UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-04101
Excelsior Tax-Exempt Funds, Inc.
(Exact name of registrant as specified in charter)
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One Freedom Valley Drive
Oaks, Pennsylvania 19456
(Address of principal executive offices) (Zip code)
Michael R. Rosella, Esq.
Paul, Hastings, Janofsky & Walker LLP
75 East 55th Street
New York, New York 10022
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-446-1012
Date of fiscal year end: March 31, 2004
Date of reporting period: March 31, 2004
Item 1. Reports to Stockholders.
Excelsior Tax-Exempt Funds, Inc. currently offers shares in seven managed
investment portfolios: Tax-Exempt Money Fund, New York Tax-Exempt Money Fund,
Long-Term Tax-Exempt Fund, Intermediate-Term Tax-Exempt Fund, Short-Term
Tax-Exempt Securities Fund, New York Intermediate-Term Tax-Exempt Fund and
California Tax-Exempt Income Fund. Each Portfolio is included in one of the two
reports included herein.
[LOGO] Excelsior Funds
TAX-EXEMPT
FIXED INCOME
PORTFOLIOS
ANNUAL REPORT
March 31, 2004
TABLE OF CONTENTS
PAGE
----
LETTER TO SHAREHOLDERS........................................... 1
ADVISER'S FIXED INCOME MARKET REVIEW............................. 2
ADVISER'S INVESTMENT REVIEWS
Long-Term Tax-Exempt Fund..................................... 3
Intermediate-Term Tax-Exempt Fund............................. 4
Short-Term Tax-Exempt Securities Fund......................... 5
New York Intermediate-Term Tax-Exempt Fund.................... 6
California Tax-Exempt Income Fund............................. 7
STATEMENTS OF ASSETS AND LIABILITIES............................. 8
STATEMENTS OF OPERATIONS......................................... 9
STATEMENTS OF CHANGES IN NET ASSETS.............................. 10
FINANCIAL HIGHLIGHTS -- SELECTED PER SHARE DATA AND RATIOS....... 12
PORTFOLIOS OF INVESTMENTS
Long-Term Tax-Exempt Fund..................................... 14
Intermediate-Term Tax-Exempt Fund............................. 16
Short-Term Tax-Exempt Securities Fund......................... 19
New York Intermediate-Term Tax-Exempt Fund.................... 22
California Tax-Exempt Income Fund............................. 24
NOTES TO FINANCIAL STATEMENTS.................................... 29
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS................ 38
DIRECTORS/TRUSTEES AND OFFICERS OF THE EXCELSIOR FUNDS COMPLEX... 39
FEDERAL TAX INFORMATION.......................................... 43
For shareholder account information, current price and yield quotations, or to
make an initial purchase or obtain a prospectus, call 1-800-446-1012, from
overseas, call 617-483-7297.
Internet Address: http://www.excelsiorfunds.com
This report must be preceded or accompanied by a current prospectus.
A description of the policies and procedures that Excelsior Funds use to
determine how to vote proxies relating to portfolio securities is available (i)
without charge, upon request, by calling 1-800-446-1012, and (ii) on the
Excelsior Funds' website.
You should consider the Fund's investment objectives, risks, charges and
expenses carefully before you invest. Information about these and other
important subjects is in the fund's prospectus, which you should read carefully
before investing.
Excelsior Tax-Exempt Funds, Inc. are distributed by Edgewood Services, Inc.
You may write to Excelsior Tax-Exempt Funds, Inc. at the following address:
Excelsior Funds
P.O. Box 8529
Boston, MA 02266-8529
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, U.S. TRUST COMPANY, N.A.,
THEIR PARENT OR AFFILIATES AND SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN THE FUNDS INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL. FUND SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
April 2, 2004
Dear Valued Excelsior Shareholder:
The fiscal year ended March 31, 2004 was marked by a continuing market uptrend,
which signaled the end of a difficult multi-year downturn that concluded just
as the new fiscal year began in the spring of 2003. I am pleased to report that
Excelsior's fund managers were ready for the challenge of renewed global growth.
As economic stimulus from Federal Reserve monetary policy and Treasury fiscal
policy took hold, the markets rallied strongly. We believe, our fixed-income
product offerings, dealt successfully with the Fed's prevailing interest-rate
environment.*
I also wish to emphasize that when it comes to safeguarding investors, we take
our fiduciary responsibility to our fellow shareholders seriously. Accordingly,
we monitor our daily cash flows and work with intermediaries to identify market
timers and attempt to prohibit them from investing in our funds. Last November,
our Board of Trustees approved enhanced policies to monitor and combat this
activity.
The independent trustees have independent counsel who report to them and assist
them in protecting shareholders' best interests. All employees of the adviser
are required to adhere to a strict Code of Ethics, which prohibits them from
utilizing insider information, from engaging in "late trading" or "market
timing" of any mutual fund's shares.
From the perspective of fees and expense management, we maintain expense caps
on each of our mutual funds. U.S. Trust as adviser reimburses the Funds, when
necessary; to ensure that expense caps are not exceeded. Currently, all
Excelsior Funds are benchmarked under the Lipper Average for expenses.
Additionally, we do not charge front-end sales loads on any of our Funds.
Going forward, we see a more challenging investment environment, with
geo-political uncertainty and a domestic focus on the Presidential election,
along with a clear shift in Federal Reserve policy that we expect will result
in rising interest rates. We expect that U.S. Trust's portfolio managers will
continually evaluate their investment decisions, since it is our belief that
new investment opportunities will emerge. Acting as disciplined professionals,
our portfolio managers can be expected to continue to capitalize on these
prospects as they take shape.
As always, we value your confidence in selecting Excelsior to fulfill your
investment needs. We maintain a total commitment to providing you with
best-in-class investment products and service. We strongly believe that our
array of products may help you to meet the full range of your financial
objectives.
Sincerely,
/s/ James L. Bailey
James L. Bailey
President
- --------
* Past performance is not predictive of future performance. Please refer to
our discussion and analysis of each Excelsior Fund's performance for the
year ended March 31, 2004 in the pages that follow.
1
EXCELSIOR TAX-EXEMPT FUNDS, INC. ADVISER'S FIXED INCOME MARKET REVIEW
- --------------------------------------------------------------------------------
In the fiscal first quarter of 2003, interest rates declined by 25 to 30
basis points ("bp") across the yield curve. Higher yields in the beginning of
the quarter (the 10 year Treasury was just over 4%), gave way to a sharp
decline in rates in the middle of the quarter in response to weaker economic
data. Interest rates bottomed out in the middle of June just prior to the 13th
rate cut by the Federal Reserve. The federal funds rate was reduced by 25 bp to
a generation low of 1%, while the discount rate was kept at 0.75%. After
reaching record low yields (the 2 year Treasury came close to 2%), interest
rates then rose 40 to 50 bp into quarter end. By the end of the quarter, the
yield on the 2 year Treasury was 1.3%, while the 5 year and 10 year Treasury
yields were at 2.4% and 3.5%, respectively. Adjusting for the roll of the newly
issued Treasury securities during the quarter, the shape of the yield curve was
relatively unchanged with the 2 year/30 year spread ending the quarter at 326
bp.
Municipal securities, on the other hand, rallied in mid-April, propelled by
the increasing awareness that the economy had not been restrained by the Iraq
war alone. The positive momentum continued into June, but then dwindled in the
run up to the Federal Open Market Committee meeting on June 25th. In the final
weeks of the quarter, interest rates ratcheted higher as investors focused
their attention on prospects of a stronger economy fueled by a combination of
fiscal and monetary stimulus as well as a weaker dollar.
The fiscal second quarter proved to be another extremely volatile period for
the fixed-income markets. Treasury yields, for instance, saw notably wide
swings. In the first two months of the quarter, interest rates rose by over 100
basis points for 3 to 10 year securities on signs of stronger economic growth.
The yield on the 10 year Treasury note, for example, climbed to a high of 4.6%
from 3.5% at the end of June. The last month of the quarter, however, saw a
significant decline in the rise in yields on concern that the rebound in the
economy could not be sustained at the same pace. In September, Treasury yields
dropped by 30-60 bp. For the quarter, the Treasury yield curve steepened at the
front end with the 2 year/5 year spread widening by 26 bp. The curve beyond 5
years flattened as the 5 year/30 year spread narrowed by 9 bp to 205 bp.
Municipal securities followed a similar pattern, continuing trends that had
been in place through much of the previous fiscal year.
In the fiscal third quarter, Treasury yields rose as a result of continued
acceleration in economic growth and improvement in the equity markets. For the
period, municipal securities decisively outperformed Treasuries, most notably
on the longer end of the yield curve (beyond seven years), while municipal
interest rates actually declined modestly for the period. In general, municipal
interest rates rose through mid-October, and then began a volatile two-month
decline, which ended in mid-December. During the quarter continued strong
investor demand combined with lighter supply was the impetus for the strong
relative performance of municipal securities as compared to Treasuries.
In the final quarter of the fiscal year, Treasuries rallied and yields
declined overall. The yield on the 10 year Treasury note, for instance,
declined by over 40 bp in the period, falling below 3.75% for the first time
since last summer, to end the quarter at 3.85%. The intermediate part of the
curve experienced the greatest drop in yields as the yield on the 5 year
Treasury note declined more than 45 bp to 2.78%. Inflation remained low which,
along with muted job growth, kept the Federal Reserve from raising its target
interest rate of 1%. Reversing the trend, the Treasury yield curve flattened at
the front end with the 2 year/5 year spread narrowing by approximately 22 bp.
Beyond 5 years, there was further steepening in the yield curve as the 5 year/
30 year spread widened an additional 17 bp to 199 bp. Municipal yields, on the
other hand, were essentially flat across the board for the three month period,
significantly underperforming Treasuries and taxable fixed-income securities in
the period. As has been the case for some time now, the almost identical
beginning and ending yield numbers mask considerable intra-quarter volatility.
2
EXCELSIOR TAX-EXEMPT FUNDS, INC. LONG-TERM TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
For the fiscal first half of the year ended March 31, 2004, Fund investment
activity was minimal, as we remained comfortable with the Fund's barbell
structure and strategy. We did sell several bonds with short calls. As all long
bonds were by and large trading at their calls, we moved out toward bonds with
longer (10-year) call provisions. Fund performance came in slightly below the
Merrill Lynch 22+ Year Muni Index, its benchmark, in the first half of the
year. In the fiscal third quarter, we raised cash to 40% and maintained a
similarly defensive strategy in anticipation of higher long-term interest
rates. In the final quarter, we did make a single purchase as the market
rallied. We nevertheless maintained roughly 40% cash reserves. To sum up the
fiscal year as a whole, we were expecting interest rates to rise and so had
positioned the Fund defensively with large cash positions; unfortunately, rates
declined, and thus the cash position proved to be a drag on the Fund's
performance. For the twelve months ended March 31, 2004, the Fund posted a
total return of 4.01%* ranking 260 out of 299 funds, based on total return, in
the Lipper General Municipal Debt Fund category**. The Fund ranked 153 and 13
among 229 and 120 funds, respectively, for the same Lipper category for the
five and ten years ended March 31, 2004, with cumulative total returns of
23.43%* and 86.89%,* respectively.
[CHART]
- ---------------------------------------------
Long-Term Tax-Exempt Fund+
- ---------------------------------------------
Average Annual Total Return Ended on 3/31/04*
- ---------------------------------------------
1 Year 5 Years 10 Years
- ---------------------------------------------
4.01% 4.30% 6.45%
- ---------------------------------------------
Long-Term Tax-Exempt Fund Merrill Lynch 22+ Year Muni Index***
------------------------- ------------------------------------
3/31/94 $10,000 $10,000
3/31/95 11,101 10,640
3/31/96 12,139 11,539
3/31/97 12,776 12,145
3/31/98 14,363 13,874
3/31/99 15,142 14,784
3/31/00 14,540 14,289
3/31/01 16,247 16,327
3/31/02 16,620 16,833
3/31/03 17,969 18,644
3/31/04 18,690 20,214
Past performance is not predictive of future performance. Investment returns
and principal values will vary and shares may be worth more or less at
redemption than their original cost. A portion of the Fund's income may be
subject to the Alternative Minimum Tax and some investors may be subject to
certain state and local taxes.
The above illustration compares a $10,000 investment made in the Fund and a
broad-based index over the past ten fiscal years. The chart assumes 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: Lipper, Inc.--Lipper is an independent mutual fund performance
monitor. Lipper rankings do not consider sales charges.
*** Source: Merrill Lynch--the Merrill Lynch 22+ Year Muni Index consists of
bonds with an outstanding par which is greater than or equal to 25 million
and a maturity range greater than or equal to 22 years.
+ Currently certain fees are waived. Had such fees not been waived, returns
would have been lower. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of shares.
3
EXCELSIOR TAX-EXEMPT FUNDS, INC. INTERMEDIATE-TERM TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
In the fiscal first quarter of the year ended March 31, 2004, we kept
investment activity to a minimum as we were satisfied with the defensive
structure of the Fund. Given the drop in interest rates, and the steepness of
the yield curve, we continued to replace 5 and 6 year bonds with 10 year bonds.
At the same time, we increased the Fund's cash position by about 5% (to roughly
29%) while maintaining a 6.25 year average maturity. In the ensuing two fiscal
quarters, we pursued a similar strategy, making relatively few changes to the
Fund. During the final quarter of the fiscal year, we did extend the Fund's
average maturity by two to three months; we also put the Fund's cash to work,
bringing the number down to roughly 24%. We continued to maintain a slight
barbell position, with 7 to 10 year non-callable bonds and cash, as we waited
for the yield curve to flatten. For the fiscal year as a whole, the Fund's cash
position detracted from Fund performance; at the same time, however, the Fund's
roughly six year average maturity proved a partial offset, as did the fact that
the yield curve between 5 and 10 year issues flattened modestly for the year.
For the fiscal year ended, March 31, 2004, the Fund realized a total return of
4.19%* and ranked 77 out of 148 funds, based on total return, in the Lipper
Intermediate Municipal Debt Fund category**. The Fund ranked 47 and 14 among 97
and 66 funds, respectively, for the same Lipper category for the five and ten
years ended March 31, 2004, with cumulative total returns of 27.75%* and
76.68%,* respectively.
[CHART]
- ---------------------------------------------
Intermediate-Term Tax-Exempt Fund+
- ---------------------------------------------
Average Annual Total Return Ended on 3/31/04*
- ---------------------------------------------
1 Year 5 Years 10 Years
- ---------------------------------------------
4.19% 5.02% 5.86%
- ---------------------------------------------
Intermediate-Term Merrill Lynch 3-7 Merrill Lynch 7-12
Tax-Exempt Fund Year Muni Index*** Year Muni Index****
--------------- ----------------- ------------------
3/31/94 $10,000 $10,000 $10,000
3/31/95 10,634 10,527 10,616
3/31/96 11,517 11,281 11,606
3/31/97 12,044 11,735 12,159
3/31/98 13,105 12,640 13,438
3/31/99 13,830 13,371 14,259
3/31/00 13,758 13,496 14,318
3/31/01 15,149 14,845 15,990
3/31/02 15,514 15,364 16,500
3/31/03 16,958 17,014 18,358
3/31/04 17,669 17,790 19,531
Past performance is not predictive of future performance. Investment returns
and principal values will vary and shares may be worth more or less at
redemption than their original cost. A portion of the Fund's income may be
subject to the Alternative Minimum Tax and some investors may be subject to
certain state and local taxes.
The above illustration compares a $10,000 investment made in the Fund and
broad-based indices over the past ten fiscal years. The chart assumes all
dividends and capital gain distributions are reinvested. The Fund's performance
takes into account fees and expenses. The indices do 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: Lipper, Inc.--Lipper is an independent mutual fund performance
monitor. Lipper rankings do not consider sales charges.
***Source: Merrill Lynch--the Merrill Lynch 3-7 Year Muni Index is a
widely-accepted unmanaged market-weighted index comprised of fixed-rate,
coupon-bearing bonds issued within five years of the most recent month-end
with greater than $50 million principal amount having a Moody's investment
grade rating and maturities of three to seven years.
****Source: Merrill Lynch--the Merrill Lynch 7-12 Year Muni Index is a
widely-accepted unmanaged market-weighted index comprised of fixed-rate,
coupon-bearing bonds issued within five years of the most recent month-end
with greater than $50 million principal amount having a Moody's investment
grade rating and maturities of seven to twelve years.
+Currently certain fees are waived. Had such fees not been waived, returns
would have been lower. Returns do not reflect the deduction of taxes that
a shareholder would pay on Fund distributions or the redemption of shares.
4
EXCELSIOR TAX-EXEMPT FUNDS, INC. SHORT-TERM TAX-EXEMPT SECURITIES FUND
- --------------------------------------------------------------------------------
In the fiscal first quarter, of the year ended March 31, 2004, while cash
inflows to the Fund continued at a rapid pace, putting the money to work
effectively in two or three year bonds proved challenging as rates dropped
sharply in the period. We saw little to be gained at that point--in terms of
higher yields--by extending the Fund's average maturity. In other words, as the
yield spread between the very short end and the one to two year area was
virtually flat, we saw little incentive to extend. That said, given the cash
inflows, we did make several purchases in the 1.5-2 year range in the fiscal
first quarter. At the end of this period, the average life of the Fund stood at
roughly 5 months, down from about 8 months. We maintained roughly a 45% cash
level as we awaited an upturn in rates. In the fiscal second and third
quarters, as short rates did indeed back up, we deployed cash and equivalents,
bringing the number from 48% to 25%, and extended the Fund's average maturity
from 4 months to approximately 2 years. These moves contributed positively to
the Fund's performance. In the fiscal fourth quarter, cash inflows to the Fund
continued at a rapid rate. Even so, although we put the cash to work wherever
possible, between cash inflows and maturing issues, the cash level had grown to
45% by the end of the fiscal year. By year end, the average maturity had
declined from 2.0 years to 1.5 years, much of it caused merely by the passage
of time.
[CHART]
- ---------------------------------------------
Short-Term Tax-Exempt Securities Fund+
- ---------------------------------------------
Average Annual Total Return Ended on 3/31/04*
- ---------------------------------------------
1 Year 5 Years 10 Years
- ---------------------------------------------
1.40% 2.79% 3.59%
- ---------------------------------------------
Short-Term Tax-Exempt Merrill Lynch 1-3
Securities Fund Year Municipal Bond Index**
--------------- ---------------------------
3/31/94 $10,000 $10,000
3/31/95 10,345 10,363
3/31/96 10,906 10,974
3/31/97 11,293 11,366
3/31/98 11,859 11,973
3/31/99 12,393 12,550
3/31/00 12,569 12,893
3/31/01 13,321 13,766
3/31/02 13,747 14,341
3/31/03 14,028 15,081
3/31/04 14,224 15,414
Past performance is not predictive of future performance. Investment returns
and principal values will vary and shares may be worth more or less at
redemption than their original cost. A portion of the Fund's income may be
subject to the Alternative Minimum Tax and some investors may be subject to
certain state and local taxes.
The above illustration compares a $10,000 investment made in the Fund and a
broad-based index over the past ten fiscal years. The chart assumes 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: Merrill Lynch--the Merrill Lynch 1-3 Year Municipal Bond Index is a
widely-accepted unmanaged market-weighted index comprised of fixed-rate,
coupon-bearing bonds issued within five years of the most recent month-end
with greater than $50 million principal amount having a Moody's investment
grade rating and maturities of one to three years.
+ Currently certain fees are waived. Had such fees not been waived, returns
would have been lower. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of shares.
5
EXCELSIOR TAX-EXEMPT FUNDS, INC. NEW YORK INTERMEDIATE-TERM TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
In the fiscal first quarter of the year ended March 31, 2004, we kept Fund
activity to a minimum as we were satisfied with its structure, which was
positioned defensively to wait for an increase in interest rates. Given the
drop in rates, and the steepness of the yield curve, we continued to replace 5
and 6 year bonds with 10 year bonds. At the same time, we increased cash by
about 5% (to roughly 29%) while maintaining an approximate 6.25 year average
maturity. In the ensuing two fiscal quarters, we pursued a similar strategy,
making relatively few changes to the Fund. In the final fiscal quarter, we made
a single purchase, extending the average maturity of the Fund by roughly two to
three months, bringing cash from 29% to approximately 25%. We continued to
maintain a slight barbell position, with 7 to 10 year non-callable bonds and
cash, as we waited for the yield curve to flatten. For the fiscal year as a
whole, the Fund's cash position detracted from Fund performance; at the same
time, however, the Fund's approximate six year average maturity proved a
partial offset, as did the fact that the yield curve between 5 and 10 year
issues flattened modestly for the year. Finally, New York credit-related issues
had no impact on the Fund's performance as the average rating on the Fund's
holding was AA-plus.
[CHART]
- ---------------------------------------------
New York Intermediate-Term Tax-Exempt Fund+
- ---------------------------------------------
Average Annual Total Return Ended on 3/31/04*
- ---------------------------------------------
1 Year 5 Years 10 Years
- ---------------------------------------------
4.06% 4.96% 5.55%
- ---------------------------------------------
New York Merrill Lynch Merrill Lynch
Intermediate-Term 3-7 Year New York Muni 7-12 Year New York Muni
Tax-Exempt Fund Index** Index***
----------------- ------------- --------------
3/31/94 $10,000 $10,000 $10,000
3/31/95 10,605 10,726 10,319
3/31/96 11,323 11,683 11,793
3/31/97 11,828 12,225 12,380
3/31/98 12,816 13,213 13,790
3/31/99 13,477 13,980 14,639
3/31/00 13,412 14,059 14,676
3/31/01 14,763 15,502 16,412
3/31/02 15,138 16,009 16,962
3/31/03 16,494 17,655 18,770
3/31/04 17,164 18,490 20,129
Past performance is not predictive of future performance. Investment returns
and principal values will vary and shares may be worth more or less at
redemption than their original cost. A portion of the Fund's income may be
subject to the Alternative Minimum Tax.
The above illustration compares a $10,000 investment made in the Fund and
broad-based indices over the past ten fiscal years. The chart assumes all
dividends and capital gain distributions are reinvested. The Fund's performance
takes into account fees and expenses. The indices do 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: Merrill Lynch--the Merrill Lynch 3-7 Year New York Muni Index is a
widely-accepted unmanaged market-weighted index comprised of fixed-rate,
coupon-bearing bonds of New York Municipalities issued within five years of
the most recent month-end with greater than $50 million principal amount
having a Moody's investment grade rating and maturities of three to seven
years.
*** Source: Merrill Lynch--the Merrill Lynch 7-12 Year New York Muni Index is a
widely-accepted unmanaged market-weighted index comprised of fixed-rate,
coupon-bearing bonds of New York Municipalities issued within five years of
the most recent month-end with greater than $50 million principal amount
having a Moody's investment grade rating and maturities of seven to twelve
years.
+ Currently certain fees are waived. Had such fees not been waived, returns
would have been lower. Returns do not reflect the deduction of taxes that
a shareholder would pay on Fund distributions or the redemption of shares.
6
EXCELSIOR TAX-EXEMPT FUNDS, INC. CALIFORNIA TAX-EXEMPT INCOME FUND
- --------------------------------------------------------------------------------
Although tax-exempt yields were very similar at the end of the fiscal year
of March 31, 2004, to the beginning, there was still a fair amount of
volatility throughout the year. Yields rose sharply across all markets in late
June and July, 2003, and otherwise trended generally lower, ending with little
change for the fiscal year. The yield spread between California and national
bonds remained very narrow in intermediate maturities. California bond yields
historically are lower than national bonds by 15-25 basis points, but with the
budget difficulties the State has endured over the last few years, that
relationship has changed to 5 to 10 basis points. As California finances
improve, and the yield relationship returns to historical norms, the relative
performance of California portfolios should also improve. Over the past year we
have emphasized high quality, short to intermediate California bonds, with
higher coupons in an effort to protect the Fund from high volatility. With
interest rates remaining low, our strategy has been to keep the duration of the
Fund shorter than our comparable national benchmark, to be defensively
positioned in the event that rates rose. Duration is a measure of a security's
price sensitivity to changes in interest rates. The Fund had a duration of 3.48
at the end of the fiscal year, compared to 4.38 for the Merrill Lynch 3-7 Year
Municipal Index, the Fund's benchmark. Because rates did not rise significantly
over the year, longer bonds performed somewhat better than the Fund's more
defensive shorter to intermediate term bonds, negatively impacting Fund
performance.
[CHART]
- ---------------------------------------------
California Tax-Exempt Income Fund+
- ---------------------------------------------
Average Annual Total Return Ended on 3/1/04*
- ---------------------------------------------
Since Inception
1 Year 5 Years (10/1/96)
- ---------------------------------------------
3.19% 4.25% 4.59%
- ---------------------------------------------
Merrill Lynch
California Tax-Exempt 3-7 Year Municipal
Income Fund Index**
--------------------- ------------------
10/01/96 $10,000 $10,000
3/31/97 10,105 10,188
3/31/98 10,854 10,973
3/31/99 11,369 11,608
3/31/00 11,501 11,717
3/31/01 12,320 12,887
3/31/02 12,729 13,338
3/31/03 13,568 14,771
3/31/04 14,000 15,444
Past performance is not predictive of future performance. Investment returns
and principal values will vary and shares may be worth more or less at
redemption than their original cost. A portion of the Fund's income may be
subject to the Alternative Minimum Tax.
The above illustration compares a $10,000 investment made in the Fund and a
broad-based index since 10/1/96 (inception date). The chart assumes 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: Merrill Lynch--the Merrill Lynch 3-7 Year Municipal Index is a
widely-accepted unmanaged market-weighted index comprised of fixed-rate,
coupon-bearing bonds issued within five years of the most recent month-end
with greater than $50 million principal amount having a Moody's investment
grade rating and maturities of three to seven years.
+ Currently certain fees are waived. Had such fees not been waived, returns
would have been lower. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of shares.
7
Excelsior Tax-Exempt Funds, Inc.
Statements of Assets and Liabilities
March 31, 2004
New York
Intermediate- Short-Term Intermediate- California
Long-Term Term Tax-Exempt Term Tax-Exempt
Tax-Exempt Tax-Exempt Securities Tax-Exempt Income
Fund Fund Fund Fund Fund
----------- ------------- ------------ ------------- -----------
ASSETS:
Investments, at cost-see accompanying
portfolios............................ $70,893,065 $368,382,039 $359,682,386 $170,982,472 $64,463,629
=========== ============ ============ ============ ===========
Investments, at value (Note 1)......... $72,303,672 $384,464,086 $361,112,928 $176,358,201 $67,380,775
Interest receivable.................... 661,591 4,033,763 3,234,966 2,213,021 743,045
Receivable for fund shares sold........ 40 222,118 495,115 50 45,000
----------- ------------ ------------ ------------ -----------
Total Assets.......................... 72,965,303 388,719,967 364,843,009 178,571,272 68,168,820
LIABILITIES:
Payable for dividends declared......... 124,769 780,631 268,034 308,484 155,650
Payable for fund shares redeemed....... 2,813 121,003 3,809,927 41,592 2,027
Payable for investments purchased...... -- -- -- -- 1,083,130
Investment advisory fees payable
(Note 2).............................. 31,417 115,577 91,663 76,525 13,711
Administration fees payable (Note 2)... 6,984 36,704 33,968 17,010 6,326
Shareholder servicing fees payable
(Note 2).............................. 3,044 2,317 468 968 531
Directors' fees payable (Note 2)....... 78 576 962 279 131
Accrued expenses and other
payables.............................. 13,108 39,383 34,350 19,343 12,938
----------- ------------ ------------ ------------ -----------
Total Liabilities..................... 182,213 1,096,191 4,239,372 464,201 1,274,444
----------- ------------ ------------ ------------ -----------
NET ASSETS.............................. $72,783,090 $387,623,776 $360,603,637 $178,107,071 $66,894,376
=========== ============ ============ ============ ===========
NET ASSETS consist of:
Undistributed net investment
income................................ $ 124 $ 5,545 $ 12,685 $ 2,025 $ 1,264
Accumulated net realized gain (loss) on
investments........................... (548,190) 1,544,163 47,830 893,417 (664)
Unrealized appreciation of
investments........................... 1,410,607 16,082,047 1,430,542 5,375,729 2,917,146
Par value (Note 5)..................... 7,218 39,982 49,972 19,865 8,933
Paid-in capital in excess of par value. 71,913,331 369,952,039 359,062,608 171,816,035 63,967,697
----------- ------------ ------------ ------------ -----------
Total Net Assets........................ $72,783,090 $387,623,776 $360,603,637 $178,107,071 $66,894,376
=========== ============ ============ ============ ===========
Shares of Common Stock
Outstanding........................... 7,217,714 39,982,381 49,971,986 19,865,164 8,932,643
NET ASSET VALUE PER SHARE (net
assets / shares outstanding):.......... $10.08 $9.69 $7.22 $8.97 $7.49
====== ===== ===== ===== =====
See Notes to Financial Statements.
8
Excelsior Tax-Exempt Funds, Inc.
Statements of Operations
Year Ended March 31, 2004
New York
Intermediate- Short-Term Intermediate- California
Long-Term Term Tax-Exempt Term Tax-Exempt
Tax-Exempt Tax-Exempt Securities Tax-Exempt Income
Fund Fund Fund Fund Fund
----------- ------------- ---------- ------------- ----------
INVESTMENT INCOME:
Interest income.......................... $ 2,810,719 $12,628,806 $4,945,214 $ 5,629,472 $2,351,581
----------- ----------- ---------- ----------- ----------
EXPENSES:
Investment advisory fees (Note 2)........ 418,154 1,402,773 935,193 911,564 323,741
Administration fees (Note 2)............. 126,532 606,366 471,612 275,827 97,957
Shareholder servicing fees (Note 2)...... 39,400 275,566 245,730 24,543 103,599
Transfer agent fees (Note 2)............. 23,933 27,451 7,484 8,913 3,422
Registration and filing fees............. 18,746 22,172 15,269 16,286 12,413
Legal and audit fees..................... 18,439 92,999 74,471 43,054 14,861
Custodian fees........................... 11,388 44,455 35,351 21,204 9,000
Directors' fees and expenses (Note 2).... 4,347 20,566 16,023 9,440 3,356
Shareholder reports...................... 1,761 11,226 10,686 5,061 2,014
Miscellaneous expenses................... 7,035 29,303 23,641 14,001 10,169
----------- ----------- ---------- ----------- ----------
Total Expenses.......................... 669,735 2,532,877 1,835,460 1,329,893 580,532
Fees waived and reimbursed by:
Investment adviser (Note 2)............. (25,555) (135,324) (234,580) (15,817) (230,672)
Administrator (Note 2).................. (33,453) (160,319) (124,693) (72,926) (25,899)
----------- ----------- ---------- ----------- ----------
Net Expenses............................ 610,727 2,237,234 1,476,187 1,241,150 323,961
----------- ----------- ---------- ----------- ----------
NET INVESTMENT INCOME..................... 2,199,992 10,391,572 3,469,027 4,388,322 2,027,620
----------- ----------- ---------- ----------- ----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (Note 1):
Net realized gain (loss) on security
transactions............................ 2,026,982 6,421,021 138,268 4,269,437 (664)
Change in unrealized appreciation/
depreciation of investments during the
year.................................... (1,032,776) (435,500) 573,155 (1,558,337) (12,855)
----------- ----------- ---------- ----------- ----------
Net realized and unrealized gain (loss)
on investments.......................... 994,206 5,985,521 711,423 2,711,100 (13,519)
----------- ----------- ---------- ----------- ----------
Net increase in net assets resulting from
operations.............................. $ 3,194,198 $16,377,093 $4,180,450 $ 7,099,422 $2,014,101
=========== =========== ========== =========== ==========
See Notes to Financial Statements.
9
Excelsior Tax-Exempt Funds, Inc.
Statements of Changes in Net Assets
New York
Intermediate- Short-Term Intermediate- California
Long-Term Term Tax-Exempt Term Tax-Exempt
Tax-Exempt Tax-Exempt Securities Tax-Exempt Income
Fund Fund Fund Fund Fund
------------ ------------- ------------ ------------- -----------
Year Ended March 31, 2004
Net investment income....................... $ 2,199,992 $ 10,391,572 $ 3,469,027 $ 4,388,322 $ 2,027,620
Net realized gain (loss) on security
transactions............................... 2,026,982 6,421,021 138,268 4,269,437 (664)
Change in unrealized appreciation/
depreciation of investments during the
year....................................... (1,032,776) (435,500) 573,155 (1,558,337) (12,855)
------------ ------------ ------------ ------------ -----------
Net increase in net assets resulting from
operations................................. 3,194,198 16,377,093 4,180,450 7,099,422 2,014,101
Distributions to shareholders:
From net investment income................. (2,199,868) (10,386,027) (3,456,342) (4,385,426) (2,026,301)
From net realized gain on investments...... -- (13,530,881) -- (5,786,218) --
------------ ------------ ------------ ------------ -----------
Total distributions to
shareholders.......................... (2,199,868) (23,916,908) (3,456,342) (10,171,644) (2,026,301)
Increase (decrease) in net assets from
fund share transactions (Note 5)........... (23,176,722) (11,938,064) 68,597,584 (6,220,877) 712,830
------------ ------------ ------------ ------------ -----------
Net increase (decrease) in net assets....... (22,182,392) (19,477,879) 69,321,692 (9,293,099) 700,630
NET ASSETS:
Beginning of year.......................... 94,965,482 407,101,655 291,281,945 187,400,170 66,193,746
------------ ------------ ------------ ------------ -----------
End of year (1)............................ $ 72,783,090 $387,623,776 $360,603,637 $178,107,071 $66,894,376
============ ============ ============ ============ ===========
- --------
(1) Including undistributed net
investment income....................... $ 124 $ 5,545 $ 12,685 $ 2,025 $ 1,264
============ ============ ============ ============ ===========
Year Ended March 31, 2003
Net investment income....................... $ 3,287,309 $ 12,324,648 $ 3,701,564 $ 5,630,120 $ 2,096,862
Net realized gain on security
transactions............................... 1,512,685 11,353,856 1,826 5,908,606 23
Change in unrealized appreciation/
depreciation of investments during the
year....................................... 4,049,677 11,066,477 679,319 4,637,865 1,810,327
------------ ------------ ------------ ------------ -----------
Net increase in net assets resulting from
operations................................. 8,849,671 34,744,981 4,382,709 16,176,591 3,907,212
Distributions to shareholders:
From net investment income................. (3,310,944) (12,412,447) (3,712,472) (5,629,628) (2,115,423)
From net realized gain on
investments............................... -- (2,583,052) -- (2,636,726) (11,988)
------------ ------------ ------------ ------------ -----------
Total distributions to
shareholders.......................... (3,310,944) (14,995,499) (3,712,472) (8,266,354) (2,127,411)
Increase (decrease) in net assets from
fund share transactions (Note 5)........... (25,750,812) 17,333,876 124,921,748 882,030 6,184,103
------------ ------------ ------------ ------------ -----------
Net increase (decrease) in net assets....... (20,212,085) 37,083,358 125,591,985 8,792,267 7,963,904
NET ASSETS:
Beginning of year.......................... 115,177,567 370,018,297 165,689,960 178,607,903 58,229,842
------------ ------------ ------------ ------------ -----------
End of year (2)............................ $ 94,965,482 $407,101,655 $291,281,945 $187,400,170 $66,193,746
============ ============ ============ ============ ===========
- --------
(2) Including distributions in excess of net
investment income....................... -- -- -- -- $ (1,611)
============ ============ ============ ============ ===========
See Notes to Financial Statements.
10
[THIS PAGE INTENTIONALLY LEFT BLANK]
Excelsior Tax-Exempt Funds, Inc.
Financial Highlights -- Selected Per Share Data and Ratios
Dividends Distributions
Net Asset Value, Net Net Realized and Total From From Net From Net
Beginning of Investment Unrealized Gain (Loss) Investment Investment Realized Gain
Year Income on Investments Operations Income on Investments
---------------- ---------- ---------------------- ---------- ---------- --------------
LONG-TERM TAX-EXEMPT FUND -- (2/5/86*)
Year Ended March 31,
2000................ $9.87 $0.42 $(0.82) $(0.40) $(0.42) $(0.06)
2001................ 8.99 0.40 0.63 1.03 (0.40) --
2002................ 9.62 0.36 (0.14) 0.22 (0.36) --
2003................ 9.48 0.29 0.47 0.76 (0.29) --
2004................ 9.95 0.26 0.13 0.39 (0.26) --
INTERMEDIATE-TERM TAX-EXEMPT FUND -- (12/3/85*)
Year Ended March 31,
2000................ $9.49 $0.37 $(0.43) $(0.06) $(0.37) --
2001................ 9.06 0.38 0.51 0.89 (0.38) --
2002................ 9.57 0.35 (0.12) 0.23 (0.35) $(0.06)
2003................ 9.39 0.31 0.55 0.86 (0.31) (0.06)
2004................ 9.88 0.26 0.15 0.41 (0.26) (0.34)
SHORT-TERM TAX-EXEMPT SECURITIES FUND -- (12/31/92*)
Year Ended March 31,
2000................ $7.17 $0.25 $(0.15) $ 0.10 $(0.25) --
2001................ 7.02 0.28 0.13 0.41 (0.28) --
2002................ 7.15 0.20 0.03 0.23 (0.20) $(0.01)
2003................ 7.17 0.12 0.03 0.15 (0.12) --
2004................ 7.20 0.08 0.02 0.10 (0.08) --
NEW YORK INTERMEDIATE-TERM TAX-EXEMPT FUND -- (5/31/90*)
Year Ended March 31,
2000................ $8.80 $0.32 $(0.37) $(0.05) $(0.32) $(0.09)
2001................ 8.34 0.33 0.49 0.82 (0.33) --
2002................ 8.83 0.31 (0.09) 0.22 (0.31) --
2003................ 8.74 0.27 0.51 0.78 (0.27) (0.13)
2004................ 9.12 0.22 0.14 0.36 (0.22) (0.29)
CALIFORNIA TAX-EXEMPT INCOME FUND -- (10/1/96*)
Year Ended March 31,
2000................ $7.25 $0.26 $(0.18) $ 0.08 $(0.26) --
2001................ 7.07 0.26 0.23 0.49 (0.26) --
2002................ 7.30 0.26 (0.02) 0.24 (0.26) $(0.01)
2003................ 7.27 0.25 0.22 0.47 (0.25) --(2)
2004................ 7.49 0.24 -- 0.24 (0.24) --
* Commencement of Operations
(1)Expense ratios before waiver of fees and reimbursement of expenses (if any)
by adviser and administrator.
(2)Amount represents less than $0.01 per share.
See Notes to Financial Statements.
12
Ratio of Net Ratio of Gross Ratio of Net
Operating Expenses Operating Expenses Investment Portfolio Fee
Total Net Asset Value, Total Net Assets, End to Average to Average Income to Turnover Waivers
Distributions End of Year Return of Year (000's) Net Assets Net Assets (1) Average Net Assets Rate (Note 2)
- ------------- ---------------- ------ --------------- ------------------ ------------------ ------------------ --------- --------
$(0.48) $ 8.99 (4.01)% $121,998 0.75% 0.83% 4.54% 78% $0.01
(0.40) 9.62 11.69% 135,515 0.77% 0.83% 4.33% 60% 0.01
(0.36) 9.48 2.29% 115,178 0.72% 0.82% 3.66% 35% 0.01
(0.29) 9.95 8.12% 94,965 0.70% 0.77% 2.99% 51% 0.01
(0.26) 10.08 4.01% 72,783 0.73% 0.80% 2.64% 111% 0.01
$(0.37) $ 9.06 (0.58)% $292,671 0.57% 0.64% 4.06% 91% $0.01
(0.38) 9.57 10.07% 341,170 0.57% 0.64% 4.17% 84% 0.01
(0.41) 9.39 2.41% 370,018 0.52% 0.64% 3.67% 67% 0.01
(0.37) 9.88 9.31% 407,102 0.51% 0.59% 3.15% 48% 0.01
(0.60) 9.69 4.19% 387,624 0.56% 0.63% 2.60% 31% 0.01
$(0.25) $ 7.02 1.39% $ 54,226 0.56% 0.63% 3.54% 130% --
(0.28) 7.15 5.94% 83,336 0.58% 0.65% 3.97% 42% --
(0.21) 7.17 3.20% 165,690 0.48% 0.55% 2.60% 111% $0.01
(0.12) 7.20 2.04% 291,282 0.46% 0.58% 1.57% 31% 0.01
(0.08) 7.22 1.40% 360,604 0.47% 0.59% 1.12% 99% 0.01
$(0.41) $ 8.34 (0.51)% $126,378 0.73% 0.75% 3.82% 64% --
(0.33) 8.83 10.02% 144,421 0.73% 0.75% 3.90% 39% --
(0.31) 8.74 2.54% 178,608 0.67% 0.72% 3.53% 45% --
(0.40) 9.12 8.96% 187,400 0.67% 0.72% 2.96% 43% --(2)
(0.51) 8.97 4.06% 178,107 0.68% 0.73% 2.41% 42% --(2)
$(0.26) $ 7.07 1.13% $ 65,034 0.50% 0.95% 3.67% 16% $0.03
(0.26) 7.30 7.09% 54,605 0.50% 0.97% 3.69% 6% 0.03
(0.27) 7.27 3.32% 58,230 0.50% 0.87% 3.55% 4% 0.03
(0.25) 7.49 6.59% 66,194 0.46% 0.50% 3.36% 9% --(2)
(0.24) 7.49 3.19% 66,894 0.50% 0.90% 3.14% 15% 0.03
See Notes to Financial Statements.
13
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Long-Term Tax-Exempt Fund
Principal Value
Amount (Note 1)
- ---------- -----------
TAX-EXEMPT SECURITIES -- 87.50%
$4,000,000 Connecticut State Health & Education, Connecticut
State University Revenue Bonds, Series E,
(FGIC), 5.000%, 11/01/33......................... $ 4,166,800
3,500,000 #East Baton Rouge, Louisiana, Pollution Control
Authority Revenue Bonds, Exxon Project, 1.090%,
03/01/22......................................... 3,500,000
4,000,000 Florida State Jea St. Johns River Power Park
System Revenue Bonds, 17th Series, 5.250%,
10/01/13......................................... 4,508,160
4,000,000 Houston, Texas, Water & Sewer Revenue Bonds,
Series A, (FSA), 5.000%, 12/01/30................ 4,130,240
3,500,000 #Kansas State Department of Transportation
Highway Revenue Bonds, Series B-1, 1.000%,
09/01/19......................................... 3,500,000
4,000,000 Los Angeles, California, Department of Water &
Power Revenue Bonds, Series A, (FGIC), 5.000%,
07/01/36......................................... 4,133,360
3,500,000 #Marshall County, West Virginia, Pollution
Control Authority, Mountaineer Carbon Revenue
Bonds, 1.120%, 12/01/20.......................... 3,500,000
4,000,000 New York State Metropolitan Transportation
Authority Revenue Bonds, Series A, 5.750%,
07/01/31......................................... 4,547,080
4,000,000 Orange County, California, Sanitation District
Certificates of Participation, (FGIC), 5.000%,
02/01/33......................................... 4,147,560
4,000,000 Orlando & Orange County Expressway Authority
Revenue Bonds, Series B, (AMBAC), 5.000%,
07/01/35......................................... 4,183,400
4,000,000 Pennsylvania State General
Obligation Bonds, 2nd Series, (FSA), 5.500%,
05/01/16......................................... 4,579,400
3,500,000 #Pennsylvania State University Revenue Bonds,
Series A, 1.020%, 04/01/31....................... 3,500,000
Principal Value
Amount (Note 1)
- ---------- -----------
TAX-EXEMPT SECURITIES -- (continued)
$3,565,000 #Port Authority of New York & New Jersey Special
Obligation Revenue Bonds, Versatile Structure
Obligations, Series 5, 1.110%, 08/01/24.......... $ 3,565,000
4,000,000 Seattle, Washington, Municipal Light & Power
Revenue Bonds, (FSA), 5.000%, 11/01/28........... 4,150,880
4,000,000 University of California Revenue Bonds,
Multi-Purpose Projects, Series Q, (FSA), 5.000%,
09/01/34......................................... 4,133,240
3,445,000 #University of Missouri Revenue Bonds, System
Facilities, Series A, 1.120%, 11/01/31........... 3,445,000
-----------
63,690,120
-----------
TAX-EXEMPT SECURITIES -- BACKED BY
LETTERS OF CREDIT -- 9.62%
BANK OF AMERICA
---------------
3,500,000 #Washington State Public Power Supply Revenue
Bonds, Nuclear Project No. 1, Series
1A-1, 1.010%, 07/01/17........................... 3,500,000
MORGAN GUARANTY TRUST
---------------------
3,500,000 #New York City, New York, General Obligation
Bonds, Sub-Series A-7, 1.100%, 08/01/21.......... 3,500,000
-----------
7,000,000
-----------
Shares
- ----------
SHORT-TERM INVESTMENTS -- 2.22%
5,634 @BlackRock Muni Fund.............................. 5,634
1,607,918 @Dreyfus Tax Exempt Cash Fund..................... 1,607,918
-----------
1,613,552
-----------
TOTAL INVESTMENTS (Cost $70,893,065).............. 99.34% $72,303,672
OTHER ASSETS & LIABILITIES (NET).................. 0.66 479,418
------ -----------
NET ASSETS........................................ 100.00% $72,783,090
====== ===========
See Notes to Financial Statements.
14
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Long-Term Tax-Exempt Fund -- (continued)
- --------
FGIC--Financial Guaranty Insurance Corp.
# Variable rate demand bonds and notes are payable upon not more than seven
business days notice. Rate shown is as of March 31, 2004.
FSA--Financial Security Assurance
AMBAC--American Municipal Bond Assurance Corp.
@ Registered Investment Company
Notes:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Adviser, under the supervision of the Board of
Directors, to be of comparable quality at the time of purchase to rated
instruments that may be acquired by the Fund.
At March 31, 2004, approximately 10% of the net assets are invested in
municipal securities that have letter of credit enhancement features or escrows
in U.S. Government securities backing them, on which the Fund relies. Without
such features, the securities may or may not meet the quality standards of
securities purchased by the Fund.
% of
Net
State Diversification Assets Value
- --------------------- ------- -----------
California...................... 17.06 % $12,414,160
New York........................ 15.95 11,612,080
Florida......................... 11.94 8,691,560
Pennsylvania.................... 11.10 8,079,400
Washington...................... 10.51 7,650,880
Connecticut..................... 5.72 4,166,800
Texas........................... 5.68 4,130,240
Kansas.......................... 4.81 3,500,000
Louisiana....................... 4.81 3,500,000
West Virginia................... 4.81 3,500,000
Missouri........................ 4.73 3,445,000
Short-Term Investments.......... 2.22 1,613,552
------- -----------
Total Investments............... 99.34% $72,303,672
Other Assets & Liabilities (Net) 0.66 479,418
------- -----------
Net Assets...................... 100.00 % $72,783,090
======= ===========
See Notes to Financial Statements.
15
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Intermediate-Term Tax-Exempt Fund
Principal Value
Amount (Note 1)
- ----------- ------------
TAX-EXEMPT SECURITIES -- 89.17%
$10,000,000 #Alaska State Housing Finance Authority, Capital
Project Revenue Bonds, Series C, (MBIA), 1.020%,
07/01/22......................................... $ 10,000,000
10,000,000 Clark County, Nevada, School District General
Obligation Bonds, Series B, (FSA), 5.000%,
06/15/12......................................... 11,257,300
10,000,000 Colorado Springs, Colorado,
Utilities Revenue Bonds, Series A, 5.250%,
11/15/10......................................... 11,475,500
10,000,000 #Connecticut State Health & Education, Yale
University Revenue Bonds, Series X-3, 1.070%,
07/01/37......................................... 10,000,000
10,000,000 Connecticut State Special Tax Obligation Revenue
Bonds, Transportation Infrastructure, Series A,
(FGIC), 5.500%, 10/01/10......................... 11,630,500
10,000,000 Cook County, Illinois, General Obligation
Bonds, Series D, (AMBAC), 5.250%, 11/15/11....... 11,469,300
10,000,000 Dallas, Texas, Water Works & Sewer System
Revenue Bonds, (FSA), 5.375%, 10/01/12........... 11,533,300
10,000,000 Detroit, Michigan, Sewer Disposal Revenue
Bonds, Series A, (FSA), 5.000%, 07/01/14......... 11,141,400
10,000,000 Florida State Division Board Finance Department,
General Services Revenue Bonds, Series A,
Department of Environmental Protection-
Preservation 2000, (FSA), 6.000%, 07/01/13....... 12,072,500
10,000,000 Florida State Jea St. Johns River Power Park
System Revenue Bonds, 17th Series, 5.250%,
10/01/13......................................... 11,270,400
10,000,000 Hawaii State General Obligation Bonds, Series CY,
(FSA), 5.500%, 02/01/12.......................... 11,550,100
Principal Value
Amount (Note 1)
- ----------- ------------
TAX-EXEMPT SECURITIES -- (continued)
$10,000,000 Illinois State General Obligation Bonds, First
Series, (MBIA), 5.500%, 08/01/14................. $ 11,653,600
10,000,000 Illinois State Sales Tax Revenue Bonds, First
Series, (FSA), 5.250%, 06/15/13.................. 11,449,800
14,800,000 #Iowa State, Finance Authority, Multifamily
Housing Village Court Association Revenue Bonds,
Series B, 1.020%, 11/01/15....................... 14,800,000
10,000,000 Jefferson County, Colorado, School District
General Obligation Bonds, (MBIA), 6.500%,
12/15/11......................................... 12,365,100
10,000,000 #Kansas State Department of Transportation
Highway Revenue Bonds, Series C-1, 1.020%,
09/01/19......................................... 10,000,000
10,000,000 Los Angeles, California, Department of Water &
Power Revenue Bonds, Series B, (MBIA), 5.000%,
07/01/13......................................... 11,309,800
10,000,000 #Loudon County, Virginia, Industrial Development
Authority Revenue Bonds,
Howard Hughes Medical, Series A, 1.090%, 02/15/38 10,000,000
10,000,000 Maryland State General Obligation Bonds, State &
Local Facilities Loan, 1st Series, 5.250%,
03/01/13......................................... 11,527,100
10,000,000 Michigan State Building Authority Revenue Bonds,
Facilities Program, Series I, (FSA), 5.250%,
10/15/14......................................... 11,372,600
10,000,000 #Missouri State Health & Education, Washington
University Revenue Bonds, Series B, 1.050%,
02/15/33......................................... 10,000,000
10,000,000 New Jersey State General Obligation Bonds, Series
D, 6.000%, 02/15/11.............................. 11,827,000
See Notes to Financial Statements.
16
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Intermediate-Term Tax-Exempt Fund -- (continued)
Principal Value
Amount (Note 1)
- ----------- ------------
TAX-EXEMPT SECURITIES -- (continued)
$20,000,000 New Jersey State Transportation Trust Fund
Authority, Transportation Systems
Revenue Bonds, Series C, (FSA), 5.500%, 12/15/10. $ 23,248,200
10,000,000 New York State Dormitory Authority, State
University Educational Facilities Revenue Bonds,
Series B, (FSA), 5.250%, 05/15/11................ 11,410,300
10,000,000 Pennsylvania State General Obligation
Bonds, 5.500%, 02/01/13.......................... 11,654,900
10,000,000 Pennsylvania State General Obligation
Bonds, First Series, (MBIA), 5.250%, 02/01/12.... 11,475,300
10,000,000 Pennsylvania State General Obligation Bonds,
Second Series, (FGIC), 5.250%, 10/01/14.......... 11,601,500
10,000,000 South Carolina State Public Services Authority
Revenue Bonds, Series A, (FSA), 5.500%, 01/01/11. 11,534,400
15,000,000 #Valdez, Alaska, Marine Terminal Revenue Bonds,
BP Pipelines Project, Series B, 1.120%, 07/01/37. 15,000,000
------------
345,629,900
------------
TAX-EXEMPT SECURITY -- BACKED BY
LETTERS OF CREDIT -- 2.58%
PNC BANK N.A.
-------------
10,000,000 #Pennsylvania State, Higher Educational
Facilities Authority, Association of Independent
Colleges Revenue Bonds, Series E-3, 1.020%,
11/01/14......................................... 10,000,000
------------
TAX-EXEMPT SECURITIES -- ESCROWED IN
U.S. GOVERNMENTS -- 5.93%
10,000,000 Chicago, Illinois, Metropolitan Water Reclamation
District Authority General Obligation
Bonds, Series A, 5.250%, 12/01/10 (Escrowed to
Maturity)........................................ 11,530,400
Principal Value
Amount (Note 1)
- ----------- ------------
TAX-EXEMPT SECURITIES -- ESCROWED IN
U.S. GOVERNMENTS -- (continued)
$10,000,000 New Jersey State Transportation Trust Fund
Authority, Transportation Systems Revenue Bonds,
Series A, 5.250%, 06/15/11 (Escrowed to Maturity) $ 11,466,700
------------
22,997,100
------------
Shares
- -----------
SHORT-TERM INVESTMENTS -- 1.50%
630,612 @BlackRock Muni Fund.............................. 630,612
5,206,474 @Dreyfus Tax Exempt Cash Fund..................... 5,206,474
------------
5,837,086
------------
TOTAL INVESTMENTS (Cost $368,382,039)............. 99.18% $384,464,086
OTHER ASSETS & LIABILITIES (NET).................. 0.82 3,159,690
------ ------------
NET ASSETS........................................ 100.00% $387,623,776
====== ============
- --------
# Variable rate demand bonds and notes are payable upon not more than seven
business days notice. Rate shown is as of March 31, 2004.
MBIA--Municipal Bond Insurance Assoc.
FSA--Financial Security Assurance
FGIC--Financial Guaranty Insurance Corp.
AMBAC--American Municipal Bond Assurance Corp.
@ Registered Investment Company
Notes:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Adviser, under the supervision of the Board of
Directors, to be of comparable quality at the time of purchase to rated
instruments that may be acquired by the Fund.
At March 31, 2004, approximately, 9% of the net assets are invested in
municipal securities that have letter of credit enhancement features or escrows
in U.S. Government securities backing them, on which the Fund relies. Without
such features, the securities may or may not meet the quality standards of
securities purchased by the Fund.
See Notes to Financial Statements.
17
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Intermediate-Term Tax-Exempt Fund -- (continued)
% of
Net
State Diversification Assets Value
- --------------------- ------ ------------
New Jersey...................... 12.01% $ 46,541,900
Illinois........................ 11.89 46,103,100
Pennsylvania.................... 11.54 44,731,700
Alaska.......................... 6.45 25,000,000
Colorado........................ 6.15 23,840,600
Florida......................... 6.02 23,342,900
Michigan........................ 5.81 22,514,000
Connecticut..................... 5.58 21,630,500
Iowa............................ 3.82 14,800,000
Hawaii.......................... 2.98 11,550,100
South Carolina.................. 2.98 11,534,400
Texas........................... 2.98 11,533,300
Maryland........................ 2.97 11,527,100
New York........................ 2.94 11,410,300
California...................... 2.92 11,309,800
Nevada.......................... 2.90 11,257,300
Kansas.......................... 2.58 10,000,000
Missouri........................ 2.58 10,000,000
Virginia........................ 2.58 10,000,000
Short-Term Investments.......... 1.50 5,837,086
------ ------------
Total Investments............... 99.18% $384,464,086
Other Assets & Liabilities (Net) 0.82 3,159,690
------ ------------
Net Assets...................... 100.00% $387,623,776
====== ============
See Notes to Financial Statements.
18
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Short-Term Tax-Exempt Securities Fund
Principal Value
Amount (Note 1)
- ----------- ------------
TAX-EXEMPT SECURITIES -- 92.47%
$ 5,985,000 #Clark County, Nevada, School District General
Obligation Bonds, Series A, (FSA), 1.100%,
06/15/21......................................... $ 5,985,000
17,000,000 #Connecticut State Health & Education, Yale
University Revenue Bonds, Series T-1, 1.070%,
07/01/29......................................... 17,000,000
10,000,000 #Detroit, Michigan, Water Supply System Revenue
Bonds, Series C, (FGIC), 1.010%, 07/01/29........ 10,000,000
13,000,000 Florida State Board of Education Capital Outlay
General Obligation Bonds, Series A, 5.000%,
06/01/07......................................... 14,278,680
6,000,000 Georgia State Road & Thruway Authority Revenue
Bonds, 4.000%, 10/01/07.......................... 6,446,520
14,000,000 #Gwinnett County, Georgia, Development Authority
Revenue Bonds, Civic & Cultural Center Project,
1.000%, 09/01/31................................. 14,000,000
11,700,000 #Hurley, New Mexico, Pollution Control Authority
Revenue Bonds, Kennecott Santa Fe, 1.120%,
12/01/15......................................... 11,700,000
20,000,000 Massachusetts State General Obligation Bonds,
Series B, 4.000%, 08/01/06....................... 21,052,000
22,500,000 Memphis, Tennessee, Electric System Revenue
Bonds, Series A, (FSA), 5.000%, 12/01/07......... 24,875,775
10,200,000 #Metropolitan Government of Nashville & Davidson
County, Tennessee, Health & Educational
Facilities Revenue Bonds, Vanderbilt University,
Series C-2, 0.920%, 10/01/30..................... 10,200,000
14,000,000 #Minneapolis, Minnesota, General Obligation
Bonds, 0.870%, 12/01/18.......................... 14,000,000
Principal Value
Amount (Note 1)
- ----------- ------------
TAX-EXEMPT SECURITIES -- (continued)
$ 2,000,000 #Minneapolis, Minnesota, Guthrie Parking Ramp
General Obligation Bonds, 0.870%, 12/01/28....... $ 2,000,000
11,000,000 Montgomery County, Maryland, General
Obligation Bonds, Series A, 5.000%, 11/01/07..... 12,236,620
5,000,000 Nassau County, New York, Interim Finance
Authority Revenue Bonds, Series B, 4.000%,
11/15/05......................................... 5,206,350
12,000,000 New Jersey State, Economic Development Authority
Revenue Bonds, School Facilities, Series
F, 5.000%, 06/15/07.............................. 13,139,520
15,000,000 New York City, New York, Transitional Finance
Authority Revenue Bonds, Future Tax, Sub-Series
D-1, 5.000%, 11/01/07............................ 16,582,050
10,000,000 #New York State Local Government Assistance
Revenue Bonds, Series 4V, (FSA), 1.050%, 04/01/22 10,000,000
5,000,000 Ohio State Highway Capital Improvements Authority
General Obligation Bonds, Series F, 5.000%,
05/01/04......................................... 5,014,400
14,500,000 #Orlando, Florida, Utilities Commission Water &
Electric Revenue Bonds, Series A, 1.030%,
10/01/17......................................... 14,500,000
15,000,000 #Pennsylvania State Higher Educational Facilities
Authority Revenue Bonds, Carnegie Mellon
University Project, Series C, 1.120%, 11/01/29... 15,000,000
10,350,000 #Pennsylvania State University Revenue Bonds,
Series A, 1.020%, 03/01/32....................... 10,350,000
See Notes to Financial Statements.
19
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Short-Term Tax-Exempt Securities Fund -- (continued)
Principal Value
Amount (Note 1)
- ------------ ------------
TAX-EXEMPT SECURITIES -- (continued)
$ 8,700,000 #Port Authority of New York & New Jersey Special
Obligation Revenue Bonds, Versatile
Structure Obligations, Series 3, 1.110%, 06/01/20 $ 8,700,000
12,000,000 Seattle, Washington, Municipal Light & Power
Revenue Bonds, (FSA), 5.000%, 11/01/06........... 12,995,520
11,000,000 Texas State Public Finance Authority General
Obligation Bonds, Series A, 5.250%, 10/01/07..... 12,214,620
25,000,000 Texas State Public Finance Authority Revenue
Bonds, Series A, (FSA), 5.000%, 12/15/07......... 27,666,750
8,000,000 University of Maryland Revenue Bonds, Auxiliary
Facility & Tuition, Series A, 5.000%, 04/01/05... 8,309,280
10,000,000 #Valdez, Alaska, Marine Terminal Revenue Bonds,
Exxon Pipeline Project, Series C, 1.000%,
12/01/33......................................... 10,000,000
------------
333,453,085
------------
TAX-EXEMPT SECURITY -- BACKED BY
LETTERS OF CREDIT -- 2.77%
BNP PARIBAS
-----------
10,000,000 #New York State Housing Finance Agency Service
Revenue Bonds, Series E, 1.050%, 03/15/27........ 10,000,000
------------
TAX-EXEMPT SECURITIES -- ESCROWED IN
U.S. GOVERNMENTS -- 4.30%
5,000,000 Harris County, Texas, Toll Road
Revenue Bonds, Series A, (MBIA), 6.375%,
08/15/24 (Prerefunded 08/15/04 @ 102)............ 5,198,050
10,000,000 New Jersey State Economic Development, Authority
Market Transition Facilities
Revenue Bonds, Series A, (MBIA), 5.875%,
07/01/11 (Prerefunded 07/01/04 @ 102)............ 10,317,800
------------
15,515,850
------------
Value
Shares (Note 1)
- --------- ------------
SHORT-TERM INVESTMENTS -- 0.60%
1,186,927 @BlackRock Muni Fund.............................. $1,186,927
957,066 @Dreyfus Tax Exempt Cash Fund..................... 957,066
----------
2,143,993
----------
TOTAL INVESTMENTS
(Cost $359,682,386) 100.14% $361,112,928
OTHER ASSETS &
LIABILITIES (NET).. (0.14) (509,291)
------ ------------
NET ASSETS.......... 100.00% $360,603,637
====== ============
- --------
# Variable rate demand bonds and notes are payable upon not more than seven
business days notice. Rate shown is as of March 31, 2004.
FSA--Financial Security Assurance
FGIC--Financial Guaranty Insurance Corp.
MBIA--Municipal Bond Insurance Assoc.
@ Registered Investment Company
Notes:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Adviser, under the supervision of the Board of
Directors, to be of comparable quality at the time of purchase to rated
instruments that may be acquired by the Fund.
At March 31, 2004, approximately, 7% of the net assets are invested in
municipal securities that have letter of credit enhancement features or escrows
in U.S. Government securities backing them, on which the Fund relies. Without
such features, the securities may or may not meet the quality standards of
securities purchased by the Fund.
See Notes to Financial Statements.
20
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Short-Term Tax-Exempt Securities Fund -- (continued)
% of
Net
State Diversification Assets Value
- --------------------- ------- ------------
New York........................ 14.00 % $ 50,488,400
Texas........................... 12.50 45,079,420
Tennessee....................... 9.73 35,075,775
Florida......................... 7.98 28,778,680
Pennsylvania.................... 7.03 25,350,000
New Jersey...................... 6.51 23,457,320
Massachusetts................... 5.84 21,052,000
Maryland........................ 5.70 20,545,900
Georgia......................... 5.67 20,446,520
Connecticut..................... 4.71 17,000,000
Minnesota....................... 4.44 16,000,000
Washington...................... 3.60 12,995,520
Mexico.......................... 3.24 11,700,000
Alaska.......................... 2.77 10,000,000
Michigan........................ 2.77 10,000,000
Nevada.......................... 1.66 5,985,000
Ohio............................ 1.39 5,014,400
Short-Term Investments.......... 0.60 2,143,993
------- ------------
Total Investments............... 100.14% $361,112,928
Other Assets & Liabilities (Net) (0.14) (509,291)
------- ------------
Net Assets...................... 100.00 % $360,603,637
======= ============
See Notes to Financial Statements.
21
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
New York Intermediate-Term Tax-Exempt Fund
Principal Value
Amount (Note 1)
- ----------- ------------
TAX-EXEMPT SECURITIES -- 86.60%
$ 8,095,000 #Babylon, New York, General Obligation Bonds,
(AMBAC), 0.990%, 09/01/17........................ $ 8,095,000
Long Island Power Authority, New York Electric
Authority Revenue Bonds, Series A, (AMBAC),
10,000,000 5.500%, 12/01/09................................. 11,487,400
10,000,000 5.500%, 12/01/11................................. 11,565,000
15,000,000 Nassau County, New York, Interim Finance
Authority Revenue Bonds, Series B,
(AMBAC), 5.000%, 11/15/12........................ 16,909,350
7,000,000 New York City, New York, Transitional Finance
Authority Revenue Bonds, Series A, 5.250%,
11/01/10......................................... 7,977,760
3,605,000 #New York City, New York, Trust for Cultural
Resources Revenue Bonds, American Museum of
Natural History, Series A, 0.990%, 04/01/21...... 3,605,000
10,000,000 New York State Dormitory Authority Revenue Bonds,
Series B, 5.250%, 11/15/23....................... 11,181,200
5,000,000 New York State Dormitory Authority, New York
University Revenue Bonds, Series A,
(AMBAC), 5.750%, 07/01/12........................ 5,908,750
7,000,000 New York State Dormitory Authority, State
Personal Income Tax Revenue Bonds, Series
A, 5.500%, 03/15/12.............................. 8,036,770
7,000,000 New York State Environmental Facilities Revenue
Bonds, Municipal Water Project,
Series K, 5.000%, 06/15/12....................... 7,880,110
5,000,000 New York State Local Government Assistance
Authority Revenue Bonds, Series A-1,
(FSA), 5.000%, 04/01/12.......................... 5,611,300
Principal Value
Amount (Note 1)
- ---------- -------------
TAX-EXEMPT SECURITIES --(continued)
$7,000,000 New York State Thruway Authority Revenue Bonds,
Local Highway & Bridge Project, Series
C, 5.500%, 04/01/12.............................. $ 8,105,650
5,000,000 New York State Thruway Authority Revenue
Bonds, Series A, (MBIA), 5.000%, 04/01/11........ 5,616,200
10,000,000 New York State Thruway Authority Service
Construction Revenue Bonds, Local Highway &
Bridge Project, 5.500%, 04/01/14................. 11,338,600
5,000,000 New York State Urban Development Revenue Bonds,
Correctional Facilities, Series A, 6.500%,
01/01/10......................................... 5,921,800
3,000,000 #Port Authority of New York & New Jersey Special
Obligation Revenue Bonds, Versatile Structure
Obligations, Series 5, 1.110%, 08/01/24.......... 3,000,000
5,000,000 Puerto Rico Electric Power Authority Revenue
Bonds, Series BB, (MBIA), 6.000%, 07/01/11....... 5,994,450
8,000,000 #Suffolk County, New York, Water
Authority, Bond Anticipation Notes, 1.030%,
01/01/08......................................... 8,000,000
8,000,000 #Westchester County, New York, Health Revenue
Bonds, Series C-1, 0.880%, 11/01/19.............. 8,000,000
-------------
154,234,340
-------------
TAX-EXEMPT SECURITIES -- BACKED BY
LETTERS OF CREDIT -- 7.13%
JP MORGAN CHASE BANK
--------------------
8,400,000 #New York City, New York, Trust for Cultural
Resources Revenue Bonds, Pierpont Morgan
Library, 1.000%, 02/01/34........................ 8,400,000
See Notes to Financial Statements.
22
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
New York Intermediate-Term Tax-Exempt Fund -- (continued)
Principal Value
Amount (Note 1)
- ---------- ------------
TAX-EXEMPT SECURITIES -- BACKED BY
LETTERS OF CREDIT --(continued)
WESTDEUTSCHE LANDESBANK
-----------------------
$4,300,000 #New York City, New York, General
Obligation Bonds, Sub-Series A-4, 1.100%,
08/01/23.................................................... $ 4,300,000
------------
12,700,000
------------
TAX-EXEMPT SECURITY -- ESCROWED IN
U.S. GOVERNMENTS -- 4.57%
7,000,000 New York State Metropolitan Transportation
Authority Revenue Bonds, Service Contract,
Series 8, (FSA), 5.375%, 07/01/21 (Prefunded 07/01/13 @ 100) 8,148,210
------------
Shares
- ----------
SHORT-TERM INVESTMENTS -- 0.72%
1,275,650 @BlackRock Institutional New York Money Market
Fund........................................................ 1,275,650
1 @Dreyfus New York Tax Exempt Cash Fund....................... 1
------------
1,275,651
------------
TOTAL INVESTMENTS (Cost $170,982,472)............. 99.02% $176,358,201
OTHER ASSETS & LIABILITIES (NET).................. 0.98 1,748,870
------ ------------
NET ASSETS........................................ 100.00% $178,107,071
====== ============
- --------
# Variable rate demand bonds and notes are payable upon not more than seven
business days notice. Rate shown is as of March 31, 2004.
AMBAC--American Municipal Bond Assurance Corp.
FSA--Financial Security Assurance
MBIA--Municipal Bond Insurance Assoc.
@ Registered Investment Company
Notes:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Adviser, under the supervision of the Board of
Directors, to be of comparable quality at the time of purchase to rated
instruments that may be acquired by the Fund.
At March 31, 2004, approximately, 12% of the net assets are invested in
municipal securities that have letter of credit enhancement features or escrows
in U.S. Government securities backing them, on which the Fund relies. Without
such features, the securities may or may not meet the quality standards of
securities purchased by the Fund.
At March 31, 2004, approximately, 95% of the net assets are invested in New
York municipal securities. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers to pay
the required principal and interest payments of the municipal securities.
At March 31, 2004, approximately, 87%, 7% and 4% of the net assets are invested
in revenue bonds, general obligation bonds and anticipation notes, respectively.
See Notes to Financial Statements.
23
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
California Tax-Exempt Income Fund
Principal Value
Amount (Note 1)
- ---------- -----------
TAX-EXEMPT SECURITIES -- 89.39%
$ 545,000 Alameda-Contra Costa, California, Certificates of
Participation, Transportation District, (AMBAC),
4.000%, 08/01/12................................. $ 574,332
595,000 Berkeley, California, Unified School District,
General Obligation Bonds, (FGIC), 4.375%,
08/01/06......................................... 635,014
35,000 California Educational Facilities Authority,
Santa Clara University Revenue Bonds,
(MBIA), 4.900%, 09/01/06......................... 37,870
750,000 California Educational Facilities Authority,
Stanford University Revenue Bonds, Series
R, 5.000%, 11/01/11.............................. 856,372
1,000,000 California State Department of Transportation
Revenue Bonds, Federal Highway Grant
Anticipation Bonds, Series A, (FGIC), 4.500%,
02/01/13......................................... 1,087,970
1,000,000 California State Department of Water Resources
Central Valley Project Revenue Bonds, Series
T, 5.000%, 12/01/11.............................. 1,116,700
500,000 California State Department of Water Resources
Central Valley Project Revenue Bonds, Series
U, 4.000%, 12/01/06.............................. 532,820
750,000 California State Infrastructure & Economic
Revenue Bonds, Bay
Area Toll Bridges, Series A, (FSA), 5.000%,
07/01/11......................................... 853,192
250,000 California State Public Works Board, Lease
Revenue Bonds, Department of Corrections, Series
D, (MBIA), 4.850%, 09/01/08...................... 275,822
750,000 California State, General Obligation
Bonds, 6.250%, 04/01/08.......................... 852,480
750,000 California State, General Obligation Bonds,
(MBIA), 7.500%, 10/01/07......................... 888,337
1,000,000 California Statewide Communities Development
Authority Revenue Bonds, California Endowment,
5.000%, 07/01/13................................. 1,130,980
Principal Value
Amount (Note 1)
- ---------- -----------
TAX-EXEMPT SECURITIES -- (continued)
$ 315,000 Central Coast, Water Authority, California,
Revenue Bonds, State
Water Project, Series A, (AMBAC), 6.000%,
10/01/05......................................... $ 337,488
Central Valley School District Financing
Authority, California, School District General
Obligation Bonds, Series A, (MBIA), 6.150%,
1,000,000 08/01/09......................................... 1,186,270
550,000 5.850%, 08/01/04................................. 558,657
1,100,000 Cerritos, California, Public Financing Authority
Tax Allocation Bonds, Redevelopment Project,
Series A, (AMBAC), 3.000%, 11/01/10.............. 1,117,743
545,000 Chino Basin, California, Regional Financing
Authority Municipal Water District Sewer System
Project, (AMBAC), 7.000%, 08/01/05............... 587,009
350,000 Contra Costa County, California, Certificates of
Participation, Capital Projects,
(AMBAC), 4.625%, 02/01/07........................ 378,591
Contra Costa, California, Transportation
Authority Sales Tax Revenue Bonds, Series A,
(FGIC),
550,000 6.000%, 03/01/07................................. 616,093
1,000,000 6.000%, 03/01/08................................. 1,145,480
750,000 East Bay, California, Regional Park District
Authority General Obligation Bonds, 5.000%,
09/01/07......................................... 830,235
250,000 Escondido, California, Unified School District
General Obligation Bonds, Series A,
(FGIC), 5.000%, 09/01/08......................... 278,800
1,150,000 Fairfield-Suisun, Unified School District,
California, General Obligation Bonds,
(MBIA), 4.250%, 08/01/10......................... 1,257,824
155,000 Fresno, California, Sewer Revenue Bonds, Series
A-1, (AMBAC), 4.800%, 09/01/06................... 167,344
See Notes to Financial Statements.
24
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
California Tax-Exempt Income Fund -- (continued)
Principal Value
Amount (Note 1)
- ---------- ----------
TAX-EXEMPT SECURITIES -- (continued)
$ 750,000 Glendale, California, Unified School District
General Obligation Bonds, Series D,
(MBIA), 4.500%, 09/01/13......................... $ 806,640
745,000 Los Altos, California, School District General
Obligation Bonds, Series A, (FSA), 5.000%,
08/01/06......................................... 805,703
Los Angeles County, California, Public Works
Financing Authority, Revenue Bonds, Regional
Park & Open Space District, Series A, 5.250%,
300,000 10/01/05......................................... 318,888
655,000 5.000%, 10/01/04................................. 667,812
500,000 Los Angeles, California, Department of Airports
Revenue Bonds, Series A, (FGIC), 6.000%, 05/15/05 526,690
150,000 Los Angeles, California, Municipal Improvement
Revenue Bonds, Series A, (FSA), 4.875%, 02/01/06. 159,679
750,000 Los Angeles, California, Municipal Improvement
Revenue Bonds, Series B, (AMBAC), 4.600%,
02/01/06......................................... 794,693
1,000,000 Los Angeles, California, Sanitation Equipment
Revenue Bonds, Series A, (FSA), 5.000%, 02/01/10. 1,131,170
400,000 Los Angeles, California, State Building Authority
Revenue Bonds, State of California Department of
General Services, Series A, 5.600%, 05/01/04..... 401,120
500,000 Los Angeles, California, Unified School District
General Obigation Bonds, Series F,
(FSA), 4.500%, 07/01/13.......................... 545,760
1,000,000 Los Angeles, California, Wastewater System
Revenue Bonds, Series A, (FGIC), 5.500%, 06/01/10 1,162,090
1,000,000 Los Angeles, California, Water & Power Revenue
Bonds, Power System, Series A, Sub-Series A-1,
5.000%, 07/01/14................................. 1,116,820
Principal Value
Amount (Note 1)
- ---------- ----------
TAX-EXEMPT SECURITIES -- (continued)
$ 370,000 Marin, California, Municipal Water District
Revenue Bonds, (AMBAC), 4.000%, 07/01/10......... $ 397,876
700,000 Metropolitan Water District of Southern
California, General Obligation Bonds, 4.250%,
03/01/08......................................... 760,249
1,000,000 Metropolitan Water District of Southern
California, General Obligation Bonds, Series A,
3.000%, 03/01/08................................. 1,039,290
960,000 Metropolitan Water District of
Southern California, Revenue Bonds, 5.750%,
07/01/09......................................... 1,119,965
200,000 Metropolitan Water District of Southern
California, Revenue Bonds, Series B,
(MBIA), 5.250%, 07/01/07......................... 220,550
1,000,000 Modesto, California, Irrigation District
Financing Authority Certificates of
Participation, Series A, (MBIA), 4.000%, 07/01/09 1,078,300
975,000 Modesto, California, Irrigation District
Financing Authority Revenue Bonds, Series A,
(MBIA), 5.450%, 10/01/07......................... 1,091,376
1,000,000 Moulton-Niguel, California, Water District
General Obligation Bonds, (AMBAC), 4.000%,
09/01/10......................................... 1,077,200
500,000 Napa County, California, Flood Protection &
Watershed Improvement Revenue Bonds, Series A,
(FGIC), 5.000%, 06/15/13......................... 552,285
250,000 Northern California Power Agency, Public Power
Revenue Bonds, Geothermal Project, Series A,
(AMBAC), 5.500%, 07/01/05........................ 263,525
125,000 Northern California Power Agency, Public Power
Revenue Bonds, Series A, (AMBAC), 5.600%,
07/01/06......................................... 136,471
250,000 Novato, California, General
Obligation Bonds, Series A, (MBIA), 6.250%,
08/01/07......................................... 284,553
See Notes to Financial Statements.
25
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
California Tax-Exempt Income Fund -- (continued)
Principal Value
Amount (Note 1)
- ---------- ----------
TAX-EXEMPT SECURITIES -- (continued)
$1,100,000 Orange County, California, Local Transportation
Authority Sales Tax
Revenue Bonds, 1st Senior, (AMBAC), 6.000%,
02/15/08......................................... $1,258,268
1,000,000 Orange County, California, Local Transportation
Authority Sales Tax
Revenue Bonds, 2nd Senior, (FGIC), 6.000%,
02/15/07......................................... 1,118,070
1,500,000 #Orange County, California, Sanitation District,
Certificates of Participation, Series A, 1.100%,
08/01/29......................................... 1,500,000
1,000,000 Oxnard, California, Wastewater District Financing
Authority Revenue Bonds, (FGIC), 3.500%, 06/01/09 1,055,510
1,000,000 Rancho, California, Water District Financing
Authority Revenue Bonds, Series A,
(FSA), 5.500%, 08/01/10.......................... 1,162,960
250,000 Sacramento County, California, Certificates of
Participation, Public Facilities Project,
(MBIA), 4.875%, 02/01/05......................... 257,953
255,000 Sacramento, California, City Financing Authority
Lease Revenue Bonds, Series A, (AMBAC), 5.050%,
11/01/06......................................... 278,297
300,000 San Bernardino County, California, Certificates
of Participation, Medical Center
Financing Project, (MBIA), 5.500%, 08/01/07...... 335,631
255,000 San Bernardino County, California, Transportation
Authority Sales Tax Revenue Bonds, Series A,
(MBIA), 4.625%, 03/01/05......................... 263,333
1,000,000 San Diego County, California,
Certificates of Participation, (AMBAC), 5.000%,
11/01/11......................................... 1,139,640
250,000 San Diego, California, General Obligation Bonds,
Public Safety Communication Project, 6.500%,
07/15/08......................................... 294,770
1,000,000 San Diego, California, Public Facilities
Financing Authority Sewer Revenue Bonds,
(FGIC), 5.200%, 05/15/13......................... 1,060,970
Principal Value
Amount (Note 1)
- ---------- ----------
TAX-EXEMPT SECURITIES -- (continued)
$ 300,000 San Diego, California, Public Facilities
Financing Authority
Sewer Revenue Bonds, Series B, (FGIC), 5.000%,
05/15/08......................................... $ 331,752
1,000,000 San Diego, California, Public Facilities
Financing Authority Water Revenue Bonds,
(MBIA), 5.000%, 08/01/11......................... 1,135,480
875,000 San Francisco, California, Bay Area Rapid Transit
District, Sales Tax Revenue Bonds, 5.500%,
07/01/07......................................... 976,395
1,500,000 San Francisco, California, City & County Airports
Commission Airport Revenue Bonds, 2nd Series,
Issue 20, (MBIA), 5.000%, 05/01/06............... 1,610,850
1,000,000 San Francisco, California, City & County General
Obligation Bonds, (FSA), 5.000%, 06/15/08........ 1,117,960
680,000 San Francisco, California, City & County General
Obligation Bonds, Series 1, (FGIC), 4.500%,
06/15/05......................................... 707,601
1,020,000 San Francisco, California, City & County Parking
Authority Revenue Bonds, Parking Meter Project,
Series 1, (FGIC), 4.000%, 06/01/06............... 1,076,773
325,000 San Francisco, California, City & County Public
Utilities Commission Water Revenue Bonds, Series
A, 6.500%, 11/01/04.............................. 334,620
San Jose, California, Redevelopment Agency Tax
Allocation Bonds, Merged Area Redevelopment
500,000 Project, (AMBAC), 5.000%, 08/01/07............... 551,360
625,000 4.750%, 08/01/05................................. 654,769
300,000 San Mateo County, California, Joint Powers
Financing Authority Revenue Bonds, San Mateo
County
Health Care Center, Series A, (FSA), 5.600%,
07/15/04......................................... 303,777
See Notes to Financial Statements.
26
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
California Tax-Exempt Income Fund -- (continued)
Principal Value
Amount (Note 1)
- ---------- -----------
TAX-EXEMPT SECURITIES -- (continued)
$ 500,000 San Mateo County, California, Transportation
Authority
Revenue Bonds, Series A, (MBIA), 4.200%, 06/01/04 $ 502,520
750,000 San Mateo County, California, Transportation
District, Sales Tax Revenue Bonds, Series A,
(FSA), 5.000%, 06/01/09.......................... 847,898
510,000 Santa Barbara, California, Waterfront
Certificates of Participation, (AMBAC), 4.125%,
10/01/12......................................... 546,001
1,075,000 Santa Clara County, California, Financing
Authority, Series A, (AMBAC), 4.500%, 05/15/12... 1,139,113
500,000 Santa Clara County, California, Transportation
District, Sales Tax Revenue Bonds, Series
A, 4.500%, 06/01/06.............................. 532,020
1,000,000 Santa Rosa, California, Wastewater System Revenue
Bonds, Series B, 4.000%, 09/01/11................ 1,071,250
1,000,000 Southern California Public Power Authority
Revenue Bonds, Series A, (MBIA), 5.250%, 07/01/09 1,131,880
1,000,000 Southern California Public Power Authority
Revenue Bonds, Southern Transmission, Series B,
(FSA), 4.250%, 07/01/11.......................... 1,085,500
600,000 University of California Revenue Bonds,
Multi-Purpose Projects, Series F,
(FGIC), 5.000%, 09/01/08......................... 655,212
-----------
59,800,261
-----------
TAX-EXEMPT SECURITIES -- ESCROWED IN
U.S. GOVERNMENTS -- 6.32%
100,000 California Educational Facilities Authority
Revenue Bonds, Santa Clara University Project,
(MBIA), 4.900%, 09/01/06 (Escrowed to Maturity).. 108,448
Principal Value
Amount (Note 1)
- ---------- ----------
TAX-EXEMPT SECURITIES -- ESCROWED IN
U.S. GOVERNMENTS -- (continued)
$ 750,000 California State, General Obligation Bonds,
(FGIC), 6.000%, 08/01/19 (Prerefunded 08/01/04 @
102)............................................. $ 777,225
1,000,000 Long Beach, California, Water Revenue
Bonds, 6.250%, 05/01/24 (Prerefunded 05/01/04 @
102)............................................. 1,023,870
125,000 Los Angeles, California, Department of Water &
Power Revenue Bonds, (AMBAC), 4.600%,
08/15/06 (Escrowed to Maturity).................. 127,722
40,000 Metropolitan Water District of Southern
California, Revenue Bonds, 5.750%,
07/01/09 (Escrowed to Maturity).................. 46,989
125,000 Northern California Power Agency, Public Power
Revenue Bonds, Series A, (AMBAC), 5.600%,
07/01/06 (Escrowed to Maturity).................. 137,111
400,000 Sacramento County, California, Sanitation
District Revenue Bonds, 5.500%,
12/01/05 (Escrowed to Maturity).................. 429,132
825,000 San Bernardino County, California, Certificates
of Participation, Medical Center Financing
Project, Series A, (MBIA), 5.500%,
08/01/22 (Prerefunded 08/01/05 @ 102)............ 890,258
500,000 San Francisco, California, Bay Area Rapid Transit
District, Sales Tax Revenue Bonds,
(FGIC), 5.500%, 07/01/20 (Prerefunded 07/01/05 @
101)............................................. 532,760
150,000 Santa Barbara County, California, Local
Transportation Authority Sales Tax Revenue
Bonds, (FGIC), 4.900%, 04/01/06 (Prerefunded
04/01/04 @ 101).................................. 151,500
----------
4,225,015
----------
See Notes to Financial Statements.
27
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
California Tax-Exempt Income Fund -- (continued)
Value
Shares (Note 1)
- --------- -----------
SHORT-TERM INVESTMENTS -- 5.02%
1,718,793 @BlackRock California Money Fund.................. $ 1,718,793
1,636,706 @Federated California Money Fund.................. 1,636,706
-----------
3,355,499
-----------
TOTAL INVESTMENTS (Cost $64,463,629).............. 100.73% $67,380,775
OTHER ASSETS & LIABILITIES (NET).................. (0.73) (486,399)
------ -----------
NET ASSETS........................................ 100.00% $66,894,376
====== ===========
- --------
AMBAC--American Municipal Bond Assurance Corp.
FGIC--Financial Guaranty Insurance Corp.
MBIA--Municipal Bond Insurance Assoc.
FSA--Financial Security Assurance
# Variable rate demand bonds and notes are payable upon not more than seven
business days notice. Rate shown is as of March 31, 2004.
@ Registered Investment Company
Notes:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Adviser, under the supervision of the Board of
Directors, to be of comparable quality at the time of purchase to rated
instruments that may be acquired by the Fund.
At March 31, 2004, approximately 6% of the net assets are invested in municipal
securities that have letter of credit enhancement features or escrows in U.S.
Government securities backing them, on which the Fund relies. Without such
features, the securities may or may not meet the quality standards of
securities purchased by the Fund.
At March 31, 2004, approximately, 96% of the net assets are invested in
California municipal securities. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers to pay the required principal and interest payments of the municipal
securities.
At March 31, 2004, approximately, 60%, 22%, 10% and 3% of the net assets are
invested in revenue bonds, general obligation bonds, certificates of
participation and tax allocation bonds, respectively.
See Notes to Financial Statements.
28
EXCELSIOR TAX-EXEMPT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Excelsior Tax-Exempt Funds, Inc. ("Excelsior Tax-Exempt Fund") was
incorporated under the laws of the State of Maryland on August 8, 1984 and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as open-end diversified management investment companies with the
exception of New York Intermediate-Term Tax-Exempt Fund, California Tax-Exempt
Income Fund and New York Tax-Exempt Money Fund, each of which are
non-diversified.
Excelsior Tax-Exempt Fund currently offers shares in seven managed
investment portfolios, each having its own investment objectives and policies.
The following is a summary of significant accounting policies for Long-Term
Tax-Exempt Fund, Intermediate-Term Tax-Exempt Fund, Short-Term Tax-Exempt
Securities Fund, New York Intermediate-Term Tax-Exempt Fund and California
Tax-Exempt Income Fund (the "Portfolios"). Such policies are in conformity with
accounting principles generally accepted in the United States of America and
are consistently followed by Excelsior Tax-Exempt Fund in the preparation of
the financial statements. The preparation of financial statements requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The financial statements for the remaining portfolios of
Excelsior Tax-Exempt Fund are presented separately.
(a) Portfolio valuation:
Securities are valued each business day as of the close of the New York
Stock Exchange after consultation with an independent pricing service (the
"Service"). When in the judgement of the Service, quoted bid prices for
securities are readily available and are representative of the bid side of
the market, these investments are valued at the mean between the quoted bid
prices (as obtained by the Service from dealers in such securities) and ask
prices (as calculated by the Service based upon its evaluation of the market
for such securities). Short-term debt instruments with remaining maturities
of 60 days or less, and variable rate demand notes and securities with put
options exercisable within one year, are valued at amortized cost, which
approximates market value. Securities for which market quotations are not
readily available are valued at fair value pursuant to guidelines adopted by
Excelsior Tax-Exempt Fund's Board of Directors.
(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 discounts on
investments, is earned from settlement date and is recorded on the accrual
basis.
(c) Distributions to shareholders:
Dividends from net investment income are declared daily and paid monthly.
Net realized capital gains, unless offset by any available capital loss
carryforwards, are distributed at least annually. Dividends and
distributions are recorded on the ex-dividend date.
29
(d) 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, Shareholder Servicing Fees and
Related Party Transactions:
United States Trust Company of New York ("U.S. Trust NY") and U.S. Trust
Company, N.A. (together the "Adviser"), acting through their respective
registered investment advisory divisions, U.S. Trust New York Asset Management
Division and U.S. Trust Company, N.A. Asset Management Division, serve as the
investment adviser to the Portfolios. For the services provided pursuant to the
Investment Advisory Agreements, the Adviser receives a fee, computed daily and
paid monthly, at the annual rates of 0.30% of the average daily net assets of
Short-Term Tax-Exempt Securities Fund, 0.35% of the average daily net assets of
Intermediate-Term Tax-Exempt Fund and 0.50% of the average daily net assets of
each of Long-Term Tax-Exempt Fund, New York Intermediate-Term Tax-Exempt Fund
and California Tax-Exempt Income Fund. U.S. Trust NY is a state-chartered bank
and trust company and a member bank of the Federal Reserve System. U.S. Trust
Company, N.A. is a national bank organized under the laws of the United States.
Each is a wholly-owned subsidiary of U.S. Trust Corporation, a registered bank
holding company. U.S. Trust Corporation is a wholly-owned subsidiary of The
Charles Schwab Corporation ("Schwab").
U.S. Trust Company, N.A., SEI Investments Global Funds Services and
Federated Services Company (collectively, the "Administrators") provide
administrative services to Excelsior Tax-Exempt Fund. For the services provided
to the Portfolios, the Administrators are entitled jointly to annual fees,
computed daily and paid monthly, based on the combined aggregate average daily
net assets of Excelsior Tax-Exempt Fund, Excelsior Funds, Inc. and Excelsior
Funds Trust (excluding the international equity portfolios of Excelsior Funds,
Inc. and Excelsior Funds 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. Until further notice to the Portfolios, U.S. Trust Company, N.A. has
voluntarily agreed to waive a portion of its administration fee in an amount
equal to an annual rate of 0.04% of the average daily net assets of each
Portfolio. For the year ended March 31, 2004, administration fees charged by
U.S. Trust Company, N.A., were as follows:
Waiver of Net
Administration Administration Administration
Fees Fees Fees
-------------- -------------- --------------
Long-Term Tax-Exempt Fund................. $100,382 $ 33,453 $ 66,929
Intermediate-Term Tax-Exempt Fund......... 481,916 160,319 321,597
Short-Term Tax-Exempt Securities Fund..... 375,395 124,693 250,702
New York Intermediate-Term Tax-Exempt Fund 219,233 72,926 146,307
California Tax-Exempt Income Fund......... 77,884 25,899 51,985
From time to time, in their sole discretion, U.S. Trust 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. For the year ended March 31, 2004,
U.S. Trust has contractually agreed to waive investment advisory fees and to
30
reimburse other ordinary operating expenses to the extent necessary to keep
total operating expenses from exceeding the following annual percentages of
each Portfolio's average daily net assets:
Long-Term Tax-Exempt Fund................. 0.80%
Intermediate-Term Tax-Exempt Fund......... 0.65%
Short-Term Tax-Exempt Securities Fund..... 0.60%
New York Intermediate-Term Tax-Exempt Fund 0.80%
California Tax-Exempt Income Fund......... 0.50%
For the year ended March 31, 2004, pursuant to the above, U.S. Trust waived
investment advisory fees totaling $133,830 for the California Tax-Exempt Income
Fund.
The Portfolios have entered into shareholder servicing agreements with
various service organizations, which may include Schwab, U.S. Trust and
affiliates of U.S. Trust. Services included in the servicing agreements are
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.
Shareholder servicing fees are incurred on a Portfolio and class level (where
applicable). As a consideration for these services, each service organization
receives a fee, computed daily and paid monthly, at an annual rate up to 0.25%
(0.40% prior to July 29, 2003) of the average daily net assets of its shares
held by each service organizations' customers.
U.S. Trust has voluntarily agreed to waive investment advisory and
administration fees payable in an amount equal to the shareholder servicing
fees payable to affiliates.
For the year ended March 31, 2004, shareholder servicing fees paid to
Schwab, U.S. Trust and affiliates of U.S. Trust:
Amount
Waived as
Investment
Amount Advisory
Paid Fees
-------- ----------
Long-Term Tax-Exempt Fund................. $ 34,897 $ 25,555
Intermediate-Term Tax-Exempt Fund......... 147,989 135,324
Short-Term Tax-Exempt Securities Fund..... 244,572 234,580
New York Intermediate-Term Tax-Exempt Fund 22,614 15,817
California Tax-Exempt Income Fund......... 101,934 96,842
Edgewood Services, Inc. (the "Distributor"), a wholly-owned subsidiary of
Federated Investors, Inc., serves as the distributor of Excelsior Tax-Exempt
Fund. Shares of each Portfolio are sold without a sales charge on a continuous
basis by the Distributor.
31
Boston Financial Data Services, Inc. ("BFDS") serves as transfer agent to
the Portfolios.
Each Independent Director of the Portfolios receives an annual fee of
$15,000, plus a meeting fee of $2,500 for each meeting attended. The Chairman
receives an additional annual fee of $7,500. Each member of the Nominating
Committee receives an annual fee of $2,000 for services in connection with this
committee, plus a meeting fee of $1,000 for each meeting attended. In addition,
Directors are reimbursed by the Excelsior Tax-Exempt Fund, for reasonable
expenses incurred when acting in their capacity as Directors.
3. Purchases, Sales and Maturities of Securities:
For the year ended March 31, 2004, purchases, sales and maturities of
securities, excluding short-term investments, for the Portfolios aggregated:
Sales and
Purchases Maturities
------------ ------------
Long-Term Tax-Exempt Fund................. $ 58,417,098 $ 70,429,053
Intermediate-Term Tax-Exempt Fund......... 89,768,800 103,729,185
Short-Term Tax-Exempt Securities Fund..... 210,188,520 177,126,760
New York Intermediate-Term Tax-Exempt Fund 55,607,380 58,534,890
California Tax-Exempt Income Fund......... 11,182,543 9,009,883
4. Federal Taxes:
It is the policy of Excelsior Tax-Exempt Fund that each Portfolio continue
to qualify as a regulated investment company, 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.
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.
Dividends and distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for deferral of
losses on wash sales and net capital losses incurred after October 31 and
within the taxable year ("Post-October losses"). To the extent these
differences are permanent, adjustments are made to the appropriate equity
accounts in the period that the differences arise. Accordingly, the following
reclassifications have been made to/from the following accounts:
Undistributed Accumulated
Net Investment Net Realized
Income Gain (Loss)
-------------- ------------
New York Intermediate-Term Tax-Exempt Fund $ (871) $ 871
California Tax-Exempt Income Fund......... 1,556 (1,556)
32
The tax character of dividends and contributions declared during the years
ended March 31, 2004 and March 31, 2003 were as follows:
Long-Term
Tax-Exempt Ordinary Capital
Income Income Gains Total
----------- ---------- ----------- -----------
Long-Term Tax-Exempt Fund
2004..................................... $ 2,199,868 -- -- $ 2,199,868
2003..................................... 3,309,713 $ 1,231 -- 3,310,944
Intermediate-Term Tax-Exempt Fund
2004..................................... 10,386,027 1,128,243 $12,402,638 23,916,908
2003..................................... 12,412,447 -- 2,583,052 14,995,499
Short-Term Tax-Exempt Securities Fund
2004..................................... 3,456,342 -- -- 3,456,342
2003..................................... 3,712,472 -- -- 3,712,472
New York Intermediate-Term Tax-Exempt Fund
2004..................................... 4,386,298 303,039 5,482,307 10,171,644
2003..................................... 5,629,628 -- 2,636,726 8,266,354
California Tax-Exempt Income Fund
2004..................................... 2,026,301 -- -- 2,026,301
2003..................................... 2,115,479 -- 11,932 2,127,411
As of March 31, 2004, the components of distributable earnings on a tax
basis were as follows:
Long-Term Other
Ordinary Tax-Exempt Capital Capital Loss Unrealized Temporary
Income Income Gains Carryforward Appreciation Difference Total
-------- ---------- ---------- ------------ ------------ ---------- -----------
Long-Term Tax-
Exempt Fund.... -- $147,924 -- $(548,194) $ 1,410,607 $(147,796) $ 862,541
Intermediate-Term
Tax-Exempt
Fund........... $256,062 851,303 $1,288,102 -- 16,082,047 (845,759) 17,631,755
Short-Term Tax-
Exempt
Securities
Fund........... 24,949 295,012 22,878 -- 1,430,542 (282,324) 1,491,057
New York
Intermediate-
Term Tax-
Exempt Fund.... -- 345,043 893,415 -- 5,375,729 (343,016) 6,271,171
California Tax-
Exempt Income
Fund........... -- 171,112 -- (664) 2,917,146 (169,848) 2,917,746
33
For Federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. To the extent that such
carryforwards are utilized, capital gain distributions will be reduced. At
March 31, 2004, the following Portfolios had capital loss carryforwards for
Federal tax purposes available to offset future net capital gains through the
indicated expiration dates:
Expiration Date
-------------------
March 31, March 31,
2009 2012 Total
--------- --------- --------
Long-Term Tax-Exempt Fund........ $548,194 -- $548,194
California Tax-Exempt Income Fund -- $664 664
During the year ended March 31, 2004, the Long-Term Tax-Exempt Fund and
Short-Term Tax-Exempt Fund utilized capital loss carryforwards totaling
$1,999,078 and $90,440, respectively, to offset realized capital gains.
At March 31, 2004, 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
Federal Unrealized Unrealized Unrealized
Tax Cost Appreciation (Depreciation) Appreciation
------------ ------------ -------------- ------------
Long-Term Tax-Exempt Fund............ $ 70,893,065 $ 1,410,607 -- $ 1,410,607
Intermediate-Term Tax-Exempt Fund.... 368,382,039 16,276,249 $(194,202) 16,082,047
Short-Term Tax-Exempt Securities Fund 359,682,386 1,435,061 (4,519) 1,430,542
New York Intermediate-Term Tax-Exempt
Fund............................... 170,982,472 5,516,163 (140,434) 5,375,729
California Tax-Exempt Income Fund.... 64,463,629 2,952,520 (35,374) 2,917,146
5. Common Stock:
Excelsior Tax-Exempt Fund currently has authorized capital of 24 billion
shares of Common Stock, 15 billion of which is currently classified to
represent interests in certain classes of shares. Authorized capital currently
classified for each Portfolio is as follows: 1.5 billion shares each of
Long-Term Tax-Exempt Fund, Intermediate-Term Tax-Exempt Fund, Short-Term
Tax-Exempt Securities Fund, New York Intermediate-Term Tax-Exempt Fund, and
California Tax-Exempt Income Fund.
Each share has a par value of $0.001 and represents an equal proportionate
interest in the particular Portfolio with other shares of the same Portfolio,
and is entitled to such dividends and distributions of taxable and tax-exempt
earnings on the assets belonging to such Portfolio as are declared at the
discretion of Excelsior Tax-Exempt Fund's Board of Directors.
34
Long-Term Tax-Exempt Fund
------------------------------------------------------
Year Ended Year Ended
03/31/04 03/31/03
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Sold............................... 1,973,824 $ 19,719,700 5,081,297 $ 49,458,276
Issued as reinvestment of dividends 33,235 330,955 48,822 477,558
Redeemed........................... (4,333,803) (43,227,377) (7,739,473) (75,686,646)
----------- ------------- ----------- -------------
Net (Decrease)..................... (2,326,744) $ (23,176,722) (2,609,354) $ (25,750,812)
=========== ============= =========== =============
Intermediate-Term Tax-Exempt Fund
------------------------------------------------------
Year Ended Year Ended
03/31/04 03/31/03
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Sold............................... 10,553,521 $ 104,290,828 15,584,952 $ 152,155,618
Issued as reinvestment of dividends 183,521 1,779,145 107,316 1,050,586
Redeemed........................... (11,939,158) (118,008,037) (13,904,896) (135,872,328)
----------- ------------- ----------- -------------
Net Increase (Decrease)............ (1,202,116) $ (11,938,064) 1,787,372 $ 17,333,876
=========== ============= =========== =============
Short-Term Tax-Exempt Securities Fund
------------------------------------------------------
Year Ended Year Ended
03/31/04 03/31/03
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Sold............................... 29,901,468 $ 215,547,037 30,230,078 $ 217,600,870
Issued as reinvestment of dividends 17,156 123,645 13,775 99,187
Redeemed........................... (20,414,339) (147,073,098) (12,887,229) (92,778,309)
----------- ------------- ----------- -------------
Net Increase....................... 9,504,285 $ 68,597,584 17,356,624 $ 124,921,748
=========== ============= =========== =============
New York Intermediate-Term Tax-Exempt Fund
------------------------------------------------------
Year Ended Year Ended
03/31/04 03/31/03
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Sold............................... 4,175,816 $ 38,017,393 6,548,542 $ 59,361,443
Issued as reinvestment of dividends 120,743 1,083,430 76,380 692,836
Redeemed........................... (4,975,150) (45,321,700) (6,515,400) (59,172,249)
----------- ------------- ----------- -------------
Net Increase (Decrease)............ (678,591) $ (6,220,877) 109,522 $ 882,030
=========== ============= =========== =============
California Tax-Exempt Income Fund
------------------------------------------------------
Year Ended Year Ended
03/31/04 03/31/03
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Sold............................... 2,479,328 $ 18,593,918 2,748,255 $ 20,492,940
Issued as reinvestment of dividends 17,600 131,929 13,055 97,474
Redeemed........................... (2,405,845) (18,013,017) (1,931,582) (14,406,311)
----------- ------------- ----------- -------------
Net Increase....................... 91,083 $ 712,830 829,728 $ 6,184,103
=========== ============= =========== =============
35
6. Line of Credit:
The Portfolios and other affiliated funds participate in a $50 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 redemption
of Portfolio shares. Interest is charged to each Portfolio, based on its
borrowings, at a rate equal to the Federal Funds Rate plus 0.50% per year. In
addition, a commitment fee, equal to an annual rate of 0.15% of the average
daily unused portion of the line of credit, is allocated among the
participating Portfolios at the end of each quarter, and is included in
miscellaneous expenses on the Statements of Operations. For the year ended
March 31, 2004, the Portfolios had no borrowings under the agreement.
7. Guarantees:
In the normal course of business, the Portfolios enter into contracts that
provide general indemnifications. The Portfolios' maximum exposure under these
arrangements is dependent on future claims that may be made against the
Portfolios, and therefore, cannot be established; however, based on experience,
the risk of loss from such claim is considered remote.
8. Legal Proceedings:
U.S. Trust Company, N.A., United States Trust Company of New York, the
investment advisers (the "Adviser") of Excelsior Funds, Inc., Excelsior
Tax-Exempt Funds, Inc. and Excelsior Funds Trust (collectively the "Companies")
and the Companies have been contacted by the Office of the New York State
Attorney General (the "NYAG") and the Adviser has been contacted by the
Securities and Exchange Commission (the "SEC") in connection with their
investigation of practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares (the "Investigations"). The
Adviser has also been contacted, through its parent, by the U.S. Attorney's
Office in San Francisco and the Attorney General of the State of West Virginia
(the "WVAG") with inquiries regarding the same subject matter. The Adviser and
the Companies have been providing full cooperation with respect to these
investigations, and continue to review the facts and circumstances relevant to
the investigations.
Four class actions suits have been filed against the Companies and the
Adviser: James Page Jr. v. Charles Schwab et al. (filed on November 20, 2003 in
the United States District Court for the Northern District of California); A.
Joseph Szydlowski v. Charles Schwab et al. (filed December 4, 2003 in the
United States District Court for the Southern District of New York); Wilson v.
Excelsior Funds, et al. (filed December 10, 2003 in the United States District
Court for the Southern District of New York); and John R. Granelli v. Charles
Schwab, et al. (filed January 20, 2004 in the United States District Court for
the Southern District of New York). While details in each suit vary, in general
each alleges that during the Class Period, the Adviser, the Companies and
others allowed certain parties and others to engage in illegal and improper
trading practices, which caused financial injury to the shareholders of the
Companies. Each demands unspecified monetary damages. The Wilson complaint also
demands a rescission of the contract with the advisers.
A fifth class action complaint, styled Mike Sayegh v. Janus Capital Corp. et
al., was filed in Los Angeles Superior Court on or about October 22, 2003. On
or about December 3, 2003, the Companies were served with a copy of the
complaint in Sayegh on the basis that they were one of the several Doe
36
Defendants named in the complaint. The complaint alleges violations of the
California Business and Professions Code, arising from improper trading
activities, and seeks injunctive, declaratory, and other equitable relief in
addition to unspecified monetary damages. The extent to which and capacity in
which the Funds may have had any role in the allegations contained therein is
currently unclear.
In addition, a derivative action, styled Richard Elliott v. Charles Schwab
Corporation, et al., No. 04 CV 2262, which is purportedly brought on behalf of
Excelsior High Yield Fund and Excelsior Funds Trust, alleges violations of
Section 36 of the Investment Company Act, 15 U.S.C. (S) 80a-35(b) and the
common law breach of fiduciary duty by Schwab, the Adviser and certain
directors of the Companies. This action has not yet been served on the
Companies or their directors.
The Adviser and the Companies are evaluating the claims in these complaints
and intend to vigorously defend against them. The Adviser anticipates
consolidation of these suits is possible. On February 20, 2004, the Judicial
Panel on Multi-District Litigation issued an order transferring 96 actions
involving allegations of mutual fund late trading and market timing to the
United States District Court for the District of Maryland, for coordinated or
consolidated pretrial proceedings ("MDL 1586"). On March 3, 2004, however, the
Panel issued a Conditional Transfer Order which transferred additional "tag
along cases" to MDL 1586, including the Sayegh, Page and Wilson actions. The
Adviser expects that most or all of the civil actions regarding alleged late
trading and/or market timing, which are pending in federal courts, will
ultimately be transferred to MDL 1586.
Based on currently available information, the Adviser believes that the
likelihood is remote that the pending private lawsuits and Investigations will
have a material adverse financial impact on the Companies, and that the pending
Investigations and private lawsuits are not likely to materially affect its
ability to provide investment management services to the Companies.
37
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Boards of Directors of Excelsior Tax-Exempt Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Long-Term Tax-Exempt,
Intermediate-Term Tax-Exempt, Short-Term Tax-Exempt Securities, New York
Intermediate-Term Tax-Exempt, and California Tax-Exempt Income Portfolios (five
of the portfolios constituting the Excelsior Tax-Exempt Funds, Inc.) (the
"Funds") as of March 31, 2004, and the related statements of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Funds' 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 auditing standards generally
accepted in the United States. 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, 2004, by correspondence with the custodian and brokers or
by 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 Long-Term Tax-Exempt, Intermediate-Term Tax-Exempt, Short-Term
Tax-Exempt Securities, New York Intermediate-Term Tax-Exempt, and California
Tax-Exempt Income Funds at March 31, 2004, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 7, 2004
38
Directors/Trustees and Officers of the Excelsior Funds Complex (Unaudited)
Information pertaining to the directors/trustees and officers of Excelsior
Fund, Excelsior Tax-Exempt Fund and Excelsior Funds Trust (each a "Company" and
collectively, the "Excelsior Funds Complex") is set forth below.
Directors/Trustees who are not deemed to be "interested persons" of the
Excelsior Funds Complex as defined in the 1940 Act are referred to as
"Independent Board Members." Directors/Trustees who are deemed to be
"interested persons" of the Excelsior Funds Complex are referred to as
"Interested Board Members."
Number of
Portfolios in
Excelsior
Term of Funds
Office and Complex Other
Position(s) Length of Overseen by Directorships
Name, Address, Held with each Time Principal Occupation(s) Board Held by Board
Age(1) Company Served(2) During Past 5 Years Member(3) Member(4)
-------------- -------------- ------------- ------------------------------------------- ------------- -------------
INTERESTED BOARD MEMBER
James L. Bailey(5) Director/ Since Executive Vice President of U.S. Trust N/A N/A
114 West 47th Trustee February 2004 Corporation and U.S. Trust New York
Street (since January 2003); President, Excelsior
New York, NY Fund, Excelsior Tax-Exempt Fund and
10036 Excelsior Funds Trust (since May 2003);
Age: 58 Consultant in the financial services
industry (from August 2000 to January
2003); Executive Vice President of Citicorp
(1992 to August 2000).
INDEPENDENT BOARD MEMBERS
Frederick S. Wonham Director/ Since 1997 Retired; Chairman of the Board (since 32 None
Age: 72 Trustee, 1997) and President, Treasurer and
Chairman of Director (since 1995) of Excelsior Fund
the Board and Excelsior Tax-Exempt Fund; Chairman
of the Boards (since 1997), President,
Treasurer and Trustee (since 1995) of
Excelsior Funds Trust; Vice Chairman of
U.S. Trust Corporation and U.S. Trust New
York (from February 1990 until September
1995); and Chairman, U.S. Trust Company
(from March 1993 to May 1997).
Rodman L. Drake Director/ Since 1994 Director of Excelsior Fund and Excelsior 32 4
Age: 61 Trustee Tax-Exempt Fund (since 1996); Trustee of
Excelsior Funds Trust (since 1994);
Director, Parsons Brinkerhoff, Inc.
(engineering firm) (since 1995); President,
Continuation Investments Group, Inc.
(since 1997); President, Mandrake Group
(investment and consulting firm) (1994-
1997); Chairman, MetroCashcard
International Inc. (since 1999); Director,
Hotelivision, Inc. (since 1999); Director,
Alliance Group Services, Inc. (since 1998);
Director, Clean Fuels Technology Corp.
(since 1998); Director, Absolute Quality
Inc. (since 2000); Director, Hyperion Total
Return Fund, Inc. and three other funds
for which Hyperion Capital Management,
Inc. serves as investment adviser (since
1991); Director, The Latin America Smaller
Companies Fund, Inc. (from 1993 to 1998).
39
Number of
Portfolios in
Excelsior
Term of Funds
Office and Complex Other
Position(s) Length of Overseen by Directorships
Name, Address, Held with each Time Principal Occupation(s) Board Held by Board
Age(1) Company Served(2) During Past 5 Years Member(3) Member(4)
-------------- -------------- ---------- --------------------------------------- ------------- -------------
Mel Hall Director/ Since 2000 Director of Excelsior Fund and 32 None
Age: 59 Trustee Excelsior Tax-Exempt Fund (since
July 2000); Trustee of Excelsior
Funds Trust (since July 2000); Chief
Executive Officer, Comprehensive
Health Services, Inc. (health care
management and administration).
Roger M. Lynch Director/ Since 2001 Retired; Director of Excelsior Fund 32 None
Age: 63 Trustee and Excelsior Tax-Exempt Fund and
Trustee of Excelsior Funds Trust
(since September 2001); Chairman
of the Board of Trustees of Fairfield
University (since 1996); Director,
SLD Commodities, Inc. (importer of
nuts) (since 1991); President,
Corporate Asset Funding Co., Inc.
(asset securitization) (from 1987 to
1999); General Partner (from 1980
to 1986) and Limited Partner (from
1986 to 1999), Goldman Sachs &
Co.; Chairman, Goldman Sachs
Money Markets, Inc. (from 1982 to
1986).
Jonathan Piel Director/ Since 1994 Director, Excelsior Funds, Inc. and 32 None
Age: 65 Trustee Excelsior Tax-Exempt Funds, Inc.
(since 1996); Trustee, Excelsior
Funds Trust (since 1994); Director,
Group for the South Fork,
Bridgehampton, NY (since 1993).
Retired in 1994 as The Editor,
Scientific American and Vice President,
Scientific American, Inc.
OFFICERS
Mary Martinez Executive Since Managing Director U.S. Trust N/A N/A
114 West 47th Street Vice President February Company and Chief Operating
New York, NY 10036 2004 Officer of Investment Products
Age: 44 (since 2003); Managing Director and
Director of Relationship
Management Service, Marketing,
Information and Technology at
Bessemer Trust (1998 to 2003).
Joseph Trainor Vice President Since Managing Director U. S. Trust N/A N/A
114 West 47th Street February Company (since 2003); President of
New York, NY 10036 2004 MFS Institutional Advisors (1998 to
Age: 43 2002).
40
Number of
Portfolios in
Excelsior
Term of Funds
Office and Complex Other
Position(s) Length of Overseen by Directorships
Name, Address, Held with each Time Principal Occupation(s) Board Held by Board
Age(1) Company Served(2) During Past 5 Years Member(3) Member(4)
-------------- --------------- ---------- ------------------------------------ ------------- -------------
Agnes Mullady Treasurer Since Senior Vice President, U.S. Trust N/A N/A
225 High Ridge Road Chief Financial February Company (since 2004); Chief
Stamford, and Chief 2004 Financial Officer, AMIC Distribution
CT 06905 Accounting Partners, (2002 to 2004); Controller
Age : 45 Officer Reserve Management Corporation,
Reserve Management Company, Inc.
and Reserve Partners, Inc. (2000 to
2002); Vice President and Treasurer,
Northstar Funds; Senior Vice
President and Chief Financial
Officer, Northstar Investment
Management Corp.; President and
Treasurer, Northstar Administrators
Corp.; and Vice President and
Treasurer, Northstar Distributors,
Inc. (1993 to 2000).
Frank Bruno Vice President Since 2001 Vice President, U.S. Trust Company N/A N/A
225 High Ridge Road and Assistant (since 1994); Vice President and
Stamford, CT 06905 Treasurer Assistant Treasurer, Excelsior Fund,
Age: 44 Excelsior Tax-Exempt Fund and
Excelsior Funds Trust (since
February 2001).
Joseph Leung Vice President Since Vice President, U.S. Trust Company N/A N/A
225 High Ridge Road and Assistant May 2003 (since March 2003); Vice President
Stamford, CT 06905 Treasurer and Assistant Treasurer, Excelsior
Age: 38 Fund, Excelsior Tax-Exempt Fund
and Excelsior Funds Trust (since
May 2003); Vice President of Merrill
Lynch & Co. (from 2000 to 2002);
Treasurer, Vice President and Chief
Accounting Officer of Midas Funds,
Bexil Fund, Tuxis Fund, Global
Income Fund and Winmill & Co.
Incorporated (from 1995 to 2000).
Michael R. Rosella, Esq. Acting Since Partner, Paul, Hastings, Janofsky & N/A N/A
75 East 55th Street Secretary and February Walker LLP (law firm) (since 2000);
New York, NY 10022 Chief Legal 2004 Partner, Battle Fowler LLP (law
Age: 46 Officer firm) (1988 to 2000).
Lee Wilcox Assistant Since Employed by SEI Investments since N/A N/A
530 E. Swedesford Treasurer June 2002 June 2002. Director of Fund
Road Accounting, SEI Investments since
Wayne, PA 19087 June 2002. Senior Operations
Age: 42 Manager of Deutsche Bank Global
Fund Services (2000-2002),
PricewaterhouseCoopers LLP (1995-
2000), United States Army (1982-
1992).
41
Number of
Portfolios in
Excelsior
Term of Funds
Office and Complex Other
Position(s) Length of Overseen by Directorships
Name, Address, Held with each Time Principal Occupation(s) Board Held by Board
Age(1) Company Served(2) During Past 5 Years Member(3) Member(4)
-------------- -------------- ---------- -------------------------------------- ------------- -------------
Timothy D. Barto Assistant Since 2001 Employed by SEI Investments since N/A N/A
One Freedom Treasurer October 1999. Vice President and
Valley Drive Assistant Secretary of SEI Investments
Oaks, PA 19456 since December 1999. Associate at
Age: 36 Dechert, Price & Rhoads (1997-1999).
Associate at Richter, Miller & Finn
(1993-1997).
- --------
(1) Each director/trustee may be contacted by writing to Excelsior Funds, One
Freedom Valley Drive, Oaks, PA 19456.
(2) Each director/trustee shall hold office until the election and
qualification of his or her successor, or until he or she sooner dies,
resigns or is removed. The president, treasurer and secretary of each
Company shall hold office for a one year term and until their respective
successors are chosen and qualified, or in each case until he or she sooner
dies, resigns is removed, or becomes disqualified in accordance with each
Company's by-laws.
(3) The Excelsior Funds Complex consists of all registered investment companies
(Excelsior Fund, Excelsior Tax-Exempt Fund and Excelsior Funds Trust) for
which U.S. Trust serves as investment adviser. As of March 31, 2004, the
Excelsior Funds Complex consisted of 32 Funds.
(4) Directorships of companies required to report to the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (i.e.,
"public companies") or other investment companies registered under the 1940
Act.
(5) Mr. James L. Bailey is a board member who is deemed to be an "interested
person" of the Excelsior Funds Complex, as that term is defined in the 1940
Act, because he is an Executive Vice President of the Investment Adviser.
For more information regarding the Directors/Trustees and Officers, please
refer to the Statement of Additional Information, which is available upon
request by calling 1-800-446-1012.
42
Federal Tax Information: (Unaudited)
For the year ended March 31, 2004, the designation of long-term capital
gains and percentage of exempt interest dividends paid are approximated as
follows:
20% 15%
Long-Term Long-Term Exempt
Capital Gain Capital Gain Interest Dividends
------------ ------------ ------------------
Long-Term Tax-Exempt Fund................. -- -- 100.00%
Intermediate-Term Tax-Exempt Fund......... $9,182,172 $3,220,466 43.77%
Short-Term Tax-Exempt Securities Fund..... -- -- 100.00%
New York Intermediate-Term Tax-Exempt Fund 2,212,274 3,270,033 43.61%
California Tax-Exempt Income Fund......... -- -- 100.00%
43
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AR-TXEX-0304
[LOGO] Excelsior Funds
MONEY MARKET
PORTFOLIOS
ANNUAL REPORT
March 31, 2004
TABLE OF CONTENTS
PAGE
----
LETTER TO SHAREHOLDERS........................................ 1
STATEMENTS OF ASSETS AND LIABILITIES.......................... 2
STATEMENTS OF OPERATIONS...................................... 3
STATEMENTS OF CHANGES IN NET ASSETS........................... 4
FINANCIAL HIGHLIGHTS -- SELECTED PER SHARE DATA AND RATIOS.... 6
PORTFOLIOS OF INVESTMENTS
Money Fund................................................. 8
Government Money Fund...................................... 9
Treasury Money Fund........................................ 10
Tax-Exempt Money Fund...................................... 11
New York Tax-Exempt Money Fund............................. 18
NOTES TO FINANCIAL STATEMENTS................................. 22
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS............. 31
DIRECTORS/TRUSTEES AND OFFICERS OF THE EXCELSIOR FUNDS COMPLEX 32
FEDERAL TAX INFORMATION....................................... 36
For shareholder account information, current price and yield quotations, or to
make an initial purchase or obtain a prospectus, call 1-800-446-1012, from
overseas, call 617-483-7297.
Internet Address: http://www.excelsiorfunds.com
This report must be preceded or accompanied by a current prospectus.
A description of the policies and procedures that Excelsior Funds use to
determine how to vote proxies relating to portfolio securities is available (i)
without charge, upon request, by calling 1-800-446-1012, and (ii) on the
Excelsior Funds' website.
You should consider the Fund's investment objectives, risks, charges and
expenses carefully before you invest. Information about these and other
important subjects is in the Fund's prospectus, which you should read carefully
before investing.
Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. are distributed by
Edgewood Services, Inc.
You may write to Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. at
the following address:
Excelsior Funds
P.O. Box 8529
Boston, MA 02266-8529
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, U.S. TRUST COMPANY, N.A.,
THEIR PARENT AND AFFILIATES AND SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. FUND
SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. ALTHOUGH THE FUNDS
SEEK TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS
POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUNDS.
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
April 2, 2004
Dear Valued Excelsior Shareholder:
The fiscal year ended March 31, 2004 was marked by a continuing market uptrend,
which signaled the end of a difficult multi-year downturn that concluded just
as the new fiscal year began in the spring of 2003. I am pleased to report that
Excelsior's fund managers were ready for the challenge of renewed global growth.
As economic stimulus from Federal Reserve monetary policy and Treasury fiscal
policy took hold, the markets rallied strongly, resulting in double-digit
advances for traditional market measures such as the Standard & Poor's 500
Index.
I also wish to emphasize that when it comes to safeguarding investors, we take
our fiduciary responsibility to our fellow shareholders seriously. Accordingly,
we monitor our daily cash flows and work with intermediaries to identify market
timers and attempt to prohibit them from investing in our funds. Last November,
our Board of Trustees approved enhanced policies to monitor and combat this
activity.
The independent trustees have independent counsel who report to them and assist
them in protecting shareholders' best interests. All employees of the adviser
are required to adhere to a strict Code of Ethics, which prohibits them from
utilizing insider information, from engaging in "late trading" or "market
timing" of any mutual fund's shares.
From the perspective of fees and expense management, we maintain expense caps
on each of our mutual funds. U.S. Trust as adviser reimburses the Funds, when
necessary; to ensure that expense caps are not exceeded. Currently, all
Excelsior Funds are benchmarked under the Lipper Average for expenses.
Additionally, we do not charge front-end sales loads on any of our Funds.
Going forward, we see a more challenging investment environment, with
geo-political uncertainty and a domestic focus on the Presidential election,
along with a clear shift in Federal Reserve policy that we expect will result
in rising interest rates. We expect that U.S. Trust's portfolio managers will
continually evaluate their investment decisions, since it is our belief that
new investment opportunities will emerge. Acting as disciplined professionals,
our portfolio managers can be expected to continue to capitalize on these
prospects as they take shape.
As always, we value your confidence in selecting Excelsior to fulfill your
investment needs. We maintain a total commitment to providing you with
best-in-class investment products and service. We strongly believe that our
array of products may help you to meet the full range of your financial
objectives.
Sincerely,
/s/ James L. Bailey
James L. Bailey
President
1
Excelsior Funds
Statements of Assets and Liabilities
March 31, 2004
New York
Government Treasury Tax-Exempt Tax-Exempt
Money Money Money Money Money
Fund Fund Fund Fund Fund
-------------- ------------ ------------ -------------- ------------
ASSETS:
Investments, at cost -- see accompanying
portfolios............................. $1,612,892,307 $545,159,207 $719,759,735 $2,044,631,080 $493,963,223
============== ============ ============ ============== ============
Investments, at value (excluding
repurchase agreements) (Note 1)........ $1,548,892,307 $528,159,207 $719,759,735 $2,044,631,080 $493,963,223
Repurchase agreements, at value
(Note 1)............................... 64,000,000 17,000,000 -- -- --
Interest receivable..................... 247,746 87,435 34,426 3,451,054 875,513
Receivable for fund shares sold......... 84,583 430 51 1,379 90,006
Due from investment adviser
(Note 2)............................... 84,189 -- -- -- --
-------------- ------------ ------------ -------------- ------------
Total Assets........................... 1,613,308,825 545,247,072 719,794,212 2,048,083,513 494,928,742
LIABILITIES:
Payable for dividends declared.......... 732,408 265,752 146,371 1,019,535 168,577
Payable for fund shares redeemed........ 283,074 30,000 1,600 55,860 403,014
Payable for investments purchased....... -- -- 199,688,014 -- 4,006,680
Investment advisory fees payable
(Note 2)............................... -- 121,008 133,471 453,529 120,804
Administration fees payable (Note 2).... 158,086 53,767 49,456 201,597 49,153
Shareholder servicing fees payable
(Note 2)............................... 229,375 15 27 520 20,076
Directors' fees payable (Note 2)........ 77 269 229 2,481 1,145
Due to custodian bank................... -- -- -- 1,489,786 7,134
Accrued expenses and other payables..... 154,610 54,946 53,495 183,786 53,386
-------------- ------------ ------------ -------------- ------------
Total Liabilities...................... 1,557,630 525,757 200,072,663 3,407,094 4,829,969
-------------- ------------ ------------ -------------- ------------
NET ASSETS............................... $1,611,751,195 $544,721,315 $519,721,549 $2,044,676,419 $490,098,773
============== ============ ============ ============== ============
NET ASSETS consist of:
Undistributed net investment income..... $ -- $ -- $ 2,747 $ 56 $ --
Accumulated net realized (loss) on
investments............................ (47,687) (34,615) -- (1,827) (908)
Par value (Note 4)...................... 1,611,998 544,823 519,729 2,044,928 490,101
Paid-in capital in excess of par value.. 1,610,186,884 544,211,107 519,199,073 2,042,633,262 489,609,580
-------------- ------------ ------------ -------------- ------------
Total Net Assets......................... $1,611,751,195 $544,721,315 $519,721,549 $2,044,676,419 $490,098,773
============== ============ ============ ============== ============
Net Assets:
Shares.................................. $1,141,562,354 $544,721,315 $519,721,549 $2,044,676,419 $490,098,773
Institutional Shares.................... 470,188,841 -- -- -- --
Shares of Common Stock Outstanding
(Note 4):
Shares.................................. 1,141,807,272 544,822,975 519,728,929 2,044,928,039 490,100,591
Institutional Shares.................... 470,191,017 -- -- -- --
NET ASSET VALUE PER SHARE (net
assets / shares outstanding):
Shares.................................. $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Institutional Shares.................... $1.00 -- -- -- --
===== = = = =
See Notes to Financial Statements.
2
Excelsior Funds
Statements of Operations
Year Ended March 31, 2004
New York
Government Treasury Tax-Exempt Tax-Exempt
Money Money Money Money Money
Fund Fund Fund Fund Fund
----------- ---------- ---------- ----------- -----------
INVESTMENT INCOME:
Interest income............................ $22,954,795 $6,776,856 $5,246,866 $21,272,107 $ 4,945,789
----------- ---------- ---------- ----------- -----------
EXPENSES:
Investment advisory fees (Note 2).......... 5,157,440 1,585,953 1,598,190 5,295,803 2,496,278
Administration fees (Note 2)............... 3,120,371 958,964 805,641 3,204,676 755,436
Shareholder servicing fees (Note 2)........ 1,155,681 -- -- -- --
Shareholder servicing fees -- Shares
(Note 2).................................. 3,309,810 548,093 351,011 2,677,048 220,725
Shareholder servicing fees -- Institutional
Shares (Note 2)........................... 132,150 -- -- -- --
Legal and audit fees....................... 453,237 149,051 124,210 469,254 111,592
Custodian fees............................. 183,780 60,154 63,022 215,406 58,916
Transfer agent fees (Note 2)............... 127,856 18,111 30,302 25,483 17,899
Registration and filing fees............... 51,718 27,902 22,924 30,205 16,300
Directors' fees and expenses (Note 2)...... 32,899 18,932 15,937 110,287 26,300
Shareholder reports........................ 12,156 7,929 7,176 29,752 7,157
Miscellaneous expenses..................... 104,652 39,641 36,482 143,259 37,079
----------- ---------- ---------- ----------- -----------
Total Expenses............................ 13,841,750 3,414,730 3,054,895 12,201,173 3,747,682
Fees waived and reimbursed by:
Investment adviser (Note 2)............... (3,813,686) (310,801) (187,511) (1,947,158) (1,058,879)
Administrator (Note 2).................... (1,938,819) (253,755) (213,093) (847,336) (199,704)
----------- ---------- ---------- ----------- -----------
Net Expenses.............................. 8,089,245 2,850,174 2,654,291 9,406,679 2,489,099
----------- ---------- ---------- ----------- -----------
NET INVESTMENT INCOME....................... 14,865,550 3,926,682 2,592,575 11,865,428 2,456,690
----------- ---------- ---------- ----------- -----------
REALIZED GAIN (LOSS) ON INVESTMENTS
(Note 1):
Net realized gain (loss) on security
transactions.............................. (23,975) (6,483) 4,011 (780) 18,555
----------- ---------- ---------- ----------- -----------
Net increase in net assets resulting from
operations................................ $14,841,575 $3,920,199 $2,596,586 $11,864,648 $ 2,475,245
=========== ========== ========== =========== ===========
See Notes to Financial Statements.
3
Excelsior Funds
Statements of Changes in Net Assets
New York
Government Treasury Tax-Exempt Tax-Exempt
Money Money Money Money Money
Fund Fund Fund Fund Fund
-------------- ------------- ------------ -------------- -------------
Year Ended March 31, 2004
Net investment income.................... $ 14,865,550 $ 3,926,682 $ 2,592,575 $ 11,865,428 $ 2,456,690
Net realized gain (loss) on security
transactions............................ (23,975) (6,483) 4,011 (780) 18,555
-------------- ------------- ------------ -------------- -------------
Net increase in net assets resulting from
operations.............................. 14,841,575 3,920,199 2,596,586 11,864,648 2,475,245
Distributions to shareholders:
From net investment income
Shares................................. (9,962,795) (3,926,682) (2,592,576) (11,865,425) (2,456,690)
Institutional Shares................... (4,902,755) -- -- -- --
From net realized gain on
investments............................ -- -- (4,586) (311,916) (31,105)
-------------- ------------- ------------ -------------- -------------
Total distributions................. (14,865,550) (3,926,682) (2,597,162) (12,177,341) (2,487,795)
-------------- ------------- ------------ -------------- -------------
(Decrease) in net assets from fund share
transactions (Note 4):
Shares................................. (646,272,448) (49,768,352) (52,275,911) (236,273,538) (58,462,779)
Institutional Shares................... (77,930,018) -- -- -- --
-------------- ------------- ------------ -------------- -------------
Total from fund share
transactions....................... (724,202,466) (49,768,352) (52,275,911) (236,273,538) (58,462,779)
-------------- ------------- ------------ -------------- -------------
Net (decrease) in net assets............. (724,226,441) (49,774,835) (52,276,487) (236,586,231) (58,475,329)
NET ASSETS:
Beginning of year....................... 2,335,977,636 594,496,150 571,998,036 2,281,262,650 548,574,102
-------------- ------------- ------------ -------------- -------------
End of year (1)......................... $1,611,751,195 $ 544,721,315 $519,721,549 $2,044,676,419 $ 490,098,773
============== ============= ============ ============== =============
- --------
(1)Including undistributed net
investment income..................... -- -- $ 2,747 $ 56 --
============== ============= ============ ============== =============
Year Ended March 31, 2003
Net investment income.................... $ 32,216,854 $ 8,597,692 $ 6,332,776 $ 23,541,551 $ 5,261,693
Net realized gain on security
transactions............................ 900 3,572 3,323 331,711 53,989
-------------- ------------- ------------ -------------- -------------
Net increase in net assets resulting from
operations.............................. 32,217,754 8,601,264 6,336,099 23,873,262 5,315,682
Distributions to shareholders:
From net investment income
Shares................................. (22,588,431) (8,291,220) (6,364,693) (23,466,099) (5,188,979)
Institutional Shares................... (9,382,533) -- -- -- --
From net realized gain on
investments............................ -- -- -- (24,155) (23,128)
-------------- ------------- ------------ -------------- -------------
Total distributions................. (31,970,964) (8,291,220) (6,364,693) (23,490,254) (5,212,107)
-------------- ------------- ------------ -------------- -------------
Increase (decrease) in net assets from
fund share transactions (Note 4):
Shares................................. (14,462,035) (201,100,703) (32,254,682) (241,575,086) (147,622,258)
Institutional Shares................... 238,227,587 -- -- -- --
-------------- ------------- ------------ -------------- -------------
Total from fund share
transactions....................... 223,765,552 (201,100,703) (32,254,682) (241,575,086) (147,622,258)
-------------- ------------- ------------ -------------- -------------
Net increase (decrease) in net assets.... 224,012,342 (200,790,659) (32,283,276) (241,192,078) (147,518,683)
NET ASSETS:
Beginning of year....................... 2,111,965,294 795,286,809 604,281,312 2,522,454,728 696,092,785
-------------- ------------- ------------ -------------- -------------
End of year............................. $2,335,977,636 $ 594,496,150 $571,998,036 $2,281,262,650 $ 548,574,102
============== ============= ============ ============== =============
See Notes to Financial Statements.
4
[THIS PAGE INTENTIONALLY LEFT BLANK]
Excelsior Funds
Financial Highlights -- Selected Per Share Data and Ratios
Dividends Distributions
Net Asset Value, Net Net Realized Total From From Net From Net
Beginning of Investment Gain (Loss) Investment Investment Realized Gain
Year Income on Investments Operations Income on Investments
---------------- ---------- -------------- ---------- ---------- --------------
MONEY FUND
Shares -- (5/3/85*)
Year Ended March 31,
2000................ $1.00 $0.05005 -- $0.05005 $(0.05005) --
2001................ 1.00 0.05804 -- 0.05804 (0.05804) --
2002................ 1.00 0.02741 $ 0.00010 0.02751 (0.02751) --
2003................ 1.00 0.01255 (0.00010) 0.01245 (0.01245) --
2004................ 1.00 0.00662 -- 0.00662 (0.00662) --
GOVERNMENT MONEY FUND -- (5/8/85*)
Year Ended March 31,
2000................ $1.00 $0.05004 -- $0.05004 $(0.05004) --
2001................ 1.00 0.05752 -- 0.05752 (0.05752) --
2002................ 1.00 0.02585 $ 0.00038 0.02623 (0.02623) --
2003................ 1.00 0.01199 (0.00039) 0.01160 (0.01160) --
2004................ 1.00 0.00625 -- 0.00625 (0.00625) --
TREASURY MONEY FUND -- (2/13/91*)
Year Ended March 31,
2000................ $1.00 $0.04560 -- $0.04560 $(0.04560) --
2001................ 1.00 0.05339 -- 0.05339 (0.05339) --
2002................ 1.00 0.02451 $(0.00002) 0.02449 (0.02449) --
2003................ 1.00 0.01085 0.00004 0.01089 (0.01089) --
2004................ 1.00 0.00484 0.00002 0.00486 (0.00485) $(0.00001)
TAX-EXEMPT MONEY FUND -- (5/24/85*)
Year Ended March 31,
2000................ $1.00 $0.02946 $(0.00001) $0.02945 $(0.02945) --
2001................ 1.00 0.03580 -- 0.03580 (0.03580) --
2002................ 1.00 0.01862 0.00013 0.01875 (0.01865) $(0.00010)
2003................ 1.00 0.00967 (0.00002) 0.00965 (0.00964) (0.00001)
2004................ 1.00 0.00546 0.00029 0.00575 (0.00560) (0.00015)
NEW YORK TAX-EXEMPT MONEY FUND -- (8/3/98*)
Year Ended March 31,
2000................ $1.00 $0.02809 -- $0.02809 $(0.02809) --
2001................ 1.00 0.03431 -- 0.03431 (0.03431) --
2002................ 1.00 0.01758 $ 0.00011 0.01769 (0.01769) --
2003................ 1.00 0.00884 (0.00007) 0.00877 (0.00873) $(0.00004)
2004................ 1.00 0.00491 0.00006 0.00497 (0.00490) (0.00007)
* Commencement of Operations
(1)Expense ratios before waiver of fees and reimbursement of expenses (if any)
by adviser and administrator.
See Notes to Financial Statements.
6
Ratio of Net Ratio of Gross Ratio of Net
Operating Expenses Operating Expenses Investment Fee
Total Net Asset Value, Total Net Assets, End to Average to Average Income to Waivers
Distributions End of Year Return of Year (000's) Net Assets Net Assets (1) Average Net Assets (Note 2)
- ------------- ---------------- ------ --------------- ------------------ ------------------ ------------------ --------
$(0.05005) $1.00 5.08% $1,467,183 0.47% 0.58% 5.05% $0.00104
(0.05804) 1.00 5.96% 1,891,042 0.47% 0.71% 5.84% 0.00238
(0.02751) 1.00 2.79% 1,802,136 0.44% 0.74% 2.76% 0.00295
(0.01245) 1.00 1.25% 1,787,852 0.39% 0.43% 1.25% 0.00033
(0.00662) 1.00 0.66% 1,141,562 0.45% 0.73% 0.67% 0.00279
$(0.05004) $1.00 5.08% $ 772,690 0.47% 0.50% 5.01% $0.00035
(0.05752) 1.00 5.91% 1,427,560 0.46% 0.48% 5.76% 0.00029
(0.02623) 1.00 2.65% 795,287 0.43% 0.49% 2.72% 0.00063
(0.01160) 1.00 1.17% 594,496 0.39% 0.47% 1.21% 0.00082
(0.00625) 1.00 0.63% 544,721 0.45% 0.54% 0.62% 0.00089
$(0.04560) $1.00 4.62% $ 525,394 0.51% 0.53% 4.58% $0.00021
(0.05339) 1.00 5.47% 615,926 0.50% 0.55% 5.35% 0.00046
(0.02449) 1.00 2.48% 604,281 0.48% 0.54% 2.42% 0.00062
(0.01089) 1.00 1.09% 571,998 0.45% 0.53% 1.08% 0.00075
(0.00486) 1.00 0.49% 519,722 0.50% 0.57% 0.49% 0.00075
$(0.02945) $1.00 2.96% $2,051,108 0.46% 0.52% 2.97% $0.00066
(0.03580) 1.00 3.64% 2,617,329 0.45% 0.53% 3.59% 0.00075
(0.01875) 1.00 1.89% 2,522,455 0.44% 0.58% 1.85% 0.00136
(0.00965) 1.00 0.97% 2,281,263 0.39% 0.54% 0.97% 0.00158
(0.00575) 1.00 0.58% 2,044,676 0.44% 0.58% 0.56% 0.00132
$(0.02809) $1.00 2.82% $ 421,393 0.54% 0.71% 2.84% $0.00174
(0.03431) 1.00 3.49% 682,445 0.51% 0.72% 3.43% 0.00214
(0.01769) 1.00 1.78% 696,093 0.48% 0.71% 1.76% 0.00228
(0.00877) 1.00 0.88% 548,574 0.44% 0.49% 0.89% 0.00043
(0.00497) 1.00 0.50% 490,099 0.50% 0.75% 0.49% 0.00253
See Notes to Financial Statements.
7
Excelsior Funds, Inc.
Portfolio of Investments -- March 31, 2004
Money Fund
Principal Value
Amount Rate (Note 1)
- ----------- ----- --------------
CERTIFICATES OF DEPOSIT -- 18.30%
$75,000,000 Bank National of Paris,
06/11/04...................... 1.030% $ 75,000,000
70,000,000 CIBC, 06/08/04................. 1.040 70,001,261
75,000,000 Toronto Dominion,
06/17/04...................... 1.035 75,000,781
75,000,000 Wells Fargo Co., 04/13/04...... 1.020 75,000,000
--------------
TOTAL CERTIFICATES OF
DEPOSIT
(Cost $295,002,042)........... 295,002,042
--------------
COMMERCIAL PAPER -- 54.24%
American Express Credit
Corp., Discount Note,
50,000,000 04/07/04...................... 1.080 49,991,000
25,000,000 04/20/04...................... 1.080 24,985,750
Bank of America Corp.,
Discount Note,
35,000,000 04/05/04...................... 1.060 34,995,878
50,000,000 04/07/04...................... 1.100 49,990,833
CIT Group Inc., Discount
Note,
20,000,000 05/24/04...................... 1.030 19,969,672
30,000,000 06/14/04...................... 1.050 29,935,250
75,000,000 Citicorp, Discount Note,
06/16/04...................... 1.025 74,837,708
70,000,000 Falcon Asset Securities Corp.,
Discount Note, 04/20/04....... 1.030 69,961,947
75,000,000 General Electric Capital Corp.,
Discount Note, 04/08/04....... 1.110 74,983,813
50,000,000 *Goldman Sachs, 11/09/04....... 1.080 50,000,000
50,000,000 HBOS Treasury Services, plc,
Discount Note, 04/07/04....... 1.110 49,990,750
50,000,000 Household Finance Corp.,
Discount Note, 05/06/04....... 1.050 49,948,958
30,000,000 International Lease Finance
Corp., Discount Note,
04/26/04...................... 1.020 29,978,750
40,000,000 Mortgage Interest Networking
Trust, Discount Note,
05/24/04...................... 1.030 39,939,345
75,000,000 New Center Asset Trust,
Discount Note, 06/16/04....... 1.030 74,836,917
75,000,000 Preferred Receivable Funding,
Discount Note, 04/19/04....... 1.030 74,961,375
75,000,000 Receivables Capital, Discount
Note, 04/19/04................ 1.020 74,961,750
--------------
TOTAL COMMERCIAL
PAPER
(Cost $874,269,696)........... 874,269,696
--------------
Principal Value
Amount Rate (Note 1)
- ------------ ----- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 23.55%
$100,000,000 Federal Home Loan Bank,
Discount Note, 04/28/04.... 0.995% $ 99,925,375
60,000,000 Federal Home Loan
Mortgage Corporation,
Discount Note, 04/14/04.... 0.990 59,978,550
Federal National Mortgage
Association, Discount Note,
45,000,000 06/02/04................... 1.085 44,915,912
100,000,000 07/28/04................... 1.020 99,665,667
75,000,000 Student Loan Marketing
Association, Discount Note,
04/01/04................... 0.970 75,000,000
--------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $379,485,504) 379,485,504
--------------
Shares
- ------------
OTHER SHORT-TERM INVESTMENT -- 0.01%
135,065 @Dreyfus Government Cash
Management Fund
(Cost $135,065)............ 135,065
--------------
Principal
Amount
- ------------
REPURCHASE AGREEMENT -- 3.97%
$64,000,000 Morgan Stanley Dean Witter,
1.05%, dated 03/31/04,
due 04/01/04, to be
repurchased at $64,001,867
(collateralized by a U.S.
Government Agency
Obligation, total market
value $65,280,727)
(Cost $64,000,000)......... 64,000,000
--------------
TOTAL INVESTMENTS (Cost $1,612,892,307)........... 100.07% $1,612,892,307
OTHER ASSETS & LIABILITIES (NET).................. (0.07) (1,141,112)
------ --------------
NET ASSETS........................................ 100.00% $1,611,751,195
====== ==============
- --------
Discount Note--The rate reported is the discount rate at the time of purchase.
* Variable rate security--The rate disclosed is as of March 31, 2004.
plc--public limited company
@ Registered Investment Company
See Notes to Financial Statements.
8
Excelsior Funds, Inc.
Portfolio of Investments -- March 31, 2004
Government Money Fund
Principal Value
Amount Rate (Note 1)
- ------------ ----- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 96.87%
$125,000,000 *Federal Farm Credit Bank, 04/07/04............... 0.975% $ 124,999,377
100,000,000 Federal Home Loan Bank, Discount Note, 04/28/04... 0.995 99,925,375
Federal Home Loan Mortgage Corporation, Discount
Note,
48,000,000 04/02/04......................................... 0.980 47,998,693
70,000,000 04/05/04......................................... 0.980 69,992,378
100,000,000 Federal National Mortgage Association, Discount
Note, 06/30/04................................... 1.010 99,747,500
85,000,000 Student Loan Marketing Association, Discount
Note, 04/01/04................................... 0.970 85,000,000
--------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost
$527,663,323)........................................... 527,663,323
--------------
Shares
- ------------
OTHER SHORT-TERM INVESTMENT -- 0.09%
495,884 @Dreyfus Treasury Prime Cash Management Fund (Cost
$495,884)............................................... 495,884
--------------
Principal Value
Amount (Note 1)
- ----------- --------------
REPURCHASE AGREEMENT -- 3.12%
$17,000,000 Morgan Stanley Dean Witter, 1.05%, dated 03/31/04, due
04/01/04, to be repurchased at $17,000,496
(collateralized by U.S. Government Agency Obligations,
total market value $17,611,644) (Cost $17,000,000)...... $ 17,000,000
--------------
TOTAL INVESTMENTS (Cost $545,159,207)......................... 100.08% $ 545,159,207
OTHER ASSETS & LIABILITIES (NET).............................. (0.08) (437,892)
------ --------------
NET ASSETS.................................................... 100.00% $ 544,721,315
====== ==============
- --------
* Variable rate security--The rate disclosed is as of March 31, 2004.
Discount Note--The rate reported is the discount rate at the time of purchase.
@ Registered Investment Company
See Notes to Financial Statements.
9
Excelsior Funds, Inc.
Portfolio of Investments -- March 31, 2004
Treasury Money Fund
Principal Value
Amount Rate (Note 1)
- ------------ ----- -------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 137.97%
$ 40,000,000 *Federal Farm Credit Bank, 04/07/04............... 0.975% $ 39,999,800
Federal Home Loan Bank, Discount Note,
7,500,000 04/01/04......................................... 0.910 7,500,000
50,000,000 04/14/04......................................... 0.970 49,982,486
30,000,000 **United States Treasury Bills, 04/01/04.......... 0.915 30,000,000
50,000,000 04/01/04......................................... 0.910 50,000,000
200,000,000 04/01/04......................................... 0.902 200,000,000
20,000,000 04/15/04......................................... 0.916 19,992,884
20,000,000 04/15/04......................................... 0.911 19,992,922
100,000,000 04/29/04......................................... 0.941 99,926,889
100,000,000 05/06/04......................................... 0.907 99,912,014
100,000,000 07/01/04......................................... 0.947 99,761,125
-------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost
$717,068,120)........................................... 717,068,120
-------------
Value
Shares (Note 1)
- --------- -------------
OTHER SHORT-TERM INVESTMENT -- 0.52%
2,691,615 @Dreyfus Treasury Prime Cash Management
Fund (Cost $2,691,615).......................... $ 2,691,615
-------------
TOTAL INVESTMENTS
(Cost $719,759,735)........................................ 138.49% $ 719,759,735
OTHER ASSETS & LIABILITIES (NET)............................ (38.49) (200,038,186)
------ -------------
NET ASSETS.................................................. 100.00% $ 519,721,549
====== =============
- --------
* Variable rate security--The rate disclosed is as of March 31, 2004.
Discount Note--The rate reported is the discount rate at the time of purchase.
**The rate shown is the effective yield at the time of purchase.
@ Registered Investment Company
See Notes to Financial Statements.
10
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Tax-Exempt Money Fund
Principal Value
Amount (Note 1)
- ----------- --------------
TAX-EXEMPT CASH EQUIVALENT SECURITIES -- 85.31%
$11,000,000 #Alaska State, Housing Finance Authority, State
Capital Project, Revenue Bonds, Series C,
(MBIA), 1.020%, 07/01/22........................ $ 11,000,000
20,000,000 Ann Arundel County, Maryland, Commercial
Paper, 0.930%, 04/21/04.......................... 20,000,000
63,525,000 Burke County, Georgia, Commercial Paper, 0.950%,
05/11/04......................................... 63,525,000
4,800,000 #Carbon County, Wyoming, Pollution Control, Amoco
Project, Revenue Bonds, 1.050%, 11/01/14........ 4,800,000
44,430,000 #Charlotte, North Carolina, Water & Sewer System,
Revenue Bonds, Series B, 1.020%, 07/01/27....... 44,430,000
12,200,000 #Chicago, Illinois, Board of Education, General
Obligation Bonds, Series D, (FSA), 1.020%,
03/01/32........................................ 12,200,000
40,530,000 #Chicago, Illinois, Metropolitan Water
Reclamation District Project, Capital
Improvement, General Obligation Bonds, Series
E, 1.030%, 12/01/22.............................. 40,530,000
53,800,000 #Chicago, Illinois, Metropolitan Water
Reclamation District Project, General
Obligation Bonds, Series A, 1.000%, 12/01/31.... 53,800,000
20,540,000 #Chicago, Illinois, Sales Tax, Revenue Bonds,
(FGIC), 1.050%, 01/01/34........................ 20,540,000
13,925,000 #Connecticut State, Health & Educational
Facilities Board, Yale University, Revenue
Bonds, Series X-3, 1.070%, 07/01/37............. 13,925,000
Principal Value
Amount (Note 1)
- ----------- --------------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- (continued)
$37,395,000 #Dade County, Florida, Water & Sewer System,
Revenue Bonds, (FGIC), 1.000%, 10/05/22......... $ 37,395,000
7,510,000 #Dallas, Texas, General Obligation Bonds, 1.070%,
02/15/15........................................ 7,510,000
10,000,000 #Detroit, Michigan, Sewage Disposal, Revenue
Bonds, Series A, (MBIA), 1.030%, 07/01/23....... 10,000,000
39,170,000 #Detroit, Michigan, Sewage Disposal, Revenue
Bonds, Series C-1, (FSA), 1.020%, 07/01/27...... 39,170,000
51,805,000 #Detroit, Michigan, Sewage Disposal, Revenue
Bonds, Series C-2, (FGIC), 1.020%, 07/01/29..... 51,805,000
23,900,000 #District of Columbia, General Obligation
Bonds, Series D, (FGIC), 1.050%, 06/01/29....... 23,900,000
5,705,000 Florence County, South Carolina, School District,
Bond Anticipation Notes, 1.250%, 09/01/04........ 5,710,886
13,665,000 #Florida State, Board of Education, General
Obligation Bonds, Series 374, 1.070%, 06/01/22.. 13,665,000
6,600,000 #Florida State, General Obligation Bonds, Class
A, 1.080%, 07/01/33............................. 6,600,000
9,265,000 #Frisco, Texas, Munitops Certificates Trust,
General Obligation Bonds, 1.120%, 08/15/11...... 9,265,000
6,350,000 #Gwinnett County, Georgia, Development Authority,
Civic & Cultural Project, Revenue
Bonds, 1.000%, 09/01/31......................... 6,350,000
See Notes to Financial Statements.
11
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Tax-Exempt Money Fund -- (continued)
Principal Value
Amount (Note 1)
- ----------- --------------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- (continued)
$10,420,000 #Hawaii State, Munitops Certificates Trust,
General Obligation Bonds, (FSA), 1.080%,
07/01/10........................................ $ 10,420,000
10,000,000 #Hockley County, Texas, Industrial Development
Authority, Amoco Project -- Standard Oil
Company, Revenue Bonds, 0.900%, 03/01/14........ 9,996,000
23,000,000 Intermountain Power Agency, Utah, Commercial
Paper, Series B, 0.950%, 05/07/04................ 23,000,000
25,000,000 Intermountain Power Agency, Utah, Commercial
Paper, Series B-5, 1.030%, 04/07/04.............. 25,000,000
#Intermountain Power Agency, Utah, Revenue
Bonds, Series F, (AMBAC),.......................
9,925,000 0.920%, 07/01/15................................. 9,925,000
20,685,000 1.050%, 07/01/18................................. 20,685,000
30,000,000 Jacksonville, Florida, Commercial Paper, Series
2001-C, 1.050%, 10/04/04......................... 30,000,000
30,000,000 Jacksonville, Florida, Commercial Paper, Series
A, 0.920%, 04/08/04.............................. 30,000,000
10,000,000 Jacksonville, Florida, Commercial Paper, Series
C-1, 0.970%, 05/14/04............................ 10,000,000
8,505,000 #Jacksonville, Florida, Water & Sewer System,
Revenue Bonds, Series N-8, 1.130%, 10/01/23..... 8,505,000
8,955,000 #Judson, Texas, Munitops Certificates Trust,
General Obligation Bonds, 1.120%, 02/01/11...... 8,955,000
27,105,000 #Kansas State, Department of Highway
Transportation, Revenue Bonds, Series B-3,
1.000%, 09/01/19................................ 27,105,000
Principal Value
Amount (Note 1)
- ----------- --------------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- (continued)
$13,410,000 #Kansas State, Department of Highway
Transportation, Revenue Bonds, Series C-1,
1.020%, 09/01/19................................ $ 13,410,000
23,400,000 #Kansas State, Department of Highway
Transportation, Revenue Bonds, Series C-2,
1.020%, 09/01/19................................ 23,400,000
20,000,000 King County, Washington, Sewer Authority, Revenue
Bonds, Series A, 1.000%, 07/22/04................ 20,000,000
5,950,000 #Lincoln County, Wyoming, Pollution Control,
Amoco Project, Revenue Bonds, 1.050%, 10/01/12.. 5,950,000
17,300,000 #Mecklenburg County,
North Carolina, General Obligation Bonds,
Series 1996B, 0.980%, 03/01/15.................. 17,300,000
23,600,000 #Mecklenburg County, North
Carolina, General Obligation Bonds, Series
1996C, 0.980%, 03/01/14......................... 23,600,000
Metropolitan Government Nashville & Davidson
County, Commercial Paper,
8,300,000 1.100%, 05/05/04................................. 8,300,000
5,000,000 0.980%, 09/10/04................................. 5,000,000
40,000,000 #Metropolitan Government
Nashville & Davidson County, Health &
Educational Facilities Board, Revenue Bonds,
Series A, 1.000%, 10/01/30...................... 40,000,000
15,800,000 Michigan State, Commercial Paper, 1.100%, 05/11/04 15,800,000
50,000,000 Michigan State, General Obligation Bonds, Series
A, 2.000%, 09/30/04.............................. 50,252,820
18,365,000 #Michigan State, Municipal Board Authority,
Revenue Bonds, Series 718, 1.070%, 10/01/20..... 18,365,000
See Notes to Financial Statements.
12
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Tax-Exempt Money Fund -- (continued)
Principal Value
Amount (Note 1)
- ----------- --------------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- (continued)
$10,000,000 #Michigan State, Technological University,
Revenue Bonds, Series A, (AMBAC), 1.030%,
10/01/18........................................ $ 10,000,000
11,600,000 #Minneapolis, Minnesota, General Obligation
Bonds, 0.870%, 12/01/32......................... 11,600,000
15,000,000 #New Hampshire State, Health & Educational
Facilities Board, Dartmouth College, Revenue
Bonds, 0.980%, 06/01/23......................... 15,000,000
4,595,000 #New Jersey State, Transportation Trust Fund
Authority, Revenue Bonds, Series 224, 1.020%,
06/15/16........................................ 4,595,000
36,400,000 New York City, New York, Revenue
Anticipation Notes, Series A, 2.000%, 04/15/04... 36,414,398
6,800,000 New York State, Thruway Authority, General
Revenue Bond Anticipation Notes, Commercial
Paper, 0.950%, 10/12/04.......................... 6,800,000
20,000,000 #Ohio State, Higher Educational Facilities
Authority, Case Western, Revenue Bonds, 1.000%,
10/01/31........................................ 20,000,000
27,100,000 #Ohio State, Infrastructure Import, General
Obligation Bonds, Series B, 1.020%, 08/01/21.... 27,100,000
45,000,000 #Ohio State, Infrastructure Improvement Bonds,
General Obligation Bonds, Series D, 1.000%,
02/01/19........................................ 45,000,000
22,445,000 #Oklahoma State, Water Resource Board, Revenue
Bonds, 1.020%, 09/01/32......................... 22,445,000
Principal Value
Amount (Note 1)
- ----------- --------------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- (continued)
Omaha, Nebraska, Commercial Paper,
$30,000,000 0.970%, 07/14/04................................. $ 30,000,000
20,000,000 1.000%, 08/12/04................................. 20,000,000
56,800,000 #Orlando, Florida, Utilities Commission Water &
Electric, Revenue Bonds, Series A, 1.030%,
10/01/17........................................ 56,800,000
40,640,000 #Pennsylvania State University, Revenue Bonds,
Series A, 1.020%, 04/01/31...................... 40,640,000
35,000,000 #Pennsylvania State, Turnpike Commission,
Revenue Bonds, Series A-2, 1.030%, 12/01/30..... 35,000,000
3,905,000 #Phoenix, Arizona, Civic Improvement,
Revenue Bonds, Class A, 1.080%, 07/01/17........ 3,905,000
1,500,000 #Port Authority of New York & New Jersey,
Versatile Structure Obligations, Revenue Bonds,
Series 3, 1.110%, 06/01/20...................... 1,500,000
3,875,000 #Round Rock, Texas, Independent School District,
General Obligation Bonds, Series 578, 1.070%,
08/01/20........................................ 3,875,000
50,000,000 Salt River, Arizona, Commercial Paper, Series
B, 0.950%, 08/10/04.............................. 50,000,000
San Antonio, Texas, Commercial Paper,
8,000,000 0.950%, 05/10/04................................. 8,000,000
11,000,000 1.000%, 06/10/04................................. 11,000,000
15,000,000 San Antonio, Texas, Gas & Electric Authority,
Commercial Paper, Series A, 0.950%, 04/06/04..... 15,000,000
See Notes to Financial Statements.
13
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Tax-Exempt Money Fund -- (continued)
Principal Value
Amount (Note 1)
- ----------- --------------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- (continued)
$26,560,000 #Snohomish County, Washington, Public Utilities
Authority, District No. 1 Generation System,
Revenue Bonds, (MBIA), 1.000%, 01/01/25......... $ 26,560,000
27,600,000 #Snohomish County, Washington, Public Utilities
Authority, District No. 1 Generation System,
Revenue Bonds, Series A-1, (FSA), 1.030%,
12/01/19........................................ 27,600,000
39,000,000 St. James Parish, Louisiana, Texaco, Commercial
Paper, Series B, 1.080%, 06/10/04................ 39,000,000
#Texas State, Munitops Certificates Trust,
General Obligation Bonds,.......................
15,640,000 1.080%, 02/15/11................................. 15,640,000
11,800,000 1.070%, 02/15/11................................. 11,800,000
19,000,000 Texas State, Tax & Revenue Anticipation
Notes, 2.000%, 08/31/04.......................... 19,074,929
14,800,000 #University of Delaware, Revenue Bonds, 1.030%,
11/01/23........................................ 14,800,000
10,480,000 #University of Michigan, Board of Regents,
Revenue Bonds, 1.000%, 04/01/32................. 10,480,000
18,160,000 #University of Minnesota, Board of Regents,
Revenue Bonds, Series A, 1.060%, 01/01/34....... 18,160,000
12,400,000 #University of Pittsburgh, Commonwealth of Higher
Education, University Capital Project,
Revenue Bonds, Series A, 1.000%, 09/15/29....... 12,400,000
3,300,000 #University of Virginia, Revenue Bonds, Series
A, 1.080%, 06/01/33............................. 3,300,000
Principal Value
Amount (Note 1)
- ----------- --------------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- (continued)
$ 4,450,000 #Valdez, Alaska, Marine Terminal, BP Pipelines
Project, Revenue Bonds, Series B, 1.120%,
07/01/37........................................ $ 4,450,000
18,130,000 #Washington State, Public Power Supply System,
Revenue Bonds, Series 2A-1, (MBIA), 1.000%,
07/01/12........................................ 18,130,000
4,420,000 #Whiting, Indiana, Pollution Control, Amoco
Project, Revenue Bonds, 1.000%, 08/15/04........ 4,412,353
14,200,000 #Wilmington, North Carolina, General Obligation
Bonds, 1.040%, 06/01/15......................... 14,200,000
13,980,000 #Winston-Salem, North Carolina, Water & Sewer
Systems Authority, Revenue Bonds, Series
C, 1.050%, 06/01/28............................. 13,980,000
30,020,000 Wisconsin State, Transportation Authority,
Commercial Paper, 0.940%, 04/27/04............... 30,020,000
34,500,000 Wisconsin State, Transportation Authority,
Commercial Paper, Series 97A, 0.950%, 04/08/04... 34,500,000
--------------
TOTAL TAX-EXEMPT CASH EQUIVALENT SECURITIES (Cost
$1,744,271,386).................................. 1,744,271,386
--------------
TAX-EXEMPT CASH EQUIVALENT SECURITIES --
BACKED BY LETTERS OF CREDIT -- 14.48%
BANK OF AMERICA
---------------
22,000,000 #Des Moines, Iowa, Hospital Facilities Authority,
Methodist Medical Center Project, Revenue
Bonds, 1.050%, 08/01/15......................... 22,000,000
See Notes to Financial Statements.
14
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Tax-Exempt Money Fund -- (continued)
Principal Value
Amount (Note 1)
- ----------- --------------
TAX-EXEMPT CASH EQUIVALENT SECURITIES --
BACKED BY LETTERS OF CREDIT -- (continued)
BANK OF AMERICA -- (continued)
------------------------------
$15,000,000 #District of Columbia, Phillips College Issue,
General Obligation Bonds, 1.050%, 08/01/33...... $ 15,000,000
20,000,000 #Washington State, Public Power, Revenue Bonds,
Series A1-2, 1.010%, 07/01/17................... 20,000,000
BANK OF NEW YORK
----------------
30,000,000 Michigan State, Building Authority, Commercial
Paper, Series B4, 0.980%, 06/10/04............... 30,000,000
BANK ONE N.A.
-------------
6,850,000 #Chicago, Illinois, Water Authority, Revenue
Bonds, 1.000%, 11/01/30......................... 6,850,000
BANK ONE N.A.-75% / NORTHERN TRUST COMPANY-25%
----------------------------------------------
9,000,000 #Illinois State, Development Financial Authority,
Museum of Contemporary Art Project, 1.080%,
02/01/29........................................ 9,000,000
BAYERISCHE LANDESBANK
---------------------
4,200,000 #Baltimore, Maryland, Industrial Development
Authority, Capital Acquisition Project, Revenue
Bonds, 1.050%, 08/01/16......................... 4,200,000
10,000,000 #Tri-County, Oregon, Metropolitan Transportation
District, Interstate
Max Project, Revenue Bonds, Series A, 1.020%,
12/01/21........................................ 10,000,000
BAYERISCHE LANDESBANK-80% / LANDESBANK BADEN-WUERTTEMBERG-20%
-------------------------------------------------------------
19,334,000 #Long Island Power Authority, New York,
Electrical Systems, Revenue Bonds, Series
1A, 1.050%, 05/01/33............................ 19,334,000
Principal Value
Amount (Note 1)
- ----------- --------------
TAX-EXEMPT CASH EQUIVALENT SECURITIES --
BACKED BY LETTERS OF CREDIT -- (continued)
BNP PARIBAS
-----------
$29,900,000 #Baltimore, Maryland, Port Facilities
Authority, Revenue Bonds, 1.000%, 10/14/11...... $ 29,900,000
FIRST UNION NATIONAL BANK
-------------------------
16,200,000 #Virginia State, Capital Region Airport Community
Authority, Revenue Bonds, Series B, 1.050%,
06/01/29........................................ 16,200,000
LANDESBANK HESSEN
-----------------
17,600,000 #King County, Washington, Water & Sewage, Revenue
Bonds, Series A, 1.000%, 01/01/32............... 17,600,000
13,000,000 #Northampton County, Pennsylvania, Higher
Education Authority, Lafayette College Project,
Revenue Bonds, Series A, 1.020%, 11/01/28....... 13,000,000
9,635,000 #Texas State, Southwest Higher Education
Authority, Southern Methodist University,
Revenue Bonds, 1.120%, 07/01/15................. 9,635,000
MORGAN GUARANTY TRUST
---------------------
7,000,000 #Kenton County, Kentucky, Industrial Building
Authority, Redken Labs Incorporated Project,
Revenue Bonds, 1.000%, 12/01/14................. 7,000,000
NORTHERN TRUST COMPANY
----------------------
14,800,000 #Illinois State, Health Facilities Authority,
Ingalls Memorial Hospital Project, Revenue
Bonds, Series 85-B, 1.030%, 01/01/16............ 14,800,000
11,600,000 #Illinois State, Health Facilities Authority,
Ingalls Memorial Hospital Project, Revenue
Bonds, Series C, 1.030%, 01/01/16............... 11,600,000
See Notes to Financial Statements.
15
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Tax-Exempt Money Fund -- (continued)
Principal Value
Amount (Note 1)
- ----------- --------------
TAX-EXEMPT CASH EQUIVALENT SECURITIES --
BACKED BY LETTERS OF CREDIT -- (continued)
STATE STREET BANK & TRUST
-------------------------
$25,000,000 #Maryland State, Transportation Authority,
Baltimore/ Washington Airport, Revenue Bonds,
Series A, 1.020%, 07/01/13...................... $ 25,000,000
WESTDEUTSCHE LANDESBANK
-----------------------
15,000,000 #Cleveland, Ohio, Waterworks Revenue Authority,
Revenue Bonds, Series L, (FGIC), 1.000%,
01/01/33........................................ 15,000,000
--------------
TOTAL TAX-EXEMPT CASH EQUIVALENT SECURITIES --
BACKED BY LETTERS OF CREDIT (Cost $296,119,000).. 296,119,000
--------------
Shares
- -----------
OTHER SHORT-TERM INVESTMENTS -- 0.21%
3,781,927 @BlackRock Muni Fund.............................. 3,781,927
458,767 @Dreyfus Tax Exempt Fund.......................... 458,767
--------------
TOTAL OTHER SHORT- TERM INVESTMENTS (Cost
$4,240,694)...................................... 4,240,694
--------------
TOTAL INVESTMENTS (Cost $2,044,631,080)........... 100.00% $2,044,631,080
OTHER ASSETS & LIABILITIES (NET).................. 0.00 45,339
------ --------------
NET ASSETS........................................ 100.00% $2,044,676,419
====== ==============
- --------
# Variable rate demand bonds and notes are payable upon not more than seven
business days notice. Rate disclosed is as of March 31, 2004.
MBIA -- Municipal Bond Insurance Assoc.
FSA -- Financial Security Assurance
FGIC -- Financial Guaranty Insurance Corp.
AMBAC -- American Municipal Bond Assurance Corp.
@ Registered Investment Company
Note:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Adviser, under the supervision of the Board of
Directors, to be of comparable quality at the time of purchase to rated
instruments that may be acquired by the Fund.
At March 31, 2004, approximately, 14% of the net assets are invested in
municipal securities that have letter of credit enhancement features or escrows
in U.S. Government securities backing them, on which the Fund relies. Without
such features, the securities may or may not meet the quality standards of
securities purchased by the Fund.
See Notes to Financial Statements.
16
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
Tax-Exempt Money Fund -- (continued)
% of
State Diversification Net Assets Value
- --------------------- ---------- --------------
Michigan........................ 11.54% $ 235,872,820
Florida......................... 9.44 192,965,000
Illinois........................ 8.28 169,320,000
Washington...................... 6.35 129,890,000
Texas........................... 6.35 129,750,929
North Carolina.................. 5.55 113,510,000
Ohio............................ 5.24 107,100,000
Pennsylvania.................... 4.94 101,040,000
Maryland........................ 3.87 79,100,000
Utah............................ 3.84 78,610,000
Georgia......................... 3.42 69,875,000
Wisconsin....................... 3.15 64,520,000
New York........................ 3.13 64,048,398
Kansas.......................... 3.12 63,915,000
Arizona......................... 2.64 53,905,000
Tennessee....................... 2.61 53,300,000
Nebraska........................ 2.44 50,000,000
Louisiana....................... 1.91 39,000,000
District of Columbia............ 1.90 38,900,000
Minnesota....................... 1.46 29,760,000
Oklahoma........................ 1.10 22,445,000
Iowa............................ 1.08 22,000,000
Virginia........................ 0.95 19,500,000
Alaska.......................... 0.76 15,450,000
New Hampshire................... 0.73 15,000,000
Delaware........................ 0.72 14,800,000
Connecticut..................... 0.68 13,925,000
Wyoming......................... 0.53 10,750,000
Hawaii.......................... 0.51 10,420,000
Oregon.......................... 0.49 10,000,000
Kentucky........................ 0.34 7,000,000
South Carolina.................. 0.28 5,710,886
New Jersey...................... 0.22 4,595,000
Indiana......................... 0.22 4,412,353
Registered Investment Companies. 0.21 4,240,694
------ --------------
Total Investments............... 100.00% $2,044,631,080
Other Assets & Liabilities (Net) 0.00 45,339
------ --------------
Net Assets...................... 100.00% $2,044,676,419
====== ==============
See Notes to Financial Statements.
17
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
New York Tax-Exempt Money Fund
Principal Value
Amount (Note 1)
- ----------- ------------
TAX-EXEMPT CASH EQUIVALENT SECURITIES -- 83.41%
$ 3,095,000 #Babylon, New York, General Obligation Bonds,
(AMBAC), 0.990%, 09/01/17....................... $ 3,095,000
4,500,000 Carmel, New York, Central School District, Bond
Anticipation Notes, 1.750%, 04/30/04............. 4,502,308
9,100,000 #Erie County, New York, Water Authority, Revenue
Bonds, Series A, (AMBAC), 0.990%, 12/01/16...... 9,100,000
10,000,000 Harborfields Centennial School District, New
York, Bond Anticipation Notes, 1.250%, 11/04/04.. 10,017,537
15,000,000 Long Island Power Authority, New York, Commercial
Paper, 0.950%, 08/09/04.......................... 15,000,000
17,870,000 #Nassau County, New York, Financial Authority,
Sales Tax, Revenue Bonds, Series B, (FSA),
1.030%, 11/15/22................................ 17,870,000
2,000,000 Nassau County, New York, Tax Anticipation Notes,
Series A, 2.000%, 04/15/04....................... 2,000,725
1,500,000 Nassau County, New York, Tax Anticipation Notes,
Series B, 2.000%, 10/15/04....................... 1,506,793
5,300,000 New York City, New York, Mass Transit
Authority, Commercial Paper, 1.000%, 10/14/04.... 5,300,000
17,500,000 #New York City, New York, Multi- Family Housing
Development Corporation Authority, Parkgate
Development Project, Series A, (FNMA), 0.960%,
10/15/28........................................ 17,500,000
7,500,000 #New York City, New York, Municipal Water
Financing Authority, Revenue Bonds, Sub-Series
C-2, 1.000%, 06/15/18........................... 7,500,000
15,000,000 New York City, New York, Tax Anticipation
Notes, 2.000%, 04/15/04.......................... 15,006,104
Principal Value
Amount (Note 1)
- ----------- ------------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES --(continued)
$12,810,000 #New York City, New York, Transitional Finance
Authority, Revenue Bonds, (MBIA), 1.050%,
05/01/15........................................ $ 12,810,000
10,870,000 #New York City, New York, Transitional Finance
Authority, Revenue Bonds, Class A, 1.050%,
02/01/31........................................ 10,870,000
11,245,000 #New York City, New York, Transitional Finance
Authority, Revenue Bonds, Series 283, 1.070%,
11/15/18........................................ 11,245,000
4,995,000 #New York City, New York, Transitional Finance
Authority, Revenue Bonds, Series 307,
(AMBAC), 1.030%, 08/01/19....................... 4,995,000
1,425,000 #New York City, New York, Transitional Finance
Authority, Revenue Bonds, Series A-2, 1.050%,
11/15/27........................................ 1,425,000
105,000 #New York City, New York, Trust for Cultural
Resources, American Museum of Natural History,
Revenue Bonds, Series A, 0.990%, 04/01/21....... 105,000
10,000,000 New York State, Dormitory Authority, Columbia
University, Commercial Paper, 0.950%, 04/08/04... 10,000,000
15,000,000 New York State, Dormitory Authority, Cornell
University, Commercial Paper, 0.930%, 05/24/04... 15,000,000
2,500,000 #New York State, Dormitory Authority, Cornell
University, Revenue Bonds, Series B, 0.980%,
07/01/30........................................ 2,500,000
5,000,000 #New York State, Dormitory Authority, Mental
Health Facilities, Revenue Bonds,
(FSA), 1.000%, 02/15/21......................... 5,000,000
See Notes to Financial Statements.
18
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
New York Tax-Exempt Money Fund -- (continued)
Principal Value
Amount (Note 1)
- ----------- ------------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES --(continued)
$15,720,000 #New York State, Dormitory Authority, Public
Library Project, Revenue Bonds, Series A,
(MBIA), 1.030%, 07/01/28........................ $ 15,720,000
2,000,000 New York State, Environmental Facilities
Authority, Commercial Paper, Series
97-A, 1.000%, 07/22/04........................... 2,000,000
8,966,000 #New York State, Environmental Facilities
Authority, Revenue Bonds, Series 731, 1.050%,
06/15/22........................................ 8,966,000
9,800,000 #New York State, Environmental Facilities
Authority, Revenue Bonds, Series A, 1.050%,
06/15/33........................................ 9,800,000
5,500,000 New York State, Environmental Facilities Corp.,
Solid Waste Disposal, Commercial Paper, 0.950%,
07/08/04......................................... 5,500,000
2,500,000 New York State, Gas & Electric Authority,
Commercial Paper, 0.950%, 07/14/04............... 2,500,000
4,700,000 #New York State, Local Government Assistance,
Revenue Bonds, Series 3V, (FGIC), 1.050%,
04/01/24........................................ 4,700,000
7,800,000 #New York State, Local Government Assistance,
Revenue Bonds, Series 4V, (FSA), 1.050%,
04/01/22........................................ 7,800,000
12,300,000 #New York State, Metropolitan Transportation
Authority, Revenue Bonds, Series B,
(FSA), 1.010%, 11/01/22......................... 12,300,000
4,120,000 #New York State, Metropolitan Transportation
Authority,
Revenue Bonds, Series D-1, (FSA), 1.000%,
11/01/29........................................ 4,120,000
Principal Value
Amount (Note 1)
- ----------- ------------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES --(continued)
$ 9,320,000 #New York State, Metropolitan Transportation
Authority, Revenue Bonds, Series D-2,
(FSA), 1.000%, 11/01/32......................... $ 9,320,000
8,000,000 #New York State, Power Authority, Revenue &
General Purpose Obligation Bonds, 0.950%,
03/01/20........................................ 8,000,000
5,000,000 #New York State, Power Authority, Revenue Bonds,
Sub-Series 5, 1.030%, 11/15/11.................. 5,000,000
25,000,000 New York State, Thruway Authority, General
Revenue Bond Anticipation Notes, Commercial
Paper, 0.950%, 10/12/04.......................... 25,000,000
8,000,000 New York State, Thurway, Commercial
Paper, 0.950%, 05/14/04.......................... 8,000,000
21,100,000 #New York State, Triborough Bridge & Tunnel
Authority, Revenue Bonds, Series B,
(AMBAC), 1.020%, 01/01/32....................... 21,100,000
3,600,000 #New York State, Triborough Bridge & Tunnel
Authority, Revenue Bonds, Series C,
(AMBAC), 1.010%, 01/01/33....................... 3,600,000
10,900,000 #New York State, Triborough Bridge & Tunnel
Authority, Revenue Bonds, Series C,
(FSA), 1.020%, 01/01/31......................... 10,900,000
13,700,000 #Niagara Falls, New York, Bridge Community Toll
Authority, Series A, (FGIC), 1.000%, 10/01/19... 13,700,000
Pittsford, New York, Centennial School District,
4,000,000 Bond Anticipation Notes, 1.250%, 10/17/04........ 4,006,680
5,928,528 2.000%, 12/17/04................................. 5,970,875
See Notes to Financial Statements.
19
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
New York Tax-Exempt Money Fund -- (continued)
Principal Value
Amount (Note 1)
- ----------- ------------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES --(continued)
$ 9,635,000 Port Authority of New York & New Jersey,
Commercial Paper, 0.950%, 04/07/04............... $ 9,635,000
#Suffolk County, New York, Water Authority, Bond
4,100,000 Anticipation Notes, 1.030%, 06/01/06............ 4,100,000
19,600,000 1.030%, 01/01/08................................. 19,600,000
5,100,000 Wantagh, New York, Union Free School District,
Bond Anticipation Notes, 1.250%, 09/10/04........ 5,106,456
------------
TOTAL TAX-EXEMPT CASH EQUIVALENT SECURITIES (Cost
$408,793,478).................................... 408,793,478
------------
TAX-EXEMPT CASH EQUIVALENT SECURITIES --
BACKED BY LETTERS OF CREDIT -- 17.26%
BANK OF AMERICA
---------------
16,000,000 #New York City, New York, Industrial Development
Agency, Revenue Bonds, New York Stock Exchange
Project, Series B, 0.990%, 05/01/33............. 16,000,000
BANK OF NEW YORK
----------------
10,000,000 #New York City, New York, General Obligation
Bonds, Sub-Series H4, 1.100%, 03/01/34.......... 10,000,000
4,200,000 #Yonkers, New York, Industrial Development
Agency, Civic Facility Revenue Bonds, Consumers
Union Facility, 1.020%, 07/01/19................ 4,200,000
BAYERISCHE HYPOVEREINSBANK
--------------------------
8,000,000 Long Island Power Authority, New York, Commercial
Paper, 1.080%, 08/10/04.......................... 8,000,000
Principal Value
Amount (Note 1)
- ----------- ------------
TAX-EXEMPT CASH EQUIVALENT SECURITIES --
BACKED BY LETTERS OF CREDIT -- (continued)
BAYERISCHE LANDESBANK-50% / LANDESBANK HESSEN-50%
-------------------------------------------------
$ 2,300,000 New York State, Environmental Facilities
Authority, Commercial Paper, 0.930%, 07/14/04.... $ 2,300,000
BAYERISCHE LANDESBANK-50% / WESTDEUTSCHE LANDESBANK-50%
-------------------------------------------------------
100,000 #New York State, Local Government Assistance
Corp., Revenue Bonds, Series A, 1.030%, 04/01/22 100,000
CHASE MANHATTAN BANK
--------------------
4,000,000 #New York City, New York, Trust for Cultural
Preservation, Asia Society Project, Revenue
Bonds, 1.000%, 04/01/30......................... 4,000,000
JP MORGAN CHASE BANK
--------------------
9,500,000 #New York City, New York, Trust for Cultural
Preservation, Pierpont Morgan Library, Revenue
Bonds, 1.000%, 02/01/34......................... 9,500,000
LANDESBANK HESSEN
-----------------
7,000,000 #New York State, Housing Finance Agency Services,
Revenue Bonds, Series I, 1.050%, 03/15/31....... 7,000,000
MANUFACTURERS & TRADERS
-----------------------
8,800,000 #New York City, New York, Industrial Development
Agency, Civic Facility Revenue Bonds, Jewish
Community Center Project, 1.070%, 03/01/30...... 8,800,000
MORGAN GUARANTY TRUST
---------------------
2,000,000 #New York City, New York, General Obligation
Bonds, Series F-3, 1.020%, 02/15/13............. 2,000,000
See Notes to Financial Statements.
20
Excelsior Tax-Exempt Funds, Inc.
Portfolio of Investments -- March 31, 2004
New York Tax-Exempt Money Fund -- (continued)
Principal Value
Amount (Note 1)
- ---------- ------------
TAX-EXEMPT CASH EQUIVALENT SECURITIES --
BACKED BY LETTERS OF CREDIT -- (continued)
WESTDEUTSCHE LANDESBANK
-----------------------
$9,350,000 #Long Island Power Authority, New York, Revenue
Bonds, Sub- Series 2A, 1.030%, 05/01/33......... $ 9,350,000
2,000,000 #New York City, New York, General Obligation
Bonds, Sub-Series J2, 1.050%, 02/15/16.......... 2,000,000
WESTDEUTSCHE LANDESBANK-50% / BAYERISCHE LANDESBANK-50%
-------------------------------------------------------
1,350,000 #New York State, Local Government Assistance
Corp., Revenue Bonds, Series E, 1.030%, 04/01/23 1,350,000
------------
TOTAL TAX-EXEMPT CASH EQUIVALENT SECURITIES --
BACKED BY LETTERS OF CREDIT (Cost $84,600,000)... 84,600,000
------------
Shares
- ----------
OTHER SHORT-TERM INVESTMENTS -- 0.12%
569,744 @BlackRock Institutional New York Money Market
Fund............................................ 569,744
1 @Dreyfus New York Tax Exempt Fund................. 1
------------
TOTAL OTHER SHORT-TERM INVESTMENTS (Cost $569,745) 569,745
------------
TOTAL INVESTMENTS (Cost $493,963,223)............. 100.79% $493,963,223
OTHER ASSETS & LIABILITIES (NET).................. (0.79) (3,864,450)
------ ------------
NET ASSETS........................................ 100.00% $490,098,773
====== ============
- --------
# Variable rate demand bonds and notes are payable upon not more than seven
business days notice. Rate disclosed is as of March 31, 2004.
AMBAC--American Municipal Bond Assurance Corp.
FSA--Financial Security Assurance
FNMA--Federal National Mortgage Association
MBIA--Municipal Bond Insurance Assoc.
FGIC--Financial Guaranty Insurance Corp.
@ Registered Investment Company
Note:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Adviser, under the supervision of the Board of
Directors, to be of comparable quality at the time of purchase to rated
instruments that may be acquired by the Fund.
At March 31, 2004, approximately, 17% of the net assets are invested in
municipal securities that have letter of credit enhancement features or escrows
in U.S. Government securities backing them, on which the Fund relies. Without
such features, the securities may or may not meet the quality standards of
securities purchased by the Fund.
At March 31, 2004, approximately, 101% of the net assets are invested in New
York municipal securities. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of the issuers to
pay the required principal and interest payments of the municipal securities.
At March 31, 2004, approximately, 59%, 20%, 17% and 5% of the net assets are
invested in revenue bonds, anticipation notes, commercial paper and general
obligation bonds, respectively.
See Notes to Financial Statements.
21
EXCELSIOR FUNDS
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Excelsior Funds, Inc. ("Excelsior Fund") and Excelsior Tax-Exempt Funds,
Inc. ("Excelsior Tax-Exempt Fund") collectively (the "Funds") were incorporated
under the laws of the State of Maryland on August 2, 1984 and August 8, 1984,
respectively, and are registered under the Investment Company Act of 1940, as
amended, as open-end diversified management investment companies with the
exception of Energy and Natural Resources Fund, Real Estate Fund, New York
Intermediate-Term Tax-Exempt Fund, California Tax-Exempt Income Fund and New
York Tax-Exempt Money Fund, each of which are non-diversified.
Excelsior Fund and Excelsior Tax-Exempt Fund currently offer shares in
sixteen and seven managed investment portfolios, respectively, each having its
own investment objectives and policies. The following is a summary of
significant accounting policies for Money Fund, Government Money Fund, Treasury
Money Fund, portfolios of Excelsior Fund, Tax-Exempt Money Fund and New York
Tax-Exempt Money Fund, portfolios of Excelsior Tax-Exempt Fund (the
"Portfolios"). Such policies are in conformity with accounting principles
generally accepted in the United States of America and are consistently
followed by the Funds in the preparation of their financial statements. The
preparation of financial statements requires 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 Money Fund offers two classes of shares: Shares and Institutional
Shares. The Financial Highlights of the Institutional Shares as well as the
financial statements for the remaining portfolios of the Funds are presented
separately.
With regard to the Portfolios, it is the Funds' policy, to the extent
possible, to maintain a continuous net asset value per share of $1.00. Each of
the Portfolios has adopted certain investment portfolio valuation and dividend
distribution policies to enable it to do so. However, there can be no assurance
that the net asset value per share of the Portfolios will not vary.
(a) Portfolio valuation:
Securities are valued at amortized cost, which has been determined by
each Fund's Board of Directors to represent the fair value of the
Portfolios' investments. Amortized cost valuation involves valuing an
instrument at its cost initially and, thereafter, assuming a constant
amortization to maturity of any discount or premium.
(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 discounts on
investments, is earned from settlement date and is recorded on the accrual
basis.
(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
22
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 subcustodian 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 (including accrued
interest).
If the value of the underlying securities 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) Distributions to shareholders:
Dividends from net investment income are declared daily and paid monthly.
Net realized capital gains, unless offset by any available capital loss
carryforwards, are distributed to shareholders annually or more frequently
to maintain a net asset value of $1.00 per share.
(e) Expense allocation:
Expenses directly attributable to a Portfolio are charged to that
Portfolio. Other expenses are allocated to the respective Portfolios based
on average daily net assets. Shareholder servicing fees relating to a
specific class are charged directly to that class.
2. Investment Advisory Fee, Administration Fee, Shareholder Servicing Fees and
Related Party Transactions:
United States Trust Company of New York ("U.S. Trust NY") and U.S. Trust
Company, N.A. (together, the "Adviser"), acting through their respective
registered investment advisory divisions, U.S. Trust New York Asset Management
Division and U.S. Trust Company, N.A. Asset Management Division, serve as the
investment adviser to the Portfolios. For the services provided pursuant to the
Investment Advisory Agreements, the Adviser receives a fee, computed daily and
paid monthly, at the annual rates of 0.25% of the average daily net assets of
the Money Fund, the Government Money Fund and the Tax-Exempt Money Fund, 0.30%
of the average daily net assets of the Treasury Money Fund, and 0.50% of the
average daily net assets of the New York Tax-Exempt Money Fund. U.S. Trust NY
is a state-chartered bank and trust company and a member bank of the Federal
Reserve System. U.S. Trust Company, N.A. is a national bank organized under the
laws of the United States. Each is a wholly-owned subsidiary of U.S. Trust
Corporation, a registered bank holding company. U.S. Trust Corporation is a
wholly-owned subsidiary of The Charles Schwab Corporation ("Schwab").
U.S. Trust Company, N.A., SEI Investments Global Funds Services and
Federated Services Company (collectively, the "Administrators") provide
administrative services to the Funds. 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 Funds Trust
(excluding the international equity portfolios of Excelsior
23
Fund and Excelsior Funds 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. Until further notice to the Funds, U.S. Trust Company, N.A. has
voluntarily agreed to waive a portion of its administration fee in an amount
equal to an annual rate of 0.04% of the average daily net assets of each
Portfolio. For the year ended March 31, 2004, administration fees charged by
U.S. Trust Company, N.A., were as follows:
Waiver of Net
Administration Administration Administration
Fees Fees Fees
-------------- -------------- --------------
Money Fund.................... $2,477,640 $825,198 $1,652,442
Government Money Fund......... 763,346 253,755 509,591
Treasury Money Fund........... 640,389 213,093 427,296
Tax-Exempt Money Fund......... 2,548,361 847,336 1,701,025
New York Tax-Exempt Money Fund 600,090 199,704 400,386
From time to time, in their sole discretion, U.S. Trust 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. For the year ended March 31, 2004,
U.S. Trust has contractually agreed to waive investment advisory fees and to
reimburse other ordinary operating expenses to the extent necessary to keep
total operating expenses from exceeding the following annual percentages of
each Portfolio's average daily net assets:
Money Fund -- Shares.......... 0.50%
Government Money Fund......... 0.50%
Treasury Money Fund........... 0.55%
Tax-Exempt Money Fund......... 0.50%
New York Tax-Exempt Money Fund 0.60%
With regard to the Institutional Shares of Money Fund, for the year ended
March 31, 2004, and until further notice, U.S. Trust contractually agreed to
waive fees and reimburse expenses to the extent necessary to maintain an annual
expense ratio of not more than 0.25%.
For the year ended March 31, 2004, pursuant to the above, investment
advisory fees waived by U.S. Trust were as follows:
Money Fund.................... $3,771,626
New York Tax-Exempt Money Fund 1,028,791
The Portfolios have entered into shareholder servicing agreements with
various service organizations, which may include Schwab, U.S. Trust and
affiliates of U.S. Trust. Services included in the servicing agreements are
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.
Shareholder servicing fees are incurred on a Portfolio and class level (where
applicable). As a consideration for these services, each service organization
receives a fee, computed daily and paid monthly, at an annual rate up to 0.25%
(0.40% prior to July 29, 2003) of the average daily net assets of the
Portfolios' shares held by each service organizations' customers, with
24
the exception of the Institutional Shares of the Money Fund, which pays a fee
of up to 0.15% of the average daily net assets of its shares.
U. S. Trust has voluntarily agreed to waive investment advisory and
administration fees payable in an amount equal to the shareholder servicing
fees payable to affiliates.
For the year ended March 31, 2004, shareholder servicing fees paid to
Schwab, U.S. Trust and affiliates of U. S. Trust:
Amount Amount
Waived as Waived as
Amount Investment Administration
Paid Advisory Fees Fees
---------- ------------- --------------
Money Fund.................... $1,155,681 $ 42,060 $1,113,621
Government Money Fund......... 310,801 310,801 --
Treasury Money Fund........... 187,511 187,511 --
Tax-Exempt Money Fund......... 1,947,158 1,947,158 --
New York Tax-Exempt Money Fund 30,088 30,088 --
Edgewood Services, Inc. ("the Distributor"), a wholly-owned subsidiary of
Federated Investors, Inc., serves as the distributor of the Funds. Shares of
each Portfolio are sold without a sales charge on a continuous basis by the
Distributor.
Boston Financial Data Services, Inc. ("BFDS") serves as transfer agent to
the Portfolios.
Each Independent Director of the Excelsior Fund receives an annual fee of
$15,000, plus a meeting fee of $2,500 for each meeting attended. The Chairman
receives an additional annual fee of $7,500. Each member of the Nominating
Committee receives an annual fee of $2,000 for services in connection with this
committee, plus a meeting fee of $1,000 for each meeting attended. Each
Independent Director of the Excelsior Tax-Exempt Fund receives an annual fee of
$15,000, plus a meeting fee of $2,500 for each meeting attended. The Chairman
receives an additional annual fee of $7,500. Each member of the Nominating
Committee receives an annual fee of $2,000 for services in connection with this
committee, plus a meeting fee of $1,000 for each meeting attended. In addition,
Directors are reimbursed by the Excelsior Fund and Excelsior Tax-Exempt Fund,
for reasonable expenses incurred when acting in their capacity as Directors.
3. Federal Taxes:
It is the policy of the Funds that each Portfolio continue to qualify as a
regulated investment company, 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.
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.
Dividends and distributions are determined in accordance with Federal income
tax regulations which may differ from accounting principles generally accepted
in the United States of America. These differences are primarily due to
differing treatments for deferral of losses on wash sales and net capital
losses incurred
25
after October 31 and within the taxable year ("Post-October losses"). To the
extent these differences are permanent, adjustments are made to the appropriate
equity accounts in the period that the differences arise. Accordingly, the
following reclassifications have been made to/from the following accounts:
Undistributed Accumulated
Net Investment Net Realized Paid-In
Income Gain (Loss) Capital
-------------- ------------ -------
Money Fund........... -- $ 3,436 $(3,436)
Government Money Fund -- 1,189 (1,189)
Treasury Money Fund.. $2,748 (2,748) --
Tax-Exempt Money Fund 53 (53) --
The tax character of dividends and distributions declared during the years
ended March 31, 2004 and March 31, 2003 were as follows:
Long-Term
Ordinary Tax-Exempt Capital
Income Income Gains Total
----------- ----------- --------- -----------
Money Fund
2004....................... $14,865,550 -- -- $14,865,550
2003....................... 31,970,964 -- -- 31,970,964
Government Money Fund
2004....................... 3,926,682 -- -- 3,926,682
2003....................... 8,291,220 -- -- 8,291,220
Treasury Money Fund
2004....................... 2,597,162 -- -- 2,597,162
2003....................... 6,364,693 -- -- 6,364,693
Tax-Exempt Money Fund
2004....................... 38,469 $11,865,305 $273,567 12,177,341
2003....................... 16,257 23,449,842 24,155 23,490,254
New York Tax-Exempt Money Fund
2004....................... 31,529 2,456,266 -- 2,487,795
2003....................... 4,787 5,184,192 23,128 5,212,107
As of March 31, 2004, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Other
Ordinary Tax-Exempt Capital Loss Post-October Wash Temporary
Income Income Carryforward Losses Sales Difference Total
-------- ---------- ------------ ------------ ------- ----------- --------
Money Fund......... $946,177 -- $(47,687) -- -- $ (946,177) $(47,687)
Government Money
Fund............. 284,088 -- (33,689) $(926) -- (284,088) (34,615)
Treasury Money
Fund............. 187,791 -- -- -- -- (185,044) 2,747
Tax-Exempt Money
Fund............. -- $1,049,537 -- -- $(1,823) (1,049,485) (1,771)
New York Tax-Exempt
Money Fund....... -- 200,652 -- (908) -- (200,652) (908)
For Federal tax purposes, the Portfolios aggregate tax cost is equal to book
cost, with the exception of the Tax-Exempt Money Fund, and its tax basis of
investments aggregates $2,044,632,903.
26
Post-October losses are deemed to arise on the first business day of a
Fund's next taxable year.
For Federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. To the extent that such
carryforwards are utilized, capital gain distributions will be reduced. At
March 31, 2004, the following Portfolios had capital loss carryforwards for
Federal tax purposes available to offset future net capital gains through the
indicated expiration dates:
Government
Money Money
Fund Fund
------- ----------
Expiration Date March 31:
2005.................. $12,049 --
2006.................. -- $ 5,931
2007.................. -- 3,297
2008.................. -- 18,904
2011.................. 11,663 --
2012.................. 23,975 5,557
------- -------
Total.................... $47,687 $33,689
======= =======
4. Capital Transactions:
Excelsior Fund has authorized capital of 35 billion shares of Common Stock,
29.3756 billion of which is currently classified to represent interests in
certain classes of shares. Excelsior Tax-Exempt Fund has authorized capital of
24 billion shares of Common Stock, 15 billion of which is currently classified
to represent interests in one of seven separate investment portfolios.
Authorized capital currently classified for each Portfolio is as follows: 4
billion shares each of Money Fund and Government Money Fund, 2.5 billion shares
of Treasury Money Fund, 2 billion shares of New York Tax-Exempt Money Fund and
5.5 billion shares for Tax-Exempt Money Fund.
Each share has a par value of $0.001 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 each
Fund's Board of Directors. Since the Portfolios have sold, reinvested and
redeemed shares only at a constant net asset value of $1.00 per share, the
number of shares represented by such sales, reinvestments and redemptions is
the same as the amounts shown below for such transactions.
Money Fund
--------------------------------
Year Ended Year Ended
03/31/04 03/31/03
--------------- ---------------
Sold:
Shares........................... $ 4,664,084,234 $ 5,589,273,181
Institutional Shares............. 2,751,605,010 3,536,340,479
Issued as reinvestment of dividends:
Shares........................... 784,932 1,812,339
Institutional Shares............. 2,186,353 4,944,129
Redeemed:
Shares........................... (5,311,141,614) (5,605,547,555)
Institutional Shares............. (2,831,721,381) (3,303,057,021)
--------------- ---------------
Net Increase (Decrease)............. $ (724,202,466) $ 223,765,552
=============== ===============
27
Government Money Fund
--------------------------------
Year Ended Year Ended
03/31/04 03/31/03
--------------- ---------------
Sold............................... $ 3,164,391,955 $ 3,904,759,634
Issued as reinvestment of dividends 271,873 744,985
Redeemed........................... (3,214,432,180) (4,106,605,322)
--------------- ---------------
Net (Decrease)..................... $ (49,768,352) $ (201,100,703)
=============== ===============
Treasury Money Fund
--------------------------------
Year Ended Year Ended
03/31/04 03/31/03
--------------- ---------------
Sold............................... $ 2,924,119,256 $ 2,645,547,298
Issued as reinvestment of dividends 641,186 1,846,537
Redeemed........................... (2,977,036,353) (2,679,648,517)
--------------- ---------------
Net (Decrease)..................... $ (52,275,911) $ (32,254,682)
=============== ===============
Tax-Exempt Money Fund
--------------------------------
Year Ended Year Ended
03/31/04 03/31/03
--------------- ---------------
Sold............................... $ 7,348,246,145 $ 7,097,135,009
Issued as reinvestment of dividends 360,212 801,978
Redeemed........................... (7,584,879,895) (7,339,512,073)
--------------- ---------------
Net (Decrease)..................... $ (236,273,538) $ (241,575,086)
=============== ===============
New York Tax-Exempt Money Fund
--------------------------------
Year Ended Year Ended
03/31/04 03/31/03
--------------- ---------------
Sold............................... $ 1,700,208,458 $ 1,902,878,709
Issued as reinvestment of dividends 422,511 832,736
Redeemed........................... (1,759,093,748) (2,051,333,703)
--------------- ---------------
Net (Decrease)..................... $ (58,462,779) $ (147,622,258)
=============== ===============
5. Line of Credit:
The Portfolios and other affiliated funds participate in a $50 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 redemption
of Portfolio shares. Interest is charged to each Portfolio, based on its
borrowings, at a rate equal to the Federal Funds Rate plus 0.50% per year. In
addition, a commitment fee, equal to an annual rate of 0.15% of the average
daily unused portion of the line of credit, is allocated among the
participating Portfolios at the end of each quarter, and is included in
miscellaneous expenses on the Statements of Operations. For the year ended
March 31, 2004, the Portfolios had no borrowings under the agreement.
28
6. Guarantees:
In the normal course of business, the Portfolios enter into contracts that
provide general indemnifications. The Portfolios' maximum exposure under these
arrangements is dependent on future claims that may be made against the
Portfolios, and therefore, cannot be established; however, based on experience,
the risk of loss from such claim is considered remote.
7. Legal Proceedings:
U.S. Trust Company, N.A., United States Trust Company of New York, the
investment advisers (the "Adviser") of Excelsior Funds, Inc., Excelsior
Tax-Exempt Funds, Inc. and Excelsior Funds Trust (collectively the "Companies")
and the Companies have been contacted by the Office of the New York State
Attorney General (the "NYAG") and the Adviser has been contacted by the
Securities and Exchange Commission (the "SEC") in connection with their
investigation of practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares (the "Investigations"). The
Adviser has also been contacted, through its parent, by the U.S. Attorney's
Office in San Francisco and the Attorney General of the State of West Virginia
(the "WVAG") with inquiries regarding the same subject matter. The Adviser and
the Companies have been providing full cooperation with respect to these
investigations, and continue to review the facts and circumstances relevant to
the investigations.
Four class actions suits have been filed against the Companies and the
Adviser: James Page Jr. v. Charles Schwab et al. (filed on November 20, 2003 in
the United States District Court for the Northern District of California); A.
Joseph Szydlowski v. Charles Schwab et al. (filed December 4, 2003 in the
United States District Court for the Southern District of New York); Wilson v.
Excelsior Funds, et al. (filed December 10, 2003 in the United States District
Court for the Southern District of New York); and John R. Granelli v. Charles
Schwab, et al. (filed January 20, 2004 in the United States District Court for
the Southern District of New York). While details in each suit vary, in general
each alleges that during the Class Period, the Adviser, the Companies and
others allowed certain parties and others to engage in illegal and improper
trading practices, which caused financial injury to the shareholders of the
Companies. Each demands unspecified monetary damages. The Wilson complaint also
demands a rescission of the contract with the advisers.
A fifth class action complaint, styled Mike Sayegh v. Janus Capital Corp. et
al., was filed in Los Angeles Superior Court on or about October 22, 2003. On
or about December 3, 2003, the Companies were served with a copy of the
complaint in Sayegh on the basis that they were one of the several Doe
Defendants named in the complaint. The complaint alleges violations of the
California Business and Professions Code, arising from improper trading
activities, and seeks injunctive, declaratory, and other equitable relief in
addition to unspecified monetary damages. The extent to which and capacity in
which the Funds may have had any role in the allegations contained therein is
currently unclear.
In addition, a derivative action, styled Richard Elliott v. Charles Schwab
Corporation, et al., No. 04 CV 2262, which is purportedly brought on behalf of
Excelsior High Yield Fund and Excelsior Funds Trust, alleges violations of
Section 36 of the Investment Company Act, 15 U.S.C. (S) 80a-35(b) and the
common law breach of fiduciary duty by Schwab, the Adviser and certain
directors of the Companies. This action has not yet been served on the
Companies or their directors.
29
The Adviser and the Companies are evaluating the claims in these complaints
and intend to vigorously defend against them. The Adviser anticipates
consolidation of these suits is possible. On February 20, 2004, the Judicial
Panel on Multi-District Litigation issued an order transferring 96 actions
involving allegations of mutual fund late trading and market timing to the
United States District Court for the District of Maryland, for coordinated or
consolidated pretrial proceedings ("MDL 1586"). On March 3, 2004, however, the
Panel issued a Conditional Transfer Order which transferred additional "tag
along cases" to MDL 1586, including the Sayegh, Page and Wilson actions. The
Adviser expects that most or all of the civil actions regarding alleged late
trading and/or market timing, which are pending in federal courts, will
ultimately be transferred to MDL 1586.
Based on currently available information, the Adviser believes that the
likelihood is remote that the pending private lawsuits and Investigations will
have a material adverse financial impact on the Companies, and that the pending
Investigations and private lawsuits are not likely to materially affect its
ability to provide investment management services to the Companies.
30
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Boards of Directors of Excelsior Funds, Inc. and
Excelsior Tax-Exempt Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Money, Government Money,
Treasury Money, Tax-Exempt Money, and New York Tax-Exempt Money Funds (three of
the portfolios constituting the Excelsior Funds, Inc. and two of the portfolios
constituting the Excelsior Tax-Exempt Funds, Inc.) (collectively, the "Funds")
as of March 31, 2004, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Funds' 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 auditing standards generally
accepted in the United States. 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, 2004, by correspondence with the custodian and brokers or
by 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
the Money, Government Money, Treasury Money, Tax-Exempt Money and New York
Tax-Exempt Money Funds at March 31, 2004, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 7, 2004
31
Directors/Trustees and Officers of the Excelsior Funds Complex (Unaudited)
Information pertaining to the directors/trustees and officers of Excelsior
Fund, Excelsior Tax-Exempt Fund and Excelsior Funds Trust (each a "Company" and
collectively, the "Excelsior Funds Complex") is set forth below.
Directors/Trustees who are not deemed to be "interested persons" of the
Excelsior Funds Complex as defined in the 1940 Act are referred to as
"Independent Board Members." Directors/Trustees who are deemed to be
"interested persons" of the Excelsior Funds Complex are referred to as
"Interested Board Members."
Number of
Portfolios in
Excelsior
Term of Funds
Office and Complex Other
Position(s) Length of Overseen by Directorships
Name, Address, Held with each Time Principal Occupation(s) Board Held by Board
Age(1) Company Served(2) During Past 5 Years Member(3) Member(4)
-------------- -------------- ------------- ------------------------------------------- ------------- -------------
INTERESTED BOARD MEMBER
James L. Bailey(5) Director/ Since Executive Vice President of U.S. Trust N/A N/A
114 West 47th Trustee February 2004 Corporation and U.S. Trust New York
Street (since January 2003); President, Excelsior
New York, NY Fund, Excelsior Tax-Exempt Fund and
10036 Excelsior Funds Trust (since May 2003);
Age: 58 Consultant in the financial services
industry (from August 2000 to January
2003); Executive Vice President of Citicorp
(1992 to August 2000).
INDEPENDENT BOARD MEMBERS
Frederick S. Wonham Director/ Since 1997 Retired; Chairman of the Board (since 32 None
Age: 72 Trustee, 1997) and President, Treasurer and
Chairman of Director (since 1995) of Excelsior Fund
the Board and Excelsior Tax-Exempt Fund; Chairman
of the Boards (since 1997), President,
Treasurer and Trustee (since 1995) of
Excelsior Funds Trust; Vice Chairman of
U.S. Trust Corporation and U.S. Trust New
York (from February 1990 until September
1995); and Chairman, U.S. Trust Company
(from March 1993 to May 1997).
Rodman L. Drake Director/ Since 1994 Director of Excelsior Fund and Excelsior 32 4
Age: 61 Trustee Tax-Exempt Fund (since 1996); Trustee of
Excelsior Funds Trust (since 1994);
Director, Parsons Brinkerhoff, Inc.
(engineering firm) (since 1995); President,
Continuation Investments Group, Inc.
(since 1997); President, Mandrake Group
(investment and consulting firm) (1994-
1997); Chairman, MetroCashcard
International Inc. (since 1999); Director,
Hotelivision, Inc. (since 1999); Director,
Alliance Group Services, Inc. (since 1998);
Director, Clean Fuels Technology Corp.
(since 1998); Director, Absolute Quality
Inc. (since 2000); Director, Hyperion Total
Return Fund, Inc. and three other funds
for which Hyperion Capital Management,
Inc. serves as investment adviser (since
1991); Director, The Latin America Smaller
Companies Fund, Inc. (from 1993 to 1998).
32
Number of
Portfolios in
Excelsior
Term of Funds
Office and Complex Other
Position(s) Length of Overseen by Directorships
Name, Address, Held with each Time Principal Occupation(s) Board Held by Board
Age(1) Company Served(2) During Past 5 Years Member(3) Member(4)
- -------------- -------------- ------------- ------------------------------------------- ------------- -------------
Mel Hall Director/ Since 2000 Director of Excelsior Fund and Excelsior 32 None
Age: 59 Trustee Tax-Exempt Fund (since July 2000);
Trustee of Excelsior Funds Trust (since
July 2000); Chief Executive Officer,
Comprehensive Health Services, Inc.
(health care management and
administration).
Roger M. Lynch Director/ Since 2001 Retired; Director of Excelsior Fund and 32 None
Age: 63 Trustee Excelsior Tax-Exempt Fund and Trustee of
Excelsior Funds Trust (since September
2001); Chairman of the Board of Trustees
of Fairfield University (since 1996);
Director, SLD Commodities, Inc.
(importer of nuts) (since 1991); President,
Corporate Asset Funding Co., Inc. (asset
securitization) (from 1987 to 1999);
General Partner (from 1980 to 1986) and
Limited Partner (from 1986 to 1999),
Goldman Sachs & Co.; Chairman,
Goldman Sachs Money Markets, Inc. (from
1982 to 1986).
Jonathan Piel Director/ Since 1994 Director, Excelsior Funds, Inc. and 32 None
Age: 65 Trustee Excelsior Tax-Exempt Funds, Inc. (since
1996); Trustee, Excelsior Funds Trust
(since 1994); Director, Group for the
South Fork, Bridgehampton, NY (since
1993). Retired in 1994 as The Editor,
Scientific American and Vice President,
Scientific American, Inc.
OFFICERS
Mary Martinez Executive Since Managing Director U.S. Trust Company N/A N/A
114 West 47th Vice President February 2004 and Chief Operating Officer of Investment
Street Products (since 2003); Managing Director
New York, NY and Director of Relationship Management
10036 Service, Marketing, Information and
Age: 44 Technology at Bessemer Trust (1998 to
2003).
Joseph Trainor Vice President Since Managing Director U. S. Trust Company N/A N/A
114 West 47th February 2004 (since 2003); President of MFS
Street Institutional Advisors (1998 to 2002).
New York, NY
10036
Age: 43
33
Number of
Portfolios in
Excelsior
Term of Funds
Office and Complex Other
Position(s) Length of Overseen by Directorships
Name, Address, Held with each Time Principal Occupation(s) Board Held by Board
Age(1) Company Served(2) During Past 5 Years Member(3) Member(4)
-------------- --------------- ------------- ------------------------------------------- ------------- -------------
Agnes Mullady Treasurer Since Senior Vice President, U.S. Trust Company N/A N/A
225 High Ridge Chief Financial February 2004 (since 2004); Chief Financial Officer,
Road and Chief AMIC Distribution Partners, (2002 to
Stamford, Accounting 2004); Controller Reserve Management
CT 06905 Officer Corporation, Reserve Management
Age : 45 Company, Inc. and Reserve Partners, Inc.
(2000 to 2002); Vice President and
Treasurer, Northstar Funds; Senior Vice
President and Chief Financial Officer,
Northstar Investment Management Corp.;
President and Treasurer, Northstar
Administrators Corp.; and Vice President
and Treasurer, Northstar Distributors, Inc.
(1993 to 2000).
Frank Bruno Vice President Since 2001 Vice President, U.S. Trust Company (since N/A N/A
225 High Ridge and Assistant 1994); Vice President and Assistant
Road Treasurer Treasurer, Excelsior Fund, Excelsior Tax-
Stamford, CT Exempt Fund and Excelsior Funds Trust
06905 (since February 2001).
Age: 44
Joseph Leung Vice President Since Vice President, U.S. Trust Company (since N/A N/A
225 High Ridge and Assistant May 2003 March 2003); Vice President and Assistant
Road Treasurer Treasurer, Excelsior Fund, Excelsior Tax-
Stamford, CT Exempt Fund and Excelsior Funds Trust
06905 (since May 2003); Vice President of Merrill
Age: 38 Lynch & Co. (from 2000 to 2002);
Treasurer, Vice President and Chief
Accounting Officer of Midas Funds, Bexil
Fund, Tuxis Fund, Global Income Fund
and Winmill & Co. Incorporated (from
1995 to 2000).
Michael R. Rosella, Acting Since Partner, Paul, Hastings, Janofsky & Walker N/A N/A
Esq. Secretary and February 2004 LLP (law firm) (since 2000); Partner,
75 East 55th Street Chief Legal Battle Fowler LLP (law firm) (1988 to
New York, NY Officer 2000).
10022
Age: 46
Lee Wilcox Assistant Since Employed by SEI Investments since June N/A N/A
530 E. Swedesford Treasurer June 2002 2002. Director of Fund Accounting, SEI
Road Investments since June 2002. Senior
Wayne, PA 19087 Operations Manager of Deutsche Bank
Age: 42 Global Fund Services (2000-2002),
PricewaterhouseCoopers LLP (1995-2000),
United States Army (1982-1992).
34
Number of
Portfolios in
Excelsior
Term of Funds
Office and Complex Other
Position(s) Length of Overseen by Directorships
Name, Address, Held with each Time Principal Occupation(s) Board Held by Board
Age(1) Company Served(2) During Past 5 Years Member(3) Member(4)
-------------- -------------- ---------- ------------------------------------------ ------------- -------------
Timothy D. Barto Assistant Since 2001 Employed by SEI Investments since N/A N/A
One Freedom Treasurer October 1999. Vice President and
Valley Drive Assistant Secretary of SEI Investments
Oaks, PA 19456 since December 1999. Associate at
Age: 36 Dechert, Price & Rhoads (1997-1999).
Associate at Richter, Miller & Finn (1993-
1997).
- --------
(1) Each director/trustee may be contacted by writing to Excelsior Funds, One
Freedom Valley Drive, Oaks, PA 19456.
(2) Each director/trustee shall hold office until the election and
qualification of his or her successor, or until he or she sooner dies,
resigns or is removed. The president, treasurer and secretary of each
Company shall hold office for a one year term and until their respective
successors are chosen and qualified, or in each case until he or she sooner
dies, resigns is removed, or becomes disqualified in accordance with each
Company's by-laws.
(3) The Excelsior Funds Complex consists of all registered investment companies
(Excelsior Fund, Excelsior Tax-Exempt Fund and Excelsior Funds Trust) for
which U.S. Trust serves as investment adviser. As of March 31, 2004, the
Excelsior Funds Complex consisted of 32 Funds.
(4) Directorships of companies required to report to the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (i.e.,
"public companies") or other investment companies registered under the 1940
Act.
(5) Mr. James L. Bailey is a board member who is deemed to be an "interested
person" of the Excelsior Funds Complex, as that term is defined in the 1940
Act, because he is an Executive Vice President of the Investment Adviser.
For more information regarding the Directors/Trustees and Officers, please
refer to the Statement of Additional Information, which is available upon
request by calling 1-800-446-1012.
35
Federal Tax Information: (Unaudited)
For the year ended March 31, 2004, the designation of long-term capital
gains and the percentage of income earned from direct treasury obligations were
as follows:
20% Treasury
Long-Term Income
Capital Gains Earned
------------- --------
Money Fund........... -- 10.44%
Government Money Fund -- 50.83%
Treasury Money Fund.. -- 97.78%
Tax-Exempt Money Fund $273,594 --
For the year ended March 31, 2004, the percentage of exempt interest
dividends paid was approximated as follows:
Tax-Exempt Money Fund......... 97.53%
New York Tax-Exempt Money Fund 98.84%
36
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AR-MM-0304
Item 2. Code of Ethics.
The registrant has adopted a Code of Business Conduct and Ethics for principal
executive officers and senior financial officers.
Item 3. Audit Committee Financial Expert.
(a)(1) & (2) The registrant's board of directors has determined that audit
committee financial experts serving on the audit committee are Frederick S.
Wonham and Rodman L. Drake, who are independent as defined in Form N-CSR Item
3(a)(2).
Item 4. Principal Accountant Fees and Services.
Fees billed by Ernst & Young LLP (E&Y) Related to the Registrant
Ernst & Young LLP billed the Registrant aggregate fees for services rendered to
the Registrant for the last two fiscal years as follows:
- ----------------------------------------------------------------------------------------
2004 2003
- ----------------------------------------------------------------------------------------
All fees and All fees and All fees and All fees and
services services services services
to the to service to the to service
Registrant affiliates Registrant affiliates
that were that were that were that were
pre-approved pre-approved pre-approved pre-approved
- ----------------------------------------------------------------------------------------
(a) Audit Fees(1) $273,452 N/A $188,806 N/A
- ----------------------------------------------------------------------------------------
(b) Audit-Related Fees (2) $ 0 $0 $ 0 $0
- ----------------------------------------------------------------------------------------
(c) Tax Fees (3) $ 61,532 $0 $ 50,873 $0
- ----------------------------------------------------------------------------------------
(d) All Other Fees $ 0(4) $0 $ 0 $0
- ----------------------------------------------------------------------------------------
Notes:
(1) Audit fees include amounts related to the audit of the Registrant's
annual financial statements and services normally provided by the
accountant in connection with statutory and regulatory filings.
(2) For the fiscal years ended March 31, 2004 and March 31, 2003, there
were no fees for assurance and related services by E&Y reasonably
related to the performance of the audit of the Registrant's financial
statements that were not reported under (a) of this Item.
(3) For the fiscal years ended March 31, 2004 and March 31, 2003, the
aggregate tax fees billed for professional services rendered by E&Y
for tax compliance, tax advice, and tax planning were $61,532 and
$50,873, respectively. Such tax services included the review of
income and excise tax returns for the Registrant.
(4) For the fiscal years ending March 31, 2004 and March 31, 2003, there
were no fees billed for professional services rendered by E&Y for
products and services provided by E&Y to the Registrant, other than
the services reported in (a) through (c) of this Item.
(e)(1) The audit committee has adopted policies and procedures that require
pre-approval of audit and non-audit services for the Funds and certain other
services provided to the Fund's affiliates in accordance with Rule 2-01(c)(7) of
Regulation S-X. The pre-approval requirement for non-audit services for the
Funds, the Funds' investment adviser and the adviser's control affiliates may be
waived if: (i) the aggregate amount of all services provided constitutes not
more than 5% of the total amount of revenues paid to the Funds' independent
accountant by the Funds and the Funds' investment adviser and its control
affiliates that provide ongoing services to the Funds during the fiscal year in
which the services are provided that would have to be pre-approved by the Funds'
Audit Committee; (ii) such services were not recognized at the time of the
engagement to be non-audit services; and (iii) such services are promptly
brought to the attention of the Audit Committee and approved prior to the
completion of the audit by the Audit Committee or by its designated Audit
Committee member(s).
(e)(2) Percentage of fees billed applicable to non-audit services pursuant to
waiver of pre-approval requirement were as follows:
- --------------------------------------------------------------------------------
2004 2003
- --------------------------------------------------------------------------------
Audit-Related Fees N/A N/A
- --------------------------------------------------------------------------------
Tax Fees N/A N/A
- --------------------------------------------------------------------------------
All Other Fees N/A N/A
- --------------------------------------------------------------------------------
(f) Not Applicable.
(g) For the fiscal years ended March 31, 2004 and March 31, 2003, the aggregate
non-audit fees billed by E&Y for services rendered to the Registrant and the
Advisers and any entity controlling, controlled by, or under common control with
the Advisers that provided ongoing services to the Registrant were $1,039,937
and $449,173, respectively.
(h) The registrant's audit committee has considered whether its principal
accountant's provision of non-audit services that were rendered to the
registrant's investment adviser, and any control persons of the investment
adviser that provides ongoing services to the registrant, that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is
compatible with maintaining the principal accountant's independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments
Not applicable. Effective for filings made for fiscal periods ending on or after
July 9, 2004.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Company and
Affiliated Purchasers.
Not applicable.
Item 9. Submissions of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's board of directors after Registrant last
provided disclosure in response to the requirement of Item 7(d)(2)(ii)(G) of
Schedule 14A, or this Item 9.
Item 10. Controls and Procedures.
(a) The certifying officers, whose certifications are included herewith, have
evaluated the registrant's disclosure controls and procedures within 90 days of
the filing date of this report. In their opinion, based on their evaluation, the
registrant's disclosure controls and procedures are adequately designed, and are
operating effectively to ensure, that information required to be disclosed by
the registrant in the reports it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no significant changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrants internal control over financial reporting.
Items 11. Exhibits.
(a)(1) Code of Business Conduct and Ethics for principal executive and senior
financial officers, attached hereto.
(a)(2) A separate certification for the principal executive officer and the
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are filed
herewith.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing
as an Exhibit.
SIGNATURES
Pursuant to the requirements of the securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Excelsior Tax-Exempt Funds, Inc.
By (Signature and Title)* /s/ James L. Bailey
---------------------------------------
James L. Bailey
President and Director/Trustee
Date 06/07/04
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ James L. Bailey
---------------------------------------
James L. Bailey
President (principal executive officer)
Date 06/07/04
By (Signature and Title)* /s/ Agnes Mullady
---------------------------------------
Agnes Mullady
Treasurer, Chief Financial Officer and
Chief Accounting Officer
Date 06/07/04
* Print the name and title of each signing officer under his or her
signature.