<PAGE>
[LOGO APPEARS HERE]
Excelsior Money Market Funds
Institutional Shares
Prospectus
August 1, 1999
Excelsior Funds, Inc.
Money Fund
Government Money Fund
Investment Adviser
United States Trust Company of New York
U.S. Trust Company
The Securities and Exchange Commission has not approved or disapproved any Fund
shares or determined whether this prospectus is accurate or complete. It is a
crime for anyone to tell you otherwise.
[LOGO APPEARS HERE]
<PAGE>
Table of Contents
Excelsior Funds, Inc. is a mutual fund family that offers shares in separate
investment portfolios which have individual investment goals and strategies.
This prospectus gives you important information about the Institutional Shares
of the Money Fund and Government Money Fund (each, a Fund) that you should know
before investing. Please read this prospectus and keep it for future reference.
This prospectus has been arranged into different sections so that you can eas-
ily review this important information. On the next page, there is some general
information you should know about the Fund. For more detailed information about
the Fund, please see:
<TABLE>
<CAPTION>
Page
<S> <C>
Money Fund........................................................... 4
Government Money Fund................................................ 6
More Information About Risk.......................................... 8
Each Fund's Other Investments........................................ 8
The Investment Adviser............................................... 8
Purchasing, Selling and Exchanging Fund Shares....................... 9
Dividends, Distributions and Taxes................................... 11
How to Obtain More Information About Excelsior Funds ................ Back Cover
</TABLE>
<PAGE>
-------------------------------------------------------------
.......................................
................................
Information Common To All Funds
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
Each Fund has its own investment goal and strategies for reaching that goal.
The investment managers invest Fund assets in a way that they believe will help
a Fund achieve its goal. Still, investing in each Fund involves risk and there
is no guarantee that a Fund will achieve its goal. An investment manager's
judgments about the markets, the economy, or companies may not anticipate ac-
tual market movements, economic conditions or company performance, and these
judgments may affect the return on your investment. A Fund share is not a bank
deposit and it is not insured or guaranteed by the Federal Deposit Insurance
Corporation (FDIC) or any government agency.
The Funds try to maintain a constant price per share of $1.00, but there is no
guarantee that a Fund will achieve this goal.
3
<PAGE>
Money Fund [LOGO APPEARS HERE]
-----------------------------------------------------------------
..........................................................
FUND SUMMARY
Investment Goal Current income
consistent with preserving
capital and maintaining
liquidity
Investment Focus Money market
instruments
Share Price Volatility Very
low
Principal Investment
Strategy Investing in a
portfolio of high quality
short-term debt securities
designed to allow the Fund to
maintain a stable net asset
value per share
Investor Profile Conservative
institutional investors
seeking current income from
their investment
Investment Objective
The Money Fund seeks as high a level of current income as is consistent with
liquidity and stability of
principal.
Investment Strategy of the Money Fund
The Money Fund invests substantially all of its assets in high quality U.S.
dollar-denominated money market instruments, such as bank certificates of de-
posit, bankers' acceptances, commercial paper, corporate debt, mortgage-backed
securities, obligations issued or guaranteed by the U.S. government and its
agencies and instrumentalities and fully collateralized repurchase agreements.
In managing the Fund, the Adviser assesses current and projected market condi-
tions, particularly interest rates. Based on this assessment, the Adviser uses
gradual shifts in portfolio maturity to respond to expected changes and selects
securities that it believes offer the most attractive risk/return trade off.
The Fund invests only in money market instruments with a remaining maturity of
13 months or less that the Adviser believes present minimal credit risk. The
Fund maintains an average weighted remaining maturity of 90 days or less and
broadly diversifies its investments as to maturities, issuers and providers of
credit support.
Principal Risks of Investing in the Money Fund
The prices of the Fund's fixed income securities respond to economic develop-
ments, particularly interest rate changes, as well as to perceptions about the
creditworthiness of individual issuers, including governments. Generally, the
Fund's fixed income securities will decrease in value if interest rates rise.
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. Your invest-
ment is also subject to the risk that the investment return generated by the
Fund may be less than the rate of inflation. A Fund share is not a bank deposit
and is not insured or guaranteed by the FDIC or any government agency. Although
a money market fund seeks to keep a constant price per share of $1.00, you may
lose money by investing in the Fund.
The mortgages underlying mortgage-backed securities may be paid off early,
which makes it difficult to determine their actual maturity and therefore cal-
culate how they will respond to changing interest rates.
Performance Information
Institutional Shares of the Fund have less than one calendar year's perfor-
mance. For this reason, the performance information shown below is for the
Fund's other class of shares (Shares) that is not offered in this prospectus.
The Fund's Institutional Shares and Shares would have substantially similar an-
nual returns, because both share classes are invested in the same portfolio of
securities. Annual returns will differ only to the extent that Institutional
Shares and Shares do not have the same expenses. In reviewing this performance
information, however, you should be aware that Shares have a 0.40% (annualized)
Administrative Servicing Fee, while Institutional Shares have a 0.15%
(annualized) Administrative Servicing Fee. If the expenses of the Institutional
Shares were reflected, performance would be higher.
4
<PAGE>
-------------------------------------------------------------
.......................................
................................
The bar chart and the performance table below illustrate the risks and volatil-
ity of an investment in the Fund. Of course, the past performance of Shares of
the Fund does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Shares from year
to year.
[THE TABLE BELOW WAS REPRESENTED IN THE PRINTED MATERIAL AS A BAR GRAPH]
1989 9.03%
1990 8.14%
1991 6.01%
1992 3.96%
1993 2.83%
1994 3.91%
1995 5.60%
1996 5.02%
1997 5.21%
1998 5.16%
Best Quarter Worst Quarter
2.33% 0.68%
(6/30/89) (12/31/93)
The Fund's performance for the six month period ending June 30, 1999 was 1.89%.
This table shows the average annual total returns of the Fund's Shares for the
periods ended December 31, 1998.
<TABLE>
<CAPTION>
1 5 10
Year Years Years
- --------------------------------------
<S> <C> <C> <C>
Money Fund (Shares) 5.15% 4.97% 5.56%
</TABLE>
Call 1-800-861-3430 for the Fund's most current 7-day yield.
Fund Fees and Expenses
Every mutual fund has operating expenses to pay for services such as profes-
sional advisory, shareholder, administration and custody services and other
costs of doing business. This table describes the fees and expenses that you
may pay if you buy and hold Institutional Shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
Institutional Shares
<S> <C> <C>
Management Fees 0.25%
Other Expenses
Administrative Servicing Fee 0.15%
Other Operating Expenses 0.22%
Total Other Expenses 0.37%
- ------------------------------------------------------------
Total Annual Fund Operating Expenses 0.62%*
</TABLE>
* The Fund's annual operating expenses are based on actual fees and estimated
expenses for the current fiscal year. The Fund's actual total annual fund op-
erating expenses for the most recent fiscal year would have been less than
the amount shown above as a result of the Adviser's voluntary fee waivers.
The Adviser has voluntarily agreed to waive its investment advisory fee or
other fees in an amount equal to the administrative servicing fee paid by the
Fund. The Adviser may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses would have
been 0.25%. For more information about these fees, see "Investment Adviser."
Example
This Example is intended to help you compare the cost of investing in Institu-
tional Shares of the Fund with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in Institutional Shares of the Fund for
the time periods indicated and that you sell your shares at the end of the pe-
riod.
The Example also assumes that each year your investment has a 5% return and
Fund expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in Institutional Shares
of the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------------------------------------
<S> <C> <C> <C> <C>
$63 $199 $346 $774
</TABLE>
5
<PAGE>
Government Money Fund [LOGO APPEARS HERE]
-----------------------------------------------------------------
.....................................................
FUND SUMMARY
Investment Goal Current income
consistent with preserving
capital and maintaining
liquidity
Investment Focus Money market
instruments issued or
guaranteed by the U.S.
government, its agencies and
instrumentalities
Share Price Volatility Very
low
Principal Investment
Strategy Investing in a
portfolio of high quality
short-term debt securities
issued by the U.S. government,
its agencies and
instrumentalities designed to
allow the Fund to maintain a
stable net asset value per
share
Investor Profile Conservative
institutional investors
seeking current income from
their investment
Investment Objective
The Government Money Fund seeks as high a level of current income as is consis-
tent with liquidity and stability of principal.
Investment Strategy of the Government Money Fund
The Government Money Fund invests substantially all of its assets in high qual-
ity U.S. dollar-denominated money market instruments, including mortgage-backed
securities, issued or guaranteed by the U.S. government, its agencies and in-
strumentalities and fully collateralized repurchase agreements. In managing the
Fund, the Adviser assesses current and projected market conditions, particu-
larly interest rates. Based on this assessment, the Adviser uses gradual shifts
in portfolio maturity to respond to expected changes and selects securities
that it believes offer the most attractive risk/return trade off.
The Fund invests only in money market instruments with a remaining maturity of
13 months or less that the Adviser believes present minimal credit risk. The
Fund maintains an average weighted remaining maturity of 90 days or less and
broadly diversifies its investments among securities with various maturities.
Principal Risks of Investing in the Government Money Fund
The prices of the Fund's fixed income securities respond to economic develop-
ments, particularly interest rate changes, as well as to perceptions about the
creditworthiness of individual issuers, including governments. Generally, the
Fund's fixed income securities will decrease in value if interest rates rise.
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. Your invest-
ment is also subject to the risk that the investment return generated by the
Fund may be less than the rate of inflation. A Fund share is not a bank deposit
and is not insured or guaranteed by the FDIC or any government agency. Although
a money market fund seeks to keep a constant price per share of $1.00, you may
lose money by investing in the Fund.
The Fund's U.S. Government securities are not guaranteed against price move-
ments due to changing interest rates. Obligations issued by some U.S. Govern-
ment agencies are backed by the U.S. Treasury, while others are backed solely
by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own
resources.
The mortgages underlying mortgage-backed securities may be paid off early,
which makes it difficult to determine their actual maturity and therefore cal-
culate how they will respond to changing interest rates.
6
<PAGE>
-------------------------------------------------------------
.......................................
................................
Performance Information
Institutional Shares of the Fund have less than one calendar year's perfor-
mance. For this reason, the performance information shown below is for the
Fund's other class of shares (Shares) that is not offered in this prospectus.
The Fund's Institutional Shares and Shares would have substantially similar an-
nual returns, because both share classes are invested in the same portfolio of
securities. Annual returns will differ only to the extent that Institutional
Shares and Shares do not have the same expenses. In reviewing this performance
information, however, you should be aware that Shares have a 0.40% (annualized)
Administrative Servicing fee, while Institutional Shares have a 0.15%
(annualized) Administrative Servicing fee. If the expenses of the Institutional
Shares were reflected, performance would be higher.
The bar chart and the performance table below illustrate the risks and volatil-
ity of an investment in the Fund. Of course, the past performance of Shares of
the Fund does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Shares from year
to year.
[THE TABLE BELOW WAS REPRESENTED IN THE PRINTED MATERIAL AS A BAR GRAPH]
1989 8.88%
1990 7.98%
1991 5.80%
1992 3.95%
1993 2.77%
1994 3.83%
1995 5.54%
1996 4.99%
1997 5.09%
1998 5.15%
Best Quarter Worst Quarter
2.58% 0.67%
(12/31/95) (6/30/93)
The Fund's performance for the six month period ending June 30, 1999 was 1.89%.
This table shows the Fund's average annual total returns of the Fund's Shares
for the periods ended December 31, 1998.
<TABLE>
<CAPTION>
1 5 10
Year Years Years
- -------------------------------------------------
<S> <C> <C> <C>
Government Money Fund (Shares) 5.15% 4.91% 4.75%
</TABLE>
Call 1-800-861-3430 for the Fund's most current 7-day yield.
Fund Fees and Expenses
Every mutual fund has operating expenses to pay for services such as profes-
sional advisory, shareholder, administration and custody services and other
costs of doing business. This table describes the fees and expenses that you
may pay if you buy and hold Institutional Shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
Institutional Shares
<S> <C> <C>
Management Fees 0.25%
Other Expenses
Administrative Servicing Fee 0.15%
Other Operating Expenses 0.22%
Total Other Expenses 0.37%
- --------------------------------------------------------
Total Annual Fund Operating
Expenses 0.62%*
</TABLE>
* The Funds annual operating expenses are based on actual fees and estimated
expenses for the current fiscal year. The Fund's actual total annual fund op-
erating expenses for the most recent fiscal year would have been less than
the amount shown above as a result of the Adviser's voluntary fee waivers.
The Adviser has voluntarily agreed to waive its investment advisory fee or
other fees in an amount equal to the administrative servicing fee paid by the
Fund. The Adviser may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses have been
0.25%. For more information about these fees, see "Investment Adviser."
Example
This Example is intended to help you compare the cost of investing in Institu-
tional Shares of the Fund with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in Institutional Shares of the Fund for
the time periods indicated and that you sell your shares at the end of the pe-
riod.
The Example also assumes that each year your investment has a 5% return and
Fund expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in Institutional Shares
of the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------------------------------------
<S> <C> <C> <C> <C>
$63 $199 $346 $774
</TABLE>
7
<PAGE>
-------------------------------------------------------------
.......................................
................................
More Information About Risk
Fixed Income Risk
(All Funds) The market value of fixed income investments change in response to
interest rate changes and other factors. During periods of falling interest
rates, the values of outstanding fixed income securities generally rise. More-
over, while securities with longer maturities tend to produce higher yields,
the prices of longer maturity securities are also subject to greater market
fluctuations as a result of changes in interest rates.
Call Risk
(All Funds) During periods of falling interest rates, certain debt obliga-
tions with high interest rates may be prepaid (or "called") by the issuer
prior to maturity. This may cause a Fund's average weighted maturity to fluc-
tuate, and may require a Fund to invest the resulting proceeds at lower in-
terest rates.
Credit Risk
(All Funds) The possibility that an issuer will be unable to make timely pay-
ments of either principal or interest.
Event Risk
(All Funds) Securities may suffer declines in credit quality and market value
due to issuer restructurings or other factors. This risk should be reduced
because of the Fund's multiple holdings.
Mortgage-Backed Securities
(All Funds) Mortgage-backed securities are fixed income securities representing
an interest in a pool of underlying mortgage loans. They are sensitive to
changes in interest rates, but may respond to these changes differently from
other fixed income securities due to the possibility of prepayment of the un-
derlying mortgage loans. As a result, it may not be possible to determine in
advance the actual maturity date or average life of a mortgage-backed security.
Rising interest rates tend to discourage refinancings, with the result that the
average life and volatility of the security will increase, exacerbating its de-
crease in market price. When interest rates fall, however, mortgage-backed se-
curities may not gain as much in market value because of the expectation of ad-
ditional mortgage prepayments that must be reinvested at lower interest rates.
Prepayment risk may make it difficult to calculate the average maturity of a
portfolio of mortgage-backed securities and, therefore, to assess the volatil-
ity risk of that portfolio.
Year 2000 Risk
(All Funds) The Funds depend on the smooth functioning of computer systems in
almost every aspect of their business. Like other mutual funds, businesses and
individuals around the world, the Funds could be adversely affected if the com-
puter systems used by their service providers do not properly process dates on
and after January 1, 2000, and distinguish between the year 2000 and the year
1900. This is commonly known as the "Year 2000 Problem." The Adviser and the
Funds' other service providers advise that they are taking steps to address the
Year 2000 Problem with respect to the computer systems that they use. Current-
ly, they do not anticipate that the transition to the 21st Century will have
any material impact on their ability to continue to service the Funds at cur-
rent levels. At this time, however, there can be no assurance that their ef-
forts will be sufficient to avoid any adverse impact on the Funds as a result
of the Year 2000 Problem. In addition, the Funds and their shareholders may ex-
perience losses as a result of computer difficulties experienced by issuers of
portfolio securities or third parties, such as custodians, banks, broker-
dealers or others with which the Funds do business.
Each Fund's Other Investments
In addition to the investments and strategies described in this prospectus,
each Fund also may invest in other securities, use other strategies and engage
in other investment practices. These investments and strategies, as well as
those described in this prospectus, are described in detail in our Statement of
Additional Information. Of course, a Fund cannot guarantee that it will achieve
its investment goal.
Investment Adviser
United States Trust Company of New York and U.S. Trust Company (together, U.S.
Trust or the Adviser) serve as investment adviser to each Fund. United States
Trust Company of New York is a state-chartered bank and trust company and a
member bank of the Federal Reserve System. U.S. Trust Company is a Connecticut
state bank and trust company. Each is a wholly-owned subsidiary of U.S. Trust
Corporation, a registered bank holding company.
U.S. Trust is one of the oldest investment management companies in the country.
Since 1853, U.S. Trust has been a leader in wealth management for sophisticated
investors providing trust and banking services to individuals, corporations and
institutions, both nationally and
8
<PAGE>
-------------------------------------------------------------
.......................................
................................
internationally, including investment management, estate and trust administra-
tion, financial planning, corporate trust and agency banking, and personal and
corporate banking. On December 31, 1998, U.S. Trust had approximately $65 bil-
lion in aggregate assets under management. United States Trust Company of New
York has its principal offices at 114 W. 47th Street, New York, NY 10036. U.S.
Trust Company has its principal offices at 225 High Ridge Road, East Building,
Stamford, CT 06905.
The Adviser makes investment decisions for each Fund and continuously reviews,
supervises and administers each Fund's investment program.
The Board of Directors of Excelsior Funds, Inc. supervises the Adviser and es-
tablishes policies that the Adviser must follow in its management activities.
For the fiscal year ended March 31, 1999, U.S. Trust received advisory fees, as
a percentage of average daily net assets, of:
<TABLE>
<S> <C>
Money Fund 0.20%
Government Money Fund 0.22%
</TABLE>
Purchasing, Selling and Exchanging Fund Shares
This section tells you how to buy, sell (sometimes called "redeem") or exchange
Institutional Shares of the Funds.
Institutional Shares
. No sales charge
. No 12b-1 fees
. No minimum initial or subsequent investment
Institutional Shares are offered only to financial institutions investing for
their own or their customers' accounts. For information on how to open an ac-
count and set up procedures for placing transactions call (800) 909-1989 (from
overseas, call (617) 557-1755). Customers of financial institutions should con-
tact their institutions for information on their accounts.
How to Purchase Fund Shares
You may purchase shares directly by:
. Mail
. Telephone, or
. Wire
To purchase shares directly from us, please call (800) 909-1989 (from overseas,
call (617) 557-1755), or complete and send in the enclosed application to Ex-
celsior Funds, c/o Chase Global Funds Services Company, P.O. Box 2798, Boston,
MA 02208-2798. Unless you arrange to pay by wire, write your check, payable in
U.S. dollars, to "Excelsior Funds" and include the name of the appropriate
Fund(s) on the check. A Fund cannot accept third-party checks, credit card
checks or cash. To purchase shares by wire, please call us for instructions.
Federal funds and registration instructions should be wired through the Federal
Reserve System to:
The Chase Manhattan Bank
ABA #021000021
Excelsior Funds
Credit DDA 910-2-733046
[Account Registration]
[Account Number]
[Wire Control Number]
Investors making initial investments by wire must promptly complete the en-
closed application and forward it to the address indicated on the application.
Investors making subsequent investments by wire should follow the above in-
structions.
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its proce-
dures. Your institution may charge a fee for its services, in addition to the
fees charged by the Fund. You will also generally have to address your corre-
spondence or questions regarding a Fund to your institution.
The Funds' distributor may institute promotional incentive programs for deal-
ers, which will be paid for by the distributor out of its own assets and not
out of the assets of the Funds. Under any such program, the distributor may
provide incentives, in the form of cash or other compensation, including mer-
chandise, airline vouchers, trips and vacation packages, to dealers selling
shares of a Fund. If any such program is made available to any dealer, it will
be made available to all dealers on the same terms.
General Information
You may purchase shares on any day that the New York Stock Exchange (NYSE) and
the Adviser are open for business (a "Business Day"). A Fund may reject any
purchase request if it is determined that accepting the request would not be in
the best interests of the Fund or its shareholders.
9
<PAGE>
-------------------------------------------------------------
.......................................
................................
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Fund receives your purchase request in good or-
der. We consider requests to be in "good order" when all required documents are
properly completed, signed and received.
Each Fund calculates its NAV twice each Business Day at 1:00 p.m., Eastern time
and at the regularly-scheduled close of normal trading on the NYSE (normally,
4:00 p.m., Eastern time). For you to be eligible to receive dividends declared
on the day you submit your purchase request, a Fund must receive your request
in good order before 1:00 p.m., Eastern time and federal funds (readily avail-
able funds) before the regularly-scheduled close of normal trading on the NYSE.
How We Calculate NAV
NAV for one Fund share is the value of that share's portion of all of the as-
sets in the Fund.
In calculating NAV for the Funds, we generally value the securities in a Fund's
investment portfolio using the amortized cost valuation method, which is de-
scribed in detail in our Statement of Additional Information. If this method is
determined to be unreliable during certain market conditions or for other rea-
sons, a Fund may value its portfolio at market price or fair value prices may
be determined in good faith using methods approved by the Board of Directors.
How to Sell Your Fund Shares
You may sell shares directly by:
. Mail
. Telephone, or
. By Writing a Check Directly From Your Account
Holders of Institutional Shares may sell (sometimes called "redeem") shares by
following procedures established when they opened their account or accounts. If
you have questions, call (800) 909-1989 (from overseas, call (617) 557-1755).
You may sell your shares by sending a written request for redemption to:
Excelsior Funds
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Please be sure to indicate the number of shares to be sold, identify your ac-
count number and sign the request.
If you own your shares directly and previously indicated on your account appli-
cation or arranged in writing to do so, you may sell your shares on any Busi-
ness Day by contacting a Fund directly by telephone at (800) 909-1989 (from
overseas, call (617) 557-1755). We may reject a telephone redemption request if
we deem it advisable to do so.
If you would like to sell $50,000 or more of your shares, or any amount if the
proceeds are to be sent to an address other than the address of record, please
notify the Fund in writing and include a signature guarantee by a bank or other
financial institution (a notarized signature is not sufficient).
If you own your shares directly and previously indicated on your account appli-
cation or arranged in writing to do so, you may sell your shares by writing a
check for at least $500 drawn on your account. Checks are available free of
charge, and may be obtained by calling (800) 909-1989 (from overseas, call
(617) 557-1755). You cannot use a check to close your account.
The sale price of each share will be the next NAV determined after the Fund re-
ceives your request in good
order.
Receiving Your Money
Normally, we will send your sale proceeds the next Business Day after we re-
ceive your redemption request in good order. Your proceeds can be wired to your
bank account or sent to you by check. If you recently purchased your shares by
check, redemption proceeds may not be available until your check has cleared
(which may take up to 15 Business Days).
Redemptions in Kind
We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise, we might pay all or part of
your redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption in kind). It is highly unlikely that your shares
would ever be redeemed in kind, but if they were you would probably have to pay
transaction costs to sell the securities distributed to you, as well as taxes
on any capital gains from the sale as with any redemption.
Involuntary Sales of Your Shares
If your account balance drops below $500 because of redemptions, you may be re-
quired to sell your shares. But, we will always give you at least 60 days'
written notice to give you time to add to your account and avoid the sale of
your shares.
10
<PAGE>
-------------------------------------------------------------
.......................................
................................
Suspension of Your Right to Sell Your Shares
A Fund may suspend your right to sell your shares if the NYSE restricts trad-
ing, the SEC declares an emergency or for other reasons. More information about
this is in our Statement of Additional Information.
How to Exchange Your Shares
You may exchange your shares on any Business Day for Institutional Shares of
any portfolio of Excelsior Institutional Trust. In order to protect other
shareholders, we may limit your exchanges to no more than six per year, and we
may reject any exchange request. Shares can be exchanged directly by mail, or
by telephone if you previously selected the telephone exchange option on the
account application.
If you recently purchased shares by check, you may not be able to exchange your
shares until your check has cleared (which may take up to 15 Business Days).
This exchange privilege may be changed or canceled at any time.
When you exchange shares, you are really selling your shares and buying other
Fund shares. So, your sale price and purchase price will be based on the NAV
next calculated after the Fund receives your exchange request in good order.
Telephone Transactions
Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Funds have certain safeguards
and procedures to confirm the identity of callers and the authenticity of in-
structions, the Funds are not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you or
your financial institution transact with a Fund over the telephone, you will
generally bear the risk of any loss.
Authorized Intermediaries
Certain intermediaries, such as brokers or other shareholder organizations, are
authorized to accept purchase, redemption and exchange requests for Fund
shares. These intermediaries may authorize other organizations to accept pur-
chase, redemption and exchange requests for Fund shares. These requests are
normally executed at the NAV next determined after the intermediary receives
the request in good order. Authorized intermediaries are responsible for trans-
mitting requests and delivering funds on a timely basis.
Shareholder Servicing
The Funds are permitted to pay a shareholder servicing fee to certain share-
holder organizations for providing services to their customers who hold shares
of the Funds. These services may include assisting in the processing of pur-
chase, redemption and exchange requests and providing periodic account state-
ments. The shareholder servicing fee may be up to 0.15% of the average daily
net asset value of Fund shares held by clients of a shareholder organization.
Dividends, Distributions and Taxes
Each Fund distributes its income by declaring a dividend daily and paying accu-
mulated dividends monthly.
Each Fund makes distributions of capital gains, if any, at least annually. If
you own Fund shares on a Fund's record date, you will be entitled to receive
the distribution.
Dividends and distributions for shares held of record by U.S. Trust and its af-
filiates or correspondent banks will be paid in cash. Otherwise, dividends and
distributions will be paid in the form of additional Fund shares unless you
elect to receive payment in cash. To elect cash payment, you must notify the
Fund in writing prior to the date of the distribution. Your election will be
effective for dividends and distributions paid after the Fund receives your
written notice. To cancel your election, simply send the Fund written notice.
Taxes
Please consult your tax adviser regarding your specific questions about feder-
al, state and local income taxes. Below we have summarized some important tax
issues that affect the Funds and their shareholders. This summary is based on
current tax laws, which may change.
Each Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from a Fund may be taxable whether or not you reinvest them. Income
distributions are generally taxable at ordinary income tax rates. Capital gains
distributions are generally taxable at the rates applicable to long-term capi-
tal gains. Each sale or exchange of Fund shares is a taxable event.
More information about taxes is in the Statement of Additional Information.
11
<PAGE>
Excelsior Funds, Inc.
Investment Adviser
United States Trust Company of New York
114 W. 47th Street
New York, New York 10036
U.S. Trust Company
225 High Ridge Road
East Building
Stamford, Connecticut 06905
Distributor
Edgewood Services, Inc.
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-5829
More information about each Fund is available without charge through the fol-
lowing:
Statement of Additional Information (SAI)
The SAI dated August 1, 1999 includes detailed information about Excelsior
Funds, Inc. The SAI is on file with the SEC and is incorporated by reference
into this prospectus. This means that the SAI, for legal purposes, is a part of
this prospectus.
Annual and Semi-Annual Reports
These reports contain additional information about the Funds' investments. The
Annual Report also lists each Fund's holdings and contains information from the
Fund's managers about strategies, recent market conditions and trends.
To Obtain More Information:
By Telephone: Call (800) 909-1989 (from overseas, call (617) 557-1755)
By Mail: Excelsior Funds, 73 Tremont Street, Boston, Massachusetts 02108-3913
By Internet: http://www.excelsiorfunds.com
From the SEC: You can also obtain the SAI or the Annual and Semi-Annual re-
ports, as well as other information about Excelsior Funds, Inc., from the SEC's
website ("http://www.sec.gov"). You may review and copy documents at the SEC
Public Reference Room in Washington, DC (for information call 1-800-SEC-0330).
You may request documents by mail from the SEC, upon payment of a duplicating
fee, by writing to: Securities and Exchange Commission, Public Reference Sec-
tion, Washington, DC 20549-6009. Excelsior Funds, Inc.'s Investment Company Act
registration number is 811-4088.
