<PAGE>
Excelsior Funds, Inc.
Excelsior Tax-Exempt Funds, Inc.
Excelsior Institutional Trust
(the "Companies")
Supplement dated March 8, 2000
To the Prospectuses dated August 1, 1999
On January 13, 2000, The Charles Schwab Corporation ("Schwab") and U.S.
Trust Corporation ("U.S. Trust") announced that they had signed an agreement to
merge (the "Merger"). The Merger is subject to Federal Reserve Board and other
regulatory approvals, and the approval of U.S. Trust shareholders. Under the
terms of the agreement, U.S. Trust will retain its name and continue to provide
investment management, fiduciary, financial planning and private banking
services. As a result, United States Trust Company of New York ("U.S. Trust NY")
and U.S. Trust Company ("U.S. Trust Co." and together with U.S. Trust NY, the
"Adviser") both subsidiaries of U.S. Trust, will continue to serve as the
investment advisers to the Companies. The Merger, however, will represent a
change of ownership of the Adviser's parent corporation and, as such, may have
the effect under the Investment Company Act of 1940 of terminating the existing
advisory agreements between the Companies and the Adviser and the sub-advisory
agreement between the Adviser and U.S. Trust Company, N.A., with respect to the
California Tax-Exempt Income Fund.
As a consequence of the Merger and in order to facilitate the
investment management by the Companies of their respective portfolios, each of
the Boards of Directors of Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds,
Inc. and the Board of Trustees of Excelsior Institutional Trust has proposed for
the approval of its respective shareholders a new advisory agreement with the
Adviser. The Board of Directors of Excelsior Tax-Exempt Funds, Inc. has also
proposed for the approval of the shareholders of the California Tax-Exempt
Income Fund a new sub-advisory agreement with the Adviser and U.S. Trust Company
N.A. No change in fees will be proposed under the new advisory and sub-advisory
agreements. The proposed new advisory agreements will be submitted to a vote of
shareholders of the Companies on or about May 3, 2000. A proxy statement will be
mailed to the Companies' shareholders in advance of the meeting providing
further detail with respect to the proposed new advisory agreements, as well as
several other proposals.
