As filed with the Securities and Exchange Commission on April 5, 1999.
Registration No.:
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[_] Pre-Effective Amendment No. ___ [_] Post-Effective Amendment No. __
(Check appropriate box or boxes)
Exact Name of Registrant as Specified in Charter:
EXCELSIOR FUNDS, INC.
Area Code and Telephone Number:
(800) 446-1012
Address of Principal Executive Offices:
73 Tremont Street
Boston, MA 02108-3913
Name and Address of Agent for Service:
W. Bruce McConnel, III
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933.
Calculation of Registration Fee under the Securities Act of 1933: No filing fee
is required because an indefinite number of shares have previously been
registered on Form N-1A (Registration Nos. 2-92655; 811-4088) pursuant to Rule
24f-2 under the Investment Company Act of 1940. The Registrant's Rule 24f-2
Notice for the fiscal year ended March 31, 1998 was filed on June 25, 1998.
Pursuant to Rule 429 under the Securities Act of 1933, this Registration
Statement relates to the shares previously registered on the aforesaid
Registration Statement on Form N-1A.
It is proposed that this filing will become effective on May 5, 1999 pursuant to
Rule 488 under the Securities Act of 1933.
EXCELSIOR FUNDS, INC.
73 Tremont Street
Boston, MA 02108-3913
(800) 446-1012
May 5, 1999
To the Shareholders of the
Income and Growth Fund:
Enclosed you will find a proxy statement in connection with the
solicitation of proxies by the Board of Directors of Excelsior Funds, Inc. (the
"Company") for a Special Meeting of Shareholders of the Income and Growth Fund
to be held on June 30, 1999.
The proxy statement relates to the approval or disapproval of a plan
of reorganization whereby the Income and Growth Fund would be reorganized into
the Company's Blended Equity Fund.
The Board of Directors recommends that shareholders vote in favor of
the proposal.
Frederick S. Wonham
Chairman, President and Treasurer
EXCELSIOR FUNDS, INC.
73 TREMONT STREET
BOSTON, MASSACHUSETTS 02108-3913
(800) 446-1012
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE INCOME AND GROWTH FUND
TO BE HELD ON JUNE 30, 1999
To the Shareholders of the Income and Growth Fund:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of Shareholders (the
"Meeting") of the Income and Growth Fund, an investment portfolio offered by
Excelsior Funds, Inc. (the "Company"), will be held at the offices of United
States Trust Company of New York at 114 West 47th Street, New York, New York on
June 30, 1999 at 10:00 a.m. (Eastern time). During the Meeting, the shareholders
will vote on the following proposals:
ITEM 1. To approve or disapprove a Plan of Reorganization and the
transactions contemplated thereby, including the transfer of
all of the assets and liabilities of the Company's Income
and Growth Fund (the "Transferor Fund") to the Company's
Blended Equity Fund (the "Surviving Fund"), the amendment of
the Company's Charter reclassifying all shares of the
Transferor Fund as shares of the Surviving Fund, and
accomplishment of the reclassification by the issuance of
such shares of the Surviving Fund to shareholders of the
Transferor Fund.
ITEM 2. To transact such other business as may properly come before
the Meeting or any adjournment(s) thereof.
THE DIRECTORS RECOMMEND THAT YOU VOTE IN FAVOR OF EACH PROPOSAL.
The proposed reorganization and related matters are described in the
attached Combined Proxy Statement/Prospectus. Appendix A to the Combined Proxy
Statement/Prospectus is a copy of the Plan of Reorganization.
Shareholders of record as of the close of business on April 9, 1999
are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY THE
BOARD OF DIRECTORS OF THE COMPANY. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
SUBMITTING TO THE COMPANY A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY
EXECUTED PROXY OR BY ATTENDING THE MEETING AND ELECTING TO VOTE IN PERSON.
By the Order of the
Board of Directors
W. Bruce McConnel, III
Secretary
May 5, 1999
TABLE OF CONTENTS
PAGE
SUMMARY............................................................................................. 3
Proposed Reorganization........................................................................ 3
Reasons For Reorganization..................................................................... 3
Federal Income Tax Consequences................................................................ 4
Comparison of the Investment Objectives and Policies of the Funds.............................. 4
Comparison of Other Features of the Funds...................................................... 4
Comparative Fee Table.......................................................................... 5
Expense Ratios................................................................................. 6
The Investment Advisers........................................................................ 6
The Administrators............................................................................. 7
The Distributor................................................................................ 8
Administrative Servicing Fee................................................................... 8
The Transfer Agent............................................................................. 8
The Custodian.................................................................................. 9
Fee Waivers and Expense Ratios................................................................. 9
Purchase and Redemption Procedures; Exchange Procedures; Dividends, Distributions and Pricing.. 9
Voting Information............................................................................. 9
Risk Factors................................................................................... 9
INFORMATION RELATING TO THE PROPOSED REORGANIZATION................................................. 10
Description of the Plan of Reorganization...................................................... 10
Board Consideration............................................................................ 12
Capitalization................................................................................. 12
Federal Income Tax Consequences................................................................ 13
COMPARISON OF THE FUNDS............................................................................. 13
Investment Objectives and Policies............................................................. 13
Fundamental Investment Limitations............................................................. 15
Performance.................................................................................... 15
Other Information.............................................................................. 15
INFORMATION RELATING TO VOTING MATTERS.............................................................. 16
General Information............................................................................ 16
Shareholder and Board Approval................................................................. 16
Appraisal Rights............................................................................... 17
Quorum......................................................................................... 17
Annual Meetings................................................................................ 18
ADDITIONAL INFORMATION ABOUT THE FUNDS.............................................................. 18
FINANCIAL HIGHLIGHTS................................................................................ 18
FINANCIAL STATEMENTS................................................................................ 21
OTHER BUSINESS...................................................................................... 21
LITIGATION.......................................................................................... 21
SHAREHOLDER INQUIRIES............................................................................... 21
APPENDIX A--PLAN OF REORGANIZATION.................................................................. A-1
APPENDIX B--MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE............................................. B-1
SUBJECT TO COMPLETION
PRELIMINARY COPY DATED
APRIL 5, 1999
EXCELSIOR FUNDS, INC.
73 TREMONT STREET
BOSTON, MASSACHUSETTS 02108-3913
(800) 446-1012
COMBINED PROXY STATEMENT/PROSPECTUS
DATED MAY 5, 1999
This Combined Proxy Statement/Prospectus is furnished in connection with
the solicitation of proxies by the Board of Directors of Excelsior Funds, Inc.
(the "Company") for use at a Special Meeting of Shareholders of the Company's
Income and Growth Fund (the "Transferor Fund") to be held at 10:00 a.m. (Eastern
time), on June 30, 1999 at the offices of United States Trust Company of New
York at 114 West 47th Street, New York, New York, or any adjournment thereof
(the "Meeting"). At the Meeting, shareholders of the Transferor Fund will be
asked to consider and approve a proposed Plan of Reorganization dated as of
April 8, 1999 and the transactions contemplated thereby. A copy of the Plan of
Reorganization is attached hereto as Appendix A.
The Company is an open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), and currently
offers shares in eighteen investment portfolios. The Transferor Fund and the
Company's Blended Equity Fund (the "Surviving Fund") are separate investment
portfolios of the Company. Each of the Transferor Fund and the Surviving Fund
offers one class of shares. The investment objective of the Transferor Fund is
to seek moderate current income with capital appreciation as a secondary goal.
The investment objective of the Surviving Fund is to seek long-term capital
appreciation. The investment policies and fundamental limitations of the
Transferor Fund are generally similar to those of the Surviving Fund, and the
investment advisers have utilized similar investment strategies, policies and
themes in managing the Transferor Fund and Surviving Fund. In addition, the
distribution and purchase procedures, exchange rights, redemption procedures and
the service providers of the Transferor Fund and Surviving Fund are the same.
The Plan of Reorganization provides that the Transferor Fund will transfer
all of its assets and liabilities to the Surviving Fund, all shares of the
Transferor Fund will be reclassified as shares of the Surviving Fund, and each
holder of shares of the Transferor Fund will hold, immediately after the
effective time of the reorganization, full and fractional shares of the
Surviving Fund ("Corresponding Shares") with the same aggregate net asset value
as the shareholder had in the Transferor Fund immediately before the
transaction.
This Combined Proxy Statement/Prospectus sets forth the information that a
shareholder of the Transferor Fund should know before voting on the Plan of
Reorganization and should be retained for future reference. Additional
information is set forth in the Prospectus relating to
shares of the Transferor Fund and the Surviving Fund (collectively, the "Funds")
dated August 1, 1998, the Statement of Additional Information dated August 1,
1998 relating to the Funds and the Statement of Additional Information dated May
5, 1999 relating to this Combined Proxy Statement/Prospectus. Each of these
documents is on file with the Securities and Exchange Commission (the "SEC") and
is available without charge upon oral or written request by writing or calling
the Company at the address or telephone number indicated above. The information
contained in the aforesaid Prospectus and Statements of Additional Information
is incorporated herein by reference.
This Combined Proxy Statement/Prospectus constitutes the Transferor Fund's
Proxy Statement for the Meeting, and the Prospectus for the Corresponding Shares
of the Surviving Fund that have been registered with the SEC and are to be
issued in connection with the reorganization.
This Combined Proxy Statement/Prospectus is expected to be sent to
shareholders of the Transferor Fund on or about May 5, 1999.
SHARES OF THE TRANSFEROR FUND AND THE SURVIVING FUND 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 THE
SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE
SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
SHARES OF THE SURVIVING FUND OR PASSED UPON THE ADEQUACY OF THIS COMBINED PROXY
STATEMENT/ PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
-2-
SUMMARY
The following is a summary of certain information relating to the proposed
reorganization, the parties thereto and the related transactions, and is
qualified by reference to the more complete information contained elsewhere in
this Combined Proxy Statement/Prospectus, including the Plan of Reorganization
attached as Appendix A hereto, and in the Prospectus and Statement of Additional
Information of the Funds. The Company's Semi-Annual Report to Shareholders and
its Annual Report to Shareholders may be obtained free of charge by calling 1-
800-446-1012 or by writing the Company at its address given on the first page of
this Combined Proxy Statement/Prospectus.
PROPOSED REORGANIZATION. Based upon their evaluation of the relevant
information presented to them, and in light of their fiduciary duties under
federal and state law, the Company's Board of Directors, including the Directors
who are not "interested persons" within the meaning of the 1940 Act, have
determined that the proposed Plan of Reorganization is in the best interests of
the Transferor Fund's shareholders.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THE APPROVAL OF THE PLAN OF
REORGANIZATION BY THE SHAREHOLDERS OF THE TRANSFEROR FUND AT THE MEETING.
Subject to shareholder approval, the Plan of Reorganization provides for
the acquisition by the Surviving Fund of all of the assets and liabilities of
the Transferor Fund (such assets subject to such liabilities are called the
"Assets"), the amendment of the Company's Charter to reclassify all shares of
the Transferor Fund as shares of the Surviving Fund, and the issuance of
Corresponding Shares to shareholders of the Transferor Fund.
As a result of the proposed reorganization, each shareholder of the
Transferor Fund will become a shareholder of the Surviving Fund and will hold,
immediately after the time the reorganization becomes effective (the "Effective
Time of the Reorganization"), the same aggregate dollar value of Corresponding
Shares of the Surviving Fund as the shareholder held in the Transferor Fund
immediately before the Effective Time of the Reorganization.
For further information, see "INFORMATION RELATING TO THE PROPOSED
REORGANIZATION--Description of the Plan of Reorganization."
REASONS FOR REORGANIZATION. The primary reason for the reorganization is to
streamline and simplify the Company's equity products. In connection with its
approval of the Plan of Reorganization, the Company's Board of Directors noted
that the investment policies and strategies of the Transferor Fund were
generally similar to those of the Surviving Fund; that the Surviving Fund's
performance record was stronger over the short and long-term than the
performance record of the Transferor Fund; that the Surviving Fund's total
operating expense ratio was lower than that of the Transferor Fund; that the
combined total assets of the Surviving Fund would be considerably greater than
those of the Transferor Fund; that the greater aggregate assets upon
consummation of the reorganization of the Transferor Fund into the Surviving
Fund would potentially allow the Surviving Fund to take advantage of the
possible benefits of a larger asset base such as economics of scale, lower fixed
expense ratios and greater leverage in the
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market; and that the service providers for the Transferor Fund and Surviving
Fund were the same. After consideration of the reasons for the proposed
reorganization and the proposed operations of the Surviving Fund after the
reorganization, and in consideration of the fact that the reorganization will be
tax-free and will not dilute the interests of the shareholders of the Transferor
Fund or the Surviving Fund, the Board of Directors has authorized the Plan of
Reorganization and recommended approval of the Plan of Reorganization by the
shareholders of the Transferor Fund. See "INFORMATION RELATING TO THE PROPOSED
REORGANIZATION--Board Consideration."
FEDERAL INCOME TAX CONSEQUENCES. Consummation of the reorganization will
not be a taxable event for federal income tax purposes for the Transferor Fund,
the Surviving Fund or their respective shareholders. See "INFORMATION RELATING
TO THE PROPOSED REORGANIZATION--Federal Income Tax Consequences."
COMPARISON OF THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS. The
investment objective of the Transferor Fund is to seek moderate current income
with capital appreciation as a secondary goal. In attempting to achieve these
two objectives, the Transferor Fund invests, during normal market and economic
conditions, a substantial portion of its assets in common stock, preferred stock
and securities convertible into common stock. The Transferor Fund's investments
in equity securities are income-oriented, and the Fund generally invests a
portion of its assets in debt obligations on a regular basis. The investment
objective of the Surviving Fund is to seek long-term capital appreciation. Under
normal market conditions, the Surviving Fund invests at least 65% of its total
assets in common stock, preferred stock and securities convertible into common
stock.
In managing the Funds, United States Trust Company of New York ("USTNY")
and U.S. Trust Company of Connecticut ("USTCT"), the Company's joint investment
advisers (collectively, "U.S. Trust" or the "Investment Advisers"), use the same
long-term value-based investment philosophy of investing in companies believed
to have value currently not recognized in the market prices of the companies'
securities. In order to translate its investment philosophy into more specific
guidance for selection of investments, U.S. Trust uses the same three strategies
for the Surviving Fund and the equity portion of the Transferor Fund: the
problem/opportunity strategy, the transaction value strategy, and early life
cycle strategy.
In applying these strategies to the Transferor Fund, U.S. Trust places
greater emphasis on the current and anticipated income of particular securities
and lesser emphasis on the potential for capital appreciation. As a result, the
Transferor Fund can be expected to have a relatively smaller portion of its
assets invested in common shares of early life cycle companies than the
Surviving Fund. In addition, the Transferor Fund generally invests more of its
assets in debt obligations than the Surviving Fund because of its primary
investment objective to seek moderate current income.
For further information, see "COMPARISON OF THE FUNDS--Investment
Objectives and Policies."
COMPARISON OF OTHER FEATURES OF THE FUNDS. The distribution and purchase
procedures, exchange rights, redemption procedures and service providers of the
Funds are the same.
-4-
COMPARATIVE FEE TABLE. The following table sets forth: (1) the fees and
expenses of the shares of the Transferor Fund; (2) the fees and expenses of the
shares of the Surviving Fund; and (3) the estimated fees and expenses of the
shares of the Surviving Fund on a pro forma basis after giving effect to the
proposed reorganization. Hypothetical examples based on the table are shown
following the table.
PRO FORMA COMBINED
INCOME AND BLENDED BLENDED EQUITY
GROWTH FUND EQUITY FUND FUND+
SHAREHOLDER TRANSACTION
EXPENSES
Front-End Sales Load None None None
Sales Load on Reinvested
Dividends None None None
Deferred Sales Load None None None
Redemption Fees None None None
Exchange Fees None None None
ANNUAL FUND OPERATING
EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Advisory Fees (after fee
waivers)/1/ 0.66% 0.68% 0.68%
12b-1 Fees None None None
Other Operating Expenses
Administrative
Servicing Fee/1/ 0.09% 0.04% 0.04%
Other Expenses/1/ 0.30% 0.24% 0.24%
Total Operating Expenses
(after fee waivers)/1/ 1.05% 0.96% 0.96%
- --------------------------------------------------------------------------------
+ The reorganization of the Transferor Fund into the Surviving Fund will
occur only if the shareholders of the Transferor Fund approve the
reorganization.
1. The Investment Advisers and administrators may, from time to time,
voluntarily waive part of their respective fees, which waivers may be
terminated at any time. Until further notice, the Investment Advisers
and/or administrators intend to voluntarily waive fees in an amount equal
to the Administrative Servicing Fee. Without such fee waivers, "Advisory
Fees" would be 0.75%, 0.75% and 0.75% for the Income and Growth Fund,
Blended Equity Fund and pro forma combined Blended Equity Fund,
respectively, and "Total Operating Expenses" would be 1.14%, 1.03% and
1.03% for the Income and Growth Fund, Blended Equity Fund and pro forma
combined Blended Equity Fund, respectively.
-5-
Example: The following table illustrates the expenses on a $1,000 investment
- -------
based on the fees and expenses stated in the above Fee Table, assuming (1) a 5%
annual return and (2) redemption at the end of each time period.
INCOME AND BLENDED EQUITY PRO FORMA
GROWTH FUND FUND BLENDED EQUITY FUND
----------- ---- -------------------
One Year After Purchase $ 11 $ 10 $ 10
Three Years After Purchase $ 33 $ 31 $ 31
Five Years After Purchase $ 58 $ 53 $ 53
Ten Years After Purchase $ 126 $ 118 $ 118
The purpose of the Fee Table and the Example is to assist investors in
understanding the various costs and expenses of investing in shares of the
Funds. Amounts shown in the example should not be considered a representation
of past or future investment return or expenses. Actual expenses and rate of
return may be greater or lower than those shown in the expense summary and
example.
EXPENSE RATIOS. The following table sets forth the ratios of operating
expenses to average net assets of the shares of the pro forma combined Surviving
Fund, shares of the Transferor Fund and shares of the Surviving Fund for the
fiscal year ended March 31, 1998 (a) after fee waivers and (b) absent fee
waivers:
RATIO OF OPERATING EXPENSES RATIO OF OPERATING EXPENSES
TO AVERAGE NET TO AVERAGE NET
ASSETS AFTER FEE WAIVERS ASSETS ABSENT FEE WAIVERS
------------------------ -------------------------
Pro Forma Combined 1.00% 1.07%
Blended Equity Fund:
Income and Growth Fund: 1.02% 1.10%
Blended Equity Fund: 0.99% 1.06%
THE INVESTMENT ADVISERS. USTNY and USTCT serve as joint investment advisers
for each Fund and are entitled to receive advisory fees from them, computed
daily and paid monthly, at the annual rates set forth in the table below. U.S.
Trust manages each Fund, makes decisions with respect to and places orders for
all purchases and sales of its portfolio securities, and maintains records
relating to such purchases and sales.
The following table sets forth comparative data regarding the advisory fees
paid to USTNY and USTCT by the Transferor Fund and the Surviving Fund for the
fiscal year ended March 31, 1998:/1/
-6-
Annual Advisory Fee as a Advisory Fees Paid as a
Percentage of Average Percentage of Average
Fund Daily Net Assets Advisory Fees Paid Daily Net Assets
---- ---------------- ------------------ ----------------
Income and Growth 0.75% $ 990,357 0.67%
[$110,502 Waived] [0.08% Waived]
Blended Equity 0.75% $ 3,139,705 0.68%
[$332,044 Waived] [0.07% Waived]
_______________
1. Prior to May 16, 1997, USTNY served as the sole investment adviser to each
Fund.
THE ADMINISTRATORS. Administrative services are provided to the Transferor
Fund and to the Surviving Fund by Chase Global Funds Services Company ("CGFSC"),
Federated Administrative Services ("Federated") and USTCT (collectively, the
"Administrators"). The Administrators also provide administrative services to
the other investment portfolios of the Company and to all of the investment
portfolios of Excelsior Tax-Exempt Funds, Inc. and Excelsior Institutional Trust
which are also advised by U.S. Trust and its affiliates and distributed by the
Distributor (as defined below). For services provided to all of the investment
portfolios of the Company, Excelsior Tax-Exempt Funds, Inc. and Excelsior
Institutional Trust (except for the international portfolios of the Company and
Excelsior Institutional Trust), the Administrators are entitled jointly to fees,
computed daily and paid monthly, based on the combined aggregate average daily
net assets of the three companies (excluding the international portfolios of the
Company and Excelsior Institutional Trust) as follows:
COMBINED AGGREGATE AVERAGE DAILY NET ASSETS
OF THE COMPANY, EXCELSIOR TAX-EXEMPT FUNDS, INC. AND
EXCELSIOR INSTITUTIONAL TRUST (EXCLUDING
THE INTERNATIONAL PORTFOLIOS OF THE COMPANY
AND EXCELSIOR INSTITUTIONAL TRUST)
----------------------------------
ANNUAL FEE
----------
First $200 million...................................... 0.200%
Next $200 million....................................... 0.175%
Over $400 million....................................... 0.150%
Administration fees payable to the Administrators by each portfolio of the
Company, Excelsior Tax-Exempt Funds, Inc. and Excelsior Institutional Trust are
allocated in proportion to their relative average daily net assets at the time
of determination.
The following table sets forth comparative data regarding the
administration fees paid by the Transferor Fund and the Surviving Fund for the
fiscal year ended March 31, 1998:/1/
-7-
Administration Fees Paid
Administration as a Percentage of
Fund Fees Paid Average Daily Net Assets
---- --------- ------------------------
Income and Growth $223,661 0.152%
[$914 Waived] [0.0006% Waived]
Blended Equity $707,403 0.153%
[$834 Waived] [0.0002% Waived]
_______________
1. Prior to May 16, 1997, CGFSC, Federated and USTNY served as the Funds' Co-
Administrators.
THE DISTRIBUTOR. Edgewood Services, Inc. (the "Distributor"), an affiliate
of Federated Administrative Services, serves as sponsor and underwriter of the
Transferor Fund and the Surviving Fund.
ADMINISTRATIVE SERVICING FEE. The Transferor Fund and the Surviving Fund
may enter into Servicing Agreements with Service Organizations which agree to
provide their customers with various administrative support services. Service
Organizations include customers of U.S. Trust, its affiliates and correspondent
banks, and other institutions. As consideration for the administrative services
provided, a Fund will pay each 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. Administrative services
may include but are not limited to 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. U.S. Trust and the Administrators have voluntarily agreed to waive
fees payable by a Fund in an amount equal to administrative service fees payable
by that Fund.
The following table sets forth comparative information regarding the
administrative service fees paid by the Transferor Fund and the Surviving Fund
for the fiscal year ended March 31, 1998:
Percentage of Average Fees Paid to Service
Fund Daily Net Assets Organizations
---- ---------------- -------------
Income and Growth 0.08% $111,416
Blended Equity 0.04% $182,660
THE TRANSFER AGENT. USTNY serves as the transfer and dividend disbursing
agent for both the Transferor Fund and the Surviving Fund. USTNY has entered
into a sub-transfer agency arrangement with CGFSC pursuant to which CGFSC
provides certain transfer agent, dividend disbursement and registrar services to
both the Transferor Fund and the Surviving Fund.
-8-
THE CUSTODIAN. The Chase Manhattan Bank serves as custodian of the assets
for both the Transferor Fund and the Surviving Fund.
FEE WAIVERS AND EXPENSE RATIOS. Except as otherwise noted, the service
providers bear all expenses in connection with the performance of their
services, and the Funds each bear the expenses incurred in their operations.
From time to time, U.S. Trust and the Administrators may undertake to waive a
portion or all of the fees payable to them and may also reimburse the Funds for
a portion of other expenses.
PURCHASE AND REDEMPTION PROCEDURES; EXCHANGE PROCEDURES; DIVIDENDS,
DISTRIBUTIONS AND PRICING. The procedures for purchasing, redeeming and
exchanging shares of the Transferor Fund are the same as those of the Surviving
Fund. Additionally, dividends from net investment income are declared and paid
at least annually for both the Transferor Fund and the Surviving Fund, and net
realized gains (if any) for these Funds are also distributed at least annually.
The net asset value per share of each Fund is determined as of the close of
regular trading hours on the New York Stock Exchange. The procedures for
valuing the Assets of the Transferor Fund are the same as for those of the
Surviving Fund.
Additional information concerning each Fund's purchase, redemption,
exchange, dividends and distributions and pricing procedures is contained in the
Funds' Prospectus accompanying this Combined Proxy Statement/Prospectus.
VOTING INFORMATION. This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of proxies by the Company's Board
of Directors in connection with a Special Meeting of Shareholders to be held at
the offices of USTNY at 114 West 47th Street, New York, New York, on June 30,
1999 at 10:00 a.m. (Eastern time). Only shareholders of record at the close of
business on April 9, 1999 will be entitled to notice of and to vote at the
Meeting or any adjournment thereof. Each share or fraction thereof is entitled
to one vote or fraction thereof, respectively. Shares represented by a properly
executed proxy will be voted in accordance with the instructions thereon, or if
no specification is made, the persons named as proxies will vote in favor of
each proposal set forth in the Notice of Meeting. Proxies may be revoked at any
time before they are exercised by submitting to the Company a written notice of
revocation or a subsequently executed proxy or by attending the Meeting and
voting in person. For additional information, including a description of the
shareholder vote required for approval of the Plan of Reorganization and related
transactions contemplated thereby, see "INFORMATION RELATING TO VOTING MATTERS."
RISK FACTORS. The following discussion highlights the principal risk
factors associated with an investment in the Transferor Fund and the Surviving
Fund and is qualified in its entirety by the more extensive discussion in
"COMPARISON OF THE FUNDS--Investment Objectives and Policies."
Because of the similarities of the investment policies of the Transferor
Fund and the Surviving Fund, U.S. Trust believes that an investment in the
Surviving Fund involves risks that are similar to those of the Transferor Fund.
These investment risks include those typically associated with investing in a
portfolio of common stocks and securities convertible into common stock and the
risks associated with investing in debt securities. Generally, the Transferor
Fund and the Surviving Fund are subject to market risk and interest rate risk.
Market risk is the possibility that security prices will decline over short or
even extended periods. Stock
-9-
markets tend to be cyclical, with periods of generally rising prices and periods
of generally declining prices. These cycles will affect the values of each Fund.
The prices of bonds and other debt instruments generally fluctuate inversely
with interest rate changes. Therefore, interest rate risk is the risk that the
prices of debt instruments held by a Fund will decrease as interest rates
increase.
The Transferor Fund is expected to invest a greater portion of its assets
in debt obligations under normal market conditions than the Surviving Fund.
Consequently, factors affecting debt securities generally will have a greater
impact on the Transferor Fund. The Transferor Fund may also invest up to 5% of
its total assets in non-investment grade debt obligations and up to 35% of its
total assets in non-investment grade convertible debt obligations. Non-
investment grade obligations (those that are rated "Ba" or lower by Moody's
Investors Service, Inc. ("Moody's") and, at the same time, "BB" or lower by
Standard and Poor's Ratings Services ("S&P") or unrated obligations), commonly
referred to as "junk bonds," have speculative characteristics.
The Transferor Fund may also invest up to 10% of its total assets in
instruments such as liquidating trust receipts; certificates of beneficial
ownership; limited partnership interests; creditor claims; and loan
participations. In certain instances, there may be no established market for
such instruments, and certain of these instruments may have speculative
characteristics.
The Transferor Fund and the Surviving Fund may invest in common stock;
securities convertible into common stock; investment grade debt securities;
warrants; U.S. government securities; high quality money market instruments;
repurchase agreements; and securities of foreign issuers, either directly or
indirectly through sponsored and unsponsored American Depository Receipts. In
addition, the Transferor Fund and the Surviving Fund may invest up to 10% of the
value of their respective total assets in money market fund securities; lend
their respective portfolio securities; purchase eligible securities on a "when-
issued" basis; purchase or sell securities on a "forward commitment" basis;
participate in forward currency contracts; invest in real estate investment
trusts; write covered call options and enter into closing purchase transactions
with respect to such options and invest up to 10% of their respective net assets
in illiquid securities.
A more detailed description of the risks associated with an investment in
the Transferor Fund and Surviving Fund is included in the Funds' Prospectus and
Statement of Additional Information dated August 1, 1998, which are incorporated
herein by reference.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
The terms and conditions under which the reorganization may be consummated
are set forth in the Plan of Reorganization. Significant provisions of the Plan
of Reorganization are summarized below; however, this summary is qualified in
its entirety by reference to the Plan of Reorganization, a copy of which is
attached as Appendix A to this Combined Proxy Statement/ Prospectus.
DESCRIPTION OF THE PLAN OF REORGANIZATION. The Plan of Reorganization
provides that prior to the Effective Time of the Reorganization, the Company
will execute and file with the Maryland State Department of Assessments and
Taxation Articles of Amendment to the Company's Charter (the form of which is
attached hereto as part of Appendix A). Such Articles
-10-
of Amendment will, effective as of the Effective Time of the Reorganization,
reclassify all of the shares of the Transferor Fund as shares of the Surviving
Fund.
At the Effective Time of the Reorganization, all of the Assets of the
Transferor Fund will be transferred to the Surviving Fund, such that at and
after the Effective Time of the Reorganization, the Assets of the Transferor
Fund will become and be the assets (and liabilities) of the Surviving Fund. In
exchange for the transfer of Assets and in order to accomplish the
reclassification of shares described above, the Company will contemporaneously
issue to the shareholders of the Transferor Fund full and fractional
Corresponding Shares of the Surviving Fund. The number of Corresponding Shares
of the Surviving Fund so issued will have an aggregate net asset value equal to
the aggregate net asset value of the shares of the Transferor Fund that are
outstanding immediately prior to the Effective Time of the Reorganization. At
and after the Effective Time of the Reorganization, all debts, liabilities and
obligations of the Transferor Fund will attach to the Surviving Fund and may
thereafter be enforced against the Surviving Fund to the same extent as if they
had been incurred by it.
The Plan of Reorganization provides that the Board of Directors of the
Company will declare a dividend or dividends prior to the Effective Time of the
Reorganization which, together with all previous dividends, will have the effect
of distributing to the shareholders of the Transferor Fund all undistributed
ordinary income earned and net capital gains recognized up to and including the
Effective Time of the Reorganization.
The stock transfer books of the Company for the Transferor Fund will be
permanently closed as of the close of business on the day immediately preceding
the Effective Time of the Reorganization. Redemption requests received
thereafter by the Company with respect to the Transferor Fund will be deemed to
be redemption requests for the Surviving Fund. If any Transferor Fund shares
held by a Transferor Fund shareholder are represented by a share certificate,
the certificate must be surrendered to the Company's transfer agent for
cancellation before the Surviving Fund shares issued to the shareholder in the
reorganization will be redeemed.
The reorganization is subject to a number of conditions, including approval
of the Plan of Reorganization and the transactions contemplated therein by the
shareholders of the Transferor Fund, and the receipt of certain legal opinions
described in the Plan of Reorganization including a legal opinion of Drinker
Biddle & Reath LLP that the Corresponding Shares of the Surviving Fund issued to
shareholders of the Transferor Fund in accordance with the terms of the Plan of
Reorganization will be validly issued, fully paid and nonassessable. The
Company, by consent of its Board of Directors, may waive any condition to the
obligations of the Transferor Fund or Surviving Fund under the Plan of
Reorganization if, in its judgment, such waiver will not have a material adverse
affect on the interests of the shareholders of the Transferor Fund or the
Surviving Fund.
The expenses incurred in connection with the reorganization will be borne
by U.S. Trust.
Assuming satisfaction of the conditions in the Plan of Reorganization, the
Effective Time of the Reorganization will be on or about July 9, 1999,
or such other date as is scheduled by the Company.
-11-
The Plan of Reorganization and the reorganization described therein may be
abandoned at any time for any reason prior to the Effective Time of the
Reorganization upon the vote of a majority of the Board of Directors of the
Company. The Plan of Reorganization provides further that at any time prior to
or (to the fullest extent permitted by law) after approval of the Plan of
Reorganization by the shareholders of the Transferor Fund, the Company may, upon
authorization by the Board of Directors of the Company, and with or without the
approval of the shareholders, amend any of the provisions of the Plan of
Reorganization.
BOARD CONSIDERATION. The Board of Directors of the Company considered the
proposed reorganization at meetings held on February 18, 1999 and April 8, 1999.
In considering the Plan of Reorganization, the Company's Board of Directors
considered the terms of the Plan of Reorganization; a comparison of the
Transferor Fund's expense ratios and performance history with those of the
Surviving Fund; the recommendation of U.S. Trust with respect to the proposed
reorganization; the fact that the proposed reorganization would be conducted on
a tax-free basis; and the fact that the interests of shareholders would not be
diluted as a result of the reorganization. In connection with its approval of
the Plan of Reorganization, the Company's Board of Directors noted that the
investment policies and strategies of the Transferor Fund were generally similar
to those of the Surviving Fund. The Board noted the advantage of simplifying
and streamlining the equity products offered by the Company, the decreasing
asset base of the Transferor Fund, the Transferor Fund's performance relative to
similar mutual funds and the Surviving Fund, and the lower total expense ratio
of the Surviving Fund as compared to that of the Transferor Fund. The Board of
Directors also reviewed the potential advantages of a larger asset base such as
economies of scale and lower expense ratios. The Board of Directors reviewed
the expected costs of the reorganization, and noted U.S. Trust's commitment to
pay all expenses in connection with the reorganization.
Based upon their evaluation of the relevant information presented to them,
and in light of their fiduciary duties under federal and state law, the
Company's Board of Directors unanimously determined that (i) the proposed
reorganization was in the best interests of the Transferor Fund and the
Surviving Fund, (ii) that the interests of existing shareholders of the Funds
will not be diluted as a result of the transaction, and recommended the approval
of the Plan of Reorganization by shareholders of the Transferor Fund at the
Meeting. The Plan of Reorganization in the form attached hereto as Appendix A
was approved by the Board of Directors on April 8, 1999.
CAPITALIZATION. Because the Transferor Fund will be combined with the
Surviving Fund in the reorganization, the total capitalization of the Surviving
Fund after the reorganization is expected to be greater than the current
capitalization of the Transferor Fund. The following table sets forth as of
March 1, 1999 (i) the capitalization of the Transferor Fund; (ii) the
capitalization of the Surviving Fund; and (iii) the pro forma capitalization of
the Surviving Fund as adjusted to give effect to the proposed reorganization of
the Transferor Fund. There is, of course, no assurance that the reorganization
will be consummated. Moreover, if consummated, the capitalization of each Fund
is likely to be different at the Effective Time of the Reorganization as a
result of daily share purchase and redemption activity in the Funds.
-12-
PRO FORMA
INCOME AND BLENDED BLENDED
GROWTH FUND EQUITY FUND EQUITY FUND
-------------------------- ------------------------ -------------------------
Total Net Assets $62,863,637 $685,896,980 $748,760,617
Shares Outstanding 4,395,552 16,866,118 18,411,818
Net Asset Value Per Share $ 14.30 $ 40.67 $ 40.67
FEDERAL INCOME TAX CONSEQUENCES. Consummation of the transaction is
subject to the condition that the Company receive an opinion from Drinker Biddle
& Reath LLP, subject to appropriate factual assumptions, to the effect that for
federal income tax purposes: (i) the transfer of all of the Assets of the
Transferor Fund to the Surviving Fund in exchange for shares of the Surviving
Fund and the distribution to shareholders of the Transferor Fund of the shares
of the Surviving Fund so received, as described in the Plan of Reorganization,
will constitute a "reorganization" within the meaning of Section 368(a)(1)(C) or
Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Transferor Fund and the Surviving Fund each will be considered
"a party to a reorganization" within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by the Transferor Fund as a result of
such transactions; (iii) no gain or loss will be recognized by the Surviving
Fund as a result of such transactions; (iv) no gain or loss will be recognized
by the shareholders of the Transferor Fund on the distribution to them by the
Company of the Corresponding Shares of the Surviving Fund in exchange for their
shares of the Transferor Fund; (v) the tax basis of the Corresponding Shares
received by a shareholder of the Transferor Fund will be the same as the tax
basis of the shareholder's shares of the Transferor Fund immediately prior to
the reorganization; (vi) the tax basis of the Surviving Fund in the Assets of
the Transferor Fund received pursuant to the reorganization will be the same as
the tax basis of the Assets in the hands of the Transferor Fund immediately
before the reorganization; (vii) a shareholder's holding period for the
Corresponding Shares will be determined by including the period for which the
shareholder held the shares of the Transferor Fund exchanged therefor, provided
that the shareholder held such Transferor Fund's shares as capital assets; and
(viii) the Surviving Fund's holding period with respect to the Assets of the
Transferor Fund received in the reorganization will include the period for which
such Assets were held by the Transferor Fund.
The Company has not sought a tax ruling from the Internal Revenue Service
("IRS"). The tax opinion described in the preceding paragraph will not be
binding on the IRS and will not preclude the IRS from adopting a contrary
position. Shareholders should consult their own advisors concerning the
potential tax consequences to them, including state and local income tax
consequences.
COMPARISON OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES. The investment objective of the
Transferor Fund is to seek moderate current income with capital appreciation as
a secondary goal. The investment objective of the Surviving Fund is to seek
long-term capital appreciation.
Under normal market and economic conditions, the Surviving Fund will invest
at least 65% of its total assets, and the Transferor Fund will invest a
substantial portion of its assets, in
-13-
common stock, preferred stock and securities convertible into common stock. The
Transferor Fund's investments in equity securities are income-oriented, and the
Fund generally invests a portion of its assets in debt obligations on a regular
basis.
As discussed above under "SUMMARY--Comparison of the Investment Objectives
and Policies of the Funds," U.S. Trust utilizes its three-pronged investment
strategies in managing the Surviving Fund and the equity portion of the
Transferor Fund: the problem/opportunity strategy, the transaction value
strategy and the early life cycle strategy. In applying these strategies to the
Transferor Fund, however, U.S. Trust places greater emphasis on the current and
anticipated income of particular securities and lesser emphasis on the potential
for capital appreciation. As a result, the Transferor Fund can be expected to
have a relatively smaller proportion of its assets invested in common shares of
early life cycle companies than the Surviving Fund.
Normally, the Surviving Fund may invest up to 35% of its total assets in
securities other than common stock, preferred stock and securities convertible
into common stock, such as investment grade debt securities, warrants, options
and futures instruments. During temporary defensive periods or when U.S. Trust
believes that suitable stocks or convertible securities are unavailable, the
Surviving Fund may hold cash or invest some or all of its assets in U.S.
Government securities, high-quality money market instruments and repurchase
agreements collateralized by the foregoing obligations.
The Transferor Fund may acquire debt obligations to produce income and,
under certain conditions, capital appreciation, and such obligations may include
both convertible and non-convertible corporate and government bonds, debentures,
money market instruments, repurchase agreements collateralized by U.S.
Government obligations, and other types of instruments. Although the Transferor
Fund generally invests only in investment grade debt obligations, it may invest
up to 5% of its total assets in non-investment grade debt obligations and up to
35% of its total assets in non-investment grade convertible debt obligations.
The Transferor Fund may also invest up to 10% of its total assets in other types
of instruments, including warrants, options and other rights to purchase
securities, liquidating trust receipts, limited partnership interests,
certificates of beneficial ownership, creditor claims, and loan participations.
The Transferor Fund, unlike the Surviving Fund, may purchase put and call
options listed on a national securities exchange and issued by the Options
Clearing Corporation in an amount not exceeding 5% of the Transferor Fund's net
assets. Such options may relate to particular securities or to various stock or
bond indices. Purchasing options is a specialized investment technique which
entails a substantial risk of complete loss of the amounts paid as premiums to
the writer of the options.
The Surviving Fund, unlike the Transferor Fund, for hedging purposes, may
enter into interest rate futures contracts, other types of financial futures
contracts and related futures options, as well as any index or foreign market
futures which are available on recognized exchanges or in other established
financial markets. The use of futures contracts is restricted such that no more
than 10% of the Surviving Fund's total assets may be hedged.
Transactions in futures as a hedging device may subject the Surviving Fund
to a number of risks. Successful use of futures by the Fund is subject to the
ability of U.S. Trust to correctly anticipate movements in the direction of the
market. In addition, there may be an imperfect
-14-
correlation, or no correlation at all, between movements in the price of the
futures contracts (or options) and movements in the price of the instruments
being hedged. Further, there is no assurance that a liquid market will exist for
any particular futures contract (or option) at any particular time.
Consequently, the Surviving Fund may realize a loss on a futures transaction
that is not offset by a favorable movement in the price of securities which it
holds or intends to purchase or may be unable to close a futures position in the
event of adverse price movements.
Each of the Transferor Fund and Surviving Fund may: invest in the
securities of foreign issuers directly or indirectly through sponsored and
unsponsored American Depository Receipts; invest in money market instruments;
invest up to 10% of the value of its total assets in investment company
securities; lend its portfolio securities; purchase eligible securities on a
"when-issued" basis; purchase or sell securities on a "forward commitment"
basis; enter into foreign currency exchange transactions for hedging purposes;
invest in real estate investment trusts; write covered call options and enter
into closing purchase transactions with respect to such options; enter into
repurchase agreements and reverse repurchase agreements; invest in U.S.
Government obligations; borrow funds for temporary purposes; and invest up to
10% of its net assets in illiquid securities.
FUNDAMENTAL INVESTMENT LIMITATIONS. The Funds have in place certain
fundamental investment limitations that cannot be changed for a Fund without the
approval of a majority of that Fund's outstanding voting securities (as defined
in the 1940 Act). The fundamental investment limitations of the Transferor Fund
and the Surviving Fund are substantially similar.
PERFORMANCE. The average annual total return for the periods ended
December 31, 1998 for the Transferor Fund and Surviving Fund were as follows:
One Year Five Years Ten Years Since Inception
--------------- --------------- ---------------- ------------------
Income and Growth Fund 0.97% 12.75% 12.72% 11.88%
(inception 1/6/87)
Blended Equity Fund 28.70% 20.93% 18.10% 17.69%
(inception 4/25/85)
OTHER INFORMATION. The Company is organized as a Maryland corporation and,
as such, is subject to the provisions of its Articles of Incorporation and its
By-Laws. The Company is registered as an open-end management investment company
under the 1940 Act. Currently, the Company has authorized capital of 35 billion
shares of common stock, $.001 par value per share, classified into forty-three
series of shares representing interests in eighteen investment portfolios.
Each share in a Fund represents an equal proportionate interest in the
particular Fund with other shares of the same class, and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
such Fund as are declared in the discretion of the Company's Board of Directors.
The Company's Charter authorizes the Board to classify or reclassify any
unissued shares into one or more additional classes or series.
-15-
The Company's shareholders are entitled to one vote for each full share
held and fractional votes for fractional shares held and will vote in the
aggregate and not by class or series, except as otherwise expressly required by
law.
The foregoing is only a summary of certain material attributes of the Funds
and their shares. Shareholders may obtain copies of the Company's Articles of
Incorporation and By-Laws from the Company upon written request at the address
shown on the cover page of this Combined Proxy Statement/Prospectus.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Meeting. It is expected that the
solicitation of proxies will be primarily by mail. The Company's officers and
service contractors may also solicit proxies by telephone, telegraph or personal
interview. Although not anticipated, the Company may retain the services of one
or more outside organizations to aid in the solicitation of proxies. Such
organizations normally charge a fee plus out-of-pocket charges.
Only shareholders of record at the close of business on April 9, 1999 will
be entitled to vote at the Meeting. On that date, there were outstanding and
entitled to be voted __________ shares of the Transferor Fund. Each share or
fraction thereof is entitled to one vote or fraction thereof.
If the accompanying proxy is executed and returned in time for the Meeting,
the shares covered thereby will be voted in accordance with the proxy on all
matters that may properly come before the Meeting. Any shareholder giving a
proxy may revoke it at any time before it is exercised by submitting to the
Company a written notice of revocation or a subsequently executed proxy or by
attending the Meeting and electing to vote in person.
SHAREHOLDER AND BOARD APPROVAL. The Plan of Reorganization and the
transactions contemplated therein (including the amendment to the Company's
Charter) are being submitted for approval at the Meeting by the holders of a
majority of the outstanding shares of the Transferor Fund in accordance with the
terms of the Plan and the Charter. The term "majority of the outstanding
shares" as used herein means more than 50% of all the votes entitled to be cast
on the matter.
The vote of the shareholders of the Surviving Fund is not being solicited,
because their approval or consent is not required for the reorganization.
The approval of the Plan of Reorganization by the Board of Directors of the
Company is discussed above under "INFORMATION RELATING TO THE PROPOSED
REORGANIZATION--Board Consideration."
On April 9, 1999, U.S. Trust and its affiliates held of record ___% and
____% of the Transferor Fund and the Surviving Fund, respectively, as agent or
custodian for their customers. In addition, on that date, U.S. Trust and its
affiliates held investment and/or voting power with respect to ___% of the
outstanding shares of the Transferor Fund on behalf of their customers.
-16-
At April 9, 1999, the name, address and share ownership of each person who
owned beneficially or of record 5% or more of the outstanding shares of the
Transferor Fund and the Surviving Fund are listed in the following table. The
table also shows the percentage of each Fund that would be owned by these
persons upon the consummation of the reorganization based on their holdings at
that date.
PERCENTAGE PERCENTAGE OF OWNERSHIP OF
OF OWNERSHIP THE SURVIVING FUND AFTER
NAME AND ADDRESS FUND OF FUND REORGANIZATION
- --------------------------- --------------------------- ------------------------- --------------------------
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company.
At the record date for the Meeting, the Directors and officers of the
Company as a group owned beneficially less than 1% of the outstanding shares of
the Transferor Fund and the Surviving Fund.
APPRAISAL RIGHTS. Shareholders are not entitled to any rights of share
appraisal under the Company's Charter or the Maryland General Corporation Law in
connection with the Reorganization. Shareholders have, however, the right to
redeem from the Transferor Fund their shares at net asset value until the
effective time of the Reorganization, and thereafter, shareholders may redeem
from the Surviving Fund the Corresponding Shares acquired by them in connection
with the Reorganization at net asset value.
QUORUM. In the event that a quorum is not present at the Meeting, or in
the event that a quorum is present at the Meeting but sufficient votes to
approve the Plan of Reorganization are not received, the persons named as
proxies, or their substitutes, may propose one or more adjournments of the
Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares represented at the
Meeting in person or by proxy. If a quorum is not present, the persons named as
proxies will vote the proxies FOR adjournment. If a quorum is present, the
persons named as proxies will vote those proxies which they are entitled to vote
FOR the Plan of Reorganization in favor of such adjournments, and will vote
those proxies required to be voted AGAINST such proposal against any
adjournment. A quorum is constituted with respect to the Transferor Fund by the
presence in person or by proxy of the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at the Meeting. Abstentions and
shares represented by broker non-votes are treated as being present at the
meeting for purposes of determining a quorum. For purposes of determining the
affirmative vote of a "majority of the outstanding shares," an abstention or the
failure to vote, including a broker non-vote, will be the equivalent of voting
against approval of the Plan of Reorganization.
-17-
ANNUAL MEETINGS. The Company does not presently intend to hold annual
meetings of shareholders except as required by the 1940 Act or other applicable
law. The Company will call a meeting of shareholders for the purpose of voting
upon the question of removal of a member of the Board of Directors upon written
request of shareholders owning at least 25% of the outstanding shares of the
Company entitled to vote.
ADDITIONAL INFORMATION ABOUT THE FUNDS
Information about the Transferor Fund and the Surviving Fund is included in
the Prospectus dated August 1, 1998 which is incorporated by reference herein.
Additional information about the Transferor Fund and the Surviving Fund is
included in the Statement of Additional Information dated August 1, 1998, which
has been filed with the SEC and is incorporated by reference herein. Copies of
the Prospectus and the Statement of Additional Information may be obtained
without charge by calling the Company at 1-800-446-1012. The Company is subject
to the informational requirements of the Securities Exchange Act of 1934 and the
1940 Act, as applicable, and, in accordance with such requirements, files proxy
materials, reports and other information with the SEC. These materials can be
inspected and copied at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549. In addition, these materials
can be inspected and copied at the SEC's Regional Offices at 7 World Trade
Center, Suite 1300, New York, New York 10048, and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can also be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549, at prescribed rates.
FINANCIAL HIGHLIGHTS
The tables set forth below present unaudited financial information for the
shares of the Transferor Fund and the Surviving Fund. This information is
derived from the Company's unaudited financial statements presented in the Semi-
Annual Report to Shareholders for the period ended September 30, 1998, and
should be read in conjunction with the unaudited financial statements and
related notes, which are included in the Statement of Additional Information
related to this Combined Proxy Statement/Prospectus. Financial highlights for
the Transferor Fund and the Surviving Fund for prior periods are contained in
the Prospectus dated August 1, 1998, and financial statements for the Transferor
Fund and the Surviving Fund for the prior periods are contained in the Company's
Annual Report to Shareholders and are incorporated by reference into the Funds'
Statement of Additional Information dated August 1, 1998, which Prospectus and
Statement of Additional Information are incorporated herein by reference.
Additional information about the Funds' performance is included in Appendix B
attached hereto.
-18-
INCOME AND GROWTH FUND
(for a share outstanding throughout the period indicated)
For the Six-Month Period Ended
September 30, 1998
(Unaudited)
--------------------------------
Net Asset Value, Beginning of Period......................... $ 17.95
--------
Net Investment Income........................................ 0.13
Net Realized and Unrealized Gain (Loss)
on Investments and Options................................. (3.88)
--------
Total from Investment Operations............................. (3.75)
--------
Dividends from Net Investment Income......................... (0.16)
Distributions from Net Realized Gain
on Investments and Options................................. 0.00
Total Distributions (0.16)
--------
Net Asset Value, End of Period $ 14.04
========
Total Return................................................. (21.08)%
Net Assets, End of Period
(000's omitted)............................................ $ 83,059
Ratio of Net Operating Expenses to
Average Net Assets......................................... 1.05%
Ratio of Gross Operating Expenses to
Average Net Assets*........................................ 1.14%
Ratio of Net Investment Income
to Average Net Assets...................................... 1.47%
Portfolio Turnover Rate...................................... 35.00%
Fee Waivers.................................................. $ 0.01
______________________
* Expense ratio before waiver of fees and reimbursement of expenses (if any)
by U.S. Trust and the Administrators.
-19-
BLENDED EQUITY FUND
(for a share outstanding throughout the period indicated)
For the Six-Month Period Ended
September 30, 1998
(Unaudited)
--------------------------------
Net Asset Value, Beginning of Period.................... $ 36.12
--------
Net Investment Income................................... 0.06
Net Realized and Unrealized Gain (Loss)
on Investments and Options (2.89)
--------
Total from Investment Operations........................ (2.83)
--------
Dividends from Net Investment Income.................... (0.08)
Distributions from Net Realized Gain
on Investments and Options............................ 0.00
Total Distributions..................................... (0.08)
--------
Net Asset Value, End of Period.......................... $ 33.21
========
Total Return............................................ (7.87)%
Net Assets, End of Period
(000's omitted)....................................... $549,976
Ratio of Net Operating Expenses to
Average Net Assets.................................... 0.96%
Ratio of Gross Operating Expenses to
Average Net Assets*................................... 1.04%
Ratio of Net Investment Income
to Average Net Assets................................. 0.35%
Portfolio Turnover Rate................................. 11.00%
Fee Waivers............................................. $ 0.01
______________________
* Expense ratio before waiver of fees and reimbursement of expenses (if any)
by U.S. Trust and the Administrators.
-20-
FINANCIAL STATEMENTS
The audited financial statements for the Transferor Fund and the Surviving
Fund for the fiscal year ended March 31, 1998 and the unaudited financial
statements for the Transferor Fund and the Surviving Fund for the six month
period ended September 30, 1998 are included in the Statement of Additional
Information related to this Combined Proxy Statement/Prospectus. The audited
financial highlights for the Transferor Fund and the Surviving Fund for the
fiscal year ended March 31, 1998, included in the Funds' Prospectus dated August
1, 1998, and the audited financial statements for the Transferor Fund and the
Surviving Fund set forth in the Company's Annual Report to Shareholders for the
fiscal year ended March 31, 1998, are incorporated by reference into the Funds'
Statement of Additional Information dated August 1, 1998, which Prospectus and
Statement of Additional Information are incorporated by reference into this
Combined Proxy Statement/Prospectus and are also included in the Statement of
Additional Information related to this Combined Proxy Statement/Prospectus.
Such audited financial highlights and audited financial statements have been
incorporated herein in reliance on the report of Ernst & Young LLP, independent
auditors, given on the authority of that firm as experts in accounting and
auditing.
OTHER BUSINESS
The Company's Board of Directors knows of no other business to be brought
before the Meeting with respect to the Transferor Fund. However, if any other
matters come before the Meeting, it is the intention of the Board that proxies
that do not contain specific restrictions to the contrary will be voted on such
matters in accordance with the judgment of the persons named in the enclosed
form of proxy.
LITIGATION
The Company is not involved in any litigation that would have any material
adverse financial effect upon the Funds.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Company in writing at the
address on the cover page of this Combined Proxy Statement/Prospectus or by
telephoning 1-800-446-1012.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED
TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
-21-
APPENDIX A
PLAN OF REORGANIZATION
This PLAN OF REORGANIZATION (the "Plan") is dated as of the 8th day of
April, 1999, and has been adopted by the Board of Directors of Excelsior Funds,
Inc. (the "Company") to provide for the reorganization of its Income and Growth
Fund (the "Transferor Fund") into its Blended Equity Fund (the "Surviving
Fund").
A. BACKGROUND
The Transferor Fund and the Surviving Fund (individually, a "Fund" and
collectively, the "Funds") are separate investment portfolios of the Company.
The Company is organized as a Maryland corporation and is an open-end management
investment company registered with the Securities and Exchange Commission (the
"SEC") under the Investment Company Act of 1940, as amended (the "1940 Act").
The Board of Directors of the Company has determined that it is in the best
interests of the Transferor Fund and its shareholders to be reorganized through
the transfer of all of the Transferor Fund's assets and liabilities to the
Surviving Fund upon the terms set forth in this Plan (the "Reorganization").
B. THE REORGANIZATION
1. Prior to the Effective Time of the Reorganization (as defined below in
Section 6 of this Article B), the Company will execute and file Articles of
Amendment to the Company's Charter with the Maryland State Department of
Assessments and Taxation in substantially the form attached hereto as Annex I,
which Articles of Amendment will, effective as of the Effective Time of the
Reorganization: (a) reclassify all of the Company's issued and outstanding
shares of Class E Common Stock representing interests in the Transferor Fund as
shares of equal aggregate value of the Company's Class C Common Stock
representing interests in the Surviving Fund; and (b) reclassify all of the
authorized and unissued Class E Common Stock of the Transferor Fund as
authorized and unissued Class C Common Stock of the Surviving Fund.
2. At the Effective Time of the Reorganization, all property of every
description, and all interests, rights, privileges and powers of the Transferor
Fund, subject to all liabilities of the Transferor Fund, whether accrued,
absolute, contingent or otherwise (such assets subject to such liabilities are
herein referred to as the "Assets") will be transferred and conveyed by the
Transferor Fund to the Surviving Fund and will be assumed by the Surviving Fund,
such that at and after the Effective Time of the Reorganization, the Assets of
the Transferor Fund will become and be the Assets of the Surviving Fund. In
exchange for the transfer of the Assets of the Transferor Fund and in order to
accomplish the reclassification of shares as described above in Section 1 of
this Article B, the Surviving Fund will contemporaneously issue to shareholders
of the Transferor Fund full and fractional shares of the Surviving Fund (as
contemplated by Section 4 of this Article B) having an aggregate net asset value
equal to the value of the Assets
of the Transferor Fund. For purposes of effecting such exchange, the value of
the Assets of the Transferor Fund and the net asset value of the shares of the
Surviving Fund shall be determined as of 4:00 p.m., Eastern time, on July 8,
1999, or at such other time as may be determined by the Board of Directors or an
authorized officer of the Company. Such values shall be computed in the manner
set forth in the Funds' then current prospectus under the Securities Act of
1933, as amended. At and after the Effective Time of the Reorganization, all
debts, liabilities, obligations and duties of the Transferor Fund will attach to
the Surviving Fund as aforesaid and may thenceforth be enforced against the
Surviving Fund to the same extent as if the same had been incurred by the
Surviving Fund.
3. Prior to the Effective Time of the Reorganization, the Transferor Fund
shall declare a dividend, with a record date and ex-dividend date prior to the
Effective Time of the Reorganization, which, together with all previous
dividends, shall have the effect of distributing to its shareholders all of the
Transferor Fund's investment company taxable income, if any, for the taxable
periods or years ended on or before March 31, 1999 and for the period from said
date to and including the Effective Time of the Reorganization, and all of the
Transferor Fund's net capital gain, if any, recognized in the taxable periods or
years ended on or before March 31, 1999 and in the period from said date to and
including the Effective Time of the Reorganization.
4. At the Effective Time of the Reorganization, the Company will liquidate
the Transferor Fund and issue full and fractional shares of the Surviving Fund
to the Transferor Fund's shareholders, such that the shares of the Surviving
Fund that are distributed to a shareholder of the Transferor Fund will have an
aggregate net asset value equal to the aggregate net asset value of the shares
of the Transferor Fund held by such shareholder immediately prior to the
Effective Time of the Reorganization. In addition, each shareholder of the
Transferor Fund will have the right to receive any unpaid dividends or other
distributions that were declared before the Effective Time of the Reorganization
with respect to the shares of the Transferor Fund held by such shareholder
immediately prior to the Effective Time of the Reorganization.
5. The stock transfer books of the Company with respect to the Transferor
Fund will be permanently closed as of the close of business on the day
immediately preceding the Effective Time of the Reorganization. Redemption
requests received thereafter by the Company with respect to the Transferor Fund
will be deemed to be redemption requests for shares of the Surviving Fund issued
pursuant to this Plan. If any shares of the Transferor Fund are represented by
a share certificate, the certificate must be surrendered to the Company's
transfer agent for cancellation before the Surviving Fund shares issuable to the
shareholder pursuant to this Plan will be redeemed.
6. The Effective Time of the Reorganization for purposes of this Plan
shall be the opening of business on July 9, 1999, or at such other time as may
be determined by the Board of Directors or an authorized officer of the Company.
-2-
C. ACTIONS BY SHAREHOLDERS OF THE TRANSFEROR FUND
Prior to the Effective Time of the Reorganization and as a condition
thereto, the Board of Directors of the Company will call, and the Company will
hold, a meeting of the shareholders of the Transferor Fund to consider and vote
upon:
1. Approval of this Plan and the transactions contemplated hereby.
2. Such other matters as may be determined by the Board of Directors of
the Company.
D. CONDITIONS TO THE REORGANIZATION
Consummation of this Plan will be subject to:
1. The approval of the matters referred to in Article C of this Plan by
the shareholders of the Transferor Fund in the manner required by law and
otherwise deemed necessary or advisable by the Board of Directors of the
Company; and
2. The following additional conditions:
a. The Company will have received an opinion of Drinker Biddle &
Reath LLP to the effect that:
(i) the shares of the Surviving Fund issued pursuant to this
Plan will, when issued in accordance with the provisions hereof, be legally
issued, fully paid and non-assessable; and
(ii) for federal income tax purposes: (A) the acquisition of the
assets and assumption of the liabilities of the Transferor Fund by the Surviving
Fund in return for shares of the Surviving Fund followed by the distribution of
such shares to the shareholders of the Transferor Fund will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) or Section
368(a)(1)(D) of the Code and the Surviving Fund and the Transferor Fund will be
"a party to the reorganization" within the meaning of Section 368(b) of the
Code; (B) no gain or loss will be recognized by the Transferor Fund upon the
transfer of its assets and liabilities to the Surviving Fund; (C) no gain or
loss will be recognized by the Surviving Fund upon the receipt of the assets of
the Transferor Fund in exchange for shares of the Surviving Fund and the
assumption by the Surviving Fund of the liabilities of the Transferor Fund; (D)
no gain or loss will be recognized by the shareholders of the Transferor Fund
upon the receipt of the shares of the Surviving Fund in exchange for their
shares of the Transferor Fund; (E) the tax basis of the shares of the Surviving
Fund received by the shareholders of the Transferor Fund will be the same as the
tax basis of the shares of the Transferor Fund exchanged therefor; (F) the tax
basis of the assets of the Transferor Fund in the hands of the Surviving Fund
will be the same as the tax basis of such assets in the hands of the Transferor
Fund immediately prior to the transfer; (G) the holding period of the shares of
the Surviving Fund received by the shareholders of the Transferor Fund will
include the holding period of the shares of the Transferor Fund exchanged
therefor,
-3-
provided that at the time of the exchange the shares of the Transferor Fund were
held as capital assets; and (H) the holding period of the Surviving Fund for the
assets of the Transferor Fund transferred to it will include the period during
which such assets were held by the Transferor Fund.
b. All necessary approvals, registrations and exemptions required
under federal and state laws will have been obtained.
E. MISCELLANEOUS
1. This Plan and the transactions contemplated hereby will be governed and
construed in accordance with the laws of the State of Maryland.
2. This Plan and the transactions contemplated hereby may be abandoned at
any time for any reason prior to the Effective Time of the Reorganization upon
the vote of a majority of the Board of Directors of the Company.
3. At any time prior to or (to the fullest extent permitted by law) after
approval of this Plan by the shareholders of the Transferor Fund, the Company
may, upon authorization by the Board of Directors and with or without the
approval of shareholders of the Transferor Fund, amend any of the provisions of
this Plan.
4. Notwithstanding Section 2 of Article B, unamortized organizational
expenses of the Transferor Fund shall not be transferred or assumed hereunder.
The Company has been advised that such expenses will be paid to the Transferor
Fund by one or more third parties and will be eliminated from the balance sheet
of the Transferor Fund prior to the Effective Time of the Reorganization.
5. The expenses incurred in connection with the Reorganization will be
borne by United States Trust Company of New York and U.S. Trust Company of
Connecticut.
6. The Company, by consent of its Board of Directors, or an officer
authorized by such Board of Directors, may waive any condition to the
obligations of the Transferor Fund or the Surviving Fund hereunder if, in its or
such officer's judgment, such waiver will not have a material adverse effect on
the interests of the shareholders of the Transferor Fund or the shareholders of
the Surviving Fund.
-4-
ANNEX I
-------
EXCELSIOR FUNDS, INC.
ARTICLES OF AMENDMENT
EXCELSIOR FUNDS, INC., a Maryland corporation having its principal office
in the City of Baltimore, Maryland (the "Company"), certifies that:
FIRST: The Charter of the Company is amended by reclassifying all of the
-----
shares of the Company's Class E Common Stock as shares of the Company's Class C
Common Stock.
SECOND: Upon effectiveness of these Articles of Amendment:
------
(a) All of the assets and liabilities belonging to the Company's Class
E Common Stock shall be conveyed, transferred and delivered to the
Company's Class C Common Stock, and shall thereupon become and be assets
and liabilities belonging to Class C Common Stock.
(b) Each of the issued and outstanding shares (and fractions thereof)
of the Company's Class E Common Stock will automatically, and without the
need of any further act or deed, be reclassified and changed to full and
fractional issued and outstanding shares of the Company's Class C Common
Stock of equal aggregate net asset value, in such number of such Class C
Common Stock shares as shall be determined by multiplying one (1) times the
number obtained by dividing the net asset value of a share of the Class E
Common Stock by the net asset value of a share of the Class C Common Stock,
all determined as of 4:00 p.m., Eastern time, on the date immediately
preceding the effective date of these Articles of Amendment.
(c) Each unissued share (or fraction thereof) of the Company's Class E
Common Stock will automatically, and without the need of any further act or
deed, be reclassified and changed to such number of unissued shares (or
fractions thereof) of the Company's Class C Common Stock as shall result,
as of the effective time of these Articles of Amendment and as a result
hereof, in the total number of unissued shares of the Company's Class C
Common Stock being increased by 375,000,000 shares less the number of
issued and outstanding shares of the Company's Class C Common Stock
resulting from paragraph (b) above.
(d) Open accounts on the share records of the Company's Class C Common
Stock shall be established representing the appropriate number of shares of
Class C Common Stock owned by each former holder of Class E Common Stock as
a result of the reclassification.
THIRD: This amendment does not increase the authorized capital stock of
-----
the Company or the aggregate par value thereof. This amendment reclassifies and
changes the 375,000,000 authorized shares of Class E Common Stock to 375,000,000
additional authorized
shares of Class C Common Stock but does not amend the description of any class
of stock as set forth in the Charter.
FOURTH: Outstanding certificates representing issued and outstanding
------
shares of Class E Common Stock immediately prior to these Articles of Amendment
becoming effective shall, upon these Articles becoming effective, be deemed to
represent the appropriate number of issued and outstanding shares of Class C
Common Stock, calculated as set forth in Article Second of these Articles.
Certificates representing shares of Class C Common Stock resulting from the
aforesaid change and reclassification need not be issued until certificates
representing the shares of Class E Common Stock so changed and reclassified, if
issued, have been received by the Company or its agent duly endorsed for
transfer.
FIFTH: This amendment has been duly authorized and advised by the Board
-----
of Directors of the Company and approved by the stockholders of the Company
entitled to vote thereon.
SIXTH: These Articles of Amendment shall be effective as of July 9,
-----
1999.
IN WITNESS WHEREOF, EXCELSIOR FUNDS, INC. has caused these Articles of
Amendment to be signed in its name and on its behalf by its President, and
attested by its Secretary, on the ___ day of _______________, 1999.
ATTEST: EXCELSIOR FUNDS, INC.
By: _____________________________ By: __________________________
-2-
APPENDIX B
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
BLENDED EQUITY FUND (FORMERLY EQUITY FUND)
- -------------------------------------------------------------------------------
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+
- --------------------------------------------------------------------------------
Average Annual Total Return Ended on 3/31/98*
- --------------------------------------------------------------------------------
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.
- --------
* 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
EXCELSIOR FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
INCOME AND GROWTH FUND
- -------------------------------------------------------------------------------
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+
- --------------------------------------------------------------------------------
Average Annual Total Return Ended on 3/31/98*
- --------------------------------------------------------------------------------
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.
- --------
* 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
EXCELSIOR FUNDS, INC.
73 TREMONT STREET
BOSTON, MASSACHUSETTS 02108
STATEMENT OF ADDITIONAL INFORMATION
(SPECIAL MEETING OF SHAREHOLDERS OF THE INCOME AND GROWTH FUND)
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Combined Proxy Statement/Prospectus dated May 5,
1999 ("Combined Proxy Statement/Prospectus") for the Special Meeting of
Shareholders of the Income and Growth Fund (the "Transferor Fund"), an
investment portfolio offered by Excelsior Funds, Inc. (the "Company") to be held
on June 30, 1999. Copies of the Combined Proxy Statement/Prospectus may be
obtained at no charge by calling (800) 446-1012.
Unless otherwise indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the Combined Proxy
Statement/Prospectus.
Further information about the Transferor Fund and the Blended Equity Fund
(the "Surviving Fund") is contained in and incorporated by reference to said
Funds' Statement of Additional Information dated August 1, 1998.
The date of this Statement of Additional Information is May 5, 1999.
TABLE OF CONTENTS
PAGE
----
General Information............................................... 3
Pro Forma Financial Information................................... PF1 - PF13
Audited Financial Statements for the Fiscal Year Ended March 31, 1998
Unaudited Financial Statements for the Six Months Ended September 30, 1998
-2-
GENERAL INFORMATION
The shareholders of the Transferor Fund are being asked to approve or
disapprove a Plan of Reorganization dated as of April 8, 1999, including a
related amendment to the Company's Charter, and the transactions contemplated
thereby. The Plan of Reorganization contemplates the transfer of all of the
assets and liabilities of the Transferor Fund to the Surviving Fund, the
amendment of the Company's Charter reclassifying all of the shares of the
Transferor Fund as shares of the Surviving Fund, and a liquidating distribution
of shares of the Surviving Fund to shareholders of the Transferor Fund, such
that each holder of shares in the Transferor Fund at the Effective Time of the
Reorganization will receive the same aggregate dollar value of full and
fractional shares in the Surviving Fund.
The Special Meeting of Shareholders of the Transferor Fund to consider the
Plan of Reorganization and the related transactions, including the amendment to
the Company's Charter, will be held at the offices of United States Trust
Company of New York at 114 West 47th Street, New York, New York at 10:00 a.m.
(Eastern time) on June 30, 1999. For further information about the transaction,
see the Combined Proxy Statement/Prospectus.
-3-
Excelsior Funds, Inc.
Portfolio of Investments March 31, 1998
Blended Equity Fund and Income and Growth Fund
Shares Value
- -------------------------------------------------------------------------------------------------------------------------
Blended Income and Pro Forma Blended Income and Pro Forma
Equity Growth Combined Equity Growth Combined
Fund Fund Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 96.11%
CONSUMER STAPLES - 21.14%
210,000 - 210,000 Abbott Laboratories 15,815,625 - 15,815,625
55,000 - 55,000 + Alliance Pharmaceutical Corp. 409,062 - 409,062
42,000 - 42,000 Bestfoods, Inc. 4,908,750 - 4,908,750
- 100,000 100,000 + Carriage Services, Inc. - 2,393,750 2,393,750
187,500 - 187,500 Coca-Cola Company 14,519,531 - 14,519,531
10,000 - 10,000 Conagra, Inc. 321,250 - 321,250
10,500 - 10,500 + Corn Products International, Inc. 376,688 - 376,688
22,105 - 22,105 CVS Corp. 1,668,928 - 1,668,928
52,000 35,000 87,000 Gillette Co. 6,171,750 4,154,063 10,325,813
61,700 - 61,700 + Healthsouth Corp. 1,731,456 - 1,731,456
272,300 60,000 332,300 Johnson & Johnson 19,962,994 4,398,750 24,361,744
7,400 - 7,400 Lilly (Eli) & Co. 441,225 - 441,225
58,730 - 58,730 Mattel, Inc. 2,327,176 - 2,327,176
26,000 - 26,000 Merck & Co., Inc. 3,337,750 - 3,337,750
15,000 - 15,000 Novartis AG ADR 1,327,335 - 1,327,335
- 50,000 50,000 Novo-Nordisk A.S., ADR - 4,175,000 4,175,000
35,000 - 35,000 PepsiCo, Inc. 1,494,062 - 1,494,062
269,400 - 269,400 Pfizer, Inc. 26,855,813 - 26,855,813
229,100 - 229,100 Philip Morris Companies, Inc. 9,550,606 - 9,550,606
113,200 - 113,200 Procter & Gamble Co. 9,551,250 - 9,551,250
110,000 - 110,000 Schering-Plough Corp. 8,985,625 - 8,985,625
130,000 - 130,000 Stewart Enterprises, Inc., Class A 7,215,000 - 7,215,000
- 35,000 35,000 WM. Wrigley Jr. Co. - 2,861,250 2,861,250
- ---------------------------------- ----------------------------------------------
1,916,935 280,000 2,196,935 136,971,876 17,982,813 154,954,689
- ---------------------------------- ----------------------------------------------
FINANCIAL - 19.71%
15,000 - 15,000 Allstate Corp. 1,379,063 - 1,379,063
19,000 - 19,000 American Express Co. 1,744,437 - 1,744,437
37,500 25,000 62,500 American International Group, Inc. 4,722,656 3,148,437 7,871,093
225,400 - 225,400 Associates First Capital Corp. 17,806,600 - 17,806,600
37,800 - 37,800 Bank of Boston Corp. 4,167,450 - 4,167,450
20,000 - 20,000 Beneficial Corp. 2,486,250 - 2,486,250
40,200 - 40,200 Citicorp 5,708,400 - 5,708,400
20,000 - 20,000 First Union Corp. (North Carolina) 1,135,000 - 1,135,000
170,000 - 170,000 Fleet Financial Group, Inc. 14,460,625 - 14,460,625
21,790 12,000 33,790 General Re Corp. 4,807,419 2,647,500 7,454,919
6,790 - 6,790 Household International, Inc. 935,322 - 935,322
- 35,000 35,000 HSB Group, Inc. - 2,353,750 2,353,750
- 95,000 95,000 IPC Holdings Ltd. - 3,051,875 3,051,875
143,800 - 143,800 MBIA, Inc. 11,144,500 - 11,144,500
302,076 - 302,076 Mellon Bank Corp. 19,181,826 - 19,181,826
202,694 45,000 247,694 Morgan Stanley, Dean Witter & Co. 14,771,325 3,279,375 18,050,700
- 170,000 170,000 Mutual Risk Management Ltd. - 5,758,750 5,758,750
29,687 - 29,687 Nationsbank Corp. 2,165,296 - 2,165,296
32,600 - 32,600 Norwest Corp. 1,354,937 - 1,354,937
156,300 - 156,300 State Street Boston Corp. 10,638,169 - 10,638,169
102,200 - 102,200 UNUM Corp. 5,640,163 - 5,640,163
- ---------------------------------- ----------------------------------------------
1,582,837 382,000 1,964,837 124,249,438 20,239,687 144,489,125
- ---------------------------------- ----------------------------------------------
CONSUMER CYCLICAL - 19.47%
25,800 - 25,800 CBS Corp. 875,588 - 875,588
196,400 - 196,400 Centex Corp. 7,487,750 - 7,487,750
21,000 - 21,000 Chevron Corp. 1,686,562 - 1,686,562
40,000 - 40,000 Comcast Corp., Class A Special 1,412,500 - 1,412,500
105,000 - 105,000 Dayton Hudson Corp. 9,240,000 - 9,240,000
200,000 - 200,000 Ford Motor Co. 12,962,500 - 12,962,500
311,000 - 311,000 General Electric Co. 26,804,313 - 26,804,313
41,800 - 41,800 General Motors Corp. 2,818,887 - 2,818,887
25,000 - 25,000 Globecomm Systems, Inc. 340,625 - 340,625
PF-1
Excelsior Funds, Inc.
Portfolio of Investments March 31, 1998
Blended Equity Fund and Income and Growth Fund
Shares Value
- --------------------------------------------------------------------------------------------------------------------------------
Blended Income and Pro Forma Blended Income and Pro Forma
Equity Growth Combined Equity Growth Combined
Fund Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------------------------
17,000 - 17,000 Goodyear Tire and Rubber Co. 1,287,750 - 1,287,750
- 100,000 100,000 Herman Miller, Inc. - 3,350,000 3,350,000
66,000 40,000 106,000 Luxottica Group S.p.A. ADR 6,183,375 3,747,500 9,930,875
95,000 75,000 170,000 McDonald's Corp. 5,700,000 4,500,000 10,200,000
40,000 - 40,000 Meredith Corp. 1,685,000 - 1,685,000
17,000 - 17,000 New York Times Co., Class A 1,190,000 - 1,190,000
224,400 - 224,400 + O'Reilly Automotive, Inc. 6,142,950 - 6,142,950
5,100 - 5,100 + Proffitt's, Inc. 184,875 - 184,875
38,999 - 38,999 Reuters Holdings plc ADR 2,512,998 - 2,512,998
5,000 - 5,000 Sears, Roebuck & Co. 287,188 - 287,188
- 150,000 150,000 ServiceMaster Ltd. Partnership - 4,284,375 4,284,375
- 125,000 125,000 Smart & Final, Inc. - 2,421,875 2,421,875
111,450 - 111,450 Tektronix, Inc. 4,973,456 - 4,973,456
50,000 - 50,000 Time Warner, Inc. 3,600,000 - 3,600,000
25,000 - 25,000 Tribune Co. 1,762,500 - 1,762,500
250,000 - 250,000 Wal-Mart Stores, Inc. 12,703,125 - 12,703,125
57,015 - 57,015 Walt Disney Co. 6,086,351 - 6,086,351
37,800 80,000 117,800 Wiley (John) & Sons, Inc., Class A 2,081,363 4,405,000 6,486,363
- ---------------------------------- -------------------------------------------------
2,005,764 570,000 2,575,764 120,009,656 22,708,750 142,718,406
- ---------------------------------- -------------------------------------------------
TECHNOLOGY - 11.82%
- 120,000 120,000 + Analog Devices, Inc. - 3,990,000 3,990,000
227,355 - 227,355 + Cisco Systems, Inc. 15,545,398 - 15,545,398
49,800 - 49,800 Compaq Computer Corp. 1,288,575 - 1,288,575
26,400 - 26,400 Computer Associates International, Inc. 1,524,600 - 1,524,600
15,100 - 15,100 Emerson Electric, Co. 984,331 - 984,331
126,480 - 126,480 Hewlett-Packard Co. 8,015,670 - 8,015,670
3,300 - 3,300 Honeywell Corp. 272,869 - 272,869
150,000 - 150,000 Intel Corp. 11,700,000 - 11,700,000
- 695,200 695,200 + Interleaf, Inc. - 2,259,400 2,259,400
60,000 - 60,000 International Business Machines Corp. 6,232,500 - 6,232,500
46,660 - 46,660 Lucent Technologies, Inc. 5,966,647 - 5,966,647
169,240 - 169,240 + Microsoft Corp. 15,136,403 - 15,136,403
18,000 - 18,000 Nokia Corp., Class A, ADR 1,942,875 - 1,942,875
554 - 554 Raytheon Co., Class A 31,509 - 31,509
10,000 - 10,000 Reltec Corp. 354,375 - 354,375
60,000 - 60,000 SBC Communications, Inc. 2,617,500 - 2,617,500
- 103,500 103,500 + SDL, Inc. - 2,432,250 2,432,250
10,000 - 10,000 Texas Instruments, Inc. 541,250 - 541,250
46,000 - 46,000 Tyco International Ltd. 2,512,750 - 2,512,750
- 175,000 175,000 + Unitrode Corp. - 3,259,375 3,259,375
- ---------------------------------- -------------------------------------------------
1,018,889 1,093,700 2,112,589 74,667,252 11,941,025 86,608,277
- ---------------------------------- -------------------------------------------------
ENERGY - 7.92%
13,000 - 13,000 British Petroleum Company plc ADR 1,118,813 - 1,118,813
167,907 - 167,907 Burlington Resources, Inc. 8,049,042 - 8,049,042
120,100 44,000 164,100 Exxon Corp. 8,121,763 2,975,500 11,097,263
24,000 - 24,000 Minnesota Mining & Manufacturing 2,188,500 - 2,188,500
178,300 - 178,300 Mobil Corp. 13,662,237 - 13,662,237
36,000 - 36,000 + Newpark Resources, Inc. 657,000 - 657,000
- 60,000 60,000 Norsk Hydro A.S., ADR - 3,000,000 3,000,000
- 58,500 58,500 + Ocean Energy, Inc. - 1,378,406 1,378,406
162,100 - 162,100 Royal Dutch Petroleum Co. 9,209,306 - 9,209,306
- 60,000 60,000 + SEACOR Holdings, Inc. - 3,491,250 3,491,250
108,200 - 108,200 Unocal Corp. 4,185,987 - 4,185,987
- ---------------------------------- -------------------------------------------------
809,607 222,500 1,032,107 47,192,648 10,845,156 58,037,804
- ---------------------------------- -------------------------------------------------
UTILITIES - 6.90%
8,400 90,000 98,400 + AES Corp. 440,475 4,719,375 5,159,850
30,000 - 30,000 Ameritech Corp. 1,483,125 - 1,483,125
136,609 - 136,609 AT&T Corp. 8,964,965 - 8,964,965
81,500 - 81,500 Bell Atlantic Corp. 8,353,750 - 8,353,750
57,500 - 57,500 Duke Energy Corp. 3,424,844 - 3,424,844
80,000 100,000 180,000 + NEXTEL Communications, Inc., Class A 2,695,000 3,368,750 6,063,750
133,700 - 133,700 Southern Co. 3,701,819 - 3,701,819
38,000 - 38,000 + Teleport Communications Group,
Inc., Class A 2,230,125 - 2,230,125
116,400 - 116,400 Texas Utilities Co. 4,575,975 - 4,575,975
PF-2
Excelsior Funds, Inc.
Portfolio of Investments March 31, 1998
Blended Equity Fund and Income and Growth Fund
Shares Value
- --------------------------------------------------------------------------------------------------------------------------
Blended Income and Pro Forma Blended Income Pro Forma
Equity Growth Combined Equity and Growth Combined
Fund Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------------------
154,000 - 154,000 + Worldcom, Inc. $6,622,000 - $6,622,000
- ------------------------------------- -----------------------------------------------
836,109 190,000 1,026,109 42,492,078 8,088,125 50,580,203
- ------------------------------------- -----------------------------------------------
CAPITAL GOODS - 5.62%
18,000 - 18,000 Allied Signal, Inc. 756,000 - 756,000
24,000 - 24,000 Boeing Co. 1,251,000 - 1,251,000
20,000 100,000 120,000 Dover Corp. 760,000 3,800,000 4,560,000
275,266 - 275,266 Illinois Tool Works, Inc. 17,823,473 - 17,823,473
30,000 - 30,000 ITEQ, Inc. 421,875 - 421,875
20,000 - 20,000 + Lear Corp. 1,127,500 - 1,127,500
96,650 80,000 176,650 Raychem Corp. 4,017,016 3,325,000 7,342,016
172,875 - 172,875 + Thermo Electron Corp. 6,979,828 - 6,979,828
12,600 - 12,600 Thiokol Corp. 608,738 - 608,738
8,000 - 8,000 + U.S.A. Waste Services, Inc. 356,500 - 356,500
- ------------------------------------- -----------------------------------------------
677,391 180,000 857,391 34,101,930 7,125,000 41,226,930
- ------------------------------------- -----------------------------------------------
RAW / INTERMEDIATE
MATERIALS - 3.24%
48,300 - 48,300 E.I. Du Pont de Nemours & Co. 3,284,400 - 3,284,400
35,400 - 35,400 Georgia-Pacific Corp. 2,292,150 - 2,292,150
5,100 - 5,100 Georgia-Pacific Timber Group 131,006 - 131,006
- 50,000 50,000 International Flavors &
Fragrances, Inc. - 2,356,250 2,356,250
62,100 - 62,100 Monsanto Co. 3,229,200 - 3,229,200
- 18,000 18,000 Nucor Corp. - 979,875 979,875
- 80,000 80,000 Pall Corp. - 1,720,000 1,720,000
35,000 30,000 65,000 Pioneer Hi-Bred International, Inc. 3,414,688 2,926,875 6,341,563
28,200 - 28,200 Sigma-Aldrich Corp. 1,052,212 - 1,052,212
- 130,000 130,000 Worthington Industries, Inc. - 2,331,875 2,331,875
- ------------------------------------- -----------------------------------------------
214,100 308,000 522,100 13,403,656 10,314,875 23,718,531
- ------------------------------------- -----------------------------------------------
TRANSPORTATION - 0.29%
30,000 30,000 + FDX Corp. - 2,133,750 2,133,750
- ------------------------------------- -----------------------------------------------
TOTAL COMMON STOCKS 593,088,534 111,379,181 704,467,715
CONVERTIBLE PREFERRED STOCKS - 0.66%
FINANCIAL - 0.66%
- 325,000 325,000 Capstead Mortgage Corp.,
- ------------------------------------- Series B, Preferred
Exchange $1.26
(Cost $4,484,259) - 4,834,375 4,834,375
-----------------------------------------------
Principal Value
Amount -----------------------------------------------
- ------------------------------------ CORPORATE BONDS - 0.87%
MATERIALS - 0.29%
- $2,000,000 2,000,000 AK Steel Corp.,
- ------------------------------------- 9,125%, 12/15/06 - $2,150,000 $2,150,000
-----------------------------------------------
TELECOMMUNICATIONS - 0.29%
- $2,000,000 2,000,000 Comeast Cellular
- ------------------------------------- 9.50%, 05/01/07 - 2,110,000 2,110,000
-----------------------------------------------
ENERGY - 0.29%
- $2,000,000 2,000,000 Vintage Petroleum Sr. Sub-Notes,
- ------------------------------------- 9,00%, 12/15/05 - 2,102,500 2,102,500
-----------------------------------------------
TOTAL CORPORATE BONDS
(Cost $6,208,773) - 6,362,500 6,362,500
-----------------------------------------------
CONVERTIBLE BONDS - 2.80%
TECHNOLOGY - 1.85%
- 2,550,000 2,550,000 Adaptec, Inc.,
4.75%, 02/01/04 - 2,122,875 2,122,875
- 4,024,000 4,024,000 Kollmorgen Corp., Sub-Debenture
8.75%, 05/01/09 - 4,215,140 4,215,140
- 4,959,000 4,959,000 Network Equipment
Technologies, Inc.
Sub-Debenture,
7.25%, 05/15/14 - 4,704,851 4,704,851
- 2,500,000 2,500,000 VLSI Technology, - 2,484,375 2,484,375
- ------------------------------------- -----------------------------------------------
- 14,033,000 14,033,000 8.25%, 10/01/05 - 13,527,241 13,527,241
- ------------------------------------- -----------------------------------------------
PF-3
Excelsior Funds, Inc.
Portfolio of Investments March 31, 1998
Blended Equity Fund and Income and Growth Fund
Shares Value
- ---------------------------------------------------------------------------------------------------------------------
Blended Income and Pro Forma Blended Income and Pro Forma
Equity Growth Combined Equity Growth Combined
Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 0.45%
- 3,400,000 3,400,000 Novacare, Inc.,
- ---------------------------------- Sub-Debenture,
5.50%, 01/15/00 - $3,293,750 $3,293,750
-------------------------------------------------
CONSUMER CYCLICAL - 0.29%
- 1,925,000 1,925,000 Avatar Holdings
- ---------------------------------- 7.00%, 04/01/05 - 2,112,688 2,112,688
-------------------------------------------------
TRANSPORTATION - 0.22%
- 3,500,000 3,500,000 World Corp., Inc.,
- ---------------------------------- 7.00%, 05/15/04 - 1,601,250 1,601,250
-------------------------------------------------
TOTAL CONVERTIBLE BONDS - 20,534,929 20,534,929
DEMAND NOTES - 0.24%
1,004,000 - 1,004,000 Associates Corp. of North
America, Master Notes 1,004,000 - 1,004,000
727,000 - 727,000 General Electric Co.,
Promissory Notes 727,000 - 727,000
- ---------------------------------- -------------------------------------------------
1,731,000 - 1,731,000 1,731,000 - 1,731,000
- ---------------------------------- -------------------------------------------------
TOTAL DEMAND NOTES 1,731,000 - 1,731,000
TOTAL INVESTMENTS (Cost
$323,025,087, $91,748,706
and 414,773,793) - 100%
-------------------------------------------------
$594,819,534 $143,110,985 $737,930,519
=================================================
Securities in the Fund's portfolio are valued on the basis of market quotations,
valuations provided by independent pricing services or, at fair value as
determined in good faith in accordance with procedures approved by the Trustees.
Short-term debt investments maturing within 60 days are valued at amortized cost
which approximates market value.
+ Non-income producing security
ADR - American Depositary Receipt
PF-4
EXCELSIOR FUNDS, INC.
Pro Forma Combined Statement of Assets and Liabilities
MARCH 31, 1998
BLENDED INCOME AND
EQUITY GROWTH PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
------------ ----------- ------------- ------------
ASSETS:
Investments, at cost-see
accompanying portfolios ................ $323,025,087 $ 91,748,706 $ 414,773,793
============ ============ ============
Investments, at value .................... $594,819,534 $143,110,985 $ 737,930,519
Cash ..................................... 900 -- 900
Dividends receivable ..................... 703,872 49,190 753,062
Interest receivable ...................... 17,233 752,490 769,723
Receivable for investments sold .......... -- 2,288,026 2,288,026
Receivable for fund shares sold........... 25,104 11,666 36,770
Withholding tax receivable ............... -- 2,566 2,566
Prepaid expenses ......................... 24,209 6,629 30,838
------------ ------------ -------------
TOTAL ASSETS .......................... 595,590,852 146,221,552 741,812,404
LIABILITIES:
Payable for investments purchased ....... -- 1,851,736 1,851,736
Payable for fund shares redeemed ......... 46,504 200,277 246,781
Investment advisory fees payable ......... 332,905 80,725 413,630
Administration fees payable .............. 62,614 15,607 78,221
Administrative service fees payable ...... 17,951 8,805 26,756
Directors' fees payable .................. 6,195 2,028 8,223
Due to custodian bank .................... -- 5,982,956 5,982,956
Accrued expenses and other payables ...... 216,113 26,634 242,747
------------ ------------ -------------
TOTAL LIABILITIES ..................... 682,282 8,168,768 8,851,050
------------ ------------ -------------
NET ASSETS ................................... 594,908,570 138,052,784 732,961,354
============ ============ =============
NET ASSETS consist of:
Undistributed net investment income ...... $ 914,191 $ 664,026 $ 1,578,217
Accumulated net realized gain (loss) on
investments ............................ 9,746,123 8,769,306 18,515,429
Unrealized appreciation of investments and
foreign currency translations ............ 271,794,552 51,361,715 323,156,267
Par value ................................ 16,471 7,692 (3,870)(a) 20,293
Paid-in capital in excess of par value ... 312,437,233 77,250,045 3,870 (a) 389,691,148
------------ ----------- -------------
TOTAL NET ASSETS.............................. $594,908,570 $138,052,784 $ 732,961,354
============ =========== =============
Shares of Common Stock Outstanding ........ 16,470,999 7,692,203 (3,870,000) (a) 20,293,202
NET ASSET VALUE PER SHARE................. $ 36.12 $17.95 $36.12
======= ====== ======
See Notes to Pro Forma Combined Financial Statements
PF-5
Excelsior Funds, Inc
Projected Pro Forma Combined Statement Of Operations
Year Ended March 31, 1998
Blended Income And
Equity Growth Pro Forma
Fund Fund Adjustments Combined
-------------- ----------- ------------- ----------
INVESTMENT INCOME:
Interest income.............................................. $ 532,191 $2,699,016 $ 3,231,207
Dividend income.............................................. 6,631,276 1,801,187 8,432,463
Less: Foreign taxes withheld................................. -- (3,096) (3,096)
-------------- ------------ ----------
Total Income.............................................. 7,163,467 4,497,107 11,660,574
EXPENSES:
Investment advisory fees..................................... 3,471,749 1,100,859 4,572,608
Administration fees.......................................... 708,237 224,575 932,812
Administrative service fees.................................. 182,660 111,416 294,076
Shareholder servicing agent fees............................. 172,207 65,129 237,336
Custodian fees............................................... 140,402 40,483 180,885
Legal and audit fees......................................... 101,571 25,188 126,759
Shareholder reports.......................................... 43,172 8,815 51,987
Registration and filing fees................................. 22,066 12,133 34,199
Directors' fees and expenses................................. 26,142 8,008 34,150
Distribution fees-Trust Shares............................... 202 -- 202
Miscellaneous expenses....................................... 62,687 15,969 78,656
-------------- ----------- ----------
Total Expenses............................................. 4,931,095 1,612,575 6,543,670
Fees waived by investment adviser and administrators......... (332,878) (111,416) (444,294)
-------------- ----------- ----------
Net Expenses.............................................. 4,598,217 1,501,159 6,099,376
-------------- ----------- ----------
NET INVESTMENT INCOME........................................... 2,565,250 2,995,948 5,561,198
-------------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss):
Security transactions........................................ 41,083,134 19,221,367 60,304,501
Foreign currency translations................................ -- (13,460) (13,460)
-------------- ----------- -----------
Total net realized gain (loss).................................. 41,083,134 19,207,907 60,291,041
Change in unrealized appreciation/depreciation on investments
and foreign currency translations during the year.......... 205,385,468 19,295,523 224,680,991
-------------- ----------- ----------
Net realized and unrealized gain on investments.............. 246,468,602 38,503,430 284,972,032
-------------- ----------- ----------
Net decrease in net assets resulting from operations......... $ 249,033,852 $ 41,499,378 $290,533,230
-------------- ------------ ------------
See Notes to Pro Forma Combined Financial Statements
PF-6
Excelsior Funds, Inc.
Notes to Pro Forma Combined Financial Statements
March 31, 1998
Pro forma information is intended to provide shareholders of the Income and
Growth Fund with information about the impact of the proposed reorganization by
indicating how the reorganization might have affected the information had the
reorganization been consummated as of March 31, 1998.
The pro forma combined statements of assets and liabilities and results of
operations as of March 31, 1998 have been prepared to reflect the reorganization
of the Income and Growth Fund into the Blended Equity Fund after giving effect
to pro forma adjustments described in the note listed below.
(a) Acquisition by the Blended Equity Fund of the net assets of the
Income and Growth Fund and issuance of Blended Equity Fund shares in
exchange for all the outstanding shares of the Income and Growth
Fund.
PF-7
Excelsior Funds, Inc.
Combined Portfolio of Investments September 30, 1998 (Unaudited)
Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Blended Income and Pro Forma Blended Income and Pro Forma
Equity Growth Combined Equity Growth Combined
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 97.24%
CONSUMER CYCLICAL - 21.40%
32,600 - 32,600 CBS Corp. 790,550 - 790,550
201,400 - 201,400 Centex Corp. 6,948,300 - 6,948,300
52,000 - 52,000 Chevron Corp. 4,371,250 - 4,371,250
40,000 - 40,000 Comcast Corp., Class A Special 1,877,500 - 1,877,500
212,500 - 212,500 Dayton Hudson Corp. 7,596,875 - 7,596,875
200,000 - 200,000 Ford Motor Co. 9,387,500 - 9,387,500
311,000 - 311,000 General Electric Co. 24,743,937 - 24,743,937
43,800 - 43,800 General Motors Corp. 2,395,313 - 2,395,313
38,500 - 38,500 Goodyear Tire and Rubber Co. 1,977,938 - 1,977,938
- 100,000 100,000 Herman Miller, Inc. - 1,975,000 1,975,000
330,000 73,000 403,000 Luxottica Group S.p.A. ADR 3,691,875 816,687 4,508,562
95,000 70,000 165,000 McDonald's Corp. 5,670,312 4,178,125 9,848,437
211,000 - 211,000 +MCI WorldCom, Inc. 10,312,625 - 10,312,625
40,000 - 40,000 Meredith Corp. 1,280,000 - 1,280,000
43,500 - 43,500 New York Times Co., Class A 1,196,250 - 1,196,250
224,400 - 224,400 +O'Reilly Automotive, Inc. 8,078,400 - 8,078,400
39,000 - 39,000 Reuters Group plc ADR 1,925,625 - 1,925,625
5,100 - 5,100 +Saks, Inc. 114,431 - 114,431
- 150,000 150,000 ServiceMaster Ltd. Partnership - 3,281,250 3,281,250
50,000 - 50,000 Time Warner, Inc. 4,378,125 - 4,378,125
25,000 - 25,000 Tribune Co. 1,257,813 - 1,257,813
250,000 - 250,000 Wal-Mart Stores, Inc. 13,656,250 - 13,656,250
171,045 - 171,045 Walt Disney Co. 4,329,577 - 4,329,577
37,800 80,000 117,800 Wiley (John) & Sons, Inc., Class A 2,322,337 4,915,000 7,237,337
- 280,000 280,000 +Ziff-Davis, Inc. - 2,030,000 2,030,000
- ----------------------------------------- ----------------------------------------------
2,653,645 753,000 3,406,645 118,302,783 17,196,062 135,498,845
- ----------------------------------------- ----------------------------------------------
CONSUMER STAPLES - 21.76%
420,000 - 420,000 Abbott Laboratories 18,243,750 - 18,243,750
84,000 - 84,000 Bestfoods, Inc. 4,068,750 - 4,068,750
187,500 - 187,500 Coca-Cola Company 10,804,687 - 10,804,687
10,500 - 10,500 Corn Products International, Inc. 265,125 - 265,125
44,210 - 44,210 CVS Corp. 1,936,951 - 1,936,951
104,000 60,000 164,000 Gillette Co. 3,978,000 2,295,000 6,273,000
61,700 - 61,700 +Healthsouth Corp. 651,706 - 651,706
272,300 40,000 312,300 Johnson & Johnson 21,307,475 3,130,000 24,437,475
7,400 - 7,400 Lilly (Eli) & Co. 579,512 - 579,512
98,730 - 98,730 Mattel, Inc. 2,764,440 - 2,764,440
49,000 15,000 64,000 Merck & Co., Inc. 6,348,562 1,943,438 8,292,000
15,000 - 15,000 Novartis AG ADR 1,202,222 - 1,202,222
- 40,000 40,000 Novo-Nordisk A.S., ADR - 2,400,000 2,400,000
30,000 - 30,000 PepsiCo, Inc. 883,125 - 883,125
269,400 - 269,400 Pfizer, Inc. 28,539,563 - 28,539,563
113,200 - 113,200 Procter & Gamble Co. 8,030,125 - 8,030,125
110,000 - 110,000 Schering-Plough Corp. 11,391,875 - 11,391,875
260,000 - 260,000 Stewart Enterprises, Inc., Class A 4,355,000 - 4,355,000
- 35,000 35,000 WM. Wrigley Jr. Co. - 2,657,812 2,657,812
- ----------------------------------------- ----------------------------------------------
2,136,940 190,000 2,326,940 125,350,868 12,426,250 137,777,118
- ----------------------------------------- ----------------------------------------------
TECHNOLOGY - 16.60%
- 200,000 200,000 +Analog Devices, Inc. - 3,212,500 3,212,500
341,033 30,000 371,033 +Cisco Systems, Inc. 21,080,071 1,854,375 22,934,446
50,000 - 50,000 Compaq Computer Corp. 1,581,250 - 1,581,250
30,000 - 30,000 Computer Associates International, Inc. 1,110,000 - 1,110,000
70,000 - 70,000 +Dell Computer Corp. 4,602,500 - 4,602,500
PF-8
Excelsior Funds, Inc.
Combined Portfolio of Investments September 30, 1998 (Unaudited)
Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Blended Income and Pro Forma Blended Income and Pro Forma
Equity Growth Combined Equity Growth Combined
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
36,100 - 36,100 Emerson Electric, Co. 2,247,225 - 2,247,225
126,480 - 126,480 Hewlett-Packard Co. 6,695,535 - 6,695,535
30,300 - 30,300 Honeywell Corp. 1,941,094 - 1,941,094
150,000 - 150,000 Intel Corp. 12,862,500 - 12,862,500
- 695,200 695,200 +Interleaf, Inc. - 716,925 716,925
63,000 - 63,000 International Business Machines Corp. 8,064,000 - 8,064,000
69,000 - 69,000 L.M. Ericsson Telephone Co. ADR 1,267,875 - 1,267,875
93,320 - 93,320 Lucent Technologies, Inc. 6,444,913 - 6,444,913
169,240 15,000 184,240 +Microsoft Corp. 18,626,977 1,650,938 20,277,915
36,000 - 36,000 Nokia Corp., Class A, ADR 2,823,750 - 2,823,750
- 103,500 103,500 +SDL, Inc. - 1,293,750 1,293,750
60,000 - 60,000 SBC Communications, Inc. 2,666,250 - 2,666,250
25,500 - 25,500 Texas Instruments, Inc. 1,345,125 - 1,345,125
46,000 - 46,000 Tyco International Ltd. 2,541,500 - 2,541,500
- 41,800 41,800 +Unitrode Corp. - 444,125 444,125
- ------------------------------------------ --------------------------------------------------
1,395,973 1,085,500 2,481,473 95,900,565 9,172,613 105,073,178
- ------------------------------------------ --------------------------------------------------
FINANCIAL - 17.05%
30,000 - 30,000 Allstate Corp. 1,250,625 - 1,250,625
19,000 - 19,000 American Express Co. 1,474,875 - 1,474,875
56,250 20,000 76,250 American International Group, Inc. 4,331,250 1,540,000 5,871,250
277,817 - 277,817 Associates First Capital Corp. 18,127,559 - 18,127,559
75,600 - 75,600 BankBoston 2,494,800 - 2,494,800
40,200 - 40,200 Citicorp 3,736,087 - 3,736,087
20,000 - 20,000 First Union Corp. (North Carolina) 1,023,750 - 1,023,750
170,000 - 170,000 Fleet Financial Group, Inc. 12,484,375 - 12,484,375
21,790 - 21,790 General Re Corp. 4,423,370 - 4,423,370
81,702 - 81,702 Household International, Inc. 3,063,825 - 3,063,825
114,200 - 114,200 MBIA, Inc. 6,131,112 - 6,131,112
302,076 - 302,076 Mellon Bank Corp. 16,633,060 - 16,633,060
202,694 35,000 237,694 Morgan Stanley, Dean Witter & Co. 8,728,510 1,507,188 10,235,698
- 130,000 130,000 Mutual Risk Management Ltd. - 4,598,750 4,598,750
29,687 - 29,687 Nationsbank Corp. 1,588,255 - 1,588,255
32,600 - 32,600 Norwest Corp. 1,167,488 - 1,167,488
156,300 - 156,300 State Street Boston Corp. 8,528,119 - 8,528,119
102,200 - 102,200 UNUM Corp. 5,078,063 - 5,078,063
- ------------------------------------------ --------------------------------------------------
1,732,116 185,000 1,917,116 100,265,123 7,645,938 107,911,061
- ------------------------------------------ --------------------------------------------------
ENERGY - 7.91%
13,000 - 13,000 British Petroleum Company plc ADR 1,134,250 - 1,134,250
167,907 - 167,907 Burlington Resources, Inc. 6,275,524 - 6,275,524
120,100 44,000 164,100 Exxon Corp. 8,429,519 3,088,250 11,517,769
47,000 - 47,000 Minnesota Mining & Manufacturing 3,463,313 - 3,463,313
178,300 - 178,300 Mobil Corp. 13,539,656 - 13,539,656
162,100 - 162,100 Royal Dutch Petroleum Co. 7,720,012 - 7,720,012
- 90,000 90,000 +SEACOR Holdings, Inc. - 3,735,000 3,735,000
73,200 - 73,200 Unocal Corp. 2,653,500 - 2,653,500
- ------------------------------------------ --------------------------------------------------
761,607 134,000 895,607 43,215,774 6,823,250 50,039,024
- ------------------------------------------ --------------------------------------------------
UTILITIES - 6.59%
53,400 110,000 163,400 +AES Corp. 1,979,138 4,076,875 6,056,013
30,000 - 30,000 Ameritech Corp. 1,421,250 - 1,421,250
172,443 - 172,443 AT&T Corp. 10,077,138 - 10,077,138
163,000 - 163,000 Bell Atlantic Corp. 7,895,312 - 7,895,312
57,500 - 57,500 Duke Energy Corp. 3,805,781 - 3,805,781
60,000 94,000 154,000 +NEXTEL Communications, Inc., Class A 1,211,250 1,897,625 3,108,875
133,700 - 133,700 Southern Co. 3,935,794 - 3,935,794
116,400 - 116,400 Texas Utilities Co. 5,419,875 - 5,419,875
- ------------------------------------------ --------------------------------------------------
786,443 204,000 990,443 35,745,538 5,974,500 41,720,038
- ------------------------------------------ --------------------------------------------------
RAW / INTERMEDIATE MATERIALS - 2.31%
67,300 - 67,300 E.I. du Pont de Nemours & Co. 3,777,212 - 3,777,212
62,100 - 62,100 Monsanto Co. 3,500,888 - 3,500,888
- 100,000 100,000 Pall Corp. - 2,218,750 2,218,750
105,000 90,000 195,000 Pioneer Hi-Bred International, Inc. 2,756,250 2,362,500 5,118,750
- ------------------------------------------ --------------------------------------------------
234,400 190,000 424,400 10,034,350 4,581,250 14,615,600
- ------------------------------------------ --------------------------------------------------
PF-9
Excelsior Funds, Inc.
Combined Portfolio of Investments September 30, 1998 (Unaudited)
Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Blended Income and Pro Forma Blended Income and Pro Forma
Equity Growth Combined Equity Growth Combined
Fund Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS - 3.62%
24,000 - 24,000 Boeing Co. 823,500 - 823,500
12,600 - 12,600 Cordant Technologies, Inc. 533,137 - 533,137
20,000 100,000 120,000 Dover Corp. 617,500 3,087,500 3,705,000
275,266 - 275,266 Illinois Tool Works, Inc. 15,001,997 - 15,001,997
24,700 - 24,700 +Lear Corp. 1,080,625 - 1,080,625
2,000 - 2,000 Raychem Corp. 48,750 - 48,750
76,875 - 76,875 +Thermo Electron Corp. 1,157,930 - 1,157,930
11,700 - 11,700 Waste Management, Inc. 562,331 - 562,331
- ----------------------------------------- ---------------------------------------
447,141 100,000 547,141 19,825,770 3,087,500 22,913,270
- ----------------------------------------- ---------------------------------------
TOTAL COMMON STOCKS 548,640,771 66,907,363 615,548,134
Principal Amount Value
- ----------------------------------------- ---------------------------------------
CORPORATE BONDS - 0.32%
MATERIALS - 0.32%
- 2,000,000 2,000,000 AK Steel Corp.,
- -----------------------------------------
9.125%, 12/15/06
(Cost $2,080,000) - 2,015,000 2,015,000
---------------------------------------
CONVERTIBLE BONDS - 1.36%
TECHNOLOGY - 1.02%
- 2,810,000 2,810,000 Kollmorgen Corp., Sub-Debenture,
8.75%, 05/01/09 - 2,848,638 2,848,638
- 3,959,000 3,959,000 Network Equipment Technologies, Inc.,
Sub-Debenture,
- -----------------------------------------
- 6,769,000 6,769,000 7.25%, 05/15/14 - 3,597,741 3,597,741
- ----------------------------------------- ---------------------------------------
- 6,446,379 6,446,379
---------------------------------------
CONSUMER CYCLICAL - 0.28%
- 1,925,000 1,925,000 Avatar Holdings
- -----------------------------------------
7.00%, 04/01/05 - 1,766,187 1,766,187
---------------------------------------
TRANSPORTATION - 0.06%
- 3,500,000 3,500,000 World Corp., Inc.,
- -----------------------------------------
7.00%, 05/15/04 - 385,000 385,000
---------------------------------------
TOTAL CONVERTIBLE BONDS - 8,597,566 8,597,566
DEMAND NOTES - 0.91%
400,000 2,400,000 2,800,000 Associates Corp. of North America Master Notes 400,000 2,400,000 2,800,000
487,000 2,515,000 3,002,000 General Electric Co. Promissory Notes 487,000 2,515,000 3,002,000
- ----------------------------------------- ---------------------------------------
887,000 4,915,000 5,802,000 887,000 4,915,000 5,802,000
- ----------------------------------------- ---------------------------------------
TOTAL DEMAND NOTES 887,000 4,915,000 5,802,000
TOTAL INVESTMENTS -100.00%
---------------------------------------
(Cost $321,872,770, $63,631,120 and
$385,503,890, respectively) 549,527,771 82,434,929 631,962,700
=======================================
Securities in the Fund's portfolio are valued on the basis of market quotations,
valuations provided by independent pricing services or, at fair value as
determined in good faith in accordance with procedures approved by the Trustees.
Short-term debt investments maturing within 60 days are valued at amortized cost
which approximates market value.
+ Non-income producing security
ADR-American Depositary Receipt
PF-10
Excelsior Funds, Inc.
Pro Forma Combined Statement of Assets and Liabilities
September 30, 1998 (Unaudited)
Blended Income And
Equity Growth Pro Forma
Fund Fund Adjustments Combined
------------ ------------ ------------ ------------
ASSETS:
Investments, at cost-see
accompanying portfolios...................... $321,872,770 $ 63,631,120 $ 385,503,890
============ ============ ============
Investments, at value.......................... $549,527,771 $ 82,434,929 $ 631,962,700
Cash........................................... 492,860 -- 492,860
Dividends receivable........................... 613,230 83,598 696,828
Interest receivable............................ 9,355 480,830 490,185
Receivable for investments sold................ -- 3,882,391 3,882,391
Receivable for fund shares sold................ 107,781 2,745 110,526
Withholding tax receivable..................... -- 2,833 2,833
Prepaid expenses............................... 13,906 3,900 17,806
------------ ------------ ------------
Total Assets................................ 550,764,903 86,891,226 637,656,129
LIABILITIES:
Payable for investments purchased.............. -- 3,649,008 3,649,008
Payable for fund shares redeemed............... 100,624 60,557 161,181
Dividends Payable.............................. 48 181 229
Investment advisory fees payable............... 308,302 45,596 353,898
Administration fees payable.................... 57,147 8,873 66,020
Administrative service fees payable............ 37,387 15,897 53,284
Directors' fees payable........................ 8,941 2,363 11,304
Due to custodian bank.......................... -- 20,274 20,274
Accrued expenses and other payables............ 276,753 29,782 306,535
------------ ------------ ------------
Total Liabilities........................... 789,202 3,832,531 4,621,733
------------ ------------ ------------
NET ASSETS......................................... 549,975,701 83,058,695 633,034,396
============ ============ ============
NET ASSETS consist of:
Undistributed net investment income (loss)..... $ 708,211 $ 336,248 $ 1,044,459
Accumulated net realized gain (loss) on
investments................................. 4,614,692 15,932,956 20,547,648
Unrealized appreciation (depreciation) of
investments and foreign currency translations.. 227,655,105 18,803,511 246,458,616
Par value...................................... 16,559 5,970 (3,469) (a) 19,060
Paid-in capital in excess of par value......... 316,981,134 47,980,010 3,469 (a) 364,964,613
------------ ------------ ------------
Total Net Assets................................... $549,975,701 $ 83,058,695 $ 633,034,396
============ ============ ============
Shares of Common Stock Outstanding............ 16,559,384 5,914,029 (3,413,014) (a) 19,060,399
NET ASSET VALUE PER SHARE...................... $ 33.21 $ 14.04 $ 33.21
============ ============ ============
See Notes to Pro Forma Combined Financial Statements.
PF-11
Excelsior Funds, Inc.
Projected Pro Forma Combined Statement of Operations
September 30, 1998 (Unaudited)
Blended Income and
Equity Growth Pro Forma
Fund Fund Adjustments Combined
------------ ------------ ----------- ------------
INVESTMENT INCOME:
Interest income............................................... $ 98,660 $ 773,514 $ 872,174
Dividend income............................................... 3,861,000 661,408 4,522,408
------------ ------------ ------------
Total Income............................................... 3,959,660 1,434,922 5,394,582
EXPENSES:
Investment advisory fees...................................... 2,260,166 428,900 2,689,066
Administration fees........................................... 461,074 87,495 548,569
Administrative service fees................................... 116,341 51,571 167,912
Shareholder servicing agent fees.............................. 98,357 33,226 131,583
Custodian fees................................................ 75,396 16,553 91,949
Legal and audit fees.......................................... 56,082 10,242 66,324
Shareholder reports........................................... 18,014 2,968 20,982
Registration and filing fees.................................. 17,962 7,334 25,296
Directors' fees and expenses.................................. 13,505 2,804 16,309
Miscellaneous expenses........................................ 29,943 7,554 37,497
------------ ------------ ------------
Total Expenses.............................................. 3,146,840 648,647 3,795,487
Fees waived by investment adviser and administrators.......... (243,684) (51,571) (295,255)
------------ ------------ ------------
Net Expenses............................................... 2,903,156 597,076 3,500,232
------------ ------------ ------------
NET INVESTMENT INCOME............................................ 1,056,504 837,846 1,894,350
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions............. (5,131,431) 7,163,650 2,032,219
------------ ------------ ------------
Change in unrealized appreciation/depreciation on investments
and foreign currency translations during the period......... (44,139,447) (32,558,204) (76,697,651)
------------ ------------ ------------
Net realized and unrealized gain (loss) on investments........ (49,270,878) (25,394,554) (74,665,432)
------------ ------------ ------------
Net decrease in net assets resulting from operations.......... $(48,214,374) $(24,556,708) $(72,771,082)
============ ============ ============
See Notes to Pro Forma Combined Financial Statements.
PF-12
Excelsior Funds, Inc.
Notes to Pro Forma Combined Financial Statements
September 30, 1998 (Unaudited)
Pro forma information is intended to provide shareholders of the Income and
Growth Fund with information about the impact of the proposed reorganization by
indicating how the reorganization might have affected the information had the
reorganization been consummated as of September 30, 1998.
The pro forma combined statements of assets and liabilities and results of
operations as of September 30, 1998 have been prepared to reflect the
reorganization of the Income and Growth Fund into the Blended Equity Fund after
giving effect to pro forma adjustments described in the note listed below.
(a) Acquisition by the Blended Equity Fund of the net assets of the
Income and Growth Fund and issuance of Blended Equity Fund shares in
exchange for all the outstanding shares of the Income and Growth
Fund.
PF-13
Audited Financial Statements for
the Fiscal Year Ended March 31, 1998
Excelsior Funds, Inc.
Statements of Assets and Liabilities
March 31, 1998
Blended Equity
Fund Income and
(formerly Growth
Equity Fund) Fund
-------------- ------------
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
====== ======
See Notes to Financial Statements
10
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
----------------------- ---------------- ---------------------- ----------- -----------
$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
====== ====== ====== ===== =====
See Notes to Financial Statements
11
Excelsior Funds, Inc.
Statements of Operations
Year Ended March 31, 1998
Blended Equity Income and
Fund (formerly Growth
Equity Fund) Fund
-------------- -----------
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
============ ===========
* Large Cap Growth Fund and Real Estate Fund commenced operations on October 1,
1997.
See Notes to Financial Statements
12
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*
----------------------- ---------------- ---------------------- ---------- -----------
$ 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
=========== =========== ========== ========== ========
See Notes to Financial Statements
13
Excelsior Funds, Inc.
Statements of Changes in Net Assets
Blended Equity Income and
Fund (formerly Growth
Equity Fund) Fund
-------------- ------------
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
============ ============
--------
* Large Cap Growth Fund and Real Estate Fund commenced operations on October 1,
1997.
See Notes to Financial Statements
14
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*
----------------------- ---------------- ---------------------- ----------- -----------
$ 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
============ ============ ===========
See Notes to Financial Statements
15
Excelsior Funds, Inc.
Financial Highlights--Selected Per Share Data and Ratios
For a Fund share outstanding throughout each period.
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
--------- ---------- -------------- ---------- ---------- -------------- ----------------
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) -- --
* 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
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#
------------- ---------- ------ ----------- ------------ -------------- ------------- --------- -------- ----------
$(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
See Notes to Financial Statements
17
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
BLENDED EQUITY FUND (FORMERLY EQUITY FUND)
VALUE
SHARES (NOTE 1)
------- ------------
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
VALUE
SHARES (NOTE 1)
------- ------------
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
See Notes to Financial Statements
18
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
BLENDED EQUITY FUND (FORMERLY EQUITY FUND) -- (CONTINUED)
VALUE
SHARES (NOTE 1)
------- ------------
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
------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- ------------
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
------------
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
====== ============
- --------
* 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
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
INCOME AND GROWTH FUND
VALUE
SHARES (NOTE 1)
------- ------------
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
------------
VALUE
SHARES (NOTE 1)
---------- ------------
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
------------
PRINCIPAL
AMOUNT
----------
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
------------
See Notes to Financial Statements
20
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
INCOME AND GROWTH FUND -- (CONTINUED)
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- ------------
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
====== ============
- --------
* 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
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
VALUE AND RESTRUCTURING FUND (FORMERLY BUSINESS AND INDUSTRIAL RESTRUCTURING
FUND)
VALUE
SHARES (NOTE 1)
------- ------------
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
------------
VALUE
SHARES (NOTE 1)
------- ------------
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
------------
See Notes to Financial Statements
22
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
VALUE AND RESTRUCTURING FUND (FORMERLY BUSINESS AND INDUSTRIAL RESTRUCTURING
FUND) -- (CONTINUED)
VALUE
SHARES (NOTE 1)
------- ------------
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
====== ============
- --------
* 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
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
SMALL CAP FUND (FORMERLY EARLY LIFE CYCLE FUND)
VALUE
SHARES (NOTE 1)
------- -----------
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
-----------
VALUE
SHARES (NOTE 1)
---------- -----------
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
-----------
PRINCIPAL
AMOUNT
---------
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
-----------
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
====== ===========
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$56,288,895.
+ Non-income producing security.
See Notes to Financial Statements
24
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
ENERGY AND NATURAL RESOURCES FUND (FORMERLY LONG-TERM SUPPLY OF ENERGY FUND)
VALUE
SHARES (NOTE 1)
------- -----------
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
-----------
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
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
LARGE CAP GROWTH FUND
VALUE
SHARES (NOTE 1)
------ -----------
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
-----------
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
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1998
REAL ESTATE FUND
VALUE
SHARES (NOTE 1)
------ -----------
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
-----------
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
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
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
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:
Net
Tax Basis Tax Basis Unrealized
Unrealized Unrealized Appreciation
Appreciation (Depreciation) (Depreciation)
------------ -------------- --------------
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
(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
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:
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
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:
Blended Equity Fund................................................... $150,218
Energy and Natural Resources Fund..................................... 3,855
Large Cap Growth Fund................................................. 15,179
Real Estate Fund...................................................... 26,758
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
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:
U.S. Trust Administrators
---------- --------------
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 --
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:
Value and Restructuring Fund............................................ $26,847
Energy and Natural Resources Fund....................................... 630
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
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:
Purchases Sales
------------ ------------
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
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.
Blended Equity Fund (formerly Equity Fund)
---------------------------------------------------
Year Ended Year Ended
03/31/98 03/31/97
------------------------- ------------------------
Shares Amount Shares Amount
---------- ------------- ---------- ------------
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
========== ============= ========== ============
33
Income and Growth Fund
----------------------------------------------------------
Year Ended Year Ended
03/31/98 03/31/97
---------------------------- ----------------------------
Shares Amount Shares Amount
------------- -------------- ------------- -------------
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)
============ ============== ============= =============
Value and Restructuring Fund
(formerly Business and Industrial Restructuring Fund)
----------------------------------------------------------
Year Ended Year Ended
03/31/98 03/31/97
---------------------------- ----------------------------
Shares Amount Shares Amount
------------- -------------- ------------- -------------
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
============ ============== ============= =============
Small Cap Fund
(formerly Early Life Cycle Fund)
-------------------------------------------------
Year Ended Year Ended
03/31/98 03/31/97
----------------------- ------------------------
Shares Amount Shares Amount
---------- ----------- ---------- ------------
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)
========== =========== ========== ============
34
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
---------- ------------ --------- -----------
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
========== ============ ========= ===========
Large Cap Growth Fund
----------------------
Period Ended
03/31/98*
----------------------
Shares Amount
--------- -----------
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
========= ===========
Real Estate Fund
----------------------
Period Ended
03/31/98*
----------------------
Shares Amount
--------- -----------
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
========= ===========
- --------
* 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
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:
Net Unrealized
Fund Shares Assets Appreciation
- ---- --------- ----------- ------------
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
The Blended Equity Fund's net assets immediately before the reorganization
were $376,819,118.
36
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:
20% 28% TREASURY
DIVIDENDS RECEIVED LONG-TERM LONG-TERM INCOME
FUND DEDUCTION CAPITAL GAIN CAPITAL GAIN PERCENTAGE
- ---- ------------------ ------------ ------------ ----------
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........ -- -- -- --
37
Unaudited Financial Statements for the Six
Months Ended September 30, 1998
Excelsior Funds, Inc.
Statements of Assets and Liabilities
September 30, 1998 (Unaudited)
Income and
Blended Equity Growth
Fund Fund
-------------- -----------
ASSETS:
Investments, at cost--see accompanying portfo-
lios............................................ $321,872,770 $63,631,119
============ ===========
Investments, at value (Note 1)................... $549,527,771 $82,434,929
Cash............................................. 492,860 --
Dividends receivable............................. 613,230 83,598
Interest receivable.............................. 9,355 480,830
Receivable for investments sold.................. -- 3,882,391
Receivable for fund shares sold.................. 107,781 2,745
Withholding tax receivable....................... -- 2,833
Prepaid expenses................................. 13,906 3,900
Unamortized organization costs (Note 5).......... -- --
------------ -----------
Total Assets..................................... 550,764,903 86,891,226
LIABILITIES:
Payable for investments purchased................ -- 3,649,008
Payable for fund shares redeemed................. 100,624 60,557
Investment advisory fees payable (Note 2)........ 308,302 45,596
Administration fees payable (Note 2)............. 57,147 8,873
Administrative service fees payable (Note 2)..... 37,387 15,897
Directors' fees payable (Note 2)................. 8,941 2,363
Due to custodian bank............................ -- 20,274
Accrued expenses and other payables.............. 276,801 29,963
------------ -----------
Total Liabilities................................ 789,202 3,832,531
------------ -----------
NET ASSETS........................................ $549,975,701 $83,058,695
============ ===========
NET ASSETS consist of:
Undistributed net investment income (loss)....... $ 708,211 $ 336,248
Accumulated net realized gain (loss) on invest-
ments........................................... 4,614,692 15,932,956
Unrealized appreciation (depreciation) of
investments and foreign currency translations... 227,655,105 18,803,511
Par value (Note 4)............................... 16,559 5,970
Paid-in capital in excess of par value........... 316,981,134 47,980,010
------------ -----------
Total Net Assets.................................. $549,975,701 $83,058,695
============ ===========
Shares of Common Stock Outstanding................ 16,559,384 5,914,029
NET ASSET VALUE PER SHARE......................... $33.21 $14.04
====== ======
See Notes to Financial Statements
1
VALUE AND ENERGY AND LARGE CAP
RESTRUCTURING SMALL CAP NATURAL RESOURCES GROWTH REAL ESTATE
FUND FUND FUND FUND FUND
------------- ----------- ----------------- ----------- -----------
$512,524,107 $41,880,218 $41,854,862 $81,163,612 $45,729,669
============ =========== =========== =========== ===========
$482,602,821 $35,623,300 $45,209,834 $86,437,188 $39,489,147
-- 82,126 104,755 1,647 --
526,737 6,402 38,954 7,050 310,331
1,886 8,616 23,258 188 200
11,002,593 48,817 -- -- --
747,571 266 107,575 164,788 --
4,672 -- -- -- --
79,349 1,977 1,110 467 691
-- -- -- 39,633 24,609
------------ ----------- ----------- ----------- -----------
494,965,629 35,771,504 45,485,486 86,650,961 39,824,978
335,950 139,630 964,119 93,140 337,924
707,963 50,813 41,144 4,993 104,305
197,679 15,997 12,562 49,651 22,409
23,565 4,945 8,946 10,833 4,122
129,251 7,501 2,471 3,663 5,776
384 610 521 146 328
9,830,230 -- -- -- 29,491
42,285 34,831 27,011 29,155 15,630
------------ ----------- ----------- ----------- -----------
11,267,307 254,327 1,056,774 191,581 519,985
------------ ----------- ----------- ----------- -----------
$483,698,322 $35,517,177 $44,428,712 $86,459,380 $39,304,993
============ =========== =========== =========== ===========
$ 587,952 $ (32,242) $ 127,883 $ (185,287) $ 347,467
2,394,413 (1,310,873) (479,349) (1,733,165) (313,555)
(29,921,870) (6,256,918) 3,354,972 5,273,576 (6,240,522)
25,935 4,411 4,239 10,161 6,483
510,611,892 43,112,799 41,420,967 83,094,095 45,505,120
------------ ----------- ----------- ----------- -----------
$483,698,322 $35,517,177 $44,428,712 $86,459,380 $39,304,993
============ =========== =========== =========== ===========
25,934,565 4,411,701 4,239,250 10,160,624 6,482,915
$18.65 $8.05 $10.48 $8.51 $6.06
====== ===== ====== ===== =====
See Notes to Financial Statements
2
Excelsior Funds, Inc.
Statements of Operations
Six Months Ended September 30, 1998 (Unaudited)
Income and
Blended Equity Growth
Fund Fund
-------------- ------------
INVESTMENT INCOME:
Interest income............................... $ 98,660 $ 773,514
Dividend income............................... 3,861,000 661,408
------------ ------------
Total Income.................................. 3,959,660 1,434,922
EXPENSES:
Investment advisory fees (Note 2)............. 2,260,166 428,900
Administration fees (Note 2).................. 461,074 87,495
Administrative servicing fees (Note 2)........ 116,341 51,571
Shareholder servicing agent fees.............. 98,357 33,226
Custodian fees................................ 75,396 16,553
Legal and audit fees.......................... 56,082 10,242
Shareholder reports........................... 18,014 2,968
Amortization of organization costs (Note 5)... -- --
Registration and filing fees.................. 17,962 7,334
Directors' fees and expenses (Note 2)......... 13,505 2,804
Miscellaneous expenses........................ 29,943 7,554
------------ ------------
Total Expenses................................ 3,146,840 648,647
Fees waived by investment adviser and
administrators (Note 2)...................... (243,684) (51,571)
------------ ------------
Net Expenses.................................. 2,903,156 597,076
------------ ------------
NET INVESTMENT INCOME (LOSS)................... 1,056,504 837,846
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 1):
Net realized gain (loss):
Security transactions......................... (5,131,431) 7,163,650
Foreign currency translations................. -- --
------------ ------------
Total net realized gain (loss)................ (5,131,431) 7,163,650
Change in unrealized appreciation/depreciation
on investments
and foreign currency translations during the
period....................................... (44,139,447) (32,558,204)
------------ ------------
Net realized and unrealized gain (loss) on
investments.................................. (49,270,878) (25,394,554)
------------ ------------
Net decrease in net assets resulting from
operations................................... $(48,214,374) $(24,556,708)
============ ============
See Notes to Financial Statements
3
Value and Energy and Large Cap
Restructuring Small Cap Natural Resources Growth Real Estate
Fund Fund Fund Fund Fund
------------- ------------ ----------------- ----------- -----------
$ 339,835 $ 62,289 $ 114,630 $ 56,958 $ 63,476
3,383,229 166,184 343,280 139,135 1,250,126
------------- ------------ ----------- ----------- -----------
3,723,064 228,473 457,910 196,093 1,313,602
1,570,803 165,637 135,990 281,786 207,011
400,555 42,238 34,677 57,484 31,712
326,149 25,322 18,135 12,462 13,339
113,039 19,541 19,764 5,466 2,596
74,898 11,658 7,720 12,627 9,096
26,567 4,732 2,978 2,644 2,723
8,654 1,496 7,466 2,859 5,497
-- -- -- 1,742 2,959
18,875 10,843 10,153 4,968 6,298
7,018 1,205 877 796 766
21,731 3,365 2,613 11,008 1,910
------------- ------------ ----------- ----------- -----------
2,568,289 286,037 240,373 393,842 283,907
(326,149) (25,322) (18,135) (12,462) (35,011)
------------- ------------ ----------- ----------- -----------
2,242,140 260,715 222,238 381,380 248,896
------------- ------------ ----------- ----------- -----------
1,480,924 (32,242) 235,672 (185,287) 1,064,706
------------- ------------ ----------- ----------- -----------
(1,221,083) (1,939,575) (236,215) (1,519,149) (333,166)
(16,015) -- -- -- --
------------- ------------ ----------- ----------- -----------
(1,237,098) (1,939,575) (236,215) (1,519,149) (333,166)
(136,534,994) (18,540,485) (8,549,461) (911,284) (6,350,126)
------------- ------------ ----------- ----------- -----------
(137,772,092) (20,480,060) (8,785,676) (2,430,433) (6,683,292)
------------- ------------ ----------- ----------- -----------
$(136,291,168) $(20,512,302) $(8,550,004) $(2,615,720) $(5,618,586)
============= ============ =========== =========== ===========
See Notes to Financial Statements
4
EXCELSIOR FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
INCOME AND
BLENDED EQUITY GROWTH
FUND FUND
-------------- ------------
SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
Net investment income (loss)...................... $ 1,056,504 $ 837,846
Net realized gain (loss) on investments........... (5,131,431) 7,163,650
Change in unrealized appreciation/depreciation on
investments and foreign currency translations
during the period................................ (44,139,447) (32,558,204)
------------ ------------
Net decrease in net assets resulting from
operations....................................... (48,214,374) (24,556,708)
Distributions to shareholders:
From net investment income....................... (1,262,484) (1,165,624)
Increase (decrease) in net assets from fund share
transactions (Note 4)............................ 4,543,989 (29,271,757)
------------ ------------
Net increase (decrease) in net assets............. (44,932,869) (54,994,089)
NET ASSETS:
Beginning of period.............................. 594,908,570 138,052,784
------------ ------------
End of period (1)................................ $549,975,701 $ 83,058,695
============ ============
--------
(1) Including undistributed net investment income
(loss).......................................... $ 708,211 $ 336,248
============ ============
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
operations....................................... 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 (2).................................. $594,908,570 $138,052,784
============ ============
--------
(2) Including undistributed net investment
income.......................................... $ 914,191 $ 664,026
============ ============
* Large Cap Growth Fund and Real Estate Fund commenced operations on October 1,
1997.
See Notes to Financial Statements
5
Value and Energy and Large Cap
Restructuring Small Cap Natural Resources Growth Real Estate
Fund Fund Fund Fund* Fund*
------------- ------------ ----------------- ----------- -----------
$ 1,480,924 $ (32,242) $ 235,672 $ (185,287) $ 1,064,706
(1,237,098) (1,939,575) (236,215) (1,519,149) (333,166)
(136,534,994) (18,540,485) (8,549,461) (911,284) (6,350,126)
------------- ------------ ----------- ----------- -----------
(136,291,168) (20,512,302) (8,550,004) (2,615,720) (5,618,586)
(1,167,563) -- (140,511) -- (743,530)
232,709,645 (12,518,447) 6,944,780 41,546,442 4,496,385
------------- ------------ ----------- ----------- -----------
95,250,914 (33,030,749) (1,745,735) 38,930,722 (1,865,731)
388,447,408 68,547,926 46,174,447 47,528,658 41,170,724
------------- ------------ ----------- ----------- -----------
$ 483,698,322 $ 35,517,177 $44,428,712 $86,459,380 $39,304,993
============= ============ =========== =========== ===========
$ 587,952 $ (32,242) $ 127,883 $ (185,287) $ 347,467
============= ============ =========== =========== ===========
$ 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
============= ============ =========== =========== ===========
See Notes to Financial Statements
6
EXCELSIOR FUNDS, INC.
FINANCIAL HIGHLIGHTS--SELECTED PER SHARE DATA AND RATIOS
For a Fund share outstanding throughout each period.
NET REALIZED DISTRIBUTIONS
NET ASSET NET AND UNREALIZED DIVIDENDS FROM NET
VALUE, INVESTMENT GAIN (LOSS) TOTAL FROM FROM NET REALIZED GAIN
BEGINNING INCOME ON INVESTMENTS INVESTMENT INVESTMENT ON INVESTMENTS
OF PERIOD (LOSS) AND OPTIONS OPERATIONS INCOME AND OPTIONS
--------- ---------- -------------- ---------- ---------- --------------
BLENDED EQUITY FUND -- (4/25/85*)
Shares:
Year Ended March 31,
1994.................... $18.77 $ 0.05 $ 1.16 $ 1.21 $(0.08) $(0.39)
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)
Six Months Ended
September 30, 1998
(Unaudited)............ 36.12 0.06 (2.89) (2.83) (0.08) --
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)
Six Months Ended
September 30, 1998
(Unaudited)............ 17.95 0.13 (3.88) (3.75) (0.16) --
VALUE AND RESTRUCTURING FUND -- (12/31/92*)
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)
Six Months Ended
September 30, 1998
(Unaudited)............ 23.79 0.06 (5.14) (5.08) (0.06) --
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*)
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)
1998.................... 8.83 (0.01) 3.13 3.12 -- --
Six Months Ended
September 30, 1998
(Unaudited)............ 11.95 (0.01) (3.89) (3.90) -- --
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*)
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)
Six Months Ended
September 30, 1998
(Unaudited)............ 12.66 0.06 (2.20) (2.14) (0.04) --
LARGE CAP GROWTH FUND -- (10/1/97*)
Period Ended March 31,
1998................... $ 7.00 -- ++ $ 1.51 $ 1.51 -- --
Six Months Ended
September 30, 1998
(Unaudited)............ 8.51 $(0.02) 0.02 -- -- --
REAL ESTATE FUND -- (10/1/97*)
Period Ended March 31,
1998................... $ 7.00 $ 0.15 $ 0.01 $ 0.16 $(0.11) --
Six Months Ended
September 30, 1998
(Unaudited)............ 7.05 0.17 (1.04) (0.87) (0.12) --
* 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.
See Notes to Financial Statements
7
DISTRIBUTIONS IN RATIO OF NET RATIO OF GROSS RATIO OF NET
EXCESS OF NET NET ASSETS, OPERATING OPERATING INVESTMENT
REALIZED GAIN NET ASSET END EXPENSES EXPENSES INCOME (LOSS) PORTFOLIO
ON INVESTMENTS TOTAL VALUE, END TOTAL OF PERIOD TO AVERAGE TO AVERAGE TO AVERAGE TURNOVER
AND OPTIONS DISTRIBUTIONS OF PERIOD RETURN (000) NET ASSETS NET ASSETS + NET ASSETS RATE
---------------- ------------- ---------- ------ ----------- ------------ -------------- ------------- ---------
$(0.34) $(0.81) $19.17 6.54% $122,262 1.14% 1.14% 0.25% 17%
-- (0.51) 21.40 14.65% 137,417 1.05% 1.08% 0.36% 23%
-- (2.30) 24.43 26.45% 188,574 1.05% 1.12% 0.55% 27%
-- (1.30) 25.81 11.09% 306,990 1.01% 1.06% 0.71% 39%
-- (2.44) 36.12 50.82% 594,909 0.99% 1.06% 0.55% 28%
-- (0.08) 33.21 (7.87)%** 549,976 0.96%*** 1.04%*** 0.35%*** 11%***
-- (0.59) 25.78 0.23%** 81 1.36%*** 1.41%*** 0.45%*** 39%***
-- (0.05) 30.42 17.57%** -- 1.34%*** 1.41%*** 0.20%*** N/A
-- $(0.28) $11.94 6.69% $ 96,682 1.17% 1.17% 2.77% 28%
-- (0.76) 11.82 5.74% 99,925 1.06% 1.09% 3.31% 36%
-- (0.37) 14.45 25.83% 127,495 1.05% 1.11% 2.95% 22%
-- (0.98) 15.25 12.61% 132,768 1.03% 1.11% 2.17% 25%
-- (2.19) 17.95 33.29% 138,053 1.02% 1.10% 2.04% 32%
-- (0.16) 14.04 (21.08)%** 83,059 1.05%*** 1.14%*** 1.47%*** 35%***
-- $(0.09) $ 9.64 26.40% $ 14,440 0.99% 1.73% 0.77% 75%
-- (0.18) 10.55 11.49% 30,183 0.98% 1.08% 0.83% 82%
-- (0.33) 14.03 36.48% 74,052 0.91% 0.95% 0.88% 56%
-- (0.59) 15.93 18.09% 124,011 0.91% 0.95% 0.90% 62%
-- (0.36) 23.79 52.10% 388,447 0.89% 0.93% 0.54% 30%
-- (0.06) 18.65 (21.42)%** 483,698 0.86%*** 0.98%*** 0.57%*** 45%***
-- (0.28) 15.91 10.85%** 52 1.26%*** 1.30%*** 0.54%*** 62%***
-- (0.02) 18.85 18.61%** -- 1.21%*** 1.25%*** 0.47%*** N/A
-- $(0.09) $ 8.66 18.27% $ 24,951 0.95% 1.15% (0.25)% 20%
-- (0.18) 9.77 15.16% 47,782 0.96% 1.04% (0.23)% 42%
-- (0.69) 10.78 18.29% 78,061 0.90% 0.98% (0.17)% 38%
$(0.39) (0.49) 8.83 (14.33)% 53,258 0.94% 1.02% (0.26)% 55%
-- -- 11.95 35.33% 68,548 0.94% 1.01% (0.14)% 73%
-- -- 8.05 (32.64)%** 35,517 0.95%*** 1.04%*** (0.12)%*** 93%***
-- (0.22) 8.81 (9.77)%** 8 1.29%*** 1.40%*** (0.87)%*** 55%***
-- -- 11.30 29.29%** -- 1.25%*** 1.31%*** (0.59)%*** N/A
-- $(0.07) $ 7.70 (0.57)% $ 6,830 0.99% 2.03% 1.21% 6%
-- (0.11) 7.92 4.28% 15,813 0.98% 1.35% 1.18% 31%
-- (0.07) 9.55 21.60% 23,294 0.96% 1.09% 0.88% 43%
-- (1.12) 11.12 28.28% 33,393 0.93% 0.98% 0.84% 87%
$(0.07) (1.24) 12.66 24.97% 46,174 0.99% 1.07% 0.69% 88%
-- (0.04) 10.48 (16.97)%** 44,429 0.98%*** 1.06%*** 1.04%*** 51%***
-- -- $ 8.51 21.57%** $ 47,529 1.05%*** 1.20%*** (0.16)%*** 12%***
-- -- 8.51 0.00%** 86,459 1.02%*** 1.05%*** (0.49)%*** 7%***
-- $(0.11) $ 7.05 2.26%** $ 41,171 1.20%*** 1.40%*** 5.02%*** 30%***
-- (0.12) 6.06 (12.52)%** 39,305 1.20%*** 1.37%*** 5.14%*** 14%***
FEE
WAIVERS
(NOTE 2)
--------
--
--
$ 0.02
0.01
0.02
0.01
--
0.01
--
--
$ 0.01
0.01
0.01
0.01
$ 0.06
0.01
--
0.01
0.01
0.01
--
--
$ 0.01
0.01
0.01
0.01
0.01
0.01
--
--
$ 0.07
0.03
0.01
--
0.01
--
-- ++
-- ++
$ 0.01
0.01
See Notes to Financial Statements
8
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
BLENDED EQUITY FUND
VALUE
SHARES (NOTE 1)
---------- ------------
COMMON STOCKS -- 99.76%
CONSUMER STAPLES -- 22.79%
420,000 Abbott Laboratories.................................. $ 18,243,750
84,000 Bestfoods, Inc. ..................................... 4,068,750
187,500 Coca-Cola Company.................................... 10,804,687
10,500 Corn Products International, Inc. ................... 265,125
44,210 CVS Corp. ........................................... 1,936,951
104,000 Gillette Co. ........................................ 3,978,000
61,700 +Healthsouth Corp. .................................. 651,706
272,300 Johnson & Johnson.................................... 21,307,475
7,400 Lilly (Eli) & Co. ................................... 579,512
98,730 Mattel, Inc. ........................................ 2,764,440
49,000 Merck & Co., Inc. ................................... 6,348,562
15,000 Novartis AG ADR...................................... 1,202,222
30,000 PepsiCo, Inc. ....................................... 883,125
269,400 Pfizer, Inc. ........................................ 28,539,563
113,200 Procter & Gamble Co. ................................ 8,030,125
110,000 Schering-Plough Corp. ............................... 11,391,875
260,000 Stewart Enterprises, Inc., Class A................... 4,355,000
------------
125,350,868
------------
CONSUMER CYCLICAL -- 21.51%
32,600 CBS Corp. ........................................... 790,550
201,400 Centex Corp. ........................................ 6,948,300
52,000 Chevron Corp. ....................................... 4,371,250
40,000 Comcast Corp., Class A Special....................... 1,877,500
212,500 Dayton Hudson Corp. ................................. 7,596,875
200,000 Ford Motor Co. ...................................... 9,387,500
311,000 General Electric Co. ................................ 24,743,937
43,800 General Motors Corp. ................................ 2,395,313
38,500 Goodyear Tire and Rubber Co. ........................ 1,977,938
330,000 Luxottica Group S.p.A. ADR........................... 3,691,875
95,000 McDonald's Corp. .................................... 5,670,312
211,000 +MCI WorldCom, Inc. ................................. 10,312,625
40,000 Meredith Corp. ...................................... 1,280,000
43,500 New York Times Co., Class A.......................... 1,196,250
224,400 +O'Reilly Automotive, Inc. .......................... 8,078,400
39,000 Reuters Group plc ADR................................ 1,925,625
5,100 +Saks, Inc. ......................................... 114,431
50,000 Time Warner, Inc. ................................... 4,378,125
25,000 Tribune Co. ......................................... 1,257,813
250,000 Wal-Mart Stores, Inc. ............................... 13,656,250
171,045 Walt Disney Co. ..................................... 4,329,577
37,800 Wiley (John) & Sons, Inc., Class A................... 2,322,337
------------
118,302,783
------------
FINANCIAL -- 18.23%
30,000 Allstate Corp. ...................................... 1,250,625
19,000 American Express Co. ................................ 1,474,875
56,250 American International Group, Inc. .................. 4,331,250
277,817 Associates First Capital Corp. ...................... 18,127,559
75,600 BankBoston........................................... 2,494,800
40,200 Citicorp............................................. 3,736,087
COMMON STOCKS -- (CONTINUED)
FINANCIAL -- (CONTINUED)
20,000 First Union Corp. (North Carolina)................... $ 1,023,750
170,000 Fleet Financial Group, Inc. ......................... 12,484,375
21,790 General Re Corp. .................................... 4,423,370
81,702 Household International, Inc. ....................... 3,063,825
114,200 MBIA, Inc. .......................................... 6,131,112
302,076 Mellon Bank Corp. ................................... 16,633,060
202,694 Morgan Stanley, Dean Witter & Co. ................... 8,728,510
29,687 Nationsbank Corp. ................................... 1,588,255
32,600 Norwest Corp. ....................................... 1,167,488
156,300 State Street Boston Corp. ........................... 8,528,119
102,200 UNUM Corp. .......................................... 5,078,063
------------
100,265,123
------------
TECHNOLOGY -- 17.44%
341,033 +Cisco Systems, Inc. ................................ 21,080,071
50,000 Compaq Computer Corp. ............................... 1,581,250
30,000 Computer Associates International, Inc. ............. 1,110,000
70,000 +Dell Computer Corp. ................................ 4,602,500
36,100 Emerson Electric, Co. ............................... 2,247,225
126,480 Hewlett-Packard Co. ................................. 6,695,535
30,300 Honeywell Corp. ..................................... 1,941,094
150,000 Intel Corp. ......................................... 12,862,500
63,000 International Business Machines Corp. ............... 8,064,000
69,000 L.M. Ericsson Telephone Co. ADR ..................... 1,267,875
93,320 Lucent Technologies, Inc. ........................... 6,444,913
169,240 +Microsoft Corp. .................................... 18,626,977
36,000 Nokia Corp., Class A, ADR ........................... 2,823,750
60,000 SBC Communications, Inc. ............................ 2,666,250
25,500 Texas Instruments, Inc. ............................. 1,345,125
46,000 Tyco International Ltd. ............................. 2,541,500
------------
95,900,565
------------
ENERGY -- 7.86%
13,000 British Petroleum Company plc ADR.................... 1,134,250
167,907 Burlington Resources, Inc. .......................... 6,275,524
120,100 Exxon Corp. ......................................... 8,429,519
47,000 Minnesota Mining & Manufacturing..................... 3,463,313
178,300 Mobil Corp. ......................................... 13,539,656
162,100 Royal Dutch Petroleum Co. ........................... 7,720,012
73,200 Unocal Corp. ........................................ 2,653,500
------------
43,215,774
------------
UTILITIES -- 6.50%
53,400 +AES Corp. .......................................... 1,979,138
30,000 Ameritech Corp. ..................................... 1,421,250
172,443 AT&T Corp. .......................................... 10,077,138
163,000 Bell Atlantic Corp. ................................. 7,895,312
See Notes to Financial Statements
9
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
BLENDED EQUITY FUND -- (CONTINUED)
VALUE
SHARES (NOTE 1)
---------- ------------
COMMON STOCKS -- (CONTINUED)
UTILITIES -- (CONTINUED)
57,500 Duke Energy Corp. .................................. $ 3,805,781
60,000 +NEXTEL Communications, Inc., Class A............... 1,211,250
133,700 Southern Co. ....................................... 3,935,794
116,400 Texas Utilities Co. ................................ 5,419,875
------------
35,745,538
------------
CAPITAL GOODS -- 3.61%
24,000 Boeing Co. ......................................... 823,500
12,600 Cordant Technologies, Inc. ......................... 533,137
20,000 Dover Corp. ........................................ 617,500
275,266 Illinois Tool Works, Inc. .......................... 15,001,997
24,700 +Lear Corp. ........................................ 1,080,625
2,000 Raychem Corp. ...................................... 48,750
76,875 +Thermo Electron Corp. ............................. 1,157,930
11,700 Waste Management, Inc. ............................. 562,331
------------
19,825,770
------------
RAW/INTERMEDIATE MATERIALS -- 1.82%
67,300 E.I. du Pont de Nemours & Co. ...................... 3,777,212
62,100 Monsanto Co. ....................................... 3,500,888
105,000 Pioneer Hi-Bred International, Inc. ................ 2,756,250
------------
10,034,350
------------
TOTAL COMMON STOCKS
(Cost $320,985,770)................................. 548,640,771
------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- ------------
DEMAND NOTES -- 0.16%
$400,000 Associates Corp. of North America Master Notes....... $ 400,000
487,000 General Electric Co. Promissory Notes................ 487,000
------------
TOTAL DEMAND NOTES
(Cost $887,000)...................................... 887,000
------------
TOTAL INVESTMENTS
(Cost $321,872,770*)...................................... 99.92% $549,527,771
OTHER ASSETS AND LIABILITIES (NET)........................ 0.08 447,930
------ ------------
NET ASSETS................................................ 100.00% $549,975,701
====== ============
- --------
* Aggregate cost for Federal tax and book purposes.
+ Non-income producing security
ADR -- American Depositary Receipt
See Notes to Financial Statements
10
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
INCOME AND GROWTH FUND
VALUE
SHARES (NOTE 1)
---------- ------------
COMMON STOCKS -- 80.55%
CONSUMER CYCLICAL -- 20.70%
100,000 Herman Miller, Inc. ................................. $ 1,975,000
73,000 Luxottica Group S.p.A. ADR........................... 816,687
70,000 McDonald's Corp. .................................... 4,178,125
150,000 ServiceMaster Ltd. Partnership....................... 3,281,250
80,000 Wiley (John) & Sons, Inc., Class A................... 4,915,000
280,000 +Ziff-Davis, Inc. ................................... 2,030,000
------------
17,196,062
------------
CONSUMER STAPLES -- 14.96%
60,000 Gillette Co. ........................................ 2,295,000
40,000 Johnson & Johnson.................................... 3,130,000
15,000 Merck & Co., Inc. ................................... 1,943,438
40,000 Novo-Nordisk A.S., ADR............................... 2,400,000
35,000 WM. Wrigley Jr. Co. ................................. 2,657,812
------------
12,426,250
------------
TECHNOLOGY -- 11.04%
200,000 +Analog Devices, Inc. ............................... 3,212,500
30,000 +Cisco Systems, Inc. ................................ 1,854,375
695,200 +Interleaf, Inc. .................................... 716,925
15,000 +Microsoft Corp. .................................... 1,650,938
103,500 +SDL, Inc. .......................................... 1,293,750
41,800 +Unitrode Corp. ..................................... 444,125
------------
9,172,613
------------
FINANCIAL -- 9.21%
20,000 American International Group, Inc. .................. 1,540,000
35,000 Morgan Stanley, Dean Witter & Co. ................... 1,507,188
130,000 Mutual Risk Management Ltd. ......................... 4,598,750
------------
7,645,938
------------
ENERGY -- 8.21%
44,000 Exxon Corp. ......................................... 3,088,250
90,000 +SEACOR Holdings, Inc. .............................. 3,735,000
------------
6,823,250
------------
UTILITIES -- 7.19%
110,000 +AES Corp. .......................................... 4,076,875
94,000 +NEXTEL Communications, Inc., Class A................ 1,897,625
------------
5,974,500
------------
RAW/INTERMEDIATE
MATERIALS -- 5.52%
100,000 Pall Corp. .......................................... 2,218,750
90,000 Pioneer Hi-Bred International, Inc. ................. 2,362,500
------------
4,581,250
------------
CAPITAL GOODS -- 3.72%
100,000 Dover Corp. ......................................... 3,087,500
------------
TOTAL COMMON STOCKS (Cost $45,934,477)............... 66,907,363
------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- ------------
CORPORATE BONDS -- 2.43%
MATERIALS -- 2.43%
$2,000,000 AK Steel Corp.,
9.125%, 12/15/06
(Cost $2,080,000)................................... $ 2,015,000
-----------
CONVERTIBLE BONDS -- 10.35%
TECHNOLOGY -- 7.76%
2,810,000 Kollmorgen Corp.,
Sub-Debenture,
8.75%, 05/01/09..................................... 2,848,638
3,959,000 Network Equipment Technologies, Inc.,
Sub-Debenture,
7.25%, 05/15/14..................................... 3,597,741
-----------
6,446,379
-----------
CONSUMER CYCLICAL -- 2.13%
1,925,000 Avatar Holdings 7.00%, 04/01/05..................... 1,766,187
-----------
TRANSPORTATION -- 0.46%
3,500,000 World Corp., Inc., 7.00%, 05/15/04.................. 385,000
-----------
TOTAL CONVERTIBLE BONDS (Cost $10,701,642).......... 8,597,566
-----------
DEMAND NOTES -- 5.92%
2,400,000 Associates Corp. of North America Master Notes...... 2,400,000
2,515,000 General Electric Co. Promissory Notes............... 2,515,000
-----------
TOTAL DEMAND NOTES
(Cost $4,915,000)................................... 4,915,000
-----------
TOTAL INVESTMENTS (Cost $63,631,119*)...................... 99.25% $82,434,929
OTHER ASSETS AND LIABILITIES (NET)......................... 0.75 623,766
------ -----------
NET ASSETS................................................. 100.00% $83,058,695
====== ===========
- --------
* Aggregate cost for Federal tax and book purposes.
+ Non-income producing security
ADR -- American Depositary Receipt
See Notes to Financial Statements
11
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
VALUE AND RESTRUCTURING FUND
VALUE
SHARES (NOTE 1)
---------- ------------
COMMON STOCKS -- 97.53%
TECHNOLOGY -- 23.96%
308,000 Alcatel Alsthom ADR.................................. $ 5,236,000
160,000 BCE, Inc. ........................................... 4,470,000
250,000 +Bell & Howell Holdings Co. ......................... 6,484,375
130,300 Computer Associates International, Inc. ............. 4,821,100
120,000 Cordant Technologies, Inc. .......................... 5,077,500
270,000 Frontier Corp. ...................................... 7,391,250
335,000 +Industri-Matematik International Corp. ............. 1,695,938
3,001 +Intermedia Communications, Inc. .................... 73,524
106,800 International Business Machines Corp. ............... 13,670,400
165,000 +IXC Communications, Inc. ........................... 4,908,750
138,000 Nokia Corp., Class A, ADR............................ 10,824,375
136,800 +Plantronics, Inc. .................................. 6,592,050
165,000 Raytheon Co., Class A................................ 8,549,062
6,314 +Sensormatics Electronics Corp. ..................... 37,095
262,000 +Smallworldwide plc ADR.............................. 2,849,250
425,000 +Telecom-TCI Ventures Group, Class A................. 7,596,875
190,000 Texas Instruments, Inc. ............................. 10,022,500
420,000 +TriStar Aerospace Co. .............................. 4,042,500
330,000 +Unisys Corp. ....................................... 7,507,500
334,050 +Vishay Intertechnology, Inc. ....................... 4,029,478
------------
115,879,522
------------
FINANCIAL -- 21.12%
291,235 ++Akbank T.A.S. ADR.................................. 793,616
270,000 +Amerin Corp. ....................................... 5,011,875
110,000 Amvescap plc ADR..................................... 3,190,000
280,000 ARM Financial Group, Inc., Class A................... 4,970,000
135,000 Astoria Financial Corp. ............................. 5,686,875
147,000 Banc One Corp. ...................................... 6,265,875
150,000 Canadian Imperial Bank of Commerce................... 2,756,250
170,000 Chase Manhattan Corp. ............................... 7,352,500
130,614 Corporacion Bancaria de Espana S.p.A. ADR............ 5,118,436
237,000 Donaldson, Lufkin & Jenrette, Inc. .................. 6,058,312
150,000 Everest Re Holdings, Inc. ........................... 5,596,875
71,505 EXEL Ltd. ........................................... 4,504,815
157,000 Fannie Mae........................................... 10,087,250
215,000 FBL Financial Group, Inc., Class A................... 4,958,438
110,000 Mellon Bank Corp. ................................... 6,056,875
105,000 Morgan Stanley, Dean Witter & Co. ................... 4,521,563
125,000 PNC Bank Corp. ...................................... 5,625,000
205,000 SLM Holding Corp. ................................... 6,649,687
185,000 Travelers Group, Inc. ............................... 6,937,500
------------
102,141,742
------------
VALUE
SHARES (NOTE 1)
---------- ------------
COMMON STOCKS -- (CONTINUED)
CONSUMER STAPLES -- 16.84%
290,000 Avon Products, Inc. .......................... $8,138,125
108,000 Bestfoods, Inc. .............................. 5,231,250
104,000 Bristol-Myers Squibb Co. ..................... 10,803,000
220,000 Deluxe Corp. ................................. 6,256,250
168,000 Eastman Kodak Co. ............................ 12,988,500
180,000 Fort James Corp. ............................. 5,906,250
102,000 General Mills, Inc. .......................... 7,140,000
225,000 +MAPICS, Inc. ................................ 4,921,875
300,000 Philip Morris Companies, Inc. ................ 13,818,750
200,000 +Suiza Foods Corp. ........................... 6,250,000
----------
81,454,000
----------
CONSUMER CYCLICAL -- 15.91%
170,000 +American Standard Cos., Inc. ................ 4,483,750
300,000 CBS Corp. .................................... 7,275,000
140,000 Ford Motor Co. ............................... 6,571,250
135,000 General Motors Corp. ......................... 7,382,813
130,000 Harman International Industries, Inc. ........ 4,769,375
250,000 +LandCARE USA, Inc. .......................... 1,687,500
305,000 +Newmark Homes Corp. ......................... 2,058,750
275,000 News Corp. Ltd. ADR........................... 7,046,875
210,000 Olin Corp. ................................... 6,024,375
370,000 +Outdoor Systems, Inc. ....................... 7,215,000
430,000 +Paxson Communications Corp. ................. 3,950,625
160,000 +QUALCOMM, Inc. .............................. 7,670,000
128,000 XEROX Corp. .................................. 10,848,000
----------
76,983,313
----------
CAPITAL GOODS -- 6.36%
225,000 AlliedSignal, Inc. ........................... 7,959,375
245,000 Boeing Co. ................................... 8,406,563
320,000 +Coltec Industries, Inc. ..................... 4,840,000
125,000 United Technologies Corp. .................... 9,554,687
----------
30,760,625
----------
TRANSPORTATION -- 5.29%
230,000 Canadian Pacific Ltd. ........................ 4,758,125
160,000 +Coach USA, Inc. ............................. 3,950,000
202,500 +Hvide Marine, Inc., Class A.................. 1,417,500
185,000 Kansas City Southern Industries, Inc. ........ 6,475,000
180,000 +Trailer Bridge, Inc. ........................ 393,750
202,000 Union Pacific Corp. .......................... 8,610,250
----------
25,604,625
----------
See Notes to Financial Statements
12
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
VALUE AND RESTRUCTURING FUND -- (CONTINUED)
VALUE
SHARES (NOTE 1)
---------- ------------
COMMON STOCKS -- (CONTINUED)
ENERGY -- 5.12%
425,000 Dynegy, Inc. ....................................... $ 5,710,938
13,700 +Miller Exploration, Co. ........................... 65,931
82,000 Mobil Corp. ........................................ 6,226,875
260,000 +Nabors Industries, Inc. ........................... 3,948,750
285,000 +Ocean Energy, Inc. ................................ 3,740,625
195,000 YPF S.A., ADR....................................... 5,070,000
------------
24,763,119
------------
RAW/INTERMEDIATE MATERIALS -- 2.89%
270,000 Cambrex Corp. ...................................... 6,361,875
115,000 E.I. du Pont de Nemours & Co. ...................... 6,454,375
139,500 +PalEx, Inc. ....................................... 1,150,875
------------
13,967,125
------------
UTILITIES -- 0.04%
40,000 +Leap Wireless International, Inc. ................. 185,000
------------
TOTAL COMMON STOCKS
(Cost $497,649,662)................................. 471,739,071
------------
CONVERTIBLE PREFERRED STOCKS -- 2.24%
TECHNOLOGY -- 1.51%
45,000 ++Intermedia Communications, Inc., Preferred
Exchange, 7.00%..................................... 1,546,875
65,000 Intermedia Communications, Inc., Series D, Preferred
Exchange, 7.00%..................................... 2,234,375
260,000 ++Sensormatic Electronics Corp., Preferred Exchange,
6.50%............................................... 3,542,500
------------
7,323,750
------------
VALUE
SHARES (NOTE 1)
---------- ------------
CONVERTIBLE PREFERRED STOCKS -- (CONTINUED)
TRANSPORTATION -- 0.73%
80,000 ++Union Pacific Capital Trust,
Preferred Exchange, 6.25%............................ $ 3,540,000
------------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $14,874,445)................................... 10,863,750
------------
TOTAL INVESTMENTS
(Cost $512,524,107*)...................................... 99.77% $482,602,821
OTHER ASSETS AND LIABILITIES (NET)........................ 0.23 1,095,501
------ ------------
NET ASSETS................................................ 100.00% $483,698,322
====== ============
- --------
* Aggregate cost for Federal tax and book purposes.
+ 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 September 30,
1998 these securities amounted to $9,422,991, or 1.95% of net assets.
ADR -- American Depositary Receipt
See Notes to Financial Statements
13
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
SMALL CAP FUND
VALUE
SHARES (NOTE 1)
---------- -----------
COMMON STOCKS -- 96.08%
CONSUMER CYCLICAL -- 32.62%
39,000 +Big Flower Holdings, Inc. ....................... $ 911,625
16,000 +CD Radio, Inc. .................................. 304,000
36,900 +Children's Place Retail Stores, Inc. ............ 369,000
50,000 Claire's Stores, Inc. ............................ 900,000
20,000 +CONMED Corp. .................................... 457,500
11,300 Fair Isaac & Co., Inc. ........................... 377,138
31,000 +Linens'n Things, Inc. ........................... 852,500
26,700 +Men's Wearhouse, Inc. ........................... 457,237
81,000 +Natural MicroSystems Corp. ...................... 840,375
35,000 +O'Reilly Automotive, Inc. ....................... 1,260,000
40,300 +Paxar Corp. ..................................... 357,663
15,600 Polaris Industries, Inc. ......................... 483,600
54,000 +PSS World Medical, Inc. ......................... 999,000
46,300 +RDO Equipment Co., Class A....................... 419,594
26,500 +Scientific Games Holdings Corp. ................. 518,406
22,250 +Sunrise Assisted Living, Inc. ................... 763,453
13,500 Tiffany & Co. .................................... 423,562
24,850 +Travel Services International, Inc. ............. 337,028
32,000 +Ventana Medical Systems, Inc. ................... 552,000
-----------
11,583,681
-----------
FINANCIAL -- 19.46%
34,000 ARM Financial Group, Inc., Class A................ 603,500
7,400 Associates First Capital Corp., Class A........... 482,850
21,500 Cabot Industrial Trust............................ 454,188
15,300 Cullen/Frost Bankers, Inc. ....................... 738,225
9,400 Executive Risk, Inc. ............................. 423,588
13,900 First American Corp. (Tennessee).................. 533,412
76,300 Freedom Securities Corp. ......................... 1,010,975
14,400 Greenpoint Financial Corp. ....................... 459,000
15,000 Mutual Risk Management Ltd. ...................... 530,625
52,600 Sovereign Bancorp, Inc. .......................... 693,662
11,000 UNUM Corp. ....................................... 546,562
10,600 Weingarten Realty Investors....................... 434,600
-----------
6,911,187
-----------
TECHNOLOGY -- 17.54%
29,000 +Boole & Babbage, Inc. ........................... 659,750
21,000 First Data Corp. ................................. 493,500
19,000 Hughes Supply, Inc. .............................. 541,500
9,100 +Human Genome Sciences, Inc. ..................... 267,313
20,300 +Incyte Pharmaceuticals, Inc. .................... 426,300
32,800 +ITI Technologies, Inc. .......................... 787,200
29,200 +MICROS Systems, Inc. ............................ 874,175
17,600 +Newbridge Networks, Corp. ....................... 315,700
50,000 +Perceptron, Inc. ................................ 293,750
12,250 +Phoenix Technologies Ltd. ....................... 68,906
33,200 +Rock of Ages Corp. .............................. 365,200
VALUE
SHARES (NOTE 1)
---------- -----------
COMMON STOCKS -- (CONTINUED)
TECHNOLOGY -- (CONTINUED)
40,000 +SDL, Inc. ........................................... $ 500,000
10,000 Timberline Software Corp. ............................ 187,500
42,200 +Unitrode Corp. ...................................... 448,375
-----------
6,229,169
-----------
CONSUMER STAPLES -- 10.23%
11,000 Avon Products, Inc. .................................. 308,688
19,000 Carnival Corp., Class A............................... 604,438
21,000 CVS Corp. ............................................ 920,062
34,600 +Hain Food Group, Inc. ............................... 514,675
21,250 +IDEXX Laboratories, Inc. ............................ 502,031
36,000 Schweitzer-Mauduit International, Inc. ............... 783,000
-----------
3,632,894
-----------
ENERGY -- 9.08%
84,500 +Ocean Energy, Inc. .................................. 1,109,063
56,500 +R & B Falcon Corp. .................................. 678,000
24,000 +Silicon Valley Bancshares............................ 381,000
30,900 +TETRA Technologies, Inc. ............................ 370,800
82,000 +Varco International, Inc. ........................... 686,750
-----------
3,225,613
-----------
CAPITAL GOODS -- 6.21%
24,400 Baldor Electric Co. .................................. 533,750
26,500 Juno Lighting, Inc. .................................. 586,312
34,450 Lindsay Manufacturing Co. ............................ 512,444
16,400 Teleflex, Inc. ....................................... 574,000
-----------
2,206,506
-----------
RAW/INTERMEDIATE
MATERIALS -- 0.94%
18,000 Millenium Chemicals, Inc. ............................ 335,250
-----------
TOTAL COMMON STOCKS
(Cost $40,381,218).................................... 34,124,300
-----------
PRINCIPAL
AMOUNT
----------
DEMAND NOTES -- 4.22%
$700,000 Associates Corp. of North America Master Notes........ 700,000
799,000 General Electric Co. Promissory Notes................. 799,000
-----------
TOTAL DEMAND NOTES
(Cost $1,499,000)..................................... 1,499,000
-----------
TOTAL INVESTMENTS
(Cost $41,880,218*)........................................ 100.30% $35,623,300
OTHER ASSETS AND LIABILITIES (NET)......................... (0.30) (106,123)
------ -----------
NET ASSETS................................................. 100.00% $35,517,177
====== ===========
- --------
* Aggregate cost for Federal tax and book purposes.
+ Non income producing security
See Notes to Financial Statements
14
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
ENERGY AND NATURAL RESOURCES FUND
VALUE
SHARES (NOTE 1)
---------- ------------
COMMON STOCKS -- 95.58%
ENERGY -- 71.88%
26,000 Anadarko Petroleum Corp. ............................ $ 1,022,125
20,000 +Atwood Oceanics..................................... 416,250
41,000 +BJ Services Co. .................................... 666,250
33,986 British Petroleum Company plc ADR.................... 2,965,278
25,000 Burlington Resources, Inc. .......................... 934,375
40,000 +Cal Dive International, Inc. ....................... 710,000
22,000 Chevron Corp. ....................................... 1,849,375
30,000 +Cooper Cameron Corp. ............................... 843,750
40,000 Exxon Corp. ......................................... 2,807,500
95,000 +Global Industries Ltd. ............................. 1,092,500
10,000 +Marine Drilling Cos., Inc. ......................... 114,375
26,000 Mobil Corp. ......................................... 1,974,375
30,000 +Nabors Industries, Inc. ............................ 455,625
50,000 +Newfield Exploration Co. ........................... 1,125,000
30,000 +Newpark Resources, Inc. ............................ 206,250
10,000 Noble Affiliates, Inc. .............................. 318,750
135,300 +Ocean Energy, Inc. ................................. 1,775,812
73,000 +R & B Falcon Corp. ................................. 876,000
55,000 Royal Dutch Petroleum Co. ........................... 2,619,375
18,000 Schlumberger Ltd. ................................... 905,625
100,000 +Superior Energy Services, Inc. ..................... 343,750
20,000 Texaco, Inc. ........................................ 1,253,750
37,000 Tosco Corp. ......................................... 795,500
17,500 Total S.A. ADR....................................... 1,099,219
65,000 +Transmontaigne Oil Co. ............................. 901,875
30,000 +U.S. Filter Corp. .................................. 480,000
25,000 Valero Energy Corp. ................................. 496,875
95,000 +Varco International, Inc. .......................... 795,625
32,000 Vastar Resources, Inc. .............................. 1,440,000
30,000 +Weatherford International, Inc. .................... 648,750
------------
31,933,934
------------
BASIC MATERIALS -- 6.82%
50,000 Barrick Gold, Corp. ................................. 1,000,000
10,000 E.I. du Pont de Nemours & Co. ....................... 561,250
20,000 Fort James Corp. .................................... 656,250
14,000 Mead Corp. .......................................... 412,125
14,000 Willamette Industries................................ 401,625
------------
3,031,250
------------
VALUE
SHARES (NOTE 1)
---------- ------------
COMMON STOCKS -- (CONTINUED)
UTILITIES -- 16.88%
25,000 +AES Corp. ......................................... $ 926,562
42,000 Coastal Corp. ...................................... 1,417,500
30,888 Duke Energy Corp. .................................. 2,044,400
23,000 Enron Corp. ........................................ 1,214,688
23,000 KN Energy, Inc. .................................... 1,178,750
25,000 Williams Cos., Inc. ................................ 718,750
-----------
7,500,650
-----------
TOTAL COMMON STOCKS
(Cost $39,110,862).................................. 42,465,834
-----------
PRINCIPAL
AMOUNT
----------
DEMAND NOTES -- 6.18%
$1,505,000 Associates Corp. of North America Master Notes...... 1,505,000
1,239,000 General Electric Co. Promissory Notes............... 1,239,000
-----------
TOTAL DEMAND NOTES
(Cost $2,744,000)................................... 2,744,000
-----------
TOTAL INVESTMENTS
(Cost $41,854,862*)........................................ 101.76% $45,209,834
OTHER ASSETS AND LIABILITIES (NET)......................... (1.76) (781,122)
------ -----------
NET ASSETS................................................. 100.00% $44,428,712
====== ===========
- --------
* Aggregate cost for Federal tax and book purposes.
+ Non income producing security
ADR -- American Depositary Receipt
See Notes to Financial Statements
15
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
LARGE CAP GROWTH FUND
VALUE
SHARES (NOTE 1)
---------- ------------
COMMON STOCKS -- 98.48%
TECHNOLOGY -- 42.38%
47,000 America On-Line, Inc. ............................... $ 5,228,750
72,000 +Cisco Systems, Inc. ................................ 4,450,500
90,000 +Dell Computer Corp. ................................ 5,917,500
90,000 +EMC Corp. .......................................... 5,146,875
53,000 Intel Corp. ......................................... 4,544,750
77,000 Medtronic, Inc. ..................................... 4,456,375
41,000 +Microsoft Corp. .................................... 4,512,562
60,000 +Tellabs, Inc. ...................................... 2,388,750
------------
36,646,062
------------
FINANCIAL -- 20.59%
48,000 American International Group, Inc. .................. 3,696,000
30,000 Citicorp............................................. 2,788,125
64,000 Fannie Mae........................................... 4,112,000
54,000 Merrill Lynch & Co. ................................. 2,558,250
118,000 Schwab (Charles) Corp. .............................. 4,646,250
------------
17,800,625
------------
CONSUMER CYCLICAL -- 20.24%
67,000 +BMC Software, Inc. ................................. 4,020,000
83,000 Harley-Davidson, Inc. ............................... 2,438,125
101,000 Home Depot, Inc. .................................... 3,989,500
69,000 +PeopleSoft, Inc. ................................... 2,251,125
91,000 +Sylvan Learning Systems, Inc. ...................... 2,093,000
107,000 Walt Disney Co. ..................................... 2,708,438
------------
17,500,188
------------
CONSUMER STAPLES -- 15.27%
49,000 Coca-Cola Co. ....................................... 2,823,625
72,000 Gillette Co. ........................................ 2,754,000
41,000 Pfizer, Inc. ........................................ 4,343,438
75,000 +Quintiles Transnational Corp. ...................... 3,281,250
------------
13,202,313
------------
TOTAL COMMON STOCKS
(Cost $79,875,612)................................... 85,149,188
------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- ------------
REPURCHASE AGREEMENTS -- 1.49%
$1,288,000 Agreement with Chase Securities Inc., 5.25%, dated
9/30/98, due 10/01/98, to be repurchased at
$1,288,188, collateralized by $1,085,000 U.S.
Treasury Notes, 7.875% due 11/15/04, valued at
$1,319,524
(Cost $1,288,000)................................... $ 1,288,000
------------
TOTAL INVESTMENTS
(Cost $81,163,612*)........................................ 99.97% $86,437,188
OTHER ASSETS AND LIABILITIES (NET)......................... 0.03 22,192
------ -----------
NET ASSETS................................................. 100.00% $86,459,380
====== ===========
- --------
* Aggregate cost for Federal tax and book purposes.
+ Non-income producing security
See Notes to Financial Statements
16
EXCELSIOR FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
REAL ESTATE FUND
VALUE
SHARES (NOTE 1)
---------- -----------
COMMON STOCKS -- 96.98%
REAL ESTATE -- 94.47%
38,000 Arden Realty Group, Inc. ............................ $ 847,875
31,884 Avalon Bay Communities, Inc. ........................ 1,086,049
55,000 Bedford Property Investors, Inc. .................... 990,000
36,000 Boston Properties, Inc. ............................. 1,026,000
57,000 Cabot Industrial Trust............................... 1,204,125
62,000 +Catellus Development Corp. ......................... 806,000
70,500 CenterTrust Retail Properties, Inc. ................. 916,500
35,500 Chateau Communities, Inc. ........................... 991,781
33,000 Crescent Real Estate Equity, Co. .................... 833,250
60,000 Developers Divers Realty, Corp. ..................... 1,095,000
55,000 Duke Realty Investment, Inc. ........................ 1,275,312
44,203 Equity Office Properties Trust ...................... 1,082,974
47,500 First Washington Realty Trust........................ 1,128,125
37,000 Forest City Enterprises, Inc., Class A............... 777,000
38,000 Glenborough Realty Trust, Inc. ...................... 807,500
53,500 Glimcher Realty Trust................................ 916,188
35,500 Golf Trust of America, Inc. ......................... 1,056,125
39,000 Health Care REIT, Inc. .............................. 1,038,375
35,000 Healthcare Realty Trust, Inc. ....................... 892,500
32,000 Highwoods Properties, Inc. .......................... 888,000
38,000 Hospitality Properties Trust......................... 1,130,500
54,000 HRPT Properties Trust................................ 870,750
32,000 KIMCO Realty Corp. .................................. 1,216,000
31,900 Mack-Cali Realty Corp. .............................. 957,000
36,500 Meditrust Corp. ..................................... 622,781
52,000 Merry Land & Investment Companies, Inc. ............. 1,163,500
54,000 Pacific Gulf Properties, Inc. ....................... 1,086,750
40,000 Prentiss Properties Trust............................ 955,000
46,000 ProLogis Trust....................................... 1,040,750
44,000 Public Storage, Inc. ................................ 1,179,750
37,000 Simon Property Group, Inc. .......................... 1,100,750
29,000 Spieker Properties, Inc. ............................ 1,065,750
26,000 Starwood Hotels & Resorts............................ 793,000
90,000 Taubman Center, Inc. ................................ 1,260,000
77,000 United Dominion Realty Trust......................... 875,875
28,500 Vornado Realty Trust................................. 944,062
29,500 Weingarten Realty Investors.......................... 1,209,500
-----------
37,130,397
-----------
COMMON STOCKS -- (CONTINUED)
FINANCIAL -- 2.51%
20,000 Freddie Mac.......................................... $ 988,750
-----------
TOTAL COMMON STOCKS
(Cost $44,359,669)................................... 38,119,147
-----------
PRINCIPAL
AMOUNT
----------
REPURCHASE AGREEMENT -- 3.49%
$1,370,000 Agreement with Chase Securities Inc., 5.25%, dated
9/30/98, due 10/01/98, to be repurchased at
$1,370,200, collateralized by $1,155,000 U.S.
Treasury Notes, 7.875% due 11/15/04, valued at
$1,404,655
(Cost $1,370,000).................................... 1,370,000
-----------
TOTAL INVESTMENTS
(Cost $45,729,669*)........................................ 100.47% $39,489,147
OTHER ASSETS AND LIABILITIES (NET)......................... (0.47) (184,154)
------ -----------
NET ASSETS................................................. 100.00% $39,304,993
====== ===========
- --------
* Aggregate cost for Federal tax and book purposes.
+ Non-income producing security
REIT -- Real Estate Investment Trust
See Notes to Financial Statements
17
EXCELSIOR FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Excelsior Funds, Inc. ("Excelsior Fund") was incorporated under the laws of
the State of Maryland on August 2, 1984 and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Excelsior Fund currently offers shares in 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, Income and Growth Fund, Value and Restructuring Fund, Small Cap
Fund, Energy and Natural Resources 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 financial statements for the
remaining portfolios of Excelsior Fund and Excelsior Tax-Exempt Funds, Inc.
("Excelsior Tax-Exempt Fund") are presented separately.
(A) PORTFOLIO VALUATION:
Investments in securities that are traded on a recognized stock exchange
are valued at the last sale price on the exchange on which such securities
are primarily traded or at the last sale price on the national securities
market. Securities traded over-the-counter are valued each business day on
the basis of 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 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
18
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 recorded on the ex-dividend date.
Dividends and distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
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
19
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.
At September 30, 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:
TAX BASIS TAX BASIS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ -------------- --------------
Blended Equity Fund............. $232,622,673 $ (4,967,672) $227,655,001
Income and Growth Fund.......... 25,465,243 (6,661,433) 18,803,810
Value and Restructuring Fund ... 43,674,450 (73,595,736) (29,921,286)
Small Cap Fund.................. 2,518,576 (8,775,494) (6,256,918)
Energy and Natural Resources
Fund........................... 8,249,656 (4,894,684) 3,354,972
Large Cap Growth Fund........... 14,615,243 (9,341,667) 5,273,576
Real Estate Fund................ 390,236 (6,630,758) (6,240,522)
(F) EXPENSE ALLOCATION:
Expenses directly attributable to a Portfolio are charged to that
Portfolio. Other expenses are allocated to the respective Portfolios based
on average daily net assets.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE, 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 adviser to the Portfolios. For the
services provided pursuant to the Investment Advisory Agreements, U.S. Trust
is entitled to receive a fee, computed daily and paid monthly, at the annual
rates of 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 and Energy and
Natural Resources Fund, and 1.00% of the average daily net assets of the Real
Estate Fund. 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 CT, Chase Global Funds Services Company, a corporate affiliate of
The Chase Manhattan Bank, and Federated Administrative Services (collectively,
the "Administrators") provide administrative
20
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. For
the six months ended September 30, 1998, Administration fees charged by U.S.
Trust CT were as follows:
Blended Equity Fund................................................... $107,796
Income and Growth Fund................................................ 20,405
Value and Restructuring Fund.......................................... 93,637
Small Cap Fund........................................................ 9,839
Energy and Natural Resources Fund..................................... 8,144
Large Cap Growth Fund................................................. 13,466
Real Estate Fund...................................................... 7,413
From time to time, as they may deem appropriate in their sole discretion,
U.S. Trust and the Administrators may undertake to waive a portion or all of
the fees payable to them and also may reimburse the Portfolios for a portion
of other expenses. Until further notice to Excelsior Fund, U.S. Trust intends
to voluntarily waive fees 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
six months ended September 30, 1998, U.S. Trust waived fees as follows:
Blended Equity Fund.................................................... $127,343
Real Estate Fund....................................................... 21,672
Excelsior Fund has also entered into administrative servicing agreements
with various service organizations (which may include affiliates of U.S.
Trust) requiring them to provide administrative support services to their
customers owning shares of the Portfolios. As a consideration for the
administrative services provided by each service organization to its
customers, each Portfolio will pay the service organization an administrative
service fee at the annual rate of up to 0.40% of the average daily net asset
value of its shares held by the service organizations' customers. Such
services may include assisting in processing purchase, exchange and redemption
requests; transmitting and receiving funds in connection with customer orders
to purchase, exchange or redeem shares; and providing periodic statements.
Administrative service fees paid to affiliates of U.S. Trust amounted to
$300,380 for the six months ended September 30, 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 six months ended
September 30, 1998, U.S. Trust and the Administrators
21
waived investment advisory and administration fees in amounts equal to the
administrative service fees for the Portfolios as follows:
U.S.
TRUST ADMINISTRATORS
-------- --------------
Blended Equity Fund..................................... $115,491 $ 850
Income and Growth Fund.................................. 51,323 248
Value and Restructuring Fund............................ 276,461 49,688
Small Cap Fund.......................................... 25,303 19
Energy and Natural Resources Fund....................... 16,256 1,879
Large Cap Growth Fund................................... 12,372 90
Real Estate............................................. 13,336 3
Edgewood Services, Inc. (the "Distributor"), a wholly-owned subsidiary of
Federated Investors, Inc. serves as the sponsor and distributor of Excelsior
Fund. Shares of each Portfolio are sold on a continuous basis by the
Distributor.
Each Director of Excelsior Fund receives an annual fee of $9,000, plus a
meeting fee of $1,500 for each meeting attended, and is reimbursed for
expenses incurred for attending meetings. The Chairman receives an additional
annual fee of $5,000.
3. PURCHASES AND SALES OF SECURITIES:
For the six months ended September 30, 1998, purchases and sales of
securities, excluding short-term investments, for the Portfolios aggregated:
PURCHASES SALES
------------ ------------
Blended Equity Fund.................................. $ 37,593,295 $ 32,770,179
Income and Growth Fund............................... 19,454,833 59,698,389
Value and Restructuring Fund......................... 345,908,056 111,304,900
Small Cap Fund....................................... 24,086,564 34,447,367
Energy and Natural Resources Fund.................... 18,459,811 10,491,950
Large Cap Growth Fund................................ 44,799,827 2,477,082
Real Estate Fund..................................... 7,708,630 2,675,858
4. COMMON STOCK:
Excelsior Fund has authorized capital of 35 billion shares of Common Stock,
23.875 billion 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,
and at September 30, 1998 there were no Trust Shares outstanding.
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
22
taxable earnings on the assets belonging to such Portfolio as are declared at
the discretion of Excelsior Fund's Board of Directors.
Blended Equity Fund
----------------------------------------------------
Six Months Ended Year Ended
09/30/98 03/31/98
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------- ---------- -------------
Sold:
Shares................ 1,835,245 $ 66,227,633 1,830,335 $ 59,664,729
Trust Shares.......... -- -- 454 --
Issued in connection
with previous
reorganization
Shares................ -- -- 5,809,320 118,382,388
Issued as reinvestment
of dividends:
Shares................ 9,496 353,114 365,826 11,596,023
Trust Shares.......... -- -- 6 146
Redeemed:
Shares................ (1,756,356) (62,036,758) (3,428,336) (110,065,542)
Trust Shares.......... -- -- (3,604) (108,505)
---------- ------------- ---------- -------------
Net Increase............ 88,385 $ 4,543,989 4,574,001 $ 79,469,239
========== ============= ========== =============
Income and Growth Fund
----------------------------------------------------
Six Months Ended Year Ended
09/30/98 03/31/98
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------- ---------- -------------
Sold.................... 342,298 $ 5,593,585 1,061,028 $ 18,205,158
Issued as reinvestment
of dividends........... 22,747 405,482 370,069 6,178,623
Redeemed................ (2,143,219) (35,270,824) (2,444,213) (42,309,649)
---------- ------------- ---------- -------------
Net Decrease............ (1,778,174) $ (29,271,757) (1,013,116) $ (17,925,868)
========== ============= ========== =============
Value and Restructuring Fund
----------------------------------------------------
Six Months Ended Year Ended
09/30/98 03/31/98
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------- ---------- -------------
Sold
Shares................ 14,919,350 $ 342,693,196 9,949,197 $ 210,533,502
Issued as reinvestment
of dividends:
Shares................ 22,992 550,389 32,739 680,550
Trust Shares.......... -- -- 4 58
Redeemed:
Shares................ (5,333,456) (110,533,940) (1,440,113) (29,351,458)
Trust Shares.......... -- -- (3,268) (61,583)
---------- ------------- ---------- -------------
Net Increase............ 9,608,886 $ 232,709,645 8,538,559 $ 181,801,069
========== ============= ========== =============
23
SMALL CAP FUND
-------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
09/30/98 03/31/98
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
Sold:
Shares................... 2,133,506 $ 19,500,764 1,742,160 $19,925,198
Trust Shares............. -- -- 991 10,266
Issued as reinvestment of
dividends
Shares................... -- -- 1 4
Redeemed:
Shares................... (3,457,715) (32,019,211) (2,036,998) (20,366,512)
Trust Shares............. -- -- (1,905) (21,542)
---------- ------------ ---------- -----------
Net Decrease............... (1,324,209) $(12,518,447) (295,751) $ (452,586)
========== ============ ========== ===========
ENERGY AND NATURAL RESOURCES FUND
-------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
09/30/98 03/31/98
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
Sold....................... 1,364,986 $ 15,938,400 1,589,555 $20,278,480
Issued as reinvestment of
dividends................. 2,665 32,245 57,892 738,380
Redeemed................... (776,776) (9,025,865) (1,001,470) (12,312,018)
---------- ------------ ---------- -----------
Net Increase............... 590,875 $ 6,944,780 645,977 $ 8,704,842
========== ============ ========== ===========
LARGE CAP GROWTH FUND
-------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
09/30/98 03/31/98*
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
Sold....................... 5,679,608 $ 51,211,417 5,724,639 $42,655,392
Issued as reinvestment of
dividends................. -- -- -- --
Redeemed................... (1,102,389) (9,664,975) (141,234) (1,080,251)
---------- ------------ ---------- -----------
Net Increase............... 4,577,219 $ 41,546,442 5,583,405 $41,575,141
========== ============ ========== ===========
REAL ESTATE FUND
-------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
09/30/98 03/31/98*
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
Sold....................... 1,747,749 $ 11,513,412 5,989,568 $41,874,511
Issued as reinvestment of
dividends................. 1,260 8,381 481 3,364
Redeemed................... (1,106,336) (7,025,408) (149,807) (1,034,897)
---------- ------------ ---------- -----------
Net Increase............... 642,673 $ 4,496,385 5,840,242 $40,842,978
========== ============ ========== ===========
- --------
* For the period 10/1/97 (commencement of operations) through 3/31/98.
24
5. ORGANIZATION COSTS:
Excelsior Fund has borne all costs in connection with the initial
organization of new portfolios, including the fees for registering and
qualifying its shares for distribution under Federal and state securities
regulations. All such costs are being amortized on the straight-line basis
over periods of five years from the dates on which each Portfolio commenced
operations.
6. LINE OF CREDIT:
The Portfolios and other affiliated funds participate in a $250 million
unsecured line of credit provided by a syndication of banks under a line of
credit agreement. Borrowings may be made to temporarily finance the repurchase
of Portfolio shares. Interest is charged to each Portfolio, based on its
borrowings, at a rate equal to the Federal Funds Rate plus 2% per year. In
addition a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating Portfolios at the end of
each quarter. For the six months ended September 30, 1998, the Portfolios had
no borrowings under the agreement.
25
EXCELSIOR FUNDS, INC.
FORM N-14
---------
PART C. OTHER INFORMATION
Item 15. Indemnification
---------------
Article VII, Section 3 of Registrant's Articles of Incorporation,
incorporated herein by reference to Exhibit (1)(a) hereto, and Article VI,
Section 2 of Registrant's Amended and Restated Bylaws, incorporated herein by
reference to Exhibit (2)(a) hereto, provide for the indemnification of
Registrant's directors and officers. Indemnification of Registrant's principal
underwriter, custodian, transfer agent and co-administrators is provided for,
respectively, in Section 1.11 of the Amended and Restated Distribution Contract
incorporated herein by reference to Exhibit (7)(a) hereto, Section 12 of the
Custody Agreement incorporated herein by reference to Exhibit (9)(a) hereto,
Section 7 of the Amended and Restated Mutual Funds Transfer Agency Agreement
incorporated herein by reference to Exhibit (13)(e) hereto, and Section 6 of the
Amended and Restated Administration Agreement incorporated herein by reference
to Exhibit (13)(b) hereto. Registrant has obtained from a major insurance
carrier a directors' and officers' liability policy covering certain types of
errors and omissions. In no event will Registrant indemnify any of its
directors, officers, employees, or agents against any liability to which such
person would otherwise be subject by reason of his willful misfeasance, bad
faith or gross negligence in the performance of his duties, or by reason of his
reckless disregard of the duties involved in the conduct of his office or
arising under his agreement with Registrant. Registrant will comply with Rule
484 under the Securities Act of 1933 and Release No. 11330 under the Investment
Company Act of 1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
-1-
Item 16.
Exhibits:
(1) (a) Articles of Incorporation of Registrant dated August 1, 1984
(4).
(b) Articles Supplementary of Registrant dated October 29, 1985
(4).
(c) Articles Supplementary of Registrant dated September 30,
1986 (4).
(d) Articles Supplementary of Registrant dated April 10, 1987
(4).
(e) Articles Supplementary of Registrant dated April 27, 1990
(4).
(f) Articles Supplementary of Registrant dated October 26, 1990
(4).
(g) Articles Supplementary of Registrant dated January 29, 1991
(4).
(h) Articles Supplementary of Registrant dated December 23, 1992
(4).
(i) Articles Supplementary of Registrant dated August 31, 1995
(1).
(j) Articles Supplementary of Registrant dated December 28, 1995
(1).
(k) Articles Supplementary of Registrant dated September 11,
1997 (3).
(l) Articles Supplementary of Registrant dated December 22, 1997
(4).
(m) Articles Supplementary of Registrant dated November 13, 1998
(5).
(2) (a) Amended and Restated By-Laws of Registrant dated February 2,
1995 (3).
(b) Amendment No. 1 to Amended and Restated By-Laws of
Registrant dated May 16, 1997 (3).
(3) None.
(4) Plan of Reorganization filed herewith as Appendix A to the
Combined Prospectus/Proxy Statement.
-2-
(5) (a) Articles VI, VII, VIII and X of Registrant's Articles of
Incorporation dated August 1, 1984 are incorporated herein
by reference to Exhibit 1(a) hereto.
(b) Articles I, II, IV and VI of Registrant's Amended and
Restated By-Laws are incorporated herein by reference to
Exhibit 2(a) hereto.
(6) (a) Investment Advisory Agreement among Registrant, U.S. Trust
Company of Connecticut and United States Trust Company of
New York dated May 16, 1997 with respect to the Money Fund,
Government Money Fund, Blended Equity Fund, Small Cap Fund,
Long-Term Supply of Energy Fund, Productivity Enhancers
Fund, Environmentally-Related Products and Services Fund,
Aging of America Fund, Communication and Entertainment Fund,
Value and Restructuring Fund, Global Competitors Fund, Latin
America Fund, Pacific/Asia Fund, Pan European Fund, Short-
Term Government Securities Fund and Intermediate-Term
Managed Income Fund (2).
(b) Amendment No. 1 dated July 25, 1997 to the Investment
Advisory Agreement among Registrant, U.S. Trust Company of
Connecticut and United States Trust Company of New York
dated May 16, 1997 (adding the Large Cap Growth and Real
Estate Funds) (3).
(c) Amendment No. 2 dated November 14, 1997 to the Investment
Advisory Agreement among Registrant, U.S. Trust Company of
Connecticut and United States Trust Company of New York
dated May 16, 1997 (adding the Emerging Markets Fund) (4).
(d) Investment Advisory Agreement among Registrant, U.S. Trust
Company of Connecticut and United States Trust Company of
New York dated May 16, 1997 with respect to the Managed
Income Fund (2).
(e) Investment Advisory Agreement among Registrant, U.S. Trust
Company of Connecticut and United States Trust Company of
New York dated May 16, 1997 with respect to the Income and
Growth Fund (2).
(f) Investment Advisory Agreement among Registrant, U.S. Trust
Company of Connecticut and United States Trust Company of
New York dated May 16, 1997 with respect to the
International Fund (2).
(g) Investment Advisory Agreement among Registrant, U.S. Trust
Company of Connecticut and United States Trust Company of
New York dated May 16, 1997 with respect to the Treasury
Money Fund (2).
-3-
(7) (a) Amended and Restated Distribution Contract dated July 31,
1998 between Registrant and Edgewood Services, Inc. (5).
(8) None.
(9) (a) Custody Agreement between Registrant and The Chase Manhattan
Bank dated September 1, 1995 (as amended and restated on
August 1, 1997) (3).
(b) Amended Exhibit A dated November 28, 1997 to the Custody
Agreement dated September 1, 1995 (as amended and restated
on August 1, 1997) (4).
(c) Amendment No. 1 dated May 22, 1998 to the Custody Agreement
dated September 1, 1995 (as amended and restated on August
1, 1997)(5).
(d) Amendment No. 2 dated May 22, 1998 to the Custody Agreement
dated September 1, 1995 (as amended and restated on August
1, 1997)(5).
(e) Amendment No. 3 dated July 31, 1998 to the Custody Agreement
dated September 1, 1995 (as amended and restated on August
1, 1997) (5).
(10) None.
(11) Opinion of Drinker Biddle & Reath LLP (5).
(12) Opinion of Drinker Biddle & Reath LLP as to tax consequences
(including consent of the firm) (5).
(13) (a) Amended and Restated Administrative Services Plan and
Related Form of Shareholder Servicing Agreement (3).
(b) Amended and Restated Administration Agreement dated July 31,
1998 among Registrant, Chase Global Funds Services Company,
Federated Administrative Services and U.S. Trust Company of
Connecticut (5).
(c) Amended and Restated Exhibit A dated July 31, 1998 to the
Administration Agreement dated July 31, 1998 (5).
(d) Amended and Restated Exhibit B dated July 31, 1998 to the
Administration Agreement dated July 31, 1998 (5).
(e) Amended and Restated Mutual Funds Transfer Agency Agreement
dated as of July 31, 1998 between Registrant and United
States Trust Company of New York (5).
-4-
(f) Amended and Restated Mutual Funds Sub-Transfer Agency
Agreement dated as of July 31, 1998 between United States
Trust Company of New York and Chase Global Funds Services
Company (5).
(14) (a) Consent of Ernst & Young LLP (5).
(b) Consent of Drinker Biddle & Reath LLP (5).
(15) None.
(16) None.
(17) (a) Form of Proxy (5).
(b) Prospectus dated August 1, 1998 for the Blended Equity,
Income and Growth, Value and Restructuring, Small Cap and
Large Cap Growth Funds (5).
(c) Statement of Additional Information dated August 1, 1998 for
the Blended Equity, Income and Growth, Value and
Restructuring, Small Cap and Large Cap Growth Funds (5).
-5-
Notes:
- -----
(1) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 23 to its Registration Statement on Form N-1A filed July 31, 1996.
(2) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 29 to its Registration Statement on Form N-1A filed July 31, 1997.
(3) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 30 to its Registration Statement on Form N-1A filed October 8, 1997.
(4) Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 31 to its Registration Statement on Form N-1A filed March 16, 1998.
(5) Filed herewith.
Item 17. Undertakings
------------
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act of 1933, as amended
(the "1933 Act"), the reoffering prospectus will contain the
information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the
applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the 1933 Act, each post-effective amendment shall
be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
-6-
SIGNATURES
----------
As required by the Securities Act of 1933, this registration statement
has been signed on behalf of the Registrant, in the City of Vero Beach and the
State of Florida on the 5th day of April, 1999.
EXCELSIOR FUNDS, INC.
Registrant
/s/ Frederick S. Wonham
--------------------------------------------
Frederick S. Wonham, President and Treasurer
(Signature and Title)
As required by the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/ Frederick S. Wonham Chairman of the Board,
- ------------------------------
Frederick S. Wonham President and Treasurer April 5, 1999
/s/ Joseph H. Dugan
- ------------------------------
Joseph H. Dugan Director April 5, 1999
- ------------------------------
Donald L. Campbell Director
/s/ Wolfe J. Frankl
- ------------------------------
Wolfe J. Frankl Director April 5, 1999
/s/ Robert A. Robinson
- ------------------------------
Robert A. Robinson Director April 5, 1999
5
/s/ Alfred Tannachion
- ------------------------------
Alfred Tannachion Director April 5, 1999
/s/ W. Wallace McDowell, Jr.
- ------------------------------
W. Wallace McDowell, Jr. Director April 5, 1999
/s/ Jonathan Piel
- ------------------------------
Jonathan Piel Director April 5, 1999
/s/ Rodman L. Drake
- ------------------------------
Rodman L. Drake Director April 5, 1999
-7-
Exhibit Index
-------------
(1) (m) Articles Supplementary of Registrant
dated November 13, 1998.
(4) Plan of Reorganization, filed herewith as Appendix A to the
Combined Prospectus/Proxy Statement.
(7) (a) Amended and Restated Distribution Contract dated July 31, 1998
between Registrant and Edgewood Services, Inc.
(9) (c) Amendment No. 1 dated May 22, 1998 to the Custody Agreement dated
September 1, 1995 (as amended and restated on August 1, 1997).
(9) (d) Amendment No. 2 dated May 22, 1998 to the Custody Agreement dated
September 1, 1995 (as amended and restated on August 1, 1997).
(9) (e) Amendment No. 3 dated July 31, 1998 to the Custody Agreement
dated September 1, 1995 (as amended and restated on August 1,
1997).
(11) Opinion of Drinker Biddle & Reath LLP.
(12) Opinion of Drinker Biddle & Reath LLP as to tax consequences
(including consent of the firm).
(13) (b) Amended and Restated Administration Agreement dated July 31, 1998
among Registrant, Chase Global Funds Services Company, Federated
Administrative Services and U.S. Trust Company of Connecticut.
(13) (c) Amended and Restated Exhibit A dated July 31, 1998 to the
Administration Agreement dated July 31, 1998.
(13) (d) Amended and Restated Exhibit B dated July 31, 1998 to the
Administration Agreement dated July 31, 1998.
(13) (e) Amended and Restated Mutual Funds Transfer Agency Agreement dated
as of July 31, 1998 between Registrant and United States Trust
Company of New York.
(13) (f) Amended and Restated Mutual Funds Sub-Transfer Agency Agreement
dated as of July 31, 1998 between United States Trust Company of
New York and Chase Global Funds Services Company.
(14) (a) Consent of Ernst & Young LLP.
(b) Consent of Drinker Biddle & Reath LLP.
(17) (a) Form of Proxy.
(b) Prospectus dated August 1, 1998 for the Blended Equity, Income
and Growth, Value and Restructuring, Small Cap and Large Cap
Growth Funds.
-8-
(c) Statement of Additional Information dated August 1, 1998 for the
Blended Equity, Income and Growth, Value and Restructuring, Small
Cap and Large Cap Growth Funds.
-9-