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[LOGO OF EXCELSIOR FUNDS APPEARS HERE]
DOMESTIC EQUITY PORTFOLIOS
ANNUAL REPORT
MARCH 31, 1998
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TABLE OF CONTENTS
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PAGE
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LETTER TO SHAREHOLDERS................................................... 1
ADVISER'S DOMESTIC EQUITY MARKET REVIEW.................................. 2
ADVISER'S INVESTMENT REVIEWS
Blended Equity Fund (formerly Equity Fund).............................. 3
Income and Growth Fund.................................................. 4
Value and Restructuring Fund (formerly Business and Industrial
Restructuring Fund).................................................... 5
Small Cap Fund (formerly Early Life Cycle Fund)......................... 6
Energy and Natural Resources Fund (formerly Long-Term Supply of Energy
Fund).................................................................. 7
Large Cap Growth Fund................................................... 8
Real Estate Fund........................................................ 9
STATEMENTS OF ASSETS AND LIABILITIES..................................... 10
STATEMENTS OF OPERATIONS................................................. 12
STATEMENTS OF CHANGES IN NET ASSETS...................................... 14
FINANCIAL HIGHLIGHTS -- SELECTED PER SHARE DATA AND RATIOS............... 16
PORTFOLIOS OF INVESTMENTS
Blended Equity Fund (formerly Equity Fund).............................. 18
Income and Growth Fund.................................................. 20
Value and Restructuring Fund (formerly Business and Industrial
Restructuring Fund).................................................... 22
Small Cap Fund (formerly Early Life Cycle Fund)......................... 24
Energy and Natural Resources Fund (formerly Long-Term Supply of Energy
Fund).................................................................. 25
Large Cap Growth Fund................................................... 26
Real Estate Fund........................................................ 27
NOTES TO FINANCIAL STATEMENTS............................................ 28
INDEPENDENT AUDITORS' REPORT............................................. 37
FEDERAL TAX INFORMATION.................................................. 37
VOTING RESULTS OF SPECIAL MEETING OF SHAREHOLDERS........................ 38
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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 ex-
penses regarding Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. may
be obtained by contacting the Funds at 1-800-446-1012.
Investors should read the current prospectus carefully prior to investing or
sending money.
Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. are sponsored and
distributed by Edgewood Services, Inc.
You may write to Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. at
the following address:
EXCELSIOR FUNDS, INC.
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, U.S. TRUST COMPANY OF
CONNECTICUT THEIR 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.
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LETTER TO SHAREHOLDERS
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Dear Shareholder:
I am pleased to present the annual report for Excelsior Funds, Inc. Fiscal
1998 was an exciting year in the financial markets as a whole and for the fund
family. Highlights included exceptional performance by many of the funds, the
reconfiguration of some of our existing equity funds, and the commencement of
several new fund offerings.
During the year, we introduced the Large Cap Growth Fund, Real Estate Fund and
Emerging Markets Fund. These funds provide access to important asset classes
and subclasses not previously offered by Excelsior. As always, we will
continue to evaluate the current Excelsior funds and will consider expanding
our offerings to help you meet your financial goals.
Buoyed by low interest rates and the lack of inflationary pressures, corporate
profits continued to grow. These factors combined to produce another year of
extraordinary returns on domestic equity investments. They also combined to
constrain returns on fixed-income investments to modest levels. International
markets were mixed, with strong returns in Europe, moderate Latin American
returns and down markets in Asia, brought on by a weakened economic
environment and currency devaluations in several countries.
The financial markets will present many challenges and opportunities during
the coming year. Fiscal policy has continued to be effective in keeping
inflation under control. We remain cautiously optimistic regarding the
domestic equity markets. International markets, as a whole, remain attractive.
A close watch will be required in Asia, as efforts are made to right their
recent economic woes. I am confident that the Excelsior fund family will
continue to provide you with the appropriate investment vehicles to respond to
economic environment and to meet your investment objectives.
/s/ Frederick S. Wonham
Frederick S. Wonham
Chairman of the Board and President
1
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EXCELSIOR FUNDS, INC.
ADVISER'S DOMESTIC EQUITY MARKET REVIEW
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The continued strength of corporate profits and the U.S. economy--without
attendant inflationary pressures--along with good inflows of money into the
stock market led to stunning gains for the major equity market indices in the
first quarter of Fiscal 1998. Although the largest, most-familiar "blue chip"
names continued to advance, market strength broadened somewhat to include
cyclical and early life cycle smaller-capitalization companies. Many of the
quarter's big winners were notable for having underperformed in recent
quarters.
This proved to be welcome news for the Excelsior family of mutual funds. As
we had maintained our long-term diversified investment approach in previous
quarters, we were able to benefit significantly from the market's advance.
In the fiscal second quarter, shifting market leadership became more
pronounced as market favor turned away from high-flying large caps to small-
and mid-cap companies, from consumer staples to cyclicals, and from growth to
value stocks. Part of this market rotation was the result of several well-
publicized quarterly earnings disappointments (Coca Cola and Gillette the most
glaring examples) from the large multinational global competitors, whose
valuations had swelled due in large part to the perceived predictability of
their earnings. This in turn was at least partially related to the continued
strength of the U.S. dollar. Other factors were continued economic strength,
low inflation, and perhaps the prolonged disparity of relative valuations vis-
a-vis large and small caps.
While several high-profile earnings shortfalls did slow the market's uptrend
during the summer months, the real damage occurred during the fiscal third
quarter, when economic problems in Asia ignited stock market corrections
around the world. Stock market volatility increased dramatically as a result.
Nevertheless, in the fiscal fourth quarter, the U.S. equity market shrugged
off the Asian crisis and marched ahead strongly. Technology was the best-
performing sector, led by the software and communications technology areas.
Also strong were office equipment, mining, department stores, construction,
steel, autos, and pharmaceuticals. Although financials posted sold gains, they
did lag the broad market. The worst-performing sector was energy (oil drillers
and oilfield equipment in particular), followed by tobacco, gas utilities, and
real estate. While small-cap stocks participated in the broad advance, they
were outpaced by their larger-cap peers.
Still, while concerns among many investment professionals mounted regarding
the market's high valuational level, low yield and earnings expectations,
individual investors, undaunted, continue to pour near-record levels of cash
into mutual funds.
2
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EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
BLENDED EQUITY FUND (FORMERLY EQUITY FUND)
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For the twelve months ended March 31, 1998, the Fund realized a total return
of 50.82%,* versus 48.00%** for the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500"). Through the first three fiscal quarters, the Fund's
holdings of retail stocks were a source of strength. The portfolio's financial
stocks, which were overweighted, performed well due to a favorable interest-
rate environment and the market's willingness to assign higher relative
valuations. Leaders in this group included State Street, Morgan Stanley,
Mellon Bank, and Associates First Capital. Within the drug group, Pfizer and
Schering-Plough performed well. Other standouts included Ford, Centex, Lucent
Technologies, Tyco International, Microsoft, General Electric, Illinois Tool
Works and AT&T. The portfolio's energy group lagged, with declines in United
Meridian and Enron, both of which were sold. Other weak performers that were
sold include Scholastic, Pall, Waste Management, and Heilig Myers. Our basic
investment strategy did not change, we emphasized a long-term investment
horizon, as opposed to attempts at timing the market, broad portfolio
diversification across strategies and investment themes, and solid good
business values--that is, companies who have demonstrated and continue to
demonstrate solid growth in a volatile environment. During the fiscal third
quarter a portion of the portfolio began to be managed utilizing quantitative
analysis to complement the rest of the portfolio by further diversifying it in
relation to the S&P 500 and by improving the tax efficiency of the portfolio.
For the final quarter of the fiscal year, Lucent Technologies and Nokia, two
leading telecommunications equipment companies, were the portfolio's best
performers. Worldcom, which should complete its merger with MCI this year, was
also a very strong performer. Other strong performers included Microsoft and
Cisco Systems in technology; Pfizer and Schering-Plough in the drug group; and
Luxottica, Dayton-Hudson, and Wal-Mart in the retail sector.
Blended Equity Fund+
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Average Annual Total Return Ended on 3/31/98*
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1 year 5 years 10 Years
- --------------------------------------------------------------------------------
50.82% 20.92% 17.52%
[LINE GRAPH APPEARS HERE]
DATE S&P 500 INDEX
---- -------------
3/31/89 $11,820
3/31/90 $14,110
3/31/91 $16,140
3/31/92 $17,920
3/31/93 $20,650
3/31/94 $20,960
3/31/95 $24,210
3/31/96 $31,980
3/31/97 $38,300
3/31/98 $56,680
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Blended Equity
Fund and a broad-based index over the past ten fiscal years. All dividends and
capital gain distributions are reinvested. The Fund's performance takes into
account fees and expenses. The 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.
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* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: Standard & Poor's Corporation--Reflects the reinvestment of income
dividends and, where applicable, capital gain distributions. The Standard &
Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index
of U.S. stock market performance.
+ 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
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EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
INCOME AND GROWTH FUND
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For the twelve months ended March 31, 1998, the Fund realized a total return
of 33.29%*, versus 48.00%** for the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500"). To provide the income component of the Fund, we held
a variety of fixed-income and convertible securities. Within the equity
component of the Fund, which comprises the balance of the portfolio, we
emphasize thorough diversification across three investment strategies--growth,
value, and small cap--and longer-term investment themes. In all of our
investments, we focus on long term fundamental business value with special
attention to the breadth and depth of employee incentives (compensation,
safety, etc.). During the first half of the fiscal year, the Fund advanced
strongly, though it did underperform the S&P 500, due in part to the Fund's
income requirements. The Fund's structure and strategy remained essentially
unchanged in the period, and few modifications were made to the portfolio. As
the rest of the stock market began to catch up to the previously high-flying
larger capitalization stocks, the Fund, given its blend of strategies, themes,
and market capitalizations, was able to benefit. To maintain the Fund's income
level, we did add Treasuries given the narrowing yield spreads. In the second
half of the fiscal year, we increased the yield in the equity portion of the
portfolio, trimmed some of the Fund's biggest gainers, and harvested losses.
Among our new purchases, we would highlight International Flavors and
Fragrances (IFF) and HSB Group (Hartford Steam Boiler), both of which we feel
boast enviable financial strength and given our goal to increase yield, 3%-
plus dividend yields. We also purchased several high-yielding bonds.
Income and Growth Fund+
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Average Annual Total Return Ended on 3/31/98*
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1 year 5 years 10 years
33.29% 16.84% 14.58%
[LINE GRAPH APPEARS HERE]
DATE INCOME & GROWTH FUND S&P 500 INDEX
---- -------------------- -------------
3/31/89 $11,836 $11,820
3/31/90 $12,563 $14,110
3/31/91 $12,133 $16,140
3/31/92 $13,941 $17,920
3/31/93 $18,185 $20,650
3/31/94 $19,401 $20,960
3/31/95 $20,516 $24,210
3/31/96 $25,815 $31,980
3/31/97 $29,070 $38,300
3/31/98 $38,777 $56,680
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Income and
Growth Fund and a broad-based index over the past ten fiscal years. All
dividends and capital gain distributions are reinvested. The Fund's
performance takes into account fees and expenses. The 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.
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* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: Standard & Poor's Corporation -- Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of U.S. stock market performance.
+ 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
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EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
VALUE AND RESTRUCTURING FUND (FORMERLY BUSINESS AND INDUSTRIAL RESTRUCTURING
FUND)
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For the twelve months ended March 31, 1998, the Fund realized a total return
of 52.10%* versus 48.00%** for the Standard & Poor's 500 Composite Stock Price
Index and ranked 17 out of 646 funds, based on total return, in the Lipper
Growth and Income Fund category.*** The Fund's long-term performance has been
excellent as well, ranking first among 255 funds in the same Lipper category
for the five years ended March 31, 1998, with a cumulative total return of
28.14%.* During the first half of the fiscal year, Fund strength was
broadbased, and was attributable, we believe, to the continued resilience of
the restructuring investment theme as well as the Fund's thorough
diversification. Performance was helped in particular by an overweighting of
large-capitalization concerns as well as the aerospace, energy, financial
services, and technology sectors. In the first quarter, as the narrow market
focus on a handful of large-cap stocks appeared to be broadening, we added
smaller and secondary (less well-known) names to the portfolio. In the second
quarter, as the large-cap names began to stumble, we added to existing
positions in this area. In the third quarter, several of the Fund's mid- and
small-capitalization holdings contributed meaningfully to the Fund's
performance. Areas of weakness, not surprisingly, came from the Fund's more
globally oriented holdings. The Fund's technology names proved unhelpful
during the period as well. Regarding the Fund's structure and strategy, we
maintained roughly a 60% weighting in large-cap stocks, a 25% weighting to
mid-caps, and 15% in small caps. Most important, we continued to emphasize
broad portfolio diversification, though with special emphasis on technology
(less usual, more out-of-favor names), financials, and to a lesser extent
aerospace--all of which aided the Fund during the final quarter of the fiscal
year.
Value and Restucturing Fund"*
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Average Annual Total Return Ended on 3/31/98*
- --------------------------------------------------------------------------------
1 year 5 years
52.10% 28.11%
[LINE GRAPH APPEARS HERE]
Value and
DATE Restructuring Fund S&P 500 INDEX
---- ------------------ -------------
12/31/92 $10,000 $10,000
3/31/93 $11,014 $10,440
3/31/94 $13,922 $10,590
3/31/95 $15,522 $12,240
3/31/96 $21,184 $16,160
3/31/97 $25,017 $19,365
3/31/98 $38,052 $28,650
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Value and
Restructuring Fund and a broad-based index since 12/31/92 (inception date).
All dividends and capital gain distributions are reinvested. The Fund's
performance takes into account fees and expenses. The index does not take into
account charges, fees and other expenses. Further information relating to Fund
performance is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: Standard & Poor's Corporation--Reflects the reinvestment of income
dividends and, where applicable, capital gain distributions. The Standard &
Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index
of U.S. stock market performance.
*** Source: Lipper Analytical Services, Inc.--Lipper is an independent mutual
fund performance monitor.
+ 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
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EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
SMALL CAP FUND (FORMERLY EARLY LIFE CYCLE FUND)
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For the twelve months ended March 31, 1998, the Fund realized a total return
of 35.33%* versus 42.01%* for the Russell 2000 Index and 48.00%*** for the
Standard & Poor's 500 Composite Stock Price Index. During the first half of
the fiscal year, the Fund saw broadbased strength due in part to the rebound
of smaller-capitalization names and the absence of any major disappointments.
During this period, we emphasized high-quality (rather than speculative)
companies, strict discipline regarding valuations, and through portfolio
diversification. During the second half, due to the crisis in Asia, small-cap
market favor evaporated. Our basic strategy remained the same, through we
began to place increased emphasis on value. In terms of financial
characteristics, we paid close attention to strong cash flow generation, high-
return businesses, and leverage. During the final quarter, while small caps
participated in the board market advance, they were outpaced by their larger-
cap peers. Regarding portfolio structure, the Fund was and remains well
diversified, through modestly underweighted in the financial area, and
modestly overweighted in technology. Our technology holdings lagged the
overall technology sector, however, and this seemed to account for much of the
Fund's underperformance versus its Russell 2000 benchmark in the final
quarter. We remain confident in the Fund's allocations and individual stock
selection longer term.
Small Cap Fund+
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Average Annual Total Return Ended on 3/31/98*
- --------------------------------------------------------------------------------
1 year 5 years
35.33% 13.30%
[LINE GRAPH APPEARS HERE]
DATE SMALL CAP FUND RUSSELL 2000 INDEX
---- -------------- ------------------
12/31/92 10,000 10,000
3/31/93 10,571 10,440
3/31/94 12,503 11,590
3/31/95 14,398 12,210
3/31/96 17,031 15,770
3/31/97 14,590 16,576
3/31/98 19,745 23,530
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Small Cap Fund
and a broad-based index since 12/31/92 (inception date). All dividends and
capital gain distributions are reinvested. The Fund's performance takes into
account fees and expenses. The index does not take into account charges, fees
and other expenses. Further information relating to Fund performance is
contained in the Financial Highlights section of the Prospectus and elsewhere
in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: The Russell Company--The Russell 2000 Index is an unmanaged index
and is composed of the 2,000 smallest companies in the Russell 3000 Index.
The Russell 3000 Index is composed of 3,000 of the largest U.S. companies
by market capitalization. The index includes dividends reinvested.
*** Source: Standard & Poor's Corporation -- Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of U.S. stock market performance.
+ 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 FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
ENERGY AND NATURAL RESOURCES FUND (FORMERLY LONG-TERM SUPPLY OF ENERGY FUND)
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For the twelve months ended March 31, 1998, the Fund realized a total return
of 24.97%* versus 48.00%** for the Standard & Poor's 500 Composite Stock Price
Index. During the first half of the fiscal year, energy sector leadership
resided in the major international oils and the oil services group, the two
most highly weighted sectors in the Fund. The commodity price sensitive E&P
(exploration and production) sector rebounded modestly. Early in the second
fiscal quarter, we lowered our weighting in the E&P, pipeline, and refining and
marketing sectors, shifting proceeds into the oils service sector, where
pricing power was the greatest due to full rig utilization. In October, the
scope of the Fund was broadened to include natural resources, and we began to
move toward a targeted 85% energy/15% natural resources mix with the objective
of inflation-proofing the portfolio without impairing near-term performance.
Momentum turned negative in the second half, however, as the Fund was impacted
by a sharp pullback in energy prices. Our underweighting of E&P stocks and
natural resource names and an overweighting of oil service stocks benefited the
Fund during this challenging period. During the final quarter, Fund performance
was driven by the gas-leveraged E&P sector. As we felt that oil prices could
languish for another quarter or so, given high inventory levels, we reduced our
weighting in the oilfield service group from 36% to 24% and raised our
weighting in the less commodity-sensitive pipeline group from 10% to 16%.
Energy and Natural Resources Fund+
- --------------------------------------------------------------------------------
Average Annual Total Return Ended on 3/31/98*
- --------------------------------------------------------------------------------
1 year 5 years
24.97% 15.09%
[LINE GRAPH APPEARS HERE]
Energy and Natural The S & P 500
Date Resources Fund Index
- ---- ------------------ --------------
12/31/92 10,000 10,000
3/31/93 11,157 10,440
3/31/94 11,094 10,590
3/31/95 11,568 12,240
3/31/96 14,067 16,160
3/31/97 18,045 19,365
3/31/98 22,551 28,650
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Energy and
Natural Resources Fund and a broad-based index since 12/31/92 (inception date).
All dividends and capital gain distributions are reinvested. The Fund's
performance takes into account fees and expenses. The index does not take into
account charges, fees and other expenses. Further information relating to Fund
performance is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: Standard & Poor's Corporation--Reflects the reinvestment of income
dividends and, where applicable, capital gain distributions. The Standard &
Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index
of U.S. stock market performance.
+ 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.
7
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------
For the six month period from October 1, 1997 (inception date) to March 31,
1998, the Fund realized a total return of 21.57%* versus 17.23%** for the
Standard & Poor's 500 Composite Stock Price Index. Our strategy has been to
focus exclusively on a few high-quality, large-cap companies which we believe
have superior growth potential. We intend to concentrate the Fund in 25 names,
not concern ourselves with issues of market timing and valuation and to let the
winners run and eliminate the losers. As a result, the Fund's largest holdings
are generally its best performing as well. During the period we focused in
particular on several secular trends and areas where we have been able to
identify the most rapid growth potential: technology (the PC and the Internet),
globally dominant financial intermediaries, and globally dominant brand names.
The Fund's top-ten holdings at fiscal year end included America Online,
Microsoft, Cisco Systems, Dell Computer, Intel, Merrill Lynch, Citicorp,
Pfizer, Charles Schwab, and Cendant.
Large Cap Growth Fund+
- --------------------------------------------------------------------------------
Average Annual Total Return Ended on 3/31/98*
- --------------------------------------------------------------------------------
Since Inception (10/1/97)
- --------------------------------------------------------------------------------
21.57%
[LINE GRAPH APPEARS HERE]
DATE S&P 500 INDEX
---- -------------
10/31/97 $9,670
11/30/97 $10,110
12/31/97 $10,290
1/31/98 $10,400
2/28/98 $11,150
3/31/98 $11,720
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Large Cap Growth
Fund and a broad-based index since 10/1/97 (inception date). All dividends and
capital gain distributions are reinvested. The Fund's performance takes into
account fees and expenses. The index does not take into account charges, fees
and other expenses. Further information relating to Fund performance is
contained in the Financial Highlights section of the Prospectus and elsewhere
in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: Standard & Poor's Corporation -- Reflects the reinvestment of income
dividends and, where applicable, capital gain distributions. The Standard &
Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index
of U.S. stock market performance.
+ 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.
8
<PAGE>
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
REAL ESTATE FUND
- --------------------------------------------------------------------------------
For the six month period from October 1, 1997 (inception date) to March 31,
1998, the Fund realized a total return of 2.26%* versus 0.80%** for the
Standard & Poor's REIT Composite Index and 17.23%*** for the Standard & Poor's
500 Composite Stock Price Index. The timing of the Fund's launch proved
fortuitous; we were able to put cash to work after the real estate market had
begun to weaken. Apart from the macro-issues that affected the entire equity
market, the Real Estate Investment Trust ("REIT") market was negatively
impacted by substantial amounts of equity issuance (nearly $6 billion), most of
which were follow-on deals rather than IPOs. Encouragingly, the Fund and REITs
in general proved to be less volatile and more defensive during some of the
Fund's initial quarter's roughest periods. The portfolio was structured with a
balance of growth (office and diversified) and value (retail and apartment)
REITs. Perhaps because the growth stocks had done so well prior to the Fund's
inception, leading to heightened valuation levels, several of the Fund's value
and special situation holdings were among the better performers during its
initial quarter of operation. During the final quarter, REITs underperformed
the broad market for several reasons: legislative uncertainty surrounding
paired-share REITs, increased competition for acquisitions, fears that REITs
would be unable to manage well through more competitive periods, and strong
capital-raising activity that wasn't well absorbed by the market. While the
Fund did have a number of positive contributors in the quarter (Price REIT,
Cabot Industrial, and Boston Properties), some of its higher-multiple REITs
came under some pressure. We are comfortable with the Fund's current
structure--with a full weighting in the office/industrial sector and a slight
deemphasis on apartment REITs. We will continue to emphasize broad
diversification within the group in terms of geography, property type, market
cap, and valuation.
Real Estate Fund+
- --------------------------------------------------------------------------------
Total Return Ended on 3/31/98*
- --------------------------------------------------------------------------------
Since Inception (10/1/97)
- --------------------------------------------------------------------------------
2.26%
[LINE GRAPH APPEARS HERE]
DATE S&P REIT Index
---- --------------
10/31/97 $9,720
11/30/97 $9,920
12/31/97 $10,110
1/31/98 $10,000
2/28/98 $9,810
3/31/98 $10,080
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Real Estate Fund
and a broad-based index since 10/1/97 (inception date). All dividends and
capital gain distributions are reinvested. The Fund's performance takes into
account fees and expenses. The index does not take into account charges, fees
and other expenses. Further information relating to Fund performance is
contained in the Financial Highlights section of the Prospectus and elsewhere
in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** Source: Standard & Poor's Corporation--Reflects the reinvestment of income
dividends and, where applicable, capital gain distributions. The Standard &
Poor's REIT Composite Index is a capitalization-weighted index of 100 stocks
designed to measure the performance of Real Estate Investment Trusts,
commonly known as REITS.
*** Source: Standard & Poor's Corporation--Reflects the reinvestment of income
dividends and, where applicable, capital gain distributions. The Standard &
Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index
of U.S. stock market performance.
+ 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.
9
<PAGE>
EXCELSIOR FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1998
<TABLE>
<CAPTION>
BLENDED EQUITY
FUND INCOME AND
(FORMERLY GROWTH
EQUITY FUND) FUND
-------------- ------------
<S> <C> <C>
ASSETS:
Investments, at cost-see accompanying
portfolios..................................... $323,025,087 $ 91,748,706
============ ============
Investments, at value (Note 1).................. $594,819,534 $143,110,985
Cash............................................ 900 --
Dividends receivable............................ 703,872 49,190
Interest receivable............................. 17,233 752,490
Receivable for investments sold................. -- 2,288,026
Receivable for fund shares sold................. 25,104 11,666
Withholding tax receivable...................... -- 2,566
Prepaid expenses................................ 24,209 6,629
Unamortized organization costs (Note 5)......... -- --
------------ ------------
TOTAL ASSETS.................................... 595,590,852 146,221,552
LIABILITIES:
Payable for investments purchased............... -- 1,851,736
Payable for fund shares redeemed................ 46,504 200,277
Investment advisory fees payable (Note 2)....... 332,905 80,725
Administration fees payable (Note 2)............ 62,614 15,607
Administrative service fees payable (Note 2).... 17,951 8,805
Directors' fees payable (Note 2)................ 6,195 2,028
Due to custodian bank........................... -- 5,982,956
Accrued expenses and other payables............. 216,113 26,634
------------ ------------
TOTAL LIABILITIES............................... 682,282 8,168,768
------------ ------------
NET ASSETS....................................... $594,908,570 $138,052,784
============ ============
NET ASSETS consist of:
Undistributed net investment income............. $ 914,191 $ 664,026
Accumulated net realized gain (loss) on
investments.................................... 9,746,123 8,769,306
Unrealized appreciation of investments and
foreign currency translations.................. 271,794,552 51,361,715
Par value (Note 4).............................. 16,471 7,692
Paid-in capital in excess of par value.......... 312,437,233 77,250,045
------------ ------------
TOTAL NET ASSETS................................. $594,908,570 $138,052,784
============ ============
Shares of Common Stock Outstanding............... 16,470,999 7,692,203
NET ASSET VALUE PER SHARE........................ $36.12 $17.95
====== ======
</TABLE>
See Notes to Financial Statements
10
<PAGE>
<TABLE>
<CAPTION>
VALUE AND RESTRUCTURING ENERGY AND NATURAL
FUND (FORMERLY SMALL CAP FUND RESOURCES FUND LARGE CAP
BUSINESS AND INDUSTRIAL (FORMERLY EARLY (FORMERLY LONG-TERM GROWTH REAL ESTATE
RESTRUCTURING FUND) LIFE CYCLE FUND) SUPPLY OF ENERGY FUND) FUND FUND
----------------------- ---------------- ---------------------- ----------- -----------
<S> <C> <C> <C> <C>
$293,015,035 $56,288,895 $33,496,216 $41,735,015 $40,845,063
============ =========== =========== =========== ===========
$399,629,194 $68,572,462 $45,400,649 $47,919,875 $40,954,667
-- 279 777 225 1,014
313,284 10,112 25,239 12,850 236,572
63,297 27,910 6,528 414 185
-- -- 757,095 -- --
2,793,503 5,982 26,823 32,400 --
4,222 -- -- -- --
9,202 3,140 1,908 600 965
-- -- -- 41,375 27,568
------------ ----------- ----------- ----------- -----------
402,812,702 68,619,885 46,219,019 48,007,739 41,220,971
13,348,736 -- -- 413,192 --
66,123 1,460 -- 2,127 --
168,666 30,932 12,490 22,954 25,526
13,613 8,970 8,943 5,290 637
10,540 4,526 1,521 558 1,794
414 607 469 195 338
680,921 -- -- -- --
76,281 25,464 21,149 34,765 21,952
------------ ----------- ----------- ----------- -----------
14,365,294 71,959 44,572 479,081 50,247
------------ ----------- ----------- ----------- -----------
$388,447,408 $68,547,926 $46,174,447 $47,528,658 $41,170,724
============ =========== =========== =========== ===========
$ 274,591 $ -- $ 32,722 $ -- $ 26,291
3,631,511 628,702 (243,134) (214,016) 19,611
106,613,124 12,283,567 11,904,433 6,184,860 109,604
16,326 5,736 3,648 5,583 5,840
277,911,856 55,629,921 34,476,778 41,552,231 41,009,378
------------ ----------- ----------- ----------- -----------
$388,447,408 $68,547,926 $46,174,447 $47,528,658 $41,170,724
============ =========== =========== =========== ===========
16,325,679 5,735,910 3,648,375 5,583,405 5,840,242
$23.79 $11.95 $12.66 $8.51 $7.05
====== ====== ====== ===== =====
</TABLE>
See Notes to Financial Statements
11
<PAGE>
EXCELSIOR FUNDS, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
BLENDED EQUITY INCOME AND
FUND (FORMERLY GROWTH
EQUITY FUND) FUND
-------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Interest income................................. $ 532,191 $ 2,699,016
Dividend income................................. 6,631,276 1,801,187
Less: Foreign taxes withheld.................... -- (3,096)
------------ -----------
TOTAL INCOME.................................... 7,163,467 4,497,107
EXPENSES:
Investment advisory fees (Note 2)............... 3,471,749 1,100,859
Administration fees (Note 2).................... 708,237 224,575
Administrative servicing fees (Note 2).......... 182,660 111,416
Shareholder servicing agent fees................ 172,207 65,129
Custodian fees.................................. 140,402 40,483
Legal and audit fees............................ 101,571 25,188
Shareholder reports............................. 43,172 8,815
Amortization of organization costs (Note 5)..... -- --
Registration and filing fees.................... 22,066 12,133
Directors' fees and expenses (Note 2)........... 26,142 8,008
Distribution fees-- Trust Shares (Note 2)....... 202 --
Miscellaneous expenses.......................... 62,687 15,969
------------ -----------
TOTAL EXPENSES.................................. 4,931,095 1,612,575
Fees waived by investment adviser and
administrators (Note 2)......................... (332,878) (111,416)
------------ -----------
NET EXPENSES.................................... 4,598,217 1,501,159
------------ -----------
NET INVESTMENT INCOME (LOSS)..................... 2,565,250 2,995,948
------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 1):
Net realized gain (loss):
Security transactions........................... 41,083,134 19,221,367
Foreign currency translations................... -- (13,460)
------------ -----------
Total net realized gain (loss).................. 41,083,134 19,207,907
Change in unrealized appreciation/depreciation
on investments and foreign currency
translations during the year................... 205,385,468 19,295,523
------------ -----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS..................................... 246,468,602 38,503,430
------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS...................................... $249,033,852 $41,499,378
============ ===========
</TABLE>
* Large Cap Growth Fund and Real Estate Fund commenced operations on October 1,
1997.
See Notes to Financial Statements
12
<PAGE>
<TABLE>
<CAPTION>
VALUE AND RESTRUCTURING ENERGY AND NATURAL
FUND (FORMERLY SMALL CAP FUND RESOURCES FUND LARGE CAP
BUSINESS AND INDUSTRIAL (FORMERLY EARLY (FORMERLY LONG-TERM GROWTH REAL ESTATE
RESTRUCTURING FUND) LIFE CYCLE FUND) SUPPLY OF ENERGY FUND) FUND* FUND*
----------------------- ---------------- ---------------------- ---------- -----------
<S> <C> <C> <C> <C>
$ 246,500 $ 231,449 $ 132,357 $ 44,724 $ 69,427
2,733,206 250,498 582,085 52,962 788,400
-- -- -- -- --
----------- ----------- ---------- ---------- --------
2,979,706 481,947 714,442 97,686 857,827
1,248,447 362,392 255,917 82,152 137,933
318,354 92,410 65,259 16,759 20,453
88,070 41,897 29,091 1,501 1,794
74,335 40,564 33,683 2,210 1,468
67,141 23,457 14,146 10,559 11,162
29,706 9,370 7,661 1,699 2,381
10,342 3,118 16,056 744 1,119
3,171 3,171 3,171 2,231 2,943
37,445 19,583 19,974 1,968 2,127
7,976 3,051 2,290 383 562
49 29 -- -- --
48,637 8,481 7,534 11,487 11,280
----------- ----------- ---------- ---------- --------
1,933,673 607,523 454,782 131,693 193,222
(88,070) (41,897) (32,946) (16,680) (28,552)
----------- ----------- ---------- ---------- --------
1,845,603 565,626 421,836 115,013 164,670
----------- ----------- ---------- ---------- --------
1,134,103 (83,679) 292,606 (17,327) 693,157
----------- ----------- ---------- ---------- --------
4,634,390 3,491,186 3,347,027 (214,016) (749)
(38,046) -- -- -- --
----------- ----------- ---------- ---------- --------
4,596,344 3,491,186 3,347,027 (214,016) (749)
80,592,450 12,326,916 4,846,663 6,184,860 109,604
----------- ----------- ---------- ---------- --------
85,188,794 15,818,102 8,193,690 5,970,844 108,855
----------- ----------- ---------- ---------- --------
$86,322,897 $15,734,423 $8,486,296 $5,953,517 $802,012
=========== =========== ========== ========== ========
</TABLE>
See Notes to Financial Statements
13
<PAGE>
EXCELSIOR FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BLENDED EQUITY INCOME AND
FUND (FORMERLY GROWTH
EQUITY FUND) FUND
-------------- ------------
<S> <C> <C>
YEAR ENDED MARCH 31, 1998
Net investment income (loss)...................... $ 2,565,250 $ 2,995,948
Net realized gain (loss) on investments........... 41,083,134 19,207,907
Change in unrealized appreciation/depreciation on
investments and foreign currency translations
during the year.................................. 205,385,468 19,295,523
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 249,033,852 41,499,378
Distributions to shareholders:
From net investment income:
Shares........................................... (2,290,458) (2,916,488)
Trust Shares..................................... (146) --
From net realized gain on investments:
Shares........................................... (38,374,555) (15,371,776)
In excess of net realized gain on investments:
Shares........................................... -- --
------------ ------------
Total distributions............................. (40,665,159) (18,288,264)
------------ ------------
Increase (decrease) in net assets from fund share
transactions (Note 4)
Shares........................................... 79,577,598 (17,925,868)
Trust Shares..................................... (108,359) --
------------ ------------
Total from fund share transactions............. 79,469,239 (17,925,868)
------------ ------------
Net increase in net assets........................ 287,837,932 5,285,246
NET ASSETS:
Beginning of year................................ 307,070,638 132,767,538
------------ ------------
End of year (1).................................. $594,908,570 $138,052,784
============ ============
--------
(1) Including undistributed net investment
income......................................... $ 914,191 $ 664,026
============ ============
YEAR ENDED MARCH 31, 1997
Net investment income (loss)...................... $ 1,968,077 $ 2,839,449
Net realized gain (loss) on investments........... 13,470,108 8,773,424
Change in unrealized appreciation/depreciation on
investments and foreign currency translations
during the year.................................. 11,035,720 3,899,616
------------ ------------
Net increase (decrease) in net assets resulting
from operations.................................. 26,473,905 15,512,489
Distributions to shareholders:
From net investment income:
Shares........................................... (1,439,009) (3,036,535)
Trust Shares..................................... (103) --
From net realized gain on investments:
Shares........................................... (11,114,096) (5,519,778)
Trust Shares..................................... (27) --
In excess of net realized gain on investments:
Shares........................................... -- --
------------ ------------
Total distributions.............................. (12,553,235) (8,556,313)
------------ ------------
Increase (decrease) in net assets from fund share
transactions (Note 4)
Shares........................................... 104,492,129 (1,683,305)
Trust Shares..................................... 84,035 --
------------ ------------
Total from fund share transactions............... 104,576,164 (1,683,305)
------------ ------------
Net increase (decrease) in net assets............. 118,496,834 5,272,871
NET ASSETS:
Beginning of year................................ 188,573,804 127,494,667
------------ ------------
End of year (2).................................. $307,070,638 $132,767,538
============ ============
(2) Including undistributed/(distributions in
excess of) net investment income............... $ 639,545 $ 571,900
============ ============
</TABLE>
--------
* Large Cap Growth Fund and Real Estate Fund commenced operations on October 1,
1997.
See Notes to Financial Statements
14
<PAGE>
<TABLE>
<CAPTION>
VALUE AND RESTRUCTURING ENERGY AND NATURAL
FUND (FORMERLY SMALL CAP FUND RESOURCES FUND LARGE CAP
BUSINESS AND INDUSTRIAL (FORMERLY EARLY (FORMERLY LONG-TERM GROWTH REAL ESTATE
RESTRUCTURING FUND) LIFE CYCLE FUND) SUPPLY OF ENERGY FUND) FUND* FUND*
----------------------- ---------------- ---------------------- ----------- -----------
<S> <C> <C> <C> <C>
$ 1,134,103 $ (83,679) $ 292,606 $ (17,327) $ 693,157
4,596,344 3,491,186 3,347,027 (214,016) (749)
80,592,450 12,326,916 4,846,663 6,184,860 109,604
------------ ------------ ----------- ----------- -----------
86,322,897 15,734,423 8,486,296 5,953,517 802,012
(855,654) -- (309,721) -- (474,266)
(58) -- -- -- --
(2,883,915) -- (3,856,927) -- --
-- -- (243,134) -- --
------------ ------------ ----------- ----------- -----------
(3,739,627) -- (4,409,782) -- (474,266)
------------ ------------ ----------- ----------- -----------
181,862,594 (441,310) 8,704,842 41,575,141 40,842,978
(61,525) (11,276) -- -- --
------------ ------------ ----------- ----------- -----------
181,801,069 (452,586) 8,704,842 41,575,141 40,842,978
------------ ------------ ----------- ----------- -----------
264,384,339 15,281,837 12,781,356 47,528,658 41,170,724
124,063,069 53,266,089 33,393,091 -- --
------------ ------------ ----------- ----------- -----------
$388,447,408 $ 68,547,926 $46,174,447 $47,528,658 $41,170,724
============ ============ =========== =========== ===========
$ 274,591 $ -- $ 32,722 $ -- $ 26,291
============ ============ =========== =========== ===========
$ 890,216 $ (203,038) $ 247,913
3,588,792 (1,252,061) 3,066,094
10,912,205 (10,176,904) 3,501,247
------------ ------------ -----------
15,391,213 (11,632,003) 6,815,254
(770,732) -- (236,119)
(133) -- --
(2,941,935) (760,083) (2,816,614)
(702) (98) --
-- (2,895,800) --
------------ ------------ -----------
(3,713,502) (3,655,981) (3,052,733)
------------ ------------ -----------
38,284,744 (9,515,807) 6,336,079
48,311 9,034 --
------------ ------------ -----------
38,333,055 (9,506,773) 6,336,079
------------ ------------ -----------
50,010,766 (24,794,757) 10,098,600
74,052,303 78,060,846 23,294,491
------------ ------------ -----------
$124,063,069 $ 53,266,089 $33,393,091
============ ============ ===========
$ 145,348 $ -- $ 49,837
============ ============ ===========
</TABLE>
See Notes to Financial Statements
15
<PAGE>
EXCELSIOR FUNDS, INC.
FINANCIAL HIGHLIGHTS--SELECTED PER SHARE DATA AND RATIOS
For a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS DISTRIBUTIONS IN
NET ASSET NET AND UNREALIZED DIVIDENDS FROM NET EXCESS OF NET
VALUE, INVESTMENT GAIN (LOSS) TOTAL FROM FROM NET REALIZED GAIN REALIZED GAIN
BEGINNING INCOME ON INVESTMENTS INVESTMENT INVESTMENT ON INVESTMENTS ON INVESTMENTS
OF PERIOD (LOSS) AND OPTIONS OPERATIONS INCOME AND OPTIONS AND OPTIONS
--------- ---------- -------------- ---------- ---------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BLENDED EQUITY FUND -- (4/25/85*)
(formerly Equity Fund)
Shares:
Year Ended March 31,
1994.................... $18.77 $ 0.05 $ 1.16 $ 1.21 $(0.08) $(0.39) $(0.34)
1995.................... 19.17 0.07 2.67 2.74 (0.04) (0.47) --
1996.................... 21.40 0.12 5.21 5.33 (0.11) (2.19) --
1997.................... 24.43 0.18 2.50 2.68 (0.14) (1.16) --
1998.................... 25.81 0.16 12.59 12.75 (0.16) (2.28) --
Trust Shares --
(11/12/96*)
Period ended March 31,
1997................... 26.30 0.04 0.03 0.07 (0.03) (0.56) --
Period from April 1,
1997 to October 27,
1997................... 25.78 0.02 4.67 4.69 (0.05) -- --
INCOME AND GROWTH FUND -- (1/6/87*)
Year Ended March 31,
1994.................... $11.45 $ 0.31 $ 0.46 $ 0.77 $(0.27) $(0.01) --
1995.................... 11.94 0.38 0.26 0.64 (0.35) (0.41) --
1996.................... 11.82 0.39 2.61 3.00 (0.31) (0.06) --
1997.................... 14.45 0.33 1.45 1.78 (0.35) (0.63) --
1998.................... 15.25 0.36 4.53 4.89 (0.34) (1.85) --
VALUE AND RESTRUCTURING FUND -- (12/31/92*)
(formerly Business and Industrial
Restructuring Fund)
Shares:
Year Ended March 31,
1994.................... $ 7.71 $ 0.06 $ 1.96 $ 2.02 $(0.07) $(0.02) --
1995.................... 9.64 0.07 1.02 1.09 (0.06) (0.12) --
1996.................... 10.55 0.10 3.71 3.81 (0.09) (0.24) --
1997.................... 14.03 0.13 2.36 2.49 (0.12) (0.47) --
1998.................... 15.93 0.10 8.12 8.22 (0.09) (0.27) --
Trust Shares --
(9/19/96*)
Period ended March 31,
1997................... 14.61 0.05 1.53 1.58 (0.05) (0.23) --
Period from April 1,
1997 to June 30, 1997.. 15.91 0.02 2.94 2.96 (0.02) -- --
SMALL CAP FUND -- (12/31/92*)
(formerly Early Life Cycle Fund)
Shares:
Year Ended March 31,
1994.................... $ 7.40 $(0.01) $ 1.36 $ 1.35 -- $(0.09) --
1995.................... 8.66 (0.02) 1.31 1.29 -- (0.18) --
1996.................... 9.77 (0.02) 1.72 1.70 -- (0.69) --
1997.................... 10.78 (0.03) (1.43) (1.46) -- (0.10) $(0.39)
1998.................... 8.83 (0.01) 3.13 3.12 -- -- --
Trust Shares --
(9/6/96*)
Period ended March 31,
1997................... 9.98 (0.03) (0.92) (0.95) -- (0.22) --
Period from April 1,
1997 to October 27,
1997................... 8.81 (0.03) 2.52 2.49 -- -- --
ENERGY AND NATURAL RESOURCES FUND --
(12/31/92*)
(formerly Long-Term Supply of Energy Fund)
Year Ended March 31,
1994.................... $ 7.81 $ 0.08 $(0.12) $(0.04) $(0.07) -- --
1995.................... 7.70 0.09 0.24 0.33 (0.10) $(0.01) --
1996.................... 7.92 0.07 1.63 1.70 (0.07) -- --
1997.................... 9.55 0.09 2.60 2.69 (0.09) (1.03) --
1998.................... 11.12 0.09 2.69 2.78 (0.10) (1.07) $(0.07)
LARGE CAP GROWTH FUND -- (10/1/97*)
Period Ended March 31,
1998................... $ 7.00 -- ++ $ 1.51 $ 1.51 -- -- --
REAL ESTATE FUND -- (10/1/97*)
Period Ended March 31,
1998................... $ 7.00 $ 0.15 $ 0.01 $ 0.16 $(0.11) -- --
</TABLE>
* Commencement of operations. **Not Annualized. ***Annualized
+ Expense ratios before waiver of fees and reimbursement of expenses (if
any) by adviser and administrators.
++ Amount represents less than $0.01 per share.
# For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose the average commission rate per share it paid for
portfolio trades, on which commissions were charged, during the period.
See Notes to Financial Statements
16
<PAGE>
<TABLE>
<CAPTION>
RATIO OF NET RATIO OF GROSS RATIO OF NET
NET ASSETS, OPERATING OPERATING INVESTMENT
NET ASSET END EXPENSES EXPENSES INCOME (LOSS) PORTFOLIO FEE AVERAGE
TOTAL VALUE, END TOTAL OF PERIOD TO AVERAGE TO AVERAGE TO AVERAGE TURNOVER WAIVERS COMMISSION
DISTRIBUTIONS OF PERIOD RETURN (000) NET ASSETS NET ASSETS + NET ASSETS RATE (NOTE 2) RATE#
------------- ---------- ------ ----------- ------------ -------------- ------------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$(0.81) $19.17 6.54% $122,262 1.14% 1.14% 0.25% 17% -- N/A
(0.51) 21.40 14.65% 137,417 1.05% 1.08% 0.36% 23% -- N/A
(2.30) 24.43 26.45% 188,574 1.05% 1.12% 0.55% 27% $0.02 N/A
(1.30) 25.81 11.09% 306,990 1.01% 1.06% 0.71% 39% 0.01 $0.0663
(2.44) 36.12 50.82% 594,909 0.99% 1.06% 0.55% 28% 0.02 $0.0420
(0.59) 25.78 0.23%** 81 1.36%*** 1.41%*** 0.45%*** 39% -- $0.0663
(0.05) 30.42 17.57%** -- 1.34%*** 1.41%*** 0.20%*** N/A 0.01 $0.0420
$(0.28) $11.94 6.69% $ 96,682 1.17% 1.17% 2.77% 28% -- N/A
(0.76) 11.82 5.74% 99,925 1.06% 1.09% 3.31% 36% -- N/A
(0.37) 14.45 25.83% 127,495 1.05% 1.11% 2.95% 22% $0.01 N/A
(0.98) 15.25 12.61% 132,768 1.03% 1.11% 2.17% 25% 0.01 $0.0777
(2.19) 17.95 33.29% 138,053 1.02% 1.10% 2.04% 32% 0.01 $0.0539
$(0.09) $ 9.64 26.40% $ 14,440 0.99% 1.73% 0.77% 75% $0.06 N/A
(0.18) 10.55 11.49% 30,183 0.98% 1.08% 0.83% 82% 0.01 N/A
(0.33) 14.03 36.48% 74,052 0.91% 0.95% 0.88% 56% -- N/A
(0.59) 15.93 18.09% 124,011 0.91% 0.95% 0.90% 62% 0.01 $0.0755
(0.36) 23.79 52.10% 388,447 0.89% 0.93% 0.54% 30% 0.01 $0.0624
(0.28) 15.91 10.85%** 52 1.26%*** 1.30%*** 0.54%*** 62% -- $0.0755
(0.02) 18.85 18.61%** -- 1.21%*** 1.25%*** 0.47%*** N/A -- $0.0624
$(0.09) $ 8.66 18.27% $ 24,951 0.95% 1.15% (0.25)% 20% $0.01 N/A
(0.18) 9.77 15.16% 47,782 0.96% 1.04% (0.23)% 42% 0.01 N/A
(0.69) 10.78 18.29% 78,061 0.90% 0.98% (0.17)% 38% 0.01 N/A
(0.49) 8.83 (14.33)% 53,258 0.94% 1.02% (0.26)% 55% 0.01 $0.0433
-- 11.95 35.33% 68,548 0.94% 1.01% (0.14)% 73% 0.01 $0.0490
(0.22) 8.81 (9.77)%** 8 1.29%*** 1.40%*** (0.87)%*** 55% -- $0.0433
-- 11.30 29.29%** -- 1.25%*** 1.31%*** (0.59)%*** N/A -- $0.0490
$(0.07) $ 7.70 (0.57)% $ 6,830 0.99% 2.03% 1.21% 6% $0.07 N/A
(0.11) 7.92 4.28% 15,813 0.98% 1.35% 1.18% 31% 0.03 N/A
(0.07) 9.55 21.60% 23,294 0.96% 1.09% 0.88% 43% 0.01 N/A
(1.12) 11.12 28.28% 33,393 0.93% 0.98% 0.84% 87% -- $0.0809
(1.24) 12.66 24.97% 46,174 0.99% 1.07% 0.69% 88% 0.01 $0.0768
-- $ 8.51 21.57%** $ 47,529 1.05%*** 1.20%*** (0.16)%*** 12%*** -- ++ $0.0384
$(0.11) $ 7.05 2.26%** $ 41,171 1.20%*** 1.40%*** 5.02%*** 30%*** $0.01 $0.0704
</TABLE>
See Notes to Financial Statements
17
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
BLENDED EQUITY FUND (FORMERLY EQUITY FUND)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- ------------
<C> <S> <C>
COMMON STOCKS -- 99.69%
CONSUMER STAPLES -- 23.03%
210,000 Abbott Laboratories..................................... $ 15,815,625
55,000 +Alliance Pharmaceutical Corp. ......................... 409,062
42,000 Bestfoods, Inc. ........................................ 4,908,750
187,500 Coca-Cola Company....................................... 14,519,531
10,000 Conagra, Inc. .......................................... 321,250
10,500 +Corn Products International, Inc. ..................... 376,688
22,105 CVS Corp. .............................................. 1,668,928
52,000 Gillette Co. ........................................... 6,171,750
61,700 +Healthsouth Corp. ..................................... 1,731,456
272,300 Johnson & Johnson....................................... 19,962,994
7,400 Lilly (Eli) & Co. ...................................... 441,225
58,730 Mattel, Inc. ........................................... 2,327,176
26,000 Merck & Co., Inc. ...................................... 3,337,750
15,000 Novartis AG ADR......................................... 1,327,335
35,000 PepsiCo, Inc. .......................................... 1,494,062
269,400 Pfizer, Inc. ........................................... 26,855,813
229,100 Philip Morris Companies, Inc. .......................... 9,550,606
113,200 Procter & Gamble Co. ................................... 9,551,250
110,000 Schering-Plough Corp. .................................. 8,985,625
130,000 Stewart Enterprises, Inc., Class A...................... 7,215,000
------------
136,971,876
------------
FINANCIAL -- 20.89%
15,000 Allstate Corp. ......................................... 1,379,063
19,000 American Express Co. ................................... 1,744,437
37,500 American International Group, Inc. ..................... 4,722,656
225,400 Associates First Capital Corp. ......................... 17,806,600
37,800 Bank of Boston Corp. ................................... 4,167,450
20,000 Beneficial Corp. ....................................... 2,486,250
40,200 Citicorp................................................ 5,708,400
20,000 First Union Corp. (North Carolina)...................... 1,135,000
170,000 Fleet Financial Group, Inc. ............................ 14,460,625
21,790 General Re Corp. ....................................... 4,807,419
6,790 Household International, Inc. .......................... 935,322
143,800 MBIA, Inc. ............................................. 11,144,500
302,076 Mellon Bank Corp. ...................................... 19,181,826
202,694 Morgan Stanley, Dean Witter & Co. ...................... 14,771,325
29,687 Nationsbank Corp. ...................................... 2,165,296
32,600 Norwest Corp. .......................................... 1,354,937
156,300 State Street Boston Corp. .............................. 10,638,169
102,200 UNUM Corp. ............................................. 5,640,163
------------
124,249,438
------------
CONSUMER CYCLICAL -- 20.17%
25,800 CBS Corp. .............................................. 875,588
196,400 Centex Corp. ........................................... 7,487,750
21,000 Chevron Corp. .......................................... 1,686,562
40,000 Comcast Corp., Class A Special.......................... 1,412,500
105,000 Dayton Hudson Corp. .................................... 9,240,000
200,000 Ford Motor Co. ......................................... 12,962,500
311,000 General Electric Co. ................................... 26,804,313
41,800 General Motors Corp. ................................... 2,818,887
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- ------------
<C> <S> <C>
CONSUMER CYCLICAL -- (CONTINUED)
25,000 Globecomm Systems, Inc. ................................ $ 340,625
17,000 Goodyear Tire and Rubber Co. ........................... 1,287,750
66,000 Luxottica Group S.p.A. ADR.............................. 6,183,375
95,000 McDonald's Corp. ....................................... 5,700,000
40,000 Meredith Corp. ......................................... 1,685,000
17,000 New York Times Co., Class A............................. 1,190,000
224,400 +O'Reilly Automotive, Inc. ............................. 6,142,950
5,100 +Proffitt's, Inc. ...................................... 184,875
38,999 Reuters Holdings plc ADR................................ 2,512,998
5,000 Sears, Roebuck & Co. ................................... 287,188
111,450 Tektronix, Inc. ........................................ 4,973,456
50,000 Time Warner, Inc. ...................................... 3,600,000
25,000 Tribune Co. ............................................ 1,762,500
250,000 Wal-Mart Stores, Inc. .................................. 12,703,125
57,015 Walt Disney Co. ........................................ 6,086,351
37,800 Wiley (John) & Sons, Inc., Class A...................... 2,081,363
------------
120,009,656
------------
TECHNOLOGY -- 12.55%
227,355 +Cisco Systems, Inc. ................................... 15,545,398
49,800 Compaq Computer Corp. .................................. 1,288,575
26,400 Computer Associates International, Inc. ................ 1,524,600
15,100 Emerson Electric, Co. .................................. 984,331
126,480 Hewlett-Packard Co. .................................... 8,015,670
3,300 Honeywell Corp. ........................................ 272,869
150,000 Intel Corp. ............................................ 11,700,000
60,000 International Business Machines Corp. .................. 6,232,500
46,660 Lucent Technologies, Inc. .............................. 5,966,647
169,240 +Microsoft Corp. ....................................... 15,136,403
18,000 Nokia Corp., Class A, ADR............................... 1,942,875
554 Raytheon Co., Class A................................... 31,509
10,000 Reltec Corp. ........................................... 354,375
60,000 SBC Communications, Inc. ............................... 2,617,500
10,000 Texas Instruments, Inc. ................................ 541,250
46,000 Tyco International Ltd. ................................ 2,512,750
------------
74,667,252
------------
ENERGY -- 7.93%
13,000 British Petroleum Company plc ADR....................... 1,118,813
167,907 Burlington Resources, Inc. ............................. 8,049,042
120,100 Exxon Corp. ............................................ 8,121,763
24,000 Minnesota Mining & Manufacturing........................ 2,188,500
178,300 Mobil Corp. ............................................ 13,662,237
36,000 +Newpark Resources, Inc. ............................... 657,000
162,100 Royal Dutch Petroleum Co. .............................. 9,209,306
108,200 Unocal Corp. ........................................... 4,185,987
------------
47,192,648
------------
UTILITIES -- 7.14%
8,400 +AES Corp. ............................................. 440,475
30,000 Ameritech Corp. ........................................ 1,483,125
136,609 AT&T Corp. ............................................. 8,964,965
</TABLE>
See Notes to Financial Statements
18
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
BLENDED EQUITY FUND (FORMERLY EQUITY FUND) -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- ------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
UTILITIES -- (CONTINUED)
81,500 Bell Atlantic Corp. .................................... $ 8,353,750
57,500 Duke Energy Corp. ...................................... 3,424,844
80,000 +NEXTEL Communications, Inc., Class A................... 2,695,000
133,700 Southern Co............................................. 3,701,819
38,000 +Teleport Communications Group, Inc., Class A........... 2,230,125
116,400 Texas Utilities Co. .................................... 4,575,975
154,000 +Worldcom, Inc. ........................................ 6,622,000
------------
42,492,078
------------
CAPITAL GOODS -- 5.73%
18,000 Allied Signal, Inc. .................................... 756,000
24,000 Boeing Co. ............................................. 1,251,000
20,000 Dover Corp. ............................................ 760,000
275,266 Illinois Tool Works, Inc. .............................. 17,823,473
30,000 ITEQ, Inc. ............................................. 421,875
20,000 +Lear Corp. ............................................ 1,127,500
96,650 Raychem Corp. .......................................... 4,017,016
172,875 +Thermo Electron Corp. ................................. 6,979,828
12,600 Thiokol Corp. .......................................... 608,738
8,000 +U.S.A. Waste Services, Inc. ........................... 356,500
------------
34,101,930
------------
RAW/INTERMEDIATE MATERIALS -- 2.25%
48,300 E.I. Du Pont de Nemours & Co. .......................... 3,284,400
35,400 Georgia-Pacific Corp. .................................. 2,292,150
5,100 Georgia-Pacific Timber Group............................ 131,006
62,100 Monsanto Co. ........................................... 3,229,200
35,000 Pioneer Hi-Bred International, Inc. .................... 3,414,688
28,200 Sigma-Aldrich Corp. .................................... 1,052,212
------------
13,403,656
------------
TOTAL COMMON STOCKS
(Cost $321,294,087)..................................... 593,088,534
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- ------------
<C> <S> <C>
DEMAND NOTES -- 0.29%
$1,004,000 Associates Corp. of North America, Master Notes...... $ 1,004,000
727,000 General Electric Co., Promissory Notes............... 727,000
------------
TOTAL DEMAND NOTES
(Cost $1,731,000).................................... 1,731,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $323,025,087*)...................................... 99.98% $594,819,534
OTHER ASSETS AND LIABILITIES (NET)........................ 0.02 89,036
------ ------------
NET ASSETS................................................ 100.00% $594,908,570
====== ============
</TABLE>
- --------
* For Federal tax purposes, the tax basis on investments aggregates
$323,025,087.
+ Non-income producing security.
ADR -- American Depositary Receipt.
See Notes to Financial Statements
19
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
INCOME AND GROWTH FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- ------------
<C> <S> <C>
COMMON STOCKS -- 80.68%
CONSUMER CYCLICAL -- 16.45%
100,000 Herman Miller, Inc. .................................... $ 3,350,000
40,000 Luxottica Group S.p.A. ADR.............................. 3,747,500
75,000 McDonald's Corp. ....................................... 4,500,000
150,000 ServiceMaster Ltd. Partnership.......................... 4,284,375
125,000 Smart & Final, Inc. .................................... 2,421,875
80,000 Wiley (John) & Sons, Inc., Class A...................... 4,405,000
------------
22,708,750
------------
FINANCIAL -- 14.66%
25,000 American International Group, Inc. ..................... 3,148,437
12,000 General Re Corp. ....................................... 2,647,500
35,000 HSB Group, Inc. ........................................ 2,353,750
95,000 IPC Holdings Ltd. ...................................... 3,051,875
45,000 Morgan Stanley, Dean Witter & Co. ...................... 3,279,375
170,000 Mutual Risk Management Ltd. ............................ 5,758,750
------------
20,239,687
------------
CONSUMER STAPLES -- 13.03%
100,000 +Carriage Services, Inc. ............................... 2,393,750
35,000 Gillette Co. ........................................... 4,154,063
60,000 Johnson & Johnson....................................... 4,398,750
50,000 Novo-Nordisk A.S., ADR.................................. 4,175,000
35,000 WM. Wrigley Jr. Co. .................................... 2,861,250
------------
17,982,813
------------
TECHNOLOGY -- 8.65%
120,000 +Analog Devices, Inc. .................................. 3,990,000
695,200 +Interleaf, Inc. ....................................... 2,259,400
103,500 +SDL, Inc. ............................................. 2,432,250
175,000 +Unitrode Corp. ........................................ 3,259,375
------------
11,941,025
------------
ENERGY -- 7.86%
44,000 Exxon Corp. ............................................ 2,975,500
60,000 Norsk Hydro A.S., ADR................................... 3,000,000
58,500 +Ocean Energy, Inc. .................................... 1,378,406
60,000 +SEACOR Holdings, Inc. ................................. 3,491,250
------------
10,845,156
------------
RAW/INTERMEDIATE
MATERIALS -- 7.47%
50,000 International Flavors & Fragrances, Inc. ............... 2,356,250
18,000 Nucor Corp. ............................................ 979,875
80,000 Pall Corp. ............................................. 1,720,000
30,000 Pioneer Hi-Bred International, Inc. .................... 2,926,875
130,000 Worthington Industries, Inc. ........................... 2,331,875
------------
10,314,875
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
---------- ------------
<C> <S> <C>
UTILITIES -- 5.86%
90,000 +AES Corp. .......................................... $ 4,719,375
100,000 +NEXTEL Communications, Inc., Class A................ 3,368,750
------------
8,088,125
------------
CAPITAL GOODS -- 5.16%
100,000 Dover Corp. ......................................... 3,800,000
80,000 Raychem Corp. ....................................... 3,325,000
------------
7,125,000
------------
TRANSPORTATION -- 1.54%
30,000 +FDX Corp. .......................................... 2,133,750
------------
TOTAL COMMON STOCKS
(Cost $60,905,562)................................... 111,379,181
------------
CONVERTIBLE PREFERRED STOCKS -- 3.50%
FINANCIAL -- 3.50%
325,000 Capstead Mortgage Corp.,
Series B, Preferred
Exchange $1.26
(Cost $4,484,259).................................... 4,834,375
------------
<CAPTION>
PRINCIPAL
AMOUNT
----------
<C> <S> <C>
CORPORATE BONDS -- 4.61%
MATERIALS -- 1.56%
$2,000,000 AK Steel Corp.,
9.125%, 12/15/06..................................... 2,150,000
------------
TELECOMMUNICATIONS -- 1.53%
2,000,000 Comcast Cellular
9.50%, 05/01/07...................................... 2,110,000
------------
ENERGY -- 1.52%
2,000,000 Vintage Petroleum Sr. Sub-Notes,
9.00%, 12/15/05...................................... 2,102,500
------------
TOTAL CORPORATE BONDS
(Cost $6,208,773).................................... 6,362,500
------------
CONVERTIBLE BONDS -- 14.87%
TECHNOLOGY -- 9.80%
2,550,000 Adaptec, Inc.,
4.75%, 02/01/04...................................... 2,122,875
4,024,000 Kollmorgen Corp.,
Sub-Debenture,
8.75%, 05/01/09...................................... 4,215,140
4,959,000 Network Equipment
Technologies, Inc.,
Sub-Debenture,
7.25%, 05/15/14...................................... 4,704,851
2,500,000 VLSI Technology,
8.25%, 10/01/05...................................... 2,484,375
------------
13,527,241
------------
</TABLE>
See Notes to Financial Statements
20
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
INCOME AND GROWTH FUND -- (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- ------------
<S> <C> <C>
CONVERTIBLE BONDS -- (CONTINUED)
CONSUMER STAPLES -- 2.38%
$3,400,000 Novacare, Inc.,
Sub-Debenture,
5.50%, 01/15/00........ $ 3,293,750
------------
CONSUMER CYCLICAL -- 1.53%
1,925,000 Avatar Holdings
7.00%, 04/01/05........ 2,112,688
------------
TRANSPORTATION -- 1.16%
3,500,000 World Corp., Inc.,
7.00%, 05/15/04........ 1,601,250
------------
TOTAL CONVERTIBLE BONDS
(Cost $20,150,112)..... 20,534,929
------------
TOTAL INVESTMENTS
(Cost $91,748,706)...........103.66% $143,110,985
OTHER ASSETS AND LIABILITIES
(NET)........................ (3.66) (5,058,201)
------ ------------
NET ASSETS................... 100.00% $138,052,784
====== ============
</TABLE>
- --------
* For Federal tax and book purposes, the tax basis of investments aggregates
$91,770,634.
+ Non-income producing security.
ADR--American Depositary Receipt.
See Notes to Financial Statements
21
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
VALUE AND RESTRUCTURING FUND (FORMERLY BUSINESS AND INDUSTRIAL RESTRUCTURING
FUND)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- ------------
<C> <S> <C>
COMMON STOCKS -- 97.33%
FINANCIAL -- 24.11%
131,657 +Akbank T.A.S. ADR...................................... $ 1,935,358
170,000 +Amerin Corp............................................ 5,100,000
37,500 Amvesco plc ADR......................................... 4,012,500
58,000 Aon Corp................................................ 3,755,500
85,600 Banc One Corp........................................... 5,414,200
40,000 Chase Manhattan Corp.................................... 5,395,000
130,300 +CIT Group, Inc., Class A............................... 4,251,037
105,614 Corporacion Bancaria de Espana S.p.A. ADR............... 4,343,376
60,000 Donaldson, Lufkin & Jenrette,Inc........................ 5,092,500
125,000 Everest Re Holdings, Inc................................ 5,140,625
71,000 Fannie Mae.............................................. 4,490,750
90,000 FBL Financial Group, Inc.,
Class A................................................. 4,556,250
160,000 +ITLA Capital Corp...................................... 3,260,000
77,000 Mellon Bank Corp........................................ 4,889,500
60,000 Mid Ocean Ltd........................................... 4,650,000
43,000 Morgan (J.P.) & Co., Inc................................ 5,775,437
80,000 PNC Bank Corp........................................... 4,795,000
229,200 Prime Retail, Inc....................................... 3,423,675
116,000 SLM Holding Corp........................................ 5,060,500
91,000 Travelers Group, Inc.................................... 5,460,000
110,000 +Waddell & Reed Financial,
Class A................................................. 2,860,000
------------
93,661,208
------------
TECHNOLOGY -- 21.10%
152,000 Alcatel Alsthom ADR..................................... 5,776,000
170,500 +Bell & Howell Holdings Co.............................. 4,678,094
125,000 Computer Associates International, Inc.................. 7,218,750
170,000 Frontier Corp........................................... 5,535,625
943 +Intermedia Communications, Inc......................... 75,087
65,000 International Business Machines Corp.................... 6,751,875
95,000 +IXC Communications, Inc................................ 5,391,250
56,000 Motorola, Inc........................................... 3,395,000
50,000 Nokia Corp., Class A, ADR............................... 5,396,875
100,000 +Plantronics, Inc....................................... 4,093,750
110,000 +Quanta Services, Inc................................... 1,821,875
70,252 Raytheon Co., Class A................................... 3,995,582
202,000 +Smallworldwide plc ADR................................. 3,812,750
250,000 +Telecom-TCI Ventures Group,
Class A................................................. 4,390,625
121,000 Texas Instruments, Inc.................................. 6,549,125
76,000 Thiokol Corp............................................ 3,671,750
235,000 +Unisys Corp............................................ 4,465,000
210,000 Vishay Intertechnology, Inc............................. 4,935,000
------------
81,954,013
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- ------------
<C> <S> <C>
CONSUMER STAPLES -- 15.43%
55,000 +Amerisource Health Corp.,
Class A................................................. $ 3,306,875
76,000 Avon Products, Inc...................................... 5,928,000
57,200 +Benckiser N.V., Class B................................ 3,146,000
31,000 Bestfoods, Inc.......................................... 3,623,125
47,000 Bristol-Myers Squibb Co................................. 4,902,687
163,000 +Cultural Access Worldwide, Inc......................... 2,506,125
90,000 Eastman Kodak Co........................................ 5,838,750
91,375 Fort James Corp......................................... 4,186,117
55,000 General Mills, Inc...................................... 4,180,000
170,000 +MAPICS, Inc............................................ 2,996,250
125,000 Philip Morris Companies, Inc............................ 5,210,938
85,000 +Suiza Foods Corp....................................... 5,227,500
124,000 Sunbeam Corp............................................ 5,463,750
20,000 Warner Lambert Co....................................... 3,406,250
------------
59,922,367
------------
CONSUMER CYCLICAL -- 13.47%
130,000 CBS Corp................................................ 4,411,875
32,000 +CSK Auto Corp.......................................... 720,000
167,000 +Dollar Thrifty Automotive Group........................ 3,757,500
85,000 Ford Motor Co........................................... 5,509,062
75,000 General Motors Corp..................................... 5,057,812
110,000 +Newmark Homes Corp..................................... 1,196,250
90,000 Olin Corp............................................... 4,224,375
155,500 +Outdoor Systems, Inc................................... 5,452,219
235,000 +Paxson Communications Corp............................. 2,614,375
95,000 +QUALCOMM, Inc.......................................... 5,082,500
200,000 +TV Azteca, S.A. ADR.................................... 3,925,000
160,000 Viad Corp............................................... 3,880,000
61,000 XEROX Corp.............................................. 6,492,688
------------
52,323,656
------------
CAPITAL GOODS -- 8.70%
125,000 Allied Signal, Inc...................................... 5,250,000
66,000 +American Standard Cos., Inc............................ 3,027,750
100,000 AMP, Inc................................................ 4,381,250
100,000 Boeing Co............................................... 5,212,500
151,900 Chicago Bridge & Iron Co., N.V.--New York Shares........ 2,544,325
175,000 +Coltec Industries, Inc................................. 4,375,000
175,000 +National Semiconductor................................. 3,664,062
58,000 United Technologies Corp................................ 5,354,125
------------
33,809,012
------------
TRANSPORTATION -- 5.89%
145,000 Canadian Pacific Ltd.................................... 4,277,500
110,000 +Coach USA, Inc......................................... 4,785,000
182,500 +Hvide Marine, Inc., Class A............................ 3,193,750
152,000 +Kitty Hawk, Inc........................................ 3,230,000
177,000 +Trailer Bridge, Inc.................................... 1,758,938
100,000 Union Pacific Corp...................................... 5,618,750
------------
22,863,938
------------
</TABLE>
See Notes to Financial Statements
22
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
VALUE AND RESTRUCTURING FUND (FORMERLY BUSINESS AND INDUSTRIAL RESTRUCTURING
FUND) -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- ------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
ENERGY -- 5.64%
250,000 +Miller Exploration, Co................................ $ 2,500,000
57,000 Mobil Corp............................................. 4,367,625
195,000 +Nabors Industries, Inc................................ 4,619,063
234,000 +Ocean Energy, Inc..................................... 5,513,625
145,000 YPF S.A., ADR.......................................... 4,930,000
------------
21,930,313
------------
RAW/INTERMEDIATE
MATERIALS -- 2.99%
95,000 Cambrex Corp........................................... 4,785,625
185,000 +PalEx, Inc............................................ 2,381,875
53,000 W.R. Grace & Co........................................ 4,435,437
------------
11,602,937
------------
TOTAL COMMON STOCKS
(Cost $273,063,835).................................... 378,067,444
------------
CONVERTIBLE PREFERRED STOCKS -- 1.98%
TRANSPORTATION -- 1.10%
80,000 Union Pacific Corp. Preferred, Exchange, 6.25%......... 4,260,000
------------
TECHNOLOGY -- 0.88%
55,000 ++Intermedia Communications Preferred Exchange, 7.00%.. 2,901,250
10,000 Intermedia Communications, Series D, Preferred,
Exchange, 7.00%........................................ 527,500
------------
3,428,750
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $6,078,200)... 7,688,750
------------
DEMAND NOTES -- 3.57%
$6,935,000 Associates Corp. of North America Master Notes....... $ 6,935,000
6,938,000 General Electric Co. Promissory Notes................ 6,938,000
------------
TOTAL DEMAND NOTES
(Cost $13,873,000)................................... 13,873,000
------------
TOTAL INVESTMENTS (Cost $293,015,035)..................... 102.88% $399,629,194
OTHER ASSETS AND LIABILITIES (NET)........................ (2.88) (11,181,786)
------ ------------
NET ASSETS................................................ 100.00% $388,447,408
====== ============
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$293,097,599.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At March 31, 1998
these securities amounted to $2,901,250, or 0.75% of net assets.
ADR -- American Depositary Receipt.
See Notes to Financial Statements
23
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
SMALL CAP FUND (FORMERLY EARLY LIFE CYCLE FUND)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- -----------
<C> <S> <C>
COMMON STOCKS -- 94.77%
TECHNOLOGY -- 23.05%
60,000 +Asyst Technologies, Inc. ............................... $ 1,380,000
95,000 BMC Industries, Inc. .................................... 1,846,562
67,500 +Cellstar Corp. ......................................... 2,155,781
40,000 First Data Corp. ........................................ 1,300,000
32,800 +ITI Technologies, Inc. ................................. 840,500
38,100 +MICROS Systems, Inc. ................................... 2,276,475
50,000 +Perceptron, Inc. ....................................... 993,750
110,000 +Phoenix Technologies Ltd. .............................. 1,313,125
50,000 +Respironics, Inc. ...................................... 1,446,875
40,000 +SDL, Inc. .............................................. 940,000
70,200 +Unitrode Corp. ......................................... 1,307,475
-----------
15,800,543
-----------
CONSUMER CYCLICAL -- 20.75%
90,500 Arctic Cat, Inc. ........................................ 831,469
60,000 Callaway Golf Co. ....................................... 1,740,000
30,000 Fair Isaac & Co., Inc. .................................. 1,132,500
50,000 +Global Motorsport Group Inc. ........................... 906,250
70,000 Oea, Inc. ............................................... 1,273,125
65,000 +O'Reilly Automotive, Inc. .............................. 1,779,375
114,800 +Paxar Corp. ............................................ 1,628,725
15,600 Polaris Industries, Inc. ................................ 577,200
91,300 +RDO Equipment Co., Class A.............................. 1,369,500
40,000 +Rural/Metro Corp. ...................................... 1,310,000
80,000 +Scientific Games Holdings Corp. ........................ 1,675,000
-----------
14,223,144
-----------
CAPITAL GOODS -- 17.90%
58,500 Baldor Electric Co. ..................................... 1,575,844
33,700 +BE Aerospace, Inc. ..................................... 943,600
55,000 Flowserve Corp. ......................................... 1,794,375
46,300 Juno Lighting, Inc. ..................................... 972,300
52,500 Lindsay Manufacturing Co. ............................... 2,392,031
100,000 +Morrison Knudsen Corp. ................................. 1,118,750
53,000 Teleflex, Inc. .......................................... 2,226,000
70,000 +Thermedics, Inc. ....................................... 1,246,875
-----------
12,269,775
-----------
FINANCIAL -- 13.45%
35,000 Cullen/Frost Bankers, Inc. .............................. 2,067,187
41,200 First American Corp. (Tennessee)......................... 2,008,500
36,000 Greenpoint Financial Corp. .............................. 1,293,750
70,000 Sirrom Capital Corp. .................................... 2,104,375
96,000 Sovereign Bancorp, Inc. ................................. 1,746,000
-----------
9,219,812
-----------
ENERGY -- 5.34%
84,500 +Ocean Energy, Inc. ..................................... 1,991,031
56,500 +R & B Falcon Corp. ..................................... 1,673,813
-----------
3,664,844
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
---------- -----------
<C> <S> <C>
CONSUMER STAPLES -- 5.22%
62,000 Arbor Drugs, Inc. .................................... $ 1,457,000
45,000 Natures Sunshine Products, Inc. ...................... 1,203,750
122,000 +Pepsi-Cola Puerto Rico Bottling Co., Class B......... 915,000
-----------
3,575,750
-----------
RAW/INTERMEDIATE MATERIALS -- 4.02%
60,000 +Steel Dynamics, Inc. ................................ 1,271,250
60,000 +TETRA Technologies, Inc. ............................ 1,485,000
-----------
2,756,250
-----------
TELECOMMUNICATION -- 2.65%
31,000 +Teleport Communications Group, Inc., Class A......... 1,819,313
-----------
TRANSPORTATION -- 2.12%
54,800 Air Express International Corp. ...................... 1,452,200
-----------
UTILITIES -- 0.27%
3,500 +AES Corp. ........................................... 183,531
-----------
TOTAL COMMON STOCKS (Cost $52,681,595)................ 64,965,162
-----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
DEMAND NOTES -- 5.27%
$1,788,000 Associates Corp. of North America, Master Notes....... 1,788,000
1,819,300 General Electric Co., Promissory Notes................ 1,819,300
-----------
TOTAL DEMAND NOTES
(Cost $3,607,300)..................................... 3,607,300
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $56,288,895*)....................................... 100.04% $68,572,462
OTHER ASSETS AND
LIABILITIES (NET)......................................... (0.04) (24,536)
------ -----------
NET ASSETS................................................. 100.00% $68,547,926
====== ===========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$56,288,895.
+ Non-income producing security.
See Notes to Financial Statements
24
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
ENERGY AND NATURAL RESOURCES FUND (FORMERLY LONG-TERM SUPPLY OF ENERGY FUND)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------- -----------
<C> <S> <C>
COMMON STOCKS -- 93.74%
ENERGY -- 81.60%
15,000 Anadarko Petroleum Corp. ................................ $ 1,035,000
15,000 +Atwood Oceanics, Inc. .................................. 810,938
26,000 +BJ Services Co. ........................................ 947,375
33,447 British Petroleum Company plc ADR........................ 2,878,532
12,000 CAMCO International, Inc. ............................... 726,000
22,000 Chevron Corp. ........................................... 1,766,875
16,000 Coastal Corp. ........................................... 1,042,000
10,000 +Cooper Cameron Corp. ................................... 603,750
15,000 Diamond Offshore Drilling, Inc. ......................... 680,625
30,888 Duke Energy Corp. ....................................... 1,839,766
17,000 Enron Corp. ............................................. 788,375
42,000 Exxon Corp. ............................................. 2,840,250
15,000 +Friede Goldman International, Inc. ..................... 431,250
45,000 +Global Industries Ltd. ................................. 908,438
25,000 +J. Ray McDermott, S.A. ................................. 1,053,125
23,000 KN Energy, Inc. ......................................... 1,358,437
26,000 Mobil Corp. ............................................. 1,992,250
20,000 +Nabors Industries, Inc. ................................ 473,750
105,300 +Ocean Energy, Inc. ..................................... 2,481,131
36,000 +R & B Falcon Corp. ..................................... 1,066,500
46,000 Royal Dutch Petroleum Co. ............................... 2,613,375
20,000 Schlumberger Ltd. ....................................... 1,515,000
20,000 Texaco, Inc. ............................................ 1,205,000
30,000 Tosco Corp. ............................................. 1,057,500
17,500 Total S.A. ADR........................................... 1,051,094
65,000 +Transmontaigne Oil Co. ................................. 910,000
20,000 +U.S. Filter Corp. ...................................... 702,500
35,000 +Varco International, Inc. .............................. 901,250
30,000 Vastar Resources, Inc. .................................. 1,303,125
9,000 Western Atlas, Inc. ..................................... 696,375
-----------
37,679,586
-----------
RAW/INTERMEDIATE
MATERIALS -- 7.07%
6,000 Aluminum Company Of America.............................. 412,875
35,000 Barrick Gold, Corp. ..................................... 756,875
10,000 E.I. du Pont de Nemours & Co. ........................... 680,000
15,000 Monsanto Co. ............................................ 780,000
7,000 Potash Corp. of Saskatchewan, Inc. ...................... 636,125
-----------
3,265,875
-----------
UTILITIES -- 2.84%
25,000 +AES Corp. .............................................. 1,310,938
-----------
TECHNOLOGY -- 2.23%
14,000 Mead Corp. .............................................. 501,375
14,000 Willamette Industries.................................... 525,875
-----------
1,027,250
-----------
TOTAL COMMON STOCKS
(Cost $31,379,216)....................................... 43,283,649
-----------
</TABLE>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- -----------
DEMAND NOTES -- 4.58%
$1,053,000 Associates Corp. of North America
Master Notes..................... $ 1,053,000
1,064,000 General Electric Co. Promissory
Notes............................ 1,064,000
-----------
TOTAL DEMAND NOTES
(Cost $2,117,000)................ 2,117,000
-----------
TOTAL INVESTMENTS
(Cost $33,496,216*)........................................ 98.32% $45,400,649
OTHER ASSETS AND LIABILITIES
(NET)...................................................... 1.68 773,798
------ -----------
NET ASSETS................................................. 100.00% $46,174,447
====== ===========
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$33,519,782.
+ Non-income producing security.
ADR -- American Depositary Receipt.
See Notes to Financial Statements
25
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
LARGE CAP GROWTH FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS -- 95.22%
TECHNOLOGY -- 37.34%
35,000 +America On-Line, Inc. ................................... $ 2,390,937
37,000 +Cisco Systems, Inc. ..................................... 2,529,875
32,000 +Dell Computer Corp. ..................................... 2,166,000
64,000 +EMC Corp. ............................................... 2,420,000
26,000 Intel Corp. .............................................. 2,028,000
40,000 Medtronic, Inc. .......................................... 2,075,000
29,000 +Microsoft Corp. ......................................... 2,593,688
23,000 +Tellabs, Inc. ........................................... 1,543,875
-----------
17,747,375
-----------
CONSUMER STAPLES -- 22.96%
54,000 +Cendant Corp. ........................................... 2,139,750
25,000 Coca-Cola Co. ............................................ 1,935,938
15,000 Gillette Co. ............................................. 1,780,313
23,000 Pfizer, Inc. ............................................. 2,292,812
27,000 Philip Morris Companies, Inc. ............................ 1,125,562
34,000 +Quintiles Transnational Corp. ........................... 1,636,250
-----------
10,910,625
-----------
FINANCIAL -- 19.75%
14,000 American International Group, Inc. ....................... 1,763,125
13,500 Citicorp.................................................. 1,917,000
25,000 Fannie Mae................................................ 1,581,250
25,000 Merrill Lynch & Co. ...................................... 2,075,000
54,000 Schwab (Charles) Corp. ................................... 2,052,000
-----------
9,388,375
-----------
CONSUMER CYCLICAL -- 15.17%
14,000 +BMC Software, Inc. ...................................... 1,173,375
30,000 Harley-Davidson, Inc. .................................... 990,000
30,000 Home Depot, Inc. ......................................... 2,023,125
28,000 +Sylvan Learning Systems, Inc. ........................... 1,316,000
16,000 Walt Disney Co. .......................................... 1,708,000
-----------
7,210,500
-----------
TOTAL COMMON STOCKS
(Cost $39,072,015)........................................ 45,256,875
-----------
</TABLE>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- -----------
REPURCHASE AGREEMENT -- 5.60%
$2,663,000 Agreement with Chase Securities Inc., 5.60% dated
3/31/98, due 4/01/98, to be repurchased at
$2,663,414, collateralized by $2,665,000 U.S.
Treasury Notes, 5.50% due 11/15/98, valued at
$2,720,055 (Cost $2,663,000)......................... $ 2,663,000
-----------
TOTAL INVESTMENTS
(Cost $41,735,015*)........................................ 100.82% $47,919,875
OTHER ASSETS AND LIABILITIES
(NET)...................................................... (0.82) (391,217)
------ -----------
NET ASSETS................................................. 100.00% $47,528,658
====== ===========
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$41,735,015.
+ Non-income producing security.
See Notes to Financial Statements
26
<PAGE>
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
REAL ESTATE FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ -----------
<C> <S> <C>
COMMON STOCKS -- 96.60%
REAL ESTATE -- 95.54%
60,500 Alexander Haagen Properties,
Inc. ............................ $ 1,013,375
35,000 Arden Realty Group, Inc. ........ 997,500
20,500 Associated Estates Realty,
Corp. ........................... 427,937
36,500 Avalon Properties, Inc. ......... 1,058,500
55,000 Bedford Property Investors,
Inc. ............................ 1,062,187
29,500 Boston Properties, Inc. ......... 1,038,031
47,000 Cabot Industrial Trust........... 1,119,187
52,000 +Catellus Development Corp. ..... 965,250
33,500 Chateau Communities, Inc. ....... 996,625
15,500 Crescent Real Estate Equity,
Co. ............................. 558,000
27,000 Developers Divers Realty,
Corp. ........................... 1,103,625
46,000 Duke Realty Investment, Inc. .... 1,121,250
34,203 Equity Office Properties Trust... 1,047,467
23,500 Equity Residential Properties
Trust............................ 1,180,875
38,000 First Washington Realty Trust.... 1,028,375
15,500 Forest City Enterprises, Inc.,
Class A.......................... 874,781
35,000 Glenborough Realty Trust, Inc. .. 1,019,375
43,500 Glimcher Realty Trust............ 951,563
35,500 Golf Trust of America, Inc. ..... 1,113,813
52,000 Health and Retirement Properties
Trust............................ 1,046,500
36,000 Health Care REIT, Inc. .......... 990,000
32,000 Highwoods Properties, Inc. ...... 1,130,000
29,000 Hospitality Properties Trust..... 1,027,688
32,000 KIMCO Realty Corp. .............. 1,132,000
18,900 Mack-Cali Realty Corp. .......... 738,281
36,500 Meditrust Corp. ................. 1,126,938
47,000 Merry Land & Investment
Companies, Inc. ................. 1,051,625
50,000 Pacific Gulf Properties, Inc. ... 1,146,875
40,000 Prentiss Properties Trust........ 1,045,000
46,000 Security Capital Industrial
Trust............................ 1,178,750
33,000 Shurgard Storage Centers, Class
A................................ 928,125
35,000 Simon Debartolo Group, Inc. ..... 1,198,750
29,000 Spieker Properties, Inc. ........ 1,196,250
21,000 Starwood Hotels & Resorts........ 1,122,188
84,000 Taubman Center, Inc. ............ 1,097,250
77,000 United Dominion Realty Trust..... 1,116,500
26,500 Vornado Realty Trust............. 1,154,406
27,500 Weingarten Realty Investors...... 1,230,625
-----------
39,335,467
-----------
FINANCIAL -- 1.06%
16,700 Waddell & Reed Financial, Class
A................................ 434,200
-----------
TOTAL COMMON STOCKS
(Cost $39,660,063).................. 39,769,667
-----------
</TABLE>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- ----------
REPURCHASE AGREEMENT -- 2.88%
$1,185,000 Agreement with Chase Securities Inc., 5.60% dated
3/31/98, due 4/01/98, to be repurchased at $1,185,184,
collateralized by $1,185,000 U.S. Treasury Notes,
5.50% due 11/15/98, valued at 1,209,295 (Cost
$1,185,000)........................................... $1,185,000
----------
TOTAL INVESTMENTS
(Cost $40,845,063)......................................... 99.48% $40,954,667
OTHER ASSETS AND LIABILITIES (NET)......................... 0.52 216,057
------ -----------
NET ASSETS 100.00% $41,170,724
====== ===========
- --------
* For Federal tax purposes, the tax basis on investments aggregates
$40,875,331.
+ Non-income producing security.
REIT -- Real Estate Investment Trust
See Notes to Financial Statements
27
<PAGE>
EXCELSIOR FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Excelsior Funds, Inc. ("Excelsior Fund") was incorporated under the laws of
the State of Maryland on August 2, 1984 and is registered under the Investment
Company Act of 1940 (the "1940 Act"), as amended, as an open-end management
investment company.
Excelsior Fund currently offers shares in eighteen managed investment
portfolios, each having its own investment objectives and policies. The
following is a summary of significant accounting policies for the Blended
Equity Fund (formerly Equity Fund), Income and Growth Fund, Value and
Restructuring Fund (formerly Business and Industrial Restructuring Fund),
Small Cap Fund (formerly Early Life Cycle Fund), Energy and Natural Resources
Fund (formerly Long-Term Supply of Energy Fund), Large Cap Growth Fund and
Real Estate Fund (the "Portfolios"). Such policies are in conformity with
generally accepted accounting principles and are consistently followed by
Excelsior Fund in the preparation of the financial statements. Generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from these estimates. The Large Cap
Growth Fund and Real Estate Fund commenced operations on October 1, 1997. The
financial statements for the remaining portfolios of Excelsior Fund and
Excelsior Tax-Exempt Fund, Inc. ("Excelsior Tax-Exempt Fund") are presented
separately.
(A) PORTFOLIO VALUATION:
Investments in securities that are traded on a recognized stock exchange
are valued at the last sale price on the exchange on which such securities
are primarily traded or at the last sale price on the national securities
market. Securities traded over-the-counter are valued each business day on
the basis of the closing over-the-counter bid prices. Securities for which
there were no transactions are valued at the average of the most recent bid
prices (as calculated by an independent pricing service (the "Service")
based upon its evaluation of the market for such securities) when, in the
judgment of the Service, quoted bid prices for securities are readily
available and are representative of the bid side of the market. Portfolio
securities that are primarily traded on foreign securities exchanges are
generally valued at the preceding closing values of such securities on
their respective exchanges, except that when an occurrence subsequent to
the time a value was so established is likely to have changed such value,
then a fair value of those securities will be determined by consideration
of other factors under the direction of the Board of Directors. A security
which is traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market on which the security is
traded. Securities for which market quotations are not readily available
are valued at fair value, pursuant to guidelines adopted by Excelsior
Fund's Board of Directors. Short-term debt instruments with remaining
maturities of 60 days or less are valued at amortized cost, which
approximates market value.
All other foreign securities are valued at the last current bid quotation
if market quotations are available, or at fair value as determined in
accordance with policies established by the Board of Directors. Investment
valuations, other assets, and liabilities initially expressed in foreign
currencies are converted each business day into U.S. dollars based upon
current exchange rates. Purchases and sales of foreign investments and
income and expenses are converted into U.S. dollars based upon
28
<PAGE>
currency exchange rates prevailing on the respective dates of such
transactions. Gains and losses attributable to foreign currency exchange
rates are recorded for financial statement purposes as net realized gains
and losses on investments. That portion of both realized and unrealized
gains and losses on investments that results from fluctuations in foreign
currency exchange rates is not separately disclosed.
Forward foreign currency exchange contracts: The Portfolios' participation
in forward currency exchange contracts will be limited to hedging involving
either specific transactions or portfolio positions. Transaction hedging
involves the purchase or sale of foreign currency with respect to specific
receivables or payables of a Portfolio generally arising in connection with
the purchase or sale of its portfolio securities. Risk may arise upon entering
into these contracts from the potential inability of counterparties to meet
the terms of their contracts and is generally limited to the amount of
unrealized gain on the contracts, if any, at the date of default. Risk may
also arise from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar. Contracts are marked-to-market daily and the
change in market value is recorded as unrealized appreciation or depreciation.
Realized gains or losses arising from such transactions are included in net
realized gains or losses from foreign currency transactions.
(B) SECURITY TRANSACTIONS AND INVESTMENT INCOME:
Security transactions are recorded on a trade date basis. Realized gains
and losses on investments sold are recorded on the basis of identified
cost. Interest income, adjusted for amortization of premiums and, when
appropriate, discounts on investments, is recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date except for certain
dividends from foreign securities, which are recorded as soon as the
Portfolios are informed of the dividend.
(C) REPURCHASE AGREEMENTS:
Excelsior Fund may purchase portfolio securities from financial
institutions deemed to be creditworthy by the investment adviser subject to
the seller's agreement to repurchase and Excelsior Fund's agreement to
resell such securities at mutually agreed upon prices. Securities purchased
subject to such repurchase agreements are deposited with Excelsior Fund's
custodian or sub- custodian or are maintained in the Federal
Reserve/Treasury book-entry system and must have, at all times, an
aggregate market value not less than the repurchase price.
If the value of the underlying security falls below the value of the
repurchase price, Excelsior Fund will require the seller to deposit
additional collateral by the next business day. Default or bankruptcy of
the seller may, however, expose the applicable Portfolio of Excelsior Fund
to possible delay in connection with the disposition of the underlying
securities or loss to the extent that proceeds from a sale of the
underlying securities were less than the repurchase price under the
agreement.
(D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income are declared and paid quarterly. Net
realized capital gains, unless offset by any available capital loss
carryforward, are distributed to shareholders at least annually.
Dividends and distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily
29
<PAGE>
due to differing treatments for net operating losses, foreign currency
transactions, partnership income, deferral of losses on wash sales,
dividends received from real estate investment trusts (REITs) and, net
capital losses and net currency losses incurred after October 31 and within
the taxable year ("Post-October losses"). Due to the nature of
distributions that the Real Estate Fund receives from REITs, the Real
Estate Fund anticipates that it will have a tax basis return of capital.
In order to avoid a Federal excise tax, each Portfolio is required to
distribute certain minimum amounts of net realized capital gain and net
investment income for the respective periods ending October 31 and December
31 in each calendar year.
(E) FEDERAL TAXES:
It is the policy of Excelsior Fund that each Portfolio continue to
qualify as a regulated investment company, if such qualification is in the
best interest of the shareholders, by complying with the requirements of
the Internal Revenue Code applicable to regulated investment companies, and
by distributing substantially all of its taxable earnings to its
shareholders.
Post-October losses are deemed to arise on the first business day of a
Portfolio's next taxable year. Income and Growth Fund, Energy and Natural
Resources Fund and Large Cap Growth Fund incurred, and elected to defer,
net capital losses and net currency losses of approximately $6,000,
$220,000 and $214,000, respectively, for the year ended March 31, 1998.
At March 31, 1998, aggregate gross unrealized appreciation for all
securities for which there was an excess of value over tax cost and
aggregate gross unrealized depreciation for all securities for which there
was an excess of tax cost over value is as follows:
<TABLE>
<CAPTION>
NET
TAX BASIS TAX BASIS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ -------------- --------------
<S> <C> <C> <C>
Blended Equity Fund............. $272,205,534 $ (411,087) $271,794,447
Income and Growth Fund.......... 53,026,396 (1,686,045) 51,340,351
Value and Restructuring Fund.... 108,194,539 (1,662,944) 106,531,595
Small Cap Fund.................. 13,615,895 (1,332,328) 12,283,567
Energy and Natural Resources
Fund........................... 12,132,033 (251,166) 11,880,867
Large Cap Growth Fund........... 6,288,924 (104,064) 6,184,860
Real Estate Fund................ 776,812 (697,476) 79,336
</TABLE>
(F) EXPENSE ALLOCATION:
Expenses directly attributable to a Portfolio or a class of shares in
such Portfolio are charged to that Portfolio or such share class. Other
expenses are allocated to the respective Portfolios based on average net
assets.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE, DISTRIBUTION EXPENSES AND
RELATED PARTY TRANSACTIONS
United States Trust Company of New York ("U.S. Trust NY") and U.S. Trust
Company of Connecticut ("U.S. Trust CT" and collectively with U.S. Trust NY,
"U.S. Trust") serve as the investment
30
<PAGE>
advisers to the Portfolios. For the services provided pursuant to the
Investment Advisory Agreements, U.S. Trust is entitled to receive a fee,
computed daily and paid monthly, at the annual rates of 0.75% of the average
daily net assets of the Blended Equity Fund, Income and Growth Fund and Large
Cap Growth Fund, 0.60% of the average daily net assets of the Value and
Restructuring Fund, Small Cap Fund, Energy and Natural Resources Fund and
1.00% of the average daily net assets of the Real Estate Fund. Prior to May
16, 1997, U.S. Trust NY served as the Portfolios' investment adviser pursuant
to investment advisory agreements substantially similar to those currently in
effect for the Portfolios. U.S. Trust NY and U.S. Trust CT are wholly-owned
subsidiaries of U.S. Trust Corporation, a registered bank holding company.
U.S. Trust, Chase Global Funds Services Company ("CGFSC"), a corporate
affiliate of The Chase Manhattan Bank, and Federated Administrative Services
("FAS") (collectively, the "Administrators") provide administrative services
to Excelsior Fund. For the services provided to the Portfolios, the
Administrators are entitled jointly to annual fees, computed daily and paid
monthly, based on the combined aggregate average daily net assets of Excelsior
Fund, Excelsior Tax-Exempt Fund and Excelsior Institutional Trust (excluding
the international equity portfolios of Excelsior Fund and Excelsior
Institutional Trust) all of which are affiliated investment companies, as
follows: 0.200% of the first $200 million, 0.175% of the next $200 million,
and 0.150% over $400 million. Administration fees payable by each Portfolio of
the three investment companies are determined in proportion to the relative
average daily net assets of the respective Portfolios for the period paid.
Prior to May 16, 1997, U.S. Trust NY, CGFSC and FAS served as the Portfolios'
administrators pursuant to an administration agreement substantially similar
to the one currently in effect for the Portfolios. For the year ended March
31, 1998, administration fees charged by U.S. Trust were as follows:
<TABLE>
<S> <C>
Blended Equity Fund................................................... $133,639
Income and Growth Fund................................................ 41,414
Value and Restructuring Fund.......................................... 60,561
Small Cap Fund........................................................ 17,258
Energy and Natural Resources Fund..................................... 12,130
Large Cap Growth Fund................................................. 3,454
Real Estate Fund...................................................... 4,291
</TABLE>
From time to time, as they may deem appropriate in their sole discretion,
U.S. Trust and the Administrators may undertake to waive a portion or all of
the fees payable to them and also may reimburse the Portfolios for a portion
of other expenses. In addition, until further notice to Excelsior Fund, U.S.
Trust intends to voluntarily waive fees to the extent necessary to maintain an
annual expense ratio of not more than 0.99% for Value and Restructuring Fund,
Small Cap Fund and Energy and Natural Resources Fund and not more than 1.05%
and 1.20% for Large Cap Growth Fund and Real Estate Fund, respectively. For
the year ended March 31, 1998, U.S. Trust waived fees as follows:
<TABLE>
<S> <C>
Blended Equity Fund................................................... $150,218
Energy and Natural Resources Fund..................................... 3,855
Large Cap Growth Fund................................................. 15,179
Real Estate Fund...................................................... 26,758
</TABLE>
Excelsior Fund has also entered into administrative servicing agreements
with various service organizations (which may include affiliates of U.S.
Trust) requiring them to provide administrative support services to their
customers owning shares of the Portfolios. As a consideration for the
31
<PAGE>
administrative services provided by each service organization to its
customers, each Portfolio will pay the service organization an administrative
service fee at the annual rate of up to 0.40% of the average daily net asset
value of its shares held by the service organization's customers. Such
services may include assisting in processing purchase, exchange and redemption
requests; transmitting and receiving funds in connection with customer orders
to purchase, exchange or redeem shares; and providing periodic statements.
Administrative service fees paid to affiliates of U.S. Trust amounted to
$404,963, for the year ended March 31, 1998. Until further notice to Excelsior
Fund, U.S. Trust and the Administrators have voluntarily agreed to waive
investment advisory and administration fees payable by each Portfolio in an
amount equal to administrative service fees payable (including fees paid to
affiliates of U.S. Trust) by that Portfolio. For the year ended March 31,
1998, U.S. Trust and the Administrators waived investment advisory and
administration fees in amounts equal to the administrative service fees for
the Portfolios as follows:
<TABLE>
<CAPTION>
U.S. TRUST ADMINISTRATORS
---------- --------------
<S> <C> <C>
Blended Equity Fund................................... $181,826 $ 834
Income and Growth Fund................................ 110,502 914
Value and Restructuring Fund.......................... 84,739 3,331
Small Cap Fund........................................ 41,845 52
Energy and Natural Resources Fund..................... 26,869 2,222
Large Cap Growth Fund................................. 1,501 --
Real Estate Fund...................................... 1,794 --
</TABLE>
Edgewood Services, Inc. (the "Distributor"), a wholly-owned subsidiary of
Federated Investors, serves as the sponsor and distributor of Excelsior Fund.
Shares of each Portfolio are sold on a continuous basis by the Distributor.
Under the Excelsior Funds' Distribution Plan, adopted pursuant to Rule 12b-1
under the 1940 Act, the Trust Shares of each Fund bear the expense of
distributions fees at the maximum annual rate of 0.75% of the average daily
net asset value of the Fund's outstanding Trust Shares. Trust Shares of each
Portfolio currently bear the expense of such distribution fees at the annual
rate of 0.35% of the average daily net asset value of the Fund's outstanding
Trust Shares. As of August 1, 1997 Trust Shares are no longer offered, and at
March 31, 1998 there were no Trust Shares outstanding.
Each Director of Excelsior Fund receives an annual fee of $9,000, plus a
meeting fee of $1,500 for each meeting attended, and is reimbursed for
expenses incurred for attending meetings. The Chairman receives an additional
annual fee of $5,000.
For the year ended March 31, 1998, brokerage commissions on investment
transactions were paid to UST Securities Corp. as follows:
<TABLE>
<S> <C>
Value and Restructuring Fund............................................ $26,847
Energy and Natural Resources Fund....................................... 630
</TABLE>
UST Securities Corp. is a wholly-owned subsidiary of U.S. Trust Company of
New Jersey which is a wholly-owned subsidiary of U.S. Trust Corporation.
32
<PAGE>
3. PURCHASES AND SALES OF SECURITIES:
For the year ended March 31, 1998, purchases and sales of securities,
excluding short-term investments, for the Portfolios aggregated:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Blended Equity Fund.................................. $126,097,236 $191,814,633
Income and Growth Fund............................... 45,251,625 66,625,990
Value and Restructuring Fund......................... 238,743,472 62,617,783
Small Cap Fund....................................... 41,118,848 43,978,988
Energy and Natural Resources Fund.................... 39,483,382 34,950,055
Large Cap Growth Fund................................ 40,554,541 1,268,510
Real Estate Fund..................................... 43,269,891 3,609,079
</TABLE>
4. COMMON STOCK:
Excelsior Fund has authorized capital of 35 billion shares of Common Stock,
23,875 of which is currently classified to represent interests in one of
eighteen separate portfolios. Authorized capital currently classified for each
Portfolio is as follows: 375 million shares of the Blended Equity and Income
and Growth Funds and 500 million shares each of Value and Restructuring Fund,
Small Cap Fund, Energy and Natural Resources Fund, Large Cap Growth Fund and
Real Estate Fund. As of August 1, 1997 Trust Shares are no longer offered.
Each share has a par value of $.001, and represents an equal proportionate
interest in the particular Portfolio with other shares of the same Portfolio,
and is entitled to such dividends and distributions of taxable earnings on the
assets belonging to such Portfolio as are declared at the discretion of
Excelsior Fund's Board of Directors.
<TABLE>
<CAPTION>
BLENDED EQUITY FUND (FORMERLY EQUITY FUND)
---------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/98 03/31/97
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Shares................................ 1,830,335 $ 59,664,729 2,986,879 $ 76,672,109
Trust Shares.......................... 454 -- 3,154 84,440
Issued in connection with reorganization
(Note 7)
Shares................................ 5,809,320 118,382,388 -- --
Contributions in-kind................... -- -- 3,211,246 79,831,593
Issued as reinvestment of dividends.....
Shares................................ 365,826 11,596,023 195,908 5,042,100
Trust Shares.......................... 6 146 5 129
Redeemed................................
Shares................................ (3,428,336) (110,065,542) (2,218,612) (57,053,673)
Trust Shares.......................... (3,604) (108,505) (15) (534)
---------- ------------- ---------- ------------
Net Increase............................ 4,574,001 $ 79,469,239 4,178,565 $104,576,164
========== ============= ========== ============
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
INCOME AND GROWTH FUND
----------------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/98 03/31/97
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Sold.................... 1,061,028 $ 18,205,158 1,397,170 $ 21,067,243
Issued as reinvestment
of dividends........... 370,069 6,178,623 175,558 2,635,563
Redeemed................ (2,444,213) (42,309,649) (1,688,433) (25,386,111)
------------ -------------- ------------- -------------
Net Decrease............ (1,013,116) $ (17,925,868) (115,705) $ (1,683,305)
============ ============== ============= =============
<CAPTION>
VALUE AND RESTRUCTURING FUND
(FORMERLY BUSINESS AND INDUSTRIAL RESTRUCTURING FUND)
----------------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/98 03/31/97
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Sold:
Shares................ 9,949,197 $ 210,533,502 3,573,877 $ 54,756,284
Trust Shares.......... -- -- 3,212 47,503
Issued as reinvestment
of dividends:
Shares................ 32,739 680,550 23,121 351,922
Trust Shares.......... 4 58 54 835
Redeemed:
Shares................ (1,440,113) (29,351,458) (1,090,887) (16,823,462)
Trust Shares.......... (3,268) (61,583) (2) (27)
------------ -------------- ------------- -------------
Net Increase............ 8,538,559 $ 181,801,069 2,509,375 $ 38,333,055
============ ============== ============= =============
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP FUND
(FORMERLY EARLY LIFE CYCLE FUND)
-------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/98 03/31/97
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Shares................... 1,742,160 $19,925,198 1,632,860 $ 17,229,638
Trust Shares............. 991 10,266 934 9,231
Contributions in-kind...... -- -- 873,834 10,267,561
Issued as reinvestment of
dividends:
Shares................... 1 4 36,989 400,554
Trust Shares............. -- -- 10 97
Redeemed:
Shares................... (2,036,998) (20,366,512) (3,753,354) (37,413,560)
Trust Shares............. (1,905) (21,542) (30) (294)
---------- ----------- ---------- ------------
Net Decrease............... (295,751) $ (452,586) (1,208,757) $ (9,506,773)
========== =========== ========== ============
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
ENERGY AND NATURAL RESOURCES FUND
(FORMERLY LONG-TERM SUPPLY OF ENERGY FUND)
------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/98 03/31/97
------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold........................ 1,589,555 $ 20,278,480 1,183,409 $13,166,360
Issued as reinvestment of
dividends.................. 57,892 738,380 14,801 166,314
Redeemed.................... (1,001,470) (12,312,018) (635,829) (6,996,595)
---------- ------------ --------- -----------
Net Increase................ 645,977 $ 8,704,842 562,381 $ 6,336,079
========== ============ ========= ===========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP GROWTH FUND
----------------------
PERIOD ENDED
03/31/98*
----------------------
SHARES AMOUNT
--------- -----------
<S> <C> <C>
Sold.................................................... 5,724,639 $42,655,392
Issued as reinvestment of dividends..................... -- --
Redeemed................................................ (141,234) (1,080,251)
--------- -----------
Net Increase............................................ 5,583,405 $41,575,141
========= ===========
<CAPTION>
REAL ESTATE FUND
----------------------
PERIOD ENDED
03/31/98*
----------------------
SHARES AMOUNT
--------- -----------
<S> <C> <C>
Sold.................................................... 5,989,568 $41,874,511
Issued as reinvestment of dividends..................... 481 3,364
Redeemed................................................ (149,807) (1,034,897)
--------- -----------
Net Increase............................................ 5,840,242 $40,842,978
========= ===========
</TABLE>
- --------
* Large Cap Growth Fund and Real Estate Fund commenced operations on October
1, 1997.
5. ORGANIZATION COSTS:
Excelsior Fund has borne all costs in connection with the initial
organization of new portfolios, including the fees for registering and
qualifying its shares for distribution under Federal and state securities
regulations. All such costs are being amortized on the straight-line basis over
periods of five years from the dates on which each Portfolio commenced
operations.
35
<PAGE>
6. LINE OF CREDIT:
The Portfolios and other affiliated funds participate in a $250 million
unsecured line of credit provided by a syndication of banks under a line of
credit agreement. Borrowings may be made to temporarily finance the repurchase
of Portfolio shares. Interest is charged to each Portfolio, based on its
borrowings, at a rate equal to the Federal Funds Rate plus 2% per year. In
addition a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating Portfolios at the end of
each quarter. For the year ended March 31, 1998, the Portfolios had no
borrowings under the agreement.
7. PLAN OF REORGANIZATION:
On August 18, 1997, shareholders approved a tax-free Plan of Reorganization
(effective September 15, 1997) providing for the transfer of all of the assets
and liabilities of Aging of America Fund, Communication and Entertainment
Fund, Environmentally-Related Products and Services Fund, Global Competitors
Fund, and Productivity Enhancers Fund (the "Transferor Funds") to the Blended
Equity Fund, in exchange for shares of the Blended Equity Fund corresponding
to the same net assets and shares held in the respective Transferor Funds. The
corresponding shares, net assets and unrealized appreciation of the transferor
funds are as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
FUND SHARES ASSETS APPRECIATION
- ---- --------- ----------- ------------
<S> <C> <C> <C>
Aging of America Fund...................... 1,473,760 $47,071,887 $17,929,954
Communication and Entertainment Fund....... 890,996 28,458,420 10,140,533
Environmentally-Related Products and Serv-
ices Fund................................. 202,661 6,472,980 2,238,186
Global Competitors Fund.................... 2,736,914 87,417,040 29,483,610
Productivity Enhancers Fund................ 504,989 16,129,362 4,602,411
</TABLE>
The Blended Equity Fund's net assets immediately before the reorganization
were $376,819,118.
36
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors Excelsior Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Blended Equity, Income and
Growth, Value and Restructuring, Small Cap, Energy and Natural Resources, Large
Cap and Real Estate Portfolios (seven of the portfolios constituting the
Excelsior Funds, Inc. (the "Fund")) as of March 31, 1998, and the related
statements of operations for the year then ended, the statements of changes in
net assets and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1998 by correspondence with the custodian and brokers 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 Funds, Inc. at March 31, 1998,
the results of their operations for the year ended, the changes in their net
assets and the financial highlights for each of the periods indicated therein,
in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts May 8, 1998
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION: (UNAUDITED)
For the year ended March 31, 1998, the percentage of dividends paid that
qualify for the 70.0% dividends received deduction for corporate shareholders,
the designation of long-term capital gain, and the percentage of income earned
from direct U.S. Treasury obligations for the Portfolios are approximated as
follows:
<TABLE>
<CAPTION>
20% 28% TREASURY
DIVIDENDS RECEIVED LONG-TERM LONG-TERM INCOME
FUND DEDUCTION CAPITAL GAIN CAPITAL GAIN PERCENTAGE
- ---- ------------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Blended Equity Fund..... 84.34% $31,101,000 $4,590,000 --
Income and Growth Fund.. 39.99% 10,185,000 5,077,000 26.31%
Value and Restructuring
Fund................... 100.00% 982,000 1,901,000 --
Small Cap Fund.......... -- -- -- --
Energy and Natural Re-
sources Fund........... 29.12% 1,873,000 1,075,000 33.54%
Large Cap Growth Fund... -- -- -- --
Real Estate Fund........ -- -- -- --
</TABLE>
37
<PAGE>
VOTING RESULTS OF SPECIAL MEETING OF SHAREHOLDERS: (UNAUDITED)
The proposals described below were submitted to a vote of shareholders of
Excelsior Funds, Inc. ("Excelsior") at a special meeting of shareholders held
on August 18, 1997 (the "Meeting"):
Proposal No. 1--Approval of a Plan of Reorganization pursuant to which
Excelsior's Productivity Enhancers, Global Competitors, Environmentally-Related
Products and Services, Aging of America and Communication and Entertainment
Funds (each, a "Fund") will be reorganized into Excelsior's Blended Equity Fund
(formerly, the "Equity Fund"):
At the Meeting, the shareholders of each Fund approved Proposal No. 1 as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN
- ---- --------- ------- -------
<S> <C> <C> <C>
Productivity Enhancers............................... 1,089,093 21,480 73,007
Global Competitors................................... 3,812,756 75,000 211,753
Environmentally-Related Products and Services........ 552,810 4,393 22,378
Aging of America..................................... 2,253,499 73,706 132,560
Communication and Entertainment...................... 1,448,267 62,285 72,989
</TABLE>
Proposal No. 2--Approval of a change of sub-classification from diversified
to non-diversified and the elimination of a related investment limitation for
the Energy and Natural Resources Fund (formerly, the "Long-Term Supply of
Energy Fund"):
At the Meeting, the shareholders of the Energy and Natural Resources Fund
approved Proposal No. 2 as follows:
FOR AGAINST ABSTAIN
--------- ------- -------
1,645,803 47,238 88,456
Proposal No. 3--Approval of a change of fundamental investment policies to
permit the Energy and Natural Resources Fund to invest in precious metal
bullion and coins and futures contracts on commodities:
At the Meeting, the shareholders of the Energy and Natural Resources Fund
approved Proposal No. 3 as follows:
FOR AGAINST ABSTAIN
--------- ------- -------
1,569,111 119,548 92,838
Proposal No. 4--Approval of the adoption of a fundamental investment policy
to allow the Energy and Natural Resources Fund to invest more than 25% of the
value of its total assets in companies in the energy and other natural
resources groups of industries:
At the Meeting, the shareholders of the Energy and Natural Resources Fund
approved Proposal No. 4 as follows:
FOR AGAINST ABSTAIN
--------- ------- -------
1,682,507 15,739 83,251
USTDEA 398
38
