EXCELSIOR FUNDS INC, 497, 1996-01-04

EXCELSIOR FUNDS INC
497, 1996-01-04

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<PAGE>

[LOGO OF EXCELSIOR FUNDS, INC. APPEARS HERE]

A Management Investment Company

- --------------------------------------------------------------------------------

Equity Funds For initial purchase information, current
Trust Shares prices, performance information and ex-
isting account information, call (800)
446-1012. (From overseas, call (617) 557-
8280.)

73 Tremont Street Boston, MA 02108-3913

- --------------------------------------------------------------------------------

This Prospectus describes the Trust Shares ("Trust Shares" or "Shares") offered
by several separate portfolios offered to investors by Excelsior Funds, Inc.
("Excelsior Fund") (formerly UST Master Funds, Inc.), an open-end, management
investment company. Excelsior Fund also issues an additional series of shares
in the portfolios which are offered under a separate prospectus. Each portfolio
(individually, a "Fund" and collectively, the "Funds") has its own investment
objective and policies as follows:

EQUITY FUND seeks long-term capital appreciation by investing in companies be-
lieved by the Investment Adviser to represent good long-term values not cur-
rently recognized in the market prices of their securities.

AGING OF AMERICA FUND seeks long-term capital appreciation by investing in
companies which the Investment Adviser believes will benefit from the changes
occurring in the demographic structure of the U.S. population, particularly its
growing population of individuals over the age of 40.

COMMUNICATION AND ENTERTAINMENT FUND seeks long-term capital appreciation by
investing in companies which the Investment Adviser believes will benefit from
the technological and international transformation of the communications and
entertainment industries, particularly the convergence of information, communi-
cation and entertainment media.

BUSINESS AND INDUSTRIAL RESTRUCTURING FUND seeks long-term capital apprecia-
tion by investing in companies which the Investment Adviser believes will bene-
fit from their restructuring or redeployment of assets and operations in order
to become more competitive or profitable.

GLOBAL COMPETITORS FUND seeks long-term capital appreciation by investing pri-
marily in U.S.-based companies which the Investment Adviser believes will bene-
fit from their position as effective and strong competitors on a global basis.

EARLY LIFE CYCLE FUND seeks long-term capital appreciation by investing in
smaller companies in the earlier stages of their development or larger or more
mature companies engaged in new and higher growth potential operations.

Each of the Funds is sponsored and distributed by Edgewood Services, Inc. and
advised by United States Trust Company of New York (the "Investment Adviser" or
"U.S. Trust").

SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR EN-
DORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, ITS PARENT OR AFFILIATES
AND THE SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE COR-
PORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY.

AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

August 1, 1995

(as revised on January 1, 1996)
<PAGE>

PROSPECTUS SUMMARY

EXCELSIOR FUNDS, INC. is an investment company offering various diversified
investment portfolios with differing objectives and policies. Founded in 1984,
Excelsior Fund currently offers 20 Funds with combined assets of approximately
$2.5 billion. See "Description of Capital Stock."

INVESTMENT ADVISER: United States Trust Company of New York ("U.S. Trust")
serves as the Funds' investment adviser. U.S. Trust offers a variety of spe-
cialized financial and fiduciary services to high-net worth individuals, in-
stitutions and corporations. Excelsior Fund offers investors access to U.S.
Trust's services. See "Management of the Funds--Investment Adviser."

INVESTMENT OBJECTIVES AND POLICIES: Generally, each Fund is a diversified
investment portfolio which invests in equity securities. The Funds' investment
objectives and policies are summarized on the cover and explained in greater
detail later in this Prospectus. See "Investment Objectives and Policies,"
"Portfolio Instruments and Other Investment Information," and "Investment Lim-
itations."

HOW TO INVEST: The Funds' Shares are offered at their public offering price,
i.e., their net asset value plus a sales load which is subject to substantial
reductions for large purchases and programs for accumulation. The sales load
is not applicable to investors making their investments through a variety of
institutions, such as U.S. Trust, other banks and trust companies. See "How to
Purchase and Redeem Shares."

The minimum to start an account is $500 per Fund, with a minimum of $50 per
Fund for subsequent investments. The easiest way to invest is to complete the
account application which accompanies this Prospectus and to send it with a
check to the address noted on the application. Investors may also invest by
wire and through investment dealers or institutional investors with appropri-
ate sales agreements with Excelsior Fund. See "How to Purchase and Redeem
Shares."

HOW TO REDEEM: Redemptions may be requested directly from Excelsior Fund by
mail, wire or telephone. Investors investing through another institution
should request redemptions through their Shareholder Organization. See "How to
Purchase and Redeem Shares."

2
<PAGE>

EXPENSE SUMMARY

The following table summarizes the estimated expenses to be borne by the
Trust Shares of each Fund. The expense summary sets forth the expenses borne
by a separate series of shares of the Funds offered under a separate prospec-
tus for the fiscal year ended March 31, 1995, as restated to reflect the addi-
tional cost of distribution fees borne by Trust Shares.
<TABLE>
<CAPTION>
BUSINESS
AGING OF COMMUNICATION AND INDUSTRIAL GLOBAL
EQUITY AMERICA AND ENTERTAINMENT RESTRUCTURING COMPETITORS EARLY LIFE
FUND FUND FUND FUND FUND CYCLE FUND
------ -------- ----------------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load (as a
percentage of offering
price)................. 4.50% 4.50% 4.50% 4.50% 4.50% 4.50%
Sales Load on Reinvested
Dividends.............. None None None None None None
Deferred Sales Load..... None None None None None None
Redemption Fees/1/ ..... None None None None None None
Exchange Fees........... None None None None None None
ANNUAL FUND OPERATING
EXPENSES FOR TRUST
SHARES (AS A PERCENTAGE
OF AVERAGE NET ASSETS)
Advisory Fees (after fee
waivers)/2/ ........... .72% .44% .53% .52% .50% .52%
12b-1 Fees/3/........... .35% .35% .35% .35% .35% .35%
Other Operating Expenses
Administrative Servic-
ing Fee/2/............ .03% .03% .03% .02% .02% .05%
Other Expenses/2/ (af-
ter fee waivers)...... .30% .52% .42% .44% .45% .39%
----- ----- ----- ----- ----- -----
Total Operating Expenses
(after fee waivers)/2/
....................... 1.40% 1.34% 1.33% 1.33% 1.32% 1.31%
===== ===== ===== ===== ===== =====
</TABLE>
- -------
1. The Fund's transfer agent imposes a direct $8.00 charge on each wire re-
demption by noninstitutional (i.e. individual) investors which is not re-
flected in the expense ratios presented herein. Shareholder organizations
may charge their customers transaction fees in connection with redemptions.
See "Redemption Procedures."
2. The Investment Adviser and Administrators may, from time to time, voluntar-
ily waive part of their respective fees, which waivers may be terminated at
any time. Until further notice, the Investment Adviser and/or Administra-
tors intend to voluntarily waive fees in an amount equal to the Administra-
tive Servicing Fee; and to further waive fees and reimburse expenses to the
extent necessary for Shares of each of the Aging of America, Communication
and Entertainment, Business and Industrial Restructuring, Global Competi-
tors and Early Life Cycle Funds (collectively, the "Theme Funds"), respec-
tively, to maintain an annual expense ratio, net of 12b-1 fees, of not more
than .99%. Without such fee waivers, "Advisory Fees" would be .75%, .60%,
.60%, .60%, .60% and .60%, and "Total Operating Expenses" would be 1.43%,
1.61%, 1.41%, 1.43%, 1.53% and 1.39% for the Equity, Aging of America, Com-
munication and Entertainment, Business and Industrial Restructuring, Global
Competitors and Early Life Cycle Funds, respectively, and "Other Expenses"
would be .63%, .43%, .46% and .56% for the Aging of America, Communication
and Entertainment, Business and Industrial Restructuring and Global Compet-
itors Funds, respectively.

3. As a result of the payment of sales charges and distribution fees, long-
term shareholders may pay more than the economic equivalent of the maximum
front-end sales load permitted by the National Association of Securities
Dealers, Inc. ("NASD"). The NASD has adopted rules which generally limit
the aggregate sales charges and payments under Excelsior Fund's Distribu-
tion Plan to a certain percentage of total new gross share sales, plus in-
terest. Excelsior Fund would stop accruing Distribution Plan fees if, to
the extent, and for as long as such limit would otherwise be exceeded.

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual returns and (2) redemption of your investment at the end of the
following periods:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity Fund..................................... $59 $87 $118 $205
Aging of America Fund........................... 58 86 115 199
Communication and Entertainment Fund............ 58 85 115 198
Business and Industrial Restructuring Fund...... 58 85 115 198
Global Competitors Fund......................... 58 85 114 197
Early Life Cycle Fund........................... 58 85 114 196
</TABLE>

3
<PAGE>

The foregoing expense summary and example (based on the maximum sales load
payable on the Shares) are intended to assist investors in understanding the
costs and expenses that an investor in Trust Shares of the Funds will bear di-
rectly or indirectly. The expense summary sets forth advisory and other ex-
penses payable with respect to a separate series of shares of the Funds for the
fiscal year ended March 31, 1995, as restated to reflect the additional cost of
distribution fees borne by Trust Shares. For more complete descriptions of the
Funds' operating expenses, see "Management of the Funds" and "Description of
Capital Stock" in this Prospectus and the financial statements and notes incor-
porated by reference in the Statement of Additional Information.

THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE
GREATER OR LOWER THAN THOSE SHOWN IN THE EXPENSE SUMMARY AND EXAMPLE.

4
<PAGE>

FINANCIAL HIGHLIGHTS

Prior to the date of this Prospectus, each Fund offered a single series of
shares offered under a separate prospectus. As of the date of this Prospectus,
the Funds began offering a separate series of shares designated as Trust
Shares. Trust Shares and the shares of the other series offered under a sepa-
rate prospectus represent equal pro rata interests in each Fund, except that
Trust Shares bear the additional expense of distribution fees. See "Descrip-
tion of Capital Stock."

The following tables include selected data for a share of a separate series
outstanding throughout each period and other performance information derived
from the financial statements included in Excelsior Fund's Annual Report to
Shareholders for the year ended March 31, 1995 (the "Financial Statements").
No Trust Shares were offered or outstanding during the periods reflected in
the following tables. The information contained in the Financial Highlights
for each period has been audited by Ernst & Young LLP, Excelsior Fund's inde-
pendent auditors. The following tables should be read in conjunction with the
Financial Statements and notes thereto. More information about the performance
of each Fund is also contained in the Annual Report to Shareholders which may
be obtained from Excelsior Fund without charge by calling the number on the
front cover of this Prospectus.

EQUITY FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986/1/
------- ------- ------- ------- ------ ------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 19.17 $ 18.77 $ 16.28 $ 14.13 $13.87 $ 13.22 $ 11.32 $ 13.56 $ 12.35 $ 8.00
------- ------- ------- ------- ------ ------- ------- --------- ------- -------
Income From Investment
Operations
Net Investment Income.. 0.07 0.05 0.08 0.13 0.28 0.34 0.19 0.15 0.18 0.18
Net Gains or (Losses)
on Securities (both
realized and
unrealized)........... 2.67 1.16 3.01 2.23 0.39 1.26 1.88 (1.63) 1.86 4.31
------- ------- ------- ------- ------ ------- ------- --------- ------- -------
Total From Investment
Operations............ 2.74 1.21 3.09 2.36 0.67 1.60 2.07 (1.48) 2.04 4.49
------- ------- ------- ------- ------ ------- ------- --------- ------- -------
Less Distributions
Dividends From Net
Investment Income..... (0.04) (0.08) (0.09) (0.21) (0.23) (0.34) (0.17) (0.14) (0.18) (0.14)
Dividends in Excess of
Net Investment Income. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions From Net
Realized Gain on
Investments and
Options............... (0.47) (0.39) (0.51) 0.00 (0.18) (0.61) 0.00 (0.62) (0.65) 0.00
Distributions in Excess
of Net Realized Gain
on Investments and
Options............... 0.00 (0.34) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------ ------- ------- --------- ------- -------
Total Distributions.... (0.51) (0.81) (0.60) (0.21) (0.41) (0.95) (0.17) (0.76) (0.83) (0.14)
------- ------- ------- ------- ------ ------- ------- --------- ------- -------
Net Asset Value, End of
Period................. $ 21.40 $ 19.17 $ 18.77 $ 16.28 $14.13 $ 13.87 $ 13.22 $ 11.32 $ 13.56 $ 12.35
======= ======= ======= ======= ====== ======= ======= ========= ======= =======
Total Return/2/ ........ 14.65% 6.54% 19.26% 16.87% 5.11% 11.98% 18.52% (11.24)% 17.61% 56.74%
Ratios/Supplemental Data
Net Assets, End of
Period
(in millions)......... $137.42 $122.26 $106.14 $ 71.62 $29.87 $ 25.98 $ 17.61 $ 13.58 $ 13.40 $ 5.58
Ratio of Net Operating
Expenses to Average
Net Assets............ 1.05% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.21% 0.90%/3/
Ratio of Gross
Operating Expenses to
Average Net Assets.... 1.08% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.30% 2.74%/3/
Ratio of Net Investment
Income to Average Net
Assets................ 0.36% 0.25% 0.51% 0.87% 2.21% 2.45% 1.62% 1.26% 1.53% 2.63%/3/
Portfolio Turnover
Rate.................. 23.0% 17.0% 24.0% 20.0% 41.0% 53.0% 46.0% 67.0% 86.0% 207.0%/3/
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was April 25, 1985.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.

5
<PAGE>

AGING OF AMERICA FUND

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
-------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
------ ------ -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 6.99 $ 7.01 $7.00
------ ------ -----
Income From Investment Operations
Net Investment Income...................... 0.04 0.03 0.01
Net Gains or (Losses) on Securities (both
realized and unrealized).................. 0.85 (0.02) 0.00
------ ------ -----
Total From Investment Operations........... 0.89 0.01 0.01
------ ------ -----
Less Distributions
Dividends From Net Investment Income....... (0.04) (0.03) 0.00
Dividends in Excess of Net Investment
Income.................................... 0.00 0.00 0.00
Distributions From Net Realized Gain on
Investments and Options................... 0.00 0.00 0.00
Distributions in Excess of Net Realized
Gain on Investments and Options........... 0.00 0.00 0.00
------ ------ -----
Total Distributions........................ (0.04) (0.03) 0.00
------ ------ -----
Net Asset Value, End of Period............... $ 7.84 $ 6.99 $7.01
====== ====== =====
Total Return/2/.............................. 12.80% 0.13% 0.14%
Ratios/Supplemental Data
Net Assets, End of Period (in millions).... $22.17 $10.58 $2.39
Ratio of Net Operating Expenses to Average
Net Assets................................ 0.99% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses to
Average Net Assets........................ 1.26% 1.82% 3.87%/3/
Ratio of Net Investment Income to Average
Net Assets................................ 0.63% 0.59% 0.77%/3/
Portfolio Turnover Rate.................... 14.0% 24.0% 14.0%/3/
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.

6
<PAGE>

COMMUNICATION AND ENTERTAINMENT FUND

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
-------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
------ ------ -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 8.75 $ 7.61 $7.00
------ ------ -----
Income From Investment Operations
Net Investment Income...................... 0.04 0.02 0.01
Net Gains or (Losses) on Securities (both
realized and unrealized).................. 1.06 1.52 0.60
------ ------ -----
Total From Investment Operations........... 1.10 1.54 0.61
------ ------ -----
Less Distributions
Dividends From Net Investment Income....... (0.04) (0.03) 0.00
Dividends in Excess of Net Investment
Income.................................... 0.00 0.00 0.00
Distributions From Net Realized Gain on
Investments and Options................... (0.17) (0.37) 0.00
Distributions in Excess of Net Realized
Gain on Investments and Options........... 0.00 0.00 0.00
------ ------ -----
Total Distributions........................ (0.21) (0.40) 0.00
------ ------ -----
Net Asset Value, End of Period............... $ 9.64 $ 8.75 $7.61
====== ====== =====
Total Return/2/.............................. 12.87% 20.07% 8.71%
Ratios/Supplemental Data
Net Assets, End of Period (in millions).... $29.91 $21.02 $5.79
Ratio of Net Operating Expenses to Average
Net Assets................................ 0.98% 0.98% 0.99%/3/
Ratio of Gross Operating Expenses to
Average Net Assets........................ 1.06% 1.16% 2.20%/3/
Ratio of Net Investment Income to Average
Net Assets................................ 0.46% 0.29% 1.06%/3/
Portfolio Turnover Rate.................... 56.0% 60.0% 25.0%/3/
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.

7
<PAGE>

BUSINESS AND INDUSTRIAL RESTRUCTURING FUND

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
-------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
------ ------ -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 9.64 $ 7.71 $ 7.00
------ ------ ------
Income From Investment Operations
Net Investment Income...................... 0.07 0.06 0.02
Net Gains or (Losses) on Securities (both
realized and unrealized).................. 1.02 1.96 0.69
------ ------ ------
Total From Investment Operations........... 1.09 2.02 0.71
------ ------ ------
Less Distributions
Dividends From Net Investment Income....... (0.06) (0.07) 0.00
Dividends in Excess of Net Investment
Income.................................... 0.00 0.00 0.00
Distributions From Net Realized Gain on
Investments and Options................... (0.12) (0.02) 0.00
Distributions in Excess of Net Realized
Gain on Investments and Options........... 0.00 0.00 0.00
------ ------ ------
Total Distributions........................ (0.18) (0.09) 0.00
------ ------ ------
Net Asset Value, End of Period............... $10.55 $ 9.64 $ 7.71
====== ====== ======
Total Return/2/.............................. 11.49% 26.40% 10.14%
Ratios/Supplemental Data
Net Assets, End of Period (in millions).... $30.18 $14.44 $ 1.94
Ratio of Net Operating Expenses to Average
Net Assets................................ 0.98% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses to
Average Net Assets........................ 1.08% 1.73% 5.85%/3/
Ratio of Net Investment Income to Average
Net Assets................................ 0.83% 0.77% 2.48%/3/
Portfolio Turnover Rate.................... 82.0% 75.0% 9.0%/3/
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.

8
<PAGE>

GLOBAL COMPETITORS FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period. $7.69 $ 7.28 $7.00
---------- ---------- -----
Income From Investment Operations
Net Investment Income.............. 0.07 0.05 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 0.90 0.41 0.27
---------- ---------- -----
Total From Investment Operations... 0.97 0.46 0.28
---------- ---------- -----
Less Distributions
Dividends from Net Investment
Income............................ (0.07) (0.05) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00
Distributions from Net Realized
Gain on Investments and Options... 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00
---------- ---------- -----
Total Distributions................ (0.07) (0.05) 0.00
---------- ---------- -----
Net Asset Value, End of Period....... $ 8.59 $ 7.69 $7.28
========== ========== =====
Total Return/2/...................... 12.73% 6.29% 4.00%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $ 25.50 $ 10.06 $2.04
Ratio of Net Operating Expenses to
Average Net Assets................ 0.97% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets............. 1.18% 1.72% 3.97%/3/
Ratio of Net Investment Income to
Average Net Assets................ 1.04% 0.81% 0.82%/3/
Portfolio Turnover Rate............ 29.0% 19.0% 0.0%/3/
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.

9
<PAGE>

EARLY LIFE CYCLE FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 8.66 $ 7.40 $7.00
---------- ---------- -----
Income From Investment Operations
Net Investment Income.............. (0.02) (0.01) 0.00
Net Gains or (Losses) on Securities
(both realized and unrealized).... 1.31 1.36 0.40
---------- ---------- -----
Total From Investment Operations... 1.29 1.35 0.40
---------- ---------- -----
Less Distributions
Dividends From Net Investment
Income............................ 0.00 0.00 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... (0.18) (0.09) 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00
---------- ---------- -----
Total Distributions................ (0.18) (0.09) 0.00
---------- ---------- -----
Net Asset Value, End of Period....... $ 9.77 $ 8.66 $7.40
========== ========== =====
Total Return/2/...................... 15.16% 18.27% 5.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $ 47.78 $ 24.95 $5.51
Ratio of Net Operating Expenses to
Average Net Assets................ 0.96% 0.95% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets............. 1.04% 1.15% 2.70%/3/
Ratio of Net Investment Income to
Average Net Assets................ (0.23)% (0.25)% 0.12%/3/
Portfolio Turnover Rate............ 42.0% 20.0% 4.0%/3/
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.

10
<PAGE>

U.S. TRUST'S INVESTMENT PHILOSOPHY AND STRATEGIES

U.S. Trust offers a variety of specialized fiduciary and financial services
to high-net worth individuals, institutions and corporations. As one of the
largest institutions of its type, U.S. Trust prides itself in offering an at-
tentive and high level of service to each of its clients. The Excelsior Funds
offer individual investors access to U.S. Trust's services.

Philosophy. In managing investments for the Funds, U.S. Trust follows a long-
term investment philosophy which generally does not change with the short-term
variability of financial markets or fundamental conditions. U.S. Trust's ap-
proach begins with the conviction that all worthwhile investments are grounded
in value. The Investment Adviser believes that an investor can identify funda-
mental values that eventually should be reflected in market prices. U.S. Trust
believes that over time, a disciplined search for fundamental value will
achieve better results than attempting to take advantage of short-term price
movements.

Implementation of this long-term value philosophy consists of searching for,
identifying and obtaining the benefits of present or future investment values.
For example, such values may be found in a company's future earnings potential
or in its existing resources and assets. Accordingly, U.S. Trust in managing
investments for the Funds is constantly engaged in assessing, comparing and
judging the worth of companies, particularly in comparison to the price the
markets place on such companies' shares.

Strategies. In order to translate its investment philosophy into more spe-
cific guidance for selection of investments, the Investment Adviser uses three
specific strategies. These strategies, while identified separately, may over-
lap so that more than one may be applied in an investment decision.

U.S. Trust's "PROBLEM/OPPORTUNITY STRATEGY" seeks to identify industries and
companies with the capabilities to provide solutions to or benefit from com-
plex problems such as the changing demo-graphics and aging of the U.S. popula-
tion or the need to enhance industrial productivity. U.S. Trust's second
strategy is a "TRANSACTION VALUE" comparison of a company's real underlying
asset value with the market price of its shares and with the sale prices for
similar assets changing ownership in public market transactions. Differences
between a company's real asset value and the price of its shares often are
corrected over time by restructuring of the assets or by market recognition of
their value. U.S. Trust's third strategy involves identifying "EARLY LIFE CY-
CLE" companies whose products are in their earlier stages of development or
that seek to exploit new markets. Frequently such companies are smaller compa-
nies, but early life cycle companies may also include larger established com-
panies with new products or markets for existing products. The Investment Ad-
viser believes that over time the value of such companies should be recognized
in the market.

Themes. To complete U.S. Trust's investment philosophy, the three portfolio
strategies discussed above are applied in concert with several "longer-term
investment themes" to identify investment opportunities. The Investment Ad-
viser believes these longer-term themes represent strong and inexorable
trends. The Investment Adviser also believes that understanding the instiga-
tion, catalysts and effects of these longer-term trends should help to iden-
tify companies that are beneficiaries of these trends.

INVESTMENT OBJECTIVES AND POLICIES

The Investment Adviser will use its best efforts to achieve the investment
objective of each Fund, although their achievement cannot be assured. The in-
vestment objective of each Fund is "fundamental", meaning that it may not be
changed without a vote of the holders of a majority of the particular Fund's
outstanding shares (as defined under "Miscellaneous"). Except as noted below
in "Investment Limitations,"

11
<PAGE>

the investment policies of each Fund may be changed without a vote of the
holders of a majority of the outstanding shares of such Fund.

EQUITY FUND

The Equity Fund's investment objective is to seek long-term capital apprecia-
tion. The Equity Fund invests in companies which the Investment Adviser
believes have value currently not recognized in the market prices of the com-
panies' securities. The Investment Adviser uses the investment philosophy,
strategies and themes discussed above to identify such investment values and
to diversify the Fund's investments over a variety of industries and types of
companies. See "Investment Policies Common to the Equity Fund and the Theme
Funds" for a discussion of various investment policies applicable to the Eq-
uity Fund.

THEME FUNDS

Five Theme Funds are offered having the common investment objective of long-
term capital appreciation. As noted above, these Theme Funds are based on
themes identified and followed by the Investment Adviser. Each Theme Fund's
key policies are discussed below. Additional policies common to all Theme
Funds are discussed after this section.

AGING OF AMERICA FUND--invests in companies which the Investment Adviser be-
lieves will benefit from the changes occurring in the demographic structure of
the U.S. population, particularly its growing proportion of individuals over
the age of 40. In analyzing companies for this Fund, the Investment Adviser
considers carefully the ongoing changes in the mean and median ages of the
U.S. population and the resulting effects on the lifestyles and day-to-day
economic actions of the population as a whole. Companies currently positioned
to benefit from such changes include health care, pharmaceutical, biotechnol-
ogy and similar health-related firms. In addition, certain clothing, financial
services, entertainment, real estate and housing, food and beverage and other
types of companies may be positioned to benefit from the demographic changes.
Under normal conditions, at least 65% of the Fund's total assets will be in-
vested in companies of the type described in this paragraph.

COMMUNICATION AND ENTERTAINMENT FUND--invests in companies which the Invest-
ment Adviser believes will benefit from the technological and international
transformation of the communications and entertainment industries, particu-
larly the convergence of information, communication and entertainment media.
Such companies may include those engaged in the development, production, sale
and distribution of products or services in the broadcast, radio and televi-
sion, leisure, entertainment, amusement, publishing, telecommunications serv-
ices and equipment, and tele-phone utilities industries. In analyzing compa-
nies for investment, the Investment Adviser may focus on firms which the In-
vestment Adviser believes are innovators of or will benefit from the melding
of computer, communications and entertainment technologies. Under normal con-
ditions, at least 65% of the Fund's total assets will be invested in companies
of the type described in this paragraph.

BUSINESS AND INDUSTRIAL RESTRUCTURING FUND--invests in companies which the
Investment Adviser believes will benefit from their restructuring or redeploy-
ment of assets and operations in order to become more competitive or profit-
able. Such companies may include those involved in prospective mergers, con-
solidations, liquidations, spin-offs, financial restructurings and reorganiza-
tions. The business activities of such companies are not limited in any way.
Under normal conditions, at least 65% of the Fund's total assets will be in-
vested in companies of the type described in this paragraph. The Investment
Adviser's focus is to find companies whose restructuring activities offer sig-
nificant value and investment potential. For the past several years leveraged
buy-outs and mergers have been prominent trends. Currently, a great deal of
value is being created as companies deleverage, recapitalize, and rationalize
their operations in order to increase profitability. There is risk in these
types of investments. For example, should a company be unsuccessful in reduc-
ing its debt, it may be forced into default on its debt, increasing its debt
or bankruptcy.

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<PAGE>

GLOBAL COMPETITORS FUND--invests primarily in U.S.-based companies which the
Investment Adviser believes will benefit from their position as effective and
strong competitors on a global basis. Such companies are characterized by
their ability to supply something unique or of greater value, or to deliver
goods and services more efficiently or reliably. These companies develop and
implement international marketing strategies for their goods and services. The
range of businesses encompassed by this policy is broad and, by way of exam-
ple, may include companies engaged in soft drink production and sales, cloth-
ing manufacturers, tobacco product producers, precision instrument and aero-
space providers, and a variety of communications systems, biotechnology and
high technology suppliers. While the Fund will invest primarily in U.S.-based
companies with such features, up to 20% of the Fund's assets may be invested
in non-U.S.-based global competitors. The Fund will not engage in currency
hedging in an attempt to anticipate currency fluctuations with respect to any
such foreign investments. Under normal conditions, the Fund will invest in se-
curities of issuers from at least three countries and at least 65% of the
Fund's total assets will be invested in companies of the type described in
this paragraph.

EARLY LIFE CYCLE FUND--invests primarily in smaller companies which are in
the earlier stages of their development or larger or more mature companies en-
gaged in new and higher growth potential operations. An early life cycle com-
pany is one which is early in its development as a company, yet has
demonstrated or is expected to achieve substantial long-term earnings growth.
More mature or larger, established companies may also be positioned for
accelerating earnings because of rejuvenated management, new products, new
markets for existing products or structural changes in the economy. In select-
ing companies for investment, the Investment Adviser looks for innovative com-
panies whose potential has not yet been fully recognized by the securities
markets. Under normal conditions, at least 65% of the Fund's total assets will
be invested in companies with capitalization of $1 billion or less. The risk
and venture oriented nature of such companies naturally entails greater risk
for investors when contrasted with investing in more established companies.

INVESTMENT POLICIES COMMON TO THE EQUITY FUND AND THE THEME FUNDS

Under normal market and economic conditions, the Equity and each Theme Fund
will invest at least 65% of its total assets in common stock, preferred stock
and securities convertible into common stock. Normally, up to 35% of each such
Fund's total assets may be invested in other securities and instruments in-
cluding, e.g., other investment-grade debt securities, warrants, options, and
futures instruments as described in more detail below. During temporary defen-
sive periods or when the Investment Adviser believes that suitable stocks or
convertible securities are unavailable, each Fund may hold cash or invest some
or all of its assets in U.S. Government securities, high-quality money market
instruments and repurchase agreements collateralized by the foregoing obliga-
tions.

In managing the Equity and Theme Funds, the Investment Adviser seeks to pur-
chase securities having value currently not recognized in the market price of
a security, consistent with the strategies discussed above.

Portfolio holdings will include common stocks of companies having capitaliza-
tions of varying amounts, and all Funds will invest in the securities of high
growth, small companies where the Investment Adviser expects earnings and the
price of the securities to grow at an above-average rate. As discussed above,
the Early Life Cycle Fund emphasizes such companies. Certain securities owned
by the Equity and Theme Funds may be traded only in the over-the-counter mar-
ket or on a regional securities exchange, may be listed only in the quotation
service commonly known as the "pink sheets," and may not be traded every day
or in the volume typical of trading on a national securities exchange. As a
result, there may be a greater fluctuation in the value of a Fund's Shares,
and a Fund may be required, in order to meet redemptions or for other reasons,
to sell these securities at a discount from market prices, to sell during pe-
riods when such disposition

13
<PAGE>

is not desirable, or to make many small sales over a period of time.

The Equity and Theme Funds may invest in the securities of foreign issuers.
The Funds may invest indirectly in the securities of foreign issuers through
sponsored and unsponsored American Depository Receipts ("ADRs"). ADRs repre-
sent receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities of foreign issuers. Investments in
unsponsored ADRs involve additional risk because financial information based
on generally accepted accounting principles ("GAAP") may not be available for
the foreign issuers of the underlying securities. ADRs may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted.

RISK FACTORS

Each Fund is subject to market risk, interest rate risk and in some cases in-
dustry risk. Market risk is the possibility that stock prices will decline
over short or even extended periods. The stock markets tend to be cyclical,
with periods of generally rising prices and periods of generally declining
prices. These cycles will affect the values of each Fund. In addition, the
prices of bonds and other debt instruments generally fluctuate inversely with
interest rate changes. Factors affecting debt securities will affect all of
the Funds' debt holdings.

Companies in the various communications and entertainment industries encoun-
ter intense competition, short product life cycles and rapidly changing con-
sumer tastes. In addition, companies in the telecommunications and utilities
industries are subject to heavy governmental regulation.

Small companies may have limited product lines, markets, or financial re-
sources, or may be dependent upon a small management group, and their securi-
ties may be subject to more abrupt or erratic market movements than larger,
more established companies, both because their securities typically are traded
in lower volume and because the issuers typically are subject to a greater de-
gree to changes in their earnings and prospects.

All Funds may invest in the securities of foreign issuers. Investments in
foreign securities involve certain risks not ordinarily associated with in-
vestments in domestic securities. Such risks include fluctuations in foreign
exchange rates, future political and economic developments, and the possible
imposition of exchange controls or other foreign governmental laws or restric-
tions. In addition, with respect to certain countries there is the possibility
of expropriation of assets, confiscatory taxation, political or social insta-
bility or diplomatic developments which could adversely affectinvestments in
those countries. There may be less publicly available information about a for-
eign company than about a U.S. company, and foreign companies may not be sub-
ject to accounting, auditing and financial reporting standards and require-
ments comparable to or as uniform as those of U.S.-based companies. Foreign
securities markets, while growing in volume, have, for the most part, substan-
tially less volume than U.S. markets, and securities of many foreign companies
are less liquid and their prices more volatile than securities of comparable
U.S.-based companies. Transaction costs on foreign securities markets are gen-
erally higher than in the United States. There is generally less government
supervision and regulation of foreign exchanges, brokers and issuers than
there is in the United States and a Fund might have greater difficulty taking
appropriate legal action in a foreign court. Dividends and interest payable on
a Fund's foreign portfolio securities may be subject to foreign withholding
taxes. To the extent such taxes are not offset by credits or deductions al-
lowed to investors under the Federal income tax provisions, they may reduce
the net return to the shareholders.

The Funds should not be considered a complete investment program. In view of
the specialized nature of their investment activities, investment in the Eq-
uity and Theme Funds' shares may be suitable only for those investors who can
invest without concern for current income and are financially able to assume
risk in search of long-term capital gains.

14
<PAGE>

Securities of companies discussed in this section may be more volatile than
the overall market.

PORTFOLIO INSTRUMENTS AND OTHER
INVESTMENT INFORMATION

MONEY MARKET INSTRUMENTS

All Funds may invest in "money market instruments," which include, among
other things, bank obligations, commercial paper and corporate bonds with re-
maining maturities of 13 months or less.

Bank obligations include bankers' acceptances, negotiable certificates of de-
posit, and non-negotiable time deposits earning a specified return and issued
by a U.S. bank which is a member of the Federal Reserve System or insured by
the Bank Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"),
or by a savings and loan association or savings bank which is insured by the
Savings Association Insurance Fund of the FDIC. Bank obligations also include
U.S. dollar-denominated obligations of foreign branches of U.S. banks and ob-
ligations of domestic branches of foreign banks. Investments in bank obliga-
tions of foreign branches of domestic financial institutions or of domestic
branches of foreign banks are limited so that no more than 5% of the value of
a Fund's total assets may be invested in any one branch, and no more than 20%
of a particular Fund's total assets at the time of purchase may be invested in
the aggregate in such obligations (see investment limitation No. 5 below under
"Investment Limitations"). Investments in time deposits are limited to no more
than 5% of the value of a Fund's total assets at the time of purchase.

Investments by the Funds in commercial paper will consist of issues that are
rated "A-2" or better by Standard & Poor's Ratings Group ("S&P") or "Prime-2"
or better by Moody's Investors Service, Inc. ("Moody's"). In addition, each
Fund may acquire unrated commercial paper that is determined by the Investment
Adviser at the time of purchase to be of comparable quality to rated instru-
ments that may be acquired by the particular Fund.

Commercial paper may include variable and floating rate instruments. While
there may be no active secondary market with respect to a particular instru-
ment purchased by a Fund, the Fund may, from time to time as specified in the
instrument, demand payment of the principal of the instrument or may resell
the instrument to a third party. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument if
the issuer defaulted on its payment obligation or during periods that the Fund
is not entitled to exercise its demand rights, and the Fund could, for this or
other reasons, suffer a loss with respect to such instrument. Any security
which cannot be disposed of within seven days without taking a reduced price
will be considered an illiquid security subject to the 10% limitation dis-
cussed below under "Investment Limitations."

GOVERNMENT OBLIGATIONS

All Funds may invest in U.S. Government obligations, including U.S. Treasury
Bills and the obligations of Federal Home Loan Banks, Federal Farm Credit
Banks, Federal Land Banks, the Federal Housing Administration, the Farmers
Home Administration, the Export-Import Bank of the United States, the Small
Business Administration, the Government National Mortgage Association, the
Federal National Mortgage Association, the General Services Administration,
the Student Loan Marketing Association, the Central Bank for Cooperatives, the
Federal Home Loan Mortgage Corporation, the Federal Intermediate Credit Banks
and the Maritime Administration.

REPURCHASE AGREEMENTS

In order to effectively manage their cash holdings, the Funds may enter into
repurchase agreements. Each Fund will enter into repurchase agreements only
with financial institutions that are deemed to be creditworthy by the Invest-
ment Adviser, pursuant to guidelines established by Excelsior Fund's Board of
Directors. No Fund will enter into repurchase agreements with the Investment
Adviser or any of its affiliates. Repurchase agreements with remaining maturi

15
<PAGE>

ties in excess of seven days will be considered illiquid securities and will
be subject to the 10% limit described in Investment Limitation No. 6 below.

The seller under a repurchase agreement will be required to maintain the
value of the securities which are subject to the agreement and held by a Fund
at not less than the repurchase price. Default or bankruptcy of the seller
would, however, expose a Fund to possible delay in connection with the dispo-
sition 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.

SECURITIES LENDING

To increase return on its portfolio securities, each Fund may lend its port-
folio securities to broker/dealers pursuant to agreements requiring the loans
to be continuously secured by collateral equal at all times in value to at
least the market value of the securities loaned. Collateral for such loans may
include cash, securities of the U.S. Government, its agencies or instrumental-
ities, or an irrevocable letter of credit issued by a bank, or any combination
thereof. Such loans will not be made if, as a result, the aggregate of all
outstanding loans of a Fund exceeds 30% of the value of its total assets.
There may be risks of delay in receiving additional collateral or in recover-
ing the securities loaned or even a loss of rights in the collateral should
the borrower of the securities fail financially. However, loans are made only
to borrowers deemed by the Investment Adviser to be of good standing and when,
in the Investment Adviser's judgment, the income to be earned from the loan
justifies the attendant risks.

OPTIONS

To further increase return on their portfolio securities in accordance with
their respective investment objectives and policies, the Funds may enter into
option transactions as described below.

The Theme Funds may purchase put and call options listed on a national secu-
rities exchange and issued by the Options Clearing Corporation in an amount
not exceeding 5% of a Fund's net assets, as described further in the Statement
of Additional Information. Such options may relate to particular securities or
to various stock or bond indices. Purchasing options is a specialized invest-
ment technique which entails a substantial risk of a complete loss of the
amounts paid as premiums to the writer of the options.

In addition, each Fund may engage in writing covered call options (options on
securities owned by the particular Fund) and enter into closing purchase
transactions with respect to such options. Such options must be listed on a
national securities exchange and issued by the Options Clearing Corporation.
The aggregate value of the securities subject to options written by each Fund
may not exceed 25% of the value of its net assets. By writing a covered call
option, a Fund forgoes the opportunity to profit from an increase in the mar-
ket price of the underlying security above the exercise price except insofar
as the premium represents such a profit, and it will not be able to sell the
underlying security until the option expires or is exercised or the Fund ef-
fects a closing purchase transaction by purchasing an option of the same se-
ries. The use of covered call options is not a primary investment technique of
the Funds and such options will normally be written on underlying securities
as to which the Investment Adviser does not anticipate significant short-term
capital appreciation. Additional information on option practices, including
particular risks thereof, is provided in the Funds' Statement of Additional
Information.

FUTURES CONTRACTS

The Theme Funds may also enter into interest rate futures contracts, other
types of financial futures contracts and related futures options, as well as
any index or foreign market futures which are available on recognized ex-
changes or in other established financial markets.

The Theme Funds will not engage in futures transactions for speculation, but
only as a hedge against changes in market values of securities which a Fund

16
<PAGE>

holds or intends to purchase. The Theme Funds will engage in futures transac-
tions only to the extent per mitted by the Commodity Futures Trading Commis-
sion ("CFTC") and the Securities and Exchange Commission ("SEC"). When invest-
ing in futures contracts, the Funds must satisfy certain asset segregation re-
quirements to ensure that the use of futures is unleveraged. When a Fund takes
a long position in a futures contract, it must maintain a segregated account
containing cash and/or certain liquid assets equal to the purchase price of
the contract, less any margin or deposit. When a Fund takes a short position
in a futures contract, the Fund must maintain a segregated account containing
cash and/or certain liquid assets in an amount equal to the market value of
the securities underlying such contract (less any margin or deposit), which
amount must be at least equal to the market price at which the short position
was established. Asset segregation requirements are not applicable when a Fund
"covers" an options or futures position generally by entering into an offset-
ting position. Each Fund will limit its hedging transactions in futures con-
tracts and related options so that, immediately after any such transaction,
the aggregate initial margin that is required to be posted by the Fund under
the rules of the exchange on which the futures contract (or futures option) is
traded, plus any premiums paid by the Fund on its open futures options posi-
tions, does not exceed 5% of the Fund's total assets, after taking into ac-
count any unrealized profits and unrealized losses on the Fund's open con-
tracts (and excluding the amount that a futures option is "in-the-money" at
the time of purchase). An option to buy a futures contract is "in-the-money"
if the then-current purchase price of the underlying futures contract exceeds
the exercise or strike price; an option to sell a futures contract is "in-the-
money" if the exercise or strike price exceeds the then-current purchase price
of the contract that is the subject of the option. In addition, the use of
futures contracts is further restricted to the extent that no more than 10% of
a Fund's total assets may be hedged.

Transactions in futures as a hedging device may subject a Fund to a number of
risks. Successful use of futures by a Fund is subject to the ability of the
Investment Adviser to correctly anticipate movements in the direction of the
market. In addition, there may be an imperfect correlation, or no correlation
at all, between movements in the price of the futures contracts (or options)
and movements in the price of the instruments being hedged. Further, there is
no assurance that a liquid market will exist for any particular futures con-
tract (or option) at any particular time. Consequently, a Fund may realize a
loss on a futures transaction that is not offset by a favorable movement in
the price of securities which it holds or intends to purchase or may be unable
to close a futures position in the event of adverse price movements.

INVESTMENT COMPANY SECURITIES

In connection with the management of its daily cash positions, each Fund may
invest in securities issued by other investment companies which invest in
high-quality, short-term debt securities and which determine their net asset
value per share based on the amortized cost or penny-rounding method. In addi-
tion to the advisory fees and other expenses a Fund bears directly in connec-
tion with its own operations, as a shareholder of another investment company,
a Fund would bear its pro rata portion of the other investment company's advi-
sory fees and other expenses. As such, the Fund's shareholders would indi-
rectly bear the expenses of the Fund and the other investment company, some or
all of which would be duplicative. Such securities will be acquired by each
Fund within the limits prescribed by the Investment Company Act of 1940 (the
"1940 Act") which include, subject to certain exceptions, a prohibition
against a Fund investing more than 10% of the value of its total assets in
such securities.

WHEN-ISSUED AND FORWARD TRANSACTIONS

17
<PAGE>

date, at a stated price and yield. Securities purchased on a "forward commit-
ment" or "when-issued" basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. It
is expected that forward commitments and "when-issued" purchases will not ex-
ceed 25% of the value of a Fund's total assets absent unusual market condi-
tions, and that the length of such commitments will not exceed 45 days. The
Funds do not intend to engage in "when-issued" purchases and forward commit-
ments for speculative purposes, but only in furtherance of their investment ob-
jectives.

ILLIQUID SECURITIES

No Fund will knowingly invest more than 10% of the value of its net assets in
securities that are illiquid. Each Fund may purchase securities which are not
registered under the Securities Act of 1933 (the "Act") but which can be sold
to "qualified institutional buyers" in accordance with Rule 144A under the Act.
Any such security will not be considered illiquid so long as it is determined
by the Investment Adviser, acting under guidelines approved and monitored by
the Board, that an adequate trading market exists for that security. This in-
vestment practice could have the effect of increasing the level of illiquidity
in a Fund during any period that qualified institutional buyers become uninter-
ested in purchasing these restricted securities.

PORTFOLIO TURNOVER

Each Fund may sell a portfolio investment immediately after its acquisition if
the Investment Adviser believes that such a disposition is consistent with the
investment objective of the particular Fund. Portfolio investments may be sold
for a variety of reasons, such as a more favorable investment opportunity or
other circumstances bearing on the desirability of continuing to hold such in-
vestments. A high rate of portfolio turnover may involve correspondingly
greater brokerage commission expenses and other transaction costs, which must
be borne directly by a Fund and ultimately by its shareholders. High portfolio
turnover may result in the realization of substantial net capital gains. To the
extent net short-term capital gains are realized, any distributions resulting
from such gains are considered ordinary income for Federal income tax purposes.
(See "Financial Highlights" and "Taxes--Federal").

INVESTMENT LIMITATIONS

The investment limitations enumerated below are matters of fundamental policy
and may not be changed with respect to a Fund without the vote of the holders
of a majority of a Fund's outstanding shares (as defined under "Miscellane-
ous").

A Fund may not:

1. Purchase securities of any one issuer, other than U.S. Government obliga-
tions, if immediately after such purchase more than 5% of the value of its
total assets would be invested in the securities of such issuer, except that
up to 25% of the value of its total assets may be invested without regard to
this 5% limitation;

2. Borrow money except from banks for temporary purposes, and then in
amounts not in excess of 10% of the value of its total assets at the time of
such borrowing; or mortgage, pledge, or hypothecate any assets except in con-
nection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed and 10% of the value of its total assets at the
time of such borrowing. (This borrowing provision is included solely to fa-
cilitate the orderly sale of portfolio securities to accommodate abnormally
heavy redemption requests and is not for leverage purposes.) A Fund will not
purchase portfolio securities while borrowings in excess of 5% of its total
assets are outstanding. Optioned stock held in escrow is not deemed to be a
pledge; and

18
<PAGE>

may lend portfolio securities in an amount not exceeding 30% of its total as-
sets.

Each Fund may not:

4. Purchase any securities which would cause more than 25% of the value of
its total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the
same industry, provided that (a) with respect to the Equity Fund, there is no
limitation with respect to securities issued or guaranteed by the U.S. Gov-
ernment or domestic bank obligations, (b) with respect to each Theme Fund,
there is no limitation with respect to securities issued or guaranteed by the
U.S. Government, and (c) neither all finance companies, as a group, nor all
utility companies, as a group, are considered a single industry for purposes
of this policy.

The Equity Fund may not:

5. Invest in obligations of foreign branches of financial institutions or in
domestic branches of foreign banks, if immediately after such purchase (i)
more than 5% of the value of its total assets would be invested in obliga-
tions of any one foreign branch of the financial institution or domestic
branch of a foreign bank; or (ii) more than 20% of its total assets would be
invested in foreign branches of financial institutions or in domestic
branches of foreign banks; and

6. Knowingly invest more than 10% of the value of its total assets in illiq-
uid securities, including repurchase agreements with remaining maturities in
excess of seven days, restricted securities, and other securities for which
market quotations are not readily available.

* * *

In addition to the investment limitations described above, no Fund may invest
in the securities of any single issuer if, as a result, the Fund holds more
than 10% of the outstanding voting securities of such issuer.

The Theme Funds may not invest in obligations of foreign branches of financial
institutions or in domestic branches of foreign banks if immediately after such
purchase (i) more than 5% of the value of their respective total assets would
be invested in obligations of any one foreign branch of the financial institu-
tion or domestic branch of a foreign bank; or (ii) more than 20% of their re-
spective total assets would be invested in foreign branches of financial insti-
tutions or in domestic branches of foreign banks. The Theme Funds may not know-
ingly invest more than 10% of the value of their respective total assets in il-
liquid securities, including repurchase agreements with remaining maturities in
excess of seven days, restricted securities and other securities for which mar-
ket quotations are not readily available. These investment policies may be
changed by Excelsior Fund's Board of Directors upon reasonable notice to share-
holders.

The Equity Fund will not invest more than 25% of the value of its total assets
in domestic bank obligations.

With respect to all investment policies, if a percentage limitation is satis-
fied at the time of investment, a later increase or decrease in such percentage
resulting from a change in value of a Fund's portfolio securities will not con-
stitute a violation of such limitation.

PRICING OF SHARES

The net asset value of each Fund is determined and the Shares of each Fund are
priced at the close of regular trading hours on the New York Stock Exchange
(the "Exchange"), currently 4:00 p.m. (Eastern Time). Net asset value and pric-
ing for each Fund are determined on each day the Exchange and the Investment
Adviser are open for trading ("Business Day"). Currently, the holidays which
the Funds observe are New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Vet-
erans Day, Thanksgiving Day and Christmas. A Fund's net asset value per Trust
Share for purposes of pricing sales and redemptions is calculated by dividing
the value of all securities and other assets allocable to its Trust Shares,

19
<PAGE>

less the liabilities allocable to its Trust Shares, by the number of its out-
standing Trust Shares.

Assets in the Funds which are traded on a recognized domestic stock exchange
are valued at the last sale price on the securities exchange on which such se-
curities are primarily traded or at the last sale price on the national secu-
rities market. Securities traded only on over-the-counter markets are valued
on the basis of closing over-the-counter bid prices. Securities for which
there were no transactions are valued at the average of the most recent bid
and asked prices. An option or futures contract is valued at the last sales
price quoted on the principal exchange or board of trade on which such option
or contract is traded, or in the absence of a sale, the mean between the last
bid and asked prices. Restricted securities, securities for which market quo-
tations are not readily available, and other assets are valued at fair value,
pursuant to guidelines adopted by Excelsior Fund's Board of Directors.

market rate on the day of conversion. Some of the securities acquired by the
Funds may be traded on foreign exchanges or over-the-counter markets on days
which are not Business Days. In such cases, the net asset value of the Shares
may be significantly affected on days when investors can neither purchase nor
redeem a Fund's Shares. Excelsior Fund's administrators have undertaken to
price the securities in the Funds' portfolios, and may use one or more inde-
pendent pricing services in connection with this service.

HOW TO PURCHASE AND REDEEM SHARES

DISTRIBUTOR

Shares in each Fund are continuously offered for sale by Excelsior Fund's
sponsor and distributor, Edgewood Services, Inc. (the "Distributor"), a whol-
ly-owned subsidiary of Federated Investors. The Distributor is a registered
broker/dealer. Its principal business address is Clearing Operations, P.O. Box
897, Pittsburgh, PA 15230-0897.

Under Excelsior Fund's Distribution Agreement and Distribution Plan, adopted
pursuant to Rule 12b-1 under the 1940 Act, the Trust Shares of each Fund may
reimburse the Distributor monthly for distribution expenses in an amount not
to exceed the annual rate of .75% of the average daily net asset value of the
Fund's outstanding Trust Shares. Trust Shares of each Fund currently bear the
expense of such distribution fees at the annual rate of .35% of the average
daily net asset value of the Fund's outstanding Trust Shares. Distribution ex-
penses payable by the Distributor under the Distribution Plan include direct
and indirect marketing expenses such as: i) the expense of preparing, printing
and distributing promotional materials and prospectuses (other than prospec-
tuses used for regulatory purposes or for distribution to existing sharehold-
ers); ii) the expense of other advertising via radio, television or other
print or electronic media; and iii) the expense of payments to financial in-
stitutions that are not affiliated with the Distributor ("Distribution Organi-
zations") for distribution assistance (including sales incentives).

PURCHASE OF SHARES

Shares may be purchased by customers ("Customers") of financial institutions
("Shareholder Organiza-

20
<PAGE>

tions"). A Shareholder Organization may elect to hold of record Shares for its
Customers and to record beneficial ownership of Shares on the account state-
ments provided by it to its Customers. If it does so, it is the Shareholder
Organization's responsibility to transmit to the Distributor all purchase or-
ders for its Customers and to transmit, on a timely basis, payment for such
orders to Chase Global Funds Service Company ("CGFSC"), the Funds' sub-trans-
fer agent, in accordance with the procedures agreed to by the Shareholder Or-
ganization and the Distributor. Confirmations of all such Customer purchases
and redemptions will be sent by CGFSC to the particular Shareholder Organiza-
tion. As an alternative, a Shareholder Organization may elect to establish its
Customers' accounts of record with CGFSC. In this event, even if the Share-
holder Organization continues to place its Customers' purchase and redemption
orders with the Funds, CGFSC will send confirmations of such transactions and
periodic account statements directly to Customers. A Shareholder Organization
may also elect to establish its Customers as record holders.

PUBLIC OFFERING PRICE

The public offering price for Shares of each Fund is the sum of the net asset
value of the Shares purchased plus a sales load according to the table below:

<TABLE>
<CAPTION>
TOTAL SALES CHARGES REALLOWANCE TO DEALERS
------------------------------ ----------------------
AS A % OF AS A % OF AS A % OF
OFFERING PRICE NET ASSET OFFERING PRICE
AMOUNT OF TRANSACTION PER SHARE VALUE PER SHARE PER SHARE
- --------------------- -------------- --------------- ----------------------
<S> <C> <C> <C>
Less than $50,000....... 4.50% 4.71% 4.00%
$50,000 to $99,999...... 4.00 4.17 3.50
$100,000 to $249,999.... 3.50 3.63 3.00
$250,000 to $499,999.... 3.00 3.09 2.50
$500,000 to $999,999.... 2.00 2.05 1.50
$1,000,000 to
$1,999,999............. 1.00 1.00 .50
$2,000,000 and over..... .50 .50 .25
</TABLE>

The reallowance to dealers may be changed from time to time but will remain
the same for all such dealers.

At various times the Distributor may implement programs under which a deal-
er's sales force may be eligible to win nominal awards for certain sales ef-
forts or under which the Distributor will reallow to any dealer that sponsors
sales contests or recognition programs conforming to criteria established by
the Distributor, or participates in sales programs sponsored by the Distribu-
tor, an amount not exceeding the total applicable sales charges on the sales
generated by the dealer at the public offering price during such programs. Al-
so, the Distributor in its discretion may from time to time, pursuant to ob-
jective criteria established by the Distributor, pay fees to qualifying deal-
ers for certain services or activities which are primarily intended to result
in sales of Shares of the Funds. If any such program is made available to any
dealer, it will be made available to all dealers on the same terms and condi-
tions. Payments made under such programs will be made by the Distributor out
of its own assets and not out of the assets of the Funds. These programs will
not change the price of Shares or the amount that the Funds will receive from
such sales.

In addition, the Distributor may offer to pay a fee from its own assets (in-
cluding any portion of the sales load retained by the Distributor) to finan-
cial institutions as financial assistance for the continuing investment of
customers' assets in the Funds or for providing substantial marketing, sales
and operational support. The support may include initiating customer accounts,
participating in sales, educational and training seminars, providing sales
literature, and engineering computer software programs that emphasize the at-
tributes of the Funds. Such assistance will be predicated upon the amount of
Shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution.

21
<PAGE>

a bank, trust company or thrift institution, provided that appropriate notifi-
cation of such status is given at the time of investment; (c) companies, cor-
porations and partnerships (excluding full service broker/dealers and finan-
cial planners, registered investment advisers and depository institutions not
covered by the exemptions in (d) and (e) below); (d) financial planners and
registered investment advisers not affiliated with or clearing purchases
through full service broker/dealers; (e) purchases of Shares by depository in-
stitutions for their own account as principal; (f) exchange transactions (de-
scribed below under "Investor Programs--Exchange Privilege") where the Shares
being exchanged were acquired in connection with the distribution of assets
held in trust, agency or custodial accounts maintained with the trust depart-
ment of a bank; (g) corporate/ business retirement plans (such as 401(k),
403(b)(7), 457 and Keogh accounts) sponsored by the Distributor and IRA ac-
counts sponsored by the Investment Adviser; (h) company-sponsored employee
pension or retirement plans making direct investments in the Funds; (i) pur-
chases of Shares by officers, trustees, directors, employees, former employees
and retirees of Excelsior Fund, Excelsior Tax-Exempt Funds, Inc. ("Excelsior
Tax-Exempt Fund"), the Investment Adviser, the Distributor or of any direct or
indirect affiliate of any of them; (j) purchases of Shares by all beneficial
shareholders of Excelsior Fund or Excelsior Tax-Exempt Fund as of May 22,
1989; (k) purchases of Shares by investment advisers registered under the In-
vestment Advisers Act of 1940 for their customers through an omnibus account
established with United States Trust Company of New York; (l) purchases of
Shares by directors, officers and employees of brokers and dealers selling
shares pursuant to a selling agreement with Excelsior Fund and Excelsior Tax-
Exempt Fund; (m) purchases of shares by investors who are members of affinity
groups serviced by USAffinity Investments Limited Partnership; and (n) custom-
ers of certain financial institutions who purchase Shares through a registered
representative of UST Financial Services Corp. on the premises of their finan-
cial institutions. In addition, no sales load is charged on the reinvestment
of dividends or distributions or in connection with certain share exchange
transactions. Investors who have previously redeemed shares in an "Eligible
Fund" (as defined below) on which a sales load has been paid also have a one-
time privilege of purchasing shares of another "Eligible Fund" at net asset
value without a sales charge, provided that such privilege will apply only to
purchases made within 30 calendar days from the date of redemption and only
with respect to the amount of the redemption. These exemptions to the imposi-
tion of a sales load are due to the nature of the investors and/or reduced
sales effort that will be needed in obtaining investments.

QUANTITY DISCOUNTS

An investor in the Funds may be entitled to reduced sales charges through
Rights of Accumulation, a Letter of Intent or a combination of investments, as
described below, even if the investor does not wish to make an investment of a
size that would normally qualify for a quantity discount.

In order to obtain quantity discount benefits, an investor must notify CGFSC
at the time of purchase that he or she would like to take advantage of any of
the discount plans described below. Upon such notification, the investor will
receive the lowest applicable sales charge. Quantity discounts may be modified
or terminated at any time and are subject to confirmation of an investor's
holdings through a check of appropriate records. For more information about
quantity discounts, please call (800) 446-1012 or contact your Shareholder Or-
ganization.

owned shares of any Eligible Fund on which a sales load has been paid. If, for
example, an investor beneficially owns shares of one or more Eligible Funds
with an aggregate current value of $49,000 on which a sales load has been paid
and subsequently purchases shares of an Eligible Fund having a current value
of $1,000, the load applicable to the subsequent purchase would be reduced to
4.00% of the offering price. Similarly, with respect to each subsequent in-
vestment, all shares of Eligible Funds that are beneficially owned by the in-
vestor at the time of investment may be combined to determine the applicable
sales load.

Letter of Intent. By completing the Letter of Intent included as part of the
New Account Application, an investor becomes eligible for the reduced sales
load applicable to the total number of Eligible Fund shares purchased in a 13-
month period pursuant to the terms and under the conditions set forth below
and in the Letter of Intent. To compute the applicable sales load, the offer-
ing price of shares of an Eligible Fund on which a sales load has been paid,
beneficially owned by an investor on the date of submission of the Letter of
Intent, may be used as a credit toward completion of the Letter of Intent.
However, the reduced sales load will be applied only to new purchases.

CGFSC will hold in escrow shares equal to 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if an investor does not
purchase the full amount indicated in the Letter of Intent. The escrow will be
released when an investor fulfills the terms of the Letter of Intent by pur-
chasing the specified amount. If purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect an investor's total pur-
chases. If total purchases are less than the amount specified, an investor
will be requested to remit an amount equal to the difference between the sales
load actually paid and the sales load applicable to the total purchases. If
such remittance is not received within 20 days, CGFSC, as attorney-in-fact
pursuant to the terms of the Letter of Intent and at the Distributor's direc-
tion, will redeem an appropriate number of shares held in escrow to realize
the difference. Signing a Letter of Intent does not bind an investor to pur-
chase the full amount indicated at the sales load in effect at the time of
signing, but an investor must complete the intended purchase in accordance
with the terms of the Letter of Intent to obtain the reduced sales load. To
apply, an investor must indicate his or her intention to do so under a Letter
of Intent at the time of purchase.

Qualification for Discounts. For purposes of applying the Rights of Accumula-
tion and Letter of Intent privileges described above, the scale of sales loads
applies to the combined purchases made by any individual and/or spouse pur-
chasing securities for his, her or their own account or for the account of any
minor children, or the aggregate investments of a trustee or custodian of any
qualified pension or profit sharing plan or IRA established (or the aggregate
investment of a trustee or other fiduciary) for the benefit of the persons
listed above.

PURCHASE PROCEDURES

General

Customers of certain Shareholder Organizations may purchase Shares by com-
pleting the Application for purchase of Shares accompanying this Prospectus
and mailing it, together with a check payable to Excelsior Funds, to:

Excelsior Funds
c/o Chase Global Funds Service Company
P.O. Box 2798
Boston, MA 02208-2798

23
<PAGE>

Purchases by Wire

Customers of certain Shareholder Organizations may also purchase Shares by
wiring Federal funds to CGFSC. Prior to making an initial investment by wire,
an investor must telephone CGFSC at (800) 446-1012 (from overseas, call (617)
557-8280) for instructions. Federal funds and registration instructions should
be wired through the Federal Reserve System to:

The Chase Manhattan Bank, N.A.
ABA #021000021

Excelsior Funds, Account No. 9102732915
For further credit to:

Excelsior Funds
Wire Control Number
Account Registration (including account number)

Investors making initial investments by wire must promptly complete the Appli-
cation accompanying this Prospectus and forward it to CGFSC. Redemptions by in-
vestors will not be processed until the completed Application for purchase of
Shares has been received by CGFSC and accepted by the Distributor. Investors
making subsequent investments by wire should follow the above instructions.

OTHER PURCHASE INFORMATION

Except as provided in "Investor Programs" below, the minimum initial aggregate
investment by a Shareholder Organization investing on behalf of its Customers
is $500 per Fund. The minimum subsequent investment is $50 per Fund. Customers
may agree with a particular Shareholder Organization to make a minimum purchase
with respect to their accounts. Depending upon the terms of the particular ac-
count, Shareholder Organizations may charge a Customer's account fees for auto-
matic investment and other cash management services provided. Excelsior Fund
reserves the right to reject any purchase order, in whole or in part, or to
waive any minimum investment requirements.

REDEMPTION PROCEDURES

Customers of Shareholder Organizations holding Shares of record may redeem all
or part of their investments in the Funds in accordance with procedures gov-
erning their accounts at the Shareholder Organizations. It is the responsibil-
ity of the Shareholder Organizations to transmit redemption orders to CGFSC and
credit such Customer accounts with the redemption proceeds on a timely basis.
No charge for wiring redemption payments to Shareholder Organizations is im-
posed by Excelsior Fund, although Shareholder Organizations may charge a Cus-
tomer's account for wiring redemption proceeds. Information relating to such
redemption services and charges, if any, is available from the Shareholder Or-
ganizations. An investor redeeming Shares through a Shareholder Organization
may incur transaction charges in connection with such redemptions. Such invest-
ors should contact their Shareholder Organization for further information on
transaction fees. Investors may redeem all or part of their Shares in accor-
dance with the procedures described below (these procedures also apply to Cus-
tomers of Shareholder Organizations for whom individual accounts have been es-
tablished with CGFSC).

REDEMPTION BY MAIL

Customers of certain Shareholder Organizations may redeem shares by submitting
a written request for redemption to:

Excelsior Funds c/o Chase Global Funds Service Company P.O. Box 2798 Bos-
ton, MA 02208-2798

24
<PAGE>

ord, must be accompanied by signature guarantees from any eligible guarantor
institution approved by CGFSC in accordance with its Standards, Procedures and
Guidelines for the Acceptance of Signature Guarantees ("Signature Guarantee
Guidelines"). Eligible guarantor institutions generally include banks,
broker/dealers, credit unions, national securities exchanges, registered secu-
rities associations, clearing agencies and savings associations. All eligible
guarantor institutions must participate in the Securities Transfer Agents Me-
dallion Program ("STAMP") in order to be approved by CGFSC pursuant to the
Signature Guarantee Guidelines. Copies of the Signature Guarantee Guidelines
and information on STAMP can be obtained from CGFSC at (800) 446-1012 or at
the address given above. CGFSC may require additional supporting documents for
redemptions made by corporations, executors, administrators, trustees and
guardians. A redemption request will not be deemed to be properly received un-
til CGFSC receives all required documents in proper form. Payment for Shares
redeemed will ordinarily be made by mail within five Business Days after
proper receipt by CGFSC of the redemption request. Questions with respect to
the proper form for redemption requests should be directed to CGFSC at (800)
446-1012 (from overseas, call (617) 557-8280).

REDEMPTION BY WIRE OR TELEPHONE

Customers of certain Shareholder Organizations who have so indicated on the
Application, or have subsequently arranged in writing to do so, may redeem
Shares by instructing CGFSC by wire or telephone to wire the redemption pro-
ceeds directly to the investor's account at any commercial bank in the United
States. Customers of certain Shareholder Organizations who are shareholders of
record may redeem Shares by instructing CGFSC by telephone to mail a check for
redemption proceeds of $500 or more to the shareholder of record at his or her
address of record. Only redemptions of $500 or more will be wired to an in-
vestor's account. An $8.00 fee for each wire redemption by an investor is de-
ducted by CGFSC from the proceeds of the redemption. The redemption proceeds
for investors must be paid to the same bank and account as designated on the
Application or in written instructions subsequently received by CGFSC.

In order to arrange for redemption by wire or telephone after an account has
been opened or to change the bank or account designated to receive redemption
proceeds, an investor must send a written request to Excelsior Fund, c/o
CGFSC, at the address listed above under "Redemption by Mail." Such requests
must be signed by the investor, with signatures guaranteed (see "Redemption by
Mail" above, for details regarding signature guarantees). Further documenta-
tion may be requested.

CGFSC and the Distributor reserve the right to re- fuse a wire or telephone
redemption if it is believed advisable to do so. Procedures for redeeming
Shares by wire or telephone may be modified or terminated at any time by Ex-
celsior Fund, CGFSC or the Distributor. EXCELSIOR FUND, CGFSC, AND THE DIS-
TRIBUTOR WILL NOT BE LIABLE FOR ANY LOSS, LIABILITY, COST OR EXPENSE FOR ACT-
ING UPON TELEPHONE INSTRUCTIONS THAT ARE REASONABLY BELIEVED TO BE GENUINE. IN
ATTEMPTING TO CONFIRM THAT TELEPHONE INSTRUCTIONS ARE GENUINE, EXCELSIOR FUND
WILL USE SUCH PROCEDURES AS ARE CONSIDERED REASONABLE, INCLUDING RECORDING
THOSE INSTRUCTIONS AND REQUESTING INFORMATION AS TO ACCOUNT REGISTRATION.

If any portion of the Shares to be redeemed represents an investment made by
personal check, Excelsior Fund and CGFSC reserve the right not to honor the
redemption until CGFSC is reasonably satisfied that the check has been col-
lected in accordance with the applicable banking regulations which may take up
to 15 days. An investor who anticipates the need for more immediate access to
his or her investment should purchase Shares by Federal funds or bank wire or
by certified or cashier's check. Banks normally impose a charge in connection
with the use of bank wires, as well as certified checks, cashier's checks and
Federal funds. If an investor's purchase check is not collected, the purchase
will be cancelled and CGFSC will charge a fee of $25.00 to the investor's ac-
count.

During periods of substantial economic or market change, telephone redemp-
tions may be difficult to

25
<PAGE>

complete. If a Customer is unable to contact CGFSC by telephone, the Customer
may also deliver the redemption request to CGFSC in writing at the address
noted above under "How to Purchase and Redeem Shares--Redemption by Mail."

OTHER REDEMPTION INFORMATION

Except as described in "Investor Programs" below, investors may be required to
redeem Shares in a Fund after 60 days' written notice if due to investor re-
demptions the balance in the particular account with respect to the Fund re-
mains below $500. If a Customer has agreed with a particular Shareholder Organ-
ization to maintain a minimum balance in his or her account at the institution
with respect to Shares of a Fund, and the balance in such account falls below
that minimum, the Customer may be obliged by the Shareholder Organization to
redeem all or part of his or her Shares to the extent necessary to maintain the
required minimum balance.

GENERAL

Purchase and redemption orders for Shares which are received and accepted
prior to the close of regular trading hours on the Exchange (currently 4:00
p.m., Eastern Time) on any Business Day are priced according to the net asset
value determined on that day. Purchase orders received and accepted after the
close of regular trading hours on the Exchange are priced at the net asset
value per Share determined on the next Business Day.

INVESTOR PROGRAMS

EXCHANGE PRIVILEGE

Customers of Shareholder Organizations may, after appropriate prior authoriza-
tion and without an exchange fee imposed by Excelsior Fund, exchange Shares in
a Fund having a value of at least $500 for Shares of any other Fund, provided
that such other Shares may legally be sold in the state of the investor's resi-
dence.

An exchange involves a redemption of all or a portion of the Shares in a Fund
and the investment of the redemption proceeds in Shares of another Fund. The
redemption will be made at the per Share net asset value of the Shares being
redeemed next determined after the exchange request is received. The Shares of
the Fund to be acquired will be purchased at the per share net asset value of
those Shares (plus any applicable sales load) next determined after acceptance
of the exchange request. No sales load will be payable on Shares to be acquired
through an exchange to the extent that a sales load was previously paid on the
Shares being exchanged.

Investors may find the exchange privilege useful if their investment objec-
tives or market outlook should change after they invest in a Fund. For further
information regarding exchange privileges, shareholders should call (800) 446-
1012 (from overseas, call (617) 557-8280). In order to prevent abuse of this
privilege to the disadvantage of other shareholders, Excelsior Fund reserves
the right to limit the number of exchange requests of investors to no more than
six per year. Excelsior Fund may modify or terminate the exchange program at
any time upon 60 days' written notice to shareholders, and may reject any ex-
change request. EXCELSIOR FUND, CGFSC AND THE DISTRIBUTOR ARE NOT RESPONSIBLE
FOR THE AUTHENTICITY OF EXCHANGE REQUESTS RECEIVED BY TELEPHONE THAT ARE REA-
SONABLY BELIEVED TO BE GENUINE. IN ATTEMPTING TO CONFIRM THAT TELEPHONE IN-
STRUCTIONS ARE GENUINE, EXCELSIOR FUND WILL USE SUCH PROCEDURES AS ARE CONSID-
ERED REASONABLE, INCLUDING RECORDING THOSE INSTRUCTIONS AND REQUESTING INFORMA-
TION AS TO ACCOUNT REGISTRATION.

For Federal income tax purposes, an exchange of Shares is a taxable event and,
accordingly, a capital gain or loss may be realized by an investor. Before mak-
ing an exchange, an investor should consult a tax or other financial adviser to
determine tax consequences.

SYSTEMATIC WITHDRAWAL PLAN

Customers of certain Shareholder Organizations who own Shares of a Fund with a
value of $10,000 or

26
<PAGE>

more may establish a Systematic Withdrawal Plan. The investor may request a
declining-balance withdrawal, a fixed-dollar withdrawal, a fixed-share with-
drawal, or a fixed-percentage withdrawal (based on the current value of Shares
in the account) on a monthly, quarterly, semi-annual or annual basis. In-
formation concerning the availability of, and the procedures and fees relating
to, such plans may be obtained by Customers directly from their Shareholder
Organizations.

RETIREMENT PLANS

Shares are available for purchase by investors in connection with the follow-
ing tax-deferred prototype retirement plans offered by certain Shareholder Or-
ganizations:

IRAs (including "rollovers" from existing retirement plans) for individuals
and their spouses;

Profit Sharing and Money-Purchase Plans for corporations and self-employed
individuals and their partners to benefit themselves and their employees; and

Keogh Plans for self-employed individuals.

Information concerning the availability of, and the procedures and fees re-
lating to, such retirement plans may be obtained by Customers directly from
their Shareholder Organizations.

AUTOMATIC INVESTMENT PROGRAM

The Automatic Investment Program permits Customers of certain Shareholder Or-
ganizations to purchase Shares (minimum of $50 per Fund per transaction) at
regular intervals selected by the Customer. Provided the investor's financial
institution allows automatic withdrawals, Shares are purchased by transferring
funds from an investor's checking, bank money market or NOW account designated
by the investor. At the investor's option, the account designated will be deb-
ited in the specified amount, and Shares will be purchased, once a month, on
either the first or fifteenth day, or twice a month, on both days.

The Automatic Investment Program is one means by which an investor may use
"Dollar Cost Averaging" in making investments. Instead of trying to time mar-
ket performance, a fixed dollar amount is invested in Shares at predetermined
intervals. This may help investors to reduce their average cost per share be-
cause the agreed upon fixed investment amount allows more Shares to be pur-
chased during periods of lower share prices and fewer Shares during periods of
higher prices. In order to be effective, Dollar Cost Averaging should usually
be followed on a sustained, consistent basis. Investors should be aware, how-
ever, that Shares bought using Dollar Cost Averaging are purchased without re-
gard to their price on the day of investment or to market trends. In addition,
while investors may find Dollar Cost Averaging to be beneficial, it will not
prevent a loss if an investor ultimately redeems his Shares at a price which
is lower than their purchase price.

Information concerning the availability of, and the procedures and fees re-
lating to, Automatic Investment accounts may be obtained by Customers directly
from their Shareholder Organizations.

DIVIDENDS AND DISTRIBUTIONS

27
<PAGE>

tion to the holders of Trust Shares will be reduced by the amount of other ex-
penses allocated to such series, including the expense of distribution fees
associated with Excelsior Fund's Distribution Plan. Net realized capital gains
are distributed at least annually. Dividends and distributions will reduce the
net asset value of each of the Funds by the amount of the dividend or distri-
bution. All dividends and distributions paid on Shares held of record by the
Investment Adviser and its affiliates or correspondent banks will be paid in
cash. Customers of Shareholder Organizations will receive dividends and dis-
tributions in additional Shares of the Fund on which the dividend or distribu-
tion is paid (as determined on the payable date), unless they have requested
in writing (received by CGFSC at Excelsior Fund's address prior to the payment
date) to receive dividends and distributions in cash. Reinvested dividends and
distributions receive the same tax treatment as those paid in cash.

TAXES

FEDERAL

Each of the Funds qualified for its last taxable year as a "regulated invest-
ment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Each Fund expects to so qualify in future years. Such qualification
generally relieves a Fund of liability for Federal income taxes to the extent
its earnings are distributed in accordance with the Code.

Qualification as a regulated investment company under the Code requires,
among other things, that a Fund distribute to its shareholders an amount equal
to at least 90% of its investment company taxable income for each taxable
year. In general, a Fund's investment company taxable income will be its in-
come (including dividends and interest), subject to certain adjustments and
excluding the excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year. Each Fund intends
to distribute substantially all of its investment company taxable income each
year. Such dividends will be taxable as ordinary income to Fund shareholders
who are not currently exempt from Federal income taxes, whether such income is
received in cash or reinvested in additional Shares. (Federal income taxes for
distributions to IRAs and qualified pension plans are deferred under the
Code.) The dividends received deduction for corporations will apply to such
ordinary income distributions to the extent of the total qualifying dividends
received by a Fund from domestic corporations for the taxable year.

Distribution by a Fund of the excess of its net long- term capital gain over
its net short-term capital loss is taxable to shareholders as long-term capi-
tal gain, regardless of how long the shareholders have held their Shares and
whether such gains are received in cash or reinvested in additional Shares.
Such distributions are not eligible for the dividends received deduction.

Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to
have been received by shareholders and paid by a Fund on December 31 of such
year in the event such dividends are actually paid during January of the fol-
lowing year.

An investor considering buying Shares of a Fund on or just before the record
date of a dividend should be aware that the amount of the forthcoming dividend
payment, although in effect a return of capital, will be taxable to him.

28
<PAGE>

ing gain or loss on a redemption, transfer or exchange of such Shares. Howev-
er, if the shareholder effects an exchange of such Shares for Shares of an-
other Fund within 90 days of the purchase and is able to reduce the sales
charges applicable to the new Shares (by virtue of the exchange privilege),
the amount equal to such reduction may not be included in the tax basis of the
shareholder's exchanged Shares for the purpose of determining gain or loss but
may be included (subject to the same limitation) in the tax basis of the new
Shares.

Qualification as a regulated investment company under the Code also requires
that each Fund satisfy certain requirements with respect to the source of its
income for a taxable year. At least 90% of the gross income of each Fund must
be derived from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities or for-
eign currencies, and other income (including, but not limited to, gains from
options, futures, or forward contracts) derived with respect to the Fund's
business of investing in such stock, securities or currencies. The Treasury
Department may by regulation exclude from qualifying income foreign currency
gains which are not directly related to a Fund's principal business of invest-
ing in stock or securities, or options and futures with respect to stock or
securities. Any income derived by a Fund from a partnership or trust is
treated for this purpose as derived with respect to the Fund's business of in-
vesting in stock, securities or currencies only to the extent that such income
is attributable to items of income which would have been qualifying income if
realized by the Fund in the same manner as by the partnership or trust.

The foregoing summarizes some of the important tax considerations generally
affecting the Funds and their shareholders and is not intended as a substitute
for careful tax planning. Accordingly, potential investors in the Funds should
consult their tax advisers with specific reference to their own tax situa-
tions. Shareholders will be advised annually as to the Federal income tax con-
sequences of distributions made each year.

STATE AND LOCAL

Purchasers are advised to consult their tax advisers concerning the applica-
tion of state and local taxes, which may have different consequences from
those of the Federal income tax law described above.

MANAGEMENT OF THE FUNDS

The business and affairs of the Funds are managed under the direction of Ex-
celsior Fund's Board of Directors. The Statement of Additional Information
contains the names of and general background information concerning Excelsior
Fund's directors.

INVESTMENT ADVISER

United States Trust Company of New York serves as the Investment Adviser to
each Fund. U.S. Trust is a state-chartered bank and trust company. The Invest-
ment Adviser provides trust and banking services to individuals, corporations,
and institutions both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate
trust and agency banking, and personal and corporate banking. The Investment
Adviser is a member bank of the Federal Reserve System and the Federal Deposit
Insurance Corporation and is one of the twelve members of the New York Clear-
ing House Association.

On December 31, 1994, the Investment Adviser's Asset Management Group had ap-
proximately $33 billion in assets under management. The Investment Adviser,
which has its principal offices at 114 W. 47th Street, New York, New York
10036, is a subsidiary of U.S. Trust Corporation, a registered bank holding
company.

The Equity Fund's portfolio manager, David A. Tillson, is the person primar-
ily responsible for the day-

29
<PAGE>

to-day management of the Fund's investment portfolio. Mr. Tillson, a Senior
Vice President and Senior Portfolio Manager, has been with U.S. Trust since
1993, and has been the Fund's portfolio manager since December 1994. Prior to
joining U.S. Trust, Mr. Tillson was the founder and President of TDA Capital
Management Company, and a Senior Vice President of Matrix Asset Advisors until
1993. He was also a Vice President and Senior Portfolio Manager with V C S & O
Asset Management until 1990.

The Aging of America Fund's portfolio manager, Jonathan L. Stanley, is the
person primarily responsible for the day-to-day management of the Fund's in-
vestment portfolio. Mr. Stanley, a Vice President and Senior Portfolio Manager
of U.S. Trust, has been with U.S. Trust since 1993 and has been the Fund's
portfolio manager since December, 1995. Prior to his association with U.S.
Trust, Mr. Stanley was an investment manager with Deutche Bank Capital Corpo-
ration.

The Communication and Entertainment Fund's portfolio manager, John J.
Apruzzese, is the person primarily responsible for the day-to-day management
of the Fund's investment portfolio. Mr. Apruzzese, a Senior Vice President,
Department Manager and Senior Portfolio Manager of U.S. Trust, has been with
U.S. Trust since 1984 and has been the Fund's portfolio manager since its in-
ception.

The Business and Industrial Restructuring Fund's portfolio manager, David J.
Williams, is the person primarily responsible for the day-to-day management of
the Fund's investment portfolio. Mr. Williams, Senior Vice President, Depart-
ment Manager and Senior Portfolio Manager of the Personal Equity and Balanced
Investment Division of U.S. Trust, has been with U.S. Trust since 1987 and has
been the Fund's portfolio manager since its inception.

The Global Competitors Fund's portfolio manager, Wendy S. Popowich, is the
person primarily responsible for the day-to-day management of the Fund's in-
vestment portfolio. Ms. Popowich, a Vice President and Portfolio Manager of
the Personal Investment Division of U.S. Trust, has been with U.S. Trust since
1983 and has been the Fund's portfolio manager since its inception.

The Early Life Cycle Fund's portfolio manager, Timothy W. Evnin, is the per-
son primarily responsible for the day-to-day management of the Fund's invest-
ment portfolio. Mr. Evnin, a Vice President and Portfolio Manager of U.S.
Trust, has been with U.S. Trust since 1987 and has been the Fund's portfolio
manager since its inception.

For the services provided and expenses assumed pursuant to its Investment Ad-
visory Agreements, the Investment Adviser is entitled to be paid a fee, com-
puted daily and paid monthly, at the annual rate of: .75% of the average daily
net assets of the Equity Fund; and .60% of the average daily net assets of
each Theme Fund. The advisory fee rate payable by the Equity Fund is higher
than the rates payable by most mutual funds. The Board of Directors believes,
based on information supplied to it by the Investment Adviser, that this fee
is comparable to the rate paid by many other funds with similar investment ob-
jectives and policies and is appropriate for the Fund in light of its invest-
ment objective and policies. For the fiscal year ended March 31, 1995, the In-
vestment Adviser received an advisory fee at the effective annual rates of
.72%, .44%, .53%, .52%, .50% and .52% of the average daily net assets of the
Equity, Aging of America, Communication and Entertainment, Business and Indus-
trial Restructuring, Global Competitors and Early Life Cycle Funds, respec-
tively. For the same period, the Investment Adviser waived advisory fees at
the effective annual rates of .03%, .16%, .07%, .08%, .10% and .08% of the av-
erage daily net assets of the Equity, Aging of America, Communication and En-
tertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively.

From time to time, the Investment Adviser may waive (either voluntarily or
pursuant to applicable state expense limitations) all or a portion of the ad-
visory fees payable to it by a Fund, which waiver may be terminated at any
time. See "Management of the Funds--Service Organizations" for additional in-
formation on fee waivers.
30
<PAGE>

ADMINISTRATORS

CGFSC, Federated Administrative Services and U.S. Trust serve as the Funds'
administrators (the "Administrators") and provide them with general adminis-
trative and operational assistance. The Administrators also serve as adminis-
trators of the other portfolios of Excelsior Fund and Excelsior Tax-Exempt
Fund and Excelsior Institutional Trust, which are also advised by the Invest-
ment Adviser and distributed by the Distributor. For the services provided to
all portfolios of Excelsior Fund (except the International, Emerging Americas,
Pacific/Asia and Pan European Funds) and Excelsior Tax-Exempt Fund and Excel-
sior Institutional Trust, the Administrators are entitled jointly to annual
fees, computed daily and paid monthly, based on the combined aggregate average
daily net assets of the three companies (excluding the International, Emerging
Americas, Pacific/Asia and Pan European Funds) as follows:

<TABLE>
<CAPTION>
COMBINED AGGREGATE AVERAGE DAILY
NET ASSETS OF EXCELSIOR FUND
(EXCLUDING THE INTERNATIONAL, EMERGING AMERICAS,
PACIFIC/ASIA AND PAN EUROPEAN FUNDS)
AND EXCELSIOR TAX-EXEMPT FUND ANNUAL
AND EXCELSIOR INSTITUTIONAL TRUST FEE
------------------------------------------------ ------
<S> <C>
first $200 million....................................................... .200%
next $200 million........................................................ .175%
over $400 million........................................................ .150%
</TABLE>

Administration fees payable to the Administrators by each portfolio of the
three investment companies are determined in proportion to their relative av-
erage daily net assets at the time of determination. From time to time, the
Administrators may waive (either voluntarily or pursuant to applicable state
expense limitations) all or a portion of the administration fee payable to
them by a Fund, which waivers may be terminated at any time. See "Management
of the Funds--Service Organizations" for additional information on fee waiv-
ers. For the fiscal year ended March 31, 1995, CGFSC and Concord Holding Cor-
poration ("Concord"), the former co-administrator, received an aggregate ad-
ministration fee (under the same compensation arrangements noted above) at the
effective annual rates of .154%, .155%, .154%, .154%, .155% and .154% of the
average daily net assets of the Equity, Aging of America, Communication and
Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively. For the same period, CGFSC and Concord
waived fees at the effective annual rates of .115%, .009%, .026% and .106% of
the average daily net assets of the Aging of America, Communication and Enter-
tainment, Business and Industrial Restructuring and Global Competitors Funds,
respectively.

SERVICE ORGANIZATIONS

Excelsior Fund will enter into Shareholder Servicing agreements ("Servicing
Agreement") with Shareholder Organizations which agree to provide their Cus-
tomers various shareholder administrative services with respect to their
Shares (hereinafter referred to as "Service Organizations"). As a considera-
tion for the administrative services provided to Customers, a Fund will pay
each Service Organization an administrative service fee at the annual rate of
up to .40% of the average daily net asset value of its Shares held by the
Service Organization's Customers. Such services, which are described more
fully in the Statement of Additional Information under "Management of the
Funds--Service Organizations," may include assisting in processing purchase,
exchange and redemption requests; transmitting and receiving funds in connec-
tion with Customer orders to purchase, exchange or redeem Shares; and provid-
ing periodic statements. Under the terms of the Servicing Agreement, Service
Organizations will be required to provide to Customers a schedule of any fees
that they may charge in connection with a Customer's investment. Until further
notice, the Investment Adviser and Administrators have voluntarily agreed to
waive fees payable by a Fund in an amount equal to administrative service fees
payable by that Fund.

BANKING LAWS

pany continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling or distributing securities such
as Shares of the Funds, but such banking laws and regulations do not prohibit
such a holding company or affiliate or banks generally from acting as invest-
ment adviser, transfer agent, or custodian to such an investment company, or
from purchasing shares of such company for and upon the order of customers.
The Investment Adviser, CGFSC and certain Shareholder Organizations may be
subject to such banking laws and regulations. State securities laws may differ
from the interpretations of Federal law discussed in this paragraph and banks
and financial institutions may be required to register as dealers pursuant to
state law.

Should legislative, judicial, or administrative action prohibit or restrict
the activities of the Investment Adviser or other Shareholder Organizations in
connection with purchases of Fund Shares, the Investment Adviser and such
Shareholder Organizations might be required to alter materially or discontinue
the investment services offered by them to Customers. It is not anticipated,
however, that any resulting change in the Funds' method of operations would
affect their net asset values per Share or result in financial loss to any
shareholder.

DESCRIPTION OF CAPITAL STOCK

Excelsior Funds, Inc. (formerly UST Master Funds, Inc.) was organized as a
Maryland corporation on August 2, 1984. Currently, Excelsior Fund has autho-
rized capital of 35 billion shares of Common Stock, $.001 par value per share,
classified into 40 series of shares representing interests in 20 investment
portfolios. This Prospectus describes the Equity, Early Life Cycle, Aging of
America, Communication and Entertainment, Business and Industrial Restructur-
ing and Global Competitors Funds. In addition to the Trust Shares, Excelsior
Fund offers a separate series of shares offered under a separate prospectus
representing interests in each of those Funds. Trust Shares and the other se-
ries of shares offered under a separate prospectus have different expenses,
which may affect performance. Call (800) 446-1012 for information regarding
the other series of shares in each Fund offered under a separate prospectus.

Each share (irrespective of series designation) in a Fund represents an equal
proportionate interest in the particular Fund with other shares of the same
class, and is entitled to such dividends and distributions out of the income
earned on the assets belonging to such Fund as are declared in the discretion
of Excelsior Fund's Board of Directors. Excelsior Fund's Charter authorizes
the Board of Directors to classify or reclassify any class of shares into one
or more additional classes or series.

Excelsior Fund's shareholders are entitled to one vote for each full share
held and fractional votes for fractional shares held and will vote in the ag-
gregate and not by class or series, except as otherwise expressly required by
law.

Certificates for Shares will not be issued unless expressly requested in
writing to CGFSC and will not be issued for fractional Shares.

As of July 11, 1995, U.S. Trust held of record substantially all of the
Shares in the Funds as agent or custodian for its customers, but did not own
such Shares beneficially because it did not have voting or investment discre-
tion with respect to such Shares. U.S. Trust is a wholly-owned subsidiary of
U.S. Trust Corporation.

CUSTODIAN AND TRANSFER AGENT

The Chase Manhattan Bank, N.A. ("Chase"), a wholly-owned subsidiary of The
Chase Manhattan Corporation, serves as the custodian of the Funds' assets.
Communications to the custodian should be directed to Chase, Mutual Funds
Service Division, 770 Broadway, New York, New York 10003-9598.

Chase may enter into an international sub-custodian agreement with a third
party providing for the custody of foreign securities held by the Funds.
32
<PAGE>

U.S. Trust serves as the Funds' transfer and dividend disbursing agent. U.S.
Trust has also entered into a sub-transfer agency arrangement with CGFSC, 73
Tremont Street, Boston, Massachusetts 02108-3913, pursuant to which CGFSC pro-
vides certain transfer agent, dividend disbursement and registrar services to
the Funds.

PERFORMANCE INFORMATION

From time to time, in advertisements or in reports to shareholders, the per-
formance of the Shares of the Funds may be quoted and compared to that of
other mutual funds with similar investment objectives and to stock or other
relevant indices or to rankings prepared by independent services or other fi-
nancial or industry publications that monitor the performance of mutual funds.
For example, the performance of a Fund may be compared to data prepared by
Lipper Analytical Services, Inc., a widely recognized independent service
which monitors the performance of mutual funds. The performance of the Equity
and Theme Funds may be also compared to the Standard & Poor's 500 Stock Index
("S&P 500"), an index of unmanaged groups of common stocks, the Consumer Price
Index, or the Dow Jones Industrial Average, a recognized unmanaged index of
common stocks of 30 industrial companies listed on the New York Stock Ex-
change.

Performance data as reported in national financial publications, including
but not limited to Money Magazine, Forbes, Barron's, The Wall Street Journal
and The New York Times, or in publications of a local or regional nature, may
also be used in comparing the performance of the Funds.

From time to time, each Fund may advertise its performance by using "average
annual total return" over various periods of time. Such total return figure
reflects the average percentage change in the value of an investment in a Fund
from the beginning date of the measuring period to the end of the measuring
period. Average total return figures will be given for the most recent one-
year period, and may be given for other periods as well (such as from the com-
mencement of a Fund's operations, or on a year-by-year basis). Each Fund may
also use aggregate total return figures for various periods, representing the
cumulative change in the value of an investment in the Fund for the specific
period. Both methods of calculating total return assume that dividends and
capital gain distributions made by a Fund during the period are reinvested in
Fund Shares and also reflect the maximum sales load charged by the Fund.

Performance will fluctuate and any quotation of performance should not be
considered as representative of a Fund's future performance. Shareholders
should remember that performance is generally a function of the kind and qual-
ity of the instruments held in a portfolio, operating expenses, and market
conditions. Any fees charged by Shareholder Organizations with respect to ac-
counts of Customers that have invested in Shares will not be included in cal-
culations of performance.

MISCELLANEOUS

Shareholders will receive unaudited semiannual reports describing the Funds'
investment operations and annual financial statements audited by the Funds'
independent auditors.

As used in this Prospectus, a "vote of the holders of a majority of the out-
standing shares" of Excelsior Fund or a particular Fund means, with respect to
the approval of an investment advisory agreement or a change in a fundamental
investment policy, the affirmative vote of the lesser of (a) more than 50% of
the outstanding shares of Excelsior Fund or such Fund, or (b) 67% or more of
the shares of Excelsior Fund or such Fund present at a meeting if more than
50% of the outstanding shares of Excelsior Fund or such Fund are represented
at the meeting in person or by proxy.

Inquiries regarding any of the Funds may be directed to the Distributor at
the address listed under "Distributor."

33
<PAGE>

INSTRUCTIONS FOR NEW ACCOUNT APPLICATION

OPENING YOUR ACCOUNT:

Complete the Application(s) and mail to: FOR OVERNIGHT DELIVERY: send to:

Excelsior Funds Excelsior Funds
c/o Chase Global Funds Service Company c/o Chase Global Funds Service
P.O. Box 2798 Company--Transfer Agent
Boston, MA 02208-2798 73 Tremont Street
Boston, MA 02108-3913

Please enclose with the Application(s) your check made payable to the "Ex-
celsior Funds" in the amount of your investment.

For direct wire purchases please refer to the section of the Prospectus en-
titled "How to Purchase and Redeem Shares--Purchase Procedures."

MINIMUM INVESTMENTS:

Except as provided in the Prospectus, the minimum initial investment is $500
per Fund; subsequent investments must be in the minimum amount of $50 per
Fund. Investments may be made in excess of these minimums.

REDEMPTIONS:

Shares can be redeemed in any amount and at any time in accordance with pro-
cedures described in the Prospectus. In the case of shares recently purchased
by check, redemption proceeds will not be made available until the transfer
agent is reasonably assured that the check has been collected in accordance
with applicable banking regulations.

Certain legal documents will be required from corporations or other organi-
zations, executors and trustees, or if redemption is requested by anyone other
than the shareholder of record. Written redemption requests in excess of
$50,000 per account must be accompanied by signature guarantees.

SIGNATURES: Please be sure to sign the Application(s).

If the shares are registered in the name of:
- an individual, the individual should sign.
- joint tenants, both tenants should sign.
- a custodian for a minor, the custodian should sign.
- a corporation or other organization, an authorized officer should sign
(please indicate corporate office or title).*
- a trustee or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity).*
* A corporate resolution or appropriate certificate may be required.

QUESTIONS:

If you have any questions regarding the Application or redemption require-
ments, please contact the transfer agent at (800) 446-1012 between 9:00 a.m.
and 5:00 p.m. (Eastern Time).

34
<PAGE>

- --------------------------------------------------------------------------------

[LOGO OF EXCELSIOR FUNDS CHASE GLOBAL FUNDS SERVICE COMPANY NEW
INC. APPEARS HERE] CLIENT SERVICES ACCOUNT
P.O. Box 2798 APPLICATION
Boston, MA 02208-2798 (Trust Shares)
(800) 446-1012
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACCOUNT REGISTRATION
- --------------------------------------------------------------------------------

[_] Individual [_] Joint Tenants [_] Trust [_] Gift/Transfer to Minor
[_] Other ____________________________________________________________________

Note: Joint tenant registration will be as "joint tenants with right of
survivorship" unless otherwise specified. Trust registrations should specify
name of the trust, trustee(s), beneficiary(ies), and the date of the trust
instrument. Registration for Uniform Gifts/Transfers to Minors should be in
the name of one custodian and one minor and include the state under which the
custodianship is created (using the minor's Social Security Number ("SSN")).
For IRA accounts a different application is required.

_____________________________ _______________________________________________
Name(s) (please print) Social Security # or Taxpayer Identification #

( )
_____________________________ _______________________________________________
Name Telephone #
_____________________________
Address
_____________________________ [_] U.S. Citizen [_] Other (specify)__________
City/State/Zip

- --------------------------------------------------------------------------------

FUND INITIAL INVESTMENT Fund INITIAL INVESTMENT
<S> <C> <C> <C>
[_] Equity Fund $ ____________ 8815 [_] Global Competitors Fund $ ____________ 8819
[_] Aging of America Fund $ ____________ 8816 [_] Early Life Cycle Fund $ ____________ 8812
[_] Communication & Entertainment Fund $ ____________ 8817 [_] Other ________________________ $ ____________
[_] Business & Industrial Restructuring Fund $ ____________ 8818
TOTAL INITIAL INVESTMENT: $ ____________
</TABLE>

NOTE: If investing by wire, you must obtain a Bank Wire Control Number. To do
so, please call (800) 446-1012 and ask for the Wire Desk.

A. BY MAIL: Enclosed is a check in the amount of $ _____ payable to "Excelsior
Funds."
B. BY WIRE: A bank wire in the amount of $_____ has been sent to the Fund

from _________________________________ ______________________________________
Name of Bank Wire Control Number

CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS: All capital gain and dividend
distributions will be reinvested in additional shares unless appropriate
boxes below are checked:
All dividends are to be [_] reinvested [_] paid in cash
All capital gains are to be [_] reinvested [_] paid in cash

- --------------------------------------------------------------------------------
ACCOUNT PRIVILEGES
- --------------------------------------------------------------------------------

TELEPHONE EXCHANGE AND REDEMPTION

[_] I/We appoint CGFSC as my/our agent to act upon instructions received by
telephone in order to effect the telephone exchange and redemption privileges.
I/We hereby ratify any instructions given pursuant to this authorization and
agree that Excelsior Fund, Excelsior Tax-Exempt Fund, CGFSC and their
directors, officers and employees will not be liable for any loss, liability,
cost or expense for acting upon instructions believed to be genuine and in
accordance with the procedures described in the then current Prospectus. To
the extent that Excelsior Fund and Excelsior Tax-Exempt Fund fail to use
reasonable procedures as a basis for their belief, they or their service
contractors may be liable for instructions that prove to be fraudulent or
unauthorized.

I/We further acknowledge that it is my/our responsibility to read the
Prospectus of any Fund into which I/we exchange.

[_] I/We do not wish to have the ability to exercise telephone redemption and
exchange privileges. I/We further understand that all exchange and redemption
requests must be in writing.

SPECIAL PURCHASE AND REDEMPTION PLANS
I/We have completed and attached the Supplemental Application for:

[_] Automatic Investment Plan
[_] Systematic Withdrawal Plan

AUTHORITY TO TRANSMIT REDEMPTION PROCEEDS TO PRE-DESIGNATED ACCOUNT.

I/We hereby authorize CGFSC to act upon instructions received by telephone to
withdraw $1,000 or more from my/our account in the Excelsior Funds and to wire
the amount withdrawn to the following commercial bank account. I/We understand
that CGFSC charges an $8.00 fee for each wire redemption, which will be
deducted from the proceeds of the redemption.

Title on Bank Account*________________________________________________________

Name of Bank _________________________________________________________________

Bank A.B.A. Number ___________________________ Account Number ________________

Bank Address _________________________________________________________________

City/State/Zip _______________________________________________________________
(attach voided check here)

A corporation, trust or partnership must also submit a "Corporate Resolution"
(or "Certificate of Partnership") indicating the names and titles of officers
authorized to act on its behalf.
* TITLE ON BANK AND FUND ACCOUNT MUST BE IDENTICAL.

- --------------------------------------------------------------------------------
<PAGE>

To qualify for Rights of Accumulation, you must complete this section,
listing all of your accounts including those in your spouse's name, joint
accounts and accounts held for your minor children. If you need more space,
please attach a separate sheet.

[_] I/We qualify for the Rights of Accumulation sales charge discount
described in the Prospectus and Statement of Additional Information.
[_] I/We own shares of more than one Fund distributed by Edgewood Services,
Inc. Listed below are the numbers of each of my/our Shareholder Accounts.
[_] The registration of some of my/our shares differs from that shown on this
application. Listed below are the account number(s) and full
registration(s) in each case.

LIST OF OTHER EXCELSIOR FUND ACCOUNTS:
______________________ ______________________________________________________
______________________ ______________________________________________________
______________________ ______________________________________________________
ACCOUNT NUMBER ACCOUNT REGISTRATIONS

- --------------------------------------------------------------------------------
LETTER OF INTENT
- --------------------------------------------------------------------------------

[_] I agree to the Letter of Intent provisions set forth in the Prospectus.
Although I am not obligated to purchase, and Excelsior Fund is not obligated
to sell, I intend to invest, over a 13-month period beginning on , 19 , an
aggregate amount in Eligible Funds of Excelsior Fund and Excelsior Tax-Exempt
Fund at least equal to (check appropriate box):

[_] $50,00 [_] $100,000 [_] $250,000
[_] $500,000 [_] $1,000,000 [_] $2,000,0000

By signing this application, I hereby authorize CGFSC to redeem an
appropriate number of shares held in escrow to pay any additional sales loads
payable in the event that I do not fulfill the terms of this Letter of
Intent.
- --------------------------------------------------------------------------------
AGREEMENTS AND SIGNATURES
- --------------------------------------------------------------------------------
By signing this application, I/we hereby certify under penalty of perjury
that the information on this application is complete and correct and that as
required by Federal law:

[_] I/We certify that (1) the number(s) shown on this form is/are the correct
taxpayer identification number(s) and (2) I/we are not subject to backup
withholding either because I/we have not been notified by the Internal
Revenue Service that I/we are subject to backup withholding, or the IRS has
notified me/us that I am/we are no longer subject to backup withholding.
(NOTE: IF ANY OR ALL OF PART 2 IS NOT TRUE, PLEASE STRIKE OUT THAT PART
BEFORE SIGNING.)

[_] If no taxpayer identification number ("TIN") or SSN has been provided
above, I/we have applied, or intend to apply, to the IRS or the Social
Security Administration for a TIN or a SSN, and I/we understand that if I/we
do not provide this number to CGFSC within 60 days of the date of this
application, or if I/we fail to furnish my/our correct SSN or TIN, I/we may
be subject to a penalty and a 31% backup withholding on distributions and
redemption proceeds. (Please provide this number on Form W-9. You may request
the form by calling CGFSC at the number listed above).

I/We represent that I am/we are of legal age and capacity to purchase shares
of the Excelsior Funds. I/We have received, read and carefully reviewed a
copy of the appropriate Fund's current Prospectus and agree to its terms and
by signing below I/we acknowledge that neither the Fund nor the Distributor
is a bank and that Fund Shares are not deposits or obligations of, or
guaranteed or endorsed by, United States Trust Company of New York, its
parent and affiliates and the Shares are not federally insured by, guaranteed
by, obligations of or otherwise supported by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
governmental agency; and that an investment in the Funds involves investment
risks, including possible loss of principal amount invested.

X _____________________________________ Date _________________________________
Owner Signature

X _____________________________________ Date _________________________________
Co-Owner Signature

Sign exactly as name(s) of registered owner(s) appear(s) above (including
legal title if signing for a corporation, trust custodial account, etc.).

- --------------------------------------------------------------------------------
FOR USE BY AUTHORIZED AGENT (BROKER/DEALER) ONLY
- --------------------------------------------------------------------------------

We hereby submit this application for the purchase of shares in accordance
with the terms of our selling agreement with Edgewood Services, Inc., and
with the Prospectus and Statement of Additional Information of each Fund
purchased. We agree to notify CGFSC of any purchases made under the Letter of
Intent or Rights of Accumulation.

________________________________________ ____________________________________
Investment Dealer's Name Source of Business Code

________________________________________ ____________________________________
Main Office Address Branch Number

________________________________________ ____________________________________
Representative's Number Representative's Name

________________________________________ ____________________________________
Branch Address Telephone

________________________________________ ____________________________________
Investment Dealer's Authorized Signature Title

- --------------------------------------------------------------------------------
<PAGE>

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACCOUNT REGISTRATION PLEASE SUPPLY THE FOLLOWING INFORMATION EXACTLY AS IT
APPEARS ON THE FUND'S RECORD.
- --------------------------------------------------------------------------------

Fund Name ________________________ Account Number __________________________
Owner Name _______________________ Social Security or Taxpayer ID Number ___
Street Address ___________________ City, State, Zip Code ___________________
Resident of [_] U.S. [_] Other ___ [_] Check here if this is a change of
address
- --------------------------------------------------------------------------------
DISTRIBUTION OPTIONS (DIVIDENDS AND CAPITAL GAINS WILL BE REINVESTED
UNLESS OTHERWISE INDICATED)
- --------------------------------------------------------------------------------

A. CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS: All capital gain and dividend
distributions will be reinvested in additional shares unless appropriate
boxes below are checked:

All dividends are to be [_] reinvested [_] paid in cash
All capital gains are to be [_] reinvested [_] paid in cash

B. PAYMENT ORDER: Complete only if distribution checks are to be payable
to another party. Make distribution checks payable to:

Name of Your Bank ________________________
Name _______________________ Bank Account Number ______________________
Address ____________________ Address of Bank __________________________
City, State, Zip Code ______________________________________________________

C. DISTRIBUTIONS REINVESTED-CROSS FUNDS: Permits all distributions from
one Fund to be automatically reinvested into another identically-
registered Excelsior Fund. (NOTE: You may NOT open a new Fund account with
this option.) Transfer all distributions earned:
From: ______________________ Account No. ______________________________
(Fund)
To: ________________________ Account No. ______________________________
(Fund)
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN [_ ]YES [_] NO
- --------------------------------------------------------------------------------

[_] Monthly on the 1st day
[_] Monthly on the 15th day
[_] Monthly on both the 1st and 15th days
Amount of each debit (minimum $50 per Fund) $ ________________________
NOTE: A Bank Authorization Form (below) and a voided personal check must
accompany the Automatic Investment Plan application.
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------

EXCELSIOR FUNDS CLIENT SERVICES
AUTOMATIC INVESTMENT PLAN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BANK AUTHORIZATION
- --------------------------------------------------------------------------------

______________________ ________________________ ________________________________
Bank Name Bank Address Bank Account Number

I/We authorize you, the above named bank, to debit my/our
account for amounts drawn by CGFSC, acting as my agent for
the purchase of Fund shares. I/We agree that your rights in
respect to each withdrawal shall be the same as if it were a
check drawn upon you and signed by me/us. This authority
shall remain in effect until revoked in writing and received
by you. I/We agree that you shall incur no liability when
honoring debits, except a loss due to payments drawn against
insufficient funds. I/We further agree that you will incur no
liability to me if you dishonor any such withdrawal. This
will be so even though such dishonor results in the
cancellation of that purchase.

____________________________ ______________________________________________
Account Holder's Name Joint Account Holder's Name

X ________________ __________ x _________________________ _________________
Signature Date Signature Date
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN [_] YES [_] NO NOT AVAILABLE FOR IRA'S
- --------------------------------------------------------------------------------
AVAILABLE TO SHAREHOLDERS WITH ACCOUNT BALANCES OF $10,000 OR
MORE.

I/We hereby authorize CGFSC to redeem the necessary number of
shares from my/our Excelsior Fund Account on the designated
dates in order to make the following periodic payments:

[_] Monthly on the 24th day[_] Quarterly on the 24th day of
January, April, July and October[_] Other_________________________________

(This request for participation in the Plan must be received
by the 18th day of the month in which you wish withdrawals to
begin.)

Amount of each check ($100 minimum) $ ________________________________________

Please make check payable to: (To be completed only if redemption proceeds to
be paid to other than account holder of record or mailed to address other than
address of record)

Recipient ___________________________________________________________________

Street Address ______________________________________________________________

City, State, Zip Code _______________________________________________________

NOTE: If recipient of checks is not the registered shareholder, signature(s)
below must be guaranteed. A corporation, trust or partnership must also submit
a "Corporate Resolution" (or "Certification of Partnership") indicating the
names and titles of officers authorized to act on its behalf.

- --------------------------------------------------------------------------------
AGREEMENT AND SIGNATURES
- --------------------------------------------------------------------------------

The investor(s) certifies and agrees that the certifications, authorizations,
directions and restrictions contained herein will continue until CGFSC
receives written notice of any change or revocation. Any change in these
instructions must be in writing with all signatures guaranteed (if
applicable).
Date __________________________

X ____________________________________ X _____________________________________
Signature Signature
X ____________________________________ X _____________________________________
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)

*ELIGIBLE GUARANTORS: An Eligible Guarantor institution is a bank, trust
company, broker, dealer, municipal or government securities broker or dealer,
credit union, national securities exchange, registered securities association,
clearing agency or savings association, provided that such institution is a
participant in STAMP, the Securities Transfer Agents Medallion Program.
- --------------------------------------------------------------------------------
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY......................................................... 2
EXPENSE SUMMARY............................................................ 3
FINANCIAL HIGHLIGHTS....................................................... 5
U.S. TRUST'S INVESTMENT PHILOSOPHY AND STRATEGIES.......................... 11
INVESTMENT OBJECTIVES AND POLICIES......................................... 11
PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION..................... 15
INVESTMENT LIMITATIONS..................................................... 18
PRICING OF SHARES.......................................................... 19
HOW TO PURCHASE AND REDEEM SHARES.......................................... 20
INVESTOR PROGRAMS.......................................................... 26
DIVIDENDS AND DISTRIBUTIONS................................................ 27
TAXES...................................................................... 28
MANAGEMENT OF THE FUNDS.................................................... 29
DESCRIPTION OF CAPITAL STOCK............................................... 32
CUSTODIAN AND TRANSFER AGENT............................................... 32
PERFORMANCE INFORMATION.................................................... 33
MISCELLANEOUS.............................................................. 33
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION................................... 34
</TABLE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF ADDI-
TIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OF-
FERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY EXCELSIOR
FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
EXCELSIOR FUND OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.

[LOGO OF EXCELSIOR FUNDS INC. APPEARS HERE]

EQUITY FUND

AGING OF AMERICA FUND

COMMUNICATION AND ENTERTAINMENT FUND

BUSINESS AND INDUSTRIAL RESTRUCTURING FUND

GLOBAL COMPETITORS FUND

EARLY LIFE CYCLE FUND

TRUST SHARES

Prospectus
August 1, 1995

(as revised on January 1, 1996)

USTEQP196-FT

<PAGE>

[LOGO OF EXCELSIOR FUNDS INC. APPEARS HERE]

A Management Investment Company

- -------------------------------------------------------------------------------
Equity Funds For initial purchase information, current
prices, performance information and ex-
73 Tremont Street isting account information, call (800)
Boston, MA 02108-3913 446-1012. (From overseas, call (617) 557-
8280.)

- -------------------------------------------------------------------------------

This Prospectus describes a series of shares ("Shares") offered by several
separate portfolios offered to investors by Excelsior Funds, Inc. ("Excelsior
Fund") (formerly UST Master Funds, Inc.), an open-end, management investment
company. Excelsior Fund also issues an additional series of shares in the
portfolios ("Trust Shares") which are offered under a separate prospectus.
Each portfolio (individually, a "Fund" and collectively, the "Funds") has its
own investment objective and policies as follows:

EQUITY FUND seeks long-term capital appreciation by investing in companies
believed by the Investment Adviser to represent good long-term values not cur-
rently recognized in the market prices of their securities.

AGING OF AMERICA FUND seeks long-term capital appreciation by investing in
companies which the Investment Adviser believes will benefit from the changes
occurring in the demographic structure of the U.S. population, particularly
its growing population of individuals over the age of 40.

BUSINESS AND INDUSTRIAL RESTRUCTURING FUND seeks long-term capital apprecia-
tion by investing in companies which the Investment Adviser believes will ben-
efit from their restructuring or redeployment of assets and operations in or-
der to become more competitive or profitable.

GLOBAL COMPETITORS FUND seeks long-term capital appreciation by investing
primarily in U.S.-based companies which the Investment Adviser believes will
benefit from their position as effective and strong competitors on a global
basis.

Each of the Funds is sponsored and distributed by Edgewood Services, Inc. and
advised by United States Trust Company of New York (the "Investment Adviser"
or "U.S. Trust").

AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.

August 1, 1995

(as revised on January 1, 1996)
<PAGE>

PROSPECTUS SUMMARY

2
<PAGE>

EXPENSE SUMMARY

The following table summarizes the expenses borne by the Shares offered under
this Prospectus.

<TABLE>
<CAPTION>
BUSINESS
AGING OF COMMUNICATION AND INDUSTRIAL GLOBAL
EQUITY AMERICA AND ENTERTAINMENT RESTRUCTURING COMPETITORS EARLY LIFE
FUND FUND FUND FUND FUND CYCLE FUND
------ -------- ----------------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load (as a
percentage of offering
price)................. 4.50% 4.50% 4.50% 4.50% 4.50% 4.50%
Sales Load on Reinvested
Dividends.............. None None None None None None
Deferred Sales Load..... None None None None None None
Redemption Fees/1/ ..... None None None None None None
Exchange Fees........... None None None None None None
ANNUAL FUND OPERATING
EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Advisory Fees (after fee
waivers)/2/ ........... .72% .44% .53% .52% .50% .52%
12b-1 Fees.............. None None None None None None
Other Operating Expenses
Administrative Servic-
ing Fee/2/............ .03% .03% .03% .02% .02% .05%
Other Expenses/2/ (af-
ter fee waivers)...... .30% .52% .42% .44% .45% .39%
----- ----- ----- ----- ----- -----
Total Operating Expenses
(after fee waivers)/2/
....................... 1.05% .99% .98% .98% .97% .96%
===== ===== ===== ===== ===== =====
</TABLE>
- -------
1. The Fund's transfer agent imposes a direct $8.00 charge on each wire redemp-
tion by noninstitutional (i.e. individual) investors which is not reflected
in the expense ratios presented herein. Shareholder organizations may charge
their customers transaction fees in connection with redemptions. See "Re-
demption Procedures."
2. The Investment Adviser and Administrators may, from time to time, voluntar-
ily waive part of their respective fees, which waivers may be terminated at
any time. Until further notice, the Investment Adviser and/or Administrators
intend to voluntarily waive fees in an amount equal to the Administrative
Servicing Fee; and to further waive fees and reimburse expenses to the ex-
tent necessary for Shares of each of the Aging of America, Communication and
Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds (collectively, the "Theme Funds"), respectively, to
maintain an annual expense ratio of not more than .99%. Without such fee
waivers, "Advisory Fees" would be .75%, .60%, .60%, .60%, .60% and .60%, and
"Total Operating Expenses" would be 1.08%, 1.26%, 1.06%, 1.08%, 1.18% and
1.04% for the Equity, Aging of America, Communication and Entertainment,
Business and Industrial Restructuring, Global Competitors and Early Life Cy-
cle Funds, respectively, and "Other Expenses" would be .63%, .43%, .46% and
.56% for the Aging of America, Communication and Entertainment, Business and
Industrial Restructuring and Global Competitors Funds, respectively.

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual returns and (2) redemption of your investment at the end of the
following periods:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity Fund..................................... $55 $77 $100 $167
Aging of America Fund........................... 55 75 97 161
Communication and Entertainment Fund............ 55 75 97 160
Business and Industrial Restructuring Fund...... 55 75 97 160
Global Competitors Fund......................... 54 75 96 159
Early Life Cycle Fund........................... 54 74 96 158
</TABLE>

3
<PAGE>

The foregoing expense summary and example (based on the maximum sales load
payable on the Shares) are intended to assist investors in understanding the
costs and expenses that an investor in Shares of the Funds will bear directly
or indirectly. The expense summary sets forth advisory and other expenses pay-
able with respect to Shares of the Funds for the fiscal year ended March 31,
1995. For more complete descriptions of the Funds' operating expenses, see
"Management of the Funds" and "Description of Capital Stock" in this Prospectus
and the financial statements and notes incorporated by reference in the State-
ment of Additional Information.

4
<PAGE>

FINANCIAL HIGHLIGHTS

Prior to the date of this Prospectus, each Fund offered the Shares under
this Prospectus. As of the date of this Prospectus, the Funds began offering a
separate series of shares in the Funds designated as Trust Shares. Trust
Shares and the Shares offered under this Prospectus represent equal pro rata
interests in each Fund, except that Trust Shares bear the additional expense
of distribution fees. See "Description of Capital Stock."

The following tables include selected data for a Share outstanding through-
out each period and other performance information derived from the financial
statements included in Excelsior Fund's Annual Report to Shareholders for the
year ended March 31, 1995 (the "Financial Statements"). The information con-
tained in the Financial Highlights for each period has been audited by Ernst &
Young LLP, Excelsior Fund's independent auditors. The following tables should
be read in conjunction with the Financial Statements and notes thereto. More
information about the performance of each Fund is also contained in the Annual
Report to Shareholders which may be obtained from Excelsior Fund without
charge by calling the number on the front cover of this Prospectus.

EQUITY FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986/1/
------- ------- ------- ------- ------ ------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 19.17 $ 18.77 $ 16.28 $ 14.13 $ 13.87 $ 13.22 $ 11.32 $ 13.56 $ 12.35 $ 8.00
------- ------- ------- ------- ------- ------- ------- --------- ------- -------
Income From Investment
Operations
Net Investment Income.. 0.07 0.05 0.08 0.13 0.28 0.34 0.19 0.15 0.18 0.18
Net Gains or (Losses)
on Securities (both
realized and
unrealized)........... 2.67 1.16 3.01 2.23 0.39 1.26 1.88 (1.63) 1.86 4.31
------- ------- ------- ------- ------- ------- ------- --------- ------- -------
Total From Investment
Operations............ 2.74 1.21 3.09 2.36 0.67 1.60 2.07 (1.48) 2.04 4.49
------- ------- ------- ------- ------- ------- ------- --------- ------- -------
Less Distributions
Dividends From Net
Investment Income..... (0.04) (0.08) (0.09) (0.21) (0.23) (0.34) (0.17) (0.14) (0.18) (0.14)
Dividends in Excess of
Net Investment Income. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions From Net
Realized Gain on
Investments and
Options............... (0.47) (0.39) (0.51) 0.00 (0.18) (0.61) 0.00 (0.62) (0.65) 0.00
Distributions in Excess
of Net Realized Gain
on Investments and
Options............... 0.00 (0.34) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- ------- ------- --------- ------- -------
Total Distributions.... (0.51) (0.81) (0.60) (0.21) (0.41) (0.95) (0.17) (0.76) (0.83) (0.14)
------- ------- ------- ------- ------- ------- ------- --------- ------- -------
Net Asset Value, End of
Period................. $ 21.40 $ 19.17 $ 18.77 $ 16.28 $ 14.13 $ 13.87 $ 13.22 $ 11.32 $ 13.56 $ 12.35
======= ======= ======= ======= ======= ======= ======= ========= ======= =======
Total Return/2/ ........ 14.65% 6.54% 19.26% 16.87% 5.11% 11.98% 18.52% (11.24)% 17.61% 56.74%
Ratios/Supplemental Data
Net Assets, End of
Period
(in millions)......... $137.42 $122.26 $106.14 $ 71.62 $ 29.87 $ 25.98 $ 17.61 $ 13.58 $ 13.40 $ 5.58
Ratio of Net Operating
Expenses to Average
Net Assets............ 1.05% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.21% 0.90%/3/
Ratio of Gross
Operating Expenses to
Average Net Assets.... 1.08% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.30% 2.74%/3/
Ratio of Net Investment
Income to Average Net
Assets................ 0.36% 0.25% 0.51% 0.87% 2.21% 2.45% 1.62% 1.26% 1.53% 2.63%/3/
Portfolio Turnover
Rate.................. 23.0% 17.0% 24.0% 20.0% 41.0% 53.0% 46.0% 67.0% 86.0% 207.0%/3/
</TABLE>
- -----------
NOTES:
1. Inception date of the Fund was April 25, 1985.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.

5
<PAGE>

AGING OF AMERICA FUND

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
----------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
------- ------ -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 6.99 $ 7.01 $7.00
------- ------ -----
Income From Investment Operations
Net Investment Income...................... 0.04 0.03 0.01
Net Gains or (Losses) on Securities (both
realized and unrealized).................. 0.85 (0.02) 0.00
------- ------ -----
Total From Investment Operations........... 0.89 0.01 0.01
------- ------ -----
Less Distributions
Dividends From Net Investment Income....... (0.04) (0.03) 0.00
Dividends in Excess of Net Investment
Income.................................... 0.00 0.00 0.00
Distributions From Net Realized Gain on
Investments and Options................... 0.00 0.00 0.00
Distributions in Excess of Net Realized
Gain on Investments and Options........... 0.00 0.00 0.00
------- ------ -----
Total Distributions........................ (0.04) (0.03) 0.00
------- ------ -----
Net Asset Value, End of Period............... $ 7.84 $ 6.99 $7.01
======= ====== =====
Total Return/2/.............................. 12.80% 0.13% 0.14%
Ratios/Supplemental Data
Net Assets, End of Period (in millions).... $ 22.17 $10.58 $2.39
Ratio of Net Operating Expenses to Average
Net Assets................................ 0.99% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses to
Average Net Assets........................ 1.26% 1.82% 3.87%/3/
Ratio of Net Investment Income to Average
Net Assets................................ 0.63% 0.59% 0.77%/3/
Portfolio Turnover Rate.................... 14.0% 24.0% 14.0%/3/
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.

6
<PAGE>

COMMUNICATION AND ENTERTAINMENT FUND

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
------------------ PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
------- ------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 8.75 $ 7.61 $ 7.00
------- ------- ------
Income From Investment Operations
Net Investment Income...................... 0.04 0.02 0.01
Net Gains or (Losses) on Securities (both
realized and unrealized).................. 1.06 1.52 0.60
------ ------- ------
Total From Investment Operations........... 1.10 1.54 0.61
------ ------- ------
Less Distributions
Dividends From Net Investment Income....... (0.04) (0.03) 0.00
Dividends in Excess of Net Investment
Income.................................... 0.00 0.00 0.00
Distributions From Net Realized Gain on
Investments and Options................... (0.17) (0.37) 0.00
Distributions in Excess of Net Realized
Gain on Investments and Options........... 0.00 0.00 0.00
------- ------- ------
Total Distributions........................ (0.21) (0.40) 0.00
------- ------- ------
Net Asset Value, End of Period............... $ 9.64 $ 8.75 $ 7.61
======= ======= ======
Total Return/2/.............................. 12.87% 20.07% 8.71%
Ratios/Supplemental Data
Net Assets, End of Period (in millions).... $ 29.91 $ 21.02 $ 5.79
Ratio of Net Operating Expenses to Average
Net Assets................................ 0.98% 0.98% 0.99%/3/
Ratio of Gross Operating Expenses to
Average Net Assets........................ 1.06% 1.16% 2.20%/3/
Ratio of Net Investment Income to Average
Net Assets................................ 0.46% 0.29% 1.06%/3/
Portfolio Turnover Rate.................... 56.0% 60.0% 25.0%/3/
</TABLE>
- -----------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.

7
<PAGE>

BUSINESS AND INDUSTRIAL RESTRUCTURING FUND

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
------------------ PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
------ ------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 9.64 $ 7.71 $ 7.00
------- ------- -------
Income From Investment Operations
Net Investment Income...................... 0.07 0.06 0.02
Net Gains or (Losses) on Securities (both
realized and unrealized).................. 1.02 1.96 0.69
------- ------- -------
Total From Investment Operations........... 1.09 2.02 0.71
------- ------- -------
Less Distributions
Dividends From Net Investment Income....... (0.06) (0.07) 0.00
Dividends in Excess of Net Investment
Income.................................... 0.00 0.00 0.00
Distributions From Net Realized Gain on
Investments and Options................... (0.12) (0.02) 0.00
Distributions in Excess of Net Realized
Gain on Investments and Options........... 0.00 0.00 0.00
------- ------- -------
Total Distributions........................ (0.18) (0.09) 0.00
------- ------- -------
Net Asset Value, End of Period............... $ 10.55 $ 9.64 $ 7.71
======= ======= =======
Total Return/2/.............................. 11.49% 26.40% 10.14%
Ratios/Supplemental Data
Net Assets, End of Period (in millions).... $ 30.18 $ 14.44 $ 1.94
Ratio of Net Operating Expenses to Average
Net Assets................................ 0.98% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses to
Average Net Assets........................ 1.08% 1.73% 5.85%/3/
Ratio of Net Investment Income to Average
Net Assets................................ 0.83% 0.77% 2.48%/3/
Portfolio Turnover Rate.................... 82.0% 75.0% 9.0%/3/
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.

8
<PAGE>

GLOBAL COMPETITORS FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
-------- ------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 7.69 $ 7.28 $ 7.00
------- ------- -------
Income From Investment Operations
Net Investment Income.............. 0.07 0.05 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 0.90 0.41 0.27
------- ------- -------
Total From Investment Operations... 0.97 0.46 0.28
------- ------- -------
Less Distributions
Dividends from Net Investment
Income............................ (0.07) (0.05) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00
Distributions from Net Realized
Gain on Investments and Options... 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00
------- ------- -------
Total Distributions................ (0.07) (0.05) 0.00
-------- ------- -------
Net Asset Value, End of Period....... $ 8.59 $ 7.69 $ 7.28
======== ======= =======
Total Return/2/...................... 12.73% 6.29% 4.00%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $ 25.50 $ 10.06 $ 2.04
Ratio of Net Operating Expenses to
Average Net Assets................ 0.97% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets............. 1.18% 1.72% 3.97%/3/
Ratio of Net Investment Income to
Average Net Assets................ 1.04% 0.81% 0.82%/3/
Portfolio Turnover Rate............ 29.0% 19.0% 0.0%/3/
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.

9
<PAGE>

EARLY LIFE CYCLE FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 8.66 $ 7.40 $7.00
---------- ---------- -----
Income From Investment Operations
Net Investment Income.............. (0.02) (0.01) 0.00
Net Gains or (Losses) on Securities
(both realized and unrealized).... 1.31 1.36 0.40
---------- ---------- -----
Total From Investment Operations... 1.29 1.35 0.40
---------- ---------- -----
Less Distributions
Dividends From Net Investment
Income............................ 0.00 0.00 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... (0.18) (0.09) 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00
---------- ---------- -----
Total Distributions................ (0.18) (0.09) 0.00
---------- ---------- -----
Net Asset Value, End of Period....... $ 9.77 $ 8.66 $7.40
========== ========== =====
Total Return/2/...................... 15.16% 18.27% 5.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $ 47.78 $ 24.95 $5.51
Ratio of Net Operating Expenses to
Average Net Assets................ 0.96% 0.95% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets............. 1.04% 1.15% 2.70%/3/
Ratio of Net Investment Income to
Average Net Assets................ (0.23)% (0.25)% 0.12%/3/
Portfolio Turnover Rate............ 42.0% 20.0% 4.0%/3/
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.

10
<PAGE>

U.S. TRUST'S INVESTMENT PHILOSOPHY AND STRATEGIES

INVESTMENT OBJECTIVES AND POLICIES

The Investment Adviser will use its best efforts to achieve the investment
objective of each Fund, although their achievement cannot be assured. The in-
vestment objective of each Fund is "fundamental," meaning that it may not be
changed without a vote of the holders of a majority of the particular Fund's
outstanding shares (as defined under "Miscellaneous"). Except as noted below
in "Investment Limitations,"

11
<PAGE>

the investment policies of each Fund may be changed without a vote of the
holders of a majority of the outstanding shares of such Fund.

EQUITY FUND

THEME FUNDS

COMMUNICATION AND ENTERTAINMENT FUND--invests in companies which the Invest-
ment Adviser believes will benefit from the technological and international
transformation of the communications and entertainment industries, particu-
larly the convergence of information, communication and entertainment media.
Such companies may include those engaged in the development, production, sale
and distribution of products or services in the broadcast, radio and televi-
sion, leisure, entertainment, amusement, publishing, telecommunications serv-
ices and equipment, and telephone utilities industries. In analyzing companies
for investment, the Investment Adviser may focus on firms which the Investment
Adviser believes are innovators of or will benefit from the melding of comput-
er, communications and entertainment technologies. Under normal conditions, at
least 65% of the Fund's total assets will be invested in companies of the type
described in this paragraph.

BUSINESS AND INDUSTRIAL RESTRUCTURING FUND--invests in companies which the
Investment Adviser believes will benefit from their restructuring or redeploy-
ment of assets and operations in order to become more competitive or profit-
able. Such companies may include those involved in prospective mergers, con-
solidations, liquidations, spin-offs, financial restructurings and reorganiza-
tions. The business activities of such companies are not limited in any way.
Under normal conditions, at least 65% of the Fund's total assets will be in-
vested in companies of the type described in this paragraph. The Investment
Adviser's focus is to find companies whose restructuring activities offer sig-
nificant value and investment potential. For the past several years, leveraged
buy-outs and mergers have been prominent trends. Currently, a great deal of
value is being created as companies deleverage, recapitalize, and rationalize
their operations in order to increase profitability. There is risk in these
types of investments. For example, should a company be unsuccessful in reduc-
ing its

12
<PAGE>

debt, it may be forced into default on its debt, increasing its debt or bank-
ruptcy.

GLOBAL COMPETITORS FUND--invests primarily in U.S.-based companies which the
Investment Adviser believes will benefit from their position as effective and
strong competitors on a global basis. Such companies are characterized by their
ability to supply something unique or of greater value, or to deliver goods and
services more efficiently or reliably. These companies develop and implement
international marketing strategies for their goods and services. The range of
businesses encompassed by this policy is broad and, by way of example, may in-
clude companies engaged in soft drink production and sales, clothing manufac-
turers, tobacco product producers, precision instrument and aerospace provid-
ers, and a variety of communications systems, biotechnology and high technology
suppliers. While the Fund will invest primarily in U.S.-based companies with
such features, up to 20% of the Fund's assets may be invested in non-U.S.-based
global competitors. The Fund will not engage in currency hedging in an attempt
to anticipate currency fluctuations with respect to any such foreign invest-
ments. Under normal conditions, the Fund will invest in securities of issuers
from at least three countries and at least 65% of the Fund's total assets will
be invested in companies of the type described in this paragraph.

EARLY LIFE CYCLE FUND--invests primarily in smaller companies which are in the
earlier stages of their development or larger or more mature companies engaged
in new and higher growth potential operations. An early life cycle company is
one which is early in its development as a company, yet has demonstrated or is
expected to achieve substantial long-term earnings growth. More mature or larg-
er, established companies may also be positioned for accelerating earnings be-
cause of rejuvenated management, new products, new markets for existing prod-
ucts or structural changes in the economy. In selecting companies for invest-
ment, the Investment Adviser looks for innovative companies whose potential has
not yet been fully recognized by the securities markets. Under normal condi-
tions, at least 65% of the Fund's total assets will be invested in companies
with capitalization of $1 billion or less. The risk and venture oriented nature
of such companies naturally entails greater risk for investors when contrasted
with investing in more established companies.

INVESTMENT POLICIES COMMON TO THE EQUITY FUND AND THE THEME FUNDS

Under normal market and economic conditions, the Equity and each Theme Fund
will invest at least 65% of its total assets in common stock, preferred stock
and securities convertible into common stock. Normally, up to 35% of each such
Fund's total assets may be invested in other securities and instruments includ-
ing, e.g., other investment-grade debt securities, warrants, options, and
futures instruments as described in more detail below. During temporary defen-
sive periods or when the Investment Adviser believes that suitable stocks or
convertible securities are unavailable, each Fund may hold cash or invest some
or all of its assets in U.S. Government securities, high-quality money market
instruments and repurchase agreements collateralized by the foregoing obliga-
tions.

In managing the Equity and Theme Funds, the Investment Adviser seeks to pur-
chase securities having value currently not recognized in the market price of a
security, consistent with the strategies discussed above.

Portfolio holdings will include common stocks of companies having capitaliza-
tions of varying amounts, and all Funds will invest in the securities of high
growth, small companies where the Investment Adviser expects earnings and the
price of the securities to grow at an above-average rate. As discussed above,
the Early Life Cycle Fund emphasizes such companies. Certain securities owned
by the Equity and Theme Funds may be traded only in the over-the-counter market
or on a regional securities exchange, may be listed only in the quotation serv-
ice commonly known as the "pink sheets," and may not be traded every day or in
the volume typical of trading on a national securities exchange. As a result,
there may be a greater fluctuation

13
<PAGE>

in the value of a Fund's Shares, and a Fund may be required, in order to meet
redemptions or for other reasons, to sell these securities at a discount from
market prices, to sell during periods when such disposition is not desirable,
or to make many small sales over a period of time.

RISK FACTORS

All Funds may invest in the securities of foreign issuers. Investments in
foreign securities involve certain risks not ordinarily associated with in-
vestments in domestic securities. Such risks include fluctuations in foreign
exchange rates, future political and economic developments, and the possible
imposition of exchange controls or other foreign governmental laws or restric-
tions. In addition, with respect to certain countries there is the possibility
of expropriation of assets, confiscatory taxation, political or social insta-
bility or diplomatic developments which could adversely affect investments in
those countries. There may be less publicly available information about a for-
eign company than about a U.S. company, and foreign companies may not be sub-
ject to accounting, auditing and financial reporting standards and require-
ments comparable to or as uniform as those of U.S.-based companies. Foreign
securities markets, while growing in volume, have, for the most part, substan-
tially less volume than U.S. markets, and securities of many foreign companies
are less liquid and their prices more volatile than securities of comparable
U.S.-based companies. Transaction costs on foreign securities markets are gen-
erally higher than in the United States. There is generally less government
supervision and regulation of foreign exchanges, brokers and issuers than
there is in the United States and a Fund might have greater difficulty taking
appropriate legal action in a foreign court. Dividends and interest payable on
a Fund's foreign portfolio securities may be subject to foreign withholding
taxes. To the extent such taxes are not offset by credits or deductions al-
lowed to investors under the Federal income tax provisions, they may reduce
the net return to the shareholders.

The Funds should not be considered a complete investment program. In view of
the specialized nature of

14
<PAGE>

their investment activities, investment in the Equity and Theme Funds' shares
may be suitable only for those investors who can invest without concern for
current income and are financially able to assume risk in search of long-term
capital gains.

Securities of companies discussed in this section may be more volatile than
the overall market.

PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION

MONEY MARKET INSTRUMENTS

All Funds may invest in "money market instruments," which include, among
other things, bank obligations, commercial paper and corporate bonds with re-
maining maturities of 13 months or less.

GOVERNMENT OBLIGATIONS

REPURCHASE AGREEMENTS

In order to effectively manage their cash holdings, the Funds may enter into
repurchase agreements.

15
<PAGE>

Each Fund will enter into repurchase agreements only with financial institu-
tions that are deemed to be creditworthy by the Investment Adviser, pursuant
to guidelines established by Excelsior Fund's Board of Directors. No Fund will
enter into repurchase agreements with the Investment Adviser or any of its af-
filiates. Repurchase agreements with remaining maturities in excess of seven
days will be considered illiquid securities and will be subject to the 10%
limit described in Investment Limitation No. 6 below.

SECURITIES LENDING

OPTIONS

To further increase return on their portfolio securities in accordance with
their respective investment objectives and policies, the Funds may enter into
option transactions as described below.

FUTURES CONTRACTS

The Theme Funds may also enter into interest rate futures contracts, other
types of financial futures con-

16
<PAGE>

tracts and related futures options, as well as any index or foreign market
futures which are available on recognized exchanges or in other established
financial markets.

The Theme Funds will not engage in futures transactions for speculation, but
only as a hedge against changes in market values of securities which a Fund
holds or intends to purchase. The Theme Funds will engage in futures transac-
tions only to the extent permitted by the Commodity Futures Trading Commission
("CFTC") and the Securities and Exchange Commission ("SEC"). When investing in
futures contracts, the Funds must satisfy certain asset segregation require-
ments to ensure that the use of futures is unleveraged. When a Fund takes a
long position in a futures contract, it must maintain a segregated account
containing cash and/or certain liquid assets equal to the purchase price of
the contract, less any margin or deposit. When a Fund takes a short position
in a futures contract, the Fund must maintain a segregated account containing
cash and/or certain liquid assets in an amount equal to the market value of
the securities underlying such contract (less any margin or deposit), which
amount must be at least equal to the market price at which the short position
was established. Asset segregation requirements are not applicable when a Fund
"covers" an options or futures position generally by entering into an offset-
ting position. Each Fund will limit its hedging transactions in futures con-
tracts and related options so that, immediately after any such transaction,
the aggregate initial margin that is required to be posted by the Fund under
the rules of the exchange on which the futures contract (or futures option) is
traded, plus any premiums paid by the Fund on its open futures options posi-
tions, does not exceed 5% of the Fund's total assets, after taking into ac-
count any unrealized profits and unrealized losses on the Fund's open con-
tracts (and excluding the amount that a futures option is "in-the-money" at
the time of purchase). An option to buy a futures contract is "in-the-money"
if the then-current purchase price of the underlying futures contract exceeds
the exercise or strike price; an option to sell a futures contract is "in-the-
money" if the exercise or strike price exceeds the then-current purchase price
of the contract that is the subject of the option. In addition, the use of
futures contracts is further restricted to the extent that no more than 10% of
a Fund's total assets may be hedged.

INVESTMENT COMPANY SECURITIES

17
<PAGE>

WHEN-ISSUED AND FORWARD TRANSACTIONS

Each Fund may purchase eligible securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. These transactions
involve a commitment by a Fund to purchase or sell particular securities with
payment and delivery taking place in the future, beyond the normal settlement
date, at a stated price and yield. Securities purchased on a "forward commit-
ment" or "when-issued" basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. It
is expected that forward commitments and "when-issued" purchases will not ex-
ceed 25% of the value of a Fund's total assets absent unusual market condi-
tions, and that the length of such commitments will not exceed 45 days. The
Funds do not intend to engage in "when-issued" purchases and forward commit-
ments for speculative purposes, but only in furtherance of their investment ob-
jectives.

ILLIQUID SECURITIES

PORTFOLIO TURNOVER

INVESTMENT LIMITATIONS

A Fund may not:

18
<PAGE>

its total assets are outstanding. Optioned stock held in escrow is not deemed
to be a pledge; and

Each Fund may not:

The Equity Fund may not:

* * *

The Equity Fund will not invest more than 25% of the value of its total assets
in domestic bank obligations.

PRICING OF SHARES

The net asset value of each Fund is determined and the Shares of each Fund are
priced at the close of regular trading hours on the New York Stock Exchange

19
<PAGE>

(the "Exchange"), currently 4:00 p.m. (Eastern Time). Net asset value and
pricing for each Fund are determined on each day the Exchange and the Invest-
ment Adviser are open for trading ("Business Day"). Currently, the holidays
which the Funds observe are New Year's Day, Martin Luther King, Jr. Day, Pres-
idents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus
Day, Veterans Day, Thanksgiving Day and Christmas. A Fund's net asset value
per Share for purposes of pricing sales and redemptions is calculated by di-
viding the value of all securities and other assets allocable to its Shares,
less the liabilities allocable to its Shares, by the number of its outstanding
Shares.

Portfolio securities which are primarily traded on foreign securities ex-
changes are generally valued at the preceding closing values of such securi-
ties on their respective exchanges, except that when an event subsequent to
the time where value was so established is likely to have changed such value,
then the fair value of those securities will be determined by consideration of
other factors under the direction of the Board of Directors. A security which
is listed or traded on more than one exchange is valued at the quotation on
the exchange determined to be the primary market for such security. Invest-
ments in debt securities having a maturity of 60 days or less are valued based
upon the amortized cost method. All other foreign securities are valued at the
last current bid quotation if market quotations are available, or at fair
value as determined in accordance with guidelines adopted by the Board of Di-
rectors. For valuation purposes, quotations of foreign securities in foreign
currency are converted to U.S. dollars equivalent at the prevailing market
rate on the day of conversion. Some of the securities acquired by the Funds
may be traded on foreign exchanges or over-the-counter markets on days which
are not Business Days. In such cases, the net asset value of the Shares may be
significantly affected on days when investors can neither purchase nor redeem
a Fund's Shares. Excelsior Fund's administrators have undertaken to price the
securities in the Funds' portfolios, and may use one or more independent pric-
ing services in connection with this service.

HOW TO PURCHASE AND REDEEM SHARES

DISTRIBUTOR

PURCHASE OF SHARES

The Distributor has established several procedures for purchasing Shares in
order to accommodate different types of investors.

20
<PAGE>

shareholder servicing agreements with Excelsior Fund. A Shareholder Organiza-
tion may elect to hold of record Shares for its Customers and to record bene-
ficial ownership of Shares on the account statements provided by it to its
Customers. If it does so, it is the Shareholder Organization's responsibility
to transmit to the Distributor all purchase orders for its Customers and to
transmit, on a timely basis, payment for such orders to Chase Global Funds
Service Company ("CGFSC"), the Funds' sub-transfer agent, in accordance with
the procedures agreed to by the Shareholder Organization and the Distributor.
Confirmations of all such Customer purchases and redemptions will be sent by
CGFSC to the particular Shareholder Organization. As an alternative, a Share-
holder Organization may elect to establish its Customers' accounts of record
with CGFSC. In this event, even if the Shareholder Organization continues to
place its Customers' purchase and redemption orders with the Funds, CGFSC will
send confirmations of such transactions and periodic account statements di-
rectly to Customers. A Shareholder Organization may also elect to establish
its Customers as record holders.

Excelsior Fund enters into shareholder servicing agreements with Shareholder
Organizations which agree to provide their Customers various shareholder ad-
ministrative services with respect to their Shares (hereinafter referred to as
"Service Organizations"). Shares in the Funds bear the expense of fees payable
to Service Organizations for such services. See "Management of the Funds--
Service Organizations."

Customers wishing to purchase Shares through their Shareholder Organization
should contact such entity directly for appropriate instructions. (For a list
of Shareholder Organizations in your area, call (800) 446-1012.) An investor
purchasing Shares through a registered investment adviser or certified finan-
cial planner may incur transaction charges in connection with such purchases.
Such investors should contact their registered investment adviser or certified
financial planner for further information on transaction fees. Investors may
also purchase Shares directly in accordance with procedures described below
under "Purchase Procedures."

PUBLIC OFFERING PRICE

The public offering price for Shares of each Fund is the sum of the net asset
value of the Shares purchased plus a sales load according to the table below:

The reallowance to dealers may be changed from time to time but will remain
the same for all such dealers.

The sales load described above will not be applicable to: (a) purchases of
Shares by customers of the Investment Adviser or its affiliates; (b) trust,
agency or cus-

21
<PAGE>

todial accounts opened through the trust department of a bank, trust company
or thrift institution, provided that appropriate notification of such status
is given at the time of investment; (c) companies, corporations and partner-
ships (excluding full service broker/ dealers and financial planners, regis-
tered investment advisers and depository institutions not covered by the ex-
emptions in (d) and (e) below); (d) financial planners and registered invest-
ment advisers not affiliated with or clearing purchases through full service
broker/dealers; (e) purchases of Shares by depository institutions for their
own account as principal; (f) exchange transactions (described below under
"Investor Programs--Exchange Privilege") where the Shares being exchanged were
acquired in connection with the distribution of assets held in trust, agency
or custodial accounts maintained with the trust department of a bank; (g)
corporate/business retirement plans (such as 401(k), 403(b)(7), 457 and Keogh
accounts) sponsored by the Distributor and IRA accounts sponsored by the In-
vestment Adviser; (h) company-sponsored employee pension or retirement plans
making direct investments in the Funds; (i) purchases of Shares by officers,
trustees, directors, employees, former employees and retirees of Excelsior
Fund, Excelsior Tax-Exempt Funds, Inc. ("Excelsior Tax-Exempt Fund"), the In-
vestment Adviser, the Distributor or of any direct or indirect affiliate of
any of them; (j) purchases of Shares by all beneficial shareholders of Excel-
sior Fund or Excelsior Tax-Exempt Fund as of May 22, 1989; (k) purchases of
Shares by investment advisers registered under the Investment Advisers Act of
1940 for their customers through an omnibus account established with United
States Trust Company of New York; (l) purchases of Shares by directors, offi-
cers and employees of brokers and dealers selling shares pursuant to a selling
agreement with Excelsior Fund and Excelsior Tax-Exempt Fund; (m) purchases of
shares by investors who are members of affinity groups serviced by USAffinity
Investments Limited Partnership; and (n) customers of certain financial insti-
tutions who purchase Shares through a registered representative of UST Finan-
cial Services Corp. on the premises of their financial institutions. In addi-
tion, no sales load is charged on the reinvestment of dividends or distribu-
tions or in connection with certain share exchange transactions. Investors who
have previously redeemed shares in an "Eligible Fund" (as defined below) on
which a sales load has been paid also have a one-time privilege of purchasing
shares of another "Eligible Fund" at net asset value without a sales charge,
provided that such privilege will apply only to purchases made within 30 cal-
endar days from the date of redemption and only with respect to the amount of
the redemption. These exemptions to the imposition of a sales load are due to
the nature of the investors and/or reduced sales effort that will be needed in
obtaining investments.

QUANTITY DISCOUNTS

22
<PAGE>

PURCHASE PROCEDURES

General

Direct Investors may purchase Shares by completing the Application for pur-
chase of Shares accompanying this Prospectus and mailing it, together with a
check payable to Excelsior Funds, to:

Excelsior Funds
c/o Chase Global Funds Service Company
P.O. Box 2798
Boston, MA 02208-2798

Subsequent investments in an existing account in any Fund may be made at any
time by sending to the above address a check payable to Excelsior Funds along
with: (a) the detachable form that regularly accompanies the confirmation of a
prior transaction; (b) a subsequent order form which may be obtained from
CGFSC; or (c) a letter stating the amount of the investment, the name of the
Fund and the account number in which the investment is to be made. Institu-
tional Investors may purchase Shares by transmitting their purchase orders to
CGFSC by telephone at (800) 446-1012 or by terminal access. Institutional In-
vestors must

23
<PAGE>

pay for Shares with Federal funds or funds immediately available to CGFSC.

Purchases by Wire

Investors may also purchase Shares by wiring Federal funds to CGFSC. Prior to
making an initial investment by wire, an Investor must telephone CGFSC at (800)
446-1012 (from overseas, call (617) 557-8280) for instructions. Federal funds
and registration instructions should be wired through the Federal Reserve Sys-
tem to:

The Chase Manhattan Bank, N.A.
ABA #021000021

Excelsior Funds, Account No. 9102732915
For further credit to:

Excelsior Funds
Wire Control Number
Account Registration
(including account number)

Investors making initial investments by wire must promptly complete the Appli-
cation accompanying this Prospectus and forward it to CGFSC. Redemptions by In-
vestors will not be processed until the completed Application for purchase of
Shares has been received by CGFSC and accepted by the Distributor. Investors
making subsequent investments by wire should follow the above instructions.

OTHER PURCHASE INFORMATION

Except as provided in "Investor Programs" below, the minimum initial invest-
ment by an Investor or initial aggregate investment by a Shareholder Organiza-
tion investing on behalf of its Customers is $500 per Fund. The minimum subse-
quent investment for both types of investors is $50 per Fund. Customers may
agree with a particular Shareholder Organization to make a minimum purchase
with respect to their accounts. Depending upon the terms of the particular ac-
count, Shareholder Organizations may charge a Customer's account fees for auto-
matic investment and other cash management services provided. Excelsior Fund
reserves the right to reject any purchase order, in whole or in part, or to
waive any minimum investment requirements.

REDEMPTION PROCEDURES

Customers of Shareholder Organizations holding Shares of record may redeem all
or part of their investments in the Funds in accordance with procedures gov-
erning their accounts at the Shareholder Organizations. It is the responsibil-
ity of the Shareholder Organizations to transmit redemption orders to CGFSC and
credit such Customer accounts with the redemption proceeds on a timely basis.
Redemption orders for Institutional Investors must be transmitted to CGFSC by
telephone at (800) 446-1012 or by terminal access. No charge for wiring redemp-
tion payments to Shareholder Organizations or Institutional Investors is im-
posed by Excelsior Fund, although Shareholder Organizations may charge a Cus-
tomer's account for wiring redemption proceeds. Information relating to such
redemption services and charges, if any, is available from the Shareholder Or-
ganizations. An investor redeeming Shares through a registered investment ad-
viser or certified financial planner may incur transaction charges in connec-
tion with such redemptions. Such investors should contact their registered in-
vestment adviser or certified financial planner for further information on
transaction fees. Investors may redeem all or part of their Shares in accor-
dance with any of the procedures described below (these procedures also apply
to Customers of Shareholder Organizations for whom individual accounts have
been established with CGFSC).

REDEMPTION BY MAIL

Shares may be redeemed by a Direct Investor by submitting a written request
for redemption to:

Excelsior Funds
c/o Chase Global Funds Service Company
P.O. Box 2798
Boston, MA 02208-2798

A written redemption request to CGFSC must (i) state the number of Shares to
be redeemed, (ii) iden-

24
<PAGE>

tify the shareholder account number and tax identification number, and (iii) be
signed by each registered owner exactly as the Shares are registered. If the
Shares to be redeemed were issued in certificate form, the certificates must be
endorsed for transfer (or accompanied by a duly executed stock power) and must
be submitted to CGFSC together with the redemption request. A redemption re-
quest for an amount in excess of $50,000 per account, or for any amount if the
proceeds are to be sent elsewhere than the address of record, must be accompa-
nied by signature guarantees from any eligible guarantor institution approved
by CGFSC in accordance with its Standards, Procedures and Guidelines for the
Acceptance of Signature Guarantees ("Signature Guarantee Guidelines"). Eligible
guarantor institutions generally include banks, broker/dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations. All eligible guarantor institutions must
participate in the Securities Transfer Agents Medallion Program ("STAMP") in
order to be approved by CGFSC pursuant to the Signature Guarantee Guidelines.
Copies of the Signature Guarantee Guidelines and information on STAMP can be
obtained from CGFSC at (800) 446-1012 or at the address given above. CGFSC may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees and guardians. A redemption request will
not be deemed to be properly received until CGFSC receives all required docu-
ments in proper form. Payment for Shares redeemed will ordinarily be made by
mail within five Business Days after proper receipt by CGFSC of the redemption
request. Questions with respect to the proper form for redemption requests
should be directed to CGFSC at (800) 446-1012 (from overseas, call (617) 557-
8280).

REDEMPTION BY WIRE OR TELEPHONE

Direct Investors who have so indicated on the Application, or have subse-
quently arranged in writing to do so, may redeem Shares by instructing CGFSC by
wire or telephone to wire the redemption proceeds directly to the Direct In-
vestor's account at any commercial bank in the United States. Direct Investors
who are shareholders of record may also redeem Shares by instructing CGFSC by
telephone to mail a check for redemption proceeds of $500 or more to the share-
holder of record at his or her address of record. Institutional Investors may
also redeem Shares by instructing CGFSC by telephone at (800) 446-1012 or by
terminal access. Only redemptions of $500 or more will be wired to a Direct In-
vestor's account. An $8.00 fee for each wire redemption by a Direct Investor is
deducted by CGFSC from the proceeds of the redemption. The redemption proceeds
for Direct Investors must be paid to the same bank and account as designated on
the Application or in written instructions subsequently received by CGFSC.

In order to arrange for redemption by wire or telephone after an account has
been opened or to change the bank or account designated to receive redemption
proceeds, a Direct Investor must send a written request to Excelsior Fund, c/o
CGFSC, at the address listed above under "Redemption by Mail." Such requests
must be signed by the Direct Investor, with signatures guaranteed (see "Redemp-
tion by Mail" above, for details regarding signature guarantees). Further docu-
mentation may be requested.

CGFSC and the Distributor reserve the right to re- fuse a wire or telephone
redemption if it is believed advisable to do so. Procedures for redeeming
Shares by wire or telephone may be modified or terminated at any time by Excel-
sior Fund, CGFSC or the Distributor. EXCELSIOR FUND, CGFSC, AND THE DISTRIBUTOR
WILL NOT BE LIABLE FOR ANY LOSS, LIABILITY, COST OR EXPENSE FOR ACTING UPON
TELEPHONE INSTRUCTIONS THAT ARE REASONABLY BELIEVED TO BE GENUINE. IN ATTEMPT-
ING TO CONFIRM THAT TELEPHONE INSTRUCTIONS ARE GENUINE, EXCELSIOR FUND WILL USE
SUCH PROCEDURES AS ARE CONSIDERED REASONABLE, INCLUDING RECORDING THOSE IN-
STRUCTIONS AND REQUESTING INFORMATION AS TO ACCOUNT REGISTRATION.

If any portion of the Shares to be redeemed represents an investment made by
personal check, Excelsior Fund and

25
<PAGE>

CGFSC reserve the right not to honor the redemption until CGFSC is reasonably
satisfied that the check has been collected in accordance with the applicable
banking regulations which may take up to 15 days. A Direct Investor who antic-
ipates the need for more immediate access to his or her investment should pur-
chase Shares by Federal funds or bank wire or by certified or cashier's check.
Banks normally impose a charge in connection with the use of bank wires, as
well as certified checks, cashier's checks and Federal funds. If a Direct In-
vestor's purchase check is not collected, the purchase will be cancelled and
CGFSC will charge a fee of $25.00 to the Direct Investor's account.

During periods of substantial economic or market change, telephone redemp-
tions may be difficult to complete. If an Investor is unable to contact CGFSC
by telephone, the Investor may also deliver the redemption request to CGFSC in
writing at the address noted above under "How to Purchase and Redeem Shares--
Redemption by Mail."

OTHER REDEMPTION INFORMATION

Except as described in "Investor Programs" below, Investors may be required
to redeem Shares in a Fund after 60 days' written notice if due to investor
redemptions the balance in the particular account with respect to the Fund re-
mains below $500. If a Customer has agreed with a particular Shareholder Or-
ganization to maintain a minimum balance in his or her account at the institu-
tion with respect to Shares of a Fund, and the balance in such account falls
below that minimum, the Customer may be obliged by the Shareholder Organiza-
tion to redeem all or part of his or her Shares to the extent necessary to
maintain the required minimum balance.

GENERAL

INVESTOR PROGRAMS

EXCHANGE PRIVILEGE

Investors and Customers of Shareholder Organizations may, after appropriate
prior authorization and without an exchange fee imposed by Excelsior Fund, ex-
change Shares in a Fund having a value of at least $500 for shares of the same
series of any other portfolio offered by Excelsior Fund or Excelsior Tax-Ex-
empt Fund, provided that such other shares may legally be sold in the state of
the investor's residence.

Excelsior Fund currently offers, in addition to the Equity and Theme Funds,
several additional portfolios as follows:

Money Fund, a money market fund seeking as high a level of current income as
is consistent with liquidity and stability of principal through investments
in high-quality money market investments maturing within 13 months;

Government Money Fund, a money market fund seeking as high a level of cur-
rent income as is consistent with liquidity and stability of principal
through investments in obligations issued or guaranteed by the U.S. Govern-
ment, its agencies or instrumentalities and repurchase agreements collateral-
ized by such obligations;

Treasury Money Fund, a money market fund seeking current income generally
exempt from state and local income taxes through investments in direct short-
term obligations issued by the U.S. Treasury and certain agencies or instru-
mentalities of the U.S. Government;

Short-Term Government Securities Fund, a fund seeking a high level of cur-
rent income by investing principally in obligations issued or guaranteed by
the

26
<PAGE>

U.S. Government, its agencies or instrumentalities and repurchase agreements
collateralized by such obligations, and having a dollar-weighted average
portfolio maturity of 1 to 3 years;

Intermediate-Term Managed Income Fund, a fund seeking a high level of cur-
rent interest income by investing principally in investment grade or better
debt obligations and money market instruments, and having a dollar-weighted
average portfolio maturity of 3 to 10 years;

Managed Income Fund, a fund seeking higher current income through invest-
ments in investment grade debt obligations, U.S. Government obligations and
money market instruments;

Income and Growth Fund, a fund investing substantially in equity securities
in seeking to provide moderate current income and to achieve capital appreci-
ation as a secondary objective;

Long-Term Supply of Energy Fund, a fund seeking long-term capital apprecia-
tion by investing in companies benefiting from the availability, development
and delivery of secure hydrocarbon and other energy sources;

Productivity Enhancers Fund, a fund seeking long-term capital appreciation
by investing in companies benefitting from their roles as innovators, devel-
opers and suppliers of goods and services which enhance service and manufac-
turing productivity or companies that are most effective at obtaining and ap-
plying productivity enhancement developments;

Environmentally-Related Products and Services Fund, a fund seeking long-term
capital appreciation by investing in companies benefitting from their provi-
sion of products, technologies and services related to conservation, protec-
tion and restoration of the environment;

International Fund, a fund seeking total return derived primarily from in-
vestments in foreign equity securities;

Emerging Americas Fund, a fund seeking long-term capital appreciation
through investments in companies and securities of governments based in all
countries in the Western Hemisphere, except the U.S.;

Pacific/Asia Fund, a fund seeking long-term capital appreciation through in-
vestments in companies and securities of governments based in Asia and on the
Asian side of the Pacific Ocean; and

Pan European Fund, a fund seeking long-term capital appreciation through in-
vestments in companies and securities of governments located in Europe.

Excelsior Tax-Exempt Fund currently offers five portfolios as follows:

Tax-Exempt Money Fund, a diversified tax-exempt money market fund seeking a
moderate level of current interest income exempt from Federal income taxes
through investing primarily in high-quality municipal obligations maturing
within 13 months;

Short-Term Tax-Exempt Securities Fund, a diversified fund seeking a high
level of current interest income exempt from Federal income taxes through in-
vestments in municipal obligations and having a dollar-weighted average port-
folio maturity of 1 to 3 years;

Intermediate-Term Tax-Exempt Fund, a diversified fund seeking a high level
of current income exempt from Federal income taxes through investments in mu-
nicipal obligations and having a dollar-weighted average portfolio maturity
of 3 to 10 years;

Long-Term Tax-Exempt Fund, a diversified fund seeking to maximize over time
current income exempt from Federal income taxes, investing primarily in mu-
nicipal obligations and having a dollar-weighted average maturity of 10 to 30
years; and

New York Intermediate-Term Tax-Exempt Fund, a non- diversified fund designed
to provide New York investors with a high level of current income exempt from
Federal and, to the extent possible, New York state and New York City income
taxes; this fund invests primarily in New York municipal obligations and has
a dollar-weighted average portfolio maturity of three to ten years.

An exchange involves a redemption of all or a portion of the Shares in a Fund
and the investment of the

27
<PAGE>

redemption proceeds in shares of another portfolio of Excelsior Fund or Excel-
sior Tax-Exempt Fund. The redemption will be made at the per Share net asset
value of the Shares being redeemed next determined after the exchange request
is received. The shares of the portfolio to be acquired will be purchased at
the per share net asset value of those shares (plus any applicable sales load)
next determined after acceptance of the exchange request. No sales load will
be payable on shares to be acquired through an exchange to the extent that a
sales load was previously paid on the Shares being exchanged.

Investors may find the exchange privilege useful if their investment objec-
tives or market outlook should change after they invest in a Fund. For further
information regarding exchange privileges, shareholders should call (800) 446-
1012 (from overseas, call (617) 557-8280). Investors exercising the exchange
privilege with the other portfolios of Excelsior Fund or Excelsior Tax-Exempt
Fund should request and review the prospectuses of such funds. Such prospec-
tuses may be obtained by calling the numbers listed above. In order to prevent
abuse of this privilege to the disadvantage of other shareholders, Excelsior
Fund reserves the right to limit the number of exchange requests of Investors
and Customers of Shareholder Organizations to no more than six per year. Ex-
celsior Fund may modify or terminate the exchange program at any time upon 60
days' written notice to shareholders, and may reject any exchange request. EX-
CELSIOR FUND, CGFSC AND THE DISTRIBUTOR ARE NOT RESPONSIBLE FOR THE AUTHENTIC-
ITY OF EXCHANGE REQUESTS RECEIVED BY TELEPHONE THAT ARE REASONABLY BELIEVED TO
BE GENUINE. IN ATTEMPTING TO CONFIRM THAT TELEPHONE INSTRUCTIONS ARE GENUINE,
EXCELSIOR FUND WILL USE SUCH PROCEDURES AS ARE CONSIDERED REASONABLE, INCLUD-
ING RECORDING THOSE INSTRUCTIONS AND REQUESTING INFORMATION AS TO ACCOUNT REG-
ISTRATION.

For Federal income tax purposes, an exchange of Shares is a taxable event
and, accordingly, a capital gain or loss may be realized by an investor. Be-
fore making an exchange, an investor should consult a tax or other financial
adviser to determine tax consequences.

SYSTEMATIC WITHDRAWAL PLAN

An Investor who owns Shares of a Fund with a value of $10,000 or more may es-
tablish a Systematic Withdrawal Plan. The Investor may request a declining-
balance withdrawal, a fixed-dollar withdrawal, a fixed-share withdrawal, or a
fixed-percentage withdrawal (based on the current value of Shares in the ac-
count) on a monthly, quarterly, semi-annual or annual basis. To initiate the
Systematic Withdrawal Plan, an investor must complete the Supplemental Appli-
cation contained in this Prospectus and mail it to CGFSC at the address given
above. Further information on establishing a Systematic Withdrawal Plan may be
obtained by calling (800) 446-1012 (from overseas, call (617) 557-8280.)

Shareholder Organizations may, at their discretion, establish similar system-
atic withdrawal plans with respect to the Shares held by their Customers.
Information about such plans and the applicable procedures may be obtained by
Customers directly from their institutions.

RETIREMENT PLANS

Shares are available for purchase by Investors in connection with the follow-
ing tax-deferred prototype retirement plans offered by United States Trust
Company of New York:

IRAs (including "rollovers" from existing retirement plans) for individuals
and their spouses;

Profit Sharing and Money-Purchase Plans for corporations and self-employed
individuals and their partners to benefit themselves and their employees; and

Keogh Plans for self-employed individuals.

28
<PAGE>

fees and other matters related to these plans can be obtained by calling (800)
446-1012 (from overseas, call (617) 557-8280). Customers of Shareholder Orga-
nizations may purchase Shares of the Funds pursuant to retirement plans if
such plans are offered by their Shareholder Organizations.

AUTOMATIC INVESTMENT PROGRAM

The Automatic Investment Program permits Investors to purchase Shares (mini-
mum of $50 per Fund per transaction) at regular intervals selected by the In-
vestor. The minimum initial investment for an Automatic Investment Program is
$50 per Fund. Provided the Investor's financial institution allows automatic
withdrawals, Shares are purchased by transferring funds from an Investor's
checking, bank money market or NOW account designated by the Investor. At the
Investor's option, the account designated will be debited in the specified
amount, and Shares will be purchased, once a month, on either the first or
fifteenth day, or twice a month, on both days.

The Automatic Investment Program is one means by which an Investor may use
"Dollar Cost Averaging" in making investments. Instead of trying to time mar-
ket performance, a fixed dollar amount is invested in Shares at predetermined
intervals. This may help Investors to reduce their average cost per share be-
cause the agreed upon fixed investment amount allows more Shares to be pur-
chased during periods of lower share prices and fewer Shares during periods of
higher prices. In order to be effective, Dollar Cost Averaging should usually
be followed on a sustained, consistent basis. Investors should be aware, how-
ever, that Shares bought using Dollar Cost Averaging are purchased without re-
gard to their price on the day of investment or to market trends. In addition,
while investors may find Dollar Cost Averaging to be beneficial, it will not
prevent a loss if an Investor ultimately redeems his Shares at a price which
is lower than their purchase price.

To establish an Automatic Investment account permitting Investors to use the
Dollar Cost Averaging investment method described above, an Investor must com-
plete the Supplemental Application contained in this Prospectus and mail it to
CGFSC. An Investor may cancel his participation in this Program or change the
amount of purchase at any time by mailing written notification to CGFSC, P.O.
Box 2798, Boston, MA 02208-2798 and notification will be effective three Busi-
ness Days following receipt. Excelsior Fund may modify or terminate this priv-
ilege at any time or charge a service fee, although no such fee currently is
contemplated. An Investor may also implement the Dollar Cost Averaging method
on his own initiative or through other entities.

DIVIDENDS AND DISTRIBUTIONS

Dividends from the net investment income of the Funds are declared and paid
quarterly. For dividend purposes, a Fund's investment income is reduced by ac-
crued expenses directly attributable to that Fund and the general expenses of
Excelsior Fund prorated to that Fund on the basis of its relative net assets.
A Fund's net investment income available for distribution to the holders of
Shares will be reduced by the amount of other expenses allocated to such se-
ries. Net realized capital gains are distributed at least annually. Dividends
and distributions will reduce the net asset value of each of the Funds by the
amount of the dividend or distribution. All dividends and distributions paid
on Shares held of record by the Investment Adviser and its affiliates or cor-
respondent banks will be paid in cash. Direct and Institutional Investors and
Customers of Shareholder Organizations will receive dividends and distribu-
tions in additional Shares of the Fund on which the dividend or distribution
is paid (as determined on the payable date), unless they have requested in
writing (received by CGFSC at Excelsior Fund's address prior to the payment
date) to receive dividends and distributions in cash. Reinvested dividends and
distributions receive the same tax treatment as those paid in cash.

TAXES

FEDERAL

Each of the Funds qualified for its last taxable year as a "regulated invest-
ment company" under the Internal Revenue Code of 1986, as amended (the
"Code").

29
<PAGE>

Each Fund expects to so qualify in future years. Such qualification generally
relieves a Fund of liability for Federal income taxes to the extent its earn-
ings are distributed in accordance with the Code.

A taxable gain or loss may be realized by a shareholder upon his redemption,
transfer or exchange of Shares depending upon the tax basis of such Shares and
their price at the time of redemption, transfer or exchange. If a shareholder
holds Shares for six months or less and during that time receives a capital
gain dividend on those Shares, any loss recognized on the sale or exchange of
those Shares will be treated as a long-term capital loss to the extent of the
capital gain dividend. Generally, a shareholder may include sales charges in-
curred upon the purchase of Shares in his tax basis for such Shares for the
purpose of determining gain or loss on a redemption, transfer or exchange of
such Shares. However, if the shareholder effects an exchange of such Shares
for Shares of another Fund within 90 days of the purchase and is able to re-
duce the sales charges applicable to the new Shares (by virtue of the exchange
privilege), the amount equal to such reduction may not be included in the tax
basis of the shareholder's exchanged Shares for the purpose of determining
gain or loss, but may be included (subject to the same limitation) in the tax
basis of the new Shares.

30
<PAGE>

treated for this purpose as derived with respect to the Fund's business of in-
vesting in stock, securities or currencies only to the extent that such income
is attributable to items of income which would have been qualifying income if
realized by the Fund in the same manner as by the partnership or trust.

STATE AND LOCAL

MANAGEMENT OF THE FUNDS

INVESTMENT ADVISER

The Equity Fund's portfolio manager, David A. Tillson, is the person primar-
ily responsible for the day-to-day management of the Fund's investment portfo-
lio. Mr. Tillson, a Senior Vice President and Senior Portfolio Manager, has
been with U.S. Trust since 1993, and has been the Fund's portfolio manager
since December 1994. Prior to joining U.S. Trust, Mr. Tillson was the founder
and President of TDA Capital Management Company, and a Senior Vice President
of Matrix Asset Advisors until 1993. He was also a Vice President and Senior
Portfolio Manager with V C S & O Asset Management until 1990.

ADMINISTRATORS

CGFSC, Federated Administrative Services and U.S. Trust serve as the Funds'
administrators (the "Administrators") and provide them with general adminis-
trative and operational assistance. The Administrators also serve as adminis-
trators of the other portfolios of Excelsior Fund and Excelsior Tax-Exempt
Fund and of Excelsior Institutional Trust, which are also advised by the In-
vestment Adviser and distributed by the Distributor. For the services provided
to all portfolios of Excelsior Fund (except the International, Emerging Ameri-
cas, Pacific/Asia and Pan European Funds) and Excelsior Tax-Exempt Fund and of
Excelsior Institutional Trust, the Administrators are entitled jointly to an-
nual fees, computed daily and paid monthly, based on the combined aggregate
average daily net assets of the three companies (excluding the International,
Emerging Americas, Pacific/Asia and Pan European Funds) as follows:

<TABLE>
<CAPTION>
COMBINED AGGREGATE AVERAGE DAILY
NET ASSETS OF EXCELSIOR FUND
(EXCLUDING THE INTERNATIONAL, EMERGING AMERICAS,
PACIFIC/ASIA AND PAN EUROPEAN FUNDS)
AND EXCELSIOR TAX-EXEMPT FUND ANNUAL
AND OF EXCELSIOR INSTITUTIONAL TRUST FEE
------------------------------------------------ ------
<S> <C>
first $200 million....................................................... .200%
next $200 million........................................................ .175%
over $400 million........................................................ .150%
</TABLE>

32
<PAGE>

SERVICE ORGANIZATIONS

BANKING LAWS

Banking laws and regulations currently prohibit a bank holding company regis-
tered under the Federal Bank Holding Company Act of 1956 or any bank or non-
bank affiliate thereof from sponsoring, organizing or controlling a regis-
tered, open-end investment company continuously engaged in the issuance of its
shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Shares of the Funds, but such banking laws and
regulations do not prohibit such a holding company or affiliate or banks gen-
erally from acting as investment adviser, transfer agent, or custodian to such
an investment company, or from purchasing shares of such company for and upon
the order of customers. The Investment Adviser, CGFSC and certain Shareholder
Organizations may be subject to such banking laws and regulations. State secu-
rities laws may differ from the interpretations of Federal law discussed in
this paragraph and banks and financial institutions may be required to regis-
ter as dealers pursuant to state law.

DESCRIPTION OF CAPITAL STOCK

Excelsior Funds, Inc. (formerly UST Master Funds, Inc.) was organized as a
Maryland corporation on August 2, 1984. Currently, Excelsior Fund has autho-
rized capital of 35 billion shares of Common Stock, $.001 par value per share,
classified into 40 series of shares representing interests in 20 investment
portfolios. This Prospectus describes the Equity, Early Life Cycle, Aging of
America, Communication and Entertainment, Business and Industrial Restructur-
ing and Global Competitors Funds. In addition to the Shares offered under this
Prospectus, Excelsior Fund offers a separate series of shares designated as
Trust Shares representing interests in each of those Funds. Trust Shares have
different expenses than the Shares offered under this Prospectus, which may
affect performance. Call (800) 446-1012 for information regarding the Trust
Shares in each Fund, which are offered under a separate prospectus.

Certificates for Shares will not be issued unless expressly requested in
writing to CGFSC and will not be issued for fractional Shares.

CUSTODIAN AND TRANSFER AGENT

The Chase Manhattan Bank, N.A. ("Chase"), a wholly-owned subsidiary of The
Chase Manhattan Corporation, serves as the custodian of the Funds' assets .
Communications to the custodian should be directed to Chase, Mutual Funds
Service Division, 770 Broadway, New York, New York 10003-9598.

Chase may enter into an international sub-custodian agreement with a third
party providing for the custody of foreign securities held by the Funds.

PERFORMANCE INFORMATION

34
<PAGE>

MISCELLANEOUS

Shareholders will receive unaudited semiannual reports describing the Funds'
investment operations and annual financial statements audited by the Funds'
independent auditors.

Inquiries regarding any of the Funds may be directed to the Distributor at
the address listed under "Distributor."

35
<PAGE>

INSTRUCTIONS FOR NEW ACCOUNT APPLICATION

OPENING YOUR ACCOUNT:

Complete the Application(s) and mail to: FOR OVERNIGHT DELIVERY: send to:

Please enclose with the Application(s) your check made payable to the "Ex-
celsior Funds" in the amount of your investment.

For direct wire purchases please refer to the section of the Prospectus en-
titled "How to Purchase and Redeem Shares--Purchase Procedures."

MINIMUM INVESTMENTS:

REDEMPTIONS:

SIGNATURES: Please be sure to sign the Application(s).

QUESTIONS:

If you have any questions regarding the Application or redemption require-
ments, please contact the transfer agent at (800) 446-1012 between 9:00 a.m.
and 5:00 p.m. (Eastern Time).

36
<PAGE>

- --------------------------------------------------------------------------------

[LOGO OF EXCELSIOR FUNDS CHASE GLOBAL FUNDS SERVICE COMPANY NEW
INC. APPEARS HERE] CLIENT SERVICES ACCOUNT
P.O. Box 2798 APPLICATION
Boston, MA 02208-2798
(800) 446-1012
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACCOUNT REGISTRATION
- --------------------------------------------------------------------------------

[_] Individual [_] Joint Tenants [_] Trust [_] Gift/Transfer to Minor
[_] Other ____________________________________________________________________

_____________________________ _______________________________________________
Name(s) (please print) Social Security # or Taxpayer Identification #

- --------------------------------------------------------------------------------

FUND INITIAL INVESTMENT Fund INITIAL INVESTMENT
<S> <C> <C> <C>
[_] Equity Fund $ ____________ 800 [_] Global Competitors Fund $ ____________ 819
[_] Aging of America Fund $ ____________ 816 [_] Early Life Cycle Fund $ ____________ 812
[_] Communication & Entertainment Fund $ ____________ 817 [_] Other ________________________ $ ____________
[_] Business & Industrial Restructuring Fund $ ____________ 818
TOTAL INITIAL INVESTMENT: $ ____________
</TABLE>