EXCELSIOR FUNDS INC, 497, 1996-08-12

EXCELSIOR FUNDS INC
497, 1996-08-12

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<PAGE>

[LOGO OF EXCELSIOR
FUNDS INC]
A Management Investment Company

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

This Prospectus describes a series of shares ("Shares") offered by several sep-
arate 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 certain
of the portfolios ("Trust Shares") which are offered under a separate prospec-
tus. 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.

INCOME AND GROWTH FUND seeks moderate current income with capital appreciation
as a secondary goal by investing in common stock, preferred stock and securi-
ties convertible into common stock.

LONG-TERM SUPPLY OF ENERGY FUND seeks long-term capital appreciation by in-
vesting in companies which the Investment Adviser believes will benefit from
the availability, development and delivery of secure hydrocarbon and other en-
ergy sources.

PRODUCTIVITY ENHANCERS FUND seeks long-term capital appreciation by investing
in companies which the Investment Adviser believes will benefit from their
roles as innovators, developers and suppliers of goods and services which en-
hance service and manufacturing productivity or companies that are most effec-
tive at obtaining and applying productivity enhancement developments.

ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND seeks long-term capital ap-
preciation by investing in companies which the Investment Adviser believes will
benefit from their provision of products, technologies and services related to
conservation, protection and restoration of the environment.

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, 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
$2.4 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 Income and Growth
Fund also may invest significantly in bonds. 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 In-
struments and Other Investment Information" and "Investment Limitations."

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."

INVESTMENT RISKS AND CHARACTERISTICS: Generally, each Fund is subject to
market and industry 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 de-
clining prices. These cycles will affect the values of each Fund. In addition,
the Long-Term Supply of Energy Fund will normally concentrate its investments
in the crude oil, petroleum and natural gas industry. This Fund will be sus-
ceptible to industry risk, the possibility that a particular group of stocks
will decline in price due to industry-specific developments. Because the Funds
may invest in securities of foreign issuers, they are subject to the risks of
fluctuations of the value of foreign currency relative to the U.S. dollar and
other risks associated with such investments. Because the Income and Growth
Fund also invests in bonds and other fixed-income securities, it will also be
affected directly by fluctuations in interest rates and the credit markets.
Investments in non-investment grade obligations may subject the Income and
Growth Fund to increased risk of loss upon default. Such securities are gener-
ally unsecured, are often subordinated debt and are often issued by entities
with high levels of indebtedness and that are more sensitive to adverse eco-
nomic conditions. Although each Fund generally seeks to invest for the long
term, each Fund may engage in short-term trading of portfolio securities. A
high rate of portfolio turnover may involve correspondingly greater transac-
tion costs which must be borne directly by a Fund and ultimately by its share-
holders. Investment in the Funds should not be considered a complete invest-
ment program. See "Investment Objectives and Policies."

2
<PAGE>

EXPENSE SUMMARY

The following table summarizes the expenses borne by the Shares offered un-
der this Prospectus.

<TABLE>
<CAPTION>
LONG-TERM PRODUCTIVITY ENVIRONMENTALLY-
EQUITY INCOME AND SUPPLY OF ENHANCERS RELATED PRODUCTS
FUND GROWTH FUND ENERGY FUND FUND AND SERVICES FUND
-------- ----------------- -------------- ------------ -----------------
<S> <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%
Sales Load on Reinvested
Dividends.............. None None None None None
Deferred Sales Load..... None None None None None
Redemption Fees/1/...... None None None None None
Exchange Fees........... None None None None None
ANNUAL FUND OPERATING
EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Advisory Fees (after fee
waivers)/2/............ .68% .69% .55% .55% 0%
12b-1 Fees.............. None None None None None
Other Operating Expenses
Administrative Servic-
ing Fee/2/............ .07% .06% .05% .04% .10%
Other Expenses/2/ (af-
ter fee waivers)...... .30% .30% .36% .39% .89%
----- ----- ----- ----- -----
Total Operating Expenses
(after fee waivers)/2/
....................... 1.05% 1.05% .96% .98% .99%
===== ===== ===== ===== =====
<CAPTION>
BUSINESS
AGING OF COMMUNICATION AND INDUSTRIAL GLOBAL
AMERICA AND ENTERTAINMENT RESTRUCTURING COMPETITORS EARLY LIFE
FUND FUND FUND FUND CYCLE FUND
-------- ----------------- -------------- ------------ -----------------
<S> <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%
Sales Load on Reinvested
Dividends.............. None None None None None
Deferred Sales Load..... None None None None None
Redemption Fees/1/ ..... None None None None None
Exchange Fees........... None None None None None
ANNUAL FUND OPERATING
EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Advisory Fees (after fee
waivers)/2/ ........... .56% .55% .56% .56% .52%
12b-1 Fees.............. None None None None None
Other Operating Expenses
Administrative Servic-
ing Fee/2/............ .04% .05% .04% .04% .08%
Other Expenses/2/ (af-
ter fee waivers)...... .33% .32% .31% .29% .30%
----- ----- ----- ----- -----
Total Operating Expenses
(after fee waivers)/2/
....................... .93% .92% .91% .89% .90%
===== ===== ===== ===== =====
</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 Long-Term Supply of Energy, Pro-
ductivity Enhancers, Environmentally-Related Products and Services, Aging
of America, Communication and Entertainment, Business and Industrial Re-
structuring, 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%, .75%, .60%, .60%, .60%, .60%, .60%, .60%, .60% and .60%, and "Total
Operating Expenses" would be 1.12%, 1.11%, 1.09%, 1.06%, 2.46%, .97%, .97%,
.95%, .93% and .98% for the Equity, Income and Growth, Long-Term Supply of
Energy, Productivity Enhancers, Environmentally-Related Products and Serv-
ices, Aging of America, Communication and Entertainment, Business and In-
dustrial Restructuring, Global Competitors and Early Life Cycle Funds, re-
spectively, and "Other Expenses" would be .44%, .42% and 1.76% for the
Long-Term Supply of Energy, Productivity Enhancers and Environmentally-Re-
lated Products and Services Funds, respectively.

3
<PAGE>

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
Income and Growth Fund......................... 55 77 100 167
Long-Term Supply of Energy Fund................ 54 74 96 158
Productivity Enhancers Fund.................... 55 75 97 160
Environmentally-Related Products and Services
Fund.......................................... 55 75 97 161
Aging of America Fund.......................... 54 73 94 154
Communication and Entertainment Fund........... 54 73 94 153
Business and Industrial Restructuring Fund..... 54 73 93 152
Global Competitors Fund........................ 54 72 92 150
Early Life Cycle Fund.......................... 54 72 93 151
</TABLE>

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,
1996. 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.

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

The following tables include selected data for a Share 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, 1996 (the "Financial Statements").
The information contained 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.

The Equity, Aging of America, Communication and Entertainment, Business and
Industrial Restructuring, Global Competitors and Early Life Cycle Funds offer
two separate series of shares--Trust Shares and shares of another series of-
fered under this Prospectus. Trust Shares and the Shares offered under this
Prospectus represent equal pro rata interests in each such Fund, except that
Trust Shares bear the additional expense of distribution fees. See "Descrip-
tion of Capital Stock."

EQUITY FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------ ------ ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $21.40 $ 19.17 $ 18.77 $ 16.28 $14.13 $13.87 $13.22 $11.32 $ 13.56 $12.35
------- ------- ------- ------- ------ ------ ------ ------ -------- ------
Income From Investment
Operations
Net Investment Income.. 0.12 0.07 0.05 0.08 0.13 0.28 0.34 0.19 0.15 0.18
Net Gains or (Losses)
on Securities
(both realized and
unrealized)........... 5.21 2.67 1.16 3.01 2.23 0.39 1.26 1.88 (1.63) 1.86
------- ------- ------- ------- ------ ------ ------ ------ -------- ------
Total From Investment
Operations............ 5.33 2.74 1.21 3.09 2.36 0.67 1.60 2.07 (1.48) 2.04
------- ------- ------- ------- ------ ------ ------ ------ -------- ------
Less Distributions
Dividends From Net
Investment Income..... (0.11) (0.04) (0.08) (0.09) (0.21) (0.23) (0.34) (0.17) (0.14) (0.18)
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............... (2.19) (0.47) (0.39) (0.51) 0.00 (0.18) (0.61) 0.00 (0.62) (0.65)
Distributions in Excess
of Net Realized Gain
on Investments and
Options............... 0.00 0.00 (0.34) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------ ------ ------ ------ -------- ------
Total Distributions.... (2.30) (0.51) (0.81) (0.60) (0.21) (0.41) (0.95) (0.17) (0.76) (0.83)
------- ------- ------- ------- ------ ------ ------ ------ -------- ------
Net Asset Value, End of
Period................. $24.43 $ 21.40 $ 19.17 $ 18.77 $16.28 $14.13 $13.87 $13.22 $ 11.32 $13.56
======= ======= ======= ======= ====== ====== ====== ====== ======== ======
Total Return/1/ ........ 26.45% 14.65% 6.54% 19.26% 16.87% 5.11% 11.98% 18.52% (11.24)% 17.61%
Ratios/Supplemental Data
Net Assets, End of
Period (in millions).. $188.57 $137.42 $122.26 $106.14 $71.62 $29.87 $25.98 $17.61 $ 13.58 $13.40
Ratio of Net Operating
Expenses to Average
Net Assets............ 1.05% 1.05% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.21%
Ratio of Gross
Operating Expenses to
Average
Net Assets/2/ ........ 1.12% 1.08% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.30%
Ratio of Net Investment
Income to Average
Net Assets............ 0.55% 0.36% 0.25% 0.51% 0.87% 2.21% 2.45% 1.62% 1.26% 1.53%
Portfolio Turnover
Rate.................. 27.0% 23.0% 17.0% 24.0% 20.0% 41.0% 53.0% 46.0% 67.0% 86.0%
</TABLE>
- -------
NOTES:
1. Total return data does not reflect the sales load payable on purchases of
Shares.
2. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

5
<PAGE>

INCOME AND GROWTH FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987/1/
------- ------ ------ ------ ------ ------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 11.82 $11.94 $11.45 $ 9.10 $ 8.36 $ 8.84 $ 9.09 $ 8.12 $ 8.95 $ 8.00
------- ------ ------ ------ ------ ------- ------ ------ ------- ------
Income From Investment
Operations
Net Investment Income.. 0.39 0.38 0.31 0.27 0.30 0.29 0.40 0.28 0.44 0.06
Net Gains or (Losses)
on Securities
(both realized and
unrealized)........... 2.61 0.26 0.46 2.43 0.72 (0.43) 0.19 1.15 (0.93) 0.89
------- ------ ------ ------ ------ ------- ------ ------ ------- ------
Total From Investment
Operations............ 3.00 0.64 0.77 2.70 1.02 (0.14) 0.59 1.43 (0.49) 0.95
------- ------ ------ ------ ------ ------- ------ ------ ------- ------
Less Distributions
Dividends From Net
Investment Income..... (0.31) (0.35) (0.27) (0.35) (0.28) (0.34) (0.39) (0.46) (0.21) 0.00
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............... (0.06) (0.41) (0.01) 0.00 0.00 0.00 (0.45) 0.00 (0.13) 0.00
Distributions in Excess
of Net Realized Gain
on Investments and
Options............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------ ------ ------ ------ ------- ------ ------ ------- ------
Total Distributions.... (0.37) (0.76) (0.28) (0.35) (0.28) (0.34) (0.84) (0.46) (0.34) 0.00
------- ------ ------ ------ ------ ------- ------ ------ ------- ------
Net Asset Value, End of
Period................. $ 14.45 $11.82 $11.94 $11.45 $ 9.10 $ 8.36 $ 8.84 $ 9.09 $ 8.12 $ 8.95
======= ====== ====== ====== ====== ======= ====== ====== ======= ======
Total Return/2/......... 25.83% 5.74% 6.69% 30.45% 12.42% (1.30%) 6.14% 18.36% (5.43%) 11.88%
Ratios/Supplemental Data
Net Assets, End of
Period (in millions).. $127.50 $99.93 $96.68 $51.30 $23.25 $ 19.59 $23.66 $14.62 $ 6.66 $ 3.71
Ratio of Net Operating
Expenses to Average
Net Assets............ 1.05% 1.06% 1.17% 1.15% 1.23% 1.28% 1.24% 1.22% 1.27% 1.13%/3/
Ratio of Gross
Operating Expenses to
Average
Net Assets/4/......... 1.11% 1.09% 1.17% 1.15% 1.23% 1.28% 1.24% 1.22% 1.27% 1.84%/3/
Ratio of Net Investment
Income to Average
Net Assets............ 2.95% 3.31% 2.77% 2.76% 3.52% 3.64% 4.47% 4.09% 6.20% 4.25%/3/
Portfolio Turnover
Rate.................. 22.0% 36.0% 28.0% 28.0% 81.0% 148.0% 29.0% 24.0% 27.0% 7.0%/3/
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was January 6, 1987.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

6
<PAGE>

LONG-TERM SUPPLY OF ENERGY FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $ 7.92 $ 7.70 $ 7.81 $ 7.00
------ ------ ------- ------
Income From Investment Operations
Net Investment Income............. 0.07 0.09 0.08 0.01
Net Gains or (Losses) on
Securities (both realized and
unrealized)...................... 1.63 0.24 (0.12) 0.80
------ ------ ------- ------
Total From Investment Operations.. 1.70 0.33 (0.04) 0.81
------ ------ ------- ------
Less Distributions
Dividends From Net Investment
Income........................... (0.07) (0.10) (0.07) 0.00
Dividends in Excess of Net
Investment Income................ 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options.. 0.00 (0.01) 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options...................... 0.00 0.00 0.00 0.00
------ ------ ------- ------
Total Distributions............... (0.07) (0.11) (0.07) 0.00
------ ------ ------- ------
Net Asset Value, End of Period...... $ 9.55 $ 7.92 $ 7.70 $ 7.81
====== ====== ======= ======
Total Return/2/..................... 21.60% 4.28% (0.57)% 11.57%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)........................ $23.29 $15.81 $ 6.83 $ 1.46
Ratio of Net Operating Expenses to
Average Net Assets............... 0.96% 0.98% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/......... 1.09% 1.35% 2.03% 7.03%/3/
Ratio of Net Investment Income to
Average Net Assets............... 0.88% 1.18% 1.21% 1.69%/3/
Portfolio Turnover Rate........... 43.0% 31.0% 6.0% 0%
</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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

7
<PAGE>

PRODUCTIVITY ENHANCERS FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------- ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $ 8.12 $ 7.88 $ 6.94 $ 7.00
------ ------- ------ -------
Income From Investment Operations
Net Investment Income............. 0.02 (0.01) 0.00 0.01
Net Gains or (Losses) on
Securities (both realized and
unrealized)...................... 2.12 0.35 0.96 (0.07)
------ ------- ------ -------
Total From Investment Operations.. 2.14 0.34 0.96 (0.06)
------ ------- ------ -------
Less Distributions
Dividends From Net Investment
Income........................... (0.02) 0.00 0.00 0.00
Dividends in Excess of Net
Investment Income................ (0.01) 0.00 (0.02) 0.00
Distributions From Net Realized
Gain on Investments and Options.. (1.40) (0.10) 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options.......................... 0.00 0.00 0.00 0.00
------ ------- ------ -------
Total Distributions............... (1.43) (0.10) (0.02) 0.00
------ ------- ------ -------
Net Asset Value, End of Period...... $ 8.83 $ 8.12 $ 7.88 $ 6.94
====== ======= ====== =======
Total Return/2/..................... 26.97% 4.45% 13.81% (0.86)%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)........................ $29.07 $ 18.27 $15.70 $ 3.37
Ratio of Net Operating Expenses to
Average Net Assets............... 0.98% 0.99% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/......... 1.06% 1.21% 1.49% 4.23%/3/
Ratio of Net Investment
Income/(Loss) to Average Net
Assets........................... 0.20% (0.10)% 0.01% 1.29%/3/
Portfolio Turnover Rate........... 472.0% 276.0% 198.0% 183.0%/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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

8
<PAGE>

ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------- ------- -------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $ 6.21 $ 6.24 $ 6.95 $ 7.00
------- ------- -------- -------
Income From Investment Operations
Net Investment Loss............ (0.02) (0.01) 0.00 0.00
Net Gains or (Losses) on
Securities (both realized and
unrealized)................... 1.54 (0.01) (0.71) (0.05)
------- ------- -------- -------
Total From Investment
Operations.................... 1.52 (0.02) (0.71) (0.05)
------- ------- -------- -------
Less Distributions
Dividends From Net Investment
Income........................ 0.00 0.00 0.00 0.00
Dividends in Excess of Net
Investment Income............. 0.00 (0.01) 0.00 0.00
Distributions From Net Realized
Gain on Investments and
Options....................... 0.00 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options................... 0.00 0.00 0.00 0.00
------- ------- -------- -------
Total Distributions............ 0.00 (0.01) 0.00 0.00
------- ------- -------- -------
Net Asset Value, End of Period... $ 7.73 $ 6.21 $ 6.24 $ 6.95
======= ======= ======== =======
Total Return/2/.................. 24.48% (0.27)% (10.15)% (0.71)%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)..................... $ 3.95 $ 4.36 $ 4.53 $ 2.45
Ratio of Net Operating Expenses
to Average Net Assets......... 0.99% 0.99% 0.99% 0.99%/3/
Ratio of Gross Operating
Expenses to Average Net
Assets/4/..................... 2.46% 2.42% 2.20% 2.83%/3/
Ratio of Net Investment
Income/(Loss) to Average Net
Assets........................ (0.18)% (0.10)% (0.07)% 0.32%/3/
Portfolio Turnover Rate........ 64.0% 61.0% 28.0% 0%
</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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

9
<PAGE>

AGING OF AMERICA FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------- ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $ 7.84 $ 6.99 $ 7.01 $7.00
------- ------ ------ -----
Income From Investment Operations
Net Investment Income............. 0.05 0.04 0.03 0.01
Net Gains or (Losses) on
Securities (both realized and
unrealized)...................... 1.97 0.85 (0.02) 0.00
------- ------ ------ -----
Total From Investment Operations.. 2.02 0.89 0.01 0.01
------- ------ ------ -----
Less Distributions
Dividends From Net Investment
Income........................... (0.05) (0.04) (0.03) 0.00
Dividends in Excess of Net
Investment Income................ 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options.. 0.00 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options...................... 0.00 0.00 0.00 0.00
------- ------ ------ -----
Total Distributions............... (0.05) (0.04) (0.03) 0.00
------- ------ ------ -----
Net Asset Value, End of Period...... $ 9.81 $ 7.84 $ 6.99 $7.01
======= ====== ====== =====
Total Return/2/..................... 25.80% 12.80% 0.13% 0.14%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)........................ $ 44.79 $22.17 $10.58 $2.39
Ratio of Net Operating Expenses to
Average Net Assets............... 0.93% 0.99% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/......... 0.97% 1.26% 1.82% 3.87%/3/
Ratio of Net Investment Income to
Average Net Assets............... 0.54% 0.63% 0.59% 0.77%/3/
Portfolio Turnover Rate........... 34.0% 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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

10
<PAGE>

COMMUNICATION AND ENTERTAINMENT FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 9.64 $ 8.75 $ 7.61 $7.00
------ ------ ------ -----
Income From Investment Operations
Net Investment Income.............. 0.03 0.04 0.02 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 1.30 1.06 1.52 0.60
------ ------ ------ -----
Total From Investment Operations... 1.33 1.10 1.54 0.61
------ ------ ------ -----
Less Distributions
Dividends From Net Investment
Income............................ (0.03) (0.04) (0.03) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... (0.62) (0.17) (0.37) 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options....................... 0.00 0.00 0.00 0.00
------ ------ ------ -----
Total Distributions................ (0.65) (0.21) (0.40) 0.00
------ ------ ------ -----
Net Asset Value, End of Period....... $10.32 $ 9.64 $ 8.75 $7.61
====== ====== ====== =====
Total Return/2/...................... 13.48% 12.87% 20.07% 8.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $46.95 $29.91 $21.02 $5.79
Ratio of Net Operating Expenses to
Average Net Assets................ 0.92% 0.98% 0.98% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 0.97% 1.06% 1.16% 2.20%/3/
Ratio of Net Investment Income to
Average Net Assets................ 0.28% 0.46% 0.29% 1.06%/3/
Portfolio Turnover Rate............ 65.0% 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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

11
<PAGE>

BUSINESS AND INDUSTRIAL RESTRUCTURING FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $10.55 $ 9.64 $ 7.71 $ 7.00
------ ------ ------ -------
Income From Investment Operations
Net Investment Income.............. 0.10 0.07 0.06 0.02
Net Gains or (Losses) on Securities
(both realized and unrealized).... 3.71 1.02 1.96 0.69
------ ------ ------ -------
Total From Investment Operations... 3.81 1.09 2.02 0.71
------ ------ ------ -------
Less Distributions
Dividends From Net Investment
Income............................ (0.09) (0.06) (0.07) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... (0.24) (0.12) (0.02) 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options....................... 0.00 0.00 0.00 0.00
------ ------ ------ -------
Total Distributions................ (0.33) (0.18) (0.09) 0.00
------ ------ ------ -------
Net Asset Value, End of Period....... $14.03 $10.55 $ 9.64 $ 7.71
====== ====== ====== =======
Total Return/2/...................... 36.48% 11.49% 26.40% 10.14%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $74.05 $30.18 $14.44 $ 1.94
Ratio of Net Operating Expenses to
Average Net Assets................ 0.91% 0.98% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 0.95% 1.08% 1.73% 5.85%3
Ratio of Net Investment Income to
Average Net Assets................ 0.88% 0.83% 0.77% 2.48%/3/
Portfolio Turnover Rate............ 56.0% 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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

12
<PAGE>

GLOBAL COMPETITORS FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 8.59 $ 7.69 $ 7.28 $7.00
------ ------ ------ -----
Income From Investment Operations
Net Investment Income.............. 0.07 0.07 0.05 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 2.27 0.90 0.41 0.27
------ ------ ------ -----
Total From Investment Operations... 2.34 0.97 0.46 0.28
------ ------ ------ -----
Less Distributions
Dividends from Net Investment
Income............................ (0.06) (0.07) (0.05) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions from Net Realized
Gain on Investments and Options... (0.02) 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options....................... (0.02) 0.00 0.00 0.00
------ ------ ------ -----
Total Distributions................ (0.10) (0.07) (0.05) 0.00
------ ------ ------ -----
Net Asset Value, End of Period....... $10.83 $ 8.59 $ 7.69 $7.28
====== ====== ====== =====
Total Return/2/...................... 27.39% 12.73% 6.29% 4.00%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $71.30 $25.50 $10.06 $2.04
Ratio of Net Operating Expenses to
Average Net Assets................ 0.89% 0.97% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 0.93% 1.18% 1.72% 3.97%/3/
Ratio of Net Investment Income to
Average Net Assets................ 0.73% 1.04% 0.81% 0.82%/3/
Portfolio Turnover Rate............ 17.0% 29.0% 19.0% 0%
</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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

13
<PAGE>

EARLY LIFE CYCLE FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 9.77 $ 8.66 $ 7.40 $7.00
------- ------- ------- -----
Income From Investment Operations
Net Investment Income........... (0.02) (0.02) (0.01) 0.00
Net Gains or (Losses) on
Securities (both realized and
unrealized).................... 1.72 1.31 1.36 0.40
------- ------- ------- -----
Total From Investment
Operations..................... 1.70 1.29 1.35 0.40
------- ------- ------- -----
Less Distributions
Dividends From Net Investment
Income......................... 0.00 0.00 0.00 0.00
Dividends in Excess of Net
Investment Income.............. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and
Options........................ (0.69) (0.18) (0.09) 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options.................... 0.00 0.00 0.00 0.00
------- ------- ------- -----
Total Distributions............. (0.69) (0.18) (0.09) 0.00
------- ------- ------- -----
Net Asset Value, End of Period.... $ 10.78 $ 9.77 $ 8.66 $7.40
======= ======= ======= =====
Total Return/2/................... 18.29% 15.16% 18.27% 5.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)...................... $ 78.06 $ 47.78 $ 24.95 $5.51
Ratio of Net Operating Expenses
to Average Net Assets.......... 0.90% 0.96% 0.95% 0.99%/3/
Ratio of Gross Operating
Expenses to Average Net
Assets/4/...................... 0.98% 1.04% 1.15% 2.70%/3/
Ratio of Net Investment
Income/(Loss) to Average Net
Assets......................... (0.17)% (0.23)% (0.25)% 0.12%/3/
Portfolio Turnover Rate......... 38.0% 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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

14
<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 demographics 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," 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.

15
<PAGE>

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 be-
lieves have value currently not recognized in the market prices of the compa-
nies' 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

Eight 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.

LONG-TERM SUPPLY OF ENERGY FUND--invests in companies which the Investment
Adviser believes will benefit from the availability, development and delivery
of secure hydrocarbon and other energy sources. Such companies include those
engaged in the following types of activities: the production, transmission,
marketing, control or measurement of energy or fuels; providing products or
services to companies engaged in such activities; energy-related research, ex-
perimentation and consulting; and environmental activities such as pollution
control and energy conservation. Included in such companies are oil and gas
production and pipeline companies; drilling and drilling service companies;
electric and gas utilities; and other energy resource companies such as coal
producers and newer resources such as geothermal and solar energy producers.
Normally, at least 25% of the Fund's assets will be invested in the crude oil,
petroleum and natural gas industry. However, less than that amount may be so
invested if there have been changes in governmental regulations, world eco-
nomic and political events, exploration or production spending; or supply, de-
mand or prices of crude oil, petroleum, natural gas or other energy sources,
and in the Investment Adviser's opinion, such changes would have an adverse
affect on the securities of companies in that industry. Under normal condi-
tions, at least 65% of the Fund's total assets will be invested in companies
of the type described in this paragraph.

Among the characteristics the Investment Adviser currently looks for in en-
ergy and energy-related investments are companies or energy sources which the
Investment Adviser believes are:

- - dedicated to producing supplies of energy at economically acceptable cost;
- - located in politically and economically stable or "secure" areas, i.e, sub-
ject only to minimal risk of disruption for political or ideological rea-
sons, or by economic "warfare" or systemic economic weakness;

- - available in continuous, sufficient quantity to be reliable and economically
significant; and
- - involved in energy which is easily and economically transportable and dis-
tributable to where it is consumed.

PRODUCTIVITY ENHANCERS FUND--invests in companies which the Investment Ad-
viser believes will benefit from their roles as innovators, developers and
suppliers of goods and services which enhance service and manufacturing pro-
ductivity or companies that are most effective at obtaining and applying pro-
ductivity enhancement developments. The essential criteria for such products
and services is that they have the ability to increase a user's productivity,
e.g., enable the user to generate equal or greater economic value at lower to-
tal unit cost than alternatives or provide measurable improvement of produc-
tivity by the provider or the user. Such companies may include but are not
limited to production automation manufacturers, computer hardware and software
producers and distributors, communications and mobile telephone providers, and
companies involved with cost control, asset redeployment and downsizing activ-
ities and enhancing the

16
<PAGE>

utilization of technology. Under normal conditions, at least 65% of the Fund's
total assets will be invested in companies of the type described in this para-
graph.

ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND--invests in companies
which the Investment Adviser believes will benefit from their provision of
products, technologies and services related to conservation, protection and
restoration of the environment. Such companies may include but are not limited
to companies engaged in waste management and pollution control, prevention and
cleanup activities. The Fund is not intended to be an "environmentally cor-
rect" fund and may invest in companies without regard to whether they are en-
gaged in operations harmful to the environment. Under normal conditions, at
least 65% of the Fund's total assets will be invested in companies of the type
described in this paragraph.

The Fund may also invest a portion of its assets in securities of companies
that offer products and services used by individuals in response to ecological
concerns and concerns relating to their social environment. Such investments
may include, without limitation, securities of companies that produce protec-
tive clothing, sunscreens and personal security products.

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 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 debt, it may be forced into default on its debt, increasing its debt
or bankruptcy.

17
<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 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 in the value of a Fund's Shares, and a Fund
may be required, in order to meet redemptions or for other

18
<PAGE>

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.

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 represent
receipts typically issued by a U.S. bank or trust company which evidence owner-
ship 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 con-
verted.

INCOME AND GROWTH FUND

The Income and Growth Fund has two investment objectives. Its primary invest-
ment objective is to seek to provide moderate current income and then, as a
secondary objective, to achieve capital appreciation from its investments. In
attempting to achieve these two objectives, the Income and Growth Fund invests,
during normal market and economic conditions, a substantial portion of its as-
sets in common stock, preferred stock and securities convertible into common
stock. The Fund's investments in equity securities will be income-oriented, and
it is expected that a portion of its assets will be invested on a regular basis
in debt obligations.

The Fund may invest in the securities of foreign issuers. The Fund may also
invest indirectly in the securities of foreign issuers through sponsored and
unsponsored ADRs. For information on ADRs, see "Investment Policies Common to
the Equity Fund and the Theme Funds."

In managing the equity portion of the Income and Growth Fund, the Investment
Adviser will generally select securities that are expected to pay dividends and
other distributions which will result in moderate current income when added to
the income from the Fund's non-equity investments. As a general matter, the In-
vestment Adviser will use the three strategies described above in "U.S. Trust's
Investment Philosophy and Strategies"--problem/opportunity, transaction value,
and early life cycle. In applying these strategies, however, the Investment Ad-
viser will place greater emphasis on the current and anticipated income of par-
ticular securities and lesser emphasis on the potential for capital apprecia-
tion. As a result, the Income and Growth Fund can be expected to have a rela-
tively smaller proportion of its assets invested in common shares of early life
cycle companies than the Equity Fund or other Theme Funds. The Investment Ad-
viser may also purchase equity securities for the Income and Growth Fund from
time to time without regard to the strategies outlined above if it determines
that the purchase is in furtherance of the Fund's investment objectives.

Debt obligations may be acquired by the Income and Growth Fund to produce in-
come and (under certain conditions) capital appreciation, and may include both
convertible and non-convertible corporate and government bonds, debentures,
money market instruments, repurchase agreements collateralized by U.S. Govern-
ment obligations, and other types of instruments listed in the next paragraph.
Except as stated below, investments in debt obligations will be limited to
those that are considered to be investment grade-i.e., debt obligations classi-
fied within the four highest ratings of Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Group ("S&P") or, if unrated, which
are determined by the Investment Adviser to be of comparable quality. However,
the Investment Adviser may at any time acquire other, non-investment grade ob-
ligations when it believes that their investment characteristics make them de-
sirable acquisitions for the Income and Growth Fund in light of its investment
objectives and current portfolio mix, so long as, under normal market and eco-
nomic conditions, no more than 5% of the Fund's total assets are invested in
non-investment grade debt obligations.

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<PAGE>

Notwithstanding the foregoing, the Fund may invest up to 35% of its total as-
sets in non-investment grade convertible debt obligations. Non-investment grade
obligations (those that are rated "Ba" or lower by Moody's and, at the same
time, "BB" or lower by S&P or unrated obligations), commonly referred to as
"junk bonds", have speculative characteristics. Risks associated with lower-
rated debt securities are (a) the relative youth and growth of the market for
such securities, (b) the sensitivity of such securities to interest rate and
economic changes, (c) the lower degree of protection of principal and interest
payments, (d) the relatively low trading market liquidity for the securities,
(e) the impact that legislation may have on the high yield bond market (and, in
turn, on the Fund's net asset value and investment practices), and (f) the
creditworthiness of the issuers of such securities. During an economic downturn
or substantial period of rising interest rates, highly leveraged issuers may
experience financial stress which would adversely effect their ability to serv-
ice their principal and interest payment obligations, to meet projected busi-
ness goals and to obtain additional financing. An economic downturn could also
disrupt the market for lower-rated bonds and adversely effect the value of out-
standing bonds and the ability of the issuers to repay principal and interest.
If the issuer of a debt obligation held by the Fund defaulted, the Fund could
incur additional expenses to seek recovery. Adverse publicity and investor per-
ceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of lower-rated securities held by the Fund, especially in
a thinly traded market.

Debt obligations rated "BB," "B" or "CCC" by S&P are regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" represents the
lowest degree of speculation and "CCC" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse condi-
tions. The rating "CC" is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating. The rating "C" is typically
applied to debt subordinated to senior debt which is assigned an actual or im-
plied "CCC-" debt rating, and may be used to cover a situation where a bank-
ruptcy petition has been filed, but debt service payments are continued. The
rating "CI" is reserved for income bonds on which no interest is being paid.
Debt obligations rated "D" are in default, and payments of interest and/or re-
payment of principal is in arrears. The ratings from "AA" through "CCC" are
sometimes modified by the addition of a plus or minus sign to show relative
standing within the major rating categories. Moody's has a similar classifica-
tion scheme for non-investment grade debt obligations. Debt obligations rated
"Ba," "B," "Caa," "Ca" and "C" provide questionable protection of interest and
principal. The rating "Ba" indicates that a debt obligation has some specula-
tive characteristics. The rating "B" indicates a general lack of characteris-
tics of desirable investment. Debt obligations rated "Caa" are of poor quality,
while debt obligations rated "Ca" are considered highly speculative. "C" repre-
sents the lowest rated class of debt obligations. Moody's applies numerical
modifiers 1, 2 and 3 in each generic classification from "Aa" to "B" in its
bond rating system. The modifier "1" indicates that a security ranks in the
higher end of its rating category; the modifier "2" reflects a mid-range rank-
ing; and the modifier "3" indicates that the security ranks at the lower end of
its generic rating category.

In addition, the Income and Growth Fund may invest up to 10% of its total as-
sets in other types of instruments, including warrants, options and other
rights to purchase securities; liquidating trust receipts; limited partnership
interests; certificates of beneficial ownership; creditor claims; and loan par-
ticipations. Such instruments may represent ownership or creditor interests in
a wide range of assets or businesses, and may be acquired by the Income and
Growth Fund for either income purposes (as would normally be the case with in-
struments such as liquidating trust receipts) or capital appreciation (as would
be the case with warrants and options). In certain instances, there may be

20
<PAGE>

no established market for such instruments. The Income and Growth Fund will,
however, at no time invest more than 10% of the value of its net assets in se-
curities that are illiquid or for which market quotations are not readily
available. Further, certain of these instruments may have speculative charac-
teristics. For example, certain instruments may be issued by companies that
are insolvent or have otherwise defaulted on their debt obligations. Such com-
panies may be involved in bankruptcy reorganization proceedings. Warrants and
options acquired by the Income and Growth Fund are subject to the possible
loss of the entire premium paid by the Fund if the market price of the under-
lying security falls below the exercise price. The Investment Adviser will
purchase such obligations only when it determines that the potential return
justifies the attendant risks. The investment features of the foregoing in-
struments and investment risks involving their acquisition are described fur-
ther in the Statement of Additional Information. Additionally, some of the
instruments described above may not be "securities" or may not produce quali-
fying income for purposes of the provisions of the Internal Revenue Code of
1986, as amended, applicable to investment companies. See "Taxes--Federal" be-
low for a discussion of such provisions.

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.

The Long-Term Supply of Energy Fund will normally concentrate its investments
in the crude oil, petroleum and natural gas industry. Accordingly, it will be
susceptible to industry risk, the possibility that a particular group of
stocks will decline in price due to industry-specific developments.

Energy-related investments are affected generally by supply, demand, and
other competitive factors for the companies' specific products and services.
They are also affected by unpredictable factors such as the supply and demand
for oil, gas, electricity and other energy sources, prices of such energy
sources, exploration and production spending, governmental regulation, and
world economic and political events. In addition, utilities firms in the en-
ergy field are subject to a variety of factors affecting the public utilities
industries, including: difficulty obtaining adequate returns on invested capi-
tal which are typically subject to the control and scrutiny of public service
commissions; restrictions on operations and increased costs and delays as a
result of environmental considerations; costs of and ability to secure financ-
ing for large construction and development projects; difficulties in obtaining
secure energy resources; the uncertain effects of conservation efforts; and a
variety of issues concerning financing, governmental approval and environmen-
tal aspects of nuclear power facilities.

Environmentally-related investments are affected generally by issues and un-
certainties impacting the specialty chemicals, engineering and construction,
machinery and pollution control industries. Such factors include the supply,
demand, and other normal competitive factors for the various portfolio compa-
nies' products and services. The environmental products and services industry
generally has been affected positively by legislation resulting in stricter
governmental regulations and enforcement policies for both commercial and gov-
ernmental generators of waste, as well as by specific expenditures for cleanup
efforts. Chemical products are affected, for example, by product obsolescence
and competition; the handling of hazardous chemicals and products; and the po-
tential for calamitous accidents. In addition to supply and demand factors,
engineering, construction and machinery companies are affected by changes in
interest rates and

21
<PAGE>

governmental spending and financing of public works and cleanup projects. Fi-
nally, all of these types of companies are heavily affected by regulation of
various governments, including the federal Environmental Protection Agency and
its state counterparts. As regulations are developed and enforced, such compa-
nies may be required to alter or cease production of a product or service or
to agree to restrictions on their operations.

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 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 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.

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.

22
<PAGE>

Federal Deposit Insurance Corporation ("FDIC"), or by a savings and loan asso-
ciation or savings bank which is insured by the Savings Association Insurance
Fund of the FDIC. Bank obligations also include U.S. dollar-denominated obli-
gations of foreign branches of U.S. banks and obligations of domestic branches
of foreign banks. Investments in bank obligations of foreign branches of do-
mestic 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 obli-
gations (see investment limitation No. 5 below under "Investment Limita-
tions"). 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 S&P or "Prime-2" or better by Moody's. In addition,
each Fund may acquire unrated commercial paper that is determined by the In-
vestment Adviser at the time of purchase to be of comparable quality to rated
instruments 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-
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

23
<PAGE>

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 in-
clude cash, securities of the U.S. Government, its agencies or instrumentali-
ties, 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 Income and Growth and Theme Funds may purchase put and call options
listed on a national securities exchange and issued by the Options Clearing
Corporation in an amount not exceeding 5% of 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 investment 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.

24
<PAGE>

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 require-
ments are not applicable when a Fund "covers" an options or futures position
generally by entering into an offsetting position. Each Fund will limit its
hedging transactions in futures contracts and related options so that, immedi-
ately 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 positions, does not exceed 5% of the Fund's total as-
sets, after taking into account any unrealized profits and unrealized losses on
the Fund's open contracts (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 con-
tract is "in-the-money" if the exercise or strike price exceeds the then-cur-
rent purchase price of the contract that is the subject of the option. In addi-
tion, 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 In-
vestment Adviser to correctly anticipate movements in the direction of the mar-
ket. 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 contract
(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. The Income and
Growth Fund may also purchase securities of unit investment trusts registered
with the SEC as investment companies. In addition to the advisory fees and
other expenses a Fund bears directly in connection 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 advisory fees and other expenses. As
such, the Fund's shareholders would indirectly 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

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.

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<PAGE>

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

3. Make loans, except that (i) each Fund may purchase or hold debt securi-
ties in accordance with its investment objective and policies, and may enter
into repurchase agreements with respect to obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, (ii) each Fund may
lend portfolio securities in an amount not exceeding 30% of its total assets,
and (iii) the Income and Growth Fund may purchase or hold creditor claims,
loan participations and other instruments in accordance with its investment
objectives and policies.

Each Fund other than the Long-Term Supply of Energy Fund may not:

26
<PAGE>

(a) with respect to the Equity and Income and Growth Funds, there is no limi-
tation with respect to securities issued or guaranteed by the U.S. Government
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 util-
ity companies, as a group, are considered a single industry for purposes of
this policy.

Each of the Equity and Income and Growth Funds 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 obli-
gations 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 and Income and Growth Funds will not invest more than 25% of the
value of their respective 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 Share
for purposes of pricing sales and redemptions is calculated by dividing the
value of all securities and other assets allocable to its Shares, less the lia-
bilities allocable to its Shares, by the number of its outstanding Shares.

27
<PAGE>

on the national securities market. Securities traded only on over-the-counter
markets are valued on the basis of closing over-the-counter bid prices. Secu-
rities 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 quotations are not readily available, and other assets are valued
at fair value, pursuant to guidelines adopted by Excelsior Fund's Board of Di-
rectors.

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

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.

PURCHASE OF SHARES

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

Shares may be purchased directly by individuals ("Direct Investors") or by
institutions ("Institutional Investors" and, collectively with Direct Invest-
ors, "Investors"). Shares may also be purchased by customers ("Customers") of
the Investment Adviser, its affiliates and correspondent banks, and other in-
stitutions ("Shareholder Organizations") that have entered into shareholder
servicing agreements with Excelsior Fund. A Shareholder Organization may elect
to hold of record Shares for its Customers and to record beneficial 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 Services 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 Shareholder Organi-
zation may elect to establish its Customers' accounts of record with CGFSC. In
this event, even if the Shareholder Organization continues to place its Cus-
tomers' purchase and redemption orders with the Funds, CGFSC will send confir-
mations of such transactions and periodic

28
<PAGE>

account statements directly 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 admin-
istrative 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--Serv-
ice 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
financial planner may incur transaction charges in connection with such pur-
chases. Such investors should contact their registered investment adviser or
certified financial planner for further information on transaction fees. In-
vestors may also purchase Shares directly from the Distributor 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:

<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 dealer's
sales force may be eligible to win nominal awards for certain sales efforts or
under which the Distributor will reallow to any dealer that sponsors sales con-
tests or recognition programs conforming to criteria established by the Dis-
tributor, or participates in sales programs sponsored by the Distributor, an
amount not exceeding the total applicable sales charges on the sales generated
by the dealer at the public offering price during such programs. Also, the Dis-
tributor in its discretion may from time to time, pursuant to objective crite-
ria established by the Distributor, pay fees to qualifying dealers 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 conditions. Pay-
ments 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 financial
institutions as financial assistance for the continuing investment of custom-
ers' assets in the Funds or for providing substantial marketing, sales and op-
erational support. The support may include initiating customer accounts, par-
ticipating in sales, educational and training seminars, providing sales litera-
ture, and engineering computer software programs that emphasize the attributes
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.

29
<PAGE>

that appropriate notification of such status is given at the time of invest-
ment; (c) companies, corporations and partnerships (excluding full service
broker/ dealers and financial planners, registered investment advisers and de-
pository 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 institutions for their own account as principal; (f) ex-
change transactions (described below under "Investor Programs--Exchange Privi-
lege") 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 Distribu-
tor and IRA accounts sponsored by the Investment Adviser; (h) company-spon-
sored 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"), Excelsior Institutional Trust, Excelsior
Funds, the Investment Adviser, the Distributor or of any direct or indirect
affiliate of any of them; (j) purchases of Shares by all beneficial sharehold-
ers of Excelsior 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 estab-
lished 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, Excelsior Tax-Exempt
Fund, Excelsior Institutional Trust or Excelsior Funds; (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

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.

cially 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 pur-
chases 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 offer-
ing price. Similarly, with respect to each subsequent investment, all shares
of Eligible Funds that are beneficially owned by the investor 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

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 Services 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-

31
<PAGE>

vestors must 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
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 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 Services Company
P.O. Box 2798
Boston, MA 02208-2798

32
<PAGE>

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 redemp-
tion request 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
accompanied by signature guarantees from any eligible guarantor institution ap-
proved by CGFSC in accordance with its Standards, Procedures and Guidelines for
the Acceptance of Signature Guarantees ("Signature Guarantee Guidelines"). Eli-
gible 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 Guide-
lines. 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 cor-
porations, executors, administrators, trustees and guardians. A redemption re-
quest will not be deemed to be properly received until CGFSC receives all re-
quired 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 re-
demption request. Questions with respect to the proper form for redemption re-
quests 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 CGFSC reserve the right not to honor the re-
demption until CGFSC is reasonably satisfied that the check has been collected
in accordance with the applicable banking regulations which

33
<PAGE>

may take up to 15 days. A Direct 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 a Direct Investor'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

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

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, or for Trust Shares of Excelsior Institutional Trust, provided that
such other shares may legally be sold in the state of the Investor's resi-
dence.

Excelsior Fund currently offers ten 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 U.S. Government, its agencies or instrumentalities and repurchase agree-
ments collateralized by such obligations, and having a dollar-weighted aver-
age 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,

34
<PAGE>

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;

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 six 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;

New York Intermediate-Term Tax-Exempt Fund, a non- diversified fund designed
to provide New York in vestors 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;
and

California Tax-Exempt Income Fund, a non-diversified fund designed to pro-
vide California investors with as high a level of current interest income ex-
empt from Federal and, to the extent possible, California state personal in-
come taxes as is consistent with relative stability of principal; this fund
invests primarily in California municipal obligations and has a dollar-
weighted average portfolio maturity of three to ten years.

Excelsior Institutional Trust currently offers Trust Shares in two investment
portfolios as follows:

Optimum Growth Fund, a fund seeking superior, risk-adjusted total return
through investments in a diversified portfolio of equity securities whose
growth prospects, in the opinion of its investment adviser, appear to exceed
that of the overall market; and

Value Equity Fund, a fund seeking long-term capital appreciation through in-
vestments in a diversified portfolio of equity securities whose market value,
in the opinion of its investment adviser, appears to be undervalued relative
to the marketplace.

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 portfolio
of Excelsior Fund, Excelsior Tax-Exempt Fund or Excelsior Institutional Trust.
The redemption will be made at the per Share net asset value of the Shares be-
ing 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

35
<PAGE>

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, Excelsior Tax-Exempt
Fund or Excelsior Institutional Trust should request and review the prospec-
tuses of such funds. Such prospectuses 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, Excelsior Tax-Exempt Fund and Excelsior
Institutional Trust reserve the right to limit the number of exchange requests
of Investors and Customers of Shareholder Organizations 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 exchange
request. EXCELSIOR FUND, EXCELSIOR TAX-EXEMPT FUND, EXCELSIOR INSTITUTIONAL
TRUST, CGFSC AND THE DISTRIBUTOR ARE NOT RESPONSIBLE FOR THE AUTHENTICITY OF
EXCHANGE REQUESTS RECEIVED BY TELEPHONE THAT ARE REASONABLY BELIEVED TO BE
GENUINE. IN ATTEMPTING TO CONFIRM THAT TELEPHONE INSTRUCTIONS ARE GENUINE, EX-
CELSIOR FUND, EXCELSIOR TAX-EXEMPT FUND AND EXCELSIOR INSTITUTIONAL TRUST WILL
USE SUCH PROCEDURES AS ARE CONSIDERED REASONABLE, INCLUDING RECORDING THOSE
INSTRUCTIONS AND REQUESTING INFORMATION 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. 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. In-
formation 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.

Investors investing in the Funds pursuant to Profit Sharing and Money-Pur-
chase Plans and Keogh Plans are not subject to the minimum investment and
forced redemption provisions described above. The minimum initial investment
for IRAs is $250 per Fund and the minimum subsequent investment is $50 per
Fund. Detailed information concerning eligibility, service fees and other mat-
ters related to these plans can be obtained by calling (800) 446-1012 (from
overseas, call (617) 557-8280). Customers of Shareholder Organizations may
purchase Shares of the Funds pursuant to retirement plans if such plans are
offered by their Shareholder Organizations.

36
<PAGE>

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 ac-
count is $50 per Fund. Provided the Investor's financial institution allows
automatic withdrawals, Shares are purchased by transferring funds from an In-
vestor's checking, bank money market or NOW account designated by the Invest-
or. 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 other 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

37
<PAGE>

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.

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.

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 in-

38
<PAGE>

come derived by a Fund from a partnership or trust is treated for this purpose
as derived with respect to the Fund's business of investing in stock, securi-
ties 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. Some of the invest-
ments that the Income and Growth Fund may make (such as liquidating trust re-
ceipts and creditor claims) may not be securities or may not produce qualify-
ing income. Therefore, it may be necessary for the Investment Adviser to re-
strict the investments of that Fund to ensure that non-qualifying income does
not exceed 10% of that Fund's total gross income for a taxable year.

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, 1995, the Investment Adviser's Asset Management Group had ap-
proximately $47 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-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.

The Income and Growth Fund portfolio manager, Richard L. Bayles, is the per-
son primarily responsible for the day-to-day management of the investment port-

39
<PAGE>

folio. Mr. Bayles, a Senior Vice President and Senior Portfolio Manager of U.S.
Trust, has been with U.S. Trust since 1990 and has been the Income and Growth
Fund's portfolio manager since 1990. Prior to his reassociation with U.S.
Trust, Mr. Bayles was a Managing Director at John W. Bristol and Company, an
investment advisory firm, from 1987 to 1990.

The Long-Term Supply of Energy Fund portfolio manager, Michael E. Hoover, is
the person primarily responsible for the day-to-day management of the Fund's
investment portfolio. Mr. Hoover, Vice President and Senior Analyst, has been
with U.S. Trust since 1989 and has been the Fund's Portfolio Manager since De-
cember 1995.

The Productivity Enhancers Fund's portfolio manager, Ronald C. Steele, is the
person primarily responsible for the day-to-day management of the Fund's in-
vestment portfolio. Mr. Steele, a Senior Vice President and Senior Portfolio
Manager of U.S. Trust, has been the Fund's portfolio manager since its incep-
tion.

The Environmentally-Related Products and Services Fund's portfolio manager,
Maria L. Brisbane, is the person primarily responsible for the day-to-day man-
agement of the Fund's investment portfolio. Ms. Brisbane, Vice President of the
Personal Equity and Balanced Investment Division of U.S. Trust, has been with
U.S. Trust since 1994 and has been the Fund's portfolio manager since December
1995. Prior to her association with U.S. Trust, Ms. Brisbane was an Institu-
tional Portfolio Manager at Brown Brothers Harriman & Company.

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 Senior 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 Investment Manager with Deutsche Bank Capital Cor-
poration.

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, De-
partment 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 inception.

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
investment portfolio. Ms. Popowich, a Senior Vice President and Portfolio Man-
ager 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 person
primarily responsible for the day-to-day management of the Fund's investment
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.

40
<PAGE>

most mutual funds. The Board of Directors believes, based on information sup-
plied to it by the Investment Adviser, that these fees are comparable to the
rates paid by many other funds with similar investment objectives and policies
and are appropriate for the Funds in light of their investment objectives and
policies. For the fiscal year ended March 31, 1996, the Investment Adviser re-
ceived an advisory fee at the effective annual rates of .68%, .69%, .55%,
.55%, 0%, .56%, .55%, .56%, .56% and .52% of the average daily net assets of
the Equity, Income and Growth, Long-Term Supply of Energy, Productivity
Enhancers, Environmentally-Related Products and Services, Aging of America,
Communication and Entertainment, Business and Industrial Restructuring, Global
Competitors and Early Life Cycle Funds, respectively. For the same period, the
Investment Adviser waived advisory fees at the effective annual rates of .07%,
.06%, .05%, .05%, .60%, .04%, .05%, .04%, .04% and .08% of the average daily
net assets of the Equity, Income and Growth, Long-Term Supply of Energy, Pro-
ductivity Enhancers, Environmentally-Related Products and Services, Aging of
America, Communication and Entertainment, Business and Industrial Restructur-
ing, 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.

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 of all the portfolios of
Excelsior Tax-Exempt Fund and Excelsior Institutional Trust, which are also
advised by the Investment Adviser and its affiliates and distributed by the
Distributor. For the services provided to all portfolios of Excelsior Fund,
Excelsior Tax-Exempt Fund and Excelsior Institutional Trust (except the inter-
national portfolios of Excelsior Fund and Excelsior 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 portfolios of Excelsior Fund and Excel-
sior Institutional Trust) as follows:

<TABLE>
<CAPTION>
COMBINED AGGREGATE AVERAGE DAILY NET ASSETS
OF EXCELSIOR FUND, EXCELSIOR TAX-EXEMPT FUND AND EXCELSIOR
INSTITUTIONAL TRUST (EXCLUDING THE INTERNATIONAL ANNUAL
PORTFOLIOS OF EXCELSIOR FUND 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 Excel-
sior Fund, Excelsior Tax-Exempt Fund and Excelsior Institutional Trust are al-
located in proportion to their relative average daily net assets at the time
of determination. From time to time, the Administrators may waive (either vol-
untarily 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 ter-
minated at any time. See "Management of the Funds--Service Organizations" for
additional information on fee waivers. For the period from April 1, 1995
through July 31, 1995, CGFSC and the former administrator received an aggre-
gate administration fee (under the same compensation arrangements noted above)
at the effective annual rates of .151%, .152%, .154%, .154%, .409%, .154%,
.154%, .154%, .154% and .154% of the average daily net assets of the Equity,
Income and Growth, Long-Term Supply of Energy, Productivity Enhancers, Envi-
ronmentally-Related Products and Services, Aging of America, Communication and
Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively. For the same period, CGFSC and the for-
mer administrator waived administration fees at the effective annual rates of
.003% and .002% of the average daily net assets of the
41
<PAGE>

Equity and Income and Growth Funds, respectively. From August 1, 1995 through
March 31, 1996, the Administrators received an aggregate administration fee at
the effective annual rates of .150%, .152%, 154%, .154%, .230%, .154%, .154%,
.154%, .154% and .154% of the average daily net assets of the Equity, Income
and Growth, Long-Term Supply of Energy, Productivity Enhancers, Environmental-
ly-Related Products and Services, Aging of America, Communication and
Entertainment, Business and Industrial Restructuring, Global Competitors and
Early Life Cycle Funds, respectively. For the same period, the Administrators
waived administration fees at the effective annual rates of .004%, .002%,
.119%, .047% and 1.325% of the average daily net assets of the Equity, Income
and Growth, Long-Term Supply of Energy, Productivity Enhancers and Environmen-
tally-Related Products and Services Funds, respectively.

SERVICE ORGANIZATIONS

Excelsior Fund will enter into an agreement ("Servicing Agreement") with each
Service Organization requiring it to provide administrative support services
to its Customers beneficially owning Shares. As a consideration for the admin-
istrative services provided to Customers, a Fund will pay the Service Organi-
zation 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 re-
quests; transmitting and receiving funds in connection with Customer orders to
purchase, exchange or redeem Shares; and providing 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 connec-
tion with a Customer's investment. Until further notice, the Investment Ad-
viser 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

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.

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

42
<PAGE>

and Growth, Early Life Cycle, Long-Term Supply of Energy, Productivity
Enhancers, Environmentally-Related Products and Services, Aging of America,
Communication and Entertainment, Business and Industrial Restructuring and
Global Competitors Funds. In addition to the Shares offered under this Prospec-
tus, Excelsior Fund offers a separate series of shares designated as Trust
Shares representing interests in the Equity, Aging of America, Communication
and Entertainment, Business and Industrial Restructuring, Global Competitors
and Early Life Cycle Funds. Trust Shares have different expenses than the
Shares offered under this Prospectus, which may affect performance. Call (800)
446-1012 for information regarding each of those Fund's Trust Shares, which are
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 writ-
ing to CGFSC and will not be issued for fractional Shares.

As of July 15, 1996, 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 discretion
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. Com-
munications 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.

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 financial or
industry publications that monitor the performance of mutual funds. For exam-
ple, the performance of a Fund may be compared to data prepared by Lipper Ana-
lytical 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 Exchange.

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

43
<PAGE>

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."

44
<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 c/o Chase Global Funds
Services Company Services Company--
P.O. Box 2798 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).

45
<PAGE>

[LOGO OF EXCELSIOR CHASE GLOBAL FUNDS SERVICES COMPANY NEW
FUNDS INC.] 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 #
Name ( )
------------------------------ -----------------------------
Address Telephone #
------------------------------ [_] U.S. Citizen [_] Other (specify) _____
City/State/Zip Code

FUND INITIAL INVESTMENT FUND INITIAL INVESTMENT
<S> <C> <C> <C>
[_] Equity Fund $ ____________ 800 [_] Communication & Entertainment Fund $ ____________ 817
[_] Income and Growth Fund $ ____________ 801 [_] Business & Industrial $ ____________ 818
[_] Long-Term Energy Fund $ ____________ 813 Restructuring Fund $ ____________ 819
[_] Productivity Enhancers Fund $ ____________ 814 [_] Global Competitors Fund $ ____________ 812
[_] Environmental Fund $ ____________ 815 [_] Early Life Cycle Fund $ ____________
[_] Aging of America Fund $ ____________ 816 [_] Other
-----------------------------

TOTAL INITIAL INVESTMENT: $ ____________
</TABLE>

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 AUTHORITY TO TRANSMIT
REDEMPTION REDEMPTION PROCEEDS TO PRE-
DESIGNATED ACCOUNT.
I/We hereby authorize CGFSC to
act upon instructions received
by telephone to withdraw $500
[_] I/We appoint CGFSC as or more from my/our account in
my/our agent to act upon the Excelsior Funds and to
instructions received by wire the amount withdrawn to
telephone in order to effect the following commercial bank
the telephone exchange and account. I/We understand that
redemption privileges. I/We CGFSC charges an $8.00 fee for
hereby ratify any each wire redemption, which
instructions given pursuant will be deducted from the
to this authorization and proceeds of the redemption.
agree that Excelsior Fund,
Excelsior Tax-Exempt Fund, Title on Bank Account*_________
Excelsior Institutional
Trust, CGFSC and their Name of Bank __________________
directors, trustees,
officers and employees will Bank A.B.A. Number Account
not be liable for any loss, Number ________________________
liability, cost or expense
for acting upon instructions Bank Address __________________
believed to be genuine and
in accordance with the City/State/Zip Code ___________
procedures described in the (attach voided check here)
then current Prospectus. To
the extent that Excelsior A corporation, trust or
Fund, Excelsior Tax-Exempt partnership must also submit a
Fund and Excelsior "Corporate Resolution" (or
Institutional Trust fail to "Certificate of Partnership")
use reasonable procedures as indicating the names and
a basis for their belief, titles of officers authorized
they or their service to act on its behalf.
contractors may be liable * TITLE ON BANK AND FUND
for instructions that prove ACCOUNT MUST BE IDENTICAL.
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

<PAGE>

- -----------------------------------------------------------------
RIGHTS OF ACCUMULATION
- -----------------------------------------------------------------
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):

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

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.

- -----------------------------------------------------------------
AGREEMENT 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.

THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO
ANY PROVISIONS OF THIS FORM OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.

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

----------------------------- -------------------------------
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 Title
Authorized Signature
<PAGE>

[LOGO OF EXCELSIOR CHASE GLOBAL FUNDS SERVICES COMPANY SUPPLEMENTAL
FUND INC.] CLIENT SERVICES APPLICATION
P.O. Box 2798
Boston, MA 02208-2798
(800) 446-1012 SPECIAL INVESTMENT AND
WITHDRAWAL OPTIONS

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

Street Address _____________ Number _________________________

Resident City, State, Zip Code __________
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 ________________________________________

-------------------- ----------------------------------------
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: Recipient ________________________________
(To be completed Street Address ___________________________
only if redemption City, State, Zip Code ____________________
proceeds to be
paid to other
than account
holder of record
or mailed to
address other
than address of
record)

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

Date ______________________

X X
------------------------------- -----------------------------
Signature Signature

------------------------------- -----------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)

X X
------------------------------- -----------------------------
Signature Signature

------------------------------- -----------------------------
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.......................... 15
INVESTMENT OBJECTIVES AND
POLICIES.................................................................. 15
PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION..................... 22
INVESTMENT LIMITATIONS..................................................... 26
PRICING OF SHARES.......................................................... 27
HOW TO PURCHASE AND REDEEM SHARES.......................................... 28
INVESTOR PROGRAMS.......................................................... 34
DIVIDENDS AND DISTRIBUTIONS................................................ 37
TAXES...................................................................... 37
MANAGEMENT OF THE FUNDS.................................................... 39
DESCRIPTION OF CAPITAL STOCK............................................... 42
CUSTODIAN AND TRANSFER AGENT............................................... 43
PERFORMANCE INFORMATION.................................................... 43
MISCELLANEOUS.............................................................. 44
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION................................... 45
</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.

USTEQP896

[LOGO OF EXCELSIOR FUNDS INC.]

EQUITY FUND

INCOME AND GROWTH FUND

LONG-TERM SUPPLY OF ENERGY FUND

PRODUCTIVITY ENHANCERS FUND

ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND

AGING OF AMERICA FUND

COMMUNICATION AND ENTERTAINMENT FUND

BUSINESS AND INDUSTRIAL RESTRUCTURING FUND

GLOBAL COMPETITORS FUND

EARLY LIFE CYCLE FUND

Prospectus
August 1, 1996
<PAGE>

[LOGO OF EXCELSIOR
FUNDS INC.]

A Management Investment Company

- -------------------------------------------------------------------------------
Equity Funds For initial purchase information, current
prices, performance information and ex-
isting account information, call (800)
73 Tremont Street 446-1012.
Boston, MA 02108-3913 (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, 1996
<PAGE>

PROSPECTUS SUMMARY

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 Limi-
tations."

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/ ........... .68% .56% .55% .56% .56% .52%
12b-1 Fees.............. None None None None None None
Other Operating Expenses
Administrative Servic-
ing Fee/2/............ .07% .04% .05% .04% .04% .08%
Other Expenses/2/ (af-
ter fee waivers)...... .30% .33% .32% .31% .29% .30%
----- ----- ----- ----- ----- -----
Total Operating Expenses
(after fee waivers)/2/
....................... 1.05% .93% .92% .91% .89% .90%
===== ===== ===== ===== ===== =====
</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."

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........................... 54 73 94 154
Communication and Entertainment Fund............ 54 73 94 153
Business and Industrial Restructuring Fund...... 54 73 93 152
Global Competitors Fund......................... 54 72 92 150
Early Life Cycle Fund........................... 54 72 93 151
</TABLE>

3
<PAGE>

4
<PAGE>

FINANCIAL HIGHLIGHTS

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, 1996 (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.

The Funds offer two separate series of shares--Trust Shares and shares of
another series offered under this Prospectus. Trust Shares and the Shares of-
fered by this Prospectus represent equal pro rata interests in each Fund, ex-
cept that Trust Shares bear the additional expense of distribution fees. See
"Description of Capital Stock."

EQUITY FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- ------ ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 21.40 $ 19.17 $ 18.77 $ 16.28 $ 14.13 $13.87 $ 13.22 $ 11.32 $ 13.56 $ 12.35
------- ------- ------- ------- ------- ------ ------- ------- --------- -------
Income From Investment
Operations
Net Investment Income.. 0.12 0.07 0.05 0.08 0.13 0.28 0.34 0.19 0.15 0.18
Net Gains or (Losses)
on Securities (both
realized and
unrealized)........... 5.21 2.67 1.16 3.01 2.23 0.39 1.26 1.88 (1.63) 1.86
------- ------- ------- ------- ------- ------ ------- ------- --------- -------
Total From Investment
Operations............ 5.33 2.74 1.21 3.09 2.36 0.67 1.60 2.07 (1.48) 2.04
------- ------- ------- ------- ------- ------ ------- ------- --------- -------
Less Distributions
Dividends From Net
Investment Income..... (0.11) (0.04) (0.08) (0.09) (0.21) (0.23) (0.34) (0.17) (0.14) (0.18)
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............... (2.19) (0.47) (0.39) (0.51) 0.00 (0.18) (0.61) 0.00 (0.62) (0.65)
Distributions in Excess
of Net Realized Gain
on Investments and
Options............... 0.00 0.00 (0.34) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- ------ ------- ------- --------- -------
Total Distributions.... (2.30) (0.51) (0.81) (0.60) (0.21) (0.41) (0.95) (0.17) (0.76) (0.83)
------- ------- ------- ------- ------- ------ ------- ------- --------- -------
Net Asset Value, End of
Period................. $ 24.43 $ 21.40 $ 19.17 $ 18.77 $ 16.28 $14.13 $ 13.87 $ 13.22 $ 11.32 $ 13.56
======= ======= ======= ======= ======= ====== ======= ======= ========= =======
Total Return/1/ ........ 26.45% 14.65% 6.54% 19.26% 16.87% 5.11% 11.98% 18.52% (11.24)% 17.61%
Ratios/Supplemental Data
Net Assets, End of
Period
(in millions)......... $188.57 $137.42 $122.26 $106.14 $ 71.62 $29.87 $ 25.98 $ 17.61 $ 13.58 $ 13.40
Ratio of Net Operating
Expenses to Average
Net Assets............ 1.05% 1.05% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.21%
Ratio of Gross
Operating Expenses to
Average Net Assets/2/. 1.12% 1.08% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.30%
Ratio of Net Investment
Income to Average Net
Assets................ 0.55% 0.36% 0.25% 0.51% 0.87% 2.21% 2.45% 1.62% 1.26% 1.53%
Portfolio Turnover
Rate.................. 27.0% 23.0% 17.0% 24.0% 20.0% 41.0% 53.0% 46.0% 67.0% 86.0%
</TABLE>
- -------
NOTES:
1. Total return data does not reflect the sales load payable on purchases of
Shares.
2. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

5
<PAGE>

AGING OF AMERICA FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 7.84 $ 6.99 $ 7.01 $7.00
------ ------ ------ -----
Income From Investment Operations
Net Investment Income.............. 0.05 0.04 0.03 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 1.97 0.85 (0.02) 0.00
------ ------ ------ -----
Total From Investment Operations... 2.02 0.89 0.01 0.01
------ ------ ------ -----
Less Distributions
Dividends From Net Investment
Income............................ (0.05) (0.04) (0.03) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... 0.00 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00 0.00
------ ------ ------ -----
Total Distributions................ (0.05) (0.04) (0.03) 0.00
------ ------ ------ -----
Net Asset Value, End of Period....... $ 9.81 $ 7.84 $ 6.99 $7.01
====== ====== ====== =====
Total Return/2/...................... 25.80% 12.80% 0.13% 0.14%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $44.79 $22.17 $10.58 $2.39
Ratio of Net Operating Expenses to
Average Net Assets................ 0.93% 0.99% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average
Net Assets/4/..................... 0.97% 1.26% 1.82% 3.87%/3/
Ratio of Net Investment Income to
Average Net Assets................ 0.54% 0.63% 0.59% 0.77%/3/
Portfolio Turnover Rate............ 34.0% 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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

6
<PAGE>

COMMUNICATION AND ENTERTAINMENT FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 9.64 $ 8.75 $ 7.61 $7.00
------ ------ ------ -----
Income From Investment Operations
Net Investment Income.............. 0.03 0.04 0.02 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 1.30 1.06 1.52 0.60
------ ------ ------ -----
Total From Investment Operations... 1.33 1.10 1.54 0.61
------ ------ ------ -----
Less Distributions
Dividends From Net Investment
Income............................ (0.03) (0.04) (0.03) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... (0.62) (0.17) (0.37) 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00 0.00
------ ------ ------ -----
Total Distributions................ (0.65) (0.21) (0.40) 0.00
------ ------ ------ -----
Net Asset Value, End of Period....... $10.32 $ 9.64 $ 8.75 $7.61
====== ====== ====== =====
Total Return/2/...................... 13.48% 12.87% 20.07% 8.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $46.95 $29.91 $21.02 $5.79
Ratio of Net Operating Expenses to
Average Net Assets................ 0.92% 0.98% 0.98% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 0.97% 1.06% 1.16% 2.20%/3/
Ratio of Net Investment Income to
Average Net Assets................ 0.28% 0.46% 0.29% 1.06%/3/
Portfolio Turnover Rate............ 65.0% 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.
4. Expenses ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

7
<PAGE>

BUSINESS AND INDUSTRIAL RESTRUCTURING FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $10.55 $ 9.64 $ 7.71 $ 7.00
------ ------ ------ ------
Income From Investment Operations
Net Investment Income.............. 0.10 0.07 0.06 0.02
Net Gains or (Losses) on Securities
(both realized and unrealized).... 3.71 1.02 1.96 0.69
------ ------ ------ ------
Total From Investment Operations... 3.81 1.09 2.02 0.71
------ ------ ------ ------
Less Distributions
Dividends From Net Investment
Income............................ (0.09) (0.06) (0.07) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... (0.24) (0.12) (0.02) 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00 0.00
------ ------ ------ ------
Total Distributions................ (0.33) (0.18) (0.09) 0.00
------ ------ ------ ------
Net Asset Value, End of Period....... $14.03 $10.55 $ 9.64 $ 7.71
====== ====== ====== ======
Total Return/2/...................... 36.48% 11.49% 26.40% 10.14%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $74.05 $30.18 $14.44 $ 1.94
Ratio of Net Operating Expenses to
Average Net Assets................ 0.91% 0.98% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 0.95% 1.08% 1.73% 5.85%/3/
Ratio of Net Investment Income to
Average Net Assets................ 0.88% 0.83% 0.77% 2.48%/3/
Portfolio Turnover Rate............ 56.0% 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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

8
<PAGE>

GLOBAL COMPETITORS FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $8.59 $7.69 $ 7.28 $7.00
------ ------ ------ -----
Income From Investment Operations
Net Investment Income.............. 0.07 0.07 0.05 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 2.27 0.90 0.41 0.27
------ ------ ------ -----
Total From Investment Operations... 2.34 0.97 0.46 0.28
------ ------ ------ -----
Less Distributions
Dividends from Net Investment
Income............................ (0.06) (0.07) (0.05) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00 0.00
Distributions from Net Realized
Gain on Investments and Options... (0.02) 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... (0.02) 0.00 0.00 0.00
------ ------ ------ -----
Total Distributions................ (0.10) (0.07) (0.05) 0.00
------ ------ ------ -----
Net Asset Value, End of Period....... $10.83 $ 8.59 $ 7.69 $7.28
====== ====== ====== =====
Total Return/2/...................... 27.39% 12.73% 6.29% 4.00%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $71.30 $25.50 $10.06 $2.04
Ratio of Net Operating Expenses to
Average Net Assets................ 0.89% 0.97% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 0.93% 1.18% 1.72% 3.97%/3/
Ratio of Net Investment Income to
Average Net Assets................ 0.73% 1.04% 0.81% 0.82%/3/
Portfolio Turnover Rate............ 17.0% 29.0% 19.0% 0%
</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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

9
<PAGE>

EARLY LIFE CYCLE FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 9.77 $ 8.66 $ 7.40 $7.00
------- ------- ------- -----
Income From Investment Operations
Net Investment Income........... (0.02) (0.02) (0.01) 0.00
Net Gains or (Losses) on
Securities (both realized and
unrealized).................... 1.72 1.31 1.36 0.40
------- ------- ------- -----
Total From Investment
Operations..................... 1.70 1.29 1.35 0.40
------- ------- ------- -----
Less Distributions
Dividends From Net Investment
Income......................... 0.00 0.00 0.00 0.00
Dividends in Excess of Net
Investment Income.............. 0.00 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and
Options........................ (0.69) (0.18) (0.09) 0.00
Distributions in Excess of Net
Realized Gain on Investments
and Options.................... 0.00 0.00 0.00 0.00
------- ------- ------- -----
Total Distributions............. (0.69) (0.18) (0.09) 0.00
------- ------- ------- -----
Net Asset Value, End of Period.... $ 10.78 $ 9.77 $ 8.66 $7.40
======= ======= ======= =====
Total Return/2/................... 18.29% 15.16% 18.27% 5.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)...................... $ 78.06 $ 47.78 $ 24.95 $5.51
Ratio of Net Operating Expenses
to Average Net Assets.......... 0.90% 0.96% 0.95% 0.99%/3/
Ratio of Gross Operating
Expenses to Average Net
Assets/4/...................... 0.98% 1.04% 1.15% 2.70%/3/
Ratio of Net Investment Income
to Average Net Assets.......... (0.17)% (0.23)% (0.25)% 0.12%/3/
Portfolio Turnover Rate......... 38.0% 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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

10
<PAGE>

U.S. TRUST'S INVESTMENT PHILOSOPHY AND STRATEGIES

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.

INVESTMENT OBJECTIVES AND POLICIES

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.

12
<PAGE>

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

INVESTMENT POLICIES COMMON TO THE EQUITY FUND AND THE THEME FUNDS

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.

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

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.

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.

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

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.

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.

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.

17
<PAGE>

WHEN-ISSUED AND FORWARD TRANSACTIONS

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:

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

* * *

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.

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.

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
Services 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 from the Distributor in accordance with proce-
dures 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.

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 institu

21
<PAGE>

tions as financial assistance for the continuing investment of customers' as-
sets in the Funds or for providing substantial marketing, sales and opera-
tional support. The support may include initiating customer accounts, partici-
pating in sales, educational and training seminars, providing sales litera-
ture, and engineering computer software programs that emphasize the attributes
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.

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 custodial 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 partnerships (excluding full service broker/ dealers and financial plan-
ners, 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 institutions for
their own account as principal; (f) exchange transactions (described below un-
der "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
Investment 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"), Excel-
sior Institutional Trust, Excelsior Funds, the Investment Adviser, the Dis-
tributor 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 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, officers and employees of brokers
and dealers selling shares pursuant to a selling agreement with Excelsior
Fund, Excelsior Tax-Exempt Fund, Excelsior Institutional Trust or Excelsior
Funds; (m) purchases of shares by investors who are members of affinity groups
serviced by USAffinity Investments Limited Partnership; and (n) customers of
certain financial institutions who purchase Shares through a registered repre-
sentative of UST Financial Services Corp. on the premises of their financial
institutions. In addition, no sales load is charged on the reinvestment of
dividends or distributions or in connection with certain share exchange trans-
actions. 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 pur-
chases made within 30 calendar 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 ef-
fort that will be needed in obtaining investments.

QUANTITY DISCOUNTS

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
22
<PAGE>

discount plans described below. Upon such notification, the investor will re-
ceive 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.

Rights of Accumulation. A reduced sales load applies to any purchase of
shares of any portfolio of Excelsior Fund and Excelsior Tax-Exempt Fund that
is sold with a sales load ("Eligible Fund") where an investor's then current
aggregate investment is $50,000 or more. "Aggregate investment" means the to-
tal of: (a) the dollar amount of the then current purchase of shares of an El-
igible Fund and (b) the value (based on current net asset value) of previously
purchased and beneficially 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 re-
spect to each subsequent investment, all shares of Eligible Funds that are
beneficially owned by the investor at the time of investment may be combined
to determine the applicable sales load.

PURCHASE PROCEDURES

General

Direct Investors may purchase Shares by completing the Application for pur-
chase of Shares accompanying

23
<PAGE>

this Prospectus and mailing it, together with a check payable to Excelsior
Funds, to:

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

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)

OTHER PURCHASE INFORMATION

REDEMPTION PROCEDURES

24
<PAGE>

should contact their registered investment adviser or certified financial plan-
ner for further information on transaction fees. Investors may redeem all or
part of their Shares in accordance 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 Services Company P.O. Box 2798 Bos-
ton, MA 02208-2798

A written redemption request to CGFSC must (i) state the number of Shares to
be redeemed, (ii) identify the shareholder account number and tax identifica-
tion 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 exe-
cuted stock power) and must be submitted to CGFSC together with the redemption
request. A redemption request 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 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 Sig-
nature Guarantee Guidelines. Copies of the Signature Guarantee Guidelines and
information on STAMP can be obtained from CGFSC at (800) 446-1012 or at the ad-
dress given above. CGFSC may require additional supporting documents for re-
demptions made by corporations, executors, administrators, trustees and guardi-
ans. A redemption request will not be deemed to be properly received until
CGFSC receives all required documents in proper form. Payment for Shares re-
deemed 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

25
<PAGE>

guaranteed (see "Redemption by Mail" above, for details regarding signature
guarantees). Further documentation 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. A Direct Investor who anticipates the need for more immediate ac-
cess 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 a Direct Investor's purchase check is not col-
lected, the purchase will be cancelled and CGFSC will charge a fee of $25.00
to the Direct Investor's account.

OTHER REDEMPTION INFORMATION

GENERAL

INVESTOR PROGRAMS

EXCHANGE PRIVILEGE

Excelsior Fund currently offers fourteen additional portfolios as follows:

26
<PAGE>

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 six portfolios as follows:

Long-Term Tax-Exempt Fund, a diversified fund seeking to maximize over time
current income ex-

27
<PAGE>

empt from Federal income taxes, investing primarily in municipal obligations
and having a dollar-weighted average maturity of 10 to 30 years;

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; and

Excelsior Institutional Trust currently offers Trust Shares in two investment
portfolios as follows:

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 portfolio of
Excelsior Fund, Excelsior Tax-Exempt Fund or Excelsior Institutional Trust. 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 accept-
ance of the exchange request. No sales load will be payable on shares to be ac-
quired 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, Excelsior Tax-Exempt
Fund or Excelsior Institutional Trust should request and review the prospec-
tuses of such funds. Such prospectuses 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, Excelsior Tax-Exempt Fund and Excelsior
Institutional Trust reserve the right to limit the number of exchange requests
of Investors and Customers of Shareholder Organizations 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 exchange re-
quest. EXCELSIOR FUND, EXCELSIOR TAX-EXEMPT FUND, EXCELSIOR INSTITUTIONAL
TRUST, CGFSC AND THE DISTRIBUTOR ARE NOT RESPONSIBLE FOR THE AUTHENTICITY OF
EXCHANGE REQUESTS RECEIVED BY TELEPHONE THAT ARE REASONABLY BELIEVED TO BE GEN-
UINE. IN ATTEMPTING TO CONFIRM THAT TELEPHONE INSTRUCTIONS ARE GENUINE, EXCEL-
SIOR FUND, EXCELSIOR TAX-EXEMPT FUND AND EXCELSIOR INSTITUTIONAL TRUST WILL USE
SUCH PROCEDURES AS ARE CONSIDERED REASONABLE, INCLUDING RECORDING THOSE IN-
STRUCTIONS AND REQUESTING INFORMATION 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.

28
<PAGE>

SYSTEMATIC WITHDRAWAL PLAN

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.

AUTOMATIC INVESTMENT PROGRAM

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.
29
<PAGE>

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 privi-
lege 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 corre-
spondent banks will be paid in cash. Direct and Institutional Investors and
Customers of Shareholder Organizations will receive dividends and distributions
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 (re-
ceived by CGFSC at Excelsior Fund's address prior to the payment date) to re-
ceive dividends and distributions in cash. Reinvested dividends and distribu-
tions 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 earn-
ings 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 income (includ-
ing 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 div-
idends will be taxable as ordinary income to Fund shareholders who are not cur-
rently exempt from Federal income taxes, whether such income is received in
cash or reinvested in additional Shares. (Federal income taxes for distribu-
tions to IRAs and qualified pension plans are deferred under the Code.) The
dividends received deduction for corporations will apply to such ordinary in-
come 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 capital
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

30
<PAGE>

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.

STATE AND LOCAL

MANAGEMENT OF THE FUNDS

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-

31
<PAGE>

ment Adviser provides trust and banking services to individuals, corporations,
and institutions both nationally and internationally, including investment man-
agement, 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 Insur-
ance Corporation and is one of the twelve members of the New York Clearing
House Association.

The Equity Fund's portfolio manager, David A. Tillson, is the person primarily
responsible for the day-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 De-
cember 1994. Prior to joining U.S. Trust, Mr. Tillson was the founder and Pres-
ident 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 Senior 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 Deutsche Bank Capital
Corporation.

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 Senior 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.

32
<PAGE>

supplied to it by the Investment Adviser, that this fee is comparable to the
rates paid by many other funds with similar investment objectives and policies
and is appropriate for the Fund in light of its investment objective and poli-
cies. For the fiscal year ended March 31, 1996, the Investment Adviser re-
ceived an advisory fee at the effective annual rates of .68%, .56%, .55%,
.56%, .56% and .52% of the average daily net assets of the Equity, Aging of
America, Communication and Entertainment, Business and Industrial Restructur-
ing, Global Competitors and Early Life Cycle Funds, respectively. For the same
period, the Investment Adviser waived advisory fees at the effective annual
rates of .07% .04%, .05%, .04%, .04% and .08% 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, re-
spectively.

ADMINISTRATORS

<TABLE>
<CAPTION>
COMBINED AGGREGATE AVERAGE DAILY
NET ASSETS OF EXCELSIOR FUND,
EXCELSIOR TAX-EXEMPT FUND AND EXCELSIOR
INSTITUTIONAL TRUST
(EXCLUDING THE INTERNATIONAL PORTFOLIOS OF
EXCELSIOR FUND AND EXCELSIOR ANNUAL
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 Excel-
sior Fund, Excelsior Tax-Exempt Fund and Excelsior Institutional Trust are al-
located in proportion to their relative average daily net assets at the time
of determination. From time to time, the Administrators may waive (either vol-
untarily 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 ter-
minated at any time. See "Management of the Funds--Service Organizations" for
additional information on fee waivers. For the period from April 1, 1995
through July 31, 1995, CGFSC and the former administrator received an aggre-
gate administration fee (under the same compensation arrangements noted above)
at the effective annual rates of .151%, .154%, .154%, .154%, .154% 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 the
former administrator waived administration fees at the effective annual rate
of .003% of the average daily net assets of the Equity Fund. From August 1,
1995 through March 31, 1996, the Administrators received an aggregate adminis-
tration fee at the effective annual rates of .150%, .154%, .154%, .154%, .154%
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, the
Ad

33
<PAGE>

ministrators waived administration fees at the effective annual rate of .004%,
of the average daily net assets of the Equity Fund.

SERVICE ORGANIZATIONS

Excelsior Fund will enter into an agreement ("Servicing Agreement") with each
Service Organization requiring it to provide administrative support service to
its Customers beneficially owning Shares. As a consideration for the adminis-
trative services provided to Customers, a Fund will pay each Service Organiza-
tion an administrative service fee at the annual rate of up to .40% of the av-
erage 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 re-
quests; transmitting and receiving funds in connection with Customer orders to
purchase, exchange or redeem Shares; and providing 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 connec-
tion with a Customer's investment. Until further notice, the Investment Ad-
viser 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

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.
34
<PAGE>

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

CUSTODIAN AND TRANSFER AGENT

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

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.

35
<PAGE>

recent one-year period, and may be given for other periods as well (such as
from the commencement 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.

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."

36
<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 Services Company
c/o Chase Global Funds Services Compa-
P.O. Box 2798 ny--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:

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).

37
<PAGE>

[LOGO OF EXCELSIOR CHASE GLOBAL FUNDS SERVICES COMPANY
FUNDS INC.] CLIENT SERVICES

P.O. Box 2798 NEW
Boston, MA 02208-2798 ACCOUNT
(800) 446-1012 APPLICATION

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

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 ( )
------------------------------ -----------------------------
Address Telephone #
------------------------------ [_] U.S. Citizen [_] Other
City/State/Zip Code (specify)

FUND INITIAL INVESTMENT
[_] Equity Fund $ ___________ 800
[_] Aging of America
Fund $ ___________ 816
[_] Communication &
Entertainment Fund $ ___________ 817
[_] Business &
Industrial
Restructuring Fund $ ___________ 818

FUND INITIAL INVESTMENT
[_] Global Competi-
tors Fund $ ___________ 819
[_] Early Life Cycle
Fund $ ___________ 812
[_] Other $ ___________
TOTAL INITIAL INVESTMENT: $ ___________

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 AUTHORITY TO TRANSMIT
REDEMPTION REDEMPTION PROCEEDS TO PRE-
DESIGNATED ACCOUNT.
I/We hereby authorize CGFSC to
act upon instructions received
by telephone to withdraw
[_] I/We appoint CGFSC as $500 or more from my/our
my/our agent to act upon account in the Excelsior Funds
instructions received by and to wire the amount
telephone in order to effect withdrawn to the following
the telephone exchange and commercial bank account. I/We
redemption privileges. I/We understand that CGFSC charges
hereby ratify any an $8.00 fee for each wire
instructions given pursuant redemption, which will be
to this authorization and deducted from the proceeds of
agree that Excelsior Fund, the redemption.
Excelsior Tax-Exempt Fund, Title on Bank Account*_________
Excelsior Institutional Name of Bank __________________
Trust, CGFSC and their Bank A.B.A. Number Account
directors, trustees, Number ________________________
officers and employees will Bank Address __________________
not be liable for any loss, City/State/Zip Code ___________
liability, cost or expense (attach voided check here)
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, Excelsior Tax-Exempt
Fund and Excelsior
Institutional Trust, 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.

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.

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
<PAGE>

- ------------------------------------------------------------------
RIGHTS OF ACCUMULATION
- ------------------------------------------------------------------
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.

- ------------------------------------------------------------------
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):

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

THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO
ANY PROVISIONS OF THIS FORM OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
X ___________________________ Date __________________________
Owner Signature Date __________________________
X ___________________________
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
- ------------------------------------------------------------------

----------------------------- -------------------------------
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 Title
Authorized Signature
<PAGE>

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

CHASE GLOBAL FUNDS SERVICES COMPANY CLIENT SERVICES
LOGO SUPPLEMENTAL
APPLICATION
P.O. Box 2798 Boston, MA 02208-2798 (800) 446-1012
SPECIAL INVESTMENT AND
WITHDRAWAL OPTIONS
-----------------------------------------------------------------------------

Fund Name __________________ Account Number _________________
Owner Name _________________ Social Security or Taxpayer ID
Street Address _____________ Number _________________________
Resident City, State, Zip Code __________
of [_] U.S. [_] Other ____ [_] Check here if this is a
change of address

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) Account No. ____________________
To: ________________________
(Fund)
-----------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN[_] YES[_] NO
-----------------------------------------------------------------------------

I/We hereby authorize CGFSC to debit my/our personal checking account on
the designated dates in order to purchase shares in the Fund indicated at
the top of this application at the applicable public offering price
determined on that day.
[_] 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

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

[_] 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 Recipient ________________________________
check payable Street Address ___________________________
to: (To be City, State, Zip Code ____________________
completed only
if redemption
proceeds to be
paid to other
than account
holder of record
or mailed to
address other
than address of
record)

- ------------------------------------------------------------------
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
------------------------------- -----------------------------
Signature Guarantee* (if applicable)
Signature Guarantee* (if applicable)
X X
------------------------------- -----------------------------
Signature Signature
------------------------------- -----------------------------
Signature Guarantee* (if applicable)
Signature Guarantee* (if applicable)

<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................................................ 30
TAXES...................................................................... 30
MANAGEMENT OF THE FUNDS.................................................... 31
DESCRIPTION OF CAPITAL STOCK............................................... 34
CUSTODIAN AND TRANSFER AGENT............................................... 35
PERFORMANCE INFORMATION.................................................... 35
MISCELLANEOUS.............................................................. 36
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION................................... 37
</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 REP-
RESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY EXCELSIOR
FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY EX-
CELSIOR FUND OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.

[LOGO OF EXCELSIOR FUNDS INC.]

EQUITY FUND

AGING OF AMERICA FUND

COMMUNICATION AND ENTERTAINMENT FUND

BUSINESS AND INDUSTRIAL RESTRUCTURING FUND

GLOBAL COMPETITORS FUND

EARLY LIFE CYCLE FUND

Prospectus
August 1, 1996

<PAGE>

[LOGO OF EXCELSIOR
FUNDS, INC.]

A Management Investment Company

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

This Prospectus describes several separate portfolios offered to investors by
Excelsior Funds, Inc. ("Excelsior Fund") (formerly UST Master Funds, Inc.), an
open-end, management investment company. Each portfolio (each a "Fund" and
collectively the "Funds") has its own investment objective and policies as
follows:

INTERNATIONAL FUND seeks total return on its assets through capital apprecia-
tion and income derived primarily from investments in a diversified portfolio
of marketable foreign equity securities.

EMERGING AMERICAS FUND seeks long-term capital appreciation through invest-
ments in companies and securities of governments based in all countries in the
Western Hemisphere, except the U.S.

PACIFIC/ASIA FUND seeks long-term capital appreciation through investments in
companies and securities of governments based in all countries in Asia and on
the Asian side of the Pacific Ocean.

PAN EUROPEAN FUND seeks long-term capital appreciation through investments in
companies and securities of governments based in Europe.

Excelsior Fund 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 OF THE FUNDS ("SHARES") ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARAN-
TEED OR ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, ITS PARENT OR
AFFILIATES AND THE SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGA-
TIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY.

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

August 1, 1996
<PAGE>

PROSPECTUS SUMMARY

INVESTMENT ADVISER: United States Trust Company of New York serves as the
Funds' investment adviser. U.S. Trust is a trust company offering a variety of
specialized financial and fiduciary services to high-net worth individuals,
institutions and corporations. Excelsior Fund offers investors access to U.S.
Trust's services. The International and Pan European Funds receive sub-advi-
sory services from Foreign and Colonial Asset Management ("FACAM"), and the
Emerging Americas and Pacific/Asia Funds receive sub-advisory services from
Foreign & Colonial Emerging Markets Limited ("FCEML"). FACAM and FCEML are
U.S. Trust affiliates. See "Management of the Funds--Investment Adviser."

INVESTMENT OBJECTIVES AND POLICIES: Generally, each Fund is a diversified
investment portfolio which invests principally in the equity securities of
foreign companies. The Funds also may invest in warrants, convertible securi-
ties, bonds and other securities of foreign companies and governments. The
Funds' investment objectives and policies are summarized on the cover and ex-
plained in greater detail later in this Prospectus. See "Investment Objectives
and Policies," "Portfolio Instruments and Other Information" and "Investment
Limitations."

INVESTMENT RISKS AND CHARACTERISTICS: Generally, each Fund is subject to
market risk and currency risk. Market risk is the possibility that stock
prices will decline over short or even extended periods. 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 addi-
tion, since the Funds invest in foreign securities, the Funds are subject to
the risks of fluctuations of the value of foreign currencies relative to the
U.S. dollar and other risks associated with such investments. Finally, while
the International Fund diversifies its investments in a variety of companies
and countries, the Emerging Americas, Pacific/Asia and Pan European Funds
(collectively, the "Regional Funds") focus their investment activities in
their designated regions. As a result each Regional Fund is susceptible to re-
gional economic, market, political and other more localized risks. Although
each Fund generally seeks to invest for the long term, each Fund may engage in
short-term trading of portfolio securities. A high rate of portfolio turnover
may involve correspondingly greater transaction costs which must be borne di-
rectly by a Fund and ultimately by its shareholders. Investments in the Funds
should not be considered a complete investment program. See "Investment Objec-
tives and Policies--Risk Factors" and "Portfolio Instruments and Other Invest-
ment Information."

2
<PAGE>

EXPENSE SUMMARY

<TABLE>
<CAPTION>
INTERNATIONAL EMERGING AMERICAS PACIFIC/ASIA PAN EUROPEAN
FUND FUND FUND FUND
------------- ----------------- ------------ ------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load
(as a percentage of
offering price)........ 4.50% 4.50% 4.50% 4.50%
Sales Load on Reinvested
Dividends.............. None None None None
Deferred Sales Load..... None None None None
Redemption Fees/1/...... None None None None
Exchange Fees........... None None None None
ANNUAL FUND OPERATING
EXPENSES
(AS A PERCENTAGE OF AV-
ERAGE NET ASSETS)
Advisory Fees (after fee
waivers)/2/............ .90% .91% .92% .91%
12b-1 Fees.............. None None None None
Other Operating Expenses
Administrative Servic-
ing Fee/2/............ .10% .09% .08% .09%
Other Expenses......... .40% .48% .43% .46%
----- ----- ----- -----
Total Operating Expenses
(after fee waivers)/2/. 1.40% 1.48% 1.43% 1.46%
===== ===== ===== =====
</TABLE>
- -------
/1The/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 "Redemp-
tion Procedures."
/2The/Investment Adviser and Administrators may, from time to time, voluntarily
waive a portion 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 extent
necessary for Shares of the Emerging Americas, Pacific/Asia and Pan European
Funds to maintain an annual expense ratio of not more than 1.67%. Without
such fee waivers, "Advisory Fees" would be 1.00%, 1.00%, 1.00% and 1.00% and
"Total Operating Expenses" would be 1.50%, 1.57%, 1.51%, and 1.55% for each
of the International, Emerging Americas, Pacific/Asia and Pan European Funds.

3
<PAGE>

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>
International Fund.............................. $59 $87 $118 $205
Emerging Americas Fund.......................... 59 90 122 214
Pacific/Asia Fund............................... 59 88 120 209
Pan European Fund............................... 59 89 121 212
</TABLE>

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,
1996. For more complete descriptions of the Funds' operating expenses, see
"Management of the Funds" in this Prospectus and the financial statements and
notes incorporated by reference in the Statement of Additional Information.

4
<PAGE>

FINANCIAL HIGHLIGHTS

The following tables include selected data for a Share outstanding throughout
each period and other performance information derived from the financial state-
ments included in Excelsior Fund's Annual Report to Shareholders for the year
ended March 31, 1996 (the "Financial Statements"). The information contained 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 call-
ing the number on the front cover of this Prospectus.

INTERNATIONAL FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988/1/
------ ------- ------ ------ ------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of period.... $ 9.82 $ 10.44 $ 8.66 $ 8.27 $ 8.75 $ 9.84 $ 8.61 $ 7.85 $ 8.00
------ ------- ------ ------ ------- ------- ------ ------ -------
Income From Investment
Operations
Net Investment Income.. 0.10 0.10 0.05 0.15 0.08 0.13 0.15 0.05 0.05
Net Gains or (Losses)
on Securities (both
realized and
unrealized)........... 1.15 (0.29) 1.88 0.25 (0.45) (0.64) 1.47 0.77 (0.16)
------ ------- ------ ------ ------- ------- ------ ------ -------
Total From Investment
Operations............ 1.25 (0.19) 1.93 0.40 (0.37) (0.51) 1.62 0.82 (0.11)
------ ------- ------ ------ ------- ------- ------ ------ -------
Less Distributions
Dividends From Net
Investment Income..... (0.08) 0.00 (0.02) (0.01) (0.11) (0.11) (0.16) (0.06) (0.03)
Dividends in Excess of
Net Investment Income. (0.01) (0.11) (0.12) 0.00 0.00 0.00 0.00 0.00 0.00
Distributions From Net
Realized Gain on
Investments........... (0.07) (0.32) (0.01) 0.00 0.00 (0.47) (0.23) 0.00 (0.01)
Distributions in Excess
of Net Realized Gain
on Investments........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------ ------- ------ ------ ------- ------- ------ ------ -------
Total Distributions.... (0.16) (0.43) (0.15) (0.01) (0.11) (0.58) (0.39) (0.06) (0.04)
------ ------- ------ ------ ------- ------- ------ ------ -------
Net Asset Value, End of
Period................. $10.91 $ 9.82 $10.44 $ 8.66 $ 8.27 $ 8.75 $ 9.84 $ 8.61 $ 7.85
====== ======= ====== ====== ======= ======= ====== ====== =======
Total Return/2/......... 12.77% (1.93)% 22.34% 4.85% (4.35)% (5.20)% 18.91% 10.59% (1.28)%
Ratios/Supplemental Data
Net Assets, End of
Period (in millions).. $97.85 $ 64.05 $55.74 $30.37 $ 46.92 $ 31.87 $21.49 $13.01 $ 8.56
Ratio of Net Operating
Expenses to Average
Net Assets............ 1.40% 1.47% 1.53% 1.50% 1.52% 1.61% 1.34% 1.28% 1.09%/3/
Ratio of Gross
Operating Expenses to
Average Net Assets/4/. 1.50% 1.53% 1.53% 1.50% 1.52% 1.61% 1.58% 1.93% 2.81%/3/
Ratio of Net Investment
Income to Average Net
Assets................ 0.82% 0.71% 0.18% 1.27% 0.94% 1.57% 1.55% 0.75% 1.13%/3/
Portfolio Turnover
Rate.................. 39.0% 66.0% 64.0% 31.0% 32.0% 47.0% 50.0% 80.0% 55.0%/3/
</TABLE>
- -------
NOTES:
1. Inception date of the Fund was July 21, 1987.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by adviser and administrators.

5
<PAGE>

EMERGING AMERICAS FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------ PERIOD ENDED
1995 1995 1994 MARCH 31, 1993/1/
------ -------- ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
period........................ $ 5.86 $ 9.30 $ 7.12 $ 7.00
------ -------- ------ -------
Income From Investment
Operations
Net Investment Income........ 0.10 0.01 0.05 (0.00)/5/
Net Gains or (Losses) on
Securities (both realized
and unrealized)............. 1.49 (2.56) 2.24 0.12
------ -------- ------ -------
Total From Investment Opera-
tions....................... 1.59 (2.55) 2.29 0.12
------ -------- ------ -------
Less Distributions
Dividends From Net Investment
Income...................... (0.04) 0.00 (0.03) 0.00
Dividends in Excess of Net
Investment Income........... (0.04) (0.17) (0.02) 0.00
Distributions From Net Real-
ized Gain on
Investments................. 0.00 0.00 (0.06) 0.00
Distributions in Excess of
Net Realized Gain on
Investments................. 0.00 (0.72) 0.00 0.00
------ -------- ------ -------
Total Distributions.......... (0.08) (0.89) (0.11) 0.00
------ -------- ------ -------
Net Asset Value, End of Period. $ 7.37 $ 5.86 $ 9.30 $ 7.12
====== ======== ====== =======
Total Return/2/................ 27.29% (30.47)% 32.25% 1.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)................... $43.16 $ 27.34 $39.28 $ 3.83
Ratio of Net Operating
Expenses to Average
Net Assets.................. 1.48% 1.50% 1.49% 1.67%/3/
Ratio of Gross Operating
Expenses to Average Net
Assets/4/................... 1.57% 1.57% 1.71% 2.56%/3/
Ratio of Net Investment
Income/(Loss) to
Average Net Assets.......... 1.12% 0.06% 0.29% (0.04)%/3/
Portfolio Turnover Rate...... 54.0% 69.0% 51.0% 76.0%/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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by adviser and administrators.

5. Amount represents less than $0.01 per Share.

6
<PAGE>

PACIFIC/ASIA FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------- ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of peri-
od................................. $ 8.45 $ 10.04 $ 7.54 $7.00
------ ------- ------ -----
Income From Investment Operations
Net Investment Income............. 0.12 0.08 0.08 (0.00)/5/
Net Gains or (Losses) on
Securities (both realized and
unrealized)...................... 1.33 (0.58) 2.81 0.54
------ ------- ------ -----
Total From Investment Operations.. 1.45 (0.50) 2.89 0.54
------ ------- ------ -----
Less Distributions
Dividends From Net Investment In-
come............................. (0.09) (0.03) (0.05) 0.00
Dividends in Excess of Net Invest-
ment Income...................... (0.01) (0.23) (0.06) 0.00
Distributions From Net Realized
Gain on Investments.............. (0.02) (0.83) (0.28) 0.00
Distributions in Excess of Net Re-
alized Gain on Investment........ 0.00 0.00 0.00 0.00
------ ------- ------ -----
Total Distributions............... (0.12) (1.09) (0.39) 0.00
------ ------- ------ -----
Net Asset Value, End of Period...... $ 9.78 $ 8.45 $10.04 $7.54
====== ======= ====== =====
Total Return/2/..................... 17.22% (5.89)% 38.11% 7.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)........................ $76.19 $ 47.62 $53.03 $9.67
Ratio of Net Operating Expenses to
Average Net Assets............... 1.43% 1.47% 1.53% 1.67%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/......... 1.51% 1.52% 1.77% 2.00%/3/
Ratio of Net Investment Income to
Average Net Assets............... 1.12% 0.85% 0.54% 0.27%/3/
Portfolio Turnover Rate........... 29.0% 69.0% 68.0% 1.0%/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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by adviser and administrators.

5. Amount represents less than $0.01 per Share.

7
<PAGE>

PAN EUROPEAN FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1996 1995 1994 MARCH 31, 1993/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period. $ 8.19 $ 8.03 $ 7.34 $ 7.00
------ ------ ------ -------
Income From Investment Operations
Net Investment Income.............. 0.11 0.09 0.03 (0.00)/5/
Net Gains or (Losses) on Securities
(both realized and unrealized).... 1.35 0.25 0.70 0.34
------ ------ ------ -------
Total From Investment Operations... 1.46 0.34 0.73 0.34
------ ------ ------ -------
Less Distributions
Dividends From Net Investment In-
come.............................. (0.10) (0.09) 0.00 0.00
Dividends in Excess of Net Invest-
ment Income....................... 0.00 0.00 (0.04) 0.00
Distributions From Net Realized
Gain on Investments............... (0.36) (0.09) 0.00 0.00
Distributions in Excess of Net Re-
alized Gain on
Investment........................ 0.00 0.00 0.00 0.00
------ ------ ------ -------
Total Distributions................ (0.46) (0.18) (0.04) 0.00
------ ------ ------ -------
Net Asset Value, End of Period....... $ 9.19 $ 8.19 $ 8.03 $ 7.34
====== ====== ====== =======
Total Return/2/...................... 18.25% 4.33% 10.05% 4.86%
Ratios/Supplemental Data
Net Assets, End of Period (in mil-
lions)............................ $47.92 $39.98 $36.68 $ 3.80
Ratio of Net Operating Expenses to
Average Net Assets................ 1.46% 1.51% 1.61% 1.67%/3/
Ratio of Gross Operating Expenses
to Average Net Assets/4/.......... 1.55% 1.57% 1.72% 3.13%/3/
Ratio of Net Investment
Income/(Loss) to Average Net
Assets............................ 1.28% 1.11% 0.06% (0.33%)/3/
Portfolio Turnover Rate............ 42.0% 47.0% 30.0% 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.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by adviser and administrators.

5. Amount represents less than $0.01 per Share.

8
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The Investment Adviser will use its best efforts to achieve the investment ob-
jectives 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," 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.

INTERNATIONAL FUND

The International Fund's investment objective is to seek total return on its
assets through capital appreciation and income derived primarily from invest-
ments in a diversified portfolio of marketable foreign equity securities.

In seeking to achieve this investment objective, the International Fund will
invest primarily in equity securities of foreign issuers who will, in the opin-
ion of Foreign and Colonial Asset Management, the Fund's sub-adviser (the "Sub-
Adviser" or "FACAM") and the Investment Adviser, benefit from global economic
trends, promising technologies or products and specific country opportunities
resulting from changing geo-political, economic or currency relationships. In
making investment decisions, the Sub-Adviser and Investment Adviser will seek
to identify values not recognized in the market price of a security. The pri-
mary emphasis will be on the achievement of a higher total return focusing, as
circumstances warrant, solely on either growth of capital or generation of cur-
rent income or any combination thereof.

The International Fund does not intend to have, at any time, a specified per-
centage of its assets invested either for growth or for income, and all or any
portion of its assets may be allocated among these two components based on the
Investment Adviser's and Sub-Adviser's analysis of the prevailing market condi-
tions. Although the Fund will seek to realize its investment objective primar-
ily through investments in foreign equity securities, it may, from time to
time, assume a defensive position by allocating all or any portion of its as-
sets to foreign debt obligations. In determining investment strategy and allo-
cating investments, the Sub-Adviser and Investment Adviser will continuously
analyze a broad range of international equity and fixed-income securities in
order to assess the level of return, and degree of risk, that can be expected
from each type of investment and from each market.

The International Fund's investments will generally be diversified among geo-
graphic regions and countries. While there are no prescribed limits on geo-
graphic distribution, the Fund will normally include in its portfolio securi-
ties of issuers collectively having their principal business in no fewer than
three foreign countries. The Fund's assets may be invested in securities of is-
suers located in the Pacific Basin (e.g. Japan, Hong Kong, Singapore, Malay-
sia), Europe, Australia, Latin America and Canada. The Fund may also, from time
to time, invest in other regions, seeking to capitalize on investment opportu-
nities emerging in other parts of the world.

REGIONAL FUNDS:

The investment objective of each Regional Fund is long-term capital apprecia-
tion. In seeking to achieve this investment objective, each Regional Fund will
invest primarily in equity securities of foreign issuers who will, in the opin-
ion of the particular Fund's Sub-Adviser and the Investment Adviser, benefit
from global and regional economic trends, promising technologies or products
and specific country and regional opportunities resulting from changing geo-po-
litical, economic or currency relationships. In making investment decisions,
the particular Fund's Sub-Adviser and the Investment Adviser will seek to iden-
tify values not recognized in the market price of a security.

9
<PAGE>

Although each Regional Fund will seek to realize its investment objective pri-
marily through investments in foreign equity and government securities, it may,
from time to time, assume a defensive position by allocating all or any portion
of its assets to U.S. Government or foreign debt obligations. The Regional
Funds will limit their investments in foreign debt obligations to those rated
within the top three ratings by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Ratings Group ("S&P") or, if unrated, determined by the In-
vestment Advisor or the sub-adviser to be of comparable quality. No Regional
Fund currently expects to invest more than 25% of its total assets in the secu-
rities issued by any single foreign government. Any such investment would sub-
ject the particular Regional Fund to the risks presented by investing in secu-
rities of such foreign government to a greater extent than it would if that
Fund's assets were not so concentrated. In determining investment strategy and
allocating investments, the particular Fund's Sub-Adviser and the Investment
Adviser will continuously analyze a broad range of international equity and
fixed-income securities in order to assess the level of return, and degree of
risk, that can be expected from each type of investment and from each market.

Under normal circumstances, each Regional Fund will invest at least 65% of its
total assets in securities of issuers based in its targeted region. A company
is "based in" a region if it derives more than half of its assets, revenues or
profits from such region. The Regional Funds and their targeted regions are as
follows:

EMERGING AMERICAS FUND. The Emerging Americas Fund invests primarily in secu-
rities of companies and governments based in all countries of the Western Hemi-
sphere except the U.S. Currently, the Investment Adviser believes that such
countries may include Canada, Mexico, Ecuador, the Bahamas, Costa Rica, Venezu-
ela, Colombia, Peru, Brazil, Argentina and Chile. Under normal conditions, the
Fund will invest at least 65% of its total assets in securities of issuers
based in Western Hemisphere countries other than Canada. The Fund may also in-
vest in Brady Bonds, which are securities issued in various currencies (primar-
ily the dollar) that have been created through the exchange of existing commer-
cial bank loans to Latin American public and private entities for new bonds in
connection with debt restructurings under a debt restructuring plan announced
by former U.S. Secretary of the Treasury Nicholas F. Brady (the "Brady Plan").
Brady Bonds have been issued only recently and for that reason do not have a
long payment history. Brady Bonds may be collateralized or uncollateralized,
are issued in various currencies (primarily the dollar) and are actively traded
in the over-the-counter secondary market for Latin American debt instruments.
Brady Bonds are neither issued nor guaranteed by the U.S. Government. Addi-
tional information on Brady Bonds is included in the Statement of Additional
Information.

PACIFIC/ASIA FUND. The Pacific/Asia Fund invests primarily in securities of
companies and governments based in Asia and on the Asian side of the Pacific
Ocean. Currently, the Investment Adviser believes that such countries may in-
clude Australia, New Zealand, Hong Kong, India, Japan, Indonesia, the Philip-
pines, Malaysia, Singapore, Taiwan, China, Thailand, South Korea, Sri Lanka and
Pakistan. Under normal conditions, the Fund will limit its investments in the
securities of Japanese issuers to less than 20% of its total assets.

PAN EUROPEAN FUND. The Pan European Fund invests primarily in securities of
companies and governments based in Europe. Currently, the Investment Adviser
believes that such countries may include Ireland, the United Kingdom, the Neth-
erlands, Norway, Sweden, Finland, Belgium, Luxembourg, France, Portugal, Spain,
Denmark, Germany, Poland, Czech Republic, Slovakia, Hungary, Switzerland, Aus-
tria, Greece, Turkey and Italy. As other formerly communist and Eastern Euro-
pean countries become economically viable, investments may be made there as
well.

10
<PAGE>

INVESTMENT POLICIES COMMON TO ALL FUNDS

Under normal market and economic conditions, at least 75% of each Fund's as-
sets will be invested in foreign securities. Foreign securities include common
stock, preferred stock, securities convertible into common stock, warrants,
bonds, notes and other debt obligations issued by foreign entities, as well as
shares of U.S. registered investment companies that invest primarily in for-
eign securities. Foreign debt securities purchased by a Fund may include obli-
gations issued in the Eurocurrency markets and obligations of foreign govern-
ments and their political subdivisions. In addition, each Fund may invest in
U.S. Government obligations, including the when-issued securities of such is-
suers, and obligations issued by U.S. companies which are either denominated
in foreign currency and sold abroad or, if denominated in U.S. dollars, pay-
ment on which is determined by reference to some other foreign currency.

Each Fund may invest indirectly in the securities of foreign issuers through
sponsored and unsponsored American Depository Receipts ("ADRs") and European
Depository Receipts ("EDRs"). Investments in unsponsored ADRs involve addi-
tional risk because financial information based on generally accepted account-
ing principles ("GAAP") may not be available for the foreign issuers of the
underlying securities. ADRs and EDRs may not necessarily be denominated in the
same currency as the underlying securities into which they may be converted.

Under unusual economic and market conditions, each Fund may restrict the se-
curities markets in which its assets are invested and may invest all or a ma-
jor portion of its assets in U.S. Government obligations or in U.S. dollar-de-
nominated securities of U.S. companies. Up to 25% of each Fund's assets may
also be held on a continuous basis in cash or invested in U.S. money market
instruments (see below under "Money Market Instruments") to meet redemption
requests or to take advantage of emerging investment opportunities. To the ex-
tent described below under "Portfolio Instruments and Other Investment Infor-
mation," each Fund may purchase shares of other investment companies and may
engage in repurchase agreements, securities lending, forward currency con-
tracts and futures contracts, options on futures and covered call options.

Convertible and non-convertible debt securities purchased by each Fund will
be rated "investment grade," or, if unrated, deemed by the particular Sub-Ad-
viser and the Investment Adviser to be comparable to securities rated "invest-
ment grade," by Moody's or S&P. Debt obligations rated in the lowest of the
top four "investment grade" ratings ("Baa" by Moody's and "BBB" by S&P) are
considered to have some speculative characteristics and may be more sensitive
to adverse economic change than higher rated securities. Each Fund will sell
in an orderly fashion as soon as possible any convertible and non-convertible
debt securities it holds if they are downgraded below "Baa" by Moody's or be-
low "BBB" by S&P. Foreign securities are generally unrated. In purchasing for-
eign equity securities, the particular Fund's Sub-Adviser will look generally
to established foreign companies. Each Fund may purchase securities both on
recognized stock exchanges and in over-the-counter markets. Most of the Funds'
portfolio transactions will be effected in the primary trading market for the
given security. Each Fund also may invest up to 5% of its total assets in gold
bullion. Investments in gold will not produce dividends or interest income,
and the Funds can look only to price appreciation for a return on such invest-
ments.

RISK FACTORS

Generally. Each Fund is subject to market risk, interest rate risks and the
risks of investing in foreign securities. Market risk is the possibility that
stock prices will decline over short or even extended periods. The stock mar-
kets 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, to the extent that the Funds invest in fixed-income securi-
ties, their holdings of debt securities are

11
<PAGE>

sensitive to changes in interest rates and the interest rate environment. Gen-
erally, the prices of bonds and debt securities fluctuate inversely with in-
terest rate changes.

Investments in securities of foreign issuers involve certain risks not ordi-
narily associated with investments in securities of domestic issuers. 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 restrictions. Since each Fund will invest
heavily in securities denominated or quoted in currencies other than the U.S.
dollar, changes in foreign currency exchange rates will, to the extent a Fund
does not adequately hedge against such fluctuations, affect the value of secu-
rities in the portfolio and the unrealized appreciation or depreciation of in-
vestments so far as U.S. investors are concerned. In addition, with respect to
certain countries, there is the possibility of expropriation of assets, con-
fiscatory taxation, political or social instability or diplomatic developments
which could adversely affect investments in those countries.

There may be less publicly available information about a foreign company than
about a U.S. company, and foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to or
as uniform as those of U.S.-based companies. Foreign securities markets, while
growing in volume, have, for the most part, substantially 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 generally higher than in
the United States. There is generally less government supervision and regula-
tion of foreign exchanges, brokers and issuers than there is in the U.S. The
rights of investors in certain foreign countries may be more limited than
those of shareholders of U.S. corporations. The Funds might have greater dif-
ficulty taking appropriate legal action in a foreign court than in a U.S.
court.

Dividends and interest payable on a Fund's foreign portfolio securities may
be subject to foreign withholding taxes. Each Fund also may be subject to
taxes on trading profits in some countries. In addition, some countries have a
transfer or stamp duties tax on certain securities transactions. The imposi-
tion of these taxes will increase the cost to a Fund of investing in any coun-
try imposing such taxes. To the extent such taxes are not offset by credits or
deductions allowed to investors under the Federal income tax provisions--see
"Taxes--Federal"--they may reduce the net return to the Fund's shareholders.
Investors should also understand that the expense ratio of the Funds can be
expected to be higher than those of funds investing in domestic securities.
The costs attributable to investing abroad are usually higher for several rea-
sons, such as the higher cost of investment research, higher cost of custody
of foreign securities, higher commissions paid on comparable transactions on
foreign markets and additional costs arising from delays in settlements of
transactions involving foreign securities.

Emerging Americas Fund. The Latin American economies have experienced consid-
erable difficulties in the past decade. Although there have been significant
improvements in recent years, the Latin American economies continue to experi-
ence significant problems, including high inflation rates and high interest
rates. Inflation and rapid fluctuations in inflation rates have had and may
continue to have very negative effects on the economies and securities markets
of certain Latin American countries. The emergence of the Latin American econ-
omies and securities markets will require continued economic and fiscal disci-
pline which has been lacking at times in the past, as well as stable political
and social conditions. There is no assurance that economic initiatives will be
successful. Recovery may also be influenced by international economic condi-
tions, particularly those in the United States, and by world prices for oil
and other commodities.

Pan European Fund. Political and economic developments in Europe, especially
as they relate to changes in the structure of the European Economic Community

12
<PAGE>

and the anticipated development of a unified common market, may have profound
effects upon the value of a large segment of the Fund's investment portfolio.
For example, continued progress in the evolution of a unified European common
market may be slowed by unanticipated political or social events and may,
therefore, adversely affect the value of certain of the securities held by the
Fund. There has been considerable currency volatility within the European mon-
etary system and it is unclear whether a unified currency will emerge.

Pacific/Asia Fund. The extent of economic development, political stability
and market depth of different countries in the Pacific/Asia region varies
widely. Certain countries in the region are either comparatively underdevel-
oped or are in the process of becoming developed, and investments in the secu-
rities of issuers in such countries typically involve greater potential for
gain or loss than investments in securities of issuers in more developed coun-
tries. Certain countries in the region also depend to a large degree upon ex-
ports of primary commodities and, therefore, are vulnerable to changes in com-
modity prices which, in turn, may be affected by a variety of factors. The
Fund may be particularly sensitive to changes in the economies of certain
countries in the Pacific/Asia region resulting from any reversal of economic
liberalization, political unrest or the imposition of sanctions by the United
States or other countries.

Latin America, Eastern Europe and the Pacific/Asia Region. Certain of the
risks associated with international investments are heightened with respect to
investments in developing countries and fledgling democracies in Latin Ameri-
ca, Eastern Europe and the Pacific/Asia region. The risks of expropriation,
nationalization and social, political and economic instability are greater in
those countries than in more developed capital markets. In addition, the de-
veloping countries and emerging democracies in those regions may have econo-
mies based on only a few industries and small securities markets with a low
volume of trading. Issuers in emerging markets typically are subject to a
greater degree of change in earnings and business prospects than are companies
in more developed markets. Certain countries may also impose substantial re-
strictions on investments in their capital markets by foreign entities, in-
cluding restrictions on investments in issuers of industries deemed sensitive
to relevant national interests. These factors may limit the investment oppor-
tunities available to the Funds and result in a lack of liquidity and a high
price volatility with respect to securities of issuers from the developing
countries and emerging democracies in those regions.

Countries in Latin America, Eastern Europe and the Pacific/Asia region may
also impose restrictions on the Funds' ability to repatriate investment income
or capital. Even where there is no outright restriction on repatriation of in-
vestment income or capital, the mechanics of repatriation may affect certain
aspects of the operations of the Funds.

Some of the currencies of developing countries and emerging democracies in
Latin America, Eastern Europe and the Pacific/Asia region have experienced de-
valuations relative to the U.S. dollar, and major adjustments have been made
periodically in certain of such currencies. Certain countries in these regions
face serious exchange constraints. In addition, the currencies of certain
countries in these regions may not be internationally traded.

Lastly, governments of many developing countries and emerging democracies in
Latin America, Eastern Europe and the Pacific/Asia region exercise substantial
influence over many aspects of the private sector. In some countries, the gov-
ernment owns or controls many companies, including the largest in the country.
As such, government actions in the future could have a significant effect on
economic conditions in developing countries and emerging democracies in these
regions, which could affect private sector companies, a Fund and the value of
a Fund's portfolio securities. Furthermore, certain countries in Latin Ameri-
ca, Eastern Europe and the Pacific/Asia region are among the largest debtors
to commercial banks and foreign gov-

13
<PAGE>

ernments. Trading in debt obligations issued or guaranteed by those govern-
ments or their agencies and instrumentalities involves a high degree of risk.

* * *

Because of the Funds' investment policies and the considerations discussed
above, investments in Shares of the Funds may not be appropriate for all in-
vestors and should not be considered a complete investment program.

PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION

MONEY MARKET INSTRUMENTS

"Money market instruments" which may be purchased by each Fund in accordance
with its policies set forth above include, among other things, bank obliga-
tions, commercial paper and corporate bonds with remaining maturities of 13
months or less.

Investments by a Fund in commercial paper will consist of issues that are
rated "A-2" or better by S&P or "Prime-2" by Moody's. In addition, each Fund
may acquire unrated commercial paper and corporate bonds that are determined
by the Investment Adviser at the time of purchase to be of comparable quality
to rated instruments that may be acquired by each 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, each 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 when a Fund
is not entitled to exercise its demand rights, and a Fund could, for this or
other reasons, suffer a loss with respect to such instrument.

REPURCHASE AGREEMENTS

In order to effectively manage its cash holdings, each Fund may enter into
repurchase agreements. The Funds 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. The Funds will not enter into repurchase agreements with the In-
vestment Adviser or Sub-Advisers or any of their affiliates. Repurchase agree-
ments with remaining maturities in excess of seven days will be considered il-
liquid securities and will be subject to the 10% limit described in Investment
Limitation No. 5 below.

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

14
<PAGE>

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 instrumentalities, 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 recovering the securi-
ties 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 when, in the Invest-
ment Adviser's judgment, the income to be earned from the loan justifies the
attendant risks.

FORWARD CURRENCY TRANSACTIONS

Each Fund will conduct its currency exchange transactions either on a spot
(i.e. cash) basis at the rate prevailing in the currency exchange markets, or
by entering into forward currency contracts. A forward foreign currency con-
tract involves an obligation to purchase or sell a specific currency for a set
price at a future date. In this respect, forward currency contracts are simi-
lar to foreign currency futures contracts described below; however, unlike
futures contracts, which are traded on recognized commodities exchanges, for-
ward currency contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
Also, forward currency contracts usually involve delivery of the currency in-
volved instead of cash payment as in the case of futures contracts.

A Fund's participation in forward currency contracts will be limited to hedg-
ing involving either specific transactions or portfolio positions. The Funds'
Investment Adviser does not expect to hedge positions as a routine investment
technique, but anticipates hedging principally with respect to specific trans-
actions. Transaction hedging involves the purchase or sale of foreign currency
with respect to specific receivables or payables of the Fund generally arising
in connection with the purchase or sale of its portfolio securities. The pur-
pose of transaction hedging is to "lock in" the U.S. dollar equivalent price
of such specific securities. Position hedging is the sale of foreign currency
with respect to portfolio security positions denominated or quoted in that
currency. The Funds will not speculate in foreign currency exchange transac-
tions. Transaction and position hedging will not be limited to an overall per-
centage of a Fund's assets, but will be employed as necessary to correspond to
particular transactions or positions. A Fund may not hedge its currency posi-
tions to an extent greater than the aggregate market value (at the time of en-
tering into the forward contract) of the securities held in its portfolio de-
nominated, quoted in, or currently convertible into that particular currency.
When the Funds engage in forward currency transactions, certain asset segrega-
tion requirements must be satisfied. When a Fund takes a long position in a
forward currency 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 forward
currency 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
currency 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 es-
tablished. Asset segregation requirements are not applicable when a Fund "cov-
ers" a forward currency position generally by entering into an offsetting po-
sition. Additional information on forward currency transactions, including a
discussion of risks involved in such transactions (which are similar to those
described below under "Futures Contracts"), is included in the Statement of
Additional Information.

FUTURES CONTRACTS

Each Fund may also enter into interest rate futures contracts, other types of
financial futures contracts (such as foreign currency futures contracts, which
are

15
<PAGE>

similar to forward currency contracts described above) and related futures op-
tions, as well as any index or foreign market futures which are available on
recognized exchanges or in other established financial markets.

The 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 Funds will engage in futures transactions only to
the extent permitted by the Commodity Futures Trading Commission ("CFTC") and
the Securities and Exchange Commission ("SEC"). When investing in futures con-
tracts, the Funds must satisfy certain asset segregation requirements to en-
sure 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 con-
tract, the Fund must maintain a segregated account containing cash and/or cer-
tain 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 op-
tions or futures position generally by entering into an offsetting position.
Each Fund will limit its hedging transactions in futures contracts and related
options so that, immediately after any such transaction, the aggregate initial
margin that is required to be posted by a Fund under the rules of the exchange
on which the futures contract (or futures option) is traded, plus any premiums
paid by such Fund on its open futures options positions, does not exceed 5% of
such Fund's total assets, after taking into account any unrealized profits and
unrealized losses on the Fund's open contracts (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 ex-
ceeds the then-current purchase price of the contract that is the subject of
the option.

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 and Sub-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 con-
tracts (or options) and movements in the price of the instruments being
hedged. Further, there is no assurance that a liquid market will exist for any
particular futures contract (or option) at any particular time. Consequently,
a Fund may realize a loss on a futures transaction that is not offset by a fa-
vorable movement in the price of securities which it holds or intends to pur-
chase or may be unable to close a futures position in the event of adverse
price movements.

COVERED CALL OPTIONS

To further increase return on its portfolio securities in accordance with its
investment objective and policies, each Fund may engage in writing covered
call options (options on securities owned by such 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 or be traded on foreign exchanges. The aggregate value of the se-
curities subject to options written by the 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 market 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 effects a closing purchase
transaction by purchasing an option of the same series. The use of covered
call options is not a primary investment technique of the Funds and such op-
tions will normally be written on underlying securities as to which the In-
vestment Adviser and the partic

16
<PAGE>

ular Sub-Adviser do not anticipate significant short-term capital apprecia-
tion. Additional information on option-writing practices, including particular
risks thereof, is provided in the Statement of Additional Information.

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. Each
Fund may also purchase shares of investment companies investing primarily in
foreign securities, including so called "country funds" which have portfolios
consisting exclusively of securities of issuers located in one foreign coun-
try. The Regional Funds will limit their investments in such country funds to
those funds which invest in the appropriate regions in light of a Regional
Fund's policies. Securities of other investment companies will be acquired by
a Fund within the strict limits prescribed by the Investment Company Act of
1940 (the "1940 Act"). In addition to the advisory fees and other expenses
each Fund bears directly in connection with its own operations, as a share-
holder of another investment company, each Fund would bear its pro rata por-
tion of the other investment company's advisory fees and other expenses. As
such, a Fund's shareholders would indirectly bear the expenses of the Fund and
the other investment company, some or all of which would be duplicative.

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 transac-
tions involve a commitment by a Fund to purchase or sell particular securities
with payment and delivery taking place in the future, beyond the normal set-
tlement date, at a stated price and yield. Securities purchased on a "forward
commitment" 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
objectives.

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 deter-
mined by the Investment Adviser, acting under guidelines approved and moni-
tored by the Board, that an adequate trading market exists for that security.
This investment practice could have the effect of increasing the level of il-
liquidity in a Fund during any period that qualified institutional buyers be-
come uninterested in purchasing these restricted securities.

PORTFOLIO TURNOVER

Each Fund may sell a portfolio investment immediately after its acquisition
if the Investment Adviser and the particular Sub-Adviser believe that such a
disposition is consistent with attaining the investment objective of the par-
ticular 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 investments. A high rate of port-
folio turnover may involve correspondingly greater brokerage commission ex-
penses and other transaction costs, which must be borne directly by the Fund
and ultimately by its shareholders. High portfolio turnover may result in the
realization of substantial net capital gains. (See "Financial Highlights" and
"Taxes--Federal").

17
<PAGE>

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 its outstanding shares (as defined under "Miscellaneous").

A Fund may not:

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.) The Fund will
not purchase portfolio securities while borrowings in excess of 5% of its to-
tal assets are outstanding. Optioned stock held in escrow is not deemed to be
a pledge;

3. 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 International Fund,
there is no limitation with respect to securities issued or guaranteed by the
U.S. Government or domestic bank obligations, (b) with respect to the Emerg-
ing Americas, Pacific/Asia and Pan European Funds, 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; and

4. Make loans, except that (i) a Fund may purchase or hold debt securities
in accordance with its investment objective and policies, and may enter into
repurchase agreements with respect to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, and (ii) a Fund may lend
portfolio securities in an amount not exceeding 30% of its total assets.

The International Fund may not:

5. 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, as a matter of fun-
damental policy for each Fund which may not be changed without the vote of the
holders of a majority of the Fund's outstanding shares, a Fund may not 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 Emerging Americas, Pan European and Pacific/Asia Funds may not knowingly
invest more than 10% of the value of their respective total assets in illiquid
securities, including repurchase agreements with remaining maturities in excess
of seven days, restricted securities and other securities for which market quo-
tations are not readily available. This investment policy may be changed by Ex-
celsior Fund's Board of Directors upon reasonable notice to shareholders.

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

18
<PAGE>

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 percent-
age resulting from a change in value of a Fund's portfolio securities will not
constitute a violation of such limitation.

PRICING OF SHARES

The net asset value of each Fund is determined and its Shares are priced at
the close of regular trading hours on the New York Stock Exchange (the "Ex-
change"), currently 4:00 p.m. (Eastern Time). Net asset value and pricing for
each Fund are determined on each day the Exchange and the Investment Adviser
and Sub-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, Co-
lumbus 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
dividing 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.

The Funds' portfolio securities which are primarily traded on a domestic ex-
change are valued at the last sale price on that exchange or, if there is no
recent sale, at the last current bid quotation. Portfolio securities which are
primarily traded on foreign securities exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges, ex-
cept that when an event subsequent to the time when 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 pri-
mary market for such security. Investments in foreign debt securities having a
maturity of 60 days or less are valued based upon the amortized cost method.
An option, futures or foreign currency 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. A forward currency contract is valued based on
the last published forward currency rate which reflects the duration of the
contract and the value of the underlying currency. All other foreign securi-
ties 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 Directors. For valuation purposes, quotations of for-
eign 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 ex-
changes 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
each Fund's portfolio, and may use one or more independent pricing 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.

19
<PAGE>

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 expenses of fees pay-
able 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 from the Distributor in accordance with proce-
dures 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:

<TABLE>
<CAPTION>
REALLOWANCE
TOTAL SALES CHARGES 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.

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 conditions. 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.

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 custodial 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 partnerships (excluding full service broker/dealers and financial plan-
ners, 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 institutions for
their own account as principal; (f) exchange transactions (described below un-
der "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
Investment 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"), Excel-
sior Institutional Trust, Excelsior Funds, the Investment Adviser, the Dis-
tributor 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 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, officers and employees of brokers
and dealers selling shares pursuant to a selling agreement with Excelsior
Fund, Excelsior Tax-Exempt Fund, Excelsior Institutional Trust or Excelsior
Funds; (m) purchases of shares by investors who are members of affinity groups
serviced by USAffinity Investments Limited Partnership; and (n) customers 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.

21
<PAGE>

Quantity Discounts

children, or the aggregate investments of a trustee or custodian of any quali-
fied pension or profit sharing plan or IRA established (or the aggregate in-
vestment of a trustee or other fiduciary) for the benefit of the persons listed
above.

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 Services Company
P.O. Box 2798
Boston, MA 02208-2798

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)

Other Purchase Information

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
governing their accounts at the Shareholder Organizations. It is the responsi-
bility of the Shareholder Organizations to transmit redemption orders to CGFSC
and credit such Customer accounts with the redemption proceeds on a timely ba-
sis. Redemption orders for Institutional Investors must be transmitted to CGFSC
by telephone at (800) 446-1012 or by terminal access. No

23
<PAGE>

charge for wiring redemption payments to Shareholder Organizations or Institu-
tional Investors is imposed by Excelsior Fund, although Shareholder Organiza-
tions may charge a Customer's account for wiring redemption proceeds. Informa-
tion relating to such redemption services and charges, if any, is available
from the Shareholder Organizations. An investor redeeming Shares through a reg-
istered investment adviser or certified financial planner may incur transaction
charges in connection with such redemptions. Such investors should contact
their registered investment adviser or certified financial planner for further
information on transaction fees. Investors may redeem all or part of their
Shares in accordance with any of the procedures described below (these proce-
dures 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 Services Company
P.O. Box 2798
Boston, MA 02208-2798

Redemption by Wire or Telephone

24
<PAGE>

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 "Re-
demption by Mail" above, for details regarding signature guarantees). Further
documentation may be requested.

CGFSC and the Distributor reserve the right to refuse a wire or telephone re-
demption 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 Excelsior
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 TELE-
PHONE 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 IN-
STRUCTIONS AND REQUESTING INFORMATION AS TO ACCOUNT REGISTRATION.

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

GENERAL

INVESTOR PROGRAMS

EXCHANGE PRIVILEGE

Excelsior Fund currently offers 16 additional portfolios as follows:
25
<PAGE>

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;

Equity Fund, a fund seeking primarily long-term capital appreciation through
investments in a diversified portfolio of primarily equity securities;

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 benefitting from the availability, development
and delivery of secure hydrocarbon and other energy sources;

Aging of America Fund, a fund seeking long-term capital appreciation by in-
vesting in companies benefitting from the changes occurring in the demo-
graphic structure of the U.S. population, particularly of its growing popula-
tion of individuals over the age of 40;

Communication and Entertainment Fund, a fund seeking long-term capital ap-
preciation by investing in companies benefitting from the technological and
international transformation of the communications and entertainment indus-
tries, particularly the convergence of information, communication and enter-
tainment media;

Business and Industrial Restructuring Fund, a fund seeking long-term capital
appreciation by investing in companies benefitting from their restructuring
or redeployment of assets and operations in order to become more competitive
or profitable;

Global Competitors Fund, a fund seeking long-term capital appreciation by
investing in U.S.-based companies benefitting from their position as effec-
tive and strong competitors on a global basis; and

Early Life Cycle Fund, a fund seeking long-term capital appreciation by in-
vesting in smaller companies in the earlier stages of their development or
larger

26
<PAGE>

or more mature companies engaged in new and higher growth potential opera-
tions.

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

New York Intermediate-Term Tax-Exempt Fund, a nondiversified 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; and

Excelsior Institutional Trust currently offers Trust Shares in two investment
portfolios as follows:

27
<PAGE>

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, EXCELSIOR TAX-EXEMPT FUND, EXCELSIOR INSTITU-
TIONAL TRUST, CGFSC AND THE DISTRIBUTOR ARE NOT RESPONSIBLE FOR THE AUTHENTIC-
ITY OF EXCHANGE REQUESTS RECEIVED BY TELEPHONE THAT ARE REA- SONABLY BELIEVED
TO BE GENUINE. IN ATTEMPTING TO CONFIRM THAT TELEPHONE INSTRUCTIONS ARE GENU-
INE, EXCELSIOR FUND, EXCELSIOR TAX-EXEMPT FUND AND EXCELSIOR INSTITUTIONAL
TRUST WILL USE SUCH PROCEDURES AS ARE CONSIDERED REASONABLE, INCLUDING RECORD-
ING THOSE INSTRUCTIONS AND REQUESTING INFORMATION AS TO ACCOUNT REGISTRATION.

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-
bal-
ance 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).

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.

AUTOMATIC INVESTMENT PROGRAM

The Automatic Investment Program is one means by which an Investor may use
"Dollar Cost Averaging" in

28
<PAGE>

making investments. Instead of trying to time market performance, a fixed dol-
lar amount is invested in Shares at predetermined intervals. This may help In-
vestors to reduce their average cost per share because the agreed upon fixed
investment amount allows more Shares to be purchased 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, however, that Shares bought using
Dollar Cost Averaging are purchased without regard to their price on the day
of investment or to market trends. In addition, while Investors may find Dol-
lar 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.

DIVIDENDS AND DISTRIBUTIONS

Dividends from the net income of each Fund are declared and paid semi-annual-
ly. For dividend purposes, a Fund's investment income is reduced by accrued
expenses directly attributable to that Fund and the general expenses of Excel-
sior 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 a Fund 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 correspondent
banks will be paid in cash. Direct and Institutional Investors and Customers
of other Shareholder Organizations will receive dividends and distributions in
additional Shares (as determined on the payable date), unless they have re-
quested in writing (received by CGFSC at Excelsior Fund's address prior to the
payment date) to receive dividends and distributions in cash. Reinvested divi-
dends and distributions receive the same tax treatment as those paid in cash.

TAXES

FEDERAL

Qualification as a regulated investment company under the Code requires,
among other things, that a Fund distribute to its shareholders 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 taxable income (including
dividends, interest and short-term capital gains), subject to certain adjust-
ments and excluding the excess of any net long-term capital gain for the tax-
able year over the net short-term capital loss, if any, for such year. Each
Fund intends to distribute substantially all of its investment company income
each year. Such dividends will be taxable as ordinary income to a Fund's
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 de-
ferred under the Code.) It is anticipated that none

29
<PAGE>

of the dividends paid by a Fund will be eligible for the dividends received
deduction for corporations.

Distributions by a Fund of the excess of its net long-term capital gain over
its short-term capital loss are taxable to shareholders as long-term capital
gain, regardless of how long the shareholders have held their Shares and
whether such gains are received in cash or reinvested in additional Shares.

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 share-
holder 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 ex-
change of those Shares will be treated as a long-term capital loss to the ex-
tent of the capital gain dividend. Generally, a shareholder may include sales
charges incurred 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 ex-
change of such Shares. However, if the shareholder effects an exchange of
Shares of a Fund for shares of another portfolio of Excelsior Fund or Excel-
sior Tax-Exempt 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 privi-
lege), 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.

It is expected that dividends and certain interest income earned by each Fund
from foreign securities will be subject to foreign withholding taxes or other
taxes. So long as more than 50% of the value of a Fund's total assets at the
close of any taxable year consists of stock or securities of foreign corpora-
tions, such Fund may elect, for U.S. Federal income tax purposes, to treat
certain foreign taxes paid by it, including generally any withholding taxes
and other foreign income taxes, as paid by its shareholders. A Fund may make
this election. As a consequence, the amount of such foreign taxes paid by a
Fund will be included in its shareholders' income pro rata (in addition to
taxable distributions actually received by them), and each shareholder will be
entitled either (a) to credit his proportionate amounts of such taxes against
his U.S. Federal income tax liabilities, or (b) if he itemizes his deductions,
to deduct such proportionate amounts from his U.S. taxable income, should he
so choose.

Qualification as a regulated investment company under the Code also requires
that a Fund satisfy certain requirements with respect to the source of its in-
come for a taxable year. At least 90% of the gross income of a Fund must be
derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock, securities or foreign cur-
rencies, 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 investing in stock or
securities, or options and futures with respect to stock or securities. Some
of the investments that a Fund may make (such as gold bullion) may not be se-
curities or may not produce qualifying income. Therefore, it may be necessary
for the Invest-

30
<PAGE>

ment Adviser and Sub-Adviser to restrict the investments of a Fund to ensure
that non-qualifying income does not exceed 10% of such Fund's total gross in-
come for a taxable year.

STATE AND LOCAL

MANAGEMENT OF THE FUNDS

INVESTMENT ADVISER AND SUB-ADVISERS

United States Trust Company of New York serves as the Investment Adviser to
the Funds. 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.

Foreign and Colonial Asset Management ("FACAM") (an SEC-registered investment
adviser) provides sub-advisory services to the International and Pan European
Funds. FACAM, a New York general partnership with offices at Exchange House,
Primrose Street, London EC2A2NY, is an investment management joint venture
created in 1982 by F&C Overseas Limited ("FCOC") and UST Overseas Corporation
("USTOC"), an indirect wholly owned subsidiary of the Investment Adviser. FCOC
and USTOC are general partners of FACAM with equal capital contribution. FCOC,
a private English company, is a wholly owned subsidiary of F&C Management,
Ltd. F&C Management, Ltd. is 50% owned by five U.K. investment trusts: F&C In-
vestment Trust Plc, F&C Pacific Investment Trust Plc, F&C Smaller Companies
Investment Trusts Plc, F&C Enterprise Trust Plc and F&C Eurotrust Plc. The re-
maining 50% of F&C Management, Ltd. is owned by Bayerische Hypotheken und
Wechsel Bank AG of Munich, Germany.

Foreign & Colonial Emerging Markets Ltd. ("FCEML" and, collectively with
FACAM, the "Sub-Advisers") provides sub-advisory services to the Emerging
Americas and Pacific/Asia Funds. FCEML was founded in 1987, and is a joint
venture among F&C Management, Ltd., the parent of FACAM, Banco de
Investimentos Garantia ("Banco"), a Brazilian investment bank headquartered in
Sao Paulo, Brazil, and management of FCEML. Banco is owned by private invest-
ors. FCEML's offices are at Exchange House, Primrose Street, London EC2A2NY.

The Sub-Advisers provide a continuous investment program for the Funds for
which they act as sub-adviser, including investment research and management
with respect to all foreign securities and investments of the Funds. The Sub-
Advisers prepare, subject to the

31
<PAGE>

Investment Adviser's approval, lists of recommended countries and determine
what securities and other investments will be purchased, retained or sold for
each Fund for which they act as sub-adviser. The Investment Adviser advises
the Sub-Advisers with respect to U.S. economic factors and trends, assists and
consults with the Sub-Advisers in connection with the particular Fund's con-
tinuous investment program, places orders with respect to purchases and sales
of U.S. issuers, manages the particular Fund's short-term cash in cooperation
with the particular Sub-Adviser, monitors the Sub-Advisers' investment proce-
dures and periodically reviews, evaluates and reports to Excelsior Fund's
Board of Directors concerning the Sub-Advisers' performance.

All investment decisions for the International, Emerging Americas,
Pacific/Asia and Pan European Funds are made by committee and no persons are
primarily responsible for making recommendations to that committee.

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 1% of the average daily
net assets of each Fund. Although the advisory fee rate payable by the Funds
is higher than the rates payable by most mutual funds, Excelsior Fund believes
it is comparable to the rates paid by many other funds with similar investment
objectives and policies and is appropriate for the Funds in light of their in-
vestment objective and policies. FACAM is entitled to receive from the Invest-
ment Adviser a fee, computed and paid quarterly, at the annual rate of .70% of
the average daily net assets of each of the International and Pan European
Funds. FCEML is entitled to receive from the Investment Adviser a fee, com-
puted and paid quarterly, at the annual rates of .50% and .70% of the average
daily net assets of the Emerging Americas and Pacific/Asia Funds, respective-
ly.

For the fiscal year ended March 31, 1996, the Investment Adviser received an
advisory fee after waivers at the effective annual rates of .90%, .91%, .92%
and .91% of the average daily net assets of the International, Emerging Ameri-
cas, Pacific/Asia and Pan European Funds, respectively. For the same period,
the Investment Adviser waived advisory fees at the effective annual rates of
.10%, .09% .08% and .09% of the average daily net assets of the International,
Emerging Americas, Pacific/Asia and Pan European Funds, respectively. For the
same period, FACAM received a sub-advisory fee from the Investment Adviser at
the effective annual rate of .70% of the average daily net assets of each of
the International and Pan European Funds. For the fiscal year ended March 31,
1996, FCEML received a sub-advisory fee from the Investment Adviser at the ef-
fective annual rates of .50% and .70% of the average daily net assets of the
Emerging Americas and Pacific/Asia Funds, respectively.

From time to time, the Investment Adviser and Sub-Advisers may waive (either
voluntarily or pursuant to applicable state expense limitations) all or a por-
tion of the advisory fees payable with respect to a Fund, which waivers may be
terminated at any time. See "Management of the Funds--Service Organizations"
for additional information on fee waivers.

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. For the services provided to the Funds,
the Administrators are jointly entitled to a fee, computed daily and paid
monthly, at the annual rate of .20% of the average daily net assets of each
Fund. From time to time, the Administrators may waive (either voluntarily or
pursuant to applicable state expense limitations) all or a portion of the ad-
ministration 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 waivers. For the period from April 1, 1995 through July 31,
1995, CGFSC and the former administrator received an aggregate administration
fee (under the same compensation arrangements noted above) at the effective
annual rates of

32
<PAGE>

.199%, .200%, .198% and .199% of the average daily net assets of the Interna-
tional, Emerging Americas, Pacific/Asia and Pan European Funds, respectively.
For the same period, CGFSC and the former administrator waived administration
fees at the effective annual rates of .001%, .002% and .001% of the average
daily net assets of the International, Pacific/Asia and Pan European Funds,
respectively. From August 1, 1995 through March 31, 1996, the Administrators
received an aggregate administration fee at the effective annual rate of .200%
of the average daily net assets of each of the Funds.

SERVICE ORGANIZATIONS

BANKING LAWS

DESCRIPTION OF CAPITAL STOCK

Each share in a Fund represents an equal proportionate interest in the par-
ticular Fund with other shares of the same class, and is entitled to such divi-

33
<PAGE>

dends 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 Direc-
tors. 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, except as otherwise expressly required by law.

Certificates for Shares will not be issued unless expressly requested in writ-
ing 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. Com-
munications to the custodian should bedirected 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

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 financial or
industry publications that monitor the performance of mutual funds. For exam-
ple, the performance of a Fund may be compared to data prepared by Lipper Ana-
lytical Services, Inc., a widely recognized independent service which monitors
the performance of mutual funds. The performance of a Fund may also be compared
to the Europe, Australia, and Far East Index ("EAFE") and the Financial Times
Index, unmanaged standard foreign securities indexes.

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 re-
flects 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 pe-
riod. 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 commence-
ment 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 cumu-
lative change in the value of an investment in the Fund for the specific peri-
od. 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 con-
sidered as representative

34
<PAGE>

of a Fund's future performance. Shareholders should remember that performance
is generally a function of the kind and quality of the instrument held in a
portfolio, operating expenses, and market conditions. Any fees charged by
Shareholder Organizations with respect to accounts of Customers that have in-
vested in Shares will not be included in calculations of performance.

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

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

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

MINIMUM INVESTMENTS:

REDEMPTIONS:

Shares can be redeemed in any amount and at any time in accordance with
procedures 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
organizations, 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).

*A corporate resolution or appropriate certificate may be required.

QUESTIONS:

If you have any questions regarding the Application or redemption
requirements, 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 CHASE GLOBAL FUNDS SERVICES COMPANY
FUNDS INC.] CLIENT SERVICES

P.O. Box 2798 NEW
Boston, MA 02208-2798 ACCOUNT
(800) 446-1012 APPLICATION
-----------------------------------------------------------------------------

<TABLE>
<S> <C> <C> <C> <C>
INITIAL INVESTMENT INITIAL INVESTMENT
[_] International Fund $ ____________ 802 [_] Emerging Americas Fund $ ____________ 822
[_] Pan European Fund $ ____________ 821 [_] Other $ ____________
[_] Pacific/Asia Fund $ ____________ 820 TOTAL INITIAL INVESTMENT: $ ____________
</TABLE>

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 AUTHORITY TO TRANSMIT
REDEMPTION PROCEEDS TO PRE-
DESIGNATED ACCOUNT.
[_] I/We appoint CGFSC as I/We hereby authorize CGFSC to
my/our agent to act upon act upon instructions received
instructions received by by telephone to withdraw $500
telephone in order to effect or more from my/our account in
the telephone exchange and the Excelsior Funds and to
redemption privileges. I/We wire the amount withdrawn to
hereby ratify any the following commercial bank
instructions given pursuant account. I/We understand that
to this authorization and CGFSC charges an $8.00 fee for
agree that Excelsior Fund, each wire redemption, which
Excelsior Tax-Exempt Fund, will be deducted from the
Excelsior Institutional proceeds of the redemption.
Trust, CGFSC and their Title on Bank Account*_________
directors, trustees, Name of Bank __________________
officers and employees will Bank A.B.A. Number Account
not be liable for any loss, Number ________________________
liability, cost or expense Bank Address __________________
for acting upon instructions City/State/Zip Code ___________
believed to be genuine and (attach voided check here)
in accordance with the
procedures described in the A corporation, trust or
then current Prospectus. To partnership must also submit a
the extent that Excelsior "Corporate Resolution" (or
Fund, Excelsior Tax-Exempt "Certificate of Partnership")
Fund and Excelsior indicating the names and
Institutional Trust fail to titles of officers authorized
use reasonable procedures as to act on its behalf.
a basis for their belief, * TITLE ON BANK AND FUND
they or their service ACCOUNT MUST BE IDENTICAL.
contractors may be liable
for instructions that prove
to be fraudulent or
unauthorized.

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

[_] Automatic Investment
Plan
[_] Systematic Withdrawal
Plan
<PAGE>

- ------------------------------------------------------------------
RIGHTS OF ACCUMULATION
- ------------------------------------------------------------------

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 Service, 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.

- ------------------------------------------------------------------
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):

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

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).

THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO
ANY PROVISIONS OF THIS FORM OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
X ___________________________ Date __________________________
Owner Signature
X ___________________________ Date __________________________
Co-Owner Signature