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, BANK
INSURANCE FUND, FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
AN INVESTMENT IN A FUND IS SUBJECT TO
RISK OF PRINCIPAL.
US EXITOGVE SA96
<PAGE>
EXCELSIOR INSTITUTIONAL TRUST
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1996 (UNAUDITED)
OPTIMUM GROWTH FUND
<TABLE>
<CAPTION>
SHARES VALUE
-------- -----------
<C> <S> <C>
COMMON STOCKS -- 97.39%
CONSUMER STAPLE -- 23.06%
1,600 Abbot Laboratories...................................... $ 78,800
7,000 +Amgen, Inc. ........................................... 441,875
1,200 Campbell Soup Co. ...................................... 93,600
10,000 Coca Cola Co. .......................................... 508,750
800 Colgate-Palmolive Co. .................................. 69,500
1,900 ConAgra, Inc. .......................................... 93,575
2,800 CPC International, Inc. ................................ 209,650
4,900 General Mills, Inc. .................................... 295,838
8,000 Gillette Co. ........................................... 577,000
3,500 H.J. Heinz Co. ......................................... 118,125
5,500 Hormel Foods Corp. ..................................... 128,563
4,700 International Flavors & Fragrances, Inc. ............... 205,037
2,200 Kellogg Co. ............................................ 151,525
2,100 McCormick & Company, Inc. .............................. 49,088
2,500 Merck & Co., Inc. ...................................... 175,937
7,000 Pfizer, Inc. ........................................... 553,875
5,800 Philip Morris Companies, Inc. .......................... 520,550
3,900 Procter & Gamble Co. ................................... 380,250
8,000 United Healthcare Corp. ................................ 333,000
-----------
4,984,538
-----------
TECHNOLOGY -- 22.98%
10,000 +America Online, Inc. .................................. 356,250
12,000 +Cisco Systems, Inc. ................................... 744,000
12,000 +IDEXX Laboratories, Inc. .............................. 543,000
9,000 Intel Corp. ............................................ 858,375
8,000 +Intuit, Inc. .......................................... 250,000
8,000 Medtronic, Inc. ........................................ 513,000
5,000 +Microsoft Corp. ....................................... 658,750
7,000 Motorola, Inc. ......................................... 361,375
11,000 +Sun Microsystems, Inc. ................................ 682,000
-----------
4,966,750
-----------
CONSUMER CYCLICAL -- 16.33%
12,000 +AutoZone, Inc. ........................................ 348,000
17,000 +CUC International, Inc. ............................... 677,875
7,000 Electronic Data Systems Corp. .......................... 429,625
2,600 Hannaford Brothers Co. ................................. 84,500
10,000 Home Depot, Inc. ....................................... 568,750
2,300 Polaris Industries, Inc. ............................... 52,037
5,000 +Quintiles Transnational Corp. ......................... 362,500
4,900 Vulcan Materials Co. ................................... 294,000
7,300 Wal-Mart Stores, Inc. .................................. 192,538
6,000 Walt Disney Co. ........................................ 380,250
400 Washington Post Co., Class B............................ 140,000
-----------
3,530,075
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------- -----------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
FINANCIAL -- 14.50%
5,000 American International Group, Inc. ..................... $ 503,750
19,000 Charles Schwab Corp. ................................... 439,375
6,000 Citicorp................................................ 543,750
13,000 Federal National Mortgage Association................... 453,375
9,000 First Data Corp. ....................................... 734,625
7,000 Merrill Lynch & Co., Inc. .............................. 459,375
-----------
3,134,250
-----------
TELECOMMUNICATIONS -- 10.45%
11,000 +Ascend Communications, Inc. ........................... 726,000
11,300 AT&T Corp. ............................................. 590,425
2,000 Bell Atlantic Corp. .................................... 119,750
8,000 +Tellabs, Inc. ......................................... 564,000
4,000 U.S. Robotics Corp. .................................... 258,500
-----------
2,258,675
-----------
CAPITAL GOODS -- 4.08%
7,900 General Electric Co. ................................... 718,900
2,700 Kerr-McGee Corp. ....................................... 164,363
-----------
883,263
-----------
ENERGY -- 3.83%
4,000 ARCO Chemical Co. ...................................... 200,000
3,500 Atlantic Richfield Co. ................................. 446,250
4,100 Burlington Resources, Inc. ............................. 181,937
-----------
828,187
-----------
RAW & INTERMEDIATE MATERIALS -- 2.16%
1,800 Ball Corp. ............................................. 44,100
2,300 Corning, Inc. .......................................... 89,700
1,300 Dow Chemical Co. ....................................... 104,325
3,400 International Paper Co. ................................ 144,500
1,800 Newmont Gold Co. ....................................... 85,275
-----------
467,900
-----------
TOTAL COMMON STOCKS
(Cost $19,621,456)...................................... 21,053,638
-----------
</TABLE>
See Notes to Financial Statements.
<PAGE>
EXCELSIOR INSTITUTIONAL TRUST
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1996 (UNAUDITED)
OPTIMUM GROWTH FUND -- (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----------
<C> <S> <C>
DEMAND NOTES -- 2.71%
$188,000 Associates Corp. of North America Master Notes......... $ 188,000
397,000 General Electric Co.
Promissory Notes....................................... 397,000
-----------
TOTAL DEMAND NOTES
(Cost $585,000)........................................ 585,000
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $20,206,456)......................................... 100.10% $21,638,638
OTHER ASSETS AND LIABILITIES (NET)......................... (0.10) (20,782)
------ -----------
NET ASSETS................................................. 100.00% $21,617,856
====== ===========
</TABLE>
- ------------
+ Non-income producing security.
See Notes to Financial Statements.
<PAGE>
EXCELSIOR INSTITUTIONAL TRUST
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1996 (UNAUDITED)
VALUE EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<C> <S> <C>
COMMON STOCKS -- 99.94%
TECHNOLOGY -- 23.11%
18,000 Adobe Systems, Inc. ..................................... $ 670,500
35,000 +ADT Ltd. ............................................... 669,375
7,000 International Business Machines Corp. ................... 871,500
45,000 +Loral Space & Communications............................ 708,750
17,000 Nokia Corp., Class A ADR................................. 752,250
15,000 Watkins Johnson Co. ..................................... 303,750
15,000 Xerox Corp. ............................................. 804,375
-----------
4,780,500
-----------
CONSUMER STAPLE -- 20.51%
8,000 Bristol-Meyers Squibb Co. ............................... 771,000
10,000 CPC International, Inc. ................................. 748,750
10,000 General Mills, Inc. ..................................... 603,750
30,000 +Healthsource, Inc. ..................................... 442,500
37,000 +Hvide Marine, Inc., Class A............................. 471,750
40,000 Savannah Foods & Industries, Inc. ....................... 555,000
28,000 Sunbeam Corp., Inc. ..................................... 647,500
-----------
4,240,250
-----------
FINANCIAL -- 12.81%
40,000 Commonwealth Bancorp, Inc. .............................. 465,000
20,000 Integon Corp. ........................................... 370,000
17,000 Mid Ocean Ltd. .......................................... 724,625
15,000 NAC Re Corp. ............................................ 540,000
20,000 Travelers/Aetna Property Casualty Corp., Class A......... 550,000
-----------
2,649,625
-----------
CAPITAL GOODS -- 12.44%
26,000 +American Standard Companies, Inc. ...................... 890,500
8,000 Boeing Co. .............................................. 756,000
30,000 +D.R. Horton, Inc. ...................................... 292,500
34,000 Westinghouse Electric Corp. ............................. 633,250
-----------
2,572,250
-----------
RAW & INTERMEDIATE MATERIALS -- 9.58%
9,000 Dow Chemical Co. ........................................ 722,250
18,000 Rayonier, Inc. .......................................... 715,500
10,000 Tecumseh Products, Co., Class A.......................... 542,500
-----------
1,980,250
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
ENERGY -- 9.04%
75,000 +Hugoton Energy Corp. ................................. $ 628,125
2,000 Mobil Corp. ........................................... 231,500
20,000 Valero Energy Corp. ................................... 437,500
25,000 YPF S.A. ADR........................................... 571,875
-----------
1,869,000
-----------
CONSUMER CYLICAL -- 7.22%
19,000 Dial Corp. ............................................ 261,250
40,600 +Falcon Building Products, Inc., Class A............... 527,800
14,000 Ford Motor Co. ........................................ 437,500
19,000 Viad Corp. ............................................ 266,000
-----------
1,492,550
-----------
UTILITY -- 2.84%
25,000 360 Communications Co. ................................ 587,500
-----------
TRANSPORTATION -- 2.39%
60,000 Smithway Motor Express Corp., Class A.................. 495,000
-----------
TOTAL COMMON STOCKS
(Cost $19,240,917)..................................... 20,666,925
-----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
DEMAND NOTES -- 0.23%
$37,000 Associates Corp. of North America Master Notes......... 37,000
11,000 General Electric Co.
Promissory Notes....................................... 11,000
-----------
TOTAL DEMAND NOTES
(Cost $48,000)......................................... 48,000
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $19,288,917)......................................... 100.17% $20,714,925
OTHER ASSETS AND LIABILITIES (NET)......................... (0.17) (34,949)
------ -----------
NET ASSETS................................................. 100.00% $20,679,976
====== ===========
</TABLE>
- ------------
+ Non-income producing security.
ADR -- American Depositary Receipt.
See Notes to Financial Statements.
<PAGE>
EXCELSIOR INSTITUTIONAL TRUST
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
OPTIMUM VALUE
GROWTH EQUITY
FUND FUND
----------- -----------
<S> <C> <C>
ASSETS:
Investments, at cost -- see accompanying Schedules
of Investments................................... $20,206,456 $19,288,917
=========== ===========
Investments in securities, at value (Note 1a)..... $21,638,638 $20,714,925
Cash.............................................. 340 --
Dividends and interest receivable................. 27,356 27,629
Prepaid expenses.................................. 1,978 1,925
Deferred organization expenses (Note 1f).......... 1,136 1,136
----------- -----------
Total assets................................... 21,669,448 20,745,615
LIABILITIES:
Dividends payable................................. 29,349 --
Investment advisory fees payable (Note 2a)........ 5,009 4,917
Administrators' fees payable (Note 2b)............ 2,646 2,566
Due to custodian bank............................. -- 44,550
Accrued expenses and other liabilities............ 14,588 13,606
----------- -----------
Total liabilities.............................. 51,592 65,639
----------- -----------
NET ASSETS......................................... $21,617,856 $20,679,976
=========== ===========
NET ASSETS CONSIST OF:
Paid-in capital................................... $20,513,271 $19,587,865
Undistributed net investment income............... 15,251 23,494
Accumulated net realized loss..................... (342,848) (357,391)
Net unrealized appreciation....................... 1,432,182 1,426,008
----------- -----------
NET ASSETS......................................... $21,617,856 $20,679,976
=========== ===========
NET ASSETS
Institutional Shares.............................. $20,762,118 $20,679,976
Trust Shares...................................... $ 855,738 --
Shares outstanding (Unlimited number of $0.00001
par value shares authorized for each Fund)........
Institutional Shares.............................. 2,078,531 2,018,760
Trust Shares...................................... 85,725 --
Net Asset Value Per Share (net assets / shares
outstanding)......................................
Institutional Shares.............................. $ 9.99 $ 10.24
=========== ===========
Trust Shares...................................... $ 9.98 $ --
=========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
EXCELSIOR INSTITUTIONAL TRUST
STATEMENTS OF OPERATIONS
FOR THE PERIOD JUNE 1, 1996 (COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
OPTIMUM VALUE
GROWTH EQUITY
FUND FUND
--------- ---------
<S> <C> <C>
INVESTMENT INCOME
Dividend income........................................ $ 85,040 $ 111,155
Interest income........................................ 8,013 1,221
--------- ---------
TOTAL INCOME........................................ 93,053 112,376
--------- ---------
EXPENSES (NOTE 1G):
Investment advisory fees (Note 2a)..................... 43,665 42,315
Administrators' fees (Note 2b)......................... 10,345 10,018
Registration fees...................................... 3,005 2,878
Auditing fees.......................................... 2,508 2,421
Transfer agent fees.................................... 2,110 2,029
Custodian fees......................................... 1,679 1,628
Legal fees............................................. 1,396 1,278
Trustees' fees and expenses (Note 2f).................. 1,049 1,022
Prospectus and shareholder reports..................... 782 749
Insurance expense...................................... 720 744
Distribution fees -- Trust Shares (Note 2e)............ 632 --
Amortization of organization expenses (Note 1f)........ 82 82
Miscellaneous.......................................... 4,122 4,035
--------- ---------
TOTAL EXPENSES...................................... 72,095 69,199
Less: Waiver of fees (Note 2c)...................... (24,440) (23,606)
--------- ---------
NET EXPENSES........................................ 47,655 45,593
--------- ---------
NET INVESTMENT INCOME................................... 45,398 66,783
--------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) (NOTE 3):
Net realized loss on investments....................... (342,848) (357,391)
Change in unrealized appreciation during the period.... 330,129 822,601
--------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS)................. (12,719) 465,210
--------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $ 32,679 $ 531,993
========= =========
</TABLE>
See Notes to Financial Statements.
<PAGE>
EXCELSIOR INSTITUTIONAL TRUST
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD JUNE 1, 1996 (COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
OPTIMUM GROWTH VALUE EQUITY
FUND FUND
-------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income........................... $ 45,398 $ 66,783
Net realized loss on investments................ (342,848) (357,391)
Net change in unrealized appreciation on
investments during the period.................. 330,129 822,601
----------- -----------
Net increase in net assets resulting from
operations.................................. 32,679 531,993
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Institutional Shares............................ (29,349) (43,289)
Trust Shares.................................... (798) --
----------- -----------
Total distributions to shareholders.......... (30,147) (43,289)
----------- -----------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Net proceeds from shares sold:
Institutional Shares............................ 118,609 --
Trust Shares.................................... 823,820 --
Contribution in kind:
Institutional Shares............................ 20,829,289 20,345,840
Trust Shares.................................... -- --
Reinvestment of dividends:
Institutional Shares............................ -- --
Trust Shares.................................... 798 --
Cost of shares redeemed:
Institutional Shares............................ (154,356) (154,568)
Trust Shares.................................... (2,836) --
----------- -----------
Net increase in net assets from beneficial
interest transactions......................... 21,615,324 20,191,272
----------- -----------
TOTAL INCREASE IN NET ASSETS................. 21,617,856 20,679,976
NET ASSETS:
Beginning of Period............................. -- --
----------- -----------
End of Period (1)............................... $21,617,856 $20,679,976
=========== ===========
-------------
(1)Including undistributed net investment
income......................................... $ 15,251 $ 23,494
=========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
EXCELSIOR INSTITUTIONAL TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED)
Selected data for a share outstanding throughout the period are as follows:
<TABLE>
<CAPTION>
OPTIMUM GROWTH FUND VALUE EQUITY FUND
---------------------------------- --------------------
INSTITUTIONAL SHARES TRUST SHARES INSTITUTIONAL SHARES
-------------------- ------------- --------------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996(1) 1996(2) 1996 (1)
-------------------- ------------- --------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................. $ 10.00 $ 9.87 $ 10.00
--------- ----------- ---------
INVESTMENT OPERATIONS:
Net investment income................................................ 0.02 0.01 0.03
Net realized and unrealized gain (loss).............................. (0.02) 0.11 0.23
--------- ----------- ---------
TOTAL FROM INVESTMENT OPERATIONS.................................. 0.00 0.12 0.26
--------- ----------- ---------
DISTRIBUTIONS:
From net investment income........................................... (0.01) (0.01) (0.02)
--------- ----------- ---------
NET ASSET VALUE, END OF PERIOD........................................ $ 9.99 $ 9.98 $ 10.24
========= =========== =========
TOTAL RETURN.......................................................... 0.04%(3) 1.21%(3) 2.61%(3)
========= =========== =========
RATIOS AND SUPPLEMENTAL DATA:
Ratios to Average Net Assets
Expenses (5)......................................................... 0.70% (4) 1.05% (4) 0.70% (4)
Net Investment Income (5)............................................ 0.68% (4) 0.33% (4) 1.02% (4)
Portfolio Turnover (6)............................................... 6% 6% 48%
Net Assets at end of Period (000's omitted)........................... $ 20,762 $ 856 $ 20,680
Average Commission Rate............................................... $ 0.0277 $ 0.0277 $ 0.0842
-------------
(1)From June 1, 1996 (Commencement of operations) to September 30, 1996.
(2)From July 3, 1996 (Commencement of operations) to September 30, 1996.
(3)Not annualized.
(4)Annualized.
(5) Reflects a voluntary expense waiver and reimbursement of expenses by the investment advisor and administrator. Without
these waivers and reimbursements, the ratio of expenses to average net assets and net investment income to average net
assets would have been as follows:
Expenses to Average Net Assets.................................... 1.06% (4) 1.58% (4) 1.06% (4)
Net Investment Income to Average
Net Assets..................................................... 0.32% (4) (0.21)% (4) 0.66% (4)
(6)Portfolio Turnover calculation excludes in-kind transfers of securities (See Note 3a)
</TABLE>
See Notes to Financial Statements.
<PAGE>
EXCELSIOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES:
Excelsior Institutional Trust ("Trust") is registered under the Investment
Company Act of 1940 (the "Act") and the Securities Act of 1933 as an open-end
diversified management investment company and is comprised of nine funds, each
having its own investment objectives and policies.
These financial statements pertain to the following two Funds: Excelsior In-
stitutional Optimum Growth Fund ("Optimum Growth Fund") and Excelsior Institu-
tional Value Equity Fund ("Value Equity Fund") (collectively, the "Funds").
The Trust offers the shares of each Fund in two classes: Institutional Shares
and Trust Shares. The Institutional Share class of both the Optimum Growth
Fund and Value Equity Fund commenced operations on June 1, 1996. The Optimum
Growth Fund began offering Trust Shares on July 3, 1996. The financial state-
ments for Excelsior Institutional Equity Fund, Excelsior Institutional Income
Fund, Excelsior Institutional Total Return Bond Fund, Excelsior Institutional
Balanced Fund, Excelsior Institutional Equity Growth Fund, Excelsior Institu-
tional International Equity Fund and Excelsior Institutional Bond Index Fund
are presented separately.
The following is a summary of the significant accounting policies of the
Funds. Such policies are in conformity with generally accepted accounting
principles for investment companies and are consistently followed by the Funds
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 on the financial statements. Actual re-
sults could differ from these estimates.
a) Valuation of Investments -- Investments in securities that are traded on
a domestic stock exchange are valued at the last sale price on the exchange on
which such securities are primarily traded or at the last sale price on a na-
tional securities market. Securities traded over-the-counter are valued each
business day on the basis of closing over-the-counter bid prices. Securities
for which there were no transactions are valued at the average of the most re-
cent bid and asked prices (as calculated by an independent pricing service
(the "Service") based upon its evaluation of the market for such securities)
when, in the judgment of the Service, quoted bid and asked prices for securi-
ties are readily available and are representative of the market. Bid price is
used when no asked price is available. Investments in securities that are pri-
marily traded on foreign securities exchanges are generally valued at the pre-
ceding closing values of such securities on their respective exchanges, except
that when an occurrence subsequent to the time a value was so established is
likely to have changed such value, then a fair value of those securities will
be determined by consideration of other factors under the direction of the
Board of Trustees. A security which is traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market on
which the security is traded.
All other foreign securities are valued at the last current bid quotation if
market quotations are available, or at fair value as determined in accordance
with policies established by the Board of Trustees. Investment valuations,
other assets, and liabilities initially expressed in foreign currencies are
converted each business day into U.S. dollars based upon current exchange
rates. Purchases and sales of foreign investments and income and expenses are
converted into U.S. dollars based upon currency exchange rates prevailing on
the respective dates of such transactions. Gains and losses attributable to
foreign currency exchange rates are recorded for financial statement purposes
as net realized gains and losses on investments. That portion of both realized
and unrealized gains and losses on investments that results from fluctuations
in foreign currency exchange rates is not separately disclosed.
<PAGE>
EXCELSIOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED) (CONTINUED)
Securities for which market quotations are not readily available are valued
at fair value pursuant to guidelines adopted by the Board of Trustees. Short-
term debt instruments with remaining maturities of 60 days or less are valued
at amortized cost, which approximates market value.
b) Forward foreign currency exchange contracts: The Funds' participation in
forward currency exchange contracts will be limited to hedging involving ei-
ther specific transactions or portfolio positions. Transaction hedging in-
volves the purchase or sale of foreign currency with respect to specific re-
ceivables or payables of a Fund generally arising in connection with the pur-
chase or sale of its portfolio securities. Risk may arise upon entering into
these contracts from the potential inability of counterparties to meet the
terms of their contracts and is generally limited to the amount of unrealized
gain on the contracts, if any, at the date of default. Risk may also arise
from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. Contracts are marked-to-market daily and the change in market
value is recorded as unrealized appreciation or depreciation. Realized gains
or losses arising from such transactions are included in net realized gains or
losses from foreign currency transactions.
c) Security transactions and investment income -- Security transactions are
recorded on a trade date basis. Realized gains and losses on investments sold
are recorded on the basis of identified cost. Interest income, including where
applicable, amortization of discounts and premiums on investments, is recorded
on the accrual basis. Dividend income is recorded on the ex-dividend date, ex-
cept for certain dividends from foreign securities, which are recorded as soon
as the Fund is informed of the dividend.
d) Dividends to Shareholders -- Dividends equal to all or substantially all
of each Fund's net investment income will be declared and paid at least quar-
terly. Distributions to shareholders of net realized capital gains, if any,
are normally declared and paid annually, but the Funds may make distributions
on a more frequent basis to comply with the distribution requirements of the
Internal Revenue Code. To the extent that net realized capital gain can be
offset by capital loss carryovers, if any, it is the policy of the Trust not
to distribute such gain.
Dividends and distributions are determined in accordance with the Federal
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
net operating losses, foreign currency transactions, partnership income, de-
ferral of losses on wash sales and post-October losses.
In order to avoid a Federal excise tax, each Fund is required to distribute
certain minimum amounts of net realized capital gain and net investment income
for the respective periods ending October 31 and December 31 in each calendar
year.
e) Repurchase Agreements -- The Funds may purchase portfolio securities from
financial institutions deemed to be creditworthy by the investment advisor
subject to the seller's agreement to repurchase and the Funds' agreement to
resell such securities at mutually agreed upon prices. Securities purchased
subject to such repurchase agreements are deposited with the Funds' custodian
or are maintained in the Federal Reserve/Treasury book-entry system and must
have, at all times, an aggregate market value of not less than 102% of the re-
purchase price (including accrued interest).
If the value of the underlying security, including accrued interest, falls
below 102% of the repurchase price plus accrued interest, the Funds will re-
quire the seller to deposit additional collateral by the
<PAGE>
EXCELSIOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED) (CONTINUED)
next business day. Default or bankruptcy of the seller may, however, expose
the applicable Fund to the possible delay in connection with the disposition
of the underlying securities or loss to the extent that proceeds from a sale
of the underlying securities were less than the repurchase price under the
agreement.
f) Deferred Organization Expense -- Expenses incurred by each Fund in con-
nection with its organization are being amortized on a straight-line basis
over a five-year period.
g) Expense Allocation -- Expenses incurred by the Trust with respect to any
two or more Funds in the Trust are allocated in proportion to the average net
assets of each Fund, except where allocations of direct expenses to each Fund
can otherwise be fairly made. Expenses directly attributable to a Fund are
charged to that Fund and expenses directly attributable to a particular class
of shares in a Fund are charged to such class.
h) Federal Income Taxes -- It is the policy of each Fund to qualify as a
regulated investment company, if such qualifications is in the best interest
to the shareholders, by complying with the requirements of the Internal Reve-
nue Code of 1986, as amended, applicable to regulated investment companies and
by distributing substantially all of its taxable earnings to its shareholders.
At September 30, 1996, the aggregate cost and gross unrealized appreciation
and gross unrealized depreciation in the value of investments owned by the
Funds, as computed on a federal tax basis, were as follows:
<TABLE>
<CAPTION>
OPTIMUM GROWTH VALUE EQUITY
FUND FUND
-------------- ------------
<S> <C> <C>
Aggregate cost..................................... $20,206,456 $19,288,917
=========== ===========
Gross unrealized appreciation...................... $ 2,451,378 $ 1,962,512
----------- -----------
Gross unrealized depreciation...................... (1,019,196) (536,504)
----------- -----------
Net unrealized appreciation (depreciation)......... $ 1,423,182 $ 1,426,008
=========== ===========
</TABLE>
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE, DISTRIBUTION EXPENSES AND
RELATED PARTY TRANSACTIONS.
a) United States Trust Company of New York ("U.S. Trust") serves as the in-
vestment advisor to the Funds'. For the services provided pursuant to the In-
vestment Advisory Agreements, U.S. Trust is entitled to receive a fee, com-
puted daily and paid monthly, at the annual rate of 0.65% of the average daily
net assets of each Fund.
b) U.S. Trust, Chase Global Funds Services Company ("CGFSC") and Federated
Administrative Services ("FAS") (collectively, the "Administrators") provide
administrative services to the Trust. For the services provided to the Funds,
the Administrators are entitled jointly to annual fees, computed daily and
paid monthly, based on the combined aggregate average daily net assets of all
investment portfolios of the Trust (excluding the International Equity Fund),
Excelsior Funds, Inc. (excluding Excelsior Fund's international equity portfo-
lios), and Excelsior Tax-Exempt Funds, Inc., all of which are affiliated in-
vestment companies, as follows: .200% of the first $200 million, .175% of the
next $200 million, and
<PAGE>
EXCELSIOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED) (CONTINUED)
.150% over $400 million. Administration fees payable by each Fund of the three
investment companies are determined in proportion to the relative average daily
net assets of the respective Funds for the period paid. For the period ended
September 30, 1996, administration fees charged by U.S. Trust were as follows:
<TABLE>
<S> <C>
Optimum Growth Fund...................................................... $1,153
Value Equity Fund........................................................ $1,117
</TABLE>
c) 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 Admin-
istrators may undertake to waive a portion of all of the fees payable to them
and also may reimburse the Funds for a portion of other operating expenses. Un-
til further notice, U.S. Trust has agreed to voluntarily waive fees and reim-
burse expenses to the extent necessary to maintain an annual operating expense
ratio of not more than 0.70% of the average daily net assets for the Institu-
tional Shares and 1.05% of the average daily net assets for the Trust Shares of
the Optimum Growth Fund and Value Equity Fund.
For the period ended September 30, 1996, U.S. Trust voluntarily waived fees
in the following amounts:
<TABLE>
<S> <C>
Optimum Growth Fund..................................................... $24,440
Value Equity Fund....................................................... $23,606
</TABLE>
d) The Trust, on behalf of the Funds, has also entered into administrative
servicing agreements with various shareholder organizations (which may include
U.S. Trust) requiring them to provide administrative support services to their
customers owning shares of the Funds. As a consideration for the administrative
services provided by each service organization to its customers, each Fund will
pay the service organizations an administrative service fee at an 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 receiv-
ing funds in connection with customer orders to purchase, exchange or redeem
shares; and providing periodic statements. For the period ended September 30,
1996, no administrative service fees have been charged to the Funds.
e) Pursuant to a Distribution Agreement, Edgewood Services, Inc. (the "Dis-
tributor") serves as the Trust's distributor. Under the Funds' Distribution
Plan, adopted pursuant to Rule 12b-1 under the Act, the Trust Shares of each
Fund may reimburse the Distributor monthly for distribution expenses in an
amount not to exceed the annual rate of .75% of the average daily net asset
value of the Fund's outstanding Trust Shares. Trust Shares of each Fund cur-
rently bear the expense of such distribution fees at the annual rate of .35% of
the average daily net asset value of the Fund's outstanding Trust Shares.
f) Trustees receive an annual retainer of $4,000 and an additional $250 for
each meeting of the Board of Trustees attended. In addition, the Trust reim-
burses independent Trustees for reasonable expenses incurred when acting in
their capacity as Trustees.
<PAGE>
EXCELSIOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED) (CONTINUED)
3. PURCHASES AND SALES OF INVESTMENT SECURITIES.
a) Investment transactions (excluding short-term investments) for the period
ended September 30, 1996 were as follows:
<TABLE>
<CAPTION>
COST OF CONTRIBUTION PROCEEDS
PURCHASES IN KIND FROM SALES
---------- ------------ ----------
<S> <C> <C> <C>
Optimum Growth Fund.......................... $ 945,036 $19,506,270 $ 487,003
Value Equity Fund............................ $4,064,820 $19,379,293 $3,845,805
</TABLE>
There were no transactions in U.S. Government and Agency Obligations for the
period ended September 30, 1996.
4. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Capital share transactions for the period ended September 30, 1996 for each
Fund by class of shares were as follows:
<TABLE>
<CAPTION>
OPTIMUM GROWTH VALUE EQUITY
FUND FUND
-------------- ------------
<S> <C> <C>
Shares sold:
Institutional Shares(1)........................... 11,440 --
Trust Shares(2)................................... 85,935 --
Contribution in kind:
Institutional Shares(1)........................... 2,082,929 2,034,584
Trust Shares(2)................................... -- --
Shares issued for dividend reinvestment:
Institutional Shares(1)........................... -- --
Trust Shares(2)................................... 80 --
Shares redeemed:
Institutional Shares(1)........................... (15,838) (15,824)
Trust Shares(2)................................... (290) --
--------- ---------
Net increase in Shares Outstanding.................. 2,164,256 2,018,760
========= =========
</TABLE>
- ------------
(1) Initial offering of Institutional Shares commenced operations on June 1,
1996 for Optimum Growth Fund and Value Equity Fund.
(2) Initial offering of Trust Shares for Optimum Growth Fund commenced opera-
tions on July 3, 1996.
