EXCELSIOR INSTITUTIONAL TRUST, 485APOS, 1995-12-19

EXCELSIOR INSTITUTIONAL TRUST
485APOS, 1995-12-19

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EXCELSIOR INSTITUTIONAL EQUITY FUND
EXCELSIOR INSTITUTIONAL INCOME FUND
EXCELSIOR INSTITUTIONAL TOTAL RETURN BOND FUND
EXCELSIOR INSTITUTIONAL BOND INDEX FUND
EXCELSIOR INSTITUTIONAL BALANCED FUND
EXCELSIOR INSTITUTIONAL EQUITY GROWTH FUND
EXCELSIOR INSTITUTIONAL INTERNATIONAL EQUITY FUND

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Excelsior Institutional Trust
73 Tremont Street
Boston, Massachusetts 02108
(617) 557-8000
For initial purchase and existing account information, call (800)909-1989
(From overseas, call (617) 557-1755)
For current prices and yield information, call (800) 861-3430
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This Prospectus describes seven mutual funds offered to institutional
investors by Excelsior Institutional Trust (the "Trust"), an open-end
diversified management investment company. The mutual funds, Excelsior
Institutional Equity Fund, Excelsior Institutional Income Fund, Excelsior
Institutional Total Return Bond Fund, Excelsior Institutional Bond Index Fund,
Excelsior Institutional Balanced Fund, Excelsior Institutional Equity Growth
Fund and Excelsior Institutional International Equity Fund (each, a "Fund";
collectively, the "Funds"), are separate series of the Trust.

This Prospectus sets forth concisely the information about the Funds that a
prospective investor should consider before investing. Investors should read
this Prospectus carefully and retain it for future reference. A Statement of
Additional Information containing additional information about the Funds has
been filed with the Securities and Exchange Commission and is available upon
request without charge by writing to the Trust at its address shown above or by
calling (800) 909-1989. The Statement of Additional Information bears the same
date as this Prospectus and is incorporated by reference in its entirety into
this Prospectus.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, BANK INSURANCE FUND, FEDERAL RESERVE BOARD, OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND IS SUBJECT TO INVESTMENT
RISK, INCLUDING LOSS OF PRINCIPAL.

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 ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

Prospectus dated February __, 1996

Each Fund has its own investment objective, as follows:

The investment objective of EXCELSIOR INSTITUTIONAL EQUITY FUND (the
"Equity Fund") is to provide long-term capital appreciation.

The investment objective of EXCELSIOR INSTITUTIONAL BALANCED FUND (the
"Balanced Fund") is to provide a high total return from a diversified portfolio
of equity and fixed income securities.

Unlike the Equity Fund, Income Fund, Total Return Bond Fund, Balanced Fund,
Equity Growth Fund and International Equity Fund, which directly acquire and
manage their own portfolios of securities, the Bond Index Fund seeks to achieve
its investment objective by investing all of its investable assets in the Bond
Index Portfolio, a series of Federated Investment Portfolios (the "Federated
Portfolios"), an open-end management investment company. The Bond Index
Portfolio has the same investment objective and policies as the Bond Index Fund.
The Bond Index Fund invests in the Bond Index Portfolio through a two-tier
master/feeder fund structure. See "Special Information Concerning Hub and
Spoke(R) Structure Applicable to the Bond Index Fund" at page [__]. Because the
Bond Index Fund invests through the Bond Index Portfolio, all references in this
Prospectus to the Bond Index Fund include the Bond Index Portfolio, except as
otherwise noted.

United States Trust Company of New York ("U.S. Trust") is the investment
adviser for the Equity Fund, Income Fund and Total Return Bond Fund.

United States Trust Company of The Pacific Northwest ("U.S. Trust Pacific")
is the investment adviser for the Balanced Fund, Equity Growth Fund and
International Equity Fund. U.S. Trust Pacific has delegated the daily management
of the security holdings of these Funds to the investment managers named below,
acting as subadvisers.

Balanced Fund............. Becker Capital Management, Inc.
Equity Growth Fund........ Luther King Capital Management
International Equity Fund. Harding, Loevner Management, L.P.

Federated Management is the investment adviser for the Bond Index
Portfolio, which is the series of Federated Portfolios in which the assets of
the Bond Index Fund are invested. Federated Management has delegated the daily
management of the security holdings of the Bond Index Portfolio to U.S. Trust,
acting as subadviser. U.S. Trust Pacific, U.S. Trust, Federated Management and
the subadvisers are referred to collectively as the "investment managers".

For more information on the investment advisers and subadvisers of the
Funds, please refer below to the section entitled "Management of the Trust -
Investment Managers".

<PAGE>

EXCELSIOR INSTITUTIONAL TRUST
SUMMARY OF EXPENSES

The following table provides (i) a summary of estimated expenses relating
to purchases and sales of shares of the Funds, and the aggregate annual
operating expenses for the Funds, as a percentage of average net assets of the
Funds, and (ii) an example illustrating the dollar cost of such estimated
expenses on a $1,000 investment in each Fund.

The table illustrates that investors in the Funds incur no shareholder
transaction expenses imposed by the Trust, although in connection with purchases
and redemptions of shares of the Funds, some institutional investors
("Shareholder Organizations") may charge their customers account fees for
investment and other cash management services. See "How to Purchase, Exchange
and Redeem Shares" below. Customers should contact their Shareholder
Organization directly for further information. Investments in a Fund are subject
to the operating expenses set forth below for each Fund as a percentage of the
average daily net assets of the Fund. Expenses of the Funds are discussed below
under "Management of the Trust".

Shareholder Transaction Expenses

Sales Load Imposed on Purchases..................... None
Sales Load Imposed on Reinvested Dividends.......... None
Deferred Sales Load................................. None
Redemption Fees..................................... None
Exchange Fees....................................... None

<PAGE>

Expense Table
Annual Operating Expenses
Total
Return Bond***
Equity Income Bond Index
Fund Fund Fund Fund
Advisory Fees (after waiver) 0.40%* 0.20%* 0.20%* 0.0%*
12b-1 Fees None None None None
Other Expenses
Administrative Fees 0.15% 0.15% 0.15% 0.08%**
Shareholder Servicing Fees
(after waiver) 0% 0% 0% 0%
Other Operating Expenses
(after waivers and 0.15% 0.15% 0.15% 0.22%
reimbursement)

Total Operating Expenses 0.70% 0.50% 0.50% 0.30%
(after waivers and
reimbursements)

Equity International
Balanced Growth Equity
Fund Fund Fund
Advisory Fees (after waiver) 0.40%* 0.40%* 0.50%*
12b-1 Fees None None None
Other Expenses
Administrative Fees 0.15% 0.15% 0.20%
Shareholder Servicing Fees
(after waiver) 0% 0% 0%
Other Operating Expenses
(after waivers and 0.15% 0.15% 0.20%
reimbursement)

Total Operating Expenses 0.70% 0.70% 0.90%
(after waivers and
reimbursements)

<PAGE>

Example

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

1 Year 3 Years 5 Years 10 Years
Equity Fund, Balanced Fund
and Equity Growth Fund $7 $22 $39 $87
Income Fund and Total Return Bond $5 $16 $28 $63
Fund
Bond Index Fund $3 $10 $17 $38
International Equity Fund $9 $29 $50 $111
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* Each investment adviser and administrator has agreed to waive
certain fees. Institutional investors may enter into an asset
management services agreement with U.S. Trust Pacific pursuant
to which the investor may agree to pay annual fees calculated
as a specified percentage of average net assets. In addition,
Shareholder Organizations may charge their customers account
fees for investment and other cash management services. See
"How to Purchase, Exchange and Redeem Shares" below.
Accordingly, the examples do not reflect an amount for any such
fees paid directly to U.S. Trust Pacific by an institutional
investor or to a Shareholder Organization by its customers.

** After waiver.

***The expenses indicated for the Bond Index Fund include the Fund's pro rata
share of the aggregate annual operating expenses of the Bond Index Portfolio,
in which all of the investable assets of the Bond Index Fund are invested.
The Trustees of the Trust believe that the aggregate per share expenses of
the Bond Index Fund and the Fund's pro rata share of the expenses for the
Bond Index Portfolio will be less than or approximately equal to the expenses
which the Bond Index Fund would incur if the Trust retained the services of
an investment adviser and the assets of the Bond Index Fund were invested
directly in the type of securities being held by the Bond Index Portfolio.

The example above should not be considered a representation of past or
future expenses or performance. Actual expenses and returns may be greater or
less than those shown. The purpose of the table is to assist investors in
understanding the various costs and expenses that shareholders of each of the
Funds will bear directly or indirectly. The expense table and example reflect
voluntary undertakings (i) by U.S. Trust, U.S. Trust Pacific, Federated
Management and the shareholder servicing agents to waive certain of their fees,
and (ii) by U.S. Trust to reimburse the Trust for certain expenses. After giving
effect to such waivers and reimbursements, the aggregate operating expenses
(including amortization of organizational expenses but exclusive of taxes,
interest, brokerage commissions and extraordinary expenses) of each Fund will be
as shown above. Without such waivers and reimbursements, (a) the advisory fees
paid would equal (x) 0.65% of the average daily net assets of the Equity,
Income, Total Return Bond, Balanced and Equity Growth Funds, (y) 0.25% of the
average daily net assets of the Bond Index Fund, and (z) 1.00% of the average
daily net assets of the International Equity Fund; (b) the administrative fees
would equal (i) 0.15% of the average daily net assets of the Equity, Income,
Total Return Bond, Balanced and Equity Growth Funds, (ii) 0.20% of the average
daily net assets of the International Equity Fund and (iii) 0.46% of the average
daily net assets of the Bond Index Fund; (c) the shareholder servicing fees
would equal 0.25% of the average daily net assets of each Fund; (d) other
expenses would equal the following percentages of the average daily net assets
of the Funds: Equity Fund, 1.62%, Income Fund, 0.60%, Total Return Bond Fund,
0.88%, Bond Index Fund, 0.56%, Balanced Fund, 0.27%, Equity Growth Fund, 0.31%,
and International Equity Fund, 1.92%; and (e) aggregate total operating expenses
would equal the following percentages of the average daily net assets of each
Fund: Equity Fund, 2.67%, Income Fund, 1.65%, Total Return Bond Fund, 1.93%,
Bond Index Fund, 1.52%, Balanced Fund, 1.32%, Equity Growth Fund, 1.36%, and
International Equity Fund, 3.32%. For more information with respect to the
expenses of each of the Funds see "Management of the Trust". Fee waivers and
expense reimbursements are terminable at any time in the sole discretion of the
service providers waiving fees or reimbursing expenses.

FINANCIAL HIGHLIGHTS

The following selected data for a share outstanding for the indicated
periods has been audited by Ernst & Young LLP. The Trust's Annual Report, which
includes the independent auditors' report and is incorporated by reference into
the Statement of Additional Information, includes a discussion of those factors,
strategies and techniques that materially affected its performance during the
period of the report, as well as certain related information. A copy of the
Trust's Annual Report will be made available without charge upon request.

<PAGE>

<TABLE>

Financial Highlights
Commencement of operations through May 31, 1995 (a)
<CAPTION>
Total
Return Bond
Selected data for a share outstanding throughout each period Equity Income Bond Index
are as follows: Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......................... $ 7.00 $ 7.00 $ 7.00 $ 7.00

Investment Operations:
Net investment income..................................... 0.05 0.19 0.18 0.46
Net realized and unrealized gain from Portfolio Series.... 0.70 0.33 0.47 0.28
Total from Investment Operations......................... 0.75 0.52 0.65 0.74

Distributions:
From net investment income................................ (0.02) (0.19) (0.18) (0.46)
In excess of net investment income........................ -- -- -- --
From net realized gains................................... -- -- -- (0.02)

Net Asset Value, End of Period............................... $ 7.73 $ 7.33 $ 7.47 $ 7.26
Total Return (b) (e)......................................... 10.80% 7.51% 9.40% 11.03%
Ratios and Supplemental Data:
Ratios to Average Net Assets
Expenses (c)(d)........................................... 0.12% 0.12% 0.12% 0.12%
Net Investment Income (c)................................. 2.44% 7.17% 7.09% 7.33%
Net Assets at end of Period (000's omitted).................. $15,409 $33,230 $24,913 $15,565
Portfolio Turnover Rate (f) 34% 34% 84% 67%

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(a)Commencement of operations: 01/16/95 01/19/95 01/16/95 07/11/95
(b)Not annualized
(c)Annualized
(d)Reflects the Fund's proportionate share of the expenses of
the corresponding portfolio of the St. James Portfolios (the
"Portfolio Series") in which the Fund had invested its
investable assets prior to December 18, 1995 (January 2,
1996 in the case of the Bond Index Fund) as well as
voluntary fee waivers and reimbursements by agents of the
Portfolio Series and a voluntary fee waiver and an expense
reimbursement by agents of the Trust. If the voluntary
waivers and expense reimbursements had not been in place,
the ratios of expenses and net investment income to average
net assets from commencement of operations to May 31, 1995
would have been as follows:
Expenses.................................................. 2.67% 1.65% 1.93% 1.23%
Net Investment Income (Loss).............................. (0.12)% 5.65% 5.28% 6.22%
(e)Each investment adviser agreed to waive all investment advisory fees during
the period indicated. While none of the portfolios of the Portfolio Series
corresponding to the Funds paid any fee to its adviser during the period
indicated, each institutional investor entered into an asset management
services agreement with U.S. Trust Pacific and agreed to pay annual fees
calculated as a specific percentage of average net assets.
(f)Turnover rate for the corresponding portfolio of the
Portfolio Series.
</TABLE>

<PAGE>

<TABLE>
Financial Highlights (continued)
Commencement of operations through May 31, 1995 (a)
<CAPTION>

Equity International
Selected data for a share outstanding throughout each period are Balanced Growth Equity
as follows: Fund Fund Fund
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.............................. $ 7.00 $ 7.00 $ 7.00

Investment Operations:
Net investment income........................................... 0.35 0.08 0.08
Net realized and unrealized gain from Portfolio Series.......... 0.64 0.85 0.80
Total from Investment Operations............................. 0.99 0.93 0.88

Distributions:
From net investment income...................................... (0.26) (0.06) --
In excess of net investment income.............................. -- -- --
From net realized gains......................................... (0.03) -- --
Net Asset Value, End of Period.................................... $ 7.70 $ 7.87 $ 7.88
Total Return (b)(e)............................................... 14.59% 13.38% 12.57%
Ratios and Supplemental Data:
Ratios to Average Net Assets
Expenses (c)(d)................................................. 0.12% 0.12% 0.25%
Net Investment Income (c)....................................... 5.55% 1.27% 3.47%
Net Assets at end of Period (000's omitted)....................... $74,478 $52,347 $8,804
Portfolio Turnover Rate (f) 57% 122% 8%
- -----------------------------------
(a)Commencement of operations: 07/11/94 07/11/94 01/24/95
(b)Not annualized
(c)Annualized
(d)Reflects the Fund's proportionate share of the expenses of the
corresponding portfolio of the St. James Portfolios (the
"Portfolio Series") in which the Fund had invested its
investable assets prior to December 18, 1995 as well as
voluntary fee waivers and reimbursements by agents of the
Portfolio Series and a voluntary fee waiver and an expense
reimbursement by agents of the Trust. If the voluntary
waivers and expense reimbursements had not been in place,
the ratios of expenses and net investment income to average
net assets from commencement of operations to May 31, 1995
would have been as follows:
Expenses.................................................... 1.32% 1.36% 3.32%
Net Investment Income (Loss)................................ 4.35% 0.03% 0.40%
(e)Each investment adviser agreed to waive all investment advisory fees during
the period indicated. While none of the portfolios of the Portfolio Series
corresponding to the Funds paid any fee to its adviser during the period
indicated, each institutional investor entered into an asset management
services agreement with U.S. Trust Pacific and agreed to pay annual fees
calculated as a specific percentage of average net assets.
(f)Turnover rate for the corresponding portfolio of the Portfolio
Series.
</TABLE>

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

Introduction

Excelsior Institutional Trust was organized as a business trust under the
laws of the State of Delaware, with the Funds established as separate series of
the Trust, on April 27, 1994. Shares of the Funds are continuously sold to
institutional investors.

Unless otherwise stated, each of the investment objectives, policies and
strategies discussed herein and in the Statement of Additional Information are
deemed "non-fundamental", i.e., the approval of a Fund's shareholders is not
required to change its investment objective or any of its investment policies
and strategies. Likewise, the approval of the investors in the Bond Index
Portfolio is not required to change the Bond Index Portfolio's investment
objective or any of the Bond Index Portfolio's investment policies and
strategies. Any changes in a Fund's (or the Bond Index Portfolio's) investment
objective, policies or strategies could result in such Fund having investment
objectives, policies and strategies different from those applicable at the time
of a shareholder's investment in such Fund.

Investment Objectives

The investment objective of EXCELSIOR INSTITUTIONAL EQUITY FUND (the
"Equity Fund") is to provide long-term capital appreciation. The Trust seeks to
achieve this investment objective by investing in companies believed to
represent good long-term values not currently recognized in the market prices of
their securities.

The investment objective of EXCELSIOR INSTITUTIONAL INCOME FUND (the
"Income Fund") is to provide as high a level of current interest income as is
consistent with moderate risk of capital and maintenance of liquidity. The Trust
seeks to achieve this investment objective by investing principally in a broad
range of investment-grade fixed income securities, including preferred stock,
bonds, notes and debentures, as well as money market instruments.

The investment objective of EXCELSIOR INSTITUTIONAL TOTAL RETURN BOND FUND
(the "Total Return Bond Fund") is to maximize the total rate of return
consistent with moderate risk of capital and maintenance of liquidity. The Trust
seeks to achieve this investment objective by investing principally in a broad
range of investment grade fixed income securities, including preferred stock,
bonds, notes and debentures, as well as money market instruments. In selecting
investment opportunities, the Total Return Bond Fund will balance yield, average
maturity and risk in seeking to provide maximum preservation of purchase power.

The investment objective of EXCELSIOR INSTITUTIONAL BOND INDEX FUND (the
"Bond Index Fund") is to provide investment results that correspond to the
investment performance of the Lehman Brothers Aggregate Bond Index (the
"Aggregate Bond Index"), a broad market-weighted index which encompasses U.S.
Treasury and agency securities, corporate investment grade bonds, and
mortgage-backed securities, each with maturities greater than one year. The
Trust seeks to achieve the investment objective of the Fund by investing all the
investable assets of the Bond Index Fund in the Bond Index Portfolio, a series
of Federated Investment Portfolios (the "Federated Portfolios"), a diversified
open-end management investment company that has the same investment objective
and policies as the Bond Index Fund. The Bond Index Portfolio seeks to achieve
its investment objective by replicating the yield and total return of the
Aggregate Bond Index through a statistically selected sample of fixed income
securities. The Aggregate Bond Index is a broad market-weighted index of U.S.
investment grade fixed income securities.

The investment objective of EXCELSIOR INSTITUTIONAL BALANCED FUND (the
"Balanced Fund") is to provide a high total return from a diversified portfolio
of equity and fixed income securities. The Trust seeks to achieve this
investment objective by investing in equity and fixed income securities, as
described more fully below.

The investment objective of EXCELSIOR INSTITUTIONAL EQUITY GROWTH FUND (the
"Equity Growth Fund") is to provide a high level of capital appreciation through
investment in a diversified portfolio of common stocks with potential for
above-average growth in earnings and dividends. The Trust seeks to achieve this
investment objective by investing primarily in the common stocks of medium and
large capitalization companies which, in the opinion of the Fund's subadviser,
will present an opportunity for significant increases in earnings and/or value,
without consideration of current income.

The investment objective of EXCELSIOR INSTITUTIONAL INTERNATIONAL EQUITY
FUND (the "International Equity Fund") is to provide long-term capital
appreciation through investment in a diversified portfolio of marketable foreign
securities. The Trust seeks to achieve this investment objective by investing
primarily in foreign equity securities of issuers that the subadviser believes
to have strong balance sheets, sustainable internal growth, superior financial
results, capable and forthright management and enduring competitive advantages.

The following is a discussion of the various investment policies and
strategies employed by each Fund. Additional information about the investment
policies and strategies of each Fund appears in the Statement of Additional
Information. There can be no assurance that the investment objective of any Fund
will be achieved. Because the Bond Index Fund invests through the Bond Index
Portfolio and has the same investment policies and strategies as the Bond Index
Portfolio, all references to the Bond Index Fund include the Bond Index
Portfolio, except as otherwise noted.

U.S. Trust's Investment Philosophy and Strategies

U.S. Trust, the adviser for the Equity, Income and Total Return Bond Funds,
and the subadviser for the Bond Index Portfolio, 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 attentive and high level of service to each of its
clients.

<PAGE>

Equity Fund

Investment Philosophy. In managing investments for the Equity Fund, 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 approach begins with the conviction that all worthwhile investments
are grounded in value. U.S. Trust believes that an investor can identify
fundamental 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 Equity Fund 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
specific guidance for selection of investments, U.S. Trust uses three specific
strategies. These strategies, while identified separately, may overlap 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
complex problems such as the changing demographics and aging of the U.S.
population 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 cycle"
companies whose products are in their earlier stages of development or that seek
to exploit new markets. Frequently such companies are smaller companies, but
early life cycle companies may also include larger established companies with
new products or new markets for existing products. U.S. Trust 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. These themes include
the aging of America, the restructuring of business and industry, the
convergence of the communication and entertainment industries, the demand for
environmentally related products and services, the continued need for businesses
to become global competitors, investment in the long-term supply of energy and
the continued need to enhance productivity. U.S. Trust believes these
longer-term themes represent strong and inexorable trends. U.S. Trust also
believes that understanding the instigation, catalysts and effects of these
longer-term trends should help to identify companies that are beneficiaries of
these trends.

Income Fund and Total Return Bond Fund

Investment Philosophy. Generally, investors in fixed income securities are
best served in the long term by seeking to maximize total return. However, some
investors need to balance preservation of purchase power against the need for
current income.

As a result, the Trust is offering both objectives to investors. In the
Total Return Bond Fund, U.S. Trust will employ a total return strategy that
balances yield, average maturity and risk in seeking to provide maximum
preservation of purchase power. The Income Fund will seek to provide investors
with maximum current income commensurate with the credit quality of the Fund and
moderate risk of capital.

Bond Index Fund

Investment Philosophy. The Bond Index Fund is not managed pursuant to
traditional methods of active investment management, which involve the buying
and selling of securities based upon economic, financial, and market analyses
and investment judgment. Instead, the Bond Index Fund, utilizing a passive or
indexing investment approach, will attempt to duplicate the investment
performance of the Lehman Brothers Aggregate Bond Index (the "Aggregate Bond
Index").

The Bond Index Fund seeks to duplicate the investment performance of the
Aggregate Bond Index through statistical sampling procedures, that is, the Fund
will invest in a selected group - not the entire universe - of securities in the
Aggregate Bond Index. This group of securities, when taken together, is expected
to perform similarly to the Aggregate Bond Index as a whole. This sampling
technique is expected to enable the Bond Index Fund to track the price movements
and performance of the Aggregate Bond Index, while minimizing brokerage,
custodial and accounting costs.

The Trust expects that there will be a close correlation between the Bond
Index Fund's performance and that of the Aggregate Bond Index in both rising and
falling markets. The Bond Index Fund will attempt to maximize the correlation
between its performance and that of the Aggregate Bond Index. Over the long
term, the investment managers of the Bond Index Fund seek a correlation of 0.95
or better. In the event that a correlation of 0.95 or better is not achieved,
the Board of Trustees of the Trust will review methods for increasing such
correlation with the investment managers, such as through adjustments in
securities holdings of the Bond Index Fund. A correlation of 1.0 would indicate
a perfect correlation, which would be achieved when the Bond Index Fund's net
asset value, including the value of its dividend and capital gains
distributions, increases or decreases in exact proportion to changes in the
Aggregate Bond Index. The investment managers of the Bond Index Fund monitor the
correlation between the performance of the Bond Index Fund and the Aggregate
Bond Index on a regular basis. Factors such as the size of the Bond Index Fund's
securities holdings, transaction costs, management fees and expenses, brokerage
commissions and fees, the extent and timing of cash flows into and out of the
Bond Index Fund, and changes in the securities markets and the index itself, are
expected to account for any differences between the Bond Index Fund's
performance and that of the Aggregate Bond Index.

<PAGE>

Investment Policies

EQUITY FUND seeks to provide long-term capital appreciation by investing in
companies believed to represent good long-term values not currently recognized
in the market prices of their securities. U.S. Trust 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.

Under normal market and economic conditions, the Fund will invest at least
65% of its total assets in common stock, preferred stock and securities
convertible into common stock. Normally, not more than 35% of the Fund's total
assets may be invested in other securities and instruments including, e.g.,
investment-grade debt securities, warrants, options, and futures instruments as
described in more detail below. See "Additional Investment Strategies and
Techniques; Risk Factors" below. The Fund may hold cash or invest without
limitation in U.S. Government securities, high quality money market instruments
and repurchase agreements collateralized by the foregoing obligations, if deemed
appropriate by U.S. Trust for temporary defensive purposes. For a description of
these securities, see "Bond Index Portfolio - U.S. Government and Agency
Securities" and "Additional Investment Strategies and Techniques; Risk Factors -
Short Term Instruments" below, and the Statement of Additional Information.

In managing the Fund, U.S. Trust seeks to purchase securities having value
currently not recognized in the market price of a security, consistent with the
strategies discussed above.

Equity Fund holdings will include common stocks of companies having
capitalizations of varying amounts, and the Fund may invest a portion of its
portfolio in the securities of high growth, small companies where U.S. Trust
expects earnings and the price of the securities to grow at an above-average
rate, such as small capitalization issuers. The equity securities of small
capitalization issuers have historically been characterized by greater
volatility of returns, greater total returns, and lower dividend yields than
equity securities of large capitalization issuers. As a result, there may be a
greater fluctuation in the net asset value of the Equity Fund, and the Fund may
be required, in order to meet withdrawals by investors 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 Fund may invest in the securities of foreign issuers directly,
or indirectly through sponsored and unsponsored American Depository Receipts.
See "Additional Investment Strategies and Techniques; Risk Factors" below for
further information on foreign investments.

Because of the risks associated with common stock investments, the Equity
Fund is intended to be a long-term investment vehicle and is not designed to
provide investors with a means of speculating on short-term stock market
movements. Investors should not consider the Equity Fund a complete investment
program.

INCOME FUND seeks as high a level of current interest income as is
consistent with moderate risk of capital and maintenance of liquidity. The
Income Fund will implement this objective by lengthening the average maturity of
its holdings and purchasing higher-yielding (but relatively stable) corporate
bonds and government securities. The Fund invests principally in a broad range
of investment-grade income securities, including bonds, notes, debentures and
preferred stock, as well as money market instruments. See "Total Return Bond
Fund" below for a description of these securities and a discussion of certain
investment policies of Income Fund.

TOTAL RETURN BOND FUND seeks to maximize the total rate of return
consistent with moderate risk of capital and maintenance of liquidity. In
selecting investment opportunities, the Total Return Bond Fund will balance
yield, average maturity and risk in seeking to provide maximum preservation of
purchase power. The Total Return Bond Fund invests principally in a broad range
of investment-grade income securities, including bonds, notes, debentures and
preferred stock, as well as money market instruments.

The Income and the Total Return Bond Funds may invest in the following
types of securities: corporate debt obligations such as bonds, debentures,
obligations convertible into common stocks and money market instruments;
preferred stocks; and obligations issued or guaranteed by the U.S. Government
and its agencies or instrumentalities. The Income and the Total Return Bond
Funds are also permitted to enter into repurchase agreements, and may from time
to time invest in debt obligations exempt from Federal income tax and issued by
or on behalf of the states, territories or possessions of the United States, the
District of Columbia, and their authorities, agencies, instrumentalities and
political subdivisions ("Municipal Bonds").

The purchase of Municipal Bonds may be advantageous when, as a result of
prevailing economic, regulatory or other circumstances, the performance of such
securities, on a pre-tax basis, is comparable to that of corporate or U.S.
Government debt obligations. The two principal classifications of Municipal
Bonds which may be held by the Income and the Total Return Bond Funds are
"general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by the Funds are in most cases revenue securities and are
not payable from the unrestricted revenues of the issuer. Consequently, the
credit quality of private activity revenue bonds is usually directly related to
the credit standing of the corporate user of the facility involved.

The Income and the Total Return Bond Funds may also purchase "moral
obligation" securities, which are normally issued by special-purpose public
authorities. If the issuer of moral obligation securities is unable to meet its
debt service obligations from current revenues, it may draw on a reserve fund,
the restoration of which is a moral commitment, but not a legal obligation, of
the state or municipality which created the issuer. Subject to the quality and
diversification requirements specified below, there is no limitation on the
amount of moral obligation securities that may be held by the Income and the
Total Return Bond Funds. U.S. Trust will consider investments in Municipal Bonds
for the Income and the Total Return Bond Funds when U.S. Trust believes that the
total return on such securities is attractive relative to that of taxable
securities.

Under normal market conditions, at least 75% of the Income and the Total
Return Bond Funds' total assets will be invested in investment-grade debt
obligations rated within the four highest ratings of Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P")1/ (or in unrated
obligations considered to be of investment grade by U.S. Trust) and in U.S.
Government obligations and money market instruments of the types listed at "Bond
Index Portfolio - U.S. Government and Agency Securities" and "Additional
Investment Strategies and Techniques; Risk Factors - Short Term Instruments"
below. When, in the opinion of a Fund, a defensive investment posture is
warranted, each of these Funds may invest temporarily and without limitation in
high quality, short-term money market instruments.

Unrated securities will be considered of investment grade if deemed to be
comparable in quality to instruments so rated, as determined pursuant to
procedures established by the Board of Trustees of the Trust. With respect to
securities rated Baa by Moody's or BBB by S&P, interest and principal payments
are regarded as adequate for the present; however, securities with these
rankings may have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make interest and principal payments than is the case with higher grade
bonds. See the Appendix to the Statement of Additional Information for a more
detailed explanation of these ratings.

The Income and the Total Return Bond Funds may invest up to 25% of their
respective total assets in (a) obligations rated below the four highest ratings
of S&P or Moody's with no minimum rating required, (b) preferred stocks, and (c)
U.S. dollar-denominated debt obligations of (i) foreign issuers, including
foreign corporations and foreign governments, and (ii) U.S. companies issued
outside the United States. See "Additional Investment Strategies and Techniques;
Risk Factors" below for further information on these investments. The Income and
the Total Return Bond Funds will not invest in common stocks, and any common
stocks received through conversion of convertible debt obligations will be sold
in an orderly manner as soon as possible.

Each of the Income Fund and the Total Return Bond Fund is intended to be a
long-term investment vehicle and is not designed to provide investors with a
means of speculating on short-term bond market movements. Because of potential
share price fluctuations, these Funds may be inappropriate for investors who
have short-term objectives. Investors should not consider the Funds a complete
investment program.

BOND INDEX FUND invests at least 80% of its assets in a portfolio of
securities consisting of a representative selection of fixed income securities
included in the Lehman Brothers Aggregate Bond Index (the "Aggregate Bond
Index"). The Fund intends to remain fully invested, to the extent practicable,
in a pool of securities that match the yield and total return of the Aggregate
Bond Index.

Lehman Brothers Aggregate Bond Index. The Aggregate Bond Index is a broad
market-weighted index which encompasses three major classes of United States
investment grade fixed income securities with maturities greater than one year:
U.S. Treasury and agency securities, corporate bonds, and mortgage-backed
securities. The Index measures the total investment return (capital change plus
income) provided by a universe of fixed income securities, weighted by the
market value outstanding of each security. The securities included in the Index
generally meet the following criteria, as defined by Lehman Brothers: an
outstanding market value of at least $100 million, and investment grade quality,
rated a minimum of Baa by Moody's or BBB by S&P. The Bond Index Fund is managed
without regard to tax ramifications. As of June 30, 1995, the following classes
of fixed income securities represented the stated proportions of the total
market value of the Aggregate Bond Index:

U.S. Treasury and government agency securities.... 54%
Corporate bonds................................... 17%
Mortgage-backed securities........................ 28%
Asset-backed securities........................... 1%
Option-adjusted duration:......................... 4.6 years

The Aggregate Bond Index is composed of the following kinds of securities:
public obligations of the U.S. Government; publicly issued debt of U.S.
Government agencies and quasi-federal corporations; corporate debt guaranteed by
the U.S. Government; fixed rate nonconvertible dollar- denominated corporate
debt; 15- and 30-year fixed rate securities backed by mortgage pools of the
Government National Mortgage Association (GNMA), the Federal Home Loan Mortgage
Corporation (FHLMC), and the Federal National Mortgage Association (FNMA); and
asset-backed pass-through securities representing pools of credit card
receivables and auto or home equity loans.

U.S. Government and Agency Securities. The Bond Index Fund may invest in
U.S. Government securities and securities issued or guaranteed by agencies or
instrumentalities of the U.S. Government. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ only in their interest rates, maturities and times of
issuance: Treasury Bills have initial maturities of one year or less; Treasury
Notes have initial maturities of one to ten years; and Treasury Bonds generally
have initial maturities of greater than ten years. Some obligations issued or
guaranteed by U.S. Government agencies and instrumentalities, such as Government
National Mortgage Association pass- through certificates, are supported by the
full faith and credit of the U.S. Treasury; other securities, such as those of
the Federal Home Loan Banks, are supported by the right of the issuer to borrow
from the Treasury. Securities issued by the Federal National Mortgage
Association are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; other securities,
such as those issued by the Student Loan Marketing Association, are supported
only by the credit of the agency or instrumentality. While the U.S. Government
provides financial support to such U.S. Government-sponsored agencies or
instrumentalities, no assurance can be given that it will always do so, since it
is not so obligated by law. The Bond Index Fund and its net asset value and
yield, are not guaranteed by the U.S. Government or any federal agency or
instrumentality. For additional information on U.S. Government securities, see
the Statement of Additional Information.

The Bond Index Fund may, from time to time, substitute one type of
investment grade bond for another. For instance, the Bond Index Fund may hold
more short-term corporate bonds (and fewer short U.S. Treasury bonds) than
represented in the Aggregate Bond Index in an attempt to increase income.

Corporate Bonds. The Bond Index Fund may purchase debt securities of United
States corporations only if they are deemed investment grade, that is, they
carry a rating of at least Baa from Moody's or BBB from S&P or, if not rated by
these rating agencies, are judged by the investment managers of the Fund to be
of comparable quality. With respect to securities rated Baa by Moody's and BBB
by S&P, interest and principal payments are regarded as adequate for the
present; however, securities with these ratings may have speculative
characteristics, and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make interest and principal
payments than is the case with higher grade bonds. The Fund intends to dispose
in an orderly manner of any security which is downgraded below investment grade
subsequent to its purchase. See the Appendix to the Statement of Additional
Information for a more detailed explanation of these ratings.

Corporate bonds are subject to call risk during periods of falling interest
rates. Securities with high stated interest rates may be prepaid (or called)
prior to maturity, requiring the Bond Index Fund to invest the proceeds at
generally lower interest rates. Call provisions, common in many corporate bonds,
allow bond issuers to redeem bonds prior to maturity (at a specific price). When
interest rates are falling, bond issuers often exercise these call provisions,
paying off bonds that carry high stated interest rates and often issuing new
bonds at lower rates. For the Bond Index Fund, the result would be that bonds
with high interest rates are called and must be replaced with lower-yielding
instruments. In these circumstances, the income of the Bond Index Fund would
decline.

Mortgage Pass-Throughs and Collateralized Mortgage Obligations. The Bond
Index Fund may purchase mortgage and mortgage-related securities such as
pass-throughs and collateralized mortgage obligations that meet the Bond Index
Fund's selection criteria (collectively, "Mortgage Securities"). Mortgage
pass-throughs are securities that pass through to investors an undivided
interest in a pool of underlying mortgages. These are issued or guaranteed by
U.S. government agencies such as GNMA, FNMA, and FHLMC. Other mortgage
pass-throughs consist of whole loans originated and issued by private limited
purpose corporations or conduits. Collateralized mortgage obligation bonds are
obligations of special purpose corporations that are collateralized or supported
by mortgages or mortgage securities such as pass-throughs.

As a result of its investments in Mortgage Securities, the mortgage-backed
securities in the Bond Index Fund may be subject to a greater degree of market
volatility as a result of unanticipated prepayments of principal. During periods
of declining interest rates, the principal invested in mortgage-backed
securities with high interest rates may be repaid earlier than scheduled, and
the Bond Index Fund will be forced to reinvest the unanticipated payments at
generally lower interest rates. When interest rates fall and principal
prepayments are reinvested at lower interest rates, the income that the Bond
Index Fund derives from mortgage-backed securities is reduced. In addition, like
other fixed income securities, Mortgage Securities generally decline in price
when interest rates rise.

Because the Bond Index Fund will seek to represent all major sectors of the
investment grade fixed income securities market, the Bond Index Fund may be a
suitable vehicle for those investors seeking ownership in the "bond market" as a
whole, without regard to particular sectors. The Bond Index Fund is intended to
be a long-term investment vehicle and is not designed to provide investors with
a means of speculating on short-term bond market movements. Because of potential
share price fluctuations, the Fund may be inappropriate for investors who have
short-term objectives or who require stability of principal. Investors should
not consider the Fund a complete investment program.

BALANCED FUND seeks to provide a high total return from a diversified
portfolio of equity and fixed income securities. Total return will consist of
income plus realized and unrealized capital gains and losses. The Fund seeks to
provide a total return that approaches that of the universe of equity securities
of large U.S. companies and that exceeds the return typical of a portfolio of
fixed income securities. The Fund attempts to achieve this return by investing
in equity and fixed income instruments, as described below.

The Balanced Fund is designed for investors who wish to invest for long
term objectives. The Balanced Fund may be appropriate for investors who seek to
attain appreciation in the market value of their investments over the long term,
but with somewhat less price fluctuation than a portfolio consisting only of
equity securities. The Balanced Fund may also be an attractive option for
investors who want professional investment managers to decide how their
investments should be allocated between equity and fixed income securities.
Investors should not consider the Balanced Fund a complete investment program.

The relative emphasis placed upon each asset class will vary based upon the
subadviser's assessment of their current attractiveness on a risk-adjusted
basis. The precise allocation will depend upon numerous factors, including the
Fund investment managers' evaluation of the economy and financial markets as
well as government fiscal and monetary policies. Normally, the commitment to
stocks will range between 35% and 65% of portfolio assets. Similarly, the bond
allocation will usually fall between 35% and 65% of portfolio assets. However,
at least 25% of the total assets of the Fund are always invested in fixed income
senior securities including debt securities and preferred stock. The subadviser
may allocate the Fund's investments between these asset classes in a manner it
believes consistent with the Fund's investment objective and current market
conditions. Stocks may be over-weighted over the long term relative to bonds
given that historically equity securities have provided superior returns. Within
a shorter time horizon, however, if stocks and bonds appear equally attractive,
fixed income securities may be favored given their greater certainty of return
and lower volatility.

The subadviser intends to manage the Fund actively in pursuit of its
investment objective. While the Fund has a long-term investment perspective, it
may take advantage of short-term trading opportunities that are consistent with
its objective. To the extent the Fund engages in short-term trading, it may
incur increased transaction costs. See "Tax Matters" below.

Equity Investments. For the equity portion of the Balanced Fund, the
subadviser seeks to achieve a high total return through fundamental analysis,
systematic stock valuation and disciplined portfolio construction. The Fund's
equity investments will be primarily the common stock of large- and medium-sized
U.S. companies with market capitalizations above $1.5 billion, including common
stock of any class or series or any similar equity interest, such as trust or
limited partnership interests. The Fund's equity investments may also include
preferred stock, warrants and similar rights. The Fund may also invest in the
equity securities of small companies and of foreign issuers. The small company
holdings of the Fund are primarily companies included in the Russell 2500 Index.
The Russell 2500 Index consists of the smallest 2,500 companies from the Russell
3000 Index. The Fund's equity securities may or may not pay dividends and may or
may not carry voting rights. For a discussion of the risks of investments in
small companies, see "Equity Fund" above.

Fixed Income Investments. For the fixed income portion of the Fund, the
subadviser seeks to provide a high total return by actively managing the
duration of the Fund's fixed income securities, the allocation of securities
across market sectors, and the selection of securities within sectors. Based on
fundamental, economic and capital markets research, the subadviser adjusts the
duration of the Fund's fixed income investments in light of market conditions.
The subadviser also actively allocates the Fund's fixed income investments among
the broad sectors of the fixed income market.

Duration is a measure of the weighted average time until receipt of the
payments expected to be generated by the fixed income securities held in the
Fund, and can be used as a measure of the sensitivity of the Fund's market value
to changes in interest rates. For example, and for illustrative purposes only, a
hypothetical fund with a duration of 10 years will decrease 10% in value as a
result of a 1% increase in interest rates. Under normal market conditions, the
duration of the fixed income portion of the Fund will range between 80% and 120%
of the Lehman Brothers Government/Corporate Bond Index, which as of June 30,
1995, was approximately 5.1 years. The maturities of the individual fixed income
securities in the Fund may vary widely, however.

The Fund may purchase debt securities only if they are deemed investment
grade, that is, carry a rating of at least Baa from Moody's or BBB from S&P or,
if not rated by these rating agencies, are judged by the investment managers to
be of comparable quality. With respect to securities rated Baa by Moody's and
BBB by S&P, interest and principal payments are regarded as adequate for the
present; however, securities with these ratings may have speculative
characteristics, and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make interest and principal
payments than is the case with higher grade bonds. The Fund intends to dispose
in an orderly manner of any security which is downgraded below investment grade
subsequent to its purchase. See the Appendix to the Statement of Additional
Information for a more detailed explanation of these ratings.

The Fund may invest in a broad range of debt securities of domestic and
foreign issuers. These include debt securities of various types and maturities,
e.g., debentures, notes, mortgage securities, equipment trust certificates and
other collateralized securities and zero coupon securities. Collateralized
securities are backed by a pool of assets such as loans or receivables which
generate cash flow to cover the payments due on the securities. Collateralized
securities are subject to certain risks, including a decline in the value of the
collateral backing the security, failure of the collateral to generate the
anticipated cash flow or in certain cases more rapid prepayment because of
events affecting the collateral, such as accelerated prepayment of mortgages or
other loans backing these securities or destruction of equipment subject to
equipment trust certificates. In the event of any such prepayment the Fund will
be required to reinvest the proceeds of prepayments at interest rates prevailing
at the time of reinvestment, which may be lower. In addition, the value of zero
coupon securities which do not pay interest is more volatile than that of
interest-bearing debt securities with the same maturity. For more information on
mortgage securities and associated risks, see "Bond Index Fund - Mortgage
Pass-Throughs and Collateralized Mortgage Obligations" above.

The Fund may invest in U.S. Government securities and securities issued or
guaranteed by agencies or instrumentalities of the U.S. Government. For a
description of these securities, see "Bond Index Fund - U.S. Government and
Agency Securities" above and the Statement of Additional Information. The Fund
may also invest in municipal obligations which may be general obligations of the
issuer or payable only from specific revenue sources. However, the Fund will
invest only in municipal obligations that have been issued on a taxable basis or
have an attractive total return potential excluding tax considerations. In
addition, the Fund may invest in debt securities of foreign governments and
governmental entities denominated, in all cases, in U.S. dollars. See
"Additional Investment Strategies and Techniques; Risk Factors" below for
further information on foreign investments.

EQUITY GROWTH FUND seeks to provide a high level of capital appreciation
through investment in a diversified portfolio of common stocks with potential
for above-average growth in earnings and dividends. The Equity Growth Fund seeks
to achieve this investment objective by investing primarily in the common stocks
of medium and large capitalization U.S. companies (i.e., companies with stock
market capitalizations of more than $1 billion) which, in the opinion of the
subadviser, will present an opportunity for significant increases in earnings
and/or value. Current dividend income is incidental to the Equity Growth Fund's
investment objective of increasing the value of a shareholder's investment.
Investments will be selected based on their potential for above-average growth
in earnings and dividends, with no consideration given to current income.

Under normal market conditions, the Fund will invest at least 65% of its
total assets in common stocks. The remainder of the Fund's assets will be
invested in other types of securities including convertible and nonconvertible
bonds, warrants and short-term obligations, preferred stocks, debt securities,
and repurchase agreements collateralized by these securities. The Fund may
purchase debt securities only if they are deemed investment grade, that is,
carry a rating of at least Baa from Moody's or BBB from S&P or, if not rated by
these rating agencies, are judged by the investment managers to be of comparable
quality. With respect to securities rated Baa by Moody's and BBB by S&P,
interest and principal payments are regarded as adequate for the present;
however, securities with these ratings may have speculative characteristics, and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make interest and principal payments than is the case
with higher grade bonds. The Fund intends to dispose in an orderly manner of any
security which is downgraded below investment grade subsequent to its purchase.
See the Appendix to the Statement of Additional Information for an explanation
of these ratings. The Fund may invest without limitation in high quality money
market instruments if deemed appropriate by the subadviser for temporary
defensive purposes. See "Short-Term Instruments" below. While the Fund may
invest in foreign securities, it currently has no intention of purchasing
foreign securities other than American Depository Receipts. See "Investment
Strategies and Techniques; Risk Factors - Foreign Investments" below and
"Foreign Securities - Equity Funds" in the Statement of Additional Information.
The Fund may vary the percentage of assets invested in any one type of security
in accordance with the subadviser's interpretation of economic and market
conditions, fiscal and monetary policy, and underlying security values.

The subadviser intends to manage the Fund actively in pursuit of its
investment objective. While the Fund has a long-term investment perspective, it
may take advantage of any short-term trading opportunities that are consistent
with its objective. To the extent the Fund engages in short-term trading, it may
incur increased transaction costs. See "Tax Matters" below.

The Equity Growth Fund may be appropriate for a variety of investment
programs. While the Fund is not a substitute for an investment Fund tailored to
an investor's particular investment needs and ability to tolerate risk, it may
be used to supplement and diversify an investment Fund. Securities which offer
above-average potential for growth in earnings and dividends may also involve
greater volatility of market value. Investors should not consider the Fund a
complete investment program.

INTERNATIONAL EQUITY FUND seeks long-term capital appreciation through
investment in a diversified portfolio of marketable foreign securities. The Fund
ordinarily will invest primarily in foreign equity securities of issuers that
the subadviser believes to have strong balance sheets, sustainable internal
growth, superior financial returns, capable and forthright management, and
enduring competitive advantages.

When evaluating foreign securities, the subadviser will seek to identify
superior companies with excellent long-term growth prospects and to select from
among them those whose shares appear to offer attractive absolute returns. The
subadviser's investment criteria therefore include both growth and value
considerations. Growth stocks are those that the subadviser believes have the
potential for above-average growth in earnings. Value stocks are those that the
investment subadviser believes are undervalued by the market based on the
investment managers' assessment of the company's current value and future
earnings prospects.

In determining investment strategy and allocating investments, the
subadviser will continuously analyze a broad range of international equity
securities. Country and sector portfolio weightings are expected to reflect the
results of a "bottom up" stock selection process, rather than the results of any
"top down" country or sector allocation process. The Fund generally will sell
securities if the subadviser believes that such securities have become
substantially overvalued relative to alternative investments or if the
subadviser believes that there is an unfavorable change in the issuer's
long-term business forecast.

The Fund's investments generally will be diversified among geographic
regions and countries. While there are no prescribed limits on geographic
distributions, the Fund normally will hold securities of issuers collectively
having their principal place of business in no fewer than three foreign
countries. The subadviser expects that the Fund's assets ordinarily will be
invested in securities of issuers located in the Pacific Basin (e.g., Japan,
Hong Kong, Singapore, Malaysia), Europe, Australia, Latin America and South
Africa. The Fund also may invest, from time to time, in other regions, seeking
to capitalize on investment opportunities emerging in other parts of the world.
In purchasing foreign equity securities, the Fund will look generally to large
and small companies in mature foreign markets as well as well-established
companies in emerging markets. Under unusual economic and market conditions, the
Fund may restrict the securities markets in which its assets are invested.

Under normal market and economic conditions, at least 75% of the Fund's
assets will be invested in foreign equity securities. For cash management
purposes, the Fund may invest up to 25% of its assets on a continuous basis in
cash or short term instruments such as commercial paper, bank obligations, U.S.
Government and agency securities maturing within one year, notes and other debt
securities of various maturities, and repurchase agreements collateralized by
these securities. The Fund also may invest without limitation in any combination
of high quality domestic or foreign money market instruments if deemed
appropriate by the subadviser for temporary defensive purposes in response to
unusual market and economic conditions. See "Short-Term Instruments" below. To
the extent described below under "Additional Investment Strategies and
Techniques; Risk Factors," the Fund also may purchase shares of other investment
companies and may engage in other investment practices, including repurchase
agreements, securities lending, forward currency contracts and futures contracts
and options.

Foreign equity securities purchased by the Fund may include common stock,
preferred stock, securities convertible into common or preferred stock, and
warrants issued by companies domiciled outside of the United States ("foreign
issuers"), and shares of U.S registered investment companies that invest
primarily in foreign securities. The Fund may purchase when-issued securities
otherwise eligible for purchase by the Fund and may invest indirectly in the
securities of foreign issuers through sponsored and unsponsored American
Depository Receipts ("ADRs"), European Depository Receipts ("EDRs") and similar
securities of foreign issuers.

Convertible debt securities purchased by the Fund will be rated investment
grade by Moody's or S&P if such a rating is available. If unrated, as is the
case with most foreign securities, convertible debt securities purchased by the
Fund will be deemed to be comparable in quality to securities rated investment
grade pursuant to procedures established by the Board of Trustees of the Trust.
With respect to securities rated Baa by Moody's or BBB by S&P (the lowest of the
top four investment rankings), or deemed to be comparable in quality to such
securities, interest and principal payments are regarded as adequate for the
present; however, these securities may have speculative characteristics, and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make interest and principal payments than is the case
with higher grade bonds.

The Fund may purchase securities both on recognized stock exchanges and in
over-the-counter markets. Most Fund transactions will be effected in the primary
trading market for the given security. The 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 Fund can look only to price appreciation for a return
on such investments.

The relative performance of foreign currencies is an important element in
the Fund's performance. Although the subadviser does not expect to hedge foreign
currency exposure on a routine basis, it may do so when it has a strong view on
the prospects for a particular currency. Certain currency hedging techniques
that may be employed by the subadviser are described below in "Additional
Investment Strategies and Techniques; Risk Factors: Foreign Currency and
Exchange Transactions." Although such techniques may reduce the risk of loss to
the Fund from adverse movements in foreign exchange rates, they also may limit
possible gains from favorable movements in such rates.

The Fund is designed for investors who desire to achieve international
diversification of their investments by participating in foreign securities
markets. Because international investments generally involve risks in addition
to those associated with investments in the United States, the Fund should be
considered only as a vehicle for international diversification and not a
complete investment program. Before investing in the Fund, investors should be
familiar with the risks associated with foreign investments. These risks are
discussed below under "Additional Investment Strategies and Techniques; Risk
Factors."
<PAGE>
Additional Investment Strategies and Techniques; Risk Factors

The Funds may utilize the investment strategies and techniques described
below.

Sampling and Trading in the Bond Index Fund. The Bond Index Fund does not
expect to hold all of the individual issues which comprise the Aggregate Bond
Index because of the large number of securities involved. Instead, the Fund will
hold a representative sample of securities, selecting one or two issues to
represent entire classes or types of securities in the Index. This sampling
technique is expected to be an effective means of substantially duplicating the
income and capital returns provided by the Index.

To reduce transaction costs, the Bond Index Fund's securities holdings will
not be automatically traded or re-balanced to reflect changes in the Aggregate
Bond Index. The Fund will seek to buy round lots of securities and may trade
large blocks of securities. These policies may cause a particular security to be
over- or under-represented in the Fund relative to its Index weighting or result
in its continued ownership by the Fund after its deletion from the Index,
thereby reducing the correlation between the Fund and the Index. The Fund is not
required to buy or sell securities solely because the percentage of their assets
invested in Index securities changes when their market values increase or
decrease. In addition, the Fund may omit or remove Index securities from its
portfolio if the investment managers believe the security to be insufficiently
liquid or believe the merit of the investment has been substantially impaired by
extraordinary events or financial conditions. Over the long term, the investment
managers of the Fund seek a correlation of 0.95 or better between the
performance of the Fund and that of the Aggregate Bond Index. See "U.S. Trust's
Investment Philosophy and Strategies - Bond Index Fund" above.

Convertible Securities. Each of the Funds other than the Bond Index Fund
may invest in investment grade convertible securities of domestic and foreign
issuers. See "Balanced Fund - Fixed Income Investments" for an explanation of
investment grade ratings of debt securities, including convertible securities.
The convertible securities in which the Funds may invest include any debt
securities or preferred stock which may be converted into common stock or which
carry the right to purchase common stock. Convertible securities entitle the
holder to exchange the securities for a specified number of shares of common
stock, usually of the same company, at specified prices within a certain period
of time.

When-Issued and Delayed Delivery Securities. The Funds may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices. 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 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. When such transactions are negotiated, the
price, which is generally expressed in yield terms, is fixed at the time the
commitment is made, but delivery and payment for the securities take place at a
later date. When-issued securities and forward commitments may be sold prior to
the settlement date, but the Funds will enter into when-issued and forward
commitments only with the intention of actually receiving or delivering the
securities, as the case may be. At the time a Fund enters into a transaction on
a when-issued or forward commitment basis, a segregated account consisting of
cash or high grade liquid debt securities equal to the value of the when-issued
or forward commitment securities will be established and maintained. There is a
risk that the securities may not be delivered and that the relevant Fund may
incur a loss.

In addition, the Income and the Total Return Bond Funds may acquire
"stand-by commitments" with respect to Municipal Bonds held by them. Under a
stand-by commitment, a dealer agrees to purchase at a Fund's option specified
Municipal Bonds at a specified price. The Funds will acquire stand-by
commitments solely to facilitate Fund liquidity and do not intend to exercise
their rights thereunder for speculative purposes. Stand-by commitments acquired
by a Fund will be valued at zero in determining the Fund's net asset value.

Investments Below Investment Grade. As discussed above, investments by the
Income and the Total Return Bond Funds in obligations rated below the four
highest ratings of S&P and Moody's (commonly called "junk bonds") have different
risks than investments in securities that are rated investment grade. Risk of
loss upon default by the borrower is significantly greater because lower-rated
securities are generally unsecured and are often subordinated to other creditors
of the issuer, and because the issuers frequently have high levels of
indebtedness and are more sensitive to adverse economic conditions, such as
recessions, individual corporate developments and increasing interest rates,
than are investment grade issuers. As a result, the market price of such
securities, and the net asset value of the Income and Total Return Bond Funds'
Shares, may be particularly volatile. Additional risks associated with
lower-rated fixed-income 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),
(f) the operation of mandatory sinking fund or call/redemption provisions during
periods of declining interest rates whereby a Fund may be required to reinvest
premature redemption proceeds in lower yielding portfolio securities, and (g)
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 affect their
ability to service their principal and interest payment obligations, to meet
projected business goals and to obtain additional financing. An economic
downturn could also disrupt the market for lower-rated bonds generally and
adversely affect the value of outstanding bonds and the ability of the issuers
to repay principal and interest. If the issuer of a lower-rated debt obligation
held by a Fund defaulted, the Fund could incur additional expenses to seek
recovery. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may also decrease the values and liquidity of lower-rated
securities, especially in a thinly traded market. Finally, a Fund's trading in
fixed-income securities to achieve capital appreciation entails risks that
capital losses rather than gains will result.

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 "C" 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
conditions. The rating "CC" is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" debt rating. The rating "C" is
applied to debt subordinated to a senior debt which is assigned an actual or
implied "CCC-" rating. The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed, but debt service payments are continued.
Debt obligations rated "D" are in default, and payments of interest and/or
repayment of principal are 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
classification 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 speculative characteristics. The rating "B" indicates a general lack of
characteristics of desirable investment. Debt obligations rated "Caa" are of
poor quality, while debt obligations rated "Ca" are considered highly
speculative. "C" represents 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 ranking; and the modifier "3" indicates that the security ranks at the
lower end of its generic rating category. See the Appendix to the Statement of
Additional Information for a more detailed explanation of these ratings.

Repurchase Agreements. Each of the Funds may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Trustees of the Trust. In a repurchase agreement, a Fund buys
a security from a seller that has agreed to repurchase it at a mutually agreed
upon date and price, reflecting the interest rate effective for the term of the
agreement. The term of these agreements is usually from overnight to one week. A
repurchase agreement may be viewed as a fully collateralized loan of money by
the Fund to the seller. The Fund always receives securities as collateral with a
market value at least equal to the purchase price plus accrued interest, and
this value is maintained during the term of the agreement. If the seller
defaults and the collateral value declines, the Fund might incur a loss. If
bankruptcy proceedings are commenced with respect to the seller, the Fund's
realization upon the disposition of collateral may be delayed or limited.
Investments in certain repurchase agreements and certain other investments which
may be considered illiquid are limited. See "Illiquid Investments; Privately
Placed and other Unregistered Securities" below.

Reverse Repurchase Agreements. Each of the Funds may borrow funds, in an
amount up to one-third of the value of its total assets, for temporary or
emergency purposes, such as meeting larger than anticipated redemption requests,
and not for leverage. Each of the Funds may also agree to sell portfolio
securities to financial institutions such as banks and broker-dealers and to
repurchase them at a mutually agreed date and price (a "reverse repurchase
agreement"). The SEC views reverse repurchase agreements as a form of borrowing.
At the time a Fund enters into a reverse repurchase agreement, it will place in
a segregated custodial account cash, U.S. Government securities or high-grade
debt obligations having a value equal to the repurchase price, including accrued
interest. Reverse repurchase agreements involve the risk that the market value
of the securities sold by the Fund may decline below the repurchase price of
those securities.

Investment Company Securities. In connection with the management of its
daily cash positions, each of the Funds 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 International Equity Fund may also purchase shares
of investment companies investing primarily in foreign securities, including
so-called "country funds" which have portfolios consisting primarily of
securities of issuers located in one foreign country. 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, such Fund would
bear its pro rata portion of the other investment company's advisory fees and
other expenses. As such, the corresponding Fund's shareholders would indirectly
bear the expenses of the other investment company, some or all of which would be
duplicated. Securities of other investment companies may be acquired by the
Funds to the extent permitted under the 1940 Act, that is, a Fund may invest a
maximum of up to 10% of its total assets in securities of other investment
companies so long as not more than 3% of the total outstanding voting stock of
any one investment company is held by such Fund. In addition, not more than 5%
of the total assets of a Fund may be invested in the securities of any one
investment company. The foregoing restrictions do not apply to the Bond Index
Fund, which invests all its investable assets in the Bond Index Portfolio.

Foreign Investments. In accordance with their respective investment
objectives and policies, the Equity, Balanced and Equity Growth Funds may
invest, and the International Equity Fund will invest, in common stocks of
foreign corporations, and each of such Funds and the Income and Total Return
Bond Funds may invest in convertible securities of foreign corporations as well
as fixed income securities of foreign government and corporate issuers. Other
than the International Equity Fund, which will invest under normal market and
economic conditions at least 75% of its total assets in foreign securities, none
of the Funds expects to invest more than 30% (25% in the case of the Income and
Total Return Bond Funds) of their respective total assets at the time of
purchase in securities of foreign issuers.

All investments, domestic or foreign, involve certain risks. Investment in
securities of foreign issuers, and in obligations of foreign branches or
subsidiaries of domestic or foreign banks, may involve risks in addition to
those normally associated with investments in the securities of U.S. issuers.
Overall, there may be limited publicly available information with respect to
foreign issuers, and there may be less supervision of foreign stock exchanges
and market participants such as brokers and issuers. Moreover, available
information may not be as reliable as information regarding U.S. companies,
because foreign issuers often are not subject to uniform accounting, auditing
and financial standards and requirements comparable to those applicable to U.S.
companies.

Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes. To the extent that such taxes are not
offset by credits or deductions allowed to investors under the Federal income
tax laws, they may reduce the net return to investors. See "Tax Matters" below.

Investors should realize that the value of a Fund's investments in foreign
securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or changes in) exchange controls or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of Fund securities and could favorably or unfavorably affect a
Fund's operations. The economies of individual foreign nations may differ from
the U.S. economy in areas such as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position; it may also be more difficult to obtain and enforce a
judgment against a foreign issuer. Any foreign investments made by a Fund must
be made in compliance with U.S. and foreign currency restrictions and tax laws
restricting the amounts and types of foreign investments.

While the volume of transactions effected on foreign stock exchanges has
increased in recent years, in most cases it remains appreciably below that of
domestic security exchanges. Accordingly, a Fund's foreign investments may be
less liquid and their prices may be more volatile than comparable investments in
securities of U.S. companies. Moreover, the settlement periods for foreign
securities, which are often longer than those for securities of U.S. issuers,
may affect Fund liquidity.

The costs attributable to investing abroad are usually higher than those of
funds investing in domestic securities for several reasons, such as the higher
cost of investment research, higher cost of custody of foreign securities,
higher commissions paid on comparable transactions in foreign markets and
additional costs arising from delays in settlements of transactions involving
foreign securities.

The Funds may invest in securities of foreign issuers directly or in the
form of American Depository Receipts ("ADRs"), European Depository Receipts
("EDRs") or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a U.S. bank or trust company
which evidence ownership of the underlying foreign securities. Certain such
institutions issue ADRs which may not be sponsored by the issuer of the
underlying foreign securities. A non-sponsored depository may not provide the
same shareholder information that a sponsored depository is required to provide
under its contractual arrangements with the issuer of the underlying foreign
securities. EDRs are receipts issued by a European financial institution
evidencing a similar arrangement. Generally, ADRs, in registered form, are
designed for use in the U.S. securities markets, and EDRs, in bearer form, are
designed for use in European securities markets.

Changes in foreign exchange rates will affect the value in U.S. dollars of
all foreign currency-denominated securities held by the Funds. Exchange rates
are influenced generally by the forces of supply and demand in the foreign
currency markets and by numerous other political and economic events, many of
which may be difficult, if not impossible, to predict.

Foreign Currency Exchange Transactions. In accordance with their respective
investment objectives and policies, the Equity, Income, Total Return Bond,
Balanced and Equity Growth Funds may buy and sell, and the International Equity
Fund will buy and sell, securities (and receive interest and dividends proceeds)
in currencies other than the U.S. dollar. Therefore, these Funds may enter from
time to time into foreign currency exchange transactions. The Funds will either
enter into these transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or use forward contracts to
purchase or sell foreign currencies. The cost of a Fund's spot currency exchange
transactions will generally be the difference between the bid and offer spot
rate of the currency being purchased or sold.

A forward foreign currency exchange contract is an obligation by a Fund to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. Forward foreign currency exchange
contracts establish an exchange rate at a future date. These contracts are
transferable in the interbank market directly between currency traders (usually
large commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement, and is traded at a net price
without commission. The Funds will not enter into forward contracts for
speculative purposes. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of a Fund's securities
or in foreign exchange rates, or prevent loss if the prices of these securities
should decline.

The Funds may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or
anticipated securities transactions. The Funds may also enter into forward
contracts to hedge against a change in foreign currency exchange rates that
would cause a decline in the value of existing investments denominated or
principally traded in a foreign currency. To do this, a Fund would enter into a
forward contract to sell the foreign currency in which the investment is
denominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. A Fund will only enter into forward contracts to
sell a foreign currency in exchange for another foreign currency if its
investment manager expects the foreign currency purchased to appreciate against
the U.S. dollar.

Although these transactions are intended to minimize the risk of loss due
to a decline in the value of the hedged currency, at the same time they limit
any potential gain that might be realized should the value of the hedged
currency increase. In addition, forward contracts that convert a foreign
currency into another foreign currency will cause a Fund to assume the risk of
fluctuations in the value of the currency purchased vis a vis the hedged
currency and the U.S. dollar. The precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies will change as
a consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.

Futures Contracts and Options. Each Fund may purchase put and call options
on securities, indices of securities and futures contracts. The Funds may also
purchase and sell futures contracts. Futures contracts on securities and
securities indices will be used primarily to accommodate cash flows or in
anticipation of taking a market position when, in the opinion of the investment
managers, available cash balances do not permit economically efficient purchases
of securities. Moreover, a Fund may sell futures and options to "close out"
futures and options it may have purchased or to protect against a decrease in
the price of securities it owns but intends to sell. The Bond Index Fund will
not invest in futures or options as part of a defensive strategy to protect
against potential stock market declines. The Funds other than the Bond Index
Fund may use futures contracts and options for both hedging and risk management
purposes, although not for speculation. See "Futures Contracts and Options on
Futures Contracts" in the Statement of Additional Information.

The Funds may (a) purchase exchange-traded and over the counter (OTC) put
and call options on securities and indexes of securities, (b) purchase and sell
futures contracts on securities and indexes of securities and (c) purchase put
and call options on futures contracts on securities and indexes of securities.
In addition, the Funds may sell (write) exchange-traded and OTC put and call
options on securities and indexes of securities and on futures contracts on
securities and indexes of securities. The staff of the SEC has taken the
position that OTC options are illiquid and, therefore, together with other
illiquid securities held by a Fund, cannot exceed 15% of such Fund's net assets.
The Funds intend to comply with this limitation.

The Funds (other than the Bond Index Fund) may use options and futures
contracts to manage their exposure to changing interest rates and/or security
prices. Some options and futures strategies, including selling futures contracts
and buying puts, tend to hedge a Fund's investments against price fluctuations.
Other strategies, including buying futures contracts, writing puts and calls,
and buying calls, tend to increase market exposure. Options and futures
contracts may be combined with each other or with forward contracts in order to
adjust the risk and return characteristics of a Fund's overall strategy in a
manner deemed appropriate by the Fund's investment managers and consistent with
its objective and policies. Because combined options positions involve multiple
trades, they result in higher transaction costs and may be more difficult to
open and close out.

The use of options and futures is a highly specialized activity which
involves investment strategies and risks different from those associated with
ordinary portfolio securities transactions, and there can be no guarantee that
their use will increase a Fund's return. While the use of these techniques by a
Fund may reduce certain risks associated with owning its portfolio securities,
these investments entail certain other risks. If a Fund's investment managers
apply a strategy at an inappropriate time or judge market conditions or trends
incorrectly, options and futures strategies may lower such Fund's return.
Certain strategies limit a Fund's possibilities to realize gains as well as
limit its exposure to losses. A Fund could also experience losses if the prices
of its options and futures positions were poorly correlated with its other
investments, or if it could not close out its positions because of an illiquid
secondary market. In addition, a Fund will incur transaction costs, including
trading commissions and option premiums, in connection with its futures and
options transactions and these transactions could significantly increase the
Fund's turnover rate. For more information on these investment techniques, see
the Statement of Additional Information.

Each of the Funds may purchase and sell put and call options on securities,
indexes of securities and futures contracts, or purchase and sell futures
contracts, only if such options are written by other persons and if (i) the
aggregate premiums paid on all such options which are held at any time do not
exceed 20% of such Fund's total net assets, and (ii) the aggregate margin
deposits required on all such futures and premium on options thereon held at any
time do not exceed 5% of such Fund's total assets. The Funds may also be subject
to certain limitations pursuant to the regulations of the Commodity Futures
Trading Commission. None of the Funds has any current intention of purchasing
futures contracts or investing in put and call options on securities, indexes of
securities, or futures contracts if more than 5% of its net assets would be at
risk from such transactions.

Illiquid Investments; Privately Placed and other Unregistered Securities.
Each Fund may acquire investments that are illiquid or have limited liquidity,
such as private placements or investments that are not registered under the
Securities Act of 1933, as amended (the "1933 Act"), and cannot be offered for
public sale in the United States without first being registered under the 1933
Act. An illiquid investment is any investment that cannot be disposed of within
seven days in the normal course of business at approximately the amount at which
it is valued by the Fund. The price a Fund pays for illiquid securities or
receives upon resale may be lower than the price paid or received for similar
securities with a more liquid market. Accordingly the valuation of these
securities will reflect any limitations on their liquidity.

Acquisitions of illiquid investments by the Funds are subject to the
following non-fundamental policies. Each Fund may not invest in additional
illiquid securities if, as a result, more than 15% of the market value of its
net assets would be invested in illiquid securities. Each of the Funds may also
purchase Rule 144A securities sold to institutional investors without
registration under the 1933 Act. These securities may be determined to be liquid
in accordance with guidelines established by the investment managers and
approved by the Trustees. The Trustees of the Trust will monitor the
implementation of these guidelines on a periodic basis. Because Rule 144A is
relatively new, it is not possible to predict how markets in Rule 144A
securities will develop. If trading in Rule 144A securities were to decline,
these securities could become illiquid after being purchased, increasing the
level of illiquidity of a Fund. As a result, a Fund holding these securities
might not be able to sell these securities when the investment manager wishes to
do so, or might have to sell them at less than fair value.

Short-Term Instruments. Each Fund may invest in short-term income
securities in accordance with its investment objective and policies as described
above. The Funds may also make money market investments pending other
investments or settlement, or to maintain liquidity to meet shareholder
redemptions. Although the Bond Index Fund normally seeks to remain substantially
fully invested in securities selected to match its corresponding index
consistent with seeking a correlation of 0.95 or better between the Fund's
performance and that of its corresponding index, the Bond Index Fund may invest
temporarily up to 20% of its assets in certain short-term fixed income
securities. In adverse market conditions and for temporary defensive purposes
only, each of the Funds other than the Bond Index Fund may temporarily invest
their respective assets without limitation in short-term investments; the Bond
Index Fund, on the other hand, will not invest in short-term instruments as part
of a defensive strategy to protect against potential stock market declines.
Short-term investments include: obligations of the U.S. Government and its
agencies or instrumentalities; commercial paper and other debt securities;
variable and floating rate securities; bank obligations; repurchase agreements
collateralized by these securities; shares of other investment companies that
primarily invest in any of the above-referenced securities; and, in the case of
the International Equity Fund, cash and bank instruments denominated in foreign
currencies. Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs. Other corporate obligations in which
the Funds may invest consist of high quality, U.S. dollar-denominated short-term
bonds and notes (including variable amount master demand notes) issued by
domestic and foreign corporations. The Funds may invest in commercial paper
issued by major corporations in reliance on the exemption from registration
afforded by Section 3(a)(3) of the 1933 Act. Such commercial paper may be issued
only to finance current transactions and must mature in nine months or less.
Trading of such commercial paper is conducted primarily by institutional
investors through investment dealers, and individual investor participation in
the commercial paper market is very limited.

Each Fund may invest in U.S. dollar-denominated certificates of deposit,
time deposits, bankers' acceptances and other short-term obligations issued by
domestic banks and domestic or foreign branches or subsidiaries of foreign
banks. Certificates of deposit are certificates evidencing the obligation of a
bank to repay funds deposited with it for a specified period of time. Such
instruments include Yankee Certificates of Deposit ("Yankee CDs"), which are
certificates of deposit denominated in U.S. dollars and issued in the United
States by the domestic branch of a foreign bank. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Time deposits which may be held by the
Funds are not insured by the Federal Deposit Insurance Corporation or any other
agency of the U.S. Government. The Funds will not invest, respectively, more
than 15% of the value of their net assets in time deposits maturing in longer
than seven days and other instruments which are deemed illiquid or not readily
marketable. Bankers' acceptances are credit instruments evidencing the
obligation of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face amount
of the instrument upon maturity. The other short-term obligations in which the
Funds may invest include uninsured, direct obligations which have either fixed,
floating or variable interest rates.

The Funds will limit their short-term investments to those U.S.
dollar-denominated instruments which are determined by or on behalf of the Board
of Trustees of the Trust to present minimal credit risks and which are of "high
quality" as determined by a major rating service (i.e., rated P-1 by Moody's or
A-1 by S&P) or, in the case of instruments which are not rated, are deemed to be
of comparable quality pursuant to procedures established by the Board of
Trustees of the Trust. The Funds may invest in obligations of banks which at the
date of investment have capital, surplus and undivided profits (as of the date
of their most recently published financial statements) in excess of $100
million. Investments in high quality short-term instruments may, in many
circumstances, result in a lower yield than would be available from investments
in instruments with a lower quality or longer term.

Securities Lending. The Funds may seek to increase their income by lending
securities to banks, brokers or dealers and other recognized institutional
investors. Such loans may not exceed 30% of the value of a Fund's total assets.
In connection with such loans, each Fund will receive collateral consisting of
cash, U.S. Government or other high quality securities, irrevocable letters of
credit issued by a bank, or any combination thereof. Such collateral will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. A Fund can increase its income through
the investment of any such collateral consisting of cash. Such Fund continues to
be entitled to payments in amounts equal to the interest or dividends payable on
the loaned security, and in addition, if the collateral received is other than
cash, receives a fee based on the amount of the loan. Such loans will be
terminable at any time upon specified notice. A Fund might experience risk of
loss if the institution with which it has engaged in a portfolio loan
transaction breaches its agreement with the Fund.

Short Sales "Against the Box". In a short sale, a Fund sells a borrowed
security and has a corresponding obligation to the lender to return the
identical security. A Fund may engage in short sales only if at the time of the
short sale it owns or has the right to obtain, at no additional cost, an equal
amount of the security being sold short. This investment technique is known as a
short sale "against the box". A Fund may make a short sale as a hedge, when it
believes that the value of a security owned by it (or a security convertible or
exchangeable for such security) may decline, or when a Fund wants to sell the
security at an attractive current price but wishes to defer recognition of gain
or loss for tax purposes. Not more than 40% of a Fund's total assets would be
involved in short sales "against the box".

Certain Other Obligations. Consistent with their respective investment
objectives, policies and restrictions, the Funds may also invest in
participation interests, guaranteed investment contracts and zero coupon
obligations. See the Statement of Additional Information. In order to allow for
investments in new instruments that may be created in the future, upon the Trust
supplementing this Prospectus, a Fund may invest in obligations other than those
listed previously, provided such investments are consistent with the Fund's
investment objective, policies and restrictions.

Portfolio Turnover Rate. Although the Funds generally seek to invest for
the long term, and the Bond Index Fund is managed to reflect the composition of
the Aggregate Bond Index, each Fund may sell securities irrespective of how long
such securities have been held. Ordinarily, securities will be sold from the
Bond Index Fund only to reflect certain administrative changes in the Aggregate
Bond Index (including mergers or changes in its composition) or to accommodate
cash flows into and out of the Fund while maintaining the similarity of its
portfolio to its benchmark Index. Each Fund may sell a portfolio investment
immediately after its acquisition if the investment managers believe 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 investments.

Portfolio turnover will not be a limiting factor in making portfolio
decisions for the Income Fund and the Total Return Bond Fund, whose annual
portfolio turnover rates are not expected to exceed 400%. The annual portfolio
turnover rate for each other Fund is not expected to exceed 100%. A rate of 100%
indicates that the equivalent of all of a Fund's assets have been sold and
reinvested in a calendar year. A high rate of portfolio turnover may involve
correspondingly greater brokerage commission expenses and other transaction
costs, which must be borne directly by the Fund and ultimately by the
shareholders of the respective Funds. 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 "Tax Matters"
below.

* * *

As diversified investment companies, 75% of the assets of each Fund are
represented by cash and cash items (including receivables), government
securities, securities of other investment companies, and other securities which
for purposes of this calculation are subject to the following fundamental
limitations: (a) the Fund may not invest more than 5% of its total assets in the
securities of any one issuer, and (b) the Fund may not own more than 10% of the
outstanding voting securities of any one issuer. In addition, each Fund may not
invest 25% or more of its assets in the securities of issuers in any one
industry, unless, for the Bond Index Fund, the securities in a single industry
were to comprise 25% or more of the Aggregate Bond Index, in which case the Bond
Index Fund will invest 25% or more of its assets in that industry. These are
fundamental investment policies of each Fund which may not be changed without
investor approval.

The Statement of Additional Information includes further discussion of
investment strategies and techniques, and a listing of other fundamental
investment restrictions and non-fundamental investment policies which govern the
investment policies of each Fund. Fundamental investment restrictions may not be
changed, in the case of each Fund, without the approval of that Fund's
shareholders. If a percentage restriction (other than a restriction as to
borrowing) or a rating restriction on investment or utilization of assets is
adhered to at the time an investment is made or assets are so utilized, a later
change in percentage resulting from changes in the value of the securities held
by a Fund or a later change in the rating of a security held by a Fund is not
considered a violation of the policy. Shareholders of the Bond Index Fund should
be aware that fundamental investment restrictions of the Bond Index Portfolio
may not be changed without the approval of the investors (including the Bond
Index Fund) in that Portfolio.

The investment objective of each Fund may be changed without the approval
of that Fund's shareholders, but not without written notice thereof to that
Fund's shareholders thirty days prior to implementing the change. If there were
a change in a Fund's investment objective, shareholders should consider whether
the Fund remains an appropriate investment in light of their then-current
financial position and needs. There can, of course, be no assurance that the
investment objective of a Fund will be achieved. See "Investment Restrictions"
in the Statement of Additional Information for a description of the fundamental
investment policies and restrictions of each Fund that cannot be changed without
approval by the holders of a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of
that Fund. Except as stated otherwise, all investment objectives, policies,
strategies and restrictions described herein and in the Statement of Additional
Information are non-fundamental.

SPECIAL INFORMATION CONCERNING HUB AND SPOKE STRUCTURE
APPLICABLE TO THE BOND INDEX FUND

Unlike the Equity, Income, Total Return Bond, Balanced, Equity Growth and
International Equity Funds, which directly acquire and manage their own
portfolios of securities, the Bond Index Fund seeks to achieve its investment
objective by investing all of its investable assets in the Bond Index Portfolio,
a separate series of Federated Investment Portfolios (the "Federated
Portfolios"). The Bond Index Fund invests in the Bond Index Portfolio through
Signature Financial Group Inc.'s two-tier structure known as the Hub and
Spoke(R) financial services method. Hub and Spoke(R) employs a two-tier
master/feeder fund structure and is a registered service mark of Signature
Financial Group, Inc. The Bond Index Fund has the same investment objective and
policies as the Bond Index Portfolio. In addition to selling a beneficial
interest to the Bond Index Fund, the Bond Index Portfolio may sell beneficial
interests to other mutual funds or institutional investors. Such investors will
invest in the Bond Index Portfolio on the same terms and conditions and will pay
a proportionate share of the Bond Index Portfolio's expenses. However, the other
investors investing in the Bond Index Portfolio are not required to issue their
shares at the same public offering price as the Bond Index Fund due to
variations in sales commissions and other operating expenses. Investors in the
Bond Index Fund should be aware that these differences may result in differences
in returns experienced by investors in the different funds that invest in the
Bond Index Portfolio. Such differences in returns are also present in other
mutual fund structures. Information concerning other holders of interests in the
Bond Index Portfolio is available from Federated Administrative Services ("FAS")
at (800) 245-5040.

As with the Funds, the investment objective of the Bond Index Portfolio may
be changed without the approval of the investors in that Portfolio, but not
without written notice thereof to the investors in that Portfolio (and notice by
the Trust to the shareholders of the Bond Index Fund) thirty days prior to
implementing the change.

Smaller funds investing in the Bond Index Portfolio may be materially
affected by the actions of larger funds investing in the Portfolio. For example,
if a large fund withdraws from the Portfolio, the remaining funds may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may become less diverse, resulting in increased
portfolio risk. (However, this possibility also exists for traditionally
structured funds which have large or institutional investors.) Also, funds with
a greater pro rata ownership in the Portfolio could have effective voting
control of the operations of the Portfolio. Whenever the Trust is requested to
vote on matters pertaining to the Bond Index Portfolio (other than a vote by the
Bond Index Fund to continue its investment in the Bond Index Portfolio upon the
withdrawal of another investor in the Portfolio), the Trust will hold a meeting
of shareholders of the Bond Index Fund and will cast all of its votes in the
same proportion as the votes of the Fund's shareholders. Bond Index Fund
shareholders who do not vote will not affect the Trust's votes at the Bond Index
Portfolio meeting. The percentage of the Trust's votes representing Bond Index
Fund shareholders not voting will be voted by the Trustees or officers of the
Trust in the same proportion as Bond Index Fund shareholders who do, in fact,
vote. Certain changes in the Bond Index Portfolio's investment objective,
policies or restrictions may require the Trust to withdraw the Bond Index Fund's
investment in the Bond Index Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash distribution
from the Portfolio). If securities are distributed, the Bond Index Fund could
incur brokerage, tax or other charges in converting the securities to cash. In
addition, the distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Bond Index Fund.
Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.

The Trust may withdraw the investment of the Bond Index Fund from the Bond
Index Portfolio at any time, if the Board of Trustees of the Trust determines
that it is in the best interests of the Bond Index Fund to do so. Upon any such
withdrawal, the Board of Trustees of the Trust would consider what action might
be taken, including investing all of the investable assets of the Bond Index
Fund in another pooled investment entity having the same investment objective
and policies as the Bond Index Fund or retaining an investment adviser to manage
the Fund's assets in accordance with the investment policies described above.

For descriptions of the investment objectives, policies and restrictions of
the Bond Index Portfolio, see "Investment Objectives and Policies" herein and in
the Statement of Additional Information. For descriptions of the management of
the Bond Index Portfolio, see "Management of the Trust" herein and in the
Statement of Additional Information. For descriptions of the expenses of the
Bond Index Portfolio, see "Management of the Trust" and "Expenses" below.

PRICING OF SHARES

The net asset value of each Fund is determined and the shares of each Fund
(the "Shares") are priced for purchases and redemptions at the close of regular
trading hours on the New York Stock Exchange (the "NYSE"), currently 4:00 p.m.
(Eastern time). Net asset value and pricing for each Fund are determined on each
day the NYSE is open for trading ("Business Day"). Currently, the days on which
the Funds are closed (other than weekends) are New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Thanksgiving Day and Christmas. Net asset value per Share for purposes of
pricing sales and redemptions is calculated by dividing the value of all
securities and other assets belonging to a Fund, less the liabilities charged to
the Fund, by the number of its outstanding Shares.

Assets in the Funds which are traded on a recognized domestic stock
exchange or are quoted on a national securities market are valued at the last
sale price on the securities exchange on which such securities are primarily
traded or at the last sale price on such national securities market. Securities
in the Funds other than the Bond Index Fund which are traded only on
over-the-counter markets are valued on the basis of closing over-the-counter bid
prices, and securities in such Funds for which there were no transactions are
valued at the average of the most recent bid and asked prices. Securities in the
Bond Index Fund which are traded only on over-the-counter markets are valued on
the basis of closing over-the-counter bid 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 the Board of
Trustees of the Trust. Absent unusual circumstances, debt securities maturing in
60 days or less are valued at amortized cost.

Securities of the Funds which are primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on their respective exchanges, except 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 after consideration
of such events and other material factors, all under the direction and guidance
of the Board of Trustees of the Trust. 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. Absent unusual circumstances,
investments in foreign 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 policies established by the Board
of Trustees of the Trust. 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. The administrators have undertaken to price the
securities held by the Funds, and may use one or more independent pricing
services in connection with this service. The methods used by the pricing
services and the valuations so established will be reviewed by each Fund's
investment managers and the administrators under the general supervision of the
Board of Trustees of the Trust.

HOW TO PURCHASE, EXCHANGE AND REDEEM SHARES

Purchase of Shares

Shares of each Fund may be purchased without a sales charge on any Business
Day at the net asset value next determined after an order is transmitted to the
Trust's transfer agent, Chase Global Funds Services Company ("CGFSC"), and
accepted by the distributor, Edgewood Services, Inc. (the "Distributor"). There
is no minimum amount for initial or subsequent investments. Purchase orders for
Shares received prior to the close of regular trading on the NYSE on any day
that a Fund's net asset value is calculated are priced according to the net
asset value determined on that day. Purchase orders received after the close of
regular trading on the NYSE are priced as of the time the net asset value per
share is next determined. The Distributor has established procedures for
purchasing Shares in order to accommodate different types of investors (see
"Purchase Procedures" below).

Shares of each Fund may be purchased only in those states where they may be
lawfully sold. The Trust reserves the right to cease offering Shares for sale at
any time and the Distributor and the Trust each reserve the right to reject any
order for the purchase of Shares.

Purchase Procedures

Shares may be purchased directly only by institutional investors
("Institutional Investors"). An Institutional Investor (a "Shareholder
Organization") may elect to hold of record Shares for its customers
("Customers") and to record beneficial ownership of Shares on the account
statements provided to its Customers. In that case, it is each 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
CGFSC in accordance with the procedures agreed to by the Shareholder
Organization and the Distributor. Confirmations of all such purchases and
redemptions by Shareholder Organizations for the benefit of their customers will
be sent by CGFSC to the particular Shareholder Organization. In the alternative,
a Shareholder 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
directly to the Customers.

Certificates will not be issued for Shares.

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 account, Shareholder Organizations may charge a Customer's account
fees for automatic investment and other cash management services provided.
Customers should contact their Shareholder Organization directly for further
information.

Purchases by Wire

Institutional Investors may purchase Shares by wiring federal funds to
CGFSC. Prior to making an initial investment by wire, an investor must telephone
CGFSC at (800) 909-1989 (from overseas, please call (617) 557-1755) for
instructions, including a Wire Control Number. Federal funds and registration
instructions should be wired through the Federal Reserve System to:

The Chase Manhattan Bank, N.A.
ABA #021000021
Excelsior Institutional Trust
Credit DDA #910-2-733046
[Account Registration]
[Account Number]
[Wire Control Number] *See Above*

Shares purchased by federal funds wire will be effected at the net asset
value per share next determined after acceptance of the order provided that the
federal funds wire has been received by the Fund's bank on that Business Day.

It is intended that each Fund will be as fully invested at all times as is
reasonably practicable in order to enhance the yield on their respective assets.
Accordingly, in order to make investments which will immediately generate
income, a Fund must have federal funds available. Purchase orders received and
accepted after 4:00 p.m. Eastern time will be effected at the net asset value
next determined even if a Fund received federal funds on that day.

Investors making initial investments by wire must promptly complete the
application accompanying this Prospectus and forward it to CGFSC. No account
application is required for subsequent purchases. Completed applications should
be directed to:

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

The application may also be sent via facsimile. Please contact CGFSC at
(800) 909-1989 (from overseas, please call (617) 557-1755) for complete
instructions. Redemptions by investors will not be processed until the completed
application for purchase of Shares has been received and accepted by CGFSC.
Investors making subsequent investments by wire should follow the above
instructions.

Purchases by Telephone

For Institutional Investors who have previously selected the telephone
purchase option, a purchase order may be placed by calling CGFSC at (800)
909-1989 (from overseas, please call (617) 557-1755). The purchase by telephone
will be effected at the net asset value per share next determined after
acceptance of the order.

By establishing the telephone purchase option, the Institutional Investor
authorizes CGFSC and the Distributor to act upon telephone instructions believed
to be genuine. CGFSC and the Distributor will not be held liable for any loss,
liability, cost or expense for acting upon such instruction. Accordingly,
Institutional Investors bear the risk of loss. The Trust will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
including, without limitation, recording telephonic instructions and/or
requiring the caller to provide some form of personal identification. Failure to
employ reasonable procedures may make the Trust liable for any losses due to
unauthorized or fraudulent telephone instructions.

This option may be changed, modified or terminated at any time. The Trust
currently does not charge a fee for this service, although some Service
Organizations may charge their customers fees. Customers should contact their
Service Organization directly for further information.

Exchange Privilege

Shares of a Fund may be exchanged without payment of any exchange fee for
shares of another Fund described herein at their respective net asset values. An
exchange of shares is treated for federal and state income tax purposes as a
redemption (sale) of shares given in exchange by the shareholder, and an
exchanging shareholder may, therefore, realize a taxable gain or loss in
connection with the exchange. Shareholders exchanging shares of a Fund for
shares of another Fund should review the disclosure provided herein relating to
the exchanged-for shares carefully prior to making an exchange. The exchange
privilege is available to shareholders residing in any state in which Trust
shares being acquired may be legally sold.

The exchange option may be changed, modified or terminated at any time. The
Trust currently does not charge a fee for this service, although some Service
Organizations may charge their customers fees. Customers should contact their
Service Organization directly for further information.

Exchanges by Telephone

For Institutional Investors who have previously selected the telephone
exchange option, an exchange order may be placed by calling CGFSC at (800)
909-1989 (from overseas, please call (617) 557-1755). The exchange by telephone
will be effected at the net asset value per share next determined after
acceptance of the order for each Fund.

By establishing the telephone exchange option, the Institutional Investor
authorizes CGFSC and the Distributor to act upon telephone instructions believed
to be genuine. CGFSC and the Distributor will not be held liable for any loss,
liability, cost or expense for acting upon such instruction. Accordingly,
Institutional Investors bear the risk of loss. The Trust will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
including, without limitation, recording telephonic instructions and/or
requiring the caller to provide some form of personal identification. Failure to
employ reasonable procedures may make the Trust liable for any losses due to
unauthorized or fraudulent telephone instructions.

Redemption of Shares

Institutional Investors may redeem all or any portion of the Shares in
their account at the net asset value next determined after proper receipt in
good form and acceptance of an order for redemption. Proceeds from redemption
orders received and accepted by 4:00 p.m. Eastern time will normally be sent the
next Business Day; proceeds are sent in any event within five Business Days.

It is necessary for Institutional Investors and other entities to have on
file appropriate documentation authorizing redemptions by the institution or
entity before a redemption request is considered in proper form. In some cases,
additional documentation may be requested.

Investment return and principal value of an investment in each Fund will
fluctuate, so that the value of shares redeemed may be more or less than the
shareholder's cost. Redemptions of shares are taxable events on which a
shareholder may realize a gain or loss.

Redemption Procedures

Customers of Shareholder Organizations holding Shares of record may redeem
all or part of their investments in the Funds in accordance with the procedures
governing their accounts at their Shareholder Organization. It is the
responsibility of the Shareholder Organizations to transmit redemption orders to
CGFSC and credit such Customer accounts with the redemption proceeds on a timely
basis.

Customers redeeming Shares through certain Shareholder Organizations or
certified financial planners may incur transaction charges in connection with
such redemptions. Such Customers should contact their Shareholder Organization
for further information on transaction fees.

Institutional Investors may redeem all or part of their Shares in
accordance with any of the procedures described below. These procedures only
apply to Customers of Shareholder Organizations for whom individual accounts
have been established with CGFSC. Customers whose individual accounts are
maintained by Shareholder Organizations must contact their Shareholder
Organization directly to redeem Trust shares.

If any portion of the Shares to be redeemed represents an investment made
by check, the Trust and CGFSC reserve the right not to honor the redemption
until CGFSC is reasonably satisfied that the check has been collected in
accordance with the applicable banking regulations; such collection process may
take up to 15 days. An Institutional Investor who anticipates the need for more
immediate access to its 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 check is not collected, the purchase will be
canceled and CGFSC will charge a fee of $25.00 to the Institutional Investor's
account.

Redemption by Wire or Telephone

Institutional Investors who maintain an account at CGFSC and have so
indicated on their application, or have subsequently arranged in writing to do
so, may redeem Shares by instructing CGFSC, by wire or telephone, to wire the
redemption proceeds directly to the investor's predesignated bank account at any
commercial bank in the United States. Institutional Investors may have their
Shares redeemed by wire by instructing CGFSC at (800) 909-1989 (from overseas,
please call (617) 557-1755). No charge is imposed by the Trust for wiring
redemption payments to Institutional Investors although Shareholder
Organizations may charge Customers for wiring or crediting such redemption
payments to their accounts. Information relating to such redemption services and
charges, if any, is available to Customers directly from their Shareholder
Organizations.

In order to arrange for redemption by wire or telephone after an account
has been opened or to change the bank account designated to receive redemption
proceeds, an Institutional Investor must send a written request to the Trust at
the address listed below under "Redemption by Mail". Such requests must be
signed by the investor, with signatures guaranteed (see "Redemption by Mail"
below for details regarding signature guarantees). Further documentation may be
requested.

CGFSC and the Distributor reserve the right to refuse a wire or telephone
redemption. Procedures for redeeming Shares by wire or telephone may be modified
or terminated at any time by the Trust or the Distributor. CGFSC, the Trust and
the Distributor will not be liable for any loss, liability, cost or expense for
acting upon telephone instructions believed to be genuine. Accordingly,
shareholders will bear the risk of loss. The Trust will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
including, without limitation, recording telephone instructions and/or requiring
the caller to provide some form of personal identification. Failure to employ
reasonable procedures may make the Trust liable for any losses due to
unauthorized or fraudulent telephone instructions.

Redemption by Mail

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

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

A written redemption request to CGFSC must (i) state the number of Shares
to be redeemed, (ii) identify the shareholder account number and tax
identification number, and (iii) be signed for each registered owner by its
authorized officer exactly as the Shares are registered.

A redemption request for an amount in excess of $5,000, 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 securities associations,
clearing agencies and savings associations. All eligible guarantor institutions
must participate in the Securities Transfer Agents Medallion Program ("STAMP")
in order to be approved by CGFSC pursuant to the Signature Guarantee Guidelines.
Copies of the Signature Guarantee Guidelines and information on STAMP can be
obtained from CGFSC at (800) 909-1989 (from overseas, please call (617)
557-1755) or at the address given above. CGFSC may require additional supporting
documents. A redemption request will not be deemed to be properly received in
good form until CGFSC receives all required documents in proper form.

Questions with respect to the proper form for redemption requests should be
directed to CGFSC at (800) 909-1989 (from overseas, please call (617) 557-1755).

<PAGE>

Other Redemption Information

Except as described in "Investor Programs" below, Institutional 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 remains below $500. If a Customer has agreed with a particular
Shareholder Organization to maintain a minimum balance with respect to Shares of
a Fund and the balance in such account falls below that minimum, the Customer
may be obliged by the Shareholder Organization to redeem all or part of its
Shares to the extent necessary to maintain the required minimum balance.

INVESTOR PROGRAMS

Retirement Plans

Shares are available for purchase by Institutional Investors in connection
with the following 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 eligible non-working 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.

Institutional Investors or Customers of Shareholder Organizations investing
in Shares pursuant to a retirement plan are not subject to the minimum
investment and mandatory redemption provisions described above. Detailed
information concerning eligibility, service fees and other matters related to
these plans is available from the Trust by calling CGFSC at (800) 909-1989 (from
overseas, please call (617) 557-1755). Customers of Shareholder Organizations
may purchase Shares pursuant to retirement plans if such plans are offered by
their Shareholder Organizations.

TAX MATTERS

Each year the Trust intends to qualify each Fund and elect that each Fund
be treated as a separate "regulated investment company" under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"). Provided a Fund
meets all income, distribution and diversification requirements of the Code, and
distributes all of its net investment income and realized capital gains to
shareholders in accordance with the timing requirements imposed by the Code, no
federal income or excise taxes will be required to be paid from that Fund,
although foreign-source income of a Fund may be subject to foreign withholding
taxes. If a Fund fails to qualify as a "regulated investment company" in any
year, the Fund would incur a regular corporate federal income tax upon its
taxable income and the Fund's distributions would generally be taxable as
ordinary dividend income to shareholders. With respect to the Bond Index Fund,
the Bond Index Portfolio in which it invests is also not expected to be required
to pay any federal income or excise taxes.

Shareholders of a Fund normally will have to pay federal income taxes and
any state or local taxes on the dividends and net capital gain distributions, if
any, they receive from a Fund. Dividends from ordinary income and any
distributions from net short-term capital gains are taxable to shareholders as
ordinary income for federal income tax purposes. Distributions of net capital
gains are taxable to shareholders as long-term capital gains without regard to
the length of time the shareholders have held their Shares. Dividends and
distributions, if any, paid to shareholders will be treated in the same manner
for federal income tax purposes whether received in cash or reinvested in
additional Shares of a Fund.

A portion of the ordinary income dividends of a Fund invested in stock of
domestic corporations may qualify for the dividends-received deduction for
corporations if the recipient otherwise qualifies for that deduction with
respect to its holding of Fund Shares. Availability of the deduction for
particular shareholders is subject to certain limitations, and deducted amounts
may be subject to the alternative minimum tax and result in certain basis
adjustments.

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 following year.

At the end of each calendar year, each shareholder receives information for
tax purposes on the dividends and other distributions received during that
calendar year, including the portion thereof taxable as ordinary income, the
portion taxable as long-term capital gains, the portion (if any) which
constitutes a return of capital (which is generally free of tax but results in a
basis reduction), and the amount of dividends (if any) which may qualify for the
dividends-received deduction for corporations.

In general, any gain or loss realized upon a taxable disposition of Shares
of a Fund by a shareholder that holds such Shares as a capital asset will be
treated as long-term capital gain or loss if the Shares have been held for more
than 12 months and otherwise as a short-term capital gain or loss. However, any
loss realized upon a redemption of Shares in a Fund held for six months or less
will be treated as a long-term capital loss to the extent of any distributions
of net capital gain made with respect to those Shares. Any loss realized upon a
disposition of Shares may also be disallowed under rules relating to wash sales.

If more than 50% of the value of the International Equity Fund's total
assets at the close of any taxable year consists of stock or securities of
foreign corporations, the International Equity Fund may elect to "pass through"
to shareholders foreign income taxes paid by that Fund. Under those
circumstances, the Fund will notify shareholders of their pro rata portion of
the foreign income taxes paid by the Fund, shareholders may be eligible for
foreign tax credits or deductions with respect to those taxes, but will be
required to treat the amount of the taxes as an amount distributed to them and
thus includable in their gross income for federal income tax purposes.

The Trust may be required to withhold federal income tax at the rate of 31%
from all taxable distributions and redemption proceeds payable to shareholders
who do not provide the Trust with their correct taxpayer identification number
or make required certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding. Such withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's federal income tax liability.

Under current law, neither the Trust, as a Delaware business trust, nor any
of the Funds are liable for any income or franchise tax in the State of Delaware
as long as the Funds continue to qualify as "regulated investment companies"
under the Code.

The foregoing discussion is intended for general information only. An
investor should consult with its own tax advisor as to the tax consequences of
an investment in the Funds, including the status of distributions from the Funds
under applicable state and local laws.

MANAGEMENT OF THE TRUST

The Boards of Trustees of Excelsior Institutional Trust (the "Trust")
provide general supervision over the affairs of the Trust. The Trustees decide
upon matters of general policy and review the actions of service providers such
as the investment managers, service agent, distributor, and others.

Investment Managers

Equity Fund, Income Fund and Total Return Bond Fund

U.S. Trust is responsible for the management of the assets of the Equity
Fund, Income Fund and Total Return Bond Fund, pursuant to an investment advisory
agreement (the "Advisory Agreement") with the Trust on behalf of such Funds.
With respect to these Funds, U.S. Trust makes decisions with respect to and
places orders for all purchases and sales of portfolio securities, and maintains
records relating to such purchases and sales.

The following persons are primarily responsible for the day- to-day
management of the following Funds:

Equity Fund........... P. Ross Taylor III, Director of
Institutional Investments (Equity) and
Senior Portfolio Manager, U.S. Trust (since
1987).

Income Fund........... Charles E. Rabus, Vice President and Senior
Portfolio Manager, U.S. Trust (since 1987).

Total Return Bond Fund Henry M. Milkowicz, Senior Vice President
and Senior Portfolio Manager, U.S. Trust
(since 1986).

For its services under the Advisory Agreement, U.S. Trust is entitled to
receive from the Equity Fund, Income Fund and Total Return Bond Fund, a fee
accrued daily and paid monthly at an annual rate equal to 0.65% of each Fund's
average daily net assets. U.S. Trust has agreed to waive a portion of its
investment advisory fees under the Advisory Agreement which waiver may be
terminated at any time.

U.S. Trust is a state-chartered bank and trust company which 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 services,
and personal and corporate banking. U.S. Trust 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 Clearing House Association. On June 30, 1995,
U.S. Trust's Asset Management Group had approximately $41.2 billion in assets
under management. U.S. Trust, which has its principal offices at 114 West 47th
Street, New York, NY 10036, is a subsidiary of U.S. Trust Corporation, a
registered bank holding company. U.S. Trust also serves as investment adviser to
Excelsior Funds, Inc. (formerly known as UST Master Funds, Inc.) and Excelsior
Tax-Exempt Funds, Inc. (formerly known as UST Master Tax-Exempt Funds, Inc.),
which are registered investment companies consisting of the following funds:
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;
International Fund, Emerging Americas Fund; Pan European Fund; Pacific/Asia
Fund; Money Fund; Government Money Fund; Treasury Money Fund; Short-Term
Government Securities Fund; Intermediate-Term Managed Income Fund; Managed
Income Fund; Short-Term Tax Exempt Money Fund; Short-Term Tax-Exempt Securities
Fund; New York Intermediate-Term Tax-Exempt Fund; Intermediate-Term Tax-Exempt
Fund; and Long-Term Tax-Exempt Fund. U.S. Trust also serves as investment
adviser to the UST Variable Series, Inc.

Balanced Fund, Equity Growth Fund and International Equity Fund

United States Trust Company of The Pacific Northwest ("U.S. Trust Pacific")
is responsible for the management of the assets of the Balanced Fund, Equity
Growth Fund and International Equity Fund pursuant to an investment advisory
agreement (the "Advisory Agreement") with the Trust on behalf of such Funds.
U.S. Trust Pacific has delegated the daily management of the investment
portfolios of these Funds to the investment managers named below, acting as
subadvisers (the "Subadvisers"):

Balanced Fund................ Becker Capital Management, Inc.
("Becker")
Equity Growth Fund........... Luther King Capital Management
("Luther King")
International Equity Fund.... Harding, Loevner Management,
L.P. ("Harding Loevner")

Subject to the general guidance and policies set by the Trustees of the
Trust, U.S. Trust Pacific provides general supervision over the investment
management functions performed by each of the Subadvisers. U.S. Trust Pacific
closely monitors the Subadvisers' application of these Funds' investment
policies and strategies, and regularly evaluates the Subadvisers' investment
results and trading practices.

For its services under the Advisory Agreement, U.S. Trust Pacific is
entitled to receive from each of the Balanced, Equity Growth and International
Equity Funds, fees accrued daily and paid monthly at an annual rate equal to the
percentages specified below of such Fund's average daily net assets: (a) 0.65%
for the each of Balanced Fund and Equity Growth Fund; and (b) 1.00% for the
International Equity Fund. U.S. Trust Pacific, which has its principal offices
at 4380 Southwest Macadam Avenue, Suite 450, Portland, OR 97201, is a subsidiary
of United States Trust Company of New York. Although the advisory fee paid by
the International Equity Fund is higher than advisory fees currently being paid
by most investment companies in general, the advisory fee paid by the
International Equity Fund is similar to fees currently being paid by other
investment companies which also invest primarily in foreign issuers. U.S. Trust
Pacific has agreed to waive a portion of its investment advisory fees with
respect to each Fund listed above, which waiver may be terminated at any time.

Pursuant to the subadvisory agreements, the Subadvisers make the day-to-day
investment decisions and portfolio selections for the Balanced, Equity Growth
and International Equity Funds, consistent with the general guidelines and
policies established by U.S. Trust Pacific and the Board of Trustees of the
Trust. For the investment management services they provide to the Funds, the
Subadvisers are compensated only by U.S. Trust Pacific, and receive no fees
directly from the Trust. For their services under the subadvisory agreements,
the Subadvisers are entitled to receive from U.S. Trust Pacific, fees at a
maximum annual rate equal to the percentages specified below of the Fund's
average daily net assets: (a) 0.425% for the Balanced Fund, (b) 0.40% for the
Equity Growth Fund, and (c) 0.50% for the International Equity Fund. Each
Subadviser has agreed to waive a portion of its investment advisory fees with
respect to its respective Fund, which waivers may be terminated at any time. The
Subadvisers furnish at their own expense all services, facilities and personnel
necessary in connection with managing the Funds' investments and effecting
securities transactions for the Funds.

Becker, the Subadviser for the Balanced Fund, maintains its principal
offices at 2185 Pacwest Center, Portland, OR 97204. As of June 30, 1995, Becker
had $1.1 billion in assets under management. The person primarily responsible
for the day-to-day management of the Balanced Fund is Donald L. Wolcott, C.F.A.,
Vice President and Portfolio Manager of Becker. Mr. Wolcott joined Becker in
1987 and brings 19 years of experience in investment management to his position.

Luther King, the Subadviser for the Equity Growth Fund, maintains its
principal offices at 301 Commerce Street, Suite 1600, Forth Worth, TX 76102. As
of June 30, 1995, Luther King had $4.8 billion in assets under management.
Emmett M. Murphy is primarily responsible for the day-to-day management of
Equity Growth Fund. Mr. Murphy has been an investment manager with Luther King
since 1981. He is also a Chartered Financial Analyst.

Harding Loevner, the Subadviser for the International Equity Fund maintains
its principal offices at 50 Division Street, Suite 401, Somerville, NJ 08876. As
of June 30, 1995, Harding Loevner had $512 million in assets under management.
All investment management decisions of Harding Loevner are made by an investment
group and not by portfolio managers individually.

Bond Index Fund

The Trust seeks to achieve the investment objective of the Bond Index Fund
by investing all investable assets of that Fund in the Bond Index Portfolio,
which has the same investment objective and policies as the Bond Index Fund.
Federated Management is responsible for the management of the assets of the Bond
Index Portfolio, pursuant to an investment advisory agreement (the "Federated
Advisory Agreement") with Federated Portfolios on behalf of the Bond Index
Portfolio. Federated Management has delegated daily management of the security
holdings of the Bond Index Portfolio to U.S. Trust, acting as subadviser.

Subject to the general guidance and policies set by the Trustees of
Federated Portfolios, Federated Management provides general supervision over the
investment management functions performed by U.S. Trust. Federated Management
closely monitors U.S. Trust's application of the Bond Index Portfolio's
investment policies and strategies, and regularly evaluates U.S. Trust's
investment results and trading practices.

For its services under the Federated Advisory Agreement, Federated
Management is entitled to receive from the Bond Index Portfolio a fee accrued
daily and paid monthly at an annual rate equal to 0.25% of the Bond Index
Portfolio's average daily net assets. Federated Management has agreed to waive
all investment advisory fees with respect to the Bond Index Portfolio. This
waiver may be terminated at any time, although Federated Investors has agreed to
maintain total operating expenses (after waivers and reimbursements) of the Bond
Index Portfolio at no greater than 0.20% of average net assets for the twelve
month period following January 2, 1996. Federated Management, which has its
principal offices at Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222, is a Delaware business trust. Federated Management is an
indirect, wholly-owned subsidiary of Federated Investors, a Delaware business
trust which, together with its affiliates, has approximately $70 billion in
assets under management. Federated Management acts as investment adviser to 25
investment companies with multiple portfolios or series.

Pursuant to an investment subadvisory agreement, U.S. Trust makes the
day-to-day investment decisions and portfolio selections for the Bond Index
Portfolio, consistent with general guidelines and policies established by
Federated Management and the Board of Trustees of Federated Portfolios. For the
investment management services U.S. Trust provides to the Bond Index Portfolio,
U.S. Trust is compensated only by Federated Management and receives no fees
directly from Federated Portfolios. For its services under the subadvisory
agreement, U.S. Trust is entitled to receive from Federated Management a fee
accrued daily and paid monthly at an annual rate equal to 0.12% of the Bond
Index Portfolio's average daily net assets. U.S. Trust has agreed to waive all
investment advisory fees with respect to the Bond Index Portfolio, which waiver
may be terminated at any time. U.S. Trust furnishes at its own expense all
services, facilities and personnel necessary in connection with managing the
Bond Index Portfolio's investments and effecting securities transactions for the
Portfolio. For information on U.S. Trust please see "Investment Managers -
Equity Fund, Income Fund and Total Return Bond Fund" above.

Bruce Tavel, Senior Vice President, and Cyril M. Theccanat, Vice President
of U.S. Trust, Structured Investment Management Department, are primarily
responsible for the day-to-day management of the Bond Index Portfolio. Mr.
Theccanat has been managing structured investment portfolios at U.S. Trust since
January, 1990. Prior to this, Mr. Theccanat was a Vice President of Drexel
Burnham Lambert, responsible for interest rate and foreign exchange risk
management. Mr. Tavel designs, develops and implements analytic procedures and
services utilizing quantitative and financial information. He has over 17 years
of experience in the execution of decision support systems at U.S. Trust and
previously at Lehman Asset Management, where he was Director of Institutional
Computer Services.

Investments in the Funds are not deposits or obligations of, or guaranteed
or endorsed by, United States Trust Company of New York or any other bank.

Administrators

U.S. Trust, located at 114 West 47th Street, New York, NY 10036, Chase
Global Fund Services Company ("CGFSC"), located at 73 Tremont Street, Boston,
Massachusetts 02108, and Federated Administrative Services ("FAS"), a
wholly-owned subsidiary of Federated Investors located at Federated Investors
Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania, 15222-3779, serve as the
Funds' administrators (the "Administrators"). The Administrators supervise the
affairs of the Trust, including, among other responsibilities, the negotiation
of contracts and fees with, and the monitoring of performance and billings of,
the various service providers of the Trust; provide equipment and clerical
personnel necessary for maintaining the organization of the Trust; prepare and
distribute all materials in connection with meetings of Trustees and investors;
prepare and file all documents required for compliance by the Trust with
applicable laws and regulations; and arrange for the maintenance of Fund
accounting and record-keeping of the Trust.

Federated Services Company ("FSC"), an affiliate of FAS, also serves as
servicing agent and fund accounting agent to the Trust with respect to the Bond
Index Fund, pursuant to an agreement between FSC and the Trust (the "Servicing
Agent Agreement"), which provides that FSC will perform or provide certain
administrative and fund accounting services to the Bond Index Fund.

As compensation for providing these services and facilities to the Trust,
the Administrators and FSC (with respect to the Bond Index Fund only) are
jointly entitled to an annual fee, computed daily and paid monthly from each of
the Funds (other than the International Equity Fund), based on the combined
average daily net assets of the Funds, Excelsior Funds, Inc. (formerly known as
UST Master Funds, Inc.), and Excelsior Tax-Exempt Funds, Inc. (formerly known as
UST Master Tax-Exempt Funds, Inc.) (collectively the "Fund Complex") as follows:

Combined Average Daily Net
Assets of the Funds Complex Annual Fee

first $200 million 0.200%
next $200 million 0.175%
over $400 million 0.150%

Administrative fees payable to the Administrators and FSC by each of the
above Funds are determined in proportion to their pro rata share of the total
average daily net assets of all of the funds in the Fund Complex at the time of
determination. The Administrators are jointly entitled to an annual fee from the
International Equity Fund, computed daily and paid monthly, at the annual rate
of 0.20% of the average daily net assets of such Fund. From time to time the one
or more of the Administrators or FSC may waive all or a portion of the
administrative fee payable to them by the Funds, which waiver may be terminated
at any time. For the fiscal year ended May 31, 1995, Signature Financial
Services, Inc., the former servicing agent, was entitled to receive fees under
the compensation arrangements then in place for administrative services (other
than fund accounting services) at an annual rate of up to 0.07% of the average
daily net assets of the portfolios in which the Funds were then invested. For
its fund accounting services for the same period Signature Financial Services,
Inc. was entitled to receive a per annum fee from each Fund and each portfolio
in which the Funds were then invested equal to $12,000 and $50,000 respectively.

Distributor

Pursuant to a Distribution Agreement, Edgewood Services, Inc. (the
"Distributor"), Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222-3779, acts as principal underwriter for the Shares. Edgewood
Services, Inc., a registered broker-dealer and a wholly-owned subsidiary of
Federated Investors, is unaffiliated with U.S. Trust or any of its affiliates.
The Distributor and its affiliates act as distributor and serve as administrator
to twenty-four bank related mutual fund complexes.

Shareholder Servicing Agents

The Trust has entered into shareholder servicing agreements with several
shareholder servicing agents, including U.S. Trust. Pursuant to these
agreements, a shareholder servicing agent, as agent for its customers who are
purchasing Shares, will perform the following services for these investors,
among other things: answer customer inquiries regarding account status and
history, the manner in which purchases, exchanges and redemptions of Shares of
each Fund may be effected and certain other matters pertaining to a Fund; assist
shareholders in designating and changing dividend options, account designations
and addresses; provide necessary personnel and facilities to establish and
maintain shareholder accounts and records; assist in processing purchase,
exchange and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase, exchange or
redeem Shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
provide periodic statements showing a customer's account balances and, to the
extent practicable, integrate such information with other client transactions
otherwise effected with or through the shareholder servicing agent; furnish
(either separately or on an integrated basis with other reports sent to the
customer by its shareholder servicing agent) monthly and year-end statements and
confirmations of purchases and redemptions; transmit, on behalf of the Trust,
prospectuses, proxy statements, annual reports, updating prospectuses, if any,
and other communications from the Trust to shareholders of each Fund; receive,
tabulate and transmit to the Trust proxies executed by shareholders with respect
to meetings of shareholders of the Funds; and provide such other related
services as the Trust or a shareholder may request. For these services, the
shareholder servicing agents will receive a fee accrued daily and paid monthly
for the respective Fund's current fiscal year at an annual rate of up to 0.25%
of the average daily net assets represented by shares owned during the period
for which payment is being made by customers of the shareholder servicing agent.
In addition, certain shareholder servicing agents will perform record keeping
and administrative functions for which they will receive a fee at an annual rate
of up to 0.15% of each Fund's average daily net assets. Shareholder servicing
agents are expected to waive a portion of their fees.

Custodian and Transfer Agent

The Chase Manhattan Bank, N.A. ("Chase") serves as custodian of the Funds'
assets. Communications to the custodian should be directed to The Chase
Manhattan Bank, N.A., Mutual Funds Service Division, 770 Broadway, New York, NY
10003. Chase Global Funds Services Company ("CGFSC"), 73 Tremont Street, Boston,
Massachusetts 02108, serves as the transfer agent for the Funds, providing
transfer agency, dividend disbursement and registrar services. CGFSC is a
subsidiary of Chase.

Bond Index Portfolio - Service Providers

Federated Services Company, a Delaware business trust whose address is
Federated Investors Tower, 1001 Liberty Avenue, Pittburgh, PA 15222-3779, serves
as transfer agent, dividend disbursing agent and custody procurement agent for
Federated Portfolios. The fee paid to the transfer agent is based upon the size,
type and number of accounts and transactions made by shareholders. Federated
Services Company also maintains Federated Portfolio's accounting records. The
fee for this service (of which the Bond Index Portfolio bears its pro rata
share) is based upon the level of Federated Portfolios' average net assets for
the period plus out-of-pocket expenses. Federated Services Company is a
wholly-owned subsidiary of Federated Investors.

Federated Securities Corp. is the placement agent for investments in the
Bond Index Portfolio. Federated Securities Corp. is located at Federated
Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779. It is
a Pennsylvania corporation organized on November 14, 1969, and is the principal
distributor for a number of investment companies. Federated Securities Corp.
receives no fee for its services as placement agent for the Bond Index
Portfolio. Federated Securities Corp. is a wholly-owned subsidiary of Federated
Investors.

Federated Administrative Services ("FAS") provides administrative personnel
and services (including certain legal and financial reporting services)
necessary to operate the Bond Index Portfolio. FAS is entitled to receive a fee
from the Bond Index Portfolio accrued daily and paid monthly at a annual rate of
up to 0.05% of the average daily net assets of the Bond Index Portfolio, subject
to a minimum of $60,000 (unless waived). From time to time FAS may waive all or
a portion of the administrative fee, and has agreed to waive a portion of the
administrative fee for the twelve month period following January 2, 1996.

Investors Bank & Trust Company, 79 Milk Street, Boston, Massachusetts 02205
serves as custodian of the Bond Index Portfolio's assets.

Expenses

The expenses of the Trust include the compensation of its Trustees who are
not affiliated with the investment managers; governmental fees; interest
charges; taxes; fees and expenses of the Administrators, of independent
auditors, of legal counsel and of any transfer agent, custodian, registrar or
dividend disbursing agent of the Trust; insurance premiums; and expenses of
calculating the net asset value of, and the net income on shares of the Funds.

Expenses of the Trust also include expenses of distributing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing prospectuses, reports, notices, proxy statements and reports to
shareholders and to governmental offices and commissions; expenses of
shareholder and Trustee meetings; expenses relating to the issuance,
registration and qualification of shares of each Fund and the preparation,
printing and mailing of prospectuses for such purposes; and membership dues in
the Investment Company Institute allocable to the Trust.

The Bond Index Fund invests through the Bond Index Portfolio, which is a
series of Federated Portfolios. Expenses of Federated Portfolios (of which the
Bond Index Portfolio bears its pro rata share) include the compensation of its
Trustees who are not affiliated with the investment managers; governmental fees,
interest charges; taxes; fees and expenses of independent auditors, of legal
counsel and of any transfer agent, administrator, registrar or dividend
disbursing agent of Federated Portfolios; insurance premiums; and expenses of
calculating the net asset value of, and the net income or interests in the Bond
Index Portfolio.

Expenses of Federated Portfolios also include expenses connected with the
execution, recording and settlement of security transactions; fees and expenses
of Federated Portfolios' custodian for all services to Bond Index Portfolio,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
governmental offices and commissions; expenses of meetings of investors and
Trustees; and the advisory fees, if any, payable to Federated Management under
the Federated Advisory Agreement.

Bank Regulatory Matters. The Glass-Steagall Act and applicable banking laws
and regulations generally prohibit certain financial institutions such as U.S.
Trust from engaging in the business of underwriting securities of open-end
investment companies such as the Trust. Based on advice of its counsel, it is
the position of U.S. Trust and U.S. Trust Pacific that the investment advisory
services performed by U.S. Trust or U.S. Trust Pacific under the Advisory
Agreements with the Trust, the activities performed by U.S. Trust as one of the
administrators for the Funds and as subadviser for the Bond Index Portfolio, do
not constitute underwriting activities and are consistent with the requirements
of the Glass-Steagall Act. In addition, counsel has advised that this
combination of individually permissible activities is consistent with the
Glass-Steagall Act and other federal or state legal and regulatory precedent.
There is presently no controlling precedent regarding the performance of a
combination of investment advisory, administrative and/or shareholder servicing
activities by banks. State laws on this issue may differ from the
interpretations of relevant federal law and banks and financial institutions may
be required to register as dealers pursuant to state securities law. Future
changes in either federal statutes or regulations relating to the permissible
activities of banks, as well as future judicial or administrative decisions and
interpretations of present and future statutes and regulations, could prevent a
bank from continuing to perform all or part of its servicing or investment
management activities. If a bank were prohibited from so acting, its shareholder
customers would be permitted to remain Fund shareholders and alternative means
for continuing the servicing of such shareholders would be sought. In such
event, changes in the operation of the Funds might occur and a shareholder
serviced by such bank might no longer be able to avail himself of any automatic
investment or other services then being provided by such bank. The Trustees of
the Trust do not expect that shareholders of the Funds would suffer any adverse
financial consequences as a result of these occurrences.

Certain Relationships and Activities. U.S. Trust, U.S. Trust Pacific and
their affiliates may have deposit, loan and other commercial banking
relationships with the issuers of securities which may be purchased on behalf of
the Funds including outstanding loans to such issuers which could be repaid in
whole or in part with the proceeds of securities so purchased. U.S. Trust and
U.S. Trust Pacific have informed the Trust that, in making investment decisions,
they do not obtain or use material inside information in their possession or in
the possession of any of their affiliates. In making investment recommendations
U.S. Trust and U.S. Trust Pacific will not inquire or take into consideration
whether an issuer of securities proposed for purchase or sale by a Fund is a
customer of U.S. Trust or U.S. Trust Pacific, their parents or their
subsidiaries or affiliates. When dealing with its customers, U.S. Trust, U.S.
Trust Pacific, their parents, subsidiaries, and affiliates will not inquire or
take into consideration whether securities of such customers are held by any
Fund managed by U.S. Trust, U.S. Trust Pacific or any such affiliate.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

Dividends equal to all or substantially all of each Fund's net investment
income will be declared and paid as follows: For the Equity, Balanced and Equity
Growth Funds, dividends will be declared and paid at least quarterly; for the
Income, Total Return Bond and Bond Index Funds, dividends will be declared daily
and paid at least monthly; for the International Equity Fund, dividends will be
declared and paid at least once a year.

Long-term capital gains, if any, for each Fund will be distributed once a
year, usually in December, if a Fund's profits during that year from the sale of
securities held for longer than the applicable period exceed losses during such
year from the sale of securities together with any net capital losses carried
forward from prior years (to the extent not used to offset short-term capital
gains). Net short-term capital gains realized during a Fund's fiscal year will
also be distributed during such year. Each Fund's net income for dividend
purposes consists of (i) all accrued income, whether taxable or tax-exempt, plus
discount earned on the Fund's assets, less (ii) amortization of premium on such
assets, accrued expenses directly attributable to the Fund, and the general
expenses or the expenses common to more than one Fund (e.g., legal,
administrative, accounting, and Trustees' fees) prorated to each Fund on the
basis of its relative net assets. Dividends and distributions will reduce the
net asset value of each of the Funds by the amount of the dividend or
distribution.

Additional distributions will also be made to shareholders to the extent
necessary to avoid the application of non-deductible federal excise taxes on
certain undistributed income and net capital gains of mutual Funds.

DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

The Trust's Trust Instrument permits the Trustees of the Trust to issue an
unlimited number of full and fractional shares of beneficial interest (par value
$0.00001 per share) of each series and to divide or combine the shares into a
greater or lesser number of shares without thereby changing the proportionate
beneficial interests in each Fund. The Trust reserves the right to create and
issue any number of series; investments in each series participate equally in
the earnings, dividends and assets of the particular series only and no other
series. Currently, the Trust has seven active and two inactive series. The
active series include: Excelsior Institutional Equity Fund, Excelsior
Institutional Income Fund, Excelsior Institutional Total Return Bond Fund,
Excelsior Institutional Bond Index Fund, Excelsior Institutional Balanced Fund,
Excelsior Institutional Equity Growth Fund and Excelsior Institutional
International Equity Fund. The seven active series are offered through this
Prospectus.

Each Share of a Fund represents an interest in that Fund that is
proportionate with the interest represented by each other Share. Shares have no
preference, preemptive, conversion or similar rights. Shares when issued are
fully paid and nonassessable, except as set forth below. Shareholders are
entitled to one vote for each Share held on matters on which they are entitled
to vote. The Trust is not required to and has no current intention to hold
annual meetings of shareholders, although the Trust will hold special meetings
of shareholders when in the judgment of the Board of Trustees of the Trust it is
necessary or desirable to submit matters for a shareholder vote. Shareholders
have the right to remove one or more Trustees of the Trust at a shareholders
meeting by vote of two-thirds of the outstanding Shares of the Trust.
Shareholders also have the right to remove one or more Trustees of the Trust
without a meeting by a declaration in writing by a specified number of
shareholders. Upon liquidation or dissolution of a Fund, shareholders would be
entitled to share pro rata in the net assets of such Fund available for
distribution to shareholders.

The Trust is a business trust organized under the laws of the State of
Delaware. Under Delaware law, shareholders of Delaware business trusts are
entitled to the same limitation on personal liability extended to shareholders
of private for profit corporations organized under the general corporation law
of the State of Delaware; the courts of other states may not apply Delaware law,
however, and shareholders may, under certain circumstances, be held personally
liable for the obligations of the Trust. The Trust Instrument contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and provides for indemnification and reimbursement of expenses out of Fund
property for any shareholder held personally liable for the obligations of a
Fund solely by reason of his being or having been a shareholder. The Trust
Instrument also provides for the maintenance, by or on behalf of the Trust and
each Fund, of appropriate insurance (for example, fidelity bond and errors and
omissions insurance) for the protection of the Trust and each Fund, their
shareholders, Trustees, officers, employees and agents, covering possible tort
and other liabilities. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances in which
Delaware law did not apply, inadequate insurance existed and a Fund itself was
unable to meet its obligations.

Shareholders of all series of the Trust will vote together to elect
Trustees of the Trust and for certain other matters. Under certain
circumstances, the shareholders of one or more series of the Trust could control
the outcome of these votes.

The Bond Index Fund invests through Bond Index Portfolio, a series of
Federated Portfolios, which is a business trust organized under the laws of the
Commonwealth of Massachusetts. The interests in Federated Portfolios are divided
into separate series or portfolios (each a "Portfolio", collectively, the
"Portfolios"). Investors in each Portfolio of Federated Portfolios will vote
separately or together in the same manner as shareholders of the Trust's series.
Federated Portfolios' Declaration of Trust provides that the Bond Index Fund and
other entities investing in the Bond Index Portfolio and the other Portfolios of
Federated Portfolios (e.g., other investment companies, insurance company
separate accounts and common and commingled trust funds) will each be liable for
all obligations of the portfolio in which they invest. However, the Trustees of
the Trust believe that the risk of the Bond Index Fund incurring financial loss
on account of such liability is limited to circumstances in which both
inadequate insurance existed and the Bond Index Portfolio itself was unable to
meet its obligations, and that neither the Bond Index Fund nor its shareholders
will be exposed to a material risk of liability by reason of the Fund's
investment in the Bond Index Portfolio.

For more information regarding the Trustees of the Trust and Federated
Portfolios, see "Management of the Trust" in the Statement of Additional
Information.

PERFORMANCE INFORMATION

From time to time, in advertisements, reports to shareholders, or other
communications to shareholders or prospective investors, the performance of the
Funds may be quoted and compared to those 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. Performance information includes
the Fund's investment results and/or comparisons of its investment results to
various unmanaged indices, or results of other mutual funds or investment or
savings vehicles. A Fund's investment results as used in such communications are
calculated on a "yield" or "total rate of return" basis in the manner set forth
below.

The Trust provides period and annualized "total rates of return" and
non-standardized total return data for each Fund. The "total rate of return"
refers to the change in the value of an investment in a Fund over a stated
period which reflects any change in net asset value per share and includes the
value of any shares purchased with any dividends or capital gains declared
during such period. Period total rates of return may be annualized. An
annualized total rate of return is a compounded total rate of return which
assumes that the period total rate of return is generated over a one-year
period, and that all dividends and capital gains distributions are reinvested.

The Trust provides annualized "yield" quotations for each Fund. The "yield"
of a Fund refers to the income generated by an investment in such Fund over a
thirty day or one month period. The dates of any such period are identified in
all advertisements or communications containing yield quotations. Income is then
annualized; that is, the amount of income generated by an investment in a Fund
over a period is assumed to be generated (or remain constant) over one year and
is shown as a percentage of the net asset value on the last day of that
year-long period. The Funds may also advertise the "effective yields", which are
calculated similarly but, when annualized, income is assumed to be reinvested,
thereby making the effective yields slightly higher because of the compounding
effect of the assumed reinvestment. See "Performance Information" in the
Statement of Additional Information. These methods of calculating "yield" and
"total rate of return" are determined by regulations of the Securities and
Exchange Commission.

Since a Fund's yield and total rate of return quotations are based on
historical earnings and since such yields and total rates of return fluctuate
over time, such quotations should not be considered as an indication or
representation of the future performance of any Fund. Shareholders should
remember that performance is generally a function of the kind and quality of the
instruments held in a Fund, Fund maturity, operating expenses, and market
conditions. Any fees charged by Shareholder Organizations to Customers that have
invested in Shares and any charges to institutional investors for asset
management and related services will not be included in calculations of
performance. From time to time, Fund rankings may be quoted from various
sources, such as Lipper Analytical Services, Inc.

MISCELLANEOUS

Shareholders of record will receive unaudited semi-annual reports and
annual reports audited by the Funds' independent auditors.

The Funds' Statement of Additional Information bears the same date as this
Prospectus and contains more detailed information about the Funds and the Bond
Index Portfolio, including information related to (i) investment policies and
restrictions of the Funds and the Bond Index Portfolio, (ii) Trustees and
officers of the Trust and Federated Portfolios, (iii) portfolio transactions and
brokerage commissions, (iv) rights and liabilities of shareholders of the Trust
and investors in Federated Portfolios, (v) additional performance information,
including methods used to calculate yield and total return, (vi) determination
of the net asset value of Shares of the Funds and (vii) the audited financial
statements at May 31, 1995 of the Funds and the corresponding portfolios or
series of the St. James Portfolios in which each of the Funds had invested its
investable assets at such time.

<PAGE>

INSTRUCTIONS FOR NEW ACCOUNT APPLICATION

Opening Your Account:

Complete the Application(s) and mail (regular or overnight) to:

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

Please enclose with the Application(s) your check made payable to the
"Excelsior Institutional Trust" 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:

Except as provided in the Prospectus, there is no minimum amount required
for an initial or subsequent investment.

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 of $5,000 or
more must be accompanied by signature guarantees.

Signatures:

Please be sure to sign the Application(s).

If the shares are registered in the name of:

_ 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.

<PAGE>

Taxpayer Identification Number:

Institutional Investors and other entities must provide a tax
identification or social security number on the application. Investors who do
not supply this information or who have been notified by the Internal Revenue
Service that they are subject to backup withholding will be subject to a
withholding rate of 31% from all taxable distributions paid to the shareholder.

Questions:

If you have any questions regarding the Application or redemption
requirements, please contact your shareholder servicing agent.

<PAGE>

CHASE GLOBAL FUNDS
EXCELSIOR SERVICES COMPANY NEW ACCOUNT APPLICATION
INSTITUTIONAL CLIENT SERVICES
TRUST P.O. Box 2798
Boston, MA 02208-2798
(800) 909-1989

ACCOUNT REGISTRATION

<F129> Individual <F129> Trust <F129> Other________________

Note: Trust registrations should specify name of the trust, trustee(s),
beneficiary(ies), and the date of the trust instrument.

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

( )
Name Telephone #

Address
<F129> U.S. Citizen <F129> Other (specify)
City/State/Zip
<TABLE>
FUND SELECTION Make checks payable to "Excelsior Institutional Trust"
<CAPTION>
FUND INITIAL INVESTMENT FUND INITIAL INVESTMENT
<S> <C> <C> <C> <C> <C> <C> <C>
<F129> Equity Fund $ 3100 <F129> Total Return Bond Fund $ 3103
<F129> Equity Growth Fund $ 3110 <F129> Bond Index Fund $ 3107
<F129> Balanced Fund $ 3109 <F129> Income Fund $ 3102
<F129> International Equity Fund $ 3101 <F129> Other $
</TABLE>
TOTAL INITIAL INVESTMENT: $

NOTE: If investing by A. BY MAIL: Enclosed is a check in the amount of
wire, you must obtain a $__________ payable to "Excelsior
Bank Wire Control Institutional Trust"
Number. To do so, please B. BY WIRE: A bank wire in the amount of $_________
call (800) 909-1989 and has been sent to the Fund from
ask for the Wire Desk. ______________________ _______________________
((617) 557-1755 from Name of Bank Wire Control Number
Overseas)

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 <F129> reinvested <F129> paid in cash
All capital gains are to be <F129> reinvested <F129> paid in cash

ACCOUNT PRIVILEGES

TELEPHONE EXCHANGE AND REDEMPTION AUTHORITY TO TRANSMIT REDEMPTION
<F129> I/We appoint CGFSC as PROCEEDS TO PRE-DESIGNATED ACCOUNT.
my/our agent to act upon
instructions received by telephone I/We hereby authorize CGFSC to act
in order to effect the telephone upon instructions received by
exchange and redemption telephone to withdraw amounts from
privileges. I/We hereby ratify any my/our account in the Excelsior
instructions given pursuant to this institutional Trust and to wire the
authorization and agree that amount withdrawn to the following
Excelsior Institutional Trust, commercial bank account.
CGFSC and their directors, officers
and employees will not be liable Title on Bank Account*
for any loss, liability, cost or
expense for acting upon Name of Bank
instructions believed to be genuine
and in accordance with the Bank A.B.A. Number Account
procedures described in the then Number
current prospectus. To the extent
that Excelsior Institutional Trust Bank Address
fails to use reasonable procedures
as a basis for its belief, it or City/State/Zip
its service contractors may be (attach voided check here)
liable for instructions that prove
to be fraudulent or unauthorized. A corporation, trust or partnership
must also submit a "Corporate
I/We further acknowledge that it is Resolution" (or "Certificate of
my/our responsibility to read a Partnership") indicating the names
copy of the Funds' current and titles of officers authorized to
Prospectus. act on its behalf.

<F129> I/We do not wish to have * TITLE ON BANK AND FUND ACCOUNT
the ability to exercise telephone MUST BE IDENTICAL.
redemption and exchange privileges.
I/We further understand that all
exchange and redemption requests
must be in writing.

<PAGE>

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:

<F129> 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.)

<F129> 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 the shares
indicated of the Excelsior Institutional Trust. I/We have received, read and
carefully reviewed a copy of the Funds' 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 that the Shares are not federally insured by, guaranteed by,
obligations of or otherwise supported by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
governmental agency; and that an investment in the Funds involves investment
risks, including possible loss of principal amount invested.

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

FOR USE BY AUTHORIZED AGENT (BROKER/DEALER) ONLY

We hereby submit this application for the purchase of shares in accordance with
the terms of our selling agreement with Edgewood Services, Inc., and with the
Prospectus and Statement of Additional Information of the Funds.

Investment Dealer's Name Source of Business Code

Main Office Address Branch Number

Representative's Number Representative's Name

Branch Address Telephone

Investment Dealer's Authorized Signature Title

<PAGE>

TABLE OF CONTENTS

Page
SUMMARY OF EXPENSES
INVESTMENT OBJECTIVES AND
POLICIES
EQUITY FUND
INCOME FUND
TOTAL RETURN BOND FUND
BOND INDEX PORTFOLIO
BALANCED FUND Excelsior
EQUITY GROWTH FUND Institutional
INTERNATIONAL EQUITY FUND Trust
SPECIAL INFORMATION
CONCERNING HUB AND SPOKE(R)
STRUCTURE APPLICABLE TO THE
BOND INDEX FUND
PRICING OF SHARES
HOW TO PURCHASE, EXCHANGE Equity Fund
AND REDEEM SHARES
INVESTOR PROGRAMS Income Fund
TAX MATTERS
MANAGEMENT OF THE TRUST Total Return Bond Fund
DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS Bond Index Fund
DESCRIPTION OF SHARES,
VOTING RIGHTS AND Balanced Fund
LIABILITIES
PERFORMANCE INFORMATION Equity Growth Fund
MISCELLANEOUS
INSTRUCTIONS FOR NEW International Equity Fund
ACCOUNT APPLICATION
ACCOUNT APPLICATION

No person has been authorized to
give any information or to make any
representations not contained in this
Prospectus, or in the Funds'
Statement of Additional Information Prospectus
incorporated herein by reference, February __, 1996
in connection with the offering
made by this Prospectus and, if
given or made, such information or
representations must not be relied
upon as having been authorized by
Excelsior Institutional Trust or
its Distributor. This Prospectus
does not constitute an offer by
Excelsior Institutional Trust or
its Distributor in any jurisdiction
in which, or to any person to whom,
such offer may not lawfully be made.

1/"Standard & Poor's(R)," "S&P(R)" and "Standard & Poor's 500" are
trademarks of Standard & Poor's Corporation.

Statement of Additional Information
February __, 1996

Excelsior Institutional Trust

Excelsior Institutional Equity Fund
Excelsior Institutional Income Fund
Excelsior Institutional Total Return Bond Fund
Excelsior Institutional Bond Index Fund
Excelsior Institutional Balanced Fund
Excelsior Institutional Equity Growth Fund
Excelsior Institutional International Equity Fund

Excelsior Institutional Trust (the "Trust") is comprised of nine funds,
seven of which are active and two of which are inactive. This Statement of
Additional Information describes the shares of the seven active funds -
Excelsior Institutional Equity Fund (the "Equity Fund"), Excelsior Institutional
Income Fund (the "Income Fund"), Excelsior Institutional Total Return Bond Fund
(the "Total Return Bond Fund"), Excelsior Institutional Bond Index Fund (the
"Bond Index Fund"), Excelsior Institutional Balanced Fund (the "Balanced Fund"),
Excelsior Institutional Equity Growth Fund (the "Equity Growth Fund") and
Excelsior Institutional International Equity Fund (the "International Equity
Fund") (each, a "Fund"; collectively, the "Funds").

Table of Contents Page

Excelsior Institutional Trust
Investment Objectives, Policies and Restrictions
Performance Information
Determination of Net Asset Value; Valuation of Securities
Additional Purchase, Exchange, and Redemption Information
Management of the Trust
Independent Auditors
Taxation
Description of the Trust; Fund Shares
Financial Statements
Appendix A-1

Excelsior Institutional Trust
73 Tremont Street
Boston, Massachusetts 02108
(617) 557-8000

<PAGE>

This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the Funds'
Prospectus as it may be amended from time to time (the "Prospectus"). This
Statement of Additional Information should be read only in conjunction with the
Prospectus, a copy of which may be obtained by an investor without charge by
contacting the Trust at its address shown above or by calling (800) 909-1989.
Terms used but not defined herein, which are defined in the Prospectus, are used
herein as defined in the Prospectus.

This Statement of Additional Information is NOT a Prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective Prospectus.

EXCELSIOR INSTITUTIONAL TRUST

The Trust is an open-end diversified management investment company which
was organized as a business trust under the laws of the State of Delaware on
April 27, 1994. The shares of the Trust are continuously sold to institutional
investors. Shares of the Trust are divided into nine separate series, seven of
which are described herein. As of the date hereof, there are two additional
inactive series of the Trust. Additional series may be added to the Trust from
time to time.

United States Trust Company of New York ("U.S. Trust") is the investment
adviser for the Equity Fund, Income Fund and Total Return Bond Fund. U.S. Trust
makes decisions with respect to and places orders for all purchases and sales of
portfolio securities for these Funds.

United States Trust Company of the Pacific Northwest ("U.S. Trust Pacific")
is the investment adviser for the Balanced Fund, Equity Growth Fund and
International Equity Fund. The daily management of the security holdings of
these Funds is performed by the investment managers named below, acting as
subadvisers:

Balanced Fund...........................Becker Capital Management,Inc.

Equity Growth Fund......................Luther King Capital Management

International Equity Fund...............Harding, Loevner Management, L.P.

The Trust seeks to achieve the investment objective of the Bond Index
Fund by investing all of that Fund's investable assets in the Bond Index
Portfolio, a series of Federated Investment Portfolios (the "Federated
Portfolios"). Federated Management is the investment adviser for the Bond Index
Portfolio. The daily management of the security holdings of the Bond Index
Portfolio is performed by U.S. Trust, acting as subadviser. Because the Bond
Index Fund invests through the Bond Index Portfolio, all references in this
Statement of Additional Information to the Bond Index Fund include the Bond
Index Portfolio, except as otherwise noted.

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

Investment Objectives

The investment objective of each Fund is described in the Prospectus. There
can, of course, be no assurance that a Fund will achieve its investment
objective.

Investment Policies

The following supplements the discussions of the various investments of and
techniques employed by the Funds set forth in the Prospectus.

Other Investment Considerations - Equity Fund

The Equity Fund invests primarily in common stocks but may purchase both
preferred stocks and securities convertible into common stock at the discretion
of U.S. Trust. While current income is secondary to the Fund's objective of
long-term capital appreciation, the Trust expects that the broad and diversified
strategies utilized by U.S. Trust will result in somewhat more current income
than would be generated if U.S. Trust utilized a single strategy more narrowly
focused on rapid growth of principal and involving exposure to higher levels of
risk.

U.S. Trust's investment philosophy is to identify investment values
available in the market at attractive prices. Investment value arises from the
ability to generate earnings or from the ownership of assets or resources.
Underlying earnings potential and asset values are frequently demonstrable but
not recognized in the market prices of the securities representing their
ownership. U.S. Trust employs the following three different but closely
interrelated portfolio strategies to focus and organize its search for
investment values.

1. Problem/Opportunity Companies. Important investment opportunities often
occur where companies develop solutions to large, complex, fundamental problems,
such as declining industrial productivity; rising costs and declining sources of
energy; the economic imbalances and value erosion caused by years of high
inflation and interest rates; the soaring costs and competing priorities of
providing health care; and the accelerating interdependence and "shrinking size"
of the world.

Solutions or parts of solutions to large problems may be generated by
established companies or comparatively new companies of all sizes through the
development of new products, technologies or services, or through new
applications of older ones.

Investment in such companies represents a wide range of investment
potential, current income return rates, and exposure to fundamental and market
risks. Income generated by the Equity Fund's investments in these companies
would be expected to be moderate, characterized by lesser rates than those of a
fund whose sole objective is current income, and somewhat higher rates than
those of a higher-risk growth fund.

2. Transaction Value Companies. In the opinion of U.S. Trust, the stock
market frequently values the aggregate ownership of a company at a substantially
lower figure than its component assets would be worth if they were sold off
separately over time. Such assets may include intangible assets such as product
and market franchises, operating know-how, or distribution systems, as well as
such tangible properties as oil reserves, timber, real estate, or production
facilities. Investment opportunities in these companies are determined by the
magnitude of difference between economic worth and current market price.

Market undervaluations are often corrected by purchase and sale,
restructuring of the company, or market recognition of a company's actual worth.
The recognition process may well occur over time, however, incurring a form of
time-exposure risk. Success from investing in these companies is often great,
but may well be achieved only after a waiting period of inactivity.

Income derived from investing in undervalued companies is expected to be
moderately greater than that derived from investments in either the
problem/opportunity or early life cycle companies.

3. Early Life Cycle Companies. Investments in early life cycle companies
tend to be narrowly focused on an objective of higher rates of capital
appreciation. They correspondingly will involve a significantly greater degree
of risk and the reduction of current income to a negligible level. Such
investments will not be limited to new, small companies engaged only in frontier
technology, but will seek opportunities for maximum appreciation through the
full spectrum of business operations, products, services, and asset values.
Consequently, the Equity Fund's investments in early life cycle companies are
primarily in younger, small to medium-sized companies in the early stages of
their development. Such companies are usually more flexible in trying new
approaches to problem-solving and in making new or different employment of
assets. Because of the high risk level involved, the ratio of success among such
companies is lower than the average, but for those companies which succeed, the
magnitude of investment reward is potentially higher.

Investments and Investment Techniques

Gold Bullion - International Equity Fund

The International Equity Fund may purchase gold bars primarily of standard
weight (approximately 400 troy ounces) at the best available prices in the New
York bullion market. However, the subadviser will have discretion to purchase or
sell gold bullion in other markets, including foreign markets, if better prices
can be obtained. Gold bullion is valued by the Fund at the mean between the
closing bid and asked prices in the New York bullion market as of the close of
the New York Stock Exchange each business day. When there is no readily
available market quotation for gold bullion, the bullion will be valued by such
method as determined by the Trust's Board of Trustees to best reflect its fair
value. For purpose of determining net asset value, gold will be valued in U.S.
dollars.

Bank Obligations

Domestic commercial banks organized under federal law are supervised and
examined by the Comptroller of the Currency and are required to be members of
the Federal Reserve System. Domestic banks organized under state law are
supervised and examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. In addition, state banks are
subject to federal examination and to a substantial body of federal law and
regulation. As a result of federal or state laws and regulations, domestic
banks, among other things, generally are required to maintain specified levels
of reserves, are limited in the amounts which they can loan to a single
borrower, and are subject to other regulations designed to promote financial
soundness. However, not all of such laws and regulations apply to the foreign
branches of domestic banks.

Obligations of foreign branches and subsidiaries of domestic banks and
domestic and foreign branches of foreign banks, such as certificates of deposit
("CDs") and time deposits ("TDs"), may be general obligations of the parent
banks in addition to the issuing branch, or may be limited by the terms of a
specific obligation and governmental regulation. Such obligations are subject to
different risks than are those of domestic banks. These risks include foreign
economic and political developments, foreign governmental restrictions that may
adversely affect payment of principal and interest on the obligations, foreign
exchange controls and foreign withholding and other taxes on interest income.
Foreign branches and subsidiaries are not necessarily subject to the same or
similar regulatory requirements that apply to domestic banks, such as mandatory
reserve requirements, loan limitations, and accounting, auditing and financial
record keeping requirements. In addition, less information may be publicly
available about a foreign branch of a domestic bank or about a foreign bank than
about a domestic bank.

Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal or state regulation
as well as governmental action in the country in which the foreign bank has its
head office. A domestic branch of a foreign bank with assets in excess of $1
billion may be subject to reserve requirements imposed by the Federal Reserve
System or by the state in which the branch is located if the branch is licensed
in that state.

In addition, branches licensed by the Comptroller of the Currency and
branches licensed by certain states may be required to: (1) pledge to the
regulator, by depositing assets with a designated bank within the state, a
certain percentage of their assets as fixed from time to time by the appropriate
regulatory authority; and (2) maintain assets within the state in an amount
equal to a specified percentage of the aggregate amount of liabilities of the
foreign bank payable at or through all of its agencies or branches within the
state.

U.S. Government and Agency Securities

Securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities include U.S. Treasury securities, which differ only in their
interest rates, maturities and times of issuance. Treasury Bills have initial
maturities of one year or less; Treasury Notes have initial maturities of one to
ten years; and Treasury Bonds generally have initial maturities of greater than
ten years. Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, for example, Government National Mortgage Association
pass-through certificates, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of the Federal Home Loan Banks, by the
right of the issuer to borrow from the Treasury; others, such as those issued by
the Federal National Mortgage Association, by discretionary authority of the
U.S. Government to purchase certain obligations of the agency or
instrumentality; and others, such as those issued by the Student Loan Marketing
Association, only by the credit of the agency or instrumentality. While the U.S.
Government provides financial support to such U.S. Government-sponsored agencies
or instrumentalities, no assurance can be given that it will always do so, since
it is not so obligated by law.

Commercial Paper

Commercial paper consists of short-term (usually from 1 to 270 days)
unsecured promissory notes issued by corporations in order to finance their
current operations. A variable amount master demand note (which is a type of
commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under an agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.

Each Fund may purchase three types of commercial paper, as classified by
exemption from registration under the Securities Act of 1933, as amended (the
"1933 Act"). The three types include open market, privately placed, and letter
of credit commercial paper. Trading of such commercial paper is conducted
primarily by institutional investors through investment dealers or directly
through the issuers. Individual investor participation in the commercial paper
market is very limited.

Open Market. "Open market" commercial paper refers to the commercial paper
of any industrial, commercial, or financial institution which is openly traded,
including directly issued paper. "Open market" paper's 1933 Act exemption is
under Section 3(a)(3) which limits the use of proceeds to current transactions,
limits maturities to 270 days and requires that the paper contain no provision
for automatic rollovers.

Privately Placed. "Privately placed" commercial paper relies on the
exemption from registration provided by Section 4(2) of the 1933 Act, which
exempts transactions by an issuer not involving any public offering. The
commercial paper may only be offered to a limited number of accredited
investors. "Privately placed" commercial paper has no maturity restriction and
may be considered illiquid. See "Illiquid Securities" below.

Letter of Credit. "Letter of credit" commercial paper is exempt from
registration under Section 3(a)(2) of the 1933 Act. It is backed by an
irrevocable or unconditional commitment by a bank to provide funds for repayment
of the notes. Unlike "open market" and "privately placed" commercial paper,
"letter of credit" paper has no limitations on purchases.

Lending of Portfolio Securities

Each Fund has the authority to lend portfolio securities to brokers,
dealers and other financial organizations. By lending its securities, a Fund can
increase its income by continuing to receive income on the loaned securities as
well as by either investing the cash collateral in short-term securities subject
to payment of a rebate fee to the borrower or by obtaining a fee from the
borrower when U.S. Government obligations are used as collateral. There may be
risks of delay in receiving additional collateral or risks of delay in recovery
of the securities or even loss of rights in the collateral should the borrower
of the securities fail financially. A Fund will adhere to the following
conditions whenever its securities are loaned: (i) the Fund must receive at
least 100% cash collateral or equivalent securities from the borrower; (ii) the
borrower must increase this collateral whenever the market value of the loaned
securities including accrued interest exceeds the level of the collateral; (iii)
the Fund must be able to terminate the loan at any time subject to prior notice;
(iv) the Fund must receive a reasonable return on the loan, as well as any
dividends, interest or other distributions on the loaned securities, and any
increase in market value; (v) the Fund may pay only reasonable custodian fees in
connection with the loan; and (vi) voting rights on the loaned securities may
pass to the borrower. However, if a material event adversely affecting the
loaned securities were to occur, the Fund would terminate the loan and regain
the right to vote the securities.

Variable Rate and Floating Rate Securities

Each Fund may purchase floating and variable rate demand notes and bonds,
which are obligations ordinarily having stated maturities in excess of 397 days,
but which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding 397 days, in each case upon not more than 30
days' notice. Variable rate demand notes include master demand notes which are
obligations that permit a Fund to invest fluctuating amounts, which may change
daily without penalty, pursuant to direct arrangements between the Fund, as
lender, and the borrower. The interest rates on these notes fluctuate from time
to time. The issuer of such obligations normally has a corresponding right,
after a given period, to prepay in its discretion the outstanding principal
amount of the obligations plus accrued interest upon a specified number of days'
notice to the holders of such obligations. The interest rate on a floating rate
demand obligation is based on a known lending rate, such as a bank's prime rate,
and is adjusted automatically each time such rate is adjusted. The interest rate
on a variable rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are collateralized by letters of credit
or other credit support arrangements provided by banks. Because these
obligations are direct lending arrangements between the lender and borrower, it
is not contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value. Accordingly, where these obligations are not
secured by letters of credit or other credit support arrangements, a Fund's
right to redeem is dependent on the ability of the borrower to pay principal and
interest on demand. Such obligations frequently are not rated by credit rating
agencies and a Fund may invest in obligations which are not so rated only if its
investment managers determine that at the time of investment the obligations are
of comparable quality to the other obligations in which the Fund may invest. The
respective subadvisers of the Funds will consider on an ongoing basis the
creditworthiness of the issuers of the floating and variable rate demand
obligations held by the Funds. Each Fund will not invest more than 15% of the
value of its net assets in floating or variable rate demand obligations as to
which it cannot exercise the demand feature on not more than seven days' notice
if there is no secondary market available for these obligations, and in other
securities that are not readily marketable. See "Investment Restrictions" below.

Participation Interests

Each Fund may purchase from financial institutions participation interests
in securities in which such Fund may invest. A participation interest gives a
Fund an undivided interest in the security in the proportion that the Fund's
participation interest bears to the total principal amount of the security.
These instruments may have fixed, floating or variable rates of interest, with
remaining maturities of 13 months or less. If the participation interest is
unrated, or has been given a rating below that which is permissible for purchase
by the Fund, the participation interest will be backed by an irrevocable letter
of credit or guarantee of a bank, or the payment obligation otherwise will be
collateralized by U.S. Government securities, or, in the case of unrated
participation interests, the investment managers of a Fund must have determined
that the instrument is of comparable quality to those instruments in which the
Fund may invest. For certain participation interests, a Fund will have the right
to demand payment, on not more than seven days' notice, for all or any part of
the Fund's participation interest in the security, plus accrued interest. As to
these instruments, the Fund intends to exercise its right to demand payment only
upon a default under the terms of the security, as needed to provide liquidity
to meet redemptions, or to maintain or improve the quality of its investment
portfolio. Each Fund will not invest more than 15% of its net assets in
participation interests that do not have this demand feature, and in other
securities that are not readily marketable. Currently, no Fund intends to invest
more than 5% of its net assets in participation interests during the current
year. See "Investment Restrictions" below.

Illiquid Securities

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the 1933 Act, securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the 1933 Act are referred
to as private placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them which,
if possible at all, would result in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale of such investments to the
general public or to certain institutions may not be indicative of their
liquidity.

The Securities and Exchange Commission (the "SEC") has adopted Rule 144A,
which allows a broader institutional trading market for securities otherwise
subject to restriction on their resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the 1933 Act
for resales of certain securities to qualified institutional buyers.

Each Fund's investment managers will monitor the liquidity of Rule 144A
securities for that Fund under the supervision of the Trust's Board of Trustees.
In reaching liquidity decisions, the investment managers will consider, among
other things, the following factors: (1) the frequency of trades and quotes for
the security, (2) the number of dealers and other potential purchasers wishing
to purchase or sell the security, (3) dealer undertakings to make a market in
the security and (4) the nature of the security and of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer).

Unsecured Promissory Notes

Each Fund may also purchase unsecured promissory notes ("Notes") which are
not readily marketable and have not been registered under the 1933 Act, provided
such investments are consistent with such Fund's investment objectives and
policies. Each Fund will invest no more than 15% of its net assets in such Notes
and in other securities that are not readily marketable (which securities would
include floating and variable rate demand obligations as to which the Fund
cannot exercise the demand feature described above and as to which there is no
secondary market). Currently, no Fund intends to invest any of its assets in
unsecured promissory notes during the coming year. See "Investment Restrictions"
below.

Repurchase Agreements and Reverse Repurchase Agreements

Repurchase agreements are agreements by which a person purchases a security
and simultaneously commits to resell that security to the seller (which is
usually a member bank of the Federal Reserve System or a member firm of the New
York Stock Exchange (or a subsidiary thereof)) at an agreed-upon date within a
number of days (usually not more than seven) from the date of purchase. The
resale price reflects the purchase price plus an agreed-upon market rate of
interest which is unrelated to the coupon rate or maturity of the purchased
security. A repurchase agreement involves the obligation of the seller to pay
the agreed-upon price, which obligation is in effect secured by the value of the
underlying security, usually U.S. Government or government agency issues. Under
the Investment Company Act of 1940, as amended (the "1940 Act"), repurchase
agreements may be considered to be loans by the buyer. A Fund's risk is limited
to the ability of the seller to pay the agreed upon amount on the delivery date.
If the seller defaults, the underlying security constitutes collateral for the
seller's obligation to pay although a Fund may incur certain costs in
liquidating this collateral and in certain cases may not be permitted to
liquidate this collateral. All repurchase agreements entered into by the Funds
are fully collateralized, with such collateral being marked to market daily.

Each Fund may borrow funds for temporary or emergency purposes, such as
meeting larger than anticipated redemption requests, and not for leverage. One
means of borrowing is by agreeing to sell portfolio securities to financial
institutions such as banks and broker-dealers and to repurchase them at a
mutually agreed date and price (a "reverse repurchase agreement"). At the time a
Fund enters into a reverse repurchase agreement it will place in a segregated
custodial account cash, U.S. Government securities or high-grade debt
obligations having a value equal to the repurchase price, including accrued
interest. Reverse repurchase agreements involve the risk that the market value
of the securities sold by the Fund may decline below the repurchase price of
those securities.

Municipal Obligations - Income Fund and Total Return Bond Fund

The Income Fund and Total Return Bond Fund may, when deemed appropriate by
U.S. Trust in light of the Funds' investment objective, invest in municipal
obligations. Although yields on municipal obligations can generally be expected
under normal market conditions to be lower than yields on corporate and U.S.
Government obligations, from time to time municipal securities have
outperformed, on a total return basis, comparable corporate and federal debt
obligations as a result of prevailing economic, regulatory or other
circumstances. Dividends paid by the Income Fund and Total Return Bond Fund that
are derived from interest on municipal securities would be taxable to the Funds'
investors for federal income tax purposes.

Municipal obligations include debt obligations issued by governmental
entities to obtain funds for various public purposes, including the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to public
institutions and facilities. Private activity bonds that are issued by or on
behalf of public authorities to finance various privately operated facilities
are included within the term "municipal obligations" only if the interest paid
thereon is exempt from regular federal income tax and not treated as a specific
tax preference item under the federal alternative minimum tax.

The two principal classifications of municipal obligations are "general
obligation" and "revenue" issues, but the Funds' securities holdings may include
"moral obligation" issues, which are normally issued by special-purpose
authorities. There are, of course, variations in the quality of municipal
obligations, both within a particular classification and between
classifications, and the yields on municipal obligations depend upon a variety
of factors, including general market conditions, the financial condition of the
issuer, conditions of the municipal bond market, the size of a particular
offering, the maturity of the obligation, and the rating of the issue. The
ratings of Moody's and S&P described in the Prospectus and Appendix A hereto
represent the opinion of the respective rating agencies as to the quality of
municipal obligations. It should be emphasized that these ratings are general
and are not absolute standards of quality, and municipal obligations with the
same maturity, interest rate, and rating may have different yields while
municipal obligations of the same maturity and interest rate with different
ratings may have the same yield.

The payment of principal and interest on most municipal obligations
purchased by the Funds will depend upon the ability of the issuers to meet their
obligations. Each state, the District of Columbia, each of their political
subdivisions, agencies, instrumentalities and authorities, and each multistate
agency of which a state is a member, is a separate "issuer" as that term is used
in this Statement of Additional Information and in the Prospectus. The
non-governmental user of facilities financed by private activity bonds is also
considered to be an "issuer". An issuer's obligations are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the payment
of interest on and principal of its municipal obligations may be materially
adversely affected by litigation or other conditions.

Private activity bonds are or have been issued to obtain funds to provide,
among other things, privately operated housing facilities, pollution control
facilities, convention or trade show facilities, mass transit, airport, port or
parking facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal. Private activity bonds are also
issued to privately held or publicly owned corporations in the financing of
commercial or industrial facilities. State and local governments are authorized
in most states to issue private activity bonds for such purposes in order to
encourage corporations to locate within their communities. The principal and
interest on these obligations may be payable from the general revenues of the
users of such facilities.

Among other instruments, the Funds may purchase short-term general
obligation notes, tax anticipation notes, bond anticipation notes, revenue
anticipation notes, tax-exempt commercial paper, construction loan notes and
other forms of short-term loans. Such instruments are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues. In addition, the Funds may invest in long-term
tax-exempt instruments, such as municipal bonds and private activity bonds, to
the extent consistent with the maturity restrictions applicable to it.

Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Trust nor
U.S. Trust will review the proceedings relating to the issuance of municipal
obligations or the basis for such opinions.

Stand-By Commitments - Income Fund and Total Return Bond Fund

The Income Fund and Total Return Bond Fund may acquire "stand-by
commitments" with respect to municipal obligations held by them. Under a
stand-by commitment, a dealer or bank agrees to purchase from a Fund, at the
Fund's option, specified municipal obligations at a specified price. The amount
payable to a Fund upon its exercise of a stand-by commitment is normally (i) the
Fund's acquisition cost of the municipal obligations (excluding any accrued
interest which the Fund paid on their acquisition), less any amortized market
premium or plus any amortized market or original issue discount during the
period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period. Stand-by
commitments are exercisable by a Fund at any time before the maturity of the
underlying municipal obligations, and may be sold, transferred or assigned by
the Fund only with the underlying instruments.

The Income Fund and Total Return Bond Fund expect that stand-by commitments
will generally be available without the payment of any direct or indirect
consideration. However, if necessary or advisable, either Fund may pay for a
stand-by commitment either separately in cash or by paying a higher price for
securities which are acquired subject to the commitment (thus reducing the yield
to maturity otherwise available for the same securities). Where a Fund has paid
any consideration directly or indirectly for a stand-by commitment, its cost
will be reflected as unrealized depreciation for the period during which the
commitment was held by the Fund.

The Income Fund and Total Return Bond Fund intend to enter into stand-by
commitments only with banks and broker/dealers which, in U.S. Trust's opinion,
present minimal credit risks. In evaluating the creditworthiness of the issuer
of a stand-by commitment, U.S. Trust will review periodically the issuer's
assets, liabilities, contingent claims and other relevant financial information.

Foreign Securities

If permitted pursuant to its investment objective and policies, each Fund
may invest its assets in securities of foreign issuers. Investing in securities
issued by companies whose principal business activities are outside the United
States may involve significant risks not present in domestic investments. For
example, there is generally less publicly available information about foreign
companies, particularly those not subject to the disclosure and reporting
requirements of the U.S. securities laws. Foreign issuers are generally not
bound by uniform accounting, auditing and financial reporting requirements
comparable to those applicable to domestic issuers. Investments in foreign
securities also involve the risk of possible adverse changes in investment or
exchange control regulations, expropriation or confiscatory taxation, brokerage
or other taxation, limitation on the removal of funds or other assets of a Fund,
political or financial instability or diplomatic and other developments which
would affect such investments. Further, economies of particular countries or
areas of the world may differ from the economy of the United States.

It is anticipated that in most cases the best available market for foreign
securities would be on exchanges or in over-the-counter markets located outside
the United States. Foreign stock markets, while growing in volume and
sophistication, are generally not as developed as those in the United States,
and securities of some foreign issuers (particularly those located in developing
countries) may be less liquid and more volatile than securities of comparable
United States companies. Foreign security trading practices, including those
involving securities settlement where a Fund's assets may be released prior to
receipt of payment, may expose a Fund to increased risk in the event of a failed
trade or the insolvency of a foreign broker-dealer. In addition, foreign
brokerage commissions are generally higher than commissions on securities traded
in the United States and may be non-negotiable. In general, there is less
overall governmental supervision and regulation of foreign securities exchanges,
brokers and listed companies than in the United States.

Each Fund may invest in foreign securities that impose restrictions on
transfer within the United States or to United States persons. Although
securities subject to such transfer restrictions may be marketable abroad, they
may be less liquid than foreign securities of the same class that are not
subject to such restrictions.

Forward Foreign Currency Exchange Contracts

Because each Fund, if consistent with its investment objectives and
policies, may buy and sell securities denominated in currencies other than the
U.S. dollar and receive interest, dividends and sale proceeds in currencies
other than the U.S. dollar, each such Fund from time to time may enter into
foreign currency exchange transactions to convert to and from different foreign
currencies and to convert foreign currencies to and from the U.S. dollar. The
Funds either enter into these transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market or use forward
contracts to purchase or sell foreign currencies.

A forward foreign currency exchange contract is an obligation by a Fund to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. Forward foreign currency exchange
contracts establish an exchange rate at a future date. These contracts are
transferable in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward foreign currency
exchange contract generally has no deposit requirement and is traded at a net
price without commission. A Fund maintains with its custodian a segregated
account of high grade liquid assets in an amount at least equal to its
obligations under each forward foreign currency exchange contract. Neither spot
transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of the Fund's securities or in foreign exchange
rates, or prevent loss if the prices of these securities should decline.

Each Fund may enter into forward foreign currency exchange contracts for
hedging purposes in an attempt to protect against changes in foreign currency
exchange rates between the trade and settlement dates of specific securities
transactions or changes in foreign currency exchange rates that would adversely
affect a portfolio position or an anticipated investment position. Since
consideration of the prospect for currency parities will be incorporated into
the investment managers' long-term investment decisions, the Funds will not
routinely enter into foreign currency hedging transactions with respect to
security transactions; however, the investment managers believe that it is
important to have the flexibility to enter into foreign currency hedging
transactions when they determine that the transactions would be in a Fund's best
interest. Although these transactions tend to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they tend to limit
any potential gain that might be realized should the value of the hedged
currency increase. The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the date
the forward contract is entered into and the date it matures. The projection of
currency market movements is extremely difficult, and the successful execution
of a hedging strategy is highly uncertain.

At or before the maturity of a forward foreign currency exchange contract
when a Fund has agreed to deliver a foreign currency, the Fund may sell a
portfolio security and make delivery of the currency, or retain the security and
offset its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Fund will obtain, on the same maturity date, the
same amount of the currency which it is obligated to deliver. If the Fund
retains the portfolio security and engages in an offsetting transaction, the
Fund, at the time of execution of the offsetting transaction, will incur a gain
or a loss to the extent that movement has occurred in forward contract prices.
Should forward prices decline during the period between a Fund's entering into a
forward contract for the sale of a currency, and the date it enters into an
offsetting contract for the purchase of the currency, the Fund will realize a
gain to the extent the price of the currency it has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward prices increase,
the Fund will suffer a loss to the extent of the price of the currency it has
agreed to sell is less than the price of the currency it has agreed to purchase
in the offsetting contract.

While these contracts are not presently regulated by the Commodity Futures
Trading Commission ("CFTC"), the CFTC may in the future assert authority to
regulate forward contracts. In such event a Fund's ability to utilize forward
contracts in the manner set forth in the Prospectus may be restricted. Forward
contracts may reduce the potential gain from a positive change in the
relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for a Fund
than if it had not entered into such contracts. The use of foreign currency
forward contracts may not eliminate fluctuations in the underlying U.S. dollar
equivalent value of the prices of or rates of return on a Fund's foreign
currency denominated portfolio securities and the use of such techniques will
subject the Fund to certain risks.

The matching of the increase in value of a forward contract and the decline
in the U.S. dollar-equivalent value of the foreign currency-denominated asset
that is the subject of the hedge generally will not be precise. In addition, a
Fund may not always be able to enter into foreign currency forward contracts at
attractive prices and this will limit a Fund's ability to use such contract to
hedge or cross-hedge its assets. Also, with regard to a Fund's use of
cross-hedges, there can be no assurance that historical correlations between the
movement of certain foreign currencies relative to the U.S. dollar will
continue. Thus, at any time poor correlation may exist between movements in the
exchange rates of the foreign currencies underlying a Fund's cross-hedges and
the movements in the exchange rates of the foreign currencies in which the
Fund's assets that are the subject of such cross-hedges are denominated.

Guaranteed Investment Contracts

Each Fund may invest in guaranteed investment contracts ("GICs") issued by
insurance companies. Pursuant to such contracts, a Fund makes cash contributions
to a deposit fund of the insurance company's general account. The insurance
company then credits to the fund guaranteed interest. The GICs provide that this
guaranteed interest will not be less than a certain minimum rate. The insurance
company may assess periodic charges against a GIC for expenses and service costs
allocable to it, and the charges will be deducted from the value of the deposit
fund. Because a Fund may not receive the principal amount of a GIC from the
insurance company on seven days' notice or less, the GIC is considered an
illiquid investment and, together with other instruments in a Fund which are not
readily marketable, will not exceed 15% of the Fund's net assets. The term of a
GIC will be 13 months or less. In determining average weighted portfolio
maturity, a GIC will be deemed to have a maturity equal to the longer of the
period of time remaining until the next readjustment of the guaranteed interest
rate or the period of time remaining until the principal amount can be recovered
from the issuer through demand. Currently, each Fund intends to invest 5% or
less of its respective net assets in GICs during the current year.

When-issued Securities

If permitted pursuant to its investment objectives and policies, a Fund may
purchase securities on a "when-issued" or on a "forward delivery" basis. It is
expected that, under normal circumstances, such Fund would take delivery of such
securities. Prior to committing to the purchase of a security on a when-issued
or on a forward delivery basis, the Funds will establish procedures consistent
with the relevant policies of the SEC. Those policies currently recommend that
an amount of a Fund's assets equal to the amount of the purchase commitment be
held aside or segregated to be used to pay for the commitment. Therefore, the
Funds expect always to have cash, cash equivalents, or high quality debt
securities sufficient to cover any purchase commitments or to limit any
potential risk. Although the Funds do not intend to make such purchases for
speculative purposes and intend to adhere to SEC policies, purchases of
securities on a when issued or forward delivery basis may involve additional
risks than other types of securities purchases. For example, a Fund may have to
sell assets which have been set aside in order to meet redemptions. Also, if a
Fund determines it is advisable as a matter of investment strategy to sell the
when-issued or forward delivery securities, the Fund would be required to meet
its obligations from its then available cash flow or the sale of securities, or,
although it would not normally expect to do so, from the sale of the when-issued
or forward delivery securities themselves (which may have a value greater or
less than the Fund's payment obligation).

When a Fund engages in when-issued or forward delivery transactions, it
relies on the other party to consummate the trade. Failure of such other party
to do so may result in the Fund's incurring a loss or missing an opportunity to
obtain a price considered to be advantageous.

The market value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities and any subsequent fluctuations in
their market value are taken into account when determining the market value of a
Fund starting on the day the Fund agrees to purchase the securities. The Fund
does not earn interest on the securities it has committed to purchase until they
are paid for and delivered on the settlement date.

Zero Coupon Obligations

A Fund may acquire zero coupon obligations when consistent with its
investment objective and policies. Such obligations have greater price
volatility than coupon obligations and will not result in payment of interest
until maturity. Since [interest] income is accrued throughout the term of the
zero coupon obligation but is not actually received until maturity, a Fund,
which is required for tax purposes to distribute to its shareholders a certain
percentage of its income, may have to sell other securities to distribute the
income prior to maturity of the zero coupon obligation.

Futures Contracts and Options on Futures Contracts

General. The successful use of such instruments by a Fund may depend in
part upon its investment managers' skill and experience with respect to such
instruments. Should interest or exchange rates move in an unexpected manner, the
Fund may not achieve the anticipated benefits of futures contracts or options on
futures contracts or may realize losses and thus will be in a worse position
than if such strategies had not been used. In addition, the correlation between
movements in the price of futures contracts or options on futures contracts and
movements in the price of the securities and currencies hedged or used for cover
will not be perfect and could produce unanticipated losses.

Futures Contracts. If permitted pursuant to its investment objectives and
policies, a Fund may enter into contracts for the purchase or sale for future
delivery of securities or foreign currencies, or contracts based on financial
indices. U.S. futures contracts have been designed by exchanges which have been
designated "contracts markets" by the CFTC, and must be executed through a
futures commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on a number of exchange
markets, and, through their clearing corporations, the exchanges guarantee
performance of the contracts as between the clearing members of the exchange. A
Fund may enter into futures contracts which are based on debt securities that
are backed by the full faith and credit of the U.S. Government, such as
long-term U.S. Treasury Bonds, Treasury Notes, Government National Mortgage
Association modified pass-through mortgage-backed securities and three-month
U.S. Treasury Bills. A Fund may also enter into futures contracts which are
based on fixed income securities issued by entities other than the U.S.
Government, including foreign government securities, corporate debt securities,
or contracts based on financial indices including any index of U.S. Government
securities, foreign government securities or corporate debt securities.

Purchases or sales of stock index futures contracts are used to attempt to
protect a Fund's current or intended stock investments from broad fluctuations
in stock prices. For example, the Fund may sell stock index futures contracts in
anticipation of or during a decline in the market value of the Fund's
securities. If such decline occurs, the loss in value of portfolio securities
may be offset, in whole or part, by gains on the futures position. When a Fund
is not fully invested in the securities market and anticipates a significant
market advance, it may purchase stock index futures contracts in order to gain
rapid market exposure that may, in part or entirely, offset increases in the
cost of securities that the Fund intends to purchase. As such purchases are
made, the corresponding positions in stock index futures contracts will be
closed out. In a substantial majority of these transactions, the Fund will
purchase such securities upon termination of the futures position, but under
unusual market conditions, a long futures position may be terminated without a
related purchase of securities.

At the same time a futures contract is purchased or sold, the Fund must
allocate cash or securities as a deposit payment ("initial deposit"). It is
expected that the initial deposit would be approximately 1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Fund would
provide or receive cash that reflects any decline or increase in the contract's
value.

At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the delivery
of securities with a different interest rate from that specified in the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.

Although futures contracts by their terms call for the actual delivery or
acquisition of securities, in most cases the contractual obligation is fulfilled
before the date of the contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is accomplished by buying
(or selling, as the case may be) on a commodities exchange an identical futures
contract calling for delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation to make or take
delivery of the securities. Since all transactions in the futures market are
made, offset or fulfilled through a clearinghouse associated with the exchange
on which the contracts are traded, a Fund will incur brokerage fees when it
purchases or sells futures contracts.

The purpose of the acquisition or sale of a futures contract, in the case
of a Fund which holds or intends to acquire fixed-income securities, is to
attempt to protect the Fund from fluctuations in interest or foreign exchange
rates without actually buying or selling fixed-income securities or foreign
currencies. For example, if interest rates were expected to increase, a Fund
might enter into futures contracts for the sale of debt securities. Such a sale
would have much the same effect as selling an equivalent value of the debt
securities owned by the Fund. If interest rates did increase, the value of the
debt security in a Fund would decline, but the value of the futures contracts to
the Fund would increase at approximately the same rate, thereby keeping the net
asset value of the Fund from declining as much as it otherwise would have. The
Fund could accomplish similar results by selling debt securities and investing
in bonds with short maturities when interest rates are expected to increase.
However, since the futures market is more liquid than the cash market, the use
of futures contracts as an investment technique allows a Fund to maintain a
defensive position without having to sell its portfolio securities.

Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated purchases of
debt securities at higher prices. Since the fluctuations in the value of futures
contracts should be similar to those of debt securities, a Fund could take
advantage of the anticipated rise in the value of debt securities without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Fund could then buy debt securities on the
cash market. To the extent a Fund enters into futures contracts for this
purpose, the assets in the segregated asset account maintained to cover the
Fund's obligations with respect to such futures contracts will consist of cash,
cash equivalents or high quality liquid debt securities from its portfolio in an
amount equal to the difference between the fluctuating market value of such
futures contracts and the aggregate value of the initial and variation margin
payments made by the Fund with respect to such futures contracts.

The ordinary spreads between prices in the cash and futures market, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the investment managers may
still not result in a successful transaction.

In addition, futures contracts entail risks. Although the investment
managers believe that use of such contracts will benefit the Funds, if the
judgment of the investment managers about the general direction of interest
rates is incorrect, a Fund's overall performance would be poorer than if it had
not entered into any such contract. For example, if a Fund has hedged against
the possibility of an increase in interest rates which would adversely affect
the price of debt securities held by it and interest rates decrease instead, the
Fund will lose part or all of the benefit of the increased value of its debt
securities which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if a Fund has insufficient
cash, it may have to sell debt securities to meet daily variation margin
requirements. Such sales of bonds may be, but will not necessarily be, at
increased prices which reflect the rising market. A Fund may have to sell
securities at a time when it may be disadvantageous to do so.

Options on Futures Contracts. If permitted pursuant to its investment
objectives and policies, a Fund may purchase and write options on futures
contracts for hedging purposes. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call option on an
individual security. Depending on the pricing of the option compared to either
the price of the futures contract upon which it is based or the price of the
underlying debt securities, it may or may not be less risky than ownership of
the futures contract or underlying debt securities. As with the purchase of
futures contracts, when a Fund is not fully invested it may purchase a call
option on a futures contract to hedge against a market advance due to declining
interest rates.

The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, a Fund will retain the
full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Fund's portfolio holdings. The writing of
a put option on a futures contract constitutes a partial hedge against
increasing prices of the security or foreign currency which is deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is higher than the exercise price, the Fund will retain the full amount
of the option premium which provides a partial hedge against any increase in the
price of securities which the Fund intends to purchase. If a put or call option
the Fund has written is exercised, the Fund will incur a loss which will be
reduced by the amount of the premium it receives. Depending on the degree of
correlation between changes in the value of its portfolio securities and changes
in the value of its futures positions, the Fund's losses from existing options
on futures may to some extent be reduced or increased by changes in the value of
portfolio securities.

The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Fund may purchase a put option on a futures contract to hedge its
portfolio against the risk of rising interest rates.

The amount of risk a Fund assumes when it purchases an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.

The Board of Trustees of the Trust has adopted the requirement that futures
contracts and options on futures contracts be used either (i) as a hedge without
regard to any quantitative limitation, or (ii) for other purposes to the extent
that immediately thereafter the aggregate amount of initial margin deposits on
all (non-hedge) futures contracts of the Fund and premiums paid on outstanding
(non-hedge) options on futures contracts owned by the Fund does not exceed 5% of
the market value of the net assets of the Fund. In addition, the aggregate
market value of the outstanding futures contracts purchased by the Fund may not
exceed 50% of the market value of the total assets of the Fund. Neither of these
restrictions will be changed by the Trust's Board of Trustees without
considering the policies and concerns of the various applicable federal and
state regulatory agencies.

Options on Foreign Currencies. If permitted pursuant to its investment
objectives and policies, a Fund may purchase and write options on foreign
currencies for hedging purposes in a manner similar to that in which futures
contracts on foreign currencies, or forward contracts, will be utilized. For
example, a decline in the dollar value of a foreign currency in which portfolio
securities are denominated will reduce the dollar value of such securities, even
if their value in the foreign currency remains constant. In order to protect
against such diminutions in the value of portfolio securities, the Fund may
purchase put options on the foreign currency. If the value of the currency does
decline, a Fund will have the right to sell such currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.

Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Fund may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Fund deriving from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated, the Fund could sustain losses on transactions in
foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.

A Fund may write options on foreign currencies for the same types of
hedging purposes. For example, where a Fund anticipates a decline in the dollar
value of foreign currency denominated securities due to adverse fluctuations in
exchange rates it could, instead of purchasing a put option, write a call option
on the relevant currency. If the expected decline occurs, the options will most
likely not be exercised, and the diminution in value of portfolio securities
will be offset by the amount of the premium received.

Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the Fund
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Fund to hedge such
increased cost up to the amount of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Fund would be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on foreign currencies, the Fund also may be required to forego all or a
portion of the benefits which might otherwise have been obtained from favorable
movements in exchange rates.

Each Fund may write covered call options on foreign currencies. A call
option written on a foreign currency by a Fund is "covered" if the Fund owns the
underlying foreign currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash consideration (or
for additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other foreign currency held by it. A call option
is also covered if the Fund has a call on the same foreign currency and in the
same principal amount as the call written where the exercise price of the call
held (a) is equal to or less than the exercise price of the call written or (b)
is greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government securities and other high
quality liquid debt securities in a segregated account with its custodian.

Each Fund may write call options on foreign currencies that are not covered
for cross-hedging purposes. A call option on a foreign currency is for
cross-hedging purposes if it is not covered, but is designed to provide a hedge
against a decline in the U.S. dollar value of a security which the Fund owns or
has the right to acquire and which is denominated in the currency underlying the
option due to an adverse change in the exchange rate. In such circumstances, the
Fund collateralizes the option by maintaining in a segregated account with its
custodian, cash or U.S. Government securities or other high quality liquid debt
securities in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked to market daily.

Additional Risks of Options on Futures Contracts, Forward Contracts and
Options on Foreign Currencies. Unlike transactions entered into by a Fund in
futures contracts, options on foreign currencies and forward contracts are not
traded on contract markets regulated by the CFTC or (with the exception of
certain foreign currency options) by the SEC. To the contrary, such instruments
are traded through financial institutions acting as market-makers, although
foreign currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to SEC regulation. Similarly, options on currencies may be
traded over-the-counter. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.

Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting a Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.

As in the case of forward contracts, certain options on foreign currencies
are traded over-the-counter and involve liquidity and credit risks which may not
be present in the case of exchange-traded currency options. A Fund's ability to
terminate over-the-counter options will be more limited than with
exchange-traded options. It is also possible that broker-dealers participating
in over-the-counter options transactions will not fulfill their obligations.
Until such time as the staff of the SEC changes its position, each Fund will
treat purchased over-the-counter options and assets used to cover written
over-the-counter options as illiquid securities. With respect to options written
with primary dealers in U.S. Government securities pursuant to an agreement
requiring a closing purchase transaction at a formula price, the amount of
illiquid securities may be calculated with reference to the repurchase formula.

In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in a Fund's
ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.

Options on Securities

If permitted pursuant to its investment objectives and policies, a Fund may
write (sell) covered call and put options to a limited extent on its portfolio
securities ("covered options"). However, a Fund may forgo the benefits of
appreciation on securities sold or may pay more than the market price on
securities acquired pursuant to call and put options written by the Fund.

When a Fund writes a covered call option, it gives the purchaser of the
option the right to buy the underlying security at the price specified in the
option (the "exercise price") by exercising the option at any time during the
option period. If the option expires unexercised, the Fund will realize income
in an amount equal to the premium received for writing the option. If the option
is exercised, a decision over which a Fund has no control, the Fund must sell
the underlying security to the option holder at the exercise price. By writing a
covered call option, a Fund forgoes, in exchange for the premium less the
commission ("net premium"), the opportunity to profit during the option period
from an increase in the market value of the underlying security above the
exercise price.

When a Fund writes a covered put option, it gives the purchaser of the
option the right to sell the underlying security to the Fund at the specified
exercise price at any time during the option period. If the option expires
unexercised, the Fund will realize income in the amount of the premium received
for writing the option. If the put option is exercised, a decision over which a
Fund has no control, the Fund must purchase the underlying security from the
option holder at the exercise price. By writing a covered put option, a Fund, in
exchange for the net premium received, accepts the risk of a decline in the
market value of the underlying security below the exercise price. A Fund will
only write put options involving securities for which a determination is made at
the time the option is written that the Fund wishes to acquire the securities at
the exercise price.

A Fund may terminate its obligation as the writer of a call or put option
by purchasing an option with the same exercise price and expiration date as the
option previously written. This transaction is called a "closing purchase
transaction." Where a Fund cannot effect a closing purchase transaction, it may
be forced to incur brokerage commissions or dealer spreads in selling securities
it receives or it may be forced to hold underlying securities until an option is
exercised or expires.

When a Fund writes an option, an amount equal to the net premium received
by the Fund is included in the liability section of the Fund's Statement of
Assets and Liabilities as a deferred credit. The amount of the deferred credit
will be subsequently marked to market to reflect the current market value of the
option written. The current market value of a traded option is the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price. If an option expires on its stipulated expiration date or if the Fund
enters into a closing purchase transaction, the Fund will realize a gain (or
loss if the cost of a closing purchase transaction exceeds the premium received
when the option was sold), and the deferred credit related to such option will
be eliminated. If a call option is exercised, the Fund will realize a gain or
loss from the sale of the underlying security and the proceeds of the sale will
be increased by the premium originally received. The writing of covered call
options may be deemed to involve the pledge of the securities against which the
option is being written. Securities against which call options are written will
be segregated on the books of the custodian for the Fund.

A Fund may purchase call and put options on any securities in which it may
invest. A Fund would normally purchase a call option in anticipation of an
increase in the market value of such securities. The purchase of a call option
would entitle the Fund, in exchange for the premium paid, to purchase a security
at a specified price during the option period. A Fund would ordinarily have a
gain if the value of the securities increased above the exercise price
sufficiently to cover the premium and would have a loss if the value of the
securities remained at or below the exercise price during the option period.

A Fund would normally purchase put options in anticipation of a decline in
the market value of securities in its portfolio ("protective puts") or
securities of the type in which it is permitted to invest. The purchase of a put
option would entitle a Fund, in exchange for the premium paid, to sell a
security, which may or may not be held in the Fund's portfolio, at a specified
price during the option period. The purchase of protective puts is designed
merely to offset or hedge against a decline in the market value of the Fund's
portfolio securities. Put options also may be purchased by a Fund for the
purpose of affirmatively benefiting from a decline in the price of securities
which the Fund does not own. A Fund would ordinarily recognize a gain if the
value of the securities decreased below the exercise price sufficiently to cover
the premium and would recognize a loss if the value of the securities remained
at or above the exercise price. Gains and losses on the purchase of protective
put options would tend to be offset by countervailing changes in the value of
underlying portfolio securities.

Each Fund has adopted certain other non-fundamental policies concerning
option transactions which are discussed below. A Fund's activities in options
may also be restricted by the requirements of the Internal Revenue Code of 1986,
as amended (the "Code"), for its qualification as a regulated investment
company.

The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded. To the extent that the option
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying securities markets
that cannot be reflected in the option markets. It is impossible to predict the
volume of trading that may exist in such options, and there can be no assurance
that viable exchange markets will develop or continue.

Each Fund may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately ten
broker-dealers, including several of the largest primary dealers in U.S.
Government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, a
Fund will purchase such options only from broker-dealers who are primary
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. The investment managers
will monitor the creditworthiness of dealers with whom a Fund enters into such
options transactions, under the general supervision of the Trust's Trustees.

Options on Securities Indices

In addition to options on securities, and if permitted pursuant to its
investment objectives and policies, a Fund may also purchase and write (sell)
call and put options on securities indices. Such options give the holder the
right to receive a cash settlement during the term of the option based upon the
difference between the exercise price and the value of the index. Such options
will be used for the purposes described above under "Options on Securities."

Options on securities indices entail risks in addition to the risks of
options on securities. The absence of a liquid secondary market to close out
options positions on securities indices is more likely to occur, although a Fund
generally will only purchase or write such an option if its investment managers
believe the option can be closed out.

Use of options on securities indices also entails the risk that trading in
such options may be interrupted if trading in certain securities included in the
index is interrupted. A Fund will not purchase such options unless its
investment managers believe the market is sufficiently developed such that the
risk of trading in such options is no greater than the risk of trading in
options on securities.

Price movements in the Fund's securities may not correlate precisely with
movements in the level of an index and, therefore, the use of options on indices
cannot serve as a complete hedge. Because options on securities indices require
settlement in cash, the investment managers may be forced to liquidate portfolio
securities to meet a Fund's settlement obligations.

Short Sales "Against the Box"

In a short sale, a Fund sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. A Fund may engage in
short sales only if at the time of the short sale it owns or has the right to
obtain, at no additional cost, an equal amount of the security being sold short.
This investment technique is known as a short sale "against the box".

In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. If a Fund engages in a short sale, the collateral for the short position
will be maintained by its custodian or qualified sub-custodian. While the short
sale is open, a Fund maintains in a segregated account an amount of securities
equal in kind and amount to the securities sold short or securities convertible
into or exchangeable for such equivalent securities. These securities constitute
the Fund's long position.

A Fund will not engage in short sales against the box for investment
purposes. A Fund may, however, make a short sale as a hedge, when it believes
that the price of a security may decline, causing a decline in the value of a
security (or a security convertible or exchangeable for such security), or when
a Fund wants to sell the security at an attractive current price, but also
wishes to defer recognition of gain or loss for federal income tax purposes or
for purposes of satisfying certain tests applicable to regulated investment
companies under the Code. In such case, any future losses in a Fund's long
position should be reduced by a gain in the short position. Conversely, any gain
in the long position should be reduced by a loss in the short position. The
extent to which such gains or losses are reduced depends upon the amount of the
security sold short relative to the amount a Fund owns. There are certain
additional transaction costs associated with short sales against the box, but a
Fund will endeavor to offset these costs with the income from the investment of
the cash proceeds of short sales.

As a non-fundamental operating policy, not more than 40% of a Fund's total
assets would be involved in short sales against the box.

Certain Other Obligations

In order to allow for investments in new instruments that may be created in
the future, upon the Trust supplementing the Funds' Prospectus, a Fund may
invest in obligations other than those listed previously, provided such
investments are consistent with such Fund's investment objective, policies and
restrictions.

Rating Services

Ratings represent the opinions of rating services as to the quality of the
securities that they undertake to rate. It should be emphasized, however, that
ratings are relative and subjective and are not absolute standards of quality.
Although these ratings are an initial criterion for selection of portfolio
investments, the investment managers also make their own evaluations of these
securities, subject to review by the Board of Trustees of the Trust. After
purchase by a Fund, an obligation may cease to be rated or its rating may be
reduced below the minimum required for purchase by the Fund. Neither event would
require a Fund to dispose of the obligation, but its adviser or subadviser will
consider such an event in its determination of whether the Fund should continue
to hold the obligation. A description of the ratings used herein and in the
Funds' Prospectus is set forth in the Appendix to this Statement of Additional
Information.

Except as stated otherwise, all investment policies and restrictions
described herein are non-fundamental, and may be changed without prior
shareholder approval.

Investment Restrictions

The following investment restrictions are "fundamental policies" of each
Fund and may not be changed with respect to a Fund without the approval of a
"majority of the outstanding voting securities" of the Fund. "Majority of the
outstanding voting securities" under the 1940 Act and as used in this Statement
of Additional Information and the Prospectus means, with respect to a Fund, the
lesser of (i) 67% or more of the outstanding voting securities of the Fund
present at a meeting, if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy, or (ii) more than
50% of the outstanding voting securities of the Fund.

Shareholders of the Bond Index Fund, which invests through the Bond Index
Portfolio, should be aware that the fundamental policies of the Bond Index
Portfolio may not be changed without the approval of a "majority of the
outstanding voting securities" of such Portfolio, i.e., the holders of the
beneficial interests of the Portfolio. Whenever the Trust is requested to vote
on a fundamental policy of the Bond Index Portfolio, the Trust will hold a
meeting of the Bond Index Fund's shareholders and will cast its vote as
instructed by that Fund's shareholders.

With respect to each fundamental investment restriction and each
non-fundamental investment policy listed below, if a percentage restriction
(other than a restriction as to borrowing) or a rating restriction on investment
or utilization of assets is adhered to at the time an investment is made or
assets are so utilized, a later change in such percentage resulting from changes
in a Fund's total assets or the value of a Fund's securities, or a later change
in the rating of a portfolio security, will not be considered a violation of the
relevant restriction or policy.

As a matter of fundamental policy, each Fund may not (except that no
investment restriction of a Fund shall prevent a Fund from investing all of its
investable assets in an open-end management investment company with
substantially the same investment objective and policies as the Fund):

(1) borrow money or mortgage or hypothecate assets of the Fund, except that
in an amount not to exceed 1/3 of the current value of the Fund's assets
(including such borrowing) less liabilities (not including such borrowing), it
may borrow money, enter into reverse repurchase agreements, and purchase
when-issued securities, and except that it may pledge, mortgage or hypothecate
its assets to secure such borrowings, reverse repurchase agreements, or
when-issued securities, provided that collateral arrangements with respect to
options and futures, including deposits of initial margin and variation margin,
are not considered a pledge of assets for purposes of this restriction, and
except that assets may be pledged to secure letters of credit solely for the
purpose of participating in a captive insurance company sponsored by the
Investment Company Institute. The Fund will not purchase securities while
borrowings exceed 5% of the Fund's total assets;

(2) underwrite securities issued by other persons except insofar as the
Trust or a Fund may technically be deemed an underwriter under the 1933 Act in
selling a portfolio security;

(3) make loans to other persons except (a) through the lending of the
Fund's portfolio securities and provided that any such loans not exceed 30% of
the Fund's total assets (taken at market value), (b) through the use of
repurchase agreements or the purchase of short-term obligations, or (c) by
purchasing debt securities of types distributed publicly or privately;

(4) purchase or sell real estate (including limited partnership interests
in partnerships substantially all of whose assets consist of real estate but
excluding securities secured by real estate or interests therein), interests in
oil, gas or mineral leases, commodities or commodity contracts (except futures
and option contracts) in the ordinary course of business (the Trust may hold and
sell, for a Fund's portfolio, real estate acquired as a result of the Fund's
ownership of securities);

(5) invest 25% or more of its assets in any one industry (excluding U.S.
Government securities), unless, in the case of the Bond Index Fund, the bonds
issued by companies in a single industry were to comprise 25% or more of Lehman
Brothers Aggregate Bond Index, in which case such Fund will invest 25% or more
of its assets in that industry; or

(6) issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, provided that collateral arrangements with
respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction.

State and Federal Restrictions. In order to comply with certain state and
federal statutes and policies each Fund will not as a matter of operating policy
(except that no operating policy shall prevent a Fund from investing all of its
investable assets in an open-end investment company with substantially the same
investment objective and policies as the Fund):

(i) purchase any security or evidence of interest therein on margin, except
that such short-term credit as may be necessary for the clearance of
purchases and sales of securities may be obtained and except that
deposits of initial deposit and variation margin may be made in
connection with the purchase, ownership, holding or sale of futures;

(ii) invest for the purpose of exercising control or management;

(iii) purchase securities issued by any other investment company except by
purchase in the open market where no commission or profit to a sponsor
or dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open
market, is part of a plan of merger or consolidation; provided,
however, that securities of any investment company will not be
purchased for the Fund if such purchase at the time thereof would cause
(a) more than 10% of the Fund's total assets (taken at the greater of
cost or market value) to be invested in the securities of such issuers;
(b) more that 5% of the Fund's total assets (taken at the greater of
cost or market value) to be invested in any one investment company; or
(c) more than 3% of the outstanding voting securities of any such
issuer to be held for the Fund;

(iv) purchase securities of any issuer if such purchase at the time thereof
would cause the Fund to hold more than 10% of any class of securities
of such issuer, for which purposes all indebtedness of an issuer shall
be deemed a single class and all preferred stock of an issuer shall be
deemed a single class, except that futures or option contracts shall
not be subject to this restriction;

(v) purchase or retain in the Fund's portfolio any securities issued by an
issuer any of whose officers, directors, trustees or security holders
is an officer or Trustee of the Trust, or is an officer or partner of
the investment adviser or subadviser of the Fund, if after the purchase
of the securities of such issuer for the Fund one or more of such
persons owns beneficially more than 1/2 of 1% of the shares or
securities, or both, all taken at market value, of such issuer, and
such persons owning more than 1/2 of 1% of such shares or securities
together own beneficially more than 5% of such shares or securities, or
both, all taken at market value;

(vi) invest more than 5% of the Fund's net assets in warrants (valued at the
lower of cost or market), but not more than 2% of the Fund's net assets
may be invested in warrants not listed on the New York Stock Exchange
or the American Stock Exchange;

(vii) make short sales of securities or maintain a short position (excluding
short sales if the Fund owns an equal amount of such securities or
securities convertible into or exchangeable for, without payment of any
further consideration, securities of equivalent kind and amount) if
such short sales represent more than 25% of the Fund's net assets
(taken at market value); provided, however, that the value of the
Fund's short sales of securities (excluding U.S. Government securities)
of any one issuer may not be greater than 2% of the value (taken at
market value) of the Fund's net assets or more than 2% of the
securities of any class of any issuer;

(viii) enter into repurchase agreements providing for settlement in more than
seven days after notice, or purchase securities which are not readily
marketable, if, in the aggregate, more than 15% of its net assets would
be so invested; or

(ix) purchase puts, calls, straddles, spreads or any combination thereof, if
by reason of such purchase the value of its aggregate investment in
such securities would exceed 5% of the Fund's total assets.

Policies (i) through (ix) may be changed by the Board of Trustees of the
Trust.

Portfolio Transactions and Brokerage Commissions

Except as may be required to ensure satisfaction of certain tests
applicable to regulated investment companies under the Code, portfolio changes
are made without regard to the length of time a security has been held, or
whether a sale would result in the recognition of a profit or loss. Each Fund
may engage in short-term trading to achieve its investment objective(s).
Portfolio turnover may vary greatly from year to year as well as within a
particular year. It is expected that the Income Fund's and Total Return Bond
Fund's turnover rates may remain higher than those of many other investment
companies with similar investment objectives and policies; however, since
brokerage commissions are not normally paid on instruments purchased by these
Funds, portfolio turnover is not expected to have a material effect on the net
asset value of either Fund. Each Fund's portfolio turnover rate may also be
affected by cash requirements for redemptions of shares and by regulatory
provisions which enable a Fund to receive certain favorable tax treatment.
Portfolio turnover will not be a limiting factor in making portfolio decisions.
Portfolio trading is engaged in for a Fund if its investment managers believe
that a transaction net of costs (including custodian charges) will help achieve
the Fund's investment objective.

A Fund's purchase and sales of securities may be principal transactions,
that is, securities may be purchased directly from the issuer or from an
underwriter or market maker for the securities. There usually are no brokerage
commissions paid for such purchases and, therefore, the Funds do not anticipate
paying brokerage commissions in such transactions. Purchases and sales of the
Bond Index Fund's, Income Fund's and Total Return Bond Fund's portfolio
securities will usually be principal transactions without brokerage commissions.
Any transactions for which a Fund pays a brokerage commission will be effected
at the best price and execution available. Purchases from underwriters of
securities include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers include the
spread between the bid and the asked price.

Allocations of transactions, including their frequency, to various dealers
is determined by the investment managers in their best judgment and in a manner
deemed to be in the best interest of the investors in the applicable Fund rather
than by any formula. The primary consideration is prompt execution of orders in
an effective manner at the most favorable price.

The Advisory and Subadvisory Agreements provide that, in executing
portfolio transactions and selecting brokers or dealers, the investment managers
will seek to obtain the best net price and the most favorable execution. The
investment managers shall consider factors they deem relevant, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, for the specific transaction and on a
continuing basis.

In addition, the Advisory and Subadvisory Agreements authorize the
investment managers, to the extent permitted by law and subject to the review of
the Trust's Board of Trustees (or Federated Portfolios' Board of Trustees, in
the case of the Bond Index Portfolio), to cause the Funds to pay a broker which
furnishes brokerage and research services a higher commission than that which
might be charged by another broker for effecting the same transaction, provided
that the investment managers determine in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker, viewed in terms of either that particular transaction
or the overall responsibilities of the investment managers to the accounts as to
which it exercises investment discretion. Such brokerage and research services
might consist of reports and statistics on specific companies or industries,
general summaries of groups of stocks and their comparative earnings, or broad
overviews of the stock market and the economy. Such services might also include
reports on global, regional, and country-by-country prospects for economic
growth, anticipated levels of inflation, prevailing and expected interest rates,
and the outlook for currency relationships.

Supplementary research information so received is in addition to and not in
lieu of services required to be performed by the investment managers and does
not reduce the investment advisory fees (if any) payable by the Funds. Such
information may be useful to the investment managers in serving the Funds and
other clients and, conversely, supplemental information obtained by the
placement of business of other clients may be useful to the investment managers
in carrying out their obligations to the Funds.

Investment decisions for a Fund will be made independently from those for
any other account or investment company that is or may in the future become
managed by its investment managers or any of their affiliates. If, however, a
Fund and other investment companies or accounts managed by the same investment
manager are contemporaneously engaged in the purchase or sale of the same
security, the transactions may be averaged as to price and allocated equitably
to each account. In some cases, this policy might adversely affect the price
paid or received by a Fund or the size of the position obtainable for the Fund.
In addition, when purchases or sales of the same security for a Fund and for
other investment companies managed by the same investment manager occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.
Furthermore, in certain circumstances affiliates of the investment managers
whose investment portfolios are managed internally, rather than by the
investment managers, might seek to purchase or sell the same type of investments
at the same time as a Fund. Such an event might also adversely affect that Fund.

The following Funds1/ paid the following approximate brokerage commissions
for their respective fiscal periods from commencement of operations2/ through
May 31, 1995: Equity Fund: $27,636; Balanced Fund: $43,886; Equity Growth Fund:
$163,537; International Equity Fund: $33,014; Bond Index, Income and Total
Return Bond Funds: $0.

Portfolio Turnover

Set forth below are the portfolio turnover rates for the Funds3/ for the
indicated periods. A rate of 100% indicates that the equivalent of all of a
Fund's assets have been sold and reinvested in a year. High portfolio turnover
may result in the realization of substantial net capital gains or losses. 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 Taxation below. Portfolio turnover rates from commencement of operations4/
through May 31, 1995 were as follows: Equity Fund, 34%; Income Fund, 34%; Total
Return Bond Fund, 84%; Bond Index Fund, 67%; Balanced Fund, 57%; Equity Growth
Fund, 122%; International Equity Portfolio, 8%.

PERFORMANCE INFORMATION

Standard Performance Information

From time to time, quotations of the Funds' performance may be included in
advertisements, sales literature or shareholder reports. These performance
figures are calculated in the following manner:

Yield. The Bond Index, Income and Total Return Bond Funds may quote the
standardized effective 30-day (or one month) yield for their respective shares,
calculated in accordance with the method prescribed by the Securities and
Exchange Commission for mutual funds. Such yield will be calculated for such
Fund's shares according to the following formula:

Yield = 2 (ab/cd + 1)6

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period (net of
reimbursements).

c = average daily number of shares outstanding that were entitled
to receive dividends.

d = maximum offering price per share on the last day
of the period.

For the purpose of determining interest earned during the period (variable
"a" in the formula), each Fund computes the yield to maturity of any debt
obligation held by it based on the market value of the obligation (including
actual accrued interest) at the close of business on the last business day of
each month, or, with respect to obligations purchased during the month, the
purchase price (plus actual accrued interest). Such yield is then divided by
360, and the quotient is multiplied by the market value of the obligation
(including actual accrued interest) in order to determine the interest income on
the obligation for each day of the subsequent month that the obligation is in
the portfolio. It is assumed in the above calculation that each month contains
30 days. Also, the maturity of a debt obligation with a call provision is deemed
to be the next call date on which the obligation reasonably may be expected to
be called or, if none, the maturity date. Each Fund calculates interest gained
on tax-exempt obligations issued without original issue discount and having a
current market discount by using the coupon rate of interest instead of the
yield to maturity. In the case of tax-exempt obligations with original issue
discount, where the discount based on the current market value exceeds the
then-remaining portion of original issue discount, the yield to maturity is the
imputed rate based on the original issue discount calculation. Conversely, where
the discount based on the current market value is less than the remaining
portion of the original issue discount, the yield to maturity is based on the
market value.

Expenses accrued for the period (variable "b" in the formula) include all
recurring fees charged by a Fund to all shareholder accounts in proportion to
the length of the base period and that Fund's mean (or median) account size.
Undeclared earned income will be subtracted from the maximum offering price per
share (variable "d" in the formula).

The Balanced Fund may quote standardized effective 30-day (or one month)
yield for the fixed income portion of its portfolio, calculated in the same
manner as specified above.

Total Return. Each Fund's "average annual total return" may be quoted, and
such return is computed by determining the average annual compounded rate of
return during specified periods that equates the initial amount invested to the
ending redeemable value of such investment according to the following formula:

T = [(ERV/P)1/n - 1]

Where: T = average annual total return.

ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5- or 10-year (or other)
periods at the end of the applicable period (or a fractional
portion thereof).

P = hypothetical initial payment of $1,000.

n = period covered by the computation, expressed in years.

The calculation is made assuming that (1) all dividends and capital gains
distributions are reinvested on the reinvestment dates at the price per share
existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value (variable "ERV", in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.

Distribution Rate. Each Fund may also quote its distribution rate.
Distribution rate is calculated by annualizing the per share distribution for
the most recent calendar month and dividing such annualized distribution by the
net asset value per share on the last day of such month. The distribution rate
of a Fund will not be used in advertising unless accompanied by standard
performance measures.

Performance Results. Any yield or total return quotation provided for a
Fund should not be considered as representative of the performance of that Fund
in the future since the net asset value of shares of that Fund will vary based
not only on the type, quality and maturities of the securities held by it, but
also on changes in the current value of such securities and on changes in the
expenses of the Fund. These factors and possible differences in the methods used
to calculate yields and total return should be considered when comparing the
yield and total return of a Fund to yields and total rates of return published
for other investment companies or other investment vehicles. Total return
reflects the performance of both principal and income.

Below is set forth historical return information for the Funds for the
periods indicated (in each case the period end is May 31, 1995):

Excelsior Institutional Equity Fund: average annual total return, commencement
of operations(*) to period end: 10.80%; aggregate total return, commencement of
operations(*) to period end: 10.80%.

Excelsior Institutional Income Fund: 30-day yield for the period ending May 31,
1995: 6.46%; average annual total return, commencement of operations(*) to
period end: 7.51%; aggregate total return, commencement of operations(*) to
period end: 7.51%.

Excelsior Institutional Total Return Bond Fund: 30-day yield for the period
ending May 31, 1995: 6.70%; average annual total return, commencement of
operations(*) to period end: 9.40%; aggregate total return, commencement of
operations(*) to period end: 9.40%.

Excelsior Institutional Bond Index Fund: 30-day yield for the period ending
May 31, 1995: 6.74%; average annual total return, commencement of operations(*)
to period end: 11.03%; aggregate total return, commencement of operations(*) to
period end: 11.03%.

Excelsior Institutional Balanced Fund: 30-day yield for the period ending
May 31, 1995: 4.66%; average annual total return, commencement of operations(*)
to period end: 14.59%; aggregate total return, commencement of operations(*) to
period end: 14.59%.

Excelsior Institutional Equity Growth Fund: average annual total return,
commencement of operations(*) to period end: 13.38%; aggregate total return,
commencement of operations(*) to period end: 13.38%.

Excelsior Institutional International Equity Fund: average annual total
return, commencement of operations(*) to period end: 12.57%; aggregate total
return, commencement of operations(*) to period end: 12.57%.

- ----------------
(*) The Funds commenced operations on the following dates: Equity and Income
Funds, January 16, 1995; Total Return Bond Fund, January 19, 1995; Bond Index,
Balanced and Equity Growth Funds, July 11, 1994; and International Equity Fund,
January 24, 1995.

Comparison of Fund Performance

Comparisons of non-standardized performance measures of various investments
are valid only if performance is calculated in the same manner for each measure
in the comparison. Since there are different methods of calculating performance,
investors should consider the effect of the methods used to calculate
performance when comparing the performance of a Fund with performance quoted
with respect to other investment companies or types of investments.

In connection with communicating its performance to current or prospective
shareholders, each Fund also may compare these figures to the performance of
other mutual funds tracked by mutual fund rating services or to unmanaged
indices which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs. Some Funds may invest in
some instruments not eligible for inclusion in such an index, and may be
prohibited from investing in some instruments included in this index.
Evaluations of a Fund's performance made by independent sources may also be used
in advertisements concerning such Fund. Sources for a Fund's performance
information may include, but are not limited to, the following:

Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.

Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.

Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.

Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.

Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.

Donoghue's Money Fund Report, a weekly publication of the Donoghue Organization,
Inc., of Holliston, Massachusetts, reporting on the performance of the nation's
money market funds, summarizing money market fund activity, and including
certain averages as performance benchmarks, specifically "Donoghue's Money Fund
Average" and "Donoghue's Government Money Fund Average."

Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.

Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.

Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.

Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.

Investor's Daily, a daily newspaper that features financial, economic and
business news.

Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.

Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.

New York Times, a nationally distributed newspaper which regularly covers
financial news.

Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.

Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.

Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.

U.S. News and World Report, a national business weekly that periodically reports
mutual fund performance data.

Wall Street Journal, a Dow Jones and Company, Inc. newspaper which
regularly covers financial news.

Weisenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records, and price ranges.

Working Women, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.

World Investor, a European publication that periodically reviews the performance
of U.S. mutual funds investing internationally.

DETERMINATION OF NET ASSET VALUE; VALUATION OF SECURITIES

The Trust determines the net asset value of the shares of each Fund each
day that the New York Stock Exchange (the "NYSE") is open for business (a
"Business Day"). As a result, each Fund will normally determine its net asset
value every weekday except for the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Thanksgiving Day and Christmas. Daily determinations of net asset
value for each Fund are made at 4:00 p.m. (Eastern time) by dividing the total
assets of a Fund less all of its liabilities, by the total number of shares of
the Fund outstanding at the time the determination is made. Purchases and
redemptions will be effected at the time of determination of net asset value
next following the receipt of any purchase or redemption order deemed to be in
good order. See "How To Purchase, Exchange and Redeem Shares" in the Prospectus.

Portfolio securities are valued on the basis of market quotations when they
are readily available. Each Fund values mortgage-backed and other debt
securities for which market quotations are not readily available at their fair
value as determined in good faith, utilizing procedures approved by the Board of
Trustees of the Trust, on the basis of valuations provided either by dealers or
a pricing service. Absent unusual circumstances, debt securities having a
remaining maturity of sixty days or less when purchased, and debt securities
originally purchased with maturities in excess of sixty days but which currently
have maturities of sixty days or less, are valued at cost adjusted for
amortization of premiums and accretion of discounts.

Interest rate futures contracts held by a Fund are valued on the basis of
closing market quotations, which are normally available daily. When market
quotations are not readily available, the fair value of these contracts will be
determined in good faith utilizing procedures approved by the Board of Trustees
of the Trust.

A determination of value used in calculating net asset value must be a fair
value determination made in good faith utilizing procedures approved by the
Trust's Board of Trustees. While no single standard for determining fair value
exists, as a general rule, the current fair value of a security would appear to
be the amount which a Fund could expect to receive upon its current sale. Some,
but not necessarily all, of the general factors which may be considered in
determining fair value include: (i) the fundamental analytical data relating to
the investment; (ii) the nature and duration of restrictions on disposition of
the securities; and (iii) an evaluation of the forces which influence the market
in which these securities are purchased and sold. Without limiting or including
all of the specific factors which may be considered in determining fair value,
some of the specific factors include: type of security, financial statements of
the issuer, cost at date of purchase, size of holding, discount from market
value, value of unrestricted securities of the same class at the time of
purchase, special reports prepared by analysts, information as to any
transactions or offers with respect to the security, existence of merger
proposals or tender offers affecting the securities, price and extent of public
trading in similar securities of the issuer or comparable companies, and other
relevant matters.

The Bond Index Fund, as an investor in the Federated Portfolios, may add to
or reduce its investment in the Bond Index Portfolio on each Business Day. As of
4:00 p.m. (Eastern time) on each such day, the value of each investor's interest
in the Bond Index Portfolio will be determined by multiplying the net asset
value of that Portfolio by the percentage representing that investor's share of
the aggregate beneficial interests in the Portfolio. Any additions or reductions
which are to be effected on that day will then be effected. The investor's
percentage of the aggregate beneficial interests in the Bond Index Portfolio
will then be recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in that Portfolio
as of 4:00 p.m. on such day plus or minus, as the case may be, the amount of net
additions to or reductions in the investor's investment in the Portfolio
effected on such day, and (ii) the denominator of which is the aggregate net
asset value of the Portfolio as of 4:00 p.m. on such day plus or minus, as the
case may be, the amount of the net additions to or reductions in the aggregate
investments in the Portfolio by all investors in the Portfolio. The percentage
so determined will then be applied to determine the value of the investor's
interest in that Portfolio as of 4:00 p.m. on the following Business Day.

ADDITIONAL PURCHASE, EXCHANGE, AND REDEMPTION INFORMATION

Shares are continuously offered for sale by Edgewood Services, Inc. (the
"Distributor"). As described in the Prospectus, Shares are offered for sale
directly only to institutional investors ("Institutional Investors"). Different
types of Customer accounts at certain Institutional Investors (a "Shareholder
Organization") may be used to purchase Shares, including eligible agency and
trust accounts. Investors purchasing Shares may include officers, directors, or
employees of the particular Shareholder Organization.

As stated in the Prospectus, no sales charge is imposed by the Trust on the
purchase of Shares or reinvestment of dividends or distributions. Additionally,
the Trust does not currently charge any fees for the exchange of shares of one
Fund for another Fund.

Shareholders should be aware, however, that certain Shareholder
Organizations may charge a Customer's account fees for exchange orders and other
cash management services provided. Customers should contact their Shareholder
Organization directly for further information.

The Trust may suspend the right of redemption or postpone the date of
payment for Shares for more than 7 days during any period when (a) trading on
the NYSE is restricted by applicable rules and regulations of the Securities and
Exchange Commission; (b) the NYSE is closed for other than customary weekend and
holiday closings; (c) the Securities and Exchange Commission has by order
permitted such suspension; or (d) an emergency exists as determined by the
Securities and Exchange Commission.

In the event that Shares are redeemed in cash at their net asset value, a
shareholder may receive in payment for such Shares an amount that is more or
less than his original investment due to changes in the market prices of that
Fund's portfolio securities.

Other Investor Programs

As described in the Prospectus, Shares of the Funds may be purchased in
connection with certain Retirement Programs. Customers of Shareholder
Organizations should contact their Shareholder Organization directly to
determine their participation in certain services and programs.

MANAGEMENT OF THE TRUST

Trustees and Officers of the Trust

The Trustees and officers of the Trust, their dates of birth and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period.

Trustees

RODMAN L. DRAKE -- Trustee; Director, Parsons Brinkerhoff, Inc.,
(engineering firm) (since 1995); President, R.L. Drake & Co. Inc. (investment
and consulting firm) (since 1991); Trustee, Hyperion Total Return Fund, Inc.,
and three other closed-end funds for which Hyperion Capital Management, Inc. is
the investment adviser; Co-Chairman, KMR Power Corporation (power plants) (since
1993); Chairman, Car Rental Systems do Brazil S.A. (Hertz licensee for Brazil)
(since 1994); Managing Director and Chief Executive Officer, Cresap, McCormick &
Paget, Inc. (subsequently, Cresap, a Towers Perrin Company) (from 1980 to 1990);
Director, Alex. Brown & Sons, Inc. (1989 to 1991); Director, Mueller Industries,
Inc. (1992 to 1994). His date of birth is February 2, 1943. His address is c/o
KMR Power Corp., 30 Rockefeller Plaza, Suite 5425, New York, NY 10112.

W. WALLACE MCDOWELL, JR. -- Trustee; Private Investor (since 1994);
Managing Director, Morgan Lewis Githens & Ahn (1991 to 1994); Chairman and Chief
Executive Officer, The Prospect Group, Inc. (1983 to 1990) and Director, U.S.
Homecare Corporation (since 1992), Grossmans, Inc. (since 1993), Children's
Discovery Centers (since 1984), Interactive Technologies, Inc. (since 1992) and
Jack Morton Productions (since 1987). His date of birth is November 7, 1936. His
address is c/o Prospect Capital Corporation, 43 Arch Street, Greenwich,
Connecticut 06830.

JONATHAN PIEL -- Trustee; President and Editor, Scientific American, Inc.
(1969 to 1994); Director, Group for The South Fork, Bridgehampton, New York
(since October 1993); Member, Advisory Committee, Knight Journalism Fellowships,
MIT. His date of birth is November 23, 1938. His address is 558 East 87th
Street, New York, NY 10128.

Executive Officers of the Trust

JOSEPH S. MACHI -- President; Director, Proprietary Funds Management,
Federated Administrative Services, since 1991; Manager, Audit Department,
Federated Administrative Services, since 1989. His address is Federated
Investors Tower, Pittsburgh, PA.

JOHN M. CORCORAN -- Assistant Treasurer; Second Vice President, Chase
Global Funds Services Company (since 1993); Audit Manager, Ernst & Young (1987
to 1993). His address is c/o Chase Global Funds Services Company, 73 Tremont
Street, Boston, MA 02108.

MICHAEL LEARY -- Assistant Secretary; Assistant Treasurer, Chase Global
Funds Services Company (since 1993); Audit Manager, Ernst & Young (1988 to
1993). His address is c/o Chase Global Funds Services Company, 73 Tremont
Street, Boston, MA 02108.

Each Trustee is paid an annual fee as follows for serving as Trustee of the
Trust, and is reimbursed for expenses incurred in connection with service as a
Trustee. The compensation paid to the Trustees for the fiscal year ended May 31,
1995 is set forth below. The Trustees may hold various other directorships
unrelated to these funds.

PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS ESTIMATED FROM THE
AGGREGATE ACCRUED AS ANNUAL TRUST AND
COMPENSATION PART OF BENEFITS FUND COMPLEX
FROM THE TRUST UPON PAID TO
TRUST EXPENSES RETIREMENT TRUSTEES
Rodman L. Drake $5,000 None None $5,000
W. Wallace McDowell $5,250 None None $5,250
Jonathan Piel $5,250 None None $5,250

As used in the above compensation table, the term "Fund Complex" shall
refer to the Trust, Excelsior Funds, Inc. (formerly known as UST Master Funds,
Inc.), Excelsior Tax-Exempt Funds, Inc. (formerly known as UST Master Tax-Exempt
Funds, Inc.) and UST Master Variable Series, Inc. The Trust has no pension plan.

Trustees and Officers of the Federated Portfolios

The Trustees and officers of the Federated Portfolios, their dates of birth
and principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate those Trustees who
are "interested persons" (as defined in the 1940 Act) of the Federated
Portfolios.

Trustees

JOHN F. DONAHUE* -- Chairman of the Board and Trustee of Federated
Portfolios; Chairman and Trustee, Federated Investors, Federated Advisers,
Federated Management, Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport Research,
Ltd.; Chief Executive Officer and Director, Trustee or Managing General Partner
of 74 investment companies for which subsidiaries of Federated Investors serve
as investment adviser, administrator and/or distributor (the "Federated Fund
Complex"). Mr. Donahue is the father of J. Christopher Donahue, a Trustee and
President of Federated Portfolios. His date of birth is July 28, 1924. His
address is Federated Investors Tower, Pittsburgh, PA.

THOMAS G. BIGLEY -- Director, Oberg Manufacturing Co.; Chairman of the
Board, Children's Hospital of Pittsburgh; Director, Trustee, or Managing General
Partner of 74 investment companies within the Federated Fund Complex; formerly
Senior Partner, Ernst & Young LLP. His date of birth is February 3, 1934 His
address is 28th Floor, One Oxford Centre, Pittsburgh, PA.

JOHN T. CONROY, JR. -- President, Investment Properties Corporation; Senior
Vice President, John R. Wood and Associates, Inc., Realtors; President,
Northgate Village Development Corporation; Partner or Trustee in private real
estate ventures in Southwest Florida; Director, Trustee, or Managing General
Partner of 74 investment companies within the Federated Fund Complex; formerly,
President, Naples Property Management, Inc. His date of birth is June 23, 1937.
His address is Wood/IPC Commercial Department, John R. Wood and Associates,
Inc., Realtors, 3255 Tamiami Trail North, Naples, FL.

WILLIAM J. COPELAND -- Director and member of the Executive Committee,
Michael Baker, Inc; Director, Trustee or Managing General Partner of 74
investment companies within the Federated Fund Complex; formerly, Vice Chairman
and Director, PNC Bank, N.A. and PNC Bank Corp. and Director, Ryan Homes, Inc.
His date of birth is July 4, 1918. His address is One PNC Plaza, 23rd Floor,
Pittsburgh, PA.

JAMES E. DOWD -- Attorney-at-law; Director, The Emerging Germany Fund,
Inc.; Director, Trustee or Managing General Partner of 74 investment companies
within the Federated Fund Complex. His date of birth is May 18, 1922. His
address is 571 Hayward Mill Road, Concord, MA.

LAWRENCE D. ELLIS, M.D.* -- Professor of Medicine and Member, Board of
Trustees, University of Pittsburgh Medical Center - Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly Hematologist,
Oncologist, and Internist, Presbyterian and Montefiore Hospitals; Director,
Trustee, or Managing General Partner of 74 investment companies within the
Federated Fund Complex. His date of birth is October 11, 1932. His address is
3471 Fifth Avenue, Suite 1111, Pittsburgh, PA.

EDWARD L. FLAHERTY, JR. -- Attorney-at-law; Shareholder, Henny, Kochuba,
Meyer and Flaherty; Director, Eat'N Park Restaurants, Inc. and Statewide
Settlement Agency, Inc.; Director, Trustee, or Managing General Partner of 74
investment companies within the Federated Fund Complex; formerly, Counsel,
Horizon Financial, F.A., Western Region. His date of birth is June 18, 1924. His
address is Henny, Kochuba, Meyer and Flaherty, Two Gateway Center, Suite 674,
Pittsburgh, PA.

PETER E. MADDEN -- Consultant; State Representative, Commonwealth of
Massachusetts; Director, Trustee or Managing General Partner of 74 investment
companies within the Federated Fund Complex; formerly President, State Street
Bank and Trust Company and State Street Boston Corporation. His date of birth is
April 16, 1942. His address is 70 Westcliff Road, Weston, MA.

GREGOR F. MEYER -- Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and
Flaherty; Chairman, Meritcar, Inc.; Director, Eat'N Park Restaurants, Inc.;
Director, Trustee or Managing General Partner of 74 investment companies within
the Federated Fund Complex. His date of birth is October 6, 1926. His address is
Henny, Kochuba, Meyer and Flaherty, Two Gateway Center, Suite 674, Pittsburgh,
PA.

JOHN E. MURRAY, JR., J.D., S.J.D. -- President, Law Professor, Duquesne
University; Consulting Partner, Mollica, Murray and Hogue; Director, Trustee or
Managing General Partner of 74 investment companies within the Federated Fund
Complex. His date of birth is December 20, 1932. His address is Duquesne
University, Pittsburgh, PA.

WESLEY W. POSVAR -- Professor, International Politics and Management
Consultant; Trustee, Carnegie Endowment for International Peace, RAND
Corporation, Online Computer Library Center, Inc., and U.S. Space Foundation;
Chairman, Czecho Management Center; Director, Trustee or Managing General
Partner of 74 investment companies within the Federated Fund Complex; President
Emeritus, University of Pittsburgh; founding Chairman, National Advisory Council
for Environmental Policy and Technology and Federal Emergency Management
Advisory Board. His date of birth is September 14, 1925. His address is 1202
Cathedral of Learning, University of Pittsburgh, Pittsburgh, PA.

MARJORIE P. SMUTS -- Trustee; Public Relations/Marketing Consultant;
Conference Coordinator, Non-profit entities; Director, Trustee or Managing
General Partner of 74 investment companies within the Federated Fund Complex.
Her date of birth is June 21, 1935. Her address is 4905 Bayard Street,
Pittsburgh, PA.

J. CHRISTOPHER DONAHUE* -- President and Trustee, Federated Portfolios;
President and Trustee, Federated Investors, Federated Advisers, Federated
Management and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Administrative Services, Federated Services Company and
Federated Shareholder Services; President or Executive Vice President of 74
investment companies within the Federated Fund Complex; Director, Trustee or
Managing General Partner of certain investment companies within the Federated
Fund Complex. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee of
the Federated Portfolios. His date of birth is April 11, 1949. His address is
Federated Investors Tower, Pittsburgh, PA.

Executive Officers of Federated Portfolios

RICHARD B. FISHER -- Vice President; Executive Vice President and Trustee,
Federated Investors; Chairman and Director, Federated Securities Corp.;
President or Vice President of certain investment companies within the Federated
Fund Complex; Director or Trustee of certain investment companies within the
Federated Fund Complex. His address is Federated Investors Tower, Pittsburgh,
PA.

EDWARD C. GONZALEZ -- Executive Vice President; Vice Chairman, Treasurer
and Trustee, Federated Investors; Vice President, Federated Advisers, Federated
Management, Federated Research, Federated Research Corp., Federal Global
Research Corp. and Passport Research Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated Services Company,
Chairman, Treasurer and Trustee, Federated Administrative Services; Trustee or
Director of certain investment companies within the Federated Fund Complex;
Executive Vice President and Treasurer of 74 investment companies within the
Federated Fund Complex. His address is Federated Investors Tower, Pittsburgh,
PA.

JOHN W. MCGONIGLE -- Executive Vice President and Secretary; Executive Vice
President, Secretary, General Counsel and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management and Federated Research; Director,
Federated Research, Federated Research Corp., Federal Global Research Corp.;
Trustee, Federated Services Company; Executive Vice President, Secretary and
Trustee, Federated Administrative Services; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive Vice
President and Secretary of 74 investment companies within the Federated Fund
Complex. His address is Federated Investors Tower, Pittsburgh, PA.

DAVID M. TAYLOR -- Treasurer; Senior Vice President, Controller, and
Trustee, Federated Investors; Controller, Federated Advisers, Federated
Management, Federated Research, Federated Research Corp., and Passport Research
Ltd.; Vice President, Federated Shareholder Services; Senior Vice President,
Federated Administrative Services; Treasurer of certain investment companies
within the Federated Fund Complex. His address is Federated Investors Tower,
Pittsburgh, PA.

Messrs. Fisher, Gonzalez, McGonigle and Taylor may also hold similar
positions for other investment companies affiliated with Federal Investors.

The compensation paid to the Trustees of Federated Portfolios for the year
ended August 31, 1995 is set forth below. The Trustees may hold various other
directorships unrelated to the Federated Portfolios.

PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS FROM
AGGREGATE ACCRUED AS ESTIMATED FEDERATED
COMPENSATION PART OF ANNUAL PORTFOLIOS
FROM FEDERATED BENEFITS AND FUND
FEDERATED PORTFOLIO'S UPON COMPLEX PAID
PORTFOLIOS EXPENSES RETIREMENT TO TRUSTEES
John F. Donahue None None None $ 0
Thomas G. Bigley None None None $ 20,688
John T. Conroy, Jr. None None None $117,202
William J. Copeland None None None $117,202
James E. Dowd None None None $117,202
Lawrence D. Ellis, M.D. None None None $106,460
Edward L. Flaherty, Jr. None None None $117,202
Peter E. Madden None None None $ 90,563
Gregor F. Meyer None None None $106,460
John E. Murray, Jr., S.D., None None None $ 0
S.J.D.
Wesley W. Posvar None None None $106,460
Marjorie P. Smuts None None None $106,460
J. Christopher Donahue None None None $ 0

As used in the above compensation table, the term "Fund Complex" shall
collectively refer to Federated Portfolios and up to 68 other mutual funds for
which subsidiaries of Federated Investors serve as investment adviser,
administrator and/or distributor. Federated Portfolios has no pension plan. It
is expected that each of the Trustees who is not an "interested person" will not
receive compensation from the Federated Portfolios for service as Trustees
during the first fiscal year of the Federated Portfolios, and thereafter shall
be paid such amounts as shall be fixed by the Board of Trustees of Federated
Portfolios.

* * * * *

The Trust Instrument of the Trust provides that it will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust unless it is finally adjudicated that they engaged in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
their offices, or unless it is finally adjudicated that they did not act in good
faith in the reasonable belief that their actions were in the best interests of
the Trust. In the case of settlement, such indemnification will not be provided
unless it has been determined by a court or other body approving the settlement
or other disposition, or by a reasonable determination, based upon a review of
readily available facts, by vote of a majority of disinterested trustees, or in
a written opinion of independent counsel, that such officers or Trustees have
not engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.

The Declaration of Trust of Federated Portfolios provides that Federated
Portfolios will indemnify its Trustees and officers against liabilities and
expenses incurred in connection with litigation in which they may be involved
because of their offices with Federated Portfolios unless it is finally
adjudicated that they engaged in willful malfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices.

As of September 15, 1995, U.S. Trust held of record substantially all of
the outstanding shares in each of the Funds, but did not own such shares
beneficially because it did not have discretion to vote or invest such shares.
As of the same date, the officers and Trustees of the Trust and Federated
Portfolios as a group owned less than 1% of the shares of each Fund and the Bond
Index Portfolio. Shareholders owning 25% or more of the outstanding shares of a
Fund may have the ability to take actions without the approval of any other
investor in that Fund.

Investment Advisory Services

U.S. Trust Pacific is responsible for the management of the assets of the
Balanced, Equity Growth and International Equity Funds pursuant to an investment
advisory agreement with the Trust on behalf of such Funds, subject to the
general supervision and guidance of the Board of Trustees of the Trust. U.S.
Trust is responsible for the management of the assets of the Equity, Income and
Total Return Bond Funds pursuant to an investment advisory agreement with the
Trust on behalf of such Funds, subject to the general supervision and guidance
of the Board of Trustees of the Trust. Federated Management is responsible for
the management of the assets of the Bond Index Portfolio, in which the assets of
the Bond Index Fund are invested, pursuant to an investment advisory agreement
with Federated Portfolios, subject to the general supervision and guidance of
the Trustees of the Trust and Federated Portfolios. The investment advisory
agreements described above are referred to herein as "Advisory Agreements," each
an "Advisory Agreement."

Each Advisory Agreement will continue in effect with respect to each Fund
(or the Bond Index Portfolio) as long as such continuance is specifically
approved at least annually by the Board of Trustees of the Trust (or Federated
Portfolios, as the case may be) or by a majority vote of the shareholders in the
applicable Fund (or the Bond Index Portfolio, as the case may be) and, in either
case, by a majority of the Trustees of the Trust (or Federated Portfolios, as
the case may be) who are not parties to the Advisory Agreement or interested
persons of any such party, at a meeting called for the purpose of voting on the
Advisory Agreement. Each Advisory Agreement was approved by the Trust's Board of
Trustees on August 19, 1995. The Bond Index Portfolio's Advisory Agreement was
approved by the Board of Trustees of Federated Portfolios on October 6, 1995.
Each investment adviser and administrator has agreed to waive certain fees.
Shareholder Organizations may charge their customers account fees for investment
and other cash management services.

Each Advisory Agreement provides that the investment adviser may render
services to others, and each Advisory Agreement is terminable by the Trust (or
Federated Portfolios) without penalty on not more than 60 days' nor less than 30
days' written notice when authorized either by majority vote of the Fund (or, in
the case of the Bond Index Fund, a majority vote of the Fund and the other
investors in the Bond Index Portfolio, with the vote of each being in proportion
to the amount of its investment) or by a vote of a majority of the Board of
Trustees of the Trust (or Federated Portfolios), or by the respective investment
adviser on not more than 60 days' nor less than 30 days' written notice, and
will automatically terminate in the event of its assignment. Each Advisory
Agreement provides that neither the investment adviser nor its personnel shall
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment, or for any act or omission in the execution of security
transactions for a Fund (or the Bond Index Portfolio), except for willful
misfeasance, bad faith, gross negligence or reckless disregard of its or their
obligations and duties under the Advisory Agreement.

The Prospectus contains a description of the fees payable to the investment
advisers under the Advisory Agreements. Each investment adviser, if required by
applicable state law, shall reimburse a Fund or waive all or part of its fees up
to, but not exceeding, its investment advisory fees from the Fund. Such
reimbursement, if required, will be equal to the annual expenses of the
appropriate Fund (in the case of the Bond Index Fund, the Fund and the Bond
Index Portfolio) which exceed that expense limitation with the lowest threshold
prescribed by any state in which such Fund is qualified for offer or sale.
Management of the Trust has been advised that the lowest such threshold
currently in effect is 2 1/2% of net assets up to $30,000,000, 2% of the next
$70,000,000 of net assets and 1 1/2% of net assets in excess of that amount.

With respect to the Balanced, Equity Growth, Value Equity Income and
International Equity Funds, U.S. Trust Pacific has entered into an investment
subadvisory agreement (each a "Subadvisory Agreement") with each of the
subadvisers listed below opposite the name of the Fund. For their services under
the Subadvisory Agreements, the subadvisers are entitled to receive from U.S.
Trust Pacific, fees at a maximum annual rate equal to the percentages specified
in the table below of the Fund's average daily net assets.

Compensation Rate
Fund Name Subadviser for Subadviser (%)

Balanced Fund Becker 0.425%
Equity Growth Fund Luther King 0.40%
International Equity Fund Harding Loevner 0.50%

It is the responsibility of each of the above subadvisers to make the
day-to-day investment decisions for its respective Fund, and to place the
purchase and sales orders for securities transactions of such Fund, subject in
all cases to the general supervision of U.S. Trust Pacific. Each subadviser
furnishes at its own expense all services, facilities and personnel necessary in
connection with managing its respective Fund's investments and effecting
securities transactions for such Fund.

With respect to the Bond Index Portfolio, in which all of the investable
assets of the Bond Index Fund have been invested, Federated Management has
entered into an investment subadvisory agreement (the "Subadvisory Agreement")
with U.S. Trust as subadviser. For its services under the Subadvisory Agreement,
U.S. Trust is entitled to receive from Federated Management fees at a maximum
annual rate equal to 0.12% of the Board Index Portfolio's average daily net
assets.

It is the responsibility of U.S. Trust in its capacity as subadviser to
make the day-to-day investment decisions for the Bond Index Portfolio, and to
place the purchase and sales orders for securities transactions of such
Portfolio, subject to the general supervision of Federated Management. U.S.
Trust furnishes at its own expense all services, facilities and personnel
necessary in connection with managing the Bond Index Portfolio's investments and
effecting securities transactions for the Portfolio.

Administrators

U.S. Trust, Chase Global Funds Services Company ("CGFSC") and Federated
Administrative Services ("FAS") serve as the Funds' administrators (the
"Administrators") pursuant to an agreement between the Administrators and the
Trust (the "Administrative Agreement"). The Prospectus contains a description of
the compensation payable to the Administrators under the Administrative
Agreement.

Under the Administrative Agreement, the Administrators have agreed to
maintain office facilities for the Funds, furnish the Funds with statistical and
research data, clerical, accounting and bookkeeping services, and certain other
services required by the Funds, and to compute the net asset value, net income
and realized capital gains or losses, if any, of the respective Funds. The
Administrators prepare annual and semiannual reports to the Securities and
Exchange Commission, prepare Federal and state tax returns, prepare filings with
state securities commissions, arrange for and bear the cost of processing Share
purchase and redemption orders, maintain the Funds' financial accounts and
records, and generally assist in the Funds' operations. Pursuant to the
Administrative Agreement, the Administrators may render fund accounting and
other services to others. The Administrative Agreement terminates automatically
if assigned and may be terminated, without penalty by any party on not less than
90 days' notice. The Administrative Agreements also provide that neither the
Administrators nor their personnel shall be liable for any error of judgment or
mistake of law or for any act or omission in the administration or management of
the Trust, except for willful misfeasance, bad faith or gross negligence in the
performance of their duties, or by reason of reckless disregard of its or their
obligations and duties under said agreement.

For the period ended May 31, 1995, fund accounting fees for each Fund
amounted to the following: Equity Fund, $4,493; Income Fund, $4,526; Total
Return Bond Fund, $4,395; Bond Index Fund, $10,667; Balanced Fund, $10,677;
Equity Growth Fund, $10,677; International Equity Fund, $4,263.

For the period ended May 31, 1995, fund accounting and servicing agent fees
for the portfolios of the St. James Portfolios in which each Fund invested all
of its investable assets prior to December 18, 1995 (January 2, 1996, in the
case of the Bond Index Fund) amounted to the following: Equity Fund, $20,368;
Income Fund, $23,776; Total Return Bond, $21,403; Bond Index Fund, $54,279;
Balanced Fund, $72,155; Equity Growth Fund, $66,174; International Equity Fund,
$18,964.

Transfer Agent and Custodian

The Chase Manhattan Bank, N.A. ("Chase") serves as custodian of the Funds'
assets pursuant to a custody agreement between Chase and the Trust.

Under such agreement and acting as the Funds' custodian, Chase has agreed
to (i) maintain a separate account or accounts for each of the Funds (ii) make
receipts and disbursements of money on behalf of the Funds; (iii) collect and
receive income and other payments and distributions on account of the Funds'
securities; (iv) respond to correspondence from securities brokers and others
relating to its duties; (v) maintain certain financial accounts and records; and
(vi) make periodic reports to the Trust concerning the Funds' operations. For
the services provided by Chase under the custody agreements, the Trust has
agreed to pay Chase a fee as agreed upon from time to time.

Chase may, at its own expense, open and maintain custody accounts with
respect to the Funds with other banks or trust companies, provided that Chase
shall remain liable under the custody agreement for the performance of all of
its duties under such agreement, notwithstanding any such delegation.

Chase Global Funds Services Company ("CGFSC") serves as transfer agent for
the Funds pursuant to a transfer agency agreement. Under this agreement, CGFSC
will perform the following functions, among others: (i) issue and redeem shares
of the Funds; (ii) address and mail all communications by the Funds to their
shareholders, including reports to shareholders, dividend and distribution
notices, and proxy materials for their meetings of shareholders; (iii) respond
to correspondence by shareholders and others relating to its duties; (iv)
maintain shareholder accounts; and (v) make periodic reports to the Trust
concerning the Funds' operations. For its transfer agency and dividend
disbursement services, CGFSC is entitled to receive from the Trust such
compensation as may be agreed upon from time to time between the Trust and
CGFSC. In addition, CGFSC is entitled to be reimbursed for its out-of-pocket
expenses for the cost of forms, postage, processing purchase and redemption
orders, handling of proxies, and other similar expenses in connection with the
above services.

CGFSC may delegate its transfer agency obligations to another transfer
agent registered or qualified under applicable law, provided that CGFSC shall
remain liable for the performance of all of its transfer agency duties under the
transfer agency agreement, notwithstanding any such delegation.

Bond Index Portfolio - Service Providers

Investors Bank and Trust Company, 79 Milk Street, 7th Floor, Boston,
Massachusetts, 02205, is Custodian for the cash and securities of the Bond Index
Portfolio.

Federated Securities Corp., Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania, 15222-3779, is Placement Agent for Federated
Portfolio.

Federated Services Company, Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania, 15222-3779, is Portfolio Accountant for Federated
Portfolios.

Signature Financial Services, Inc. 6 St. James Avenue, Boston,
Massachusetts, 02116, is Sub-Portfolio Accountant for the Bond Index Portfolios.

Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services (including certain legal and
financial reporting services) necessary to operate Federated Portfolios.
Federated Administrative Services provides these for each portfolio in Federated
Portfolios at an annual rate as specified below:

Average Aggregate Daily Net
Assets of the
Maximum Administrative Fee portfolio

0.050 of 1% on the first $1 billion
0.045 of 1% on the next $1 billion
0.040 of 1% on the next $1 billion
0.025 of 1% on the next $1 billion
0.010 of 1% on the next $1 billion
0.005 of 1% on assets in excess of $5 billion

The minimum administrative fee is $60,000 annually for each portfolio.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee, and has agreed to waive a portion of its fee for the twelve month
period following January 2, 1996. Dr. Henry J. Gailliot, an officer of Federated
Management, the adviser to the Registrant, holds approximately 20% of the
outstanding common stock and serves as a director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Administrative Services.

INDEPENDENT AUDITORS

Ernst & Young LLP are the independent auditors for Excelsior Institutional
Trust and Federated Investment Portfolios, and in each case provides audit
services and assistance and consultation with respect to the preparation of
filings with the Securities and Exchange Commission.

TAXATION

Taxation of the Funds

Each series of the Trust is treated as a separate entity for federal income
tax purposes under the Internal Revenue Code of 1986, as amended (the "Code").
Each Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Code (a "RIC") by
meeting all applicable requirements of Subchapter M, including requirements as
to the nature of the Fund's gross income, the amount of the Fund's
distributions, and the composition and holding period of the Fund's portfolio
assets. Because each Fund intends to distribute all of its net investment income
and net realized capital gains to its shareholders in accordance with the timing
requirements imposed by the Code, it is not expected that the Fund will be
required to pay any federal income or excise taxes, although a Fund's foreign
source income may be subject to foreign withholding taxes. If a Fund fails to
qualify as a RIC in any year, the Fund would incur a regular corporate federal
income tax upon its taxable income, and the Fund's distributions would generally
be taxable as ordinary dividend income to shareholders.

The Trust anticipates that under interpretations of the Internal Revenue
Service, (1) the Bond Index Portfolio will be treated for federal income tax
purposes as a partnership and (2) for purposes of determining whether the Bond
Index Fund satisfies the income and diversification requirements to maintain its
status as a RIC, the Bond Index Fund, as an investor in the Bond Index
Portfolio, will be deemed to own a proportionate share of that Portfolio's
assets and will be deemed to be entitled to that Portfolio's income or loss
attributable to that share. The Bond Index Portfolio has advised the Bond Index
Fund that it intends to conduct its operations so as to enable its investors,
including the Bond Index Fund, to satisfy those requirements.

Any Fund distribution (or, in the case of the Income, Total Return Bond and
Bond Index Funds any distribution of net capital gains or net short-term capital
gains) will have the effect of reducing the per share net asset value of shares
in the Fund by the amount of the distribution. Shareholders purchasing shares
shortly before the record date of any distribution may thus pay the full price
for the shares and then effectively receive a portion of the purchase price back
as a taxable distribution.

Any investment by a Fund in zero coupon bonds, certain securities purchased
at a market discount, and similar instruments will cause a Fund to recognize
income prior to the receipt of cash payments with respect to those securities.
In order to distribute this income and avoid a tax on the Fund, a Fund may be
required to liquidate portfolio securities that it might otherwise have
continued to hold, potentially resulting in additional taxable gain or loss to
the Fund.

While certain of the Funds might invest in municipal securities, the
interest on which might otherwise be exempt from tax, it is generally not
expected that any Fund will satisfy the requirements under the Code to
pass-through such exempt income to shareholders as tax-exempt dividends.

Any Fund's transactions in options, futures contracts, and forward currency
exchange contracts will be subject to special tax rules that may affect the
amount, timing, and character of Fund income and distributions to shareholders.
In addition, foreign exchange gains or losses realized by any Fund will
generally be treated as ordinary income or loss by the Fund. Investment by a
Fund in certain "passive foreign investment companies" may also have to be
limited in order to avoid a tax on the Fund. Such a Fund may elect (if such
election is available) to mark to market any investments in "passive investment
companies" on the last day of each year. This election may cause a Fund to
recognize income prior to the receipt of cash payments with respect to those
investments; in order to distribute this income and avoid tax on the Fund, the
Fund may be required to liquidate portfolio securities that it might otherwise
have continued to hold.

Investment income of a Fund from foreign securities may be subject to
foreign income tax withheld at the source. No Fund (other than the International
Equity Fund, as discussed below) expects to be able to pass through to
shareholders foreign tax credits with respect to such foreign taxes. The United
States has entered into tax treaties with many foreign countries that may
entitle a Fund to a reduced rate of tax or an exemption from tax on such income;
each Fund intends to qualify for treaty-reduced rates where available. It is not
possible, however, to determine a Fund's effective rate of foreign tax in
advance since the amount of the Fund's assets invested within various countries
is not known.

Taxation of the Bond Index Portfolio

The Trust anticipates that the Bond Index Portfolio will be treated as a
partnership for federal income tax purposes. As such, the Portfolio is not
subject to federal income taxation. Instead, the Bond Index Fund must take into
account, in computing its federal income tax liability, its share of the Bond
Index Portfolio's income, gains, losses, deductions, credits and tax preference
items, without regard to whether it has received any cash distributions from
that Portfolio.

Taxation of Distributions

Dividends from ordinary income and any distributions from net short-term
capital gains are taxable to shareholders as ordinary income for federal income
tax purposes. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any, are taxable to
shareholders as long-term capital gains without regard to the length of time the
shareholders have held their shares. A portion of the ordinary income dividends
of a Fund invested in stock of domestic corporations may qualify for the
dividends-received deduction for corporations if the recipient otherwise
qualifies for that deduction with respect to its holding of Shares. Availability
of the deduction for particular shareholders is subject to certain limitations,
and deducted amounts may be subject to the alternative minimum tax and result in
certain basis adjustments. Distributions are taxable as described above whether
paid in cash or reinvested in additional shares. Shareholders will be notified
annually as to the federal tax status of distributions.

Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax. To
prevent imposition of the excise tax, each Fund must, and intends to, distribute
during each calendar year substantially all of its ordinary income for that year
and substantially all of its capital gain in excess of its capital losses for
that year, plus any undistributed ordinary income and capital gains from
previous years. For this and other purposes, a Fund dividend will be treated as
paid on December 31 if it is declared by a Fund in October, November or December
with a record date in such a month and paid by the Fund during January of the
following calendar year. Accordingly, those distributions will be taxable to
shareholders for the taxable year in which that December 31 falls.

If the International Equity Fund holds more than 50% of its assets in
foreign stock and securities at the close of its taxable year, the Fund may
elect to "pass through" to the Fund's shareholders foreign income taxes paid. If
the Fund so elects, shareholders will be required to treat their pro rata
portion of the foreign income taxes paid by the Fund as part of the amounts
distributed to them by the Fund and thus includable in their gross income for
federal income tax purposes. Shareholders who itemize deductions would then be
allowed to claim a deduction or credit (but not both) on their federal income
tax returns for such amounts, subject to certain limitations. Shareholders who
do not itemize deductions would (subject to such limitations) be able to claim a
credit but not a deduction. No deduction will be permitted to individuals in
computing their alternative minimum tax liability. If the International Equity
Fund does not qualify or elect to "pass through" to the Fund's shareholders
foreign income taxes paid, shareholders will not be able to claim any deduction
or credit for any part of the foreign taxes paid by the Fund.

Withdrawals by the Bond Index Fund from the Bond Index Portfolio generally
will not result in that Fund recognizing any gain or loss for federal income tax
purposes, except that (1) gain will be recognized to the extent that any cash
distributed exceeds the basis of the Fund's interest in the Bond Index Portfolio
prior to the distribution, (2) income or gain will be realized if the withdrawal
is in liquidation of the Fund's entire interest in the Bond Index Portfolio and
includes a disproportionate share of any unrealized receivables held by that
Portfolio, and (3) loss will be recognized if the distribution is in liquidation
of that entire interest and consists solely of cash and/or unrealized
receivables. The basis of the Bond Index Fund's interest in the Bond Index
Portfolio generally equals the amount of cash and the basis of any property that
the Fund invests in the Bond Index Portfolio, increased by the Fund's share of
income from that Portfolio and decreased by the Fund's share of losses from that
Portfolio and the amount of any cash distributions and the basis of any property
distributed from that Portfolio.

Other Taxation

The Trust is organized as a Delaware business trust and, under current law,
neither the Trust nor the Funds are liable for any income or franchise tax in
the State of Delaware, provided that the Funds continue to qualify as RICs for
federal income tax purposes.

The Bond Index Portfolio is organized as series of Federated Investment
Portfolios (the "Federated Portfolios"), a business trust organized under the
laws of the Commonwealth of Massachusetts. The Bond Index Portfolio is not
subject to any income or franchise tax in the Commonwealth of Massachusetts or
the State of Delaware. The investment by the Bond Index Fund in the Bond Index
Portfolio does not cause the Fund to be liable for any income or franchise tax
in the Commonwealth of Massachusetts.

Fund shareholders may be subject to state and local taxes on Fund
distributions to them by a Fund. Shareholders are advised to consult their own
tax advisers with respect to the particular tax consequences to them of an
investment in a Fund.

DESCRIPTION OF THE TRUST; FUND SHARES

The Trust is a Delaware business trust established under a Trust Instrument
dated April 27, 1994. Its authorized capital consists of an unlimited number of
shares of beneficial interest of $0.00001 par value, which may be issued in
separate series. Currently, the Trust has seven active and two inactive series,
although additional series may be established from time to time. Each share of
each series represents an equal proportionate interest in that series with each
other share in that series.

The assets of the Trust received for the issue or sale of the shares of
each series and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are specifically allocated to such series and
constitute the underlying assets of such series. The underlying assets of each
series are segregated on the books of account, and are to be charged with the
liabilities in respect to such series and with such a share of the general
liabilities of the Trust. Expenses with respect to any two or more series are to
be allocated in proportion to the asset value of the respective series except
where allocations of direct expenses can otherwise be fairly made. The officers
of the Trust, subject to the general supervision of the Trustees, have the power
to determine which liabilities are allocable to a given series, or which are
general or allocable to two or more series. In the event of the dissolution or
liquidation of the Trust or any series, the holders of the shares of any series
are entitled to receive as a class the value of the underlying assets of such
shares available for distribution to shareholders.

The Trustees may amend the Trust Instrument without shareholder approval,
except shareholder approval is required for any amendment (a) which affects the
voting rights of shareholders under the Trust Instrument, (b) which affects
shareholders' rights to approve certain amendments to the Trust Instrument, (c)
required to be approved by shareholders by law or the Registration Statement, or
(d) submitted to shareholders for their approval by the Trustees in their
discretion. Pursuant to Delaware business trust law and the Trust Instrument,
the Trustees may, without shareholder approval, (x) cause the Trust to merge or
consolidate with one or more entities, if the surviving or resulting entity is
the Trust or another open-end management investment company registered under the
1940 Act, or a series thereof, that will succeed to or assume the Trust's
registration under the 1940 Act, or (y) cause the Trust to incorporate under the
laws of the State of Delaware.

Shares of a Fund entitle their holder to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series. For example, a change in investment policy for a series would be voted
upon only by shareholders of the series involved.

The Trust Instrument provides that obligations of the Trust are not binding
upon the Trustees individually but only upon the property of the Trust, that the
Trustees and officers will not be liable for errors of judgment or mistakes of
fact or law, and that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with litigation in which they
may be involved because of their offices with the Trust unless it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices, or
unless it is finally adjudicated that they did not act in good faith in the
reasonable belief that their actions were in the best interests of the Trust. In
the case of settlement, such indemnification will not be provided unless it has
been determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested Trustees, or in a
written opinion of independent counsel, that such officers or Trustees have not
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.

Under Delaware law, shareholders of a Delaware business trust are entitled
to the same limitation on personal liability which is extended to shareholders
of private for profit corporations organized under the General Corporation Law
of the State of Delaware. The Trust Instrument contains an express disclaimer of
shareholder liability for acts or obligations of the Trust and provides for
indemnification and reimbursement of expenses out of Fund property for any
shareholder held personally liable for the obligations of a Fund solely by
reason of his being or having been a shareholder. The Trust Instrument also
provides for the maintenance, by or on behalf of the Trust and each Fund, of
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of the Trust and each Fund, their shareholders,
Trustees, officers, employees and agents, covering possible tort and other
liabilities.

Description of Federated Portfolios - Beneficial Interests

The Bond Index Portfolio is a series of Federated Portfolios, which is
organized as a trust having separate series under the laws of the Commonwealth
of Massachusetts. Under the Declaration of Trust, the Trustees are authorized to
issue beneficial interests in one or more series (each a "Portfolio").
Currently, there is one Portfolio of Federated Portfolios, the Bond Index
Portfolio. Investors in the Bond Index Portfolio will be held personally liable
for the obligations and liabilities of Federated Portfolios and of the Bond
Index Portfolio but not the obligations and liabilities of any other Portfolio,
subject, however, to indemnification by Federated Portfolios in the event that
there is imposed upon an investor any obligation or liability of the Bond Index
Portfolio or Federated Portfolios. The Declaration of Trust also provides that
Federated Portfolios may maintain appropriate insurance for the protection of
Federated Portfolios, its Trustees, officers, employees and agents, and covering
possible tort and other liabilities. The risk of an investor incurring financial
loss on account of investor liability is limited to circumstances in which
Federated Portfolios itself is unable to meet its obligations.

Investors in a Portfolio are entitled to participate pro rata in
distributions of taxable income, loss, gain and credit of their respective
Portfolio only. Upon liquidation or dissolution of a Portfolio, investors are
entitled to share pro rata in that Portfolio's (and no other Portfolio's) net
assets available for distribution to its investors. Federated Portfolios
reserves the right to create and issue additional Portfolios of beneficial
interests, in which case the beneficial interests in each new Portfolio would
participate in that Portfolio only (and no other Portfolio). Investments in a
Portfolio have no preference, preemptive, conversion or similar rights and are
fully paid and nonassesable, except as set forth below. Investments in a
Portfolio may not be transferred.

Each investor is entitled to a vote in proportion to the amount of its
investment in each Portfolio. Investors in a Portfolio do not have cumulative
voting rights, and investors holding a plurality of the aggregate beneficial
interests in all outstanding Portfolios may elect all of the Trustees if they
choose to do so and in such event other investors would not be able to elect any
Trustees. Investors in each Portfolio will vote as a separate class except as to
voting for the election or removal of Trustees, the termination of Federated
Portfolios, as otherwise required by the 1940 Act, or if the matter is
determined by the Trustees to be a matter which affects all Portfolios.
Federated Portfolios' Declaration of Trust may be amended without the vote of
investors, except that investors have the right to approve by affirmative
majority vote any amendment which would adversely affect their voting rights,
alter the procedures to amend the Declaration of Trust of Federated Portfolios,
as required by law or by Federated Portfolios' registration statement, or as
submitted to them by the Trustees.

Federated Portfolios or any Portfolio may enter into a merger or
consolidation, or sell all or substantially all of its assets, if approved (a)
at a meeting of investors by investors representing the lesser or (i) 67% or
more of the beneficial interests in the affected Portfolio present or
represented at such meeting, if investors in more than 50% of all such
beneficial interests are present or represented by proxy, or (ii) more than 50%
of all such beneficial interests, or (b) by an instrument in writing without a
meeting, consented to by investors of the beneficial interests in the affected
Portfolio.

Federated Portfolios' Declaration of Trust provides that obligations of
Federated Portfolios are not binding upon the Trustees individually but only
upon the property of Federated Portfolios and that the Trustees will not be
liable for any action or failure to act, but nothing in the Declaration of Trust
protects a Trustee against any liability to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.

Federated Portfolios' Declaration of Trust further provides that it will
indemnify its Trustees, officers, employees and agents against liabilities and
expenses incurred in connection with litigation in which they may be involved
because of their offices with Federated Portfolios, unless, as to liability to
the Federated Portfolios or its investors, it is finally adjudicated that they
engage in willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in their offices. In the case of settlement,
the by-laws of Federated Portfolios provide that such indemnification will not
be provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination, based upon a
review of readily available facts, by a vote of a majority of disinterested
Trustees or by a written opinion of independent counsel, that such officers or
Trustees have not engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.

FINANCIAL STATEMENTS

The Funds' current reports to shareholders as filed with the SEC pursuant
to Section 30(b) of the 1940 Act and Rule 30b2-1 thereunder are hereby
incorporated herein by reference. A copy of each such report will be provided
without charge to each person receiving this Statement of Additional
Information. The Annual Report of the Funds dated May 31, 1995 contains
financial statements of the following Funds and the portfolios of the St. James
Portfolios as of and for the period ended May 31, 1995:
<TABLE>
<CAPTION>
Portfolio of
Fund St. James Portfolios
<S> <C>
Excelsior Institutional Equity Fund Equity Portfolio
Excelsior Institutional Income Fund Income Portfolio
Excelsior Institutional Total Return Bond Fund Total Return Bond Portfolio
Excelsior Institutional Bond Index Fund Bond Market Portfolio
Excelsior Institutional Balanced Fund Balanced Portfolio
Excelsior Institutional Equity Growth Fund Equity Growth Portfolio
Excelsior Institutional International Equity Fund International Equity Portfolio
Excelsior Institutional Equity Index Fund Equity Market Portfolio
Excelsior Institutional Small Capitalization Fund Small Cap Portfolio
Excelsior Institutional Value Equity Income Fund Value Equity Income Portfolio
</TABLE>

Prior to December 18, 1995 (January 2, 1996 in the case of the Bond Index
Fund) each of the Funds invested its investable assets in the corresponding
portfolio of the St. James Portfolios. Effective December 18, 1995, each of the
Equity, Income, Total Return Bond, Balanced, Equity Growth and International
Equity Funds withdrew its interest in the corresponding portfolio of the St.
James Portfolios, receiving all of each portfolio's securities, and
substantially all of the other net assets of each portfolio, as of that date.
Each of those Funds now directly acquires and manages its own portfolio of
securities.

Effective January 2, 1996, the Bond Index Fund withdrew its interest in the
Bond Market Portfolio of St. James Portfolio, receiving all of that portfolio's
securities, and substantially all of its other net assets, as of that date, and
the Fund invested those securities and other net assets in the Bond Index
Portfolio, a series of Federated Investment Portfolios.

As of December 29, 1995, the Equity Index, Small Capitalization and Value
Equity Income Funds withdrew their investments in the corresponding portfolios
of the St. James Portfolios and liquidated.

<PAGE>

APPENDIX

Description of Security Ratings

STANDARD & POOR'S

Corporate and Municipal Bonds

AAA -- Debt rated "AAA" has the highest rating assigned by Standard & Poor's to
a debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA -- Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.

A -- Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB -- Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.

BB -- Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.

Plus(+) or Minus(-) -- The ratings from "AA" to "BB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

Commercial Paper, including Tax Exempt

A -- Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree of safety.

A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) designation.

A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".

A-3 -- Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.

MOODY'S

Corporate and Municipal Bonds

Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risk appear somewhat larger than in Aaa securities.

A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

Note: Moody's applies numerical modifiers, 1,2, and 3 in each generic rating
classification from Aa through Bb in its corporate bond rating system. The
modifier 1 indicates that the security rates in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category. Those municipal bonds within the Aa, A, Baa, and Ba categories that
Moody's believes possess the strongest credit attributes within those categories
are designated by the symbols Aa1, A1, Baa1, and Ba1.

Commercial Paper

Prime-1 -- Issuers rated P-1 (or supporting institutions) have a superior
ability for repayment of short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following characteristics:

- - Leading market positions in well established industries.

- - High rates of return on funds employed.

- - Conservative capitalization structure with moderate reliance on debt and ample
asset protection.

- - Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

- - Well established access to a range of financial markets and assured sources of
alternate liquidity.

Prime-2 -- Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Prime-3 -- Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market composition may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.

Not Prime -- Issuers rated "Not Prime" do not fall within any of the Prime
rating categories.

FITCH INVESTORS SERVICE

Corporate Bond Ratings

AAA -- Securities of this rating are regarded as strictly high-grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions, and
liable to but slight market fluctuation other than through changes in the money
rate. The factor last named is of importance varying with the length of
maturity. Such securities are mainly senior issues of strong companies, and are
most numerous in the railway and public utility fields, though some industrial
obligations have this rating. The prime feature of an AAA rating is showing of
earnings several times or many times interest requirements with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Other features may enter in, such as a wide margin
of protection through collateral security or direct lien on specific property as
in the case of high class equipment certificates or bonds that are first
mortgages on valuable real estate. Sinking funds or voluntary reduction of the
debt by call or purchase are often factors, while guarantee or assumption by
parties other than the original debtor may also influence the rating.

AA -- Securities in this group are of safety virtually beyond question, and as a
class are readily salable while many are highly active. Their merits are not
greatly unlike those of the AAA class, but a security so rated may be of junior
though strong lien - in many cases directly following an AAA security - or the
margin of safety is less strikingly broad. The issue may be the obligation of a
small company, strongly secured but influenced as to ratings by the lesser
financial power of the enterprise and more local type of market.

A -- Securities of this rating are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.

BBB -- Securities of this rating are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.

Plus(+) or Minus(-) -- Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.

Commercial Paper Ratings

F-1+ -- Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1 -- Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than the strongest
issue.

F-2 -- Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as for issues assigned "F-1+" and F-1" ratings.

F-3 -- Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could cause these securities to be rated below
investment grade.

DUFF & PHELPS RATINGS

Corporate Bond Ratings

AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury Funds.

AA+, AA, AA- -- High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.

A+, A, A- -- Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.

BBB+, BBB, BBB- -- Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.

Commercial Paper Ratings

Duff 1+ -- Highest certainty of timely payment. Short term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk free U.S. Treasury short term
obligations.

Duff 1 -- Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.

Duff 1- -- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.

Duff 2 -- Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.

Duff 3 -- Satisfactory liquidity and other protection factors qualify issue as
to investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.

<PAGE>

Administrators

Federated Administrative Services
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108

United States Trust Company of New
York
114 West 47 Street
New York, NY 10036

Investment Managers

United States Trust Company
of New York
114 West 47th Street
New York, NY 10036

United States Trust Company of
The Pacific Northwest
4380 Southwest
Macadam Avenue,
Suite 450
Portland, OR 97201

Becker Capital Management, Inc.
2185 Pacwest Center
Portland, OR 97204

Luther King Capital Management
301 Commerce Street, Suite 1600
Fort Worth, TX 76102

Harding, Loevner Management, L.P.
50 Division Street, Suite 401
Somerville, NJ 08876

Federated Management
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3799

Transfer Agent
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108

Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116

Distributor
Edgewood Services, Inc.
Federated Investors Tower
Pittsburgh, PA 15222

EXCELSIOR INSTITUTIONAL TRUST

STATEMENT OF ADDITIONAL
INFORMATION
February __, 1996

1/Each of the Funds paid such brokerage commissions through the
corresponding portfolio of the St. James Portfolios (the "Portfolio Series") in
which such Fund had invested all of its investable assets prior to December 18,
1995 (January 2, 1996, in the case of the Bond Index Fund).

2/The Funds commenced operations on the following dates: Equity and Income
Funds, January 16, 1995; Total Return Bond Fund, January 19, 1995; Bond Index,
Balanced and Equity Growth Funds, July 11, 1994; and International Equity Fund,
January 24, 1995.

3/The turnover rates indicated are for the portfolios of the Portfolio
Series corresponding to the Funds.

4/See footnote 2 above.

PART C

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements:

The Financial Statements included in Part A are as follows:

Financial Highlights: Excelsior Institutional Equity Fund, Excelsior
Institutional Income Fund, Excelsior Institutional Total Return Bond Fund,
Excelsior Institutional Bond Index Fund, Excelsior Institutional Balanced Fund,
Excelsior Institutional Equity Growth Fund, and Excelsior Institutional
International Equity Fund.

The Financial Statements included in Part B are as follows:

(b) Exhibits:
Excelsior Institutional Trust
Statement of Assets and Liabilities, May 31, 1995
Statements of Operations, Commencement of Operations through
May 31, 1995
Statements of Changes in Net Assets, Commencement of Operations
through May 31, 1995
Financial Highlights
Notes to Financial
Statements, May 31, 1995
Report of Price Waterhouse LLP

St. James Portfolios
Schedule of Investments, May 31, 1995
Statement of Assets and Liabilities, May 31, 1995
Statements of Operations, Commencement of Operations through
May 31, 1995
Statements of Changes in Net Assets, Commencement of Operations
through May 31, 1995
Supplementary Data
Notes to Financial Statements, May 31, 1995
Report of Price Waterhouse LLP

1. Trust Instrument of the Registrant. 5

1(a). Amended and Restated Schedule A to Trust
Instrument of the Registrant. 5

2. By-Laws of the Registrant. 5

5(a). Form of Investment Advisory Agreement 7

5(b). Form of Investment Subadvisory Agreement 7

6. Distribution Agreement between the Registrant
and Edgewood Services, Inc. 6

8(a). Form of Custodian Agreement between the Registrant
and Chase Manhattan Bank, N.A. 7

8(b). Form of Subcustodian Agreement between Chase
Manhattan Bank, N.A. and foreign subcustodians. 7

9(a). Form of Administration Agreement between the
Registrant and United States Trust Company
of New York, Chase Global Funds Services Company
and Federated Administrative Services 7

9(b). Form of Fund Accounting and Servicing Agreement
between the Registrant and Federated Services
Company 7

9(c). Form of Shareholder Servicing Agreement between
the Registrant and certain financial institutions. 2

9(d). Form of Transfer Agency Agreement between the
Registrant and Mutual Funds Service Company. 2

10. Opinion of Counsel. 2

11. Consents of Independent Accountants. 7

13. Investor Representation Letter of Initial
Shareholder. 2

16. Schedule for Computation of Performance
Quotations. 2

17. Financial Data Schedules. 7

18(a).Powers of Attorney for Trustees and officers of
the Trust. 2

18(b).Powers of Attorney for Trustees and officers of
Federated Investment Portfolios 7

1 Incorporated herein by reference from the Registrant's Registration Statement
on Form N-1A (File Nos. 33-78264 and 811-8490) (the "Registration Statement"),
as filed with the Securities and Exchange Commission (the "SEC") on April 28,
1994.

2 Incorporated herein by reference from Pre-Effective Amendment No. 2 to
the Registration Statement, as filed with the SEC on June 22, 1994.

3 Incorporated herein by reference from Post-Effective Amendment No. 1 to
the Registration Statement, as filed with the SEC on July 13, 1994.

4 Incorporated herein by reference from Post-Effective Amendment No. 2 to
the Registration Statement, as filed with the SEC on September 28, 1994.

5 Incorporated herein by reference from Post-Effective Amendment No. 3 to
the Registration Statement, as filed with the SEC on June 13, 1995.

6 Incorporated herein by reference from Post-Effective Amendment No. 4 to
the Registration Statement, as filed with the SEC on October 2, 1995.

7 Filed herewith.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Not applicable.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

Shares of Beneficial Interest (par value $.00001).

Title of Class: Number of Record Holders As
of November 25, 1995.

Excelsior Institutional Equity Fund: 3
Excelsior Institutional Income Fund: 2
Excelsior Institutional Total Return Bond Fund: 3
Excelsior Institutional Bond Index Fund: 2
Excelsior Institutional Balanced Fund: 2
Excelsior Institutional Equity Growth Fund: 2
Excelsior Institutional International Equity Fund: 2

ITEM 27. INDEMNIFICATION.

Reference is hereby made to Article IX of the Registrant's Trust
Instrument, filed as an exhibit to this Registration Statement.

The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940,
as amended (the "1940 Act").

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "1933 Act"), may be permitted to directors, trustees,
officers and controlling persons of the Registrant and the principal underwriter
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, trustee,
officer, or controlling person of the Registrant and the principal underwriter
in connection with the successful defense of any action, suite or proceeding) is
asserted against the Registrant by such director, trustee, officer or
controlling person or principal underwriter in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

United States Trust Company of New York ("U.S. Trust") is a full-service
state-chartered bank located in New York, New York. The name, position with U.S.
Trust, address, principal occupation and type of business are set forth below
for the trustees and certain senior executive officers of U.S. Trust, including
those who are engaged in any other business, profession, vocation, or employment
of a substantial nature.

SAMUEL C. BUTLER -- Trustee/Director; Cravath, Swaine & Moore, Worldwide
Plaza, 825 Eighth Avenue, New York, NY 10019 ; Partner in Cravath, Swaine &
Moore (law firm).

PETER O. CRISP -- Trustee/Director; Venrock Associates, Room 5600, 30
Rockefeller Plaza, New York, NY 10112; General Partner in Venrock Associates.

ANTONIA M. GRUMBACH -- Trustee/Director; Patterson, Belknap, Webb & Tyler,
30 Rockefeller Plaza, New York, NY 10112 ; Partner in Patterson, Belknap, Webb &
Tyler (law firm).

H. MARSHALL SCHWARZ -- Trustee/Director; Chairman of the Board and Chief
Executive Officer; United States Trust Co. of New York, 114 West 47th Street,
New York, NY 10036; Chairman of the Board & Chief Executive Officer of U.S.
Trust Corporation and U.S. Trust Company of N.Y. (bank).

PHILIPPE DE MONTEBELLO -- Trustee/Director; Metropolitan Museum of Art,
1000 Fifth Avenue, New York, NY 10029-0198; Director of the Metropolitan Museum
of Art (art museum).

PAUL W. DOUGLAS -- Trustee/Director; 250 Park Avenue, Room 1900, New York,
NY 10177; Retired.

FREDERIC C. HAMILTON -- Trustee/Director; Hamilton Oil Corp., 1560
Broadway, Suite 2000, Denver, CO 80202 ; Chairman of the Board of Hamilton Oil
Corp. (oil & gas exploration).

FRANK S. STREETER -- Honorary Trustee; 380 Madison Ave., 4th Floor, New
York, NY 10017 ; Trustees and Corp.

JOHN H. STOOKEY -- Trusteee/Director; Quantum Chemical Corp., 99 Park
Avenue, New York, NY 10016; Director, Chairman of the Board, Chief Executive
Officer and President of Quantum Chemical Corp.

ROBERT N. WILSON -- Trustee/Director; Johnson & Johnson, One Johnson &
Johnson Plaza, New Brunswick, NJ 08933 ; Vice Chairman of the Board of Johnson &
Johnson.

PETER L. MALKIN -- Trustee/Director; Wein, Malkin & Bettex , Lincoln
Building, 60 East 42nd Street, New York, NY 10165 ; Chairman of Wein, Malkin &
Bettex.

RICHARD F. TUCKER -- Trustee/Director; 11 Over Rock Lane, Westport, CT
06880 ; Retired.

CARROLL L. WAINRIGHT, JR. -- Trustee/Director; Milbank, Tweed, Hadley &
McCloy, One Chase Manhattan Plaza, New York, NY 10005 ; Consulting Partner of
Milbank, Tweed, Hadley & McCloy (law firm).

FREDERICK S. WONHAM -- Trustee/Director and Vice Chairman; United States
Trust Company of New York, 114 West 47th Street, New York, NY 10036; Vice
Chairman of the Board of U.S. Trust Corporation and United States Trust Company
of New York (bank).

DONALD M. ROBERTS -- Trustee/Director, Vice Chairman and Treasurer; United
States Trust Company of New York, 114 West 47th Street, New York, NY 10036; Vice
Chairman of the Board and Treasurer of U.S. Trust Corporation and United States
Trust Company of New York (bank).

FREDERICK B. TAYLOR -- Trustee/Director, Vice Chairman and Chief Investment
Officer; United States Trust Company of New York; 114 West 47th Street, New
York, NY 10036; Vice Chairman and Chief Investment Officer of U.S. Trust
Corporation and United States Trust Company of New York (bank).

JEFFREY S. MAURER -- Trustee/Director, President; United States Trust
Company of New York, 114 West 47th Street, New York, NY 10036; president of U.S.
Trust Corporation and U.S. Trust Company of New York (bank).

DANIEL P. DAVISON -- Trustee/Director; Christie, Manson & Woods
International, Inc., 502 Park Avenue, New York, NY 10021; Chairman, Christie,
Manson & Woods International, Inc. (fine art auctioneer).

TOM KILLEFER -- Honorary Trustee; United States Trust Company of New York,
114 West 47th Street, New York, NY 10036; Former Chairman of the Board and
President of U.S. Trust Corporation and United States Trust Company of New York
(bank).

ORSON D. MUNN -- Trustee/Director; Munn, Bernhard & Associates, Inc., 6
East 43rd Street , 28th Floor, New York, NY 10017 ; Chairman and Director of
Munn, Bernhard & Associates, Inc. (investment advisory firm).

WALTER N. ROTHSCHILD, JR. -- Trustee/Director; 145 East 48th Street, Suite
16D, New York, NY 10017 ; Corporate Director and Trustee.

PHILIP L. SMITH -- Trustee/Director; P.O. Box 205, Oakledge, Mount Sunapee,
NH 03772 ; Corporate Director and Trustee.

EDWIN D. ETHERINGTON -- Trustee/Director; P.O. Box 100, Old Lyme, CT 06371;
President Emeritus, Wesleyan University, and Former President of American Stock
Exchange (education).

HAROLD J. HUDSON, JR. -- Honorary Trustee; General Reinsurance Co.,
Financial Center, P.O. Box 10350, Stamford, CT 06904; Former Chairman of the
Board of General Reinsurance Corporation.

United States Trust Company of the Pacific Northwest ("UST-PN") is a
full-service state chartered bank located in Portland, Oregon. The name,
position with UST-PN, address, principal occupation and type of business are set
forth below for the trustees and certain senior executive officers of UST-PN,
including those who are engaged in any other business, profession, vocation, or
employment of a substantial nature.

RALPH C. RITTENOUR, JR. -- Trustee/Director; United States Trust Company of
the Pacific Northwest, 4380 SW Macadam Avenue, Suite 450, Portland, OR 97201;
Chairman and Chief Executive Officer of United States Trust Company of the
Pacific Northwest (bank).

CHARLES J. SWINDELLS -- Trustee/Director; United States Trust Company of
the Pacific Northwest, 4380 SW Macadam Avenue, Suite 450, Portland, OR 97201;
President of United States Trust Company of the Pacific Northwest (bank).

NANCY L. JACOB, PH.D. -- Trustee/Director; United States Trust Company of
the Pacific Northwest, 4380 SW Macadam Avenue, Suite 450, Portland, OR 97201;
Executive Vice President of United States Trust of the Pacific Northwest (bank).

RICHARD ACKERMAN -- Trustee/Director; United States Trust Company of the
Pacific Northwest, 4380 SW Macadam Avenue, Suite 450, Portland, OR 97201; Chief
Administrative Officer and Senior Vice President of United States Trust Company
of the Pacific Northwest (bank).

STEPHEN BRINK -- Trustee/Director; United States Trust Company of the
Pacific Northwest, 4380 SW Macadam Avenue, Suite 450, Portland, OR 97201 ;
Senior Vice President and Chief Investment Officer of United States Trust
Company of the Pacific Northwest (bank).

MARCIA BENNETT -- Trustee/Director; United States Trust Company of the
Pacific Northwest, 4380 SW Macadam Avenue, Suite 450, Portland, OR 97201; Senior
Vice President, Trust Officer and Operations Officer of United States Trust
Company of the Pacific Northwest (bank).

MARV VUKOVICH -- Trustee/Director; United States Trust Company of the
Pacific Northwest, 4380 SW Macadam Avenue, Suite 450, Portland, OR 97201; Vice
President and Chief Financial Officer of United States Trust Company of the
Pacific Northwest (bank).

CAROL HIBBS -- Trustee/Director; Tonkon Torp, Galen, Marmaduke & Booth,
1600 Pioneer Tower, 888 SW Fifth Avenue, Portland, OR 97204; Attorney at Tonkon
Torp, Galen, Marmaduke & Booth (law firm).

Becker Capital Management, Inc. ("Becker") is a registered Investment
Adviser located in Portland, Oregon. The name, position with Becker, address,
principal occupation and type of business are set forth below for the trustees
and certain senior executive officers of Becker, including those who are engaged
in any other business, profession, vocation, or employment of a substantial
nature.

PATRICK E. BECKER -- Director; President and Chief Investment Officer;
Becker Capital Management, Inc., 1211 SW Fifth Avenue, #2185, Portland, OR
97204; President and Chief Investment Officer of Becker Capital Management, Inc.
(investment advisory).

JANEEN S. MCANINCH -- Director; Executive Vice President; Becker Capital
Management, Inc. , 1211 SW Fifth Avenue, #2185, Portland, OR 97204; Executive
Vice President of Becker Capital Management, Inc. (investment advisory).

GEARY T. BECKER -- Senior Vice President - Fixed Income; Becker Capital
Management, Inc. , 1211 SW Fifth Avenue, #2185, Portland, OR 97204 , Senior Vice
President - Fixed Income of Becker Capital Management, Inc. (investment
advisory).

MICHAEL C. MALONE -- Senior Vice President - Marketing; Becker Capital
Management, Inc. , 1211 SW Fifth Avenue, #2185, Portland, OR 97204 ; Senior Vice
President - Marketing of Becker Capital Management, Inc. (investment advisory).

DONALD L. WOLCOTT -- Vice President - Equity Portfolio Manager; Becker
Capital Management, Inc., 1211 SW Fifth Avenue, #2185, Portland, OR 97204; Vice
President - Equity Portfolio Manager of Becker Capital Management, Inc.
(investment advisory).

ROBERT N. SCHAEFFER -- Vice President - Equity Portfolio Manager; Becker
Capital Management, Inc., 1211 SW Fifth Avenue, #2185, Portland, OR 97204; Vice
President - Equity Portfolio Manager of Becker Capital Management, Inc.
(investment advisory).

MICHAEL F. MCCOY -- Vice President - Quantitative Research; Becker Capital
Management, Inc., 1211 SW Fifth Avenue, #2185, Portland, OR 97204; Vice
President -- Quantitative Research of Becker Capital Management, Inc.
(investment advisory).

Harding, Loevner Management, L.P. ("Harding Loevner") is a registered
Investment Advisor located in Somerville, New Jersey. The name, position with
Harding Loevner, address, principal occupation and type of business are set
forth below for the trustees and certain senior executive officers of Harding
Loevner, including those who are engaged in any other business, profession,
vocation, or employment of a substantial nature.

DANIEL D. HARDING -- Director/Chief Investment Officer; Harding, Loevner
Management, L.P. , 50 Division Street, Suite 401, Somerville, NJ 08876; Chief
Investment Officer of Harding, Loevner Management, L.P. (investment advisory).

DAVID R. LOEVNER -- Director/Chief Executive Officer; Harding, Loevner
Management, L.P. , 50 Division Street, Suite 401, Somerville, NJ 08876; Chief
Executive Officer of Harding, Loevner Management, L.P. (investment advisory).

SIMON HALLETT -- Director/Senior Portfolio Manager; Harding, Loevner
Management, L.P., 50 Division Street, Suite 401, Somerville, NJ 08876; Senior
Portfolio Investment Manager of Harding, Loevner Management, L.P. (investment
advisory).

Luther King Capital Management ("Luther King") is a registered Investment
Advisor located in Fort Worth, Texas. The name, position with Luther King,
address, principal occupation and type of business are set forth below for the
trustees and certain senior executive officers of Luther King, including those
who are engaged in any other business, profession, vocation, or employment of a
substantial nature.

J. LUTHER KING, JR. -- President; Luther King Capital Management, 301
Commerce Street, Suite 1600, Ft. Worth, TX 76102; Chief Investment Officer of
Luther King Capital Management (investment advisory).

EMMETT M. MURPHY -- Vice President/Principal; Luther King Capital
Management, 301 Commerce Street, Suite 1600, Ft. Worth, TX 76102; Portfolio
Manager of Luther King Capital Management (investment advisory).

PAUL W. GREENWELL -- Vice President/Principal; Luther King Capital
Management, 301 Commerce Street, Suite 1600, Ft. Worth, TX 76102; Portfolio
Manager of Luther King Capital Management (investment advisory).

ROBERT M. HOLT, JR. -- Vice President/Principal; Luther King Capital
Management, 301 Commerce Street, Suite 1600, Ft. Worth, TX 76102; Portfolio
Manager of Luther King Capital Management (investment advisory).

SCOT C. HOLLMANN -- Vice President/Principal; Luther King Capital
Management, 301 Commerce Street, Suite 1600, Ft. Worth, TX 76102; Portfolio
Manager of Luther King Capital Management (investment advisory).

DAVID L. DOWLER -- Vice President/Principal; Luther King Capital
Management, 301 Commerce Street, Suite 1600, Ft. Worth, TX 76102 ; Portfolio
Manager of Luther King Capital Management (investment advisory).

BARBARA S. GARCIA -- Treasurer/Principal; Luther King Capital Management,
301 Commerce Street, Suite 1600, Ft. Worth, TX 76102; Officer Manager of Luther
King Capital Management (investment advisory).

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) Edgewood Services, Inc. is the distributor for the shares of the
Registrant. Edgewood Services, Inc. also serves as the principal underwriter for
Excelsior Funds, Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds.

(b) The following are the directors and officers of Edgewood Services, Inc.
The principal business address of these individuals is Federated Investors
Tower, Pittsburgh, PA 15222-3779. Their respective position and offices with the
Registrant, if any, are also indicated.

NAME: POSITION.

James J. Dolan: Trustee and President.
Douglas L. Hein: Trustee.
R. Jeffrey Niss: Trustee and Senior Vice-President.
Frank E. Polefrone: Trustee.
Newton Heston III: Vice-President.
Ernest L. Linane: Assistant Vice-President.
S. Elliot Cohan: Secretary.
Charles H. Field: Assistant Secretary.
Jeannete Fisher-Garber: Assistant Secretary.
Kenneth W. Pegher, Jr.: Treasurer.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules thereunder will be maintained at the
offices of:

UNITED STATES TRUST COMPANY OF NEW YORK (administrator) 114 West 47th Street,
New York, New York 10036

FEDERATED SERVICES, COMPANY (servicing and fund accounting agent):
Federated Investors Tower, Pittsburgh, PA 15222-3779.

CHASE GLOBAL FUND SERVICES COMPANY (transfer agent and administrator): 73
Tremont Street, Boston, MA 02108-3913.

THE CHASE MANHATTAN BANK, N.A. (custodian): 770 Broadway, New York, NY
10003-9598.

INVESTORS BANK & TRUST COMPANY (custodian of Bond Index Portfolio): 79 Milk
Street, Boston, MA 02205.

EDGEWOOD SERVICES, INC. (distributor): Federated Investors Tower,
Pittsburgh, PA 15222-3779.

ITEM 31. MANAGEMENT SERVICES.

Not Applicable.

ITEM 32. UNDERTAKINGS.

(a) If the information called for by Item 5A of Form N-1A is contained in
the latest annual report to shareholders, the Registrant shall furnish each
person to whom a prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.

(b) The Registrant undertakes to comply with Section 16(c) of the 1940 Act
as though such provisions of the 1940 Act were applicable to the Registrant,
except that the request referred to in the third full paragraph thereof may only
be made by shareholders who hold in the aggregate at least 10% of the
outstanding shares of the Registrant, regardless of the net asset value of
shares held by such requesting shareholders.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly authorized
in the City of Boston and Commonwealth of Massachusetts on the 15th day of
December, 1995.

EXCELSIOR INSTITUTIONAL TRUST

By: /S/ PHILIP W. COOLIDGE

Philip W. Coolidge
President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on December 15, 1995.

/S/ PHILIP W. COOLIDGE

Philip W. Coolidge
President

/S/ JOHN R. ELDER

John R. Elder
Treasurer and Chief Financial and Accounting Officer

RODMAN L. DRAKE*

Rodman L. Drake
Trustee

JONATHAN PIEL*

Jonathan Piel
Trustee

W. WALLACE MCDOWELL, JR*

W. Wallace McDowell, Jr.
Trustee

*By: /S/ PHILIP W. COOLIDGE

Philip W. Coolidge
As attorney-in-fact pursuant to
a power of attorney previously filed

<PAGE>

SIGNATURES

Federerated Investment Portfolios ("Federated Portfolios") has duly caused
the Registration Statement on Form N-1A (Registration Statement") of Excelsior
Institutional Trust (the "Trust") to be signed on its behalf by the undersigned,
thereto duly authorized in the City of Pittsburgh and the Commonwealth of
Pennsylvania on the 15th day of December, 1995.

FEDERATED INVESTMENT PORTFOLIOS

By:
John F. Donahue *
John F. Donahue
Chairman and Trustee of
Federated Portfolios

Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in
capacities indicated on December 15, 1995.

John F. Donahue *
John F. Donahue
Chairman and Trustee of
Federated Portfolios

J. Christopher Donahue *
J. Christopher Donahue
President and Trustee of
Federated Portfolios

David M. Taylor *
David M. Taylor
Treasurer of Federated Portfolios

<PAGE>

Thomas G. Bigley *
Thomas G. Bigley
Trustee of Federated Portfolios

John T. Conroy, Jr. *
John T. Conroy, Jr.
Trustee of Federated Portfolios

William J. Copeland *
William J. Copeland
Trustee of Federated Portfolios

James E. Dowd *
James E. Dowd
Trustee of Federated Portfolios

Lawrence D. Ellis, M.D.*
Lawrence D. Ellis, M.D.
Trustee of Federated Portfolios

Edward L. Flaherty, Jr.*
Edward L. Flaherty, Jr.
Trustee of Federated Portfolios

Peter E. Madden *
Peter E. Madden
Trustee of Federated Portfolios

Gregor F. Meyer *
Gregor F. Meyer
Trustee of Federated Portfolios

John E. Murray, Jr. *
John E. Murray, Jr.
Trustee of Federated Portfolios

Wesley W. Posvar *
Wesley W. Posvar
Trustee of Federated Portfolios

Marjorie P. Smuts *
Marjorie P. Smuts
Trustee of Federated Portfolios

*By
/s/S. Elliott Cohan
S. Elliott Cohan
As attorney-in-fact pursuant to a
power of attorney filed herewith

<PAGE>

INDEX TO EXHIBITS

Exhibit
No. Description of Exhibit

5(a). Form of Investment Advisory Agreement

5(b). Form of Investment Subadvisory Agreement

8(a). Form of Custodian Agreement between the Registrant
and Chase Manhattan Bank, N.A.

8(b). Form of Subcustodian Agreement between
ChaseManhattan Bank, N.A.and foreign
subcustodians.

9(a). Form of Administration Agreement between the
Registrant and United States Trust Company of New
York, Chase Global Funds Services Company and
Federated Administrative Services.

9(b). Form of Fund Accounting and Servicing Agreement
between the Registrant and Federated Services
Company

11. Consents of Independent Accountants.

17. Financial Data Schedules.

18(b). Powers of Attorney for Trustees and officers of
Federated Investment Portfolios.

FORM OF
INVESTMENT ADVISORY AGREEMENT

AGREEMENT made as of ___________, 19__ by and between [EXCELSIOR
INSTITUTIONAL TRUST, a Delaware business trust] or [FEDERATED INVESTMENT
PORTFOLIOS, a Massachusetts business trust] (the "Trust") registered as an
open-end diversified management investment company under the Investment Company
Act of 1940, as amended (the "Investment Company Act"), and [NAME OF ADVISER],
an [ADVISER ENTITY] (the "Adviser").

In consideration of the promises and the mutual covenants herein contained,
the Trust and the Adviser agree as follows:

1. Appointment. The Trust appoints the Adviser to act as investment
adviser to the Trust with respect to the series of the Trust listed on Exhibit A
hereto (the "Series") for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to provide an
investment program for the compensation provided by this Agreement. In providing
the services and assuming the obligations set forth herein, the Adviser may, at
its own expense, employ one or more subadvisers; provided that the Adviser
understands and agrees that it shall remain fully responsible for the
performance of all the duties set forth in this Agreement and that it shall
supervise the activities of each subadviser. Any agreement between the Adviser
and a subadviser shall be subject to the renewal, termination and amendment
provisions applicable to this Agreement.

2. Duties of the Adviser. Subject to the direction and control of the Board
of Trustees of the Trust, the Adviser shall:

(a) prepare (or otherwise obtain) and evaluate on both a macroeconomic and
microeconomic level any pertinent research; statistical, financial and economic
data; and other information necessary or appropriate for the performance of its
duties under this Agreement;

(b) formulate and continuously review, supervise, and administer an
investment program for the Series;

(c) determine the securities to be purchased by the Series, and
continuously monitor such securities and the issuers thereof to determine
whether and when to sell, exchange, or take any other action concerning such
securities;

(d) determine whether and how to exercise warrants, voting rights, or other
rights with respect to the Series' securities;

(e) provide valuations with respect to the securities held by the Series
[if so requested by the Trustees of the Trust];

(f) render regular reports to the Trust's officers and the Board of
Trustees concerning the investment performance of the Trust, the Adviser's
discharge of its responsibilities under this Agreement, and any other subject as
the Trust's officers or Board of Trustees reasonably may request; and

(g) assist the Trust's officers in connection with the operation of the
Trust and perform any further acts that may be necessary to effectuate the
purposes of this Agreement.

3. Supervision and compliance. The activities of the Adviser shall be
subject at all times to the direction and control of the Board of Trustees of
the Trust and shall comply with: (a) the [Trust Instrument] or [Declaration of
Trust] and By-Laws of the Trust; (b) the Registration Statement of the Trust, as
it may be amended from time to time, including the investment objectives and
policies set forth therein; (d) the Investment Company Act and the regulations
thereunder; (e) the Internal Revenue Code of 1986 and the regulations thereunder
applicable to regulated investment companies; (f) any other applicable laws or
regulations; and (g) such other limitations as the Board of Trustees may adopt.

4. Purchase and Sale of Securities. The Adviser shall, at its own expense,
place orders for the purchase, sale or loan of securities by the Trust either
directly with the issuer or with any broker and/or dealer who deals in such
securities.

(a) In placing orders with brokers and/or dealers, the Adviser shall use
its best efforts to obtain the best net price and the most favorable execution
of its orders, after taking into account all factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker and/or dealer,
and the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis.

Consistent with this obligation, the Adviser may, to the extent permitted by
law, purchase and sell portfolio securities to and from brokers who provide
brokerage and research services (within the meaning of Section 28(e) of the
Securities and Exchange Act of 1934) to or for the benefit of the Trust and/or
other accounts over which the Adviser exercises investment discretion. The
Adviser is authorized to pay a broker who provides such brokerage and research
services a commission for effecting a securities transaction which is in excess
of the amount of commission another broker would have charged for effecting that
transaction, if the Adviser determines in good faith that such commission was
reasonable in relation to the value of brokerage and research services provided
by such broker. This determination may be viewed in terms of either that
particular transaction or of the overall responsibilities of the Adviser with
respect to the accounts as to which it exercises investment discretion.

(b) The Adviser may execute transactions through itself and its affiliates
on a securities exchange provided that the commissions paid by the Trust are
"reasonable and fair" compared to commissions received by other brokers having
comparable execution capability and provided that the transactions are effected
pursuant to procedures established by the Board of Trustees of the Trust. An
affiliated broker may transmit, clear and settle transactions for the Trust that
are executed on a securities exchange provided that the affiliated broker
arranges for unaffiliated brokers to execute the transactions.

(c) Notwithstanding the foregoing, the Board of Trustees periodically
shall review the commissions paid by the Trust and determine whether those
commissions were reasonable in relation to the brokerage and research services
received. In addition, the Board of Trustees of the Trust, in its discretion,
may instruct the Adviser to effect all or a portion of its securities
transactions with one or more brokers and/or dealers selected by the Board of
Trustees, if it determines that the use of such brokers and/or dealers is in the
best interest of the Trust.

(d) When the Adviser deems the purchase or sale of a security to be in the
best interest of the Trust as well as other customers, the Adviser, to the
extent permitted by applicable law, may aggregate the securities to be so sold
or purchased in order to obtain the best execution or lower brokerage
commissions. The Adviser also may purchase or sell a particular security for one
or more customers in different amounts. Allocation of the securities purchased
or sold in either manner, as well as the expenses incurred in the transactions,
will be made by the Adviser in a manner that is equitable and consistent with
applicable law and regulations and with its fiduciary obligations to the Trust
and to such other customers.

5. Expenses.

(a) The Adviser shall furnish at its own expense all office space, office
facilities, equipment and personnel necessary or appropriate to the performance
of its duties under this Agreement. The Adviser also shall pay the salaries and
fees of all personnel of the Trust or the Adviser performing services related to
the Adviser's duties under this Agreement.

(b) It is understood that the Trust will pay all of its expenses and
liabilities, including compensation of its independent Trustees; taxes and
governmental fees; interest charges; fees and expenses of the Trust's
independent auditors and legal counsel; trade association membership dues; fees
and expenses of any custodian (including safekeeping of funds and securities,
maintenance of books and accounts and calculation of the net asset value of
beneficial interests of the Series), transfer agent and registrar and dividend
disbursing agent of the Trust; expenses of preparing and mailing reports to
investors and regulatory agencies; expenses relating to the issuance,
registration and qualification of shares of the Series, and the preparation,
printing and mailing of prospectuses for such purposes; insurance premiums;
brokerage and other expenses of executing portfolio transactions; expenses of
investors' and Trustees' meetings; organization expenses; and extraordinary
expenses.

6. Compensation of the Adviser. In consideration of the services to be
rendered by the Adviser under this Agreement, the Trust shall pay the Adviser a
fee accrued daily and paid monthly from the Series at an annual rate equal to
that specified in Exhibit A to this Agreement for the Series' average daily net
assets. The fee for any period in which the Adviser serves as investment adviser
pursuant to this Agreement for less than one full month shall be paid for that
portion of the month accrued. For purposes of calculating fees, the value of the
net assets of the Series shall be computed in the manner specified in its
Registration Statement on Form N-1A.

7. Services to Others. The services of the Adviser to the Trust are not to
be deemed exclusive, and the Adviser is free to render services to others and to
engage in other activities, provided, however, that those services and
activities do not adversely affect the Adviser's ability to perform its
obligations under this Agreement.

8. Books, Records, and Information. The Adviser shall provide the Trust
with all records concerning the Adviser's activities that the Trust is required
by law to maintain. Any records required to be maintained and preserved pursuant
to the provisions of Rule 31a-l and Rule 31a-2 under the Investment Company Act
which are prepared or maintained by the Adviser on behalf of the Trust are the
property of the Trust and will be surrendered promptly to the Trust on request.
The Trust also shall comply with all reasonable requests for information by the
Trust's officers or Board of Trustees, including information required for the
Trust's filings with the securities and Exchange Commission and state securities
commissions.

9. Limitations on Liability.

(a) The Adviser hereby is notified expressly of the limitation of
shareholder liability as set forth in the Declaration of Trust and agrees that
any obligation of the Trust or the Series arising in connection with this
Agreement shall be limited in all cases to the Series and its assets, and the
Adviser shall not seek satisfaction of any such obligation from any Trustee or
shareholder of the Series.

(b) The Adviser shall give the Trust the benefit of its best judgment and
efforts in rendering services under this Agreement. In the absence of willful
malfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Adviser, the Adviser shall not be liable to
the Trust or to any shareholder of the Series for any act or omission in the
course of, or connected with, rendering services under this Agreement or for any
losses that may be sustained in the purchase, holding or sale of any security.

10. Effective Date; Termination; Amendments.

(a) This Agreement shall be effective as to the Series on the date the
Series commences investment operations, and, unless terminated sooner as
provided herein, shall continue until the second anniversary of the execution of
this Agreement. Thereafter, unless terminated sooner as provided herein, this
Agreement shall continue in effect as to the Series for successive annual
periods, provided that such continuance is specifically approved at least
annually by the vote of a majority of the Board of Trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such continuance, and
either: (i) the vote of a majority of the outstanding voting securities of the
Series; or (ii) the vote of a majority of the full Board of Trustees.

(b) This Agreement may be terminated at any time, without the payment of
any penalty, either by: (i) the Trust, by action of the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Series, on 60
days' written notice to the Adviser; or (ii) the Adviser, on 90 days' written
notice to the Trust. This Agreement shall terminate immediately in the event of
its assignment.

(c) This Agreement may be amended only if such amendment is approved by
the vote of a majority of the outstanding voting securities of the Series or by
vote of a majority of the Board of Trustees of the Trust who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such amendment.

(d) As used in this Agreement, the terms "specifically approved at least
annually," "majority of the outstanding voting securities," "interested persons"
and "assignment" shall have the same meanings as such terms have in the
Investment Company Act and the regulations thereunder.

11. Governing Law. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Massachusetts without giving effect to the
choice of law provisions thereof, to the extent that such laws are consistent
with provisions of the Investment Company Act and the regulations thereunder.

12. Miscellaneous. The captions in this Agreement are included for the
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. Should any
part of this Agreement be held or made invalid by a court decision, statute,
regulation, or otherwise, the remainder of this Agreement shall not be affected
thereby. This Agreement shall be binding and shall inure to the benefit of the
parties hereto and their respective successors, to the extent permitted by law.

<PAGE>

IN WITNESS WHEREOF, the Trust and the Adviser have caused this Agreement
to be executed and delivered in their names and on their behalf by the
undersigned, duly authorized officers, all as of the day and year first above
written.

Attest: [EXCELSIOR INSTITUTIONAL
TRUST] or [FEDERATED
INVESTMENT PORTFOLIOS]

By:
Name:
Title:

Attest: [NAME OF ADVISER]

By:
Name:
Title:

<PAGE>

Exhibit A
to Investment
Advisory Agreement

SCHEDULE OF SERIES AND FEES UNDER INVESTMENT
ADVISORY AGREEMENT

Annual Fee (as a percentage of the
average daily net assets of the
Series Name series)

[See Prospectus -- "Management of the Trust" for annual fees]

FORM OF
INVESTMENT SUBADVISORY AGREEMENT

AGREEMENT made as of ______, 19__ by and between [NAME OF ADVISER], an
[ADVISER ENTITY] (the "Adviser"), and [NAME OF SUBADVISER], a [SUBADVISER
ENTITY] (the "Subadviser").

In consideration of the promises and the mutual covenants herein
contained, the Adviser and the Subadviser agree as follows:

1. Appointment. The Adviser has been retained by [Excelsior Institutional
Trust, a Delaware business trust] or [Federated Investment Portfolios], a
Massachusetts business trust] (the "Trust") to act as investment adviser to the
Trust with respect to the series of the Trust listed on Exhibit A hereto (the
"Series"). In accordance with and subject to the Investment Advisory Agreement
between the Trust and the Adviser, attached hereto as Exhibit B (the "Advisory
Agreement"), the Adviser appoints the Subadviser to act as subadviser with
respect to the Series for the period and on the terms set forth in this
Agreement. The Subadviser accepts such appointment and agrees to provide an
investment program for the compensation provided by this Agreement.

2. Duties of the Subadviser. Subject to the direction and control of the
Adviser and the Board of Trustees of the Trust, the Subadviser shall:

(b) formulate and continuously review, supervise, and administer an
investment program for each Series;

(c) determine the securities to be purchased by each Series, and
continuously monitor such securities and the issuers thereof to determine
whether and when to sell, exchange, or take any other action concerning such
securities;

(d) determine whether and how to exercise warrants, voting rights, or other
rights with respect to the Series' securities;

(e) provide valuations with respect to the securities held by each Series
[if so requested by the Trustees of the Trust];

(f) render regular reports to the Trust's officers and the Board of
Trustees concerning the investment performance of the Trust, the subadviser's
discharge of its responsibilities under this Agreement, and any other subject as
the Trust's officers or Board of Trustees reasonably may request; and

(g) assist the Adviser and the Trust's officers in connection with the
operation of the Trust and perform any further acts that may be necessary to
effectuate the purposes of this Agreement.

3. Supervision and Compliance. Notwithstanding any provision of this
Agreement, the Adviser shall retain all rights and ultimate responsibilities to
supervise, and, in its discretion, conduct investment advisory activities
relating to the Trust. The activities of the Subadviser shall be subject at all
times to the direction and control of the Board of Trustees of the Trust and the
Adviser and shall comply with: (a) the [Trust Instrument] or [Declaration of
Trust] and By-Laws of the Trust; (b) the Registration Statement of the Trust, as
it may be amended from time to time, including the investment objectives and
policies set forth therein; (d) the Investment Company Act and the regulations
thereunder; (e) the Internal Revenue Code of 1986 and the regulations thereunder
applicable to regulated investment companies; (f) any other applicable laws or
regulations; and (g) such other limitations as the Adviser or the Board of
Trustees of the Trust may adopt.

4. Purchase and Sale of Securities. The Subadviser shall, at its own
expense, place orders for the purchase, sale or loan of securities by the Trust
either directly with the issuer or with any broker and/or dealer who deals in
such securities.

(a) In placing orders with brokers and/or dealers, the Subadviser shall
use its best efforts to obtain the best net price and the most favorable
execution of its orders, after taking into account all factors it deems
relevant, including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker and/or
dealer, and the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. Consistent with this obligation, the
Subadviser may, to the extent permitted by law, purchase and sell portfolio
securities to and from brokers who provide brokerage and research services
(within the meaning of Section 28(e) of the Securities and Exchange Act of 1934)
to or for the benefit of the Trust and/or other accounts over which the
Subadviser or the Adviser exercises investment discretion. The Subadviser is
authorized to pay a broker who provides such brokerage and research services a
commission for effecting a securities transaction which is in excess of the
amount of commission another broker would have charged for effecting that
transaction, if the Subadviser determines in good faith that such commission was
reasonable in relation to the value of brokerage and research services provided
by such broker. This determination may be viewed in terms of either that
particular transaction or of the overall responsibilities of the Subadviser with
respect to the accounts as to which it exercises investment discretion.

(b) The Subadviser may execute transactions through itself and its
affiliates on a securities exchange provided that the commissions paid by the
Trust are "reasonable and fair" compared to commissions received by other
brokers having comparable execution capability and provided that the
transactions are effected pursuant to procedures established by the Board of
Trustees of the Trust. An affiliated broker may transmit, clear and settle
transactions for the Trust that are executed on a securities exchange provided
that the affiliated broker arranges for unaffiliated brokers to execute the
transactions.

(c) Notwithstanding the foregoing, the Board of Trustees and the Adviser
periodically shall review the commissions paid by the Trust and determine
whether those commissions were reasonable in relation to the brokerage and
research services received. In addition, the Board of Trustees of the Trust, in
its discretion, may instruct the Subadviser to effect all or a portion of its
securities transactions with one or more brokers and/or dealers selected by the
Board of Trustees, if it determines that the use of such brokers and/or dealers
is in the best interest of the Trust.

(d) when the Subadviser deems the purchase or sale of a security to be in
the best interest of the Trust as well as other customers, the Subadviser, to
the extent permitted by applicable law, may aggregate the securities to be so
sold or purchased in order to obtain the best execution or lower brokerage
commissions. The Subadviser also may purchase or sell a particular security for
one or more customers in different amounts. Allocation of the securities
purchased or sold in either manner, as well as the expenses incurred in the
transactions, will be made by the Subadviser in a manner that is equitable and
consistent with applicable law and regulations and with its fiduciary
obligations to the Trust and to such other customers.

5. Expenses.

(a) The subadviser shall furnish at its own expense all office space,
office facilities, equipment and personnel necessary or appropriate to the
performance of its duties under this Agreement. The Subadviser also shall pay
the salaries of all personnel performing services related to the Subadviser's
duties under this Agreement.

(b) It is understood that the Trust will pay all of its expenses and
liabilities, including compensation of its independent Trustees; taxes and
governmental fees; interest charges; fees and expenses of the Trust's
independent auditors and legal counsel; trade association membership dues; fees
and expenses of any custodian (including safekeeping of funds and securities,
maintenance of books and accounts and calculation of the net asset value of
beneficial interests of each Series), transfer agent and registrar and dividend
disbursing agent of the Trust; expenses of preparing and mailing reports to
investors and regulatory agencies; expenses relating to the issuance,
registration and qualification of shares of each Series, and the preparation,
printing and mailing of prospectuses for such purposes; insurance premiums;
brokerage and other expenses of executing portfolio transactions; expenses of
investors' and Trustees' meetings; organization expenses; and extraordinary
expenses.

6. Compensation of the Subadviser. In consideration of the services to be
rendered by the Subadviser under this Agreement, the Adviser shall pay the
Subadviser a fee accrued daily and paid monthly at an annual rate equal to that
specified in Exhibit A to this Agreement for that Series' average daily net
assets. The fee for any period in which the Subadviser serves as investment
adviser pursuant to this Agreement for less than one full month shall be paid
for that portion of the month accrued. For purposes of calculating fees, the
value of the net assets of each Series of the Trust shall be computed in the
manner specified in its Registration Statement on Form N-1A.

7. Services to Others. The services of the Subadviser to the Adviser and
the Trust are not to be deemed exclusive, and the Subadviser is free to render
services to others and to engage in other activities, provided, however, that
those services and activities do not adversely affect the Subadviser's ability
to perform its obligations under this Agreement.

8. Books, Records, and Information. The Subadviser shall provide the
Adviser and the Trust with all records concerning the Subadviser's activities
that the Trust is required by law to maintain. Any records required to be
maintained and preserved pursuant to the provisions of Rule 31a-l and Rule 31a-2
under the Investment Company Act which are prepared or maintained by the
Subadviser on behalf of the Trust are the property of the Trust and will be
surrendered promptly to the Trust on request.

The Subadviser also shall comply with all reasonable requests for information by
the Adviser or the Trust's officers or Board of Trustees, including information
required for the Trust's filings with the Securities and Exchange Commission and
state securities commissions.

9. Limitations on Liability.

(a) The Subadviser hereby is notified expressly of the limitation of
shareholder liability as set forth in the Declaration of Trust and agrees that
any obligation of the Trust or the Series arising in connection with this
Agreement shall be limited in all cases to the Series and their assets, and the
Subadviser shall not seek satisfaction of any such obligation from any Trustee
or shareholder of the Series.

(b) The Subadviser shall give the Adviser and the Trust the benefit of its
best judgment and efforts in rendering services under this Agreement. In the
absence of willful malfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Subadviser, the
Subadviser shall not be liable to the Trust, to any shareholder of the Series or
to the Adviser for any act or omission in the course of, or connected with,
rendering services under this Agreement or for any losses that may be sustained
in the purchase, holding or sale of any security. The Adviser agrees that the
Subadviser shall not be liable for, and shall be indemnified and held harmless
by the Adviser for, any losses, liabilities, or expenses that the Subadviser may
incur due to errors of judgment, mistakes, acts or omission of the Adviser.

10. Effective Date; Termination; Amendments.

(a) This Agreement shall be effective as to each Series on the date the
Series commences investment operations, and, unless terminated sooner as
provided herein, shall continue until the second anniversary of the execution of
this Agreement. Thereafter, unless terminated sooner as provided herein, this
Agreement shall continue in effect as to each Series for successive annual
periods, provided that such continuance is specifically approved at least
annually by the vote of a majority of the Board of Trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such continuance, and
either: (i) the vote of a majority of the outstanding voting securities of such
Series; or (ii) the vote of a majority of the full Board of Trustees.

(b) This Agreement may be terminated at any time and as to any one or more
Series, without the payment of any penalty, either by: (i) the Trust, by action
of the Board of Trustees or by vote of a majority of the outstanding voting
securities of such Series, on 60 days' written notice to the Subadviser; (ii)
the Adviser, on 60 days' written notice to the Subadviser; or (iii) the
Subadviser, on 90 days' written notice to the Adviser and the Trust. This
Agreement shall terminate immediately in the event of its assignment.

<PAGE>

IN WITNESS WHEREOF, the Adviser and the Subadviser have caused this
Agreement to be executed and delivered in their names and on their behalf by the
undersigned, duly authorized officers, all as of the day and year first above
written.

Attest: [NAME OF ADVISER]

____________________ By:
Name:
Title:

Attest: [NAME OF SUBADVISER]

____________________ By:
Name:
Title:

<PAGE>

Exhibit A
to Investment
Subadvisory Agreement

SCHEDULE OF SERIES AND FEES UNDER INVESTMENT
SUBADVISORY AGREEMENT

Annual
Fee (as a percentage of the average
Series Names daily net assets of a series)

[See Prospectus -- "Management of the Trust" for annual fees]

GLOBAL CUSTODY AGREEMENT

This AGREEMENT is effective ___________________, 199_,
and is between THE CHASE MANHATTAN BANK, N.A. (the "Bank")
and (the "Customer").

1. CUSTOMER ACCOUNTS.

The Bank agrees to establish and maintain the following accounts
("Accounts"):

(a) A custody account in the name of the Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined in
Section 3) for the account of the Customer ("Securities"); and

(b) A deposit account in the name of the Customer ("Deposit Account") for
any and all cash in any currency received by the Bank or its Subcustodian for
the account of the Customer, which cash shall not be subject to withdrawal by
draft or check.

The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. The Bank may deliver securities of the same
class in place of those deposited in the Custody Account.

Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.

2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND
SUBCUSTODIAN LOCATIONS.

Unless Instructions specifically require another location acceptable to
the Bank:

(a) Securities will be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and

(b) Cash will be credited to an account in a country or other jurisdiction
in which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.

Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.

If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by the Bank and the Customer.

3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.

The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets in
the Accounts in accounts which the Bank has established with one or more of its
branches or Subcustodians. The Bank and Subcustodians are authorized to hold any
of the Securities in their account with any securities depository in which they
participate.

The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.

4. USE OF SUBCUSTODIAN.

(a) The Bank will identify the Assets on its books as
belonging to the Customer.

(b) A Subcustodian will hold such Assets together with assets belonging to
other customers of the Bank in accounts identified on such Subcustodian's books
as special custody accounts for the exclusive benefit of customers of the Bank.

(c) Any Assets in the Accounts held by a Subcustodian will be subject only
to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the instructions of such Subcustodian.

(d) Any agreement the Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.

5. DEPOSIT ACCOUNT TRANSACTIONS.

(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.

(b) In the event that any payment to be made under this Section 5 exceeds
the funds available in the Deposit Account, the Bank, in its discretion, may
advance the Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by the Bank on similar
loans.

(c) If the Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If the Customer does not promptly return
any amount upon such notification, the Bank shall be entitled, upon oral or
written notification to the Customer, to reverse such credit by debiting the
Deposit Account for the amount previously credited. The Bank or its Subcustodian
shall have no duty or obligation to institute legal proceedings, file a claim or
a proof of claim in any insolvency proceeding or take any other action with
respect to the collection of such amount, but may act for the Customer upon
Instructions after consultation with the Customer.

6. CUSTODY ACCOUNT TRANSACTIONS.

(a) Securities will be transferred, exchanged or delivered by the Bank or
its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities received
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to the Bank.

(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Account.

(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction.

(ii) If any Securities delivered pursuant to this Section 6 are returned
by the recipient thereof, the Bank may reverse the credits and debits of
the particular transaction at any time.

7. ACTIONS OF THE BANK.

The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:

(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or Subcustodian
is actually aware of such opportunities.

(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.

(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.

(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.

The Bank will send the Customer an advice or notification of any transfers
of Assets to or from the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty (60) days of receipt, the Customer shall be deemed to
have approved such statement. In such event, or where the Customer has otherwise
approved any such statement, the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties.

All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment, redemption
or other transaction regarding Securities in the Custody Account in respect of
which the Bank has agreed to take any action under this Agreement.

8. CORPORATE ACTIONS; PROXIES; TAX RECLAIMS.

(a) Corporate Actions. Whenever the Bank receives information concerning
the Securities which requires discretionary action by the beneficial owner of
the Securities (other than a proxy), such as subscription rights, bonus issues,
stock repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions"), the Bank
will give the Customer notice of such Corporate Actions to the extent that the
Bank's central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.

When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, the Bank will endeavor to obtain Instructions from the
Customer or its Authorized Person, but if Instructions are not received in time
for the Bank to take timely action, or actual notice of such Corporate Action
was received too late to seek Instructions, the Bank is authorized to sell such
rights entitlement or fractional interest and to credit the Deposit Account with
the proceeds or take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.

(b) Proxy Voting. The Bank will provide proxy voting services only
pursuant to a separate agreement. Proxy voting services may be provided by the
Bank or, in whole or in part, by one or more third parties appointed by the Bank
(which may be affiliates of the Bank).

(i) Subject to the provisions hereof, the Bank will apply for a reduction
of withholding tax and any refund of any tax paid or tax credits which
apply in each applicable market in respect of income payments on
Securities for the benefit of the Customer which the Bank believes may be
available to such Customer.

(ii) The provision of tax reclaim services by the Bank is conditional upon
the Bank receiving from the beneficial owner of Securities (A) a
declaration of its identity and place of residence and (B) certain other
documentation (pro forma copies of which are available from the Bank). The
Customer acknowledges that, if the Bank does not receive such
declarations, documentation and information, additional United Kingdom
taxation will be deducted from all income received in respect of
Securities issued outside the United Kingdom and that U.S. non-resident
alien tax or U.S. backup withholding tax will be deducted from U.S. source
income. The Customer shall provide to the Bank such documentation and
information as it may require in connection with taxation, and warrants
that, when given, this information shall be true and correct in every
respect, not misleading in any way, and contain all material information.
The Customer undertakes to notify the Bank immediately if any such
information requires updating or amendment.

(iii) The Bank shall not be liable to the Customer or any third party for
any tax, fines or penalties payable by the Bank or the Customer, and shall
be indemnified accordingly, whether these result from the inaccurate
completion of documents by the Customer or any third party, or as a result
of the provision to the Bank or any third party of inaccurate or
misleading information or the withholding of material information by the
Customer or any other third party, or as a result of any delay of any
revenue authority or any other matter beyond the control of the Bank.

(iv) The Customer confirms that the Bank is authorized to deduct from any
cash received or credited to the Cash Account any taxes or levies required
by any revenue or governmental authority for whatever reason in respect of
the Securities or Cash Accounts.

(v) The Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to
the Customer from time to time and the Bank may, by notification in
writing, at its absolute discretion, supplement or amend the markets in
which the tax reclaim services are offered. Other than as expressly
provided in this sub-clause, the Bank shall have no responsibility with
regard to the Customer's tax position or status in any jurisdiction.

(vi) The Customer confirms that the Bank is authorised to disclose any
information requested by any revenue authority or any governmental body in
relation to the Customer or the Securities and/or Cash held for the
Customer.

(vii) Tax reclaim services may be provided by the Bank or, in whole or in
part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank); provided that the Bank shall be liable for the
performance of any such third party to the same extent as the Bank would
have been if it performed such services itself.

9. NOMINEES.

Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank, Subcustodian or securities depository, as the
case may be. The Bank may without notice to the Customer cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.

10. AUTHORIZED PERSONS.

As used in this Agreement, the term "Authorized Person" means employees or
agents including investment managers as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer under
this Agreement. Such persons shall continue to be Authorized Persons until such
time as the Bank receives Instructions from the Customer or its designated agent
that any such employee or agent is no longer an Authorized Person.

11. INSTRUCTIONS.

The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded.

Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold the
Bank harmless for the failure of an Authorized Person to send such confirmation
in writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time. The Bank may electronically record any Instructions given by
telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.

12. STANDARD OF CARE; LIABILITIES.

(a) The Bank shall be responsible for the performance of only such duties
as are set forth in this Agreement or expressly contained in Instructions which
are consistent with the provisions of this Agreement as follows:

(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be
liable to the Customer for any loss which shall occur as the result of the
failure of a Subcustodian to exercise reasonable care with respect to the
safekeeping of such Assets to the same extent that the Bank would be
liable to the Customer if the Bank were holding such Assets in New York.
In the event of any loss to the Customer by reason of the failure of the
Bank or its Subcustodian to utilize reasonable care, the Bank shall be
liable to the Customer only to the extent of the Customer's direct
damages, to be determined based on the market value of the property which
is the subject of the loss at the date of discovery of such loss and
without reference to any special conditions or circumstances. The Bank
will not be responsible for the insolvency of any Subcustodian which is
not a branch or affiliate of Bank.

(ii) The Bank will not be responsible for any act, omission, default or
the solvency of any broker or agent which it or a Subcustodian appoints
unless such appointment was made negligently or in bad faith.

(iii) The Bank shall be indemnified by, and without liability to the
Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise within the scope of this Agreement if such act
or omission was in good faith, without negligence. In performing its
obligations under this Agreement, the Bank may rely on the genuineness of
any document which it believes in good faith to have been validly
executed.

(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes
or other governmental charges, and any related expenses with respect to
income from or Assets in the Accounts.

(v) The Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for the Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice.

(vi) The Bank need not maintain any insurance for the benefit of the
Customer.

(vii) Without limiting the foregoing, the Bank shall not be liable for any
loss which results from: 1) the general risk of investing, or 2) investing
or holding Assets in a particular country including, but not limited to,
losses resulting from nationalization, expropriation or other governmental
actions; regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market conditions which
prevent the orderly execution of securities transactions or affect the
value of Assets.

(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of God.

(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:

(i) question Instructions or make any suggestions
to the Customer or an Authorized Person regarding
such Instructions;

(ii) supervise or make recommendations with
respect to investments or the retention of
Securities;

(iii) advise the Customer or an Authorized Person regarding any default in
the payment of principal or income of any security other than as provided
in Section 5(c) of this Agreement;

(iv) evaluate or report to the Customer or an Authorized Person regarding
the financial condition of any broker, agent or other party to which
Securities are delivered or payments are
made pursuant to this Agreement;

(v) review or reconcile trade confirmations received from brokers. The
Customer or its Authorized Persons (as defined in Section 10) issuing
Instructions shall bear any responsibility to review such confirmations
against Instructions issued to and statements issued by the Bank.

(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any of
the activities listed herein.

13. FEES AND EXPENSES.

The Customer agrees to pay the Bank for its services under this Agreement
such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to,
legal fees. The Bank shall have a lien on and is authorized to charge any
Accounts of the Customer for any amount owing to the Bank under any provision of
this Agreement.

14. MISCELLANEOUS.

(a) Foreign Exchange Transactions. To facilitate the administration of the
Customer's trading and investment activity, the Bank is authorized to enter into
spot or forward foreign exchange contracts with the Customer or an Authorized
Person for the Customer and may also provide foreign exchange through its
subsidiaries, affiliates or Subcustodians. Instructions, including standing
instructions, may be issued with respect to such contracts but the Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where the Bank, its subsidiaries, affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of the Bank,
its subsidiary, affiliate or Subcustodian and, to the extent not inconsistent,
this Agreement shall apply to such transaction.

(b) Certification of Residency, etc. The Customer certifies that it is a
resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.

(c) Access to Records. The Bank shall allow the Customer's independent
public accountant reasonable access to the records of the Bank relating to the
Assets as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Assets as may be required in
connection with the examination of the Customer's books and records.

(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Bank.

(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are (Check one):

Mutual Fund assets subject to certain Securities
and Exchange Commission ("SEC") rules
and regulations;

This Agreement consists exclusively of this document together with
Schedule A, Exhibits I - _______ and the following Rider(s) [Check
applicable rider(s)]:

MUTUAL FUND

SPECIAL TERMS AND CONDITIONS

There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.

(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or enforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of such provision or provisions under other circumstances or
in other jurisdictions and of the remaining provisions will not in any way be
affected or impaired.

(g) Waiver. Except as otherwise provided in this Agreement, no failure or
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise, or the exercise of any
other power or right. No waiver by a party of any provision of this Agreement,
or waiver of any breach or default, is effective unless in writing and signed by
the party against whom the waiver is to be enforced.

(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses or
such other addresses as may subsequently be given to the other party in writing:

Bank: The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division

or telex:

Customer:

or telex:

(i) Termination. This Agreement may be terminated by the Customer or the
Bank by giving sixty (60) days written notice to the other, provided that such
notice to the Bank shall specify the names of the persons to whom the Bank shall
deliver the Assets in the Accounts. If notice of termination is given by the
Bank, the Customer shall, within sixty (60) days following receipt of the
notice, deliver to the Bank Instructions specifying the names of the persons to
whom the Bank shall deliver the Assets. In either case the Bank will deliver the
Assets to the persons so specified, after deducting any amounts which the Bank
determines in good faith to be owed to it under Section 13. If within sixty (60)
days following receipt of a notice of termination by the Bank, the Bank does not
receive Instructions from the Customer specifying the names of the persons to
whom the Bank shall deliver the Assets, the Bank, at its election, may deliver
the Assets to a bank or trust company doing business in the State of New York to
be held and disposed of pursuant to the provisions of this Agreement, or to
Authorized Persons, or may continue to hold the Assets until Instructions are
provided to the Bank.

CUSTOMER

By:____________________________________
Title:
Date:

THE CHASE MANHATTAN BANK, N.A.

By:____________________________________
Title:
Date:

<PAGE>

STATE OF )
: ss.
COUNTY OF )

On this day of , 19 , before me personally came , to me known, who being
by me duly sworn, did depose and say that he/she resides in at , that he/she is
of , the entity described in and which executed the foregoing instrument; that
he/she knows the seal of said entity, that the seal affixed to said instrument
is such seal, that it was so affixed by order of said entity, and that he/she
signed his/her name thereto by like order.

Sworn to before me this

day of , 19 .

Notary

<PAGE>

STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )

On this day of , 19 , before me personally came , to me known, who being
by me duly sworn, did depose and say that he/she resides in at ; that he/she is
a Vice President of THE CHASE MANHATTAN BANK, (National Association), the
corporation described in and which executed the foregoing instrument; that
he/she knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, that it was so affixed by order of the Board
of Directors of said corporation, and that he/she signed his/her name thereto by
like order.

Sworn to before me this

day of , 19 .

Notary

<PAGE>

Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
-----------------------------------------
effective __________________

Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the Act), as the same may be
amended from time to time.

Except to the extent that the Bank has specifically agreed to comply with
a condition of a rule, regulation, interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.

The following modifications are made to the Agreement:

Section 3. Subcustodians and Securities Depositories.

Add the following language to the end of Section 3:

The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible
foreign custodian or an eligible foreign securities depository, which are
further defined as follows:

(a) "qualified U.S. Bank" shall mean a qualified U.S. bank
as defined in Rule 17f-5 under the Investment Company Act of
1940;

(b) "eligible foreign custodian" shall mean (i) a banking institution or
trust company incorporated or organized under the laws of a country other
than the United States that is regulated as such by that country's
government or an agency thereof and that has shareholders' equity in
excess of $200 million in U.S. currency (or a foreign currency equivalent
thereof), (ii) a majority owned direct or indirect subsidiary of a
qualified U.S. bank or bank holding company that is incorporated or
organized under the laws of a country other than the United States and
that has shareholders' equity in excess of $100 million in U.S. currency
(or a foreign currency equivalent thereof) (iii) a banking institution or
trust company incorporated or organized under the laws of a country other
than the United States or a majority owned direct or indirect subsidiary
of a qualified U.S. bank or bank holding company that is incorporated or
organized under the laws of a country other than the United States which
has such other qualifications as shall be specified in Instructions and
approved by the Bank; or (iv) any other entity that shall have been so
qualified by exemptive order, rule or other appropriate action of the SEC;
and

(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of
a country other than the United States, which operates (i) the central
system for handling securities or equivalent book-entries in that country,
or (ii) a transnational system for the central handling of securities or
equivalent book-entries.

The Customer represents that its Board of Directors has approved each of
the Subcustodians listed in Schedule A to this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, which are attached
as Exhibits I through of Schedule A, and further represents that its Board has
determined that the use of each Subcustodian and the terms of each subcustody
agreement are consistent with the best interests of the Fund(s) and its (their)
shareholders. The Bank will supply the Customer with any amendment to Schedule A
for approval. The Customer has supplied or will supply the Bank with certified
copies of its Board of Directors resolution(s) with respect to the foregoing
prior to placing Assets with any Subcustodian so approved.

Section 11. Instructions.

Add the following language to the end of Section 11:

Deposit Account Payments and Custody Account Transactions made pursuant to
Section 5 and 6 of this Agreement may be made only for the purposes listed
below. Instructions must specify the purpose for which any transaction is
to be made and Customer shall be solely responsible to assure that
Instructions are in accord with any limitations or restrictions applicable
to the Customer by law or as may be set forth in its prospectus.

(a) In connection with the purchase or sale of Securities
at prices as confirmed by Instructions;

(b) When Securities are called, redeemed or retired, or
otherwise become payable;

(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment;

(d) Upon conversion of Securities pursuant to their terms
into other securities;

(e) Upon exercise of subscription, purchase or other
similar rights represented by Securities;

(f) For the payment of interest, taxes, management or
supervisory fees, distributions or operating expenses;

(g) In connection with any borrowings by the Customer
requiring a pledge of Securities, but only against receipt
of amounts borrowed;

(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any
restrictions applicable to the Customer;

(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of, the
Bank, its Subcustodian or the Customer's transfer agent, such shares to be
purchased or redeemed;

(j) For the purpose of redeeming in kind shares of the Customer against
delivery to the Bank, its Subcustodian or the Customer's transfer agent of
such shares to be so redeemed;

(k) For delivery in accordance with the provisions of any agreement among
the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to compliance
with the rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Customer;

(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only
upon payment to the Bank of monies for the premium due and a receipt for
the Securities which are to be held in escrow. Upon exercise of the
option, or at expiration, the Bank will receive from brokers the
Securities previously deposited. The Bank will act strictly in accordance
with Instructions in the delivery of Securities to be held in escrow and
will have no responsibility or liability for any such Securities which are
not returned promptly when due other than to make proper request for such
return;

(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related
transactions;

(n) For other proper purposes as may be specified in Instructions issued
by an officer of the Customer which shall include a statement of the
purpose for which the delivery or payment is to be made, the amount of the
payment or specific Securities to be delivered, the name of the person or
persons to whom delivery or payment is to be made, and a certification
that the purpose is a proper purpose under the instruments governing the
Customer; and

(o) Upon the termination of this Agreement as set forth in
Section 14(i).

Section 12. Standard of Care; Liabilities.

Add the following subsection (c) to Section 12:

(c) The Bank hereby warrants to the Customer that in its opinion, after
due inquiry, the established procedures to be followed by each of its
branches, each branch of a qualified U.S. bank, each eligible foreign
custodian and each eligible foreign securities depository holding the
Customer's Securities pursuant to this Agreement afford protection for
such Securities at least equal to that afforded by the Bank's established
procedures with respect to similar securities held by the Bank and its
securities depositories in New York.

Section 14. Access to Records.

Add the following language to the end of Section 14(c):

Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of
internal accounting controls applicable to the Bank's duties under this
Agreement. The Bank shall endeavor to obtain and furnish the Customer with
such similar reports as it may reasonably request with respect to each
Subcustodian and securities depository holding the Customer's assets.

<PAGE>

SPECIAL TERMS AND CONDITIONS RIDER

GLOBAL CUSTODY AGREEMENT

WITH________________________________

DATE________________________________

<PAGE>

DOMESTIC AND GLOBAL
SPECIAL TERMS AND CONDITIONS RIDER

Domestic Corporate Actions and Proxies

With respect to domestic U.S. and Canadian Securities (the latter if held in
DTC), the following provisions will apply rather than the provisions of Section
8 of the Agreement:

The Bank will send to the Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of the
Bank's nominee or the nominee of a central depository) and communications
with respect to Securities in the Custody Account as call for voting or
relate to legal proceedings within a reasonable time after sufficient
copies are received by the Bank for forwarding to its customers. In
addition, the Bank will follow coupon payments, redemptions, exchanges or
similar matters with respect to Securities in the Custody Account and
advise the Customer or the Authorized Person for such Account of rights
issued, tender offers or any other discretionary rights with respect to
such Securities, in each case, of which the Bank has received notice from
the issuer of the Securities, or as to which notice is published in
publications routinely utilized by the Bank for this purpose.

SUBCUSTODIAN AGREEMENT

______________, 199_
[Name]
[Address]

Dear Sirs:

This will confirm to you that The Chase Manhattan Bank, N.A. ("Chase") has been
appointed to act as Trustee, Custodian or Subcustodian of securities and monies
on behalf of certain of its customers including, without limitation, investment
companies subject to the Investment Company Act of 1940, as amended and
qualified employee benefit plans subject to the Employee Retirement Income
Security Act of 1974, as amended.

Chase has been authorized to use the services of other banks, financial
institutions and securities depositories located in countries or jurisdictions
in which the principal trading markets for any shares, bonds, debentures or any
other securities (hereinafter collectively called "Securities") of its customers
are located or in which any Securities of its customers are to be presented for
payment or acquired. In particular, Chase has been authorized to use such
services for the purpose of holding Securities and Cash (as hereinafter defined)
of its customers. Chase wishes to use the services of your bank ("Bank") as
Chase's agent within __________ for the foregoing purposes and hereby
establishes with Bank a special custody account which Bank understands and
agrees shall be used exclusively for Securities and other assets of Chase's
customers ("Account") and not for Chase's own interest.

The services Bank shall provide to Chase and the manner in which such services
shall be performed are as set forth in this letter (the "Agreement") and in the
separate agent service contract ("Contract") between Bank and Chase, either of
which may be amended in writing from time to time by Bank and Chase. The terms
and conditions set forth herein shall govern the Contract in the event of any
inconsistency. To the extent inconsistent with this Agreement and/or the
Contract, Bank's rules and conditions regarding accounts generally or custody
accounts specifically shall not apply.

1. The Account shall be used exclusively to hold, acquire,
transfer or otherwise care for, on behalf of Chase as
Trustee, Custodian or Subcustodian as aforesaid and the
customers of Chase and not for Chase's own interest,
Securities and such cash or cash equivalents as are
transferred to Bank or as are received in payment for any
transfer of, or as payment on, or interest on or dividend
from, any such Securities (hereinafter such cash or cash
equivalents shall be collectively called "Cash"), and
beneficial ownership of the Securities and Cash in the
Account shall be freely transferable without payment of
money or value other than for safe custody and
administration. All transactions involving the
Securities and Cash in the Account shall be executed
solely in accordance with Chase's Instructions, as that
term is defined in Section 10, except that until Bank
receives Instructions from Chase to the contrary, Bank
shall:

a) present for payment all Securities held in the Account which are
called, redeemed or retired or otherwise become payable and all
coupons and other income items which call for payment upon
presentation and hold the Cash received therefrom in the Account
pursuant to this Agreement;

b) in respect of Securities held in the Account,
execute in the name of Chase such ownership and
other certificates as may be required to obtain
payments in respect thereof;

c) exchange interim receipts or temporary Securities
held in the Account for definitive Securities; and

d) where any Securities held in any securities depository or clearing
agency, as hereinafter authorized, are called for a partial
redemption by the issuer of such Securities, allot the called portion
to the respective holders in any manner deemed to be fair and
equitable in the Bank's sole discretion.

Whenever pursuant to this Agreement or for any purpose relating hereto
anything whatsoever may or is required to be done or given by Chase, it
shall be done or given, as the case may be, by and for Chase by such
officer or officers of Chase or other person or persons as the governing
body of Chase shall specify from time to time ("Authorized Persons"). Any
such specification by the governing body shall be by resolution, of which
a copy certified by the President or a Vice President and the seal
attested to by the Secretary or any Assistant Secretary of Chase shall be
furnished to Bank. Bank shall be conclusively entitled to rely upon the
identification of such persons as the holders of those offices and/or
titles so specified in any such resolution, absent Instructions to the
contrary. Chase shall furnish to Bank specimens of the signatures of all
such Authorized Persons specified in any such resolution which shall be in
force from time to time. Bank shall act upon, and be fully protected in
acting in accordance with, Instructions signed or given by an Authorized
Person specified in any such resolution received by Bank and in force at
the time of the receipt by Bank of such Instructions, and shall not be
charged with any responsibility respecting the application of monies paid
out in accordance therewith.

Bank shall not be liable for any act or omission in respect of any
Instructions so given, except in the case of (i) an act or omission
constituting a breach of this Agreement by Bank and/or (ii) willful
default, negligence, fraud, bad faith, willful misconduct, or reckless
disregard of duties on the part of Bank. In executing all Instructions,
Bank shall take relevant action in accordance with accepted industry
practice. Bank shall advise Chase to the extent that such practices are
contrary to, or inconsistent with, any such Instructions.

2. The Account shall not be subject to any right, charge,
security interest, lien or claim of any kind (hereinafter
collectively called "Claims") in favor of Bank or any
other institution with whom assets in the Account may be
maintained as provided in this Agreement or any creditor
of Bank or of such other institution, including a
receiver or trustee in bankruptcy, except to the extent
of Bank's or such other institution's right to
compensation or reimbursement with regard to the
Account's administration in accordance with the terms of
this Agreement. Bank shall provide Chase with prompt
notice of any attempt by any party to assert any Claim
against the Account and shall take all lawful actions to
protect the Account from such Claim until Chase has had a
reasonable opportunity to respond to such notice.

3. The ownership of the assets of the Account, whether
Securities, Cash or both, and whether any such assets are
held by Bank or in a securities depository or clearing
agency or with a Bank Subcustodian, as hereinafter
authorized, shall be clearly recorded on Bank's books as
belonging to Chase on behalf of Chase's customers and not
for Chase's own interest and, to the extent Securities
are physically held in the Account, such Securities shall
also be physically segregated from the general assets of
Bank, the assets of Chase in its individual capacity and
the assets of Bank's other customers.

In order to facilitate the settlement of transactions, Bank may, with the
approval of Chase, which shall not be unreasonably withheld, maintain all
or any part of the Securities in the Account with a securities depository
or clearing agency which is incorporated or organized under the laws of a
country other than the United States of America and which is supervised or
regulated by a government agency or regulatory authority in the foreign
jurisdiction having authority over such securities depositories or
clearing agencies, and which operates (i) the central system for handling
of securities or equivalent book entries in ____________ or (ii) a
transnational system for the central handling of securities or equivalent
book entries, provided, however, that while so maintained such Securities
shall be subject only to the directions of Bank and that Bank's duties,
obligations and responsibilities with regard to such Securities shall be
the same as if such Securities were held by Bank. Securities which are
eligible for deposit in a securities depository or clearing agency may be
maintained with any such securities depository or clearing agency in an
account for Bank's customers.

At the direction of Chase, Bank shall hold such portion of the Securities
as Chase shall direct at one or more additional custodians (collectively
"Bank Subcustodians"); provided that: (a) any such Bank Subcustodian shall
be eligible to hold investment company assets under the Investment Company
Act of 1940 and the SEC rules thereunder, and (b) Bank shall enter into a
subcustodian agreement with any such Bank Subcustodian, which agreement
shall satisfy the requirements of the Act (including Rule 17f-5 to the
extent applicable). Securities which are deposited with a Bank
Subcustodian shall be maintained therewith in an account for Bank's
customers, and while so maintained such Securities shall be subject only
to the directions of Bank and Bank's duties, obligations and
responsibilities with regard to such Securities shall be the same as if
such Securities were held by Bank.

Securities which are not deposited in a securities depository, clearing
agency or with a Bank Subcustodian shall be held in the following forms:

a) Securities issued only in bearer form shall be held
in bearer form.

b) Securities issued only in registered form shall be registered in the
name of Bank as agent, in the name of Bank on behalf of its
customers, in the name of Bank's nominee, or otherwise, as Chase may
instruct.

c) If received by Bank in registered form, Securities
issued in both bearer and registered form (which
Securities are freely interchangeable without
penalty), shall be registered in the name of Bank as
agent, in the name of Bank on behalf of its
customers, in the name of Bank's nominee, or
otherwise, as Chase may instruct. If such
Securities are received by Bank in bearer form, they
shall be so held, unless alternate Instructions are
furnished by Chase.

4. Subject to the provisions of Section 8 hereof:

a) Bank shall be responsible for complying with all provisions of the
laws of __________________, and any other laws, applicable to Bank in
connection with its duties hereunder, including, but not limited to,
the payment of all transfer or similar taxes and compliance with any
currency restrictions and securities laws;

b) All collections of funds or other property paid or
distributed in respect of Securities held in the
Account shall be made at the risk of the Account; and

c) Bank shall have no liability for any loss occasioned
by delay in the actual receipt of notice by its
Custody Division of any payment, redemption or other
transaction regarding Securities held in the Account
in respect of which Bank has agreed to take action
as provided in Section 1 hereof, except to the
extent that any such delay arises from (i) an act or
omission constituting a breach of this Agreement by
Bank and/or (ii) willful default, negligence, fraud,
bad faith, willful misconduct or reckless disregard
of duties on the part of Bank.

5. Subject to applicable law, Bank shall permit independent
public accountants for Chase and customers of Chase
reasonable access to Bank's books and records as they
pertain to the Account in connection with such
accountants' examination of the books and records of
Account. Bank shall use its best efforts in obtaining
such reasonable access with respect to the books and
records of any securities depository or clearing agency
used by Bank as authorized hereunder, as such books and
records pertain to the Account in connection with such
accountants' examination of the books and records of
Account. Further, as Chase may request from time to
time, Bank shall (i) furnish Chase with auditor's reports
on Bank's system of internal accounting controls as such
reports relate to Bank's services and duties hereunder
and (ii) use its best efforts to furnish Chase with
similar reports with respect to any securities depository
or clearing agency holding Securities in the Account.

6. Bank shall either periodically or upon Chase's request
supply Chase with such statements regarding the Account
as Chase may reasonably specify, including the name or
identification of, and the location or address and
principal place of business of, any person having
physical possession of the Securities in the Account, and
the name and address of the governmental agency or other
regulatory authority that supervises or regulates Bank
and/or any such person. In addition, Bank shall furnish
Chase periodically with advices and/or notifications of
any transfers of such Securities.

Bank shall follow interest, dividend and coupon payments, redemptions,
exchanges and similar matters with respect to Securities, and matters
concerning Securities that require discretionary action, including,
without limitation, subscription rights, bonus issues, stock repurchase
plans and rights offerings, or legal notices or other material intended to
be transmitted to securities holders ("Corporate Actions"). Bank shall
give Chase timely notice in English of such Corporate Actions to the
extent that Bank has actual knowledge of such Corporate Actions. Upon
receipt, and if Chase has so requested, Bank promptly shall send to Chase
all notices of annual and extraordinary meetings of shareholders and other
proxy solicitations together with resolutions or other matters to be voted
on by shareholders. Where such notices and related materials are not
provided to Bank in English, Bank shall provide English translations. Bank
shall also provide Chase with copies of any backup information which is
received, including the reports or recommendations of management, annual
reports and other material relevant to proxy voting. This latter
information need not be translated, but the material must be legible and
in a form suitable for copying. Bank shall vote proxies as directed
pursuant to timely Instructions. To the extent local practices or
particular issuers may impose special requirements in order to vote
proxies, Bank shall cooperate with Chase to assure such requirements are
met.

7. In the event of any loss of Securities or Cash in the Account, Bank shall
use its best efforts to ascertain the circumstances relating to such loss
and promptly report the same to Chase.

8. Bank shall hold Chase or its customers (as the case may
be) harmless from, and shall indemnify Chase for, any
loss, liability, claim or expense incurred by Chase or
them (including, but not limited to, Chase's or their
legal fees and expenses and any other legal fees and
expenses for which Chase or they may be liable, and any
loss, liability or expense in connection with a claim
settled by agreement between Chase and a customer, which
agreement is accepted by Bank) to the extent that such
loss, liability, claim or expense arises from (i) an act
or omission constituting a breach of this Agreement by
Bank and/or (ii) willful default, negligence, fraud, bad
faith, willful misconduct or reckless disregard of duties
on the part of Bank. Chase shall hold Bank harmless
from, and shall indemnify Bank for, any loss, liability,
claim or expense incurred by Bank as the result of any
action taken or omitted to be taken by Bank with respect
to the Account, except to the extent that such loss,
liability, claim or expense arises from (i) an act or
omission constituting a breach of this Agreement by Bank
and/or (ii) willful default, negligence, fraud, bad
faith, willful misconduct or reckless disregard of duties
on the part of Bank. Any provision herein to the
contrary notwithstanding, Bank shall be liable for, and
shall indemnify Chase or its customers (as the case may
be) for, any loss of Securities and/or Cash due to
mysterious or unexplained circumstances.

If Bank is the branch of a bank, the obligations and responsibilities of
Bank hereunder are the obligations and responsibilities of Bank as a whole
(including, but not limited to, Bank's head office).

9. Bank acknowledges that under U.S. regulatory requirements
Bank must be a regulated entity and must have a certain
minimum shareholders' equity in order to be used by Chase
to provide the services contemplated in this Agreement.
Bank represents and warrants to Chase, which shall be
continuing representations and warranties, that it (i) is
a banking institution incorporated or organized under the
laws of ______________, (ii) is regulated as a banking
institution by ______________, which is the agency of the
Government of ______________ responsible for the
regulation of banks and (iii) as of the close of its
fiscal year most recently completed and on and after the
date hereof or such later date as shall be specified in
Instructions, has shareholders' equity in excess of two
hundred thirty million U.S. dollars (U.S.$230,000,000),
or such lesser amount as shall be specified in any order
of the United States Securities and Exchange Commission
applicable to Bank, or the equivalent thereof in
________________ currency determined at current rates.
For purposes of this Section, shareholders' equity of the
Bank shall mean such shareholders' equity as would be
shown on any financial statement of Bank if such
financial statement were prepared according to United
States generally accepted accounting principles. If Bank
is a majority owned direct or indirect subsidiary of a
U.S. bank or bank-holding company, the provisions of this
Section 9 shall remain as specified above except that the
amount of two hundred thirty million U.S. dollars (U.S.
$230,000,000) specified in Section 9(iii) above is
substituted for the amount of one hundred thirty million
U.S. dollars (U.S. $130,000,000) and, in such case, Bank
further represents and warrants, which shall be a
continuing representation and warranty, that it is a
majority-owned direct or indirect subsidiary of a
qualified U.S. bank (as that term is defined in Rule
17f-5(c)(3) under the Investment Company Act of 1940, as
amended) or bank-holding company. If Bank is a branch of
a United States bank satisfying the requirements of
Section 17(f) and other relevant provisions of the
Investment Company Act of 1940, as amended, the
provisions of this Section 9 specified above shall not
apply; provided, however, that in such event, Bank
represents and warrants to Chase, which shall be a
continuing representation and warranty, that it is a
branch of a United States bank, which bank satisfies the
requirements of Section 17(f) and other relevant
provisions of the Investment Company Act of 1940, as
amended.

Bank shall immediately notify Chase in writing or by other authorized
means of any development or occurrence (and the circumstances related
thereto) which could render Bank unable to continue to make any
representation and warranty specified in this Section 9 at any date. Upon
such notification Chase may terminate this Agreement immediately without
prior notice to Bank.

This Agreement shall terminate immediately, without further action of
either party, if Bank shall become insolvent. Chase may terminate this
Agreement forthwith on notice to Bank if Bank is in danger of becoming
insolvent, as determined by Chase in its sole discretion. Further, Chase
may terminate this Agreement forthwith on notice to Bank if Chase and/or a
Chase customer determines, in its and/or their sole discretion, that the
political, governmental, regulatory or economic environment of ___________
threatens the security or safety of Securities and/or Cash or for any
other reason determines, in its and/or their sole discretion, that the
security or safety of Securities and/or Cash is threatened.

10. As used in this Agreement, the term "Instructions" means
instructions by an Authorized Person received by Bank via
telephone, in writing, or by the Society for Worldwide
Interbank Financial Telecommunication (SWIFT) System,
telex, TWX, facsimile transmission, bank wire or other
teleprocess or electronic instruction system acceptable
to Chase which Bank reasonably believes in good faith to
have been given or signed by an Authorized Person or
which are transmitted with proper testing or
authentication pursuant to terms and conditions which
Chase may specify or to which Chase may agree. Unless
otherwise expressly provided, all Instructions shall
continue in full force and effect until canceled or
superseded by an Authorized Person. Bank shall safeguard
any testkeys, identification codes or other security
devices which Chase may make available to it. Either
party may electronically record any Instructions given by
telephone, and any other telephone discussions with
respect to the Account. Instructions by telephone shall
be confirmed by Chase by telex or such other
communication as may be mutually acceptable. Information
communicated via telephone by Bank to Chase shall, upon
Chase's request, be confirmed by Bank by telex or such
other form of communication as may be mutually acceptable.

11. Chase shall pay Bank compensation in accordance with the
schedule of fees set forth in Appendix A hereto, and Bank
shall send Chase an invoice with the frequency set forth
in Appendix A in reasonable detail for such fees (and
Bank's reasonable expenses), in arrears for the prior
period, which fees shall be the only fees owing hereunder
by Chase to Bank. Changes to Appendix A may be made from
time to time as may be mutually agreed to in writing by
Bank and Chase. In no event shall Bank debit Chase's
account for any fee owing hereunder or for any other
reason without Chase's express prior written consent.

12. Either Bank or Chase may terminate this Agreement upon 60
days prior notice to the other party. Any such notice,
whether given by Chase or by Bank, shall be followed by
Instructions specifying the name(s) of the person(s) to
whom Bank shall deliver the Securities and Cash in the
Account and Bank shall promptly execute such
Instructions. If Bank does not receive such
Instructions, Bank shall continue to hold such Securities
and Cash subject to this Agreement until such
Instructions are received. If Chase shall terminate this
Agreement in accordance with the provisions of Section 9
above, Bank shall immediately deliver the Securities and
Cash in the Account upon receiving, and in accordance
with, the Instructions of Chase. The obligations of the
parties under Section 4(a), 8 and 11 of this Agreement
shall survive the termination of this Agreement.

13. Notices with respect to termination, specification of
Authorized Persons and terms and conditions for
Instructions (except as otherwise expressly provided
herein) shall be in writing, and delivered by mail,
postage prepaid, to the following addresses (or to such
other address as either party hereto may from time to
time designate by notice duly given in accordance with
this paragraph): (a) to Bank at:

(b) to Chase at: The Manager, Global Custody Division, The Chase Manhattan
Bank, N.A., Woolgate House, Coleman Street, London EC2P 2HD, with a copy
to: Network Management, Global Securities Services, The Chase Manhattan
Bank, N.A., 4 MetroTech Center, Brooklyn, NY 11245.

14. This Agreement shall not be assignable by either party but shall bind any
successor in interest of Chase and Bank, respectively.

15. This Agreement shall be governed by and construed in
accordance with the substantive laws of New York, and,
with respect to any disputes arising under this
Agreement, the parties hereto submit to the nonexclusive
jurisdiction of the Supreme Court of the State of New
York, County of New York, or the United States District
Court for the Southern District of New York and Bank
hereby waives the defense of forum non conveniens, to the
extent it may do so. In the event that this Agreement,
or any other document executed in connection herewith,
shall be translated into, or appear in, a language other
than English, the English language version shall govern
and control.

16. Any provision of this Agreement which may be determined
by competent authority to be prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other
jurisdiction.

17. Except as otherwise provided in this Agreement, no
failure or delay on the part of either party in
exercising any power or right under this Agreement
operates as a waiver, nor does any single or partial
exercise of any power or right preclude any other or
further exercise thereof, or the exercise of any other
power or right. No waiver by a party of any provision of
this Agreement, or waiver of any breach or default, is
effective unless in writing and signed by the party
against whom the waiver is to be enforced.

18. This Agreement, together with the Contract, set forth the
complete understanding of the parties with respect to the
subject matters contained in such agreements, and
collectively supersede and replace any previously made
proposals, representations, warranties or agreements with
respect thereto by either or both of the parties hereto.
This Agreement shall become effective upon Chase's
receipt of an executed copy of this letter.

19. Bank represents and warrants to Chase that: (i) it has
the corporate power and authority to execute, deliver and
perform this Agreement; (ii) this Agreement has been duly
authorized, executed and delivered by it, does not
contravene any contractual restriction binding on it or
any law applicable to it and constitutes a valid, binding
and enforceable obligation; and (iii) all authorizations
of, exemptions by and filings with any governmental or
other authority that are required to be obtained or made
by it in connection herewith have been obtained or made
and are valid and subsisting.

If the foregoing correctly sets forth the understanding between Bank and Chase
with respect to Bank's services in connection with the Account, kindly execute
and return to Chase the enclosed additional copy of this letter.

Very truly yours,
THE CHASE MANHATTAN BANK, N.A.

[Name of Subcustodian]
The foregoing is hereby agreed
to this ____ day of ________________, 199_

By ____________________________

- -------------------------
[Print or type name]
Title: ________________________

ADMINISTRATION AGREEMENT

This AGREEMENT made as of December 15, 1995 by and among EXCELSIOR
INSTITUTIONAL TRUST, a Delaware business trust (the "Trust"), CHASE GLOBAL FUNDS
SERVICES COMPANY, a Delaware corporation ("CGFSC"), FEDERATED ADMINISTRATIVE
SERVICES ("FAS"), a Delaware trust, and UNITED STATES TRUST COMPANY OF NEW YORK
("U.S. Trust"), a state-chartered bank and trust company (CGFSC, FAS and U.S.
Trust are collectively referred to as the "Administrators").

WITNESSETH:

WHEREAS, the Trust is registered as an open-end, management
investment Trust under the Investment Company Act of 1940, as amended (the "1940
Act"); and

WHEREAS, the Trust wishes to retain the Administrators to provide, as
co-administrators, certain administration services with respect to one or more
of the Trust's investment portfolios (individually, a "Fund," and collectively,
the "Funds"), as described and set forth on one or more exhibits to this
Agreement, and the Administrators are willing to furnish such services;

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:

1. APPOINTMENT. The Trust hereby appoints the Administrators to
provide administration services to the Funds for the period and on the terms set
forth in this Agreement. The Administrators accept such appointment and agree to
furnish the services herein set forth in return for the compensation as provided
in Section 4 of this Agreement. In the event that the Trust establishes one or
more investment portfolios other than the Funds with respect to which it decides
to retain the Administrators to act as co-administrators hereunder, the Trust
shall notify the Administrators in writing. If the Administrators are willing to
render such services to a new investment portfolio, they shall so notify the
Trust in writing whereupon such investment portfolio shall become a Fund
hereunder and shall be subject to the provisions of this Agreement to the same
extent as the Funds, except to the extent that said provisions (including those
relating to the compensation payable by the Trust) may be modified with respect
to such investment portfolio in writing by the Trust and the Administrators at
the time of the addition of such new investment portfolio.

2. DELIVERY OF DOCUMENTS. The Trust has furnished each of
the Administrators with copies, properly certified or authenticated, of each
of the following:

(a) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Administrators to provide certain administration services to
the Trust and approving this Agreement;

(b) The Trust's Declaration of Trust ("Charter");

(d) The Trust's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange Commission ("SEC");

(e) The Trust's most recent Post-Effective Amendment to its
Registration Statement on Form N-1A (File Nos. 33-78264, 811-8490) (the
"Registration Statement") under the Securities Act of 1933 and the 1940 Act, as
filed with the SEC;

(f) The Trust's Amended and Restated Servicing Plan and the
accompanying form of custodian, transfer agency, servicing and shareholder
servicing agreements; and

(g) The Trust's most recent Prospectuses and Statements of
Additional Information and all amendments and supplements thereto (such
Prospectuses and Statements of Additional Information and supplements thereto,
as presently in effect and as from time to time amended and supplemented, herein
called the "Prospectus").

The Trust will timely furnish each of the Administrators from
time to time with copies, properly certified or authenticated, of all amendments
of or supplements to the foregoing, if any.

3. SERVICES AND DUTIES. Subject to the supervision and control of the
Trust's Board of Trustees, and as delineated on one or more Exhibits to the
Agreement, the Administrators agree to assist in supervising various aspects of
each Fund's administrative operations, including the performance of the
following specific services for each Fund:

(a) Providing office facilities (which may be in the offices of
any of the Administrators or a corporate affiliate of any of them, but shall be
in such location as the Trust shall reasonably approve);

(b) Furnishing statistical and research data, clerical
services, and stationery and office supplies;

(c) Keeping and maintaining all financial accounts and records
(other than those required to be maintained by the Trust's Custodian and
Transfer Agent);

(d) Computing each Fund's net asset value, net income and net
capital gain (loss) in accordance with the Trust's Prospectus and resolutions of
its Board of Trustees;

(e) Compiling data for and preparing for execution and filing
with the SEC required reports and notices to shareholders of record and the SEC
including, without limitation, Semi-Annual and Annual Reports to Shareholders,
Semi-Annual Reports on Form N-SAR and timely Rule 24f-2 Notices;

(f) Compiling data for, and preparing for execution and filing
all reports or other documents required by Federal, state and other applicable
laws and regulations, including those required by applicable laws and
regulations, including those required by applicable Federal and state tax laws
(other than those required to be filed by the Trust's Custodian or Transfer
Agent);

(g) Reviewing and providing advice with respect to all sales
literature (advertisements, brochures and shareholder communications) for each
of the Funds and any class or series thereof;

(h) Assisting in developing and monitoring compliance procedures
for each Fund and any class or series thereof, including, without limitation,
procedures to monitor compliance with applicable law and regulations, each
Fund's investment objectives, policies and restrictions, its continued
qualification as a regulated investment company under the Internal Revenue Code
of 1986, as amended, and other tax matters;

(i) Monitoring the Trust's arrangements with respect to services
provided by certain organizations which have entered into Shareholder Servicing
Agreements with the Trust ("Shareholder Servicing Agents") provided that each
Administrator will only be responsible for monitoring arrangements with
Shareholder Servicing Agents with whom the Administrator has established the
servicing relationship on behalf of the Trust. With respect to such Shareholder
Servicing Agents, the Administrators shall specifically monitor and review the
services rendered by organizations to their customers who are the beneficial
owners of shares, pursuant to the Shareholder Servicing Agreements including,
without limitation, reviewing the qualifications of financial institutions
wishing to be Shareholder Servicing Agents, assisting in the execution and
delivery of Shareholder Servicing Agreements, reporting to the Trust's Board of
Trustees with respect to the amounts paid or payable by the Trust from time to
time under the Shareholder Servicing Agreements and the nature of the services
provided by such organizations, and maintaining appropriate records in
connection with such duties;

(k) Determining, together with the Trust's Board of Trustees,
the jurisdictions in which the Trust's shares shall be registered or qualified
for sale and, in connection therewith, maintaining the registration or
qualification of shares for sale under the securities laws of any state. Payment
of share registration fees and any fees for qualifying or continuing the
qualification of any Fund as a dealer or broker, if applicable, shall be made by
that Fund;

(l) Assisting to the extent requested by the Trust and its
outside counsel with the preparation of the Trust's Registration Statement on
Form N-1A or any supplements or amendments thereto; and

(m) Assisting in the monitoring of regulatory and legislative
developments which may affect the Trust and, in response to such developments,
counseling and assisting the Trust in routine regulatory examinations or
investigations of the Trust, and working with outside counsel to the Trust in
connection with regulatory matters or litigation.

In performing their duties as co-administrators of the Trust, the
Administrators (a) will act in accordance with the Trust's Charter, Bylaws,
Prospectus and the instructions and directions of the Trust's Board of Trustees
and will conform to, and comply with, the requirements of the 1940 Act and all
other applicable Federal or state laws and regulations, and (b) will consult
with outside legal counsel to the Trust, as necessary or appropriate.

The Administrators will preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under said Act in connection with the services required to be performed
hereunder. The Administrators further agree that all such records which they
maintain for the Trust are the property of the Trust and further agree to
surrender promptly to the Trust any of such records upon the Trust's request.

4. FEES; EXPENSES; EXPENSE REIMBURSEMENT.

For the services rendered pursuant to this Agreement for all Funds
except International Equity Fund, the Administrators (and any other entity which
provides, pursuant to any agreement which may be entered into from time to time,
services of a nature set forth herein to one or more of the Funds (a "Servicing
Agent")) shall be entitled jointly to a fee based on the average net assets of
the Trust, determined at the following annual rates applied to the average
combined daily net assets of all of the Funds and all of the investment
portfolios of UST Master Tax-Exempt Funds, Inc. and UST Master Funds, Inc., as
each of them may change its name from time to time (collectively, the "Master
Funds")(except the International, Pacific/Asia, Pan European and Emerging
Americas Funds of UST Master Fund's, Inc.): .20% of the first $200 million;
.175% of the next $200 million; and .15% of any amount in excess of $400
million; and 20% of the daily net assets of the International Equity Fund, less
any amounts payable to Federated Service Company under its Servicing Agreement
with the Trust with respect to the Bond Index Fund. Each Fund will pay a portion
of the total fee payable by the Trust in an amount equal to the proportion that
such Fund's average daily net assets bears to the total average daily net assets
of all the Funds of the Trust then covered by this Agreement. The fee
attributable to each Fund shall be the several (and not joint or joint and
several) obligation of each Fund. Such fees are to be computed daily and paid
monthly on the first business day of the following month. Upon any termination
of this Agreement with respect to any one or more Funds before the end of any
month, the fee for such part of the month shall be pro-rated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement with respect to such one
or more Funds. The Administrators agree that any fee payable by the Trust under
this Agreement shall be payable to CGFSC, as an Administrator and as agent for
FAS and U.S. Trust (and Federated Service Company under the Servicing
Agreement), and that such payment shall discharge the Trust's payment obligation
hereunder. However, such joint fee payment does not create any joint and/or
several liability among the Administrators for the services provided by the
others.

For purposes of determining fees payable to the Administrators, the
value of each Fund's net assets shall be computed as required by its Prospectus,
generally accepted accounting principles, and resolutions of the Trust's Board
of Trustees.

The Administrators will from time to time employ or associate with
themselves such person or persons as they may believe to be fitted to assist
them in the performance of this Agreement. Such person or persons may be
officers and employees who are employed by both one or more of the
Administrators and the Trust. The compensation of such person or persons for
such employment shall be paid by the Administrators and no obligation may be
incurred on behalf of the Trust in such respect.

The Administrators will bear all expenses in connection with the
performance of their services under this Agreement except as otherwise expressly
provided herein. Other expenses to be incurred in the operation of the Funds,
including taxes, interest, brokerage fees and commissions, if any, salaries and
fees of officers and directors who are not officers, directors, shareholders or
employees of the Administrators, or the Trust's investment adviser or
distributor for the Funds, Securities and Exchange Commission fees and state
Blue Sky qualification fees, advisory and administration fees, charges of
custodians, transfer and dividend disbursing agents' fees, certain insurance
premiums, outside auditing and legal expenses, payments to shareholder servicing
agents or similar organizations, costs of maintenance of corporate existence,
typesetting and printing of prospectuses for regulatory purposes and for
distribution to current shareholders of the Funds, costs of shareholders'
reports and corporate meetings and any extraordinary expenses, will be borne by
the Trust, provided, however, that, except pursuant to a distribution plan
adopted by the Trust in accordance with applicable rules and regulations, the
Trust will not bear, directly or indirectly, the cost of any activity which is
primarily intended to result in the distribution of shares of the Funds, and
further provided that the Administrators may utilize one or more independent
pricing services, approved from time to time by the Board of Trustees of the
Trust, to obtain securities prices in connection with determining the net asset
value of each Fund and that each Fund will reimburse the Administrators for its
share of the cost of such services based upon its actual use of the services.

If in any fiscal year any Fund's aggregate expenses (as defined under
the securities regulations of any state having jurisdiction over the Fund)
exceed the expense limitations of any such state, the Administrators agree to
reimburse such Fund for a portion of any such excess expenses in an amount equal
to the proportion that the fees otherwise payable to the Administrators bears to
the total amount of investment advisory and administration fees otherwise
payable by the Fund. The expense reimbursement obligation of the Administrators
is limited to the amount of their fees hereunder for such fiscal year, provided,
however, that notwithstanding the foregoing, the Administrators shall reimburse
such Fund for a portion of any such excess expenses in an amount equal to the
proportion that the fee otherwise payable to the Administrators bears to the
total amount of investment advisory and administration fees otherwise payable by
the Fund regardless of the amount of fees paid to the Administrators during such
fiscal year to the extent that the securities regulations of any state having
jurisdiction over the funds so require. Such expense reimbursement, if any, will
be estimated, reconciled and paid on a monthly basis. With respect to the
amounts required to be reimbursed under this Section 4 in any fiscal year, the
parties to this Agreement agree that CGFSC and U.S. Trust alone shall reimburse
such amounts up to the amount of fees received by CGFSC and U.S. Trust,
respectively, under this Agreement for such year. FAS shall only be obligated to
reimburse expenses to the extent that the amounts required to be reimbursed
under this Section 4 in any fiscal year exceed the amount of fees received by
CGFSC and U.S. Trust under this Agreement for such year and to the extent that
CGFSC and U.S. Trust reimburse all such fees received by them, provided that the
reimbursement obligation of FAS shall be limited to the amount of fees received
by it under this Agreement for such year.

5. PROPRIETARY AND CONFIDENTIAL INFORMATION. The Administrators agree
on behalf of themselves and their employees to treat confidentially and as
proprietary information of the Trust all records and other information relative
to the Funds and prior, present or potential shareholders, and not to use such
records and information for any purpose other than performance of their
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the Administrators may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Trust.

6. LIMITATION OF LIABILITY. Each Administrator shall not be liable
for any error of judgment or mistake of law or for any loss or expense suffered
by the Trust in connection with the matters to which this Agreement relates,
except for a loss or expense resulting from willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, partner, employee or agent of any of the
Administrators, who may be or become an officer, director, employee or agent of
the Trust shall be deemed when rendering services to the Trust or acting on any
business of the Trust (other than services or business in connection with the
Administrators' duties hereunder) to be rendering such services to or acting
solely for the Trust and not as an officer, partner, employee or agent or one
under the control or direction of the Administrators even though paid by any of
them.

7. TERM. This Agreement shall become effective on December 15, 1995
and, unless sooner terminated as provided herein, shall continue until July 31,
1996, and thereafter shall continue automatically with respect to each Fund for
successive annual periods ending on July 31 of each year, provided such
continuance is specifically approved at least annually by the Trust's Board of
Directors. This Agreement is terminable with respect to each Fund, without
penalty, on not less than ninety days' notice by the Trust's Board of Trustees
or by CGFSC, FAS or U.S. Trust. This Agreement will terminate automatically in
the event of its "assignment" (as defined in the Investment Trust Act 1940). The
parties agree that an assignment includes the transfer of "control" of more than
25% of the outstanding voting securities of FAS to a Trust that is not a
subsidiary of Federated Investors.

8. GOVERNING LAW. This Agreement shall be governed by New York law.

9. NOTICES. All notices required or permitted herein shall be in
writing and shall be deemed to be properly given when delivered personally or by
telecopier to the party entitled to receive the notice or when sent by certified
or registered mail, postage prepaid, or delivered to an internationally
recognized overnight courier service, in each case properly addressed to the
party entitled to receive such notice at the address or telecopier number stated
below or to such other address or telecopier number as may hereafter be
furnished in writing by notice similarly given by one party to the other party
hereto:

<PAGE>

If to the Trust:

Excelsior Institutional Trust
73 Tremont Street
Boston, Massachusetts 02108-3913
Telecopier Number: (617) 557-8617

If to CGFSC:

Chase Global Funds Services Trust
73 Tremont Street
Boston, Massachusetts 02108-3913
Telecopier Number: (617) 557-8617

If to FAS:

Federated Administrative Services
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Telecopier Number: (412) 288-8141

If to U.S. Trust:

United States Trust Company of New York
114 West 47th Street, 10th Floor
New York, New York 10036
Telecopier Number: (212) 852-3971

10. MISCELLANEOUS. No provisions of this Agreement may be changed,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, discharge or termination is
sought. If a change or discharge is sought against the Trust, the instrument
must be signed by each Administrators. This Agreement may be executed in one or
more counterparts and all such counterparts will constitute one and the same
instrument.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date indicated above.

ATTEST: EXCELSIOR INSTITUTIONAL
TRUST

By: By:
Title:

(SEAL)

ATTEST: CHASE GLOBAL FUNDS SERVICES
TRUST

By: By:
Title:

(SEAL)

ATTEST: FEDERATED ADMINISTRATIVE
SERVICES

By: By:
Title:

(SEAL)

ATTEST: UNITED STATES TRUST COMPANY
OF NEW YORK

By: By:
Title:

(SEAL)

<PAGE>

Exhibit A
to the
Administration Agreement

EXCELSIOR INSTITUTIONAL TRUST
Income Fund
Equity Fund
Equity Growth Fund
Total Return Bond Fund
Bond Index Fund
Balanced Fund
International Equity Fund
(each a "Fund" and collectively, the "Funds")

In consideration of the mutual covenants set forth in the
Administration Agreement dated as of December 15, 1995 among Excelsior
Institutional Trust, Chase Global Funds Services Trust ("CGFSC"), Federated
Administrative Services ("FAS") and United States Trust Company of New York
("U.S. Trust"), Excelsior Institutional Trust executes and delivers this Exhibit
on behalf of the Funds set forth above, as the same may be amended from time to
time.

Pursuant to Section 3 of the Agreement, FAS agrees to provide
facilities, equipment, and personnel to carry out the following administrative
services to the Funds, with the understanding that CGFSC will provide all other
services and duties set forth in said Section 3 but not otherwise listed below:

(a) Performing a due diligence review of SEC required reports and
notices to shareholders of record and to the SEC including, without limitation,
Semi-Annual and Annual Reports to Shareholders, Semi-Annual Reports on Form
N-SAR, Proxy Statements and SEC share registration notices;

(b) Reviewing the Trust's Registration Statement on Form N-1A
or any replacement therefor;

(d) Upon request, providing individuals reasonably acceptable to the
Trust's Board of Trustees for nomination, appointment, or election as officers
of the Trust, who will be responsible for the management of certain of the
Funds' affairs as determined by the Trust;

(e) Monitoring the Trust's arrangements with respect to services
provided by certain organizations which have entered into shareholder Servicing
Agreements with the Trust ("Shareholder Servicing Agents") provided that FAS
will only be responsible for monitoring arrangements with Shareholder Servicing
Agents with whom FAS has established the servicing relationship on behalf of the
Trust. With respect to such Shareholder Servicing Agents, FAS shall specifically
monitor and review the services rendered by organizations to their customers who
are the beneficial owners of shares, pursuant to the Shareholder Servicing
Agreements including, without limitation, reviewing the qualifications of
financial institutions wishing to be Shareholder Servicing Agents, assisting in
the execution and delivery of Shareholder Servicing Agreements, reporting to the
Trust's Board of Trustees with respect to the amounts paid or payable by the
Trust from time to time under the Shareholder Servicing Agreements and the
nature of the services provided by such organizations, and maintaining
appropriate records in connection with such duties;

(f) Consulting with CGFSC and the Trust regarding the jurisdictions
in which the Trust's shares shall be registered or qualified for sale and, in
connection therewith, reviewing and monitoring the actions of CGFSC in
maintaining the registration or qualification of shares for sale under the
securities laws of any state. Payment of share registration fees and any fees
for qualifying or continuing the qualification of any Fund as a dealer or
broker, if applicable, shall be made by that Fund.

Witness the due execution hereof as of this 15th day of December, 1995.

ATTEST: EXCELSIOR INSTITUTIONAL
TRUST

By: By:
Title:

(SEAL)

ATTEST: FEDERATED ADMINISTRATIVE
SERVICES

By: By:
Title:

(SEAL)

ATTEST: CHASE GLOBAL FUNDS SERVICES
COMPANY

By: By:
Title:

(SEAL)

<PAGE>

Exhibit B
to the
Administration Agreement

EXCELSIOR INSTITUTIONAL TRUST
Income Fund
Equity Fund
Equity Growth Fund
Total Return Bond Fund
Bond Index Fund
Balanced Fund
International Equity Fund
(each a "Fund" and collectively, the "Funds")

In consideration of the mutual covenants set forth in the
Administration Agreement dated as of December 15, 1995 among Excelsior
Institutional Trust, Chase Global Funds Services Trust ("CGFSC"), Federated
Administrative Services ("FAS") and United States Trust Company of New York
("U.S. Trust"), Excelsior Institutional Trust executes and delivers this Exhibit
on behalf of the Funds above, as the same may be amended from time to time.

Pursuant to Section 3 of the Agreement, U.S. Trust agrees to provide
facilities, equipment, and personnel to carry out the following administrative
services to the Funds:

(a) Providing guidance and assistance in the preparation of SEC
required reports and notices to shareholders of record and to the SEC including,
without limitation, Semi-Annual and Annual Reports to Shareholders, Semi-Annual
Reports to Shareholders, Semi-Annual Reports on Form N-SAR, Proxy Statements and
SEC share registration notices;

(b) Reviewing the Trust's Registration Statement on Form N-1A
or any replacement therefor;

(c) Consulting with the Funds and the Trust's Board of Trustees, as
appropriate, on matters concerning the administration and peration of the Funds;

(d) Monitoring the Trust's arrangements with respect to services
provided by certain organizations which have entered into shareholder Servicing
Agreements with the Trust ("Shareholder Servicing Agents") provided that U.S.
Trust will only be responsible for monitoring arrangements with Shareholder
Servicing Agents with whom U.S. Trust has established the servicing relationship
on behalf of the Trust. With respect to such Shareholder Servicing Agents, U.S.
Trust shall specifically monitor and review the services rendered by
organizations to their customers who are the beneficial owners of shares,
pursuant to the Shareholder Servicing Agreements including, without limitation,
reviewing the qualifications of financial institutions wishing to be Shareholder
Servicing Agents, assisting in the execution and delivery of Shareholder
Servicing Agreements, reporting to the Trust's Board of Trustees with respect to
the amounts paid or payable by the Trust from time to time under the Shareholder
Servicing Agreements and the nature of the services provided by such
organizations, and maintaining appropriate records in connection with such
duties;

Witness the due execution hereof as of this 15th day of December 1995.

ATTEST: EXCELSIOR INSTITUTIONAL
TRUST

By: By:
Title:

(SEAL)

ATTEST: UNITED STATES TRUST
COMPANY OF NEW YORK

By: By:
Title:

(SEAL)

FUND ACCOUNTING AND SERVICING AGREEMENT

AGREEMENT made as of this 2nd day of January, 1996, between EXCELSIOR
INSTITUTIONAL TRUST, a Delaware business trust (the "Fund") and FEDERATED
SERVICES COMPANY, a Delaware business trust ( "FSC").

WHEREAS, the Fund, an open-end management investment company registered
under the Investment Company Act of 1940 (the "1940 Act"), desires to engage
FSC, subject to the direction and control of the Board of the Fund, to provide
certain fund accounting services and related services with respect to the Bond
Index Fund, a series thereof, and FSC and has indicated its willingness to so
act, subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:

1. FSC Appointed. The Fund hereby appoints FSC to provide the services as
hereinafter described and FSC agrees to act as such upon the terms and
conditions hereinafter set forth.

2. Definitions. Whenever used herein, the terms listed below will have the
following meaning:

2.1 Authorized Person. Authorized Person will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of the
Fund by appropriate resolution of its Board, and set forth in a certificate of
the Secretary or Assistant Secretary of the Fund.

2.2 Board. Board will mean the Board of Directors or the Board of
Trustees of the Fund, as the case may be.

2.3 Portfolio Security. Portfolio Security will mean any security
owned by the Fund.

2.4 Officers' Certificate. Officers' Certificate will mean,
unless otherwise indicated, any request, direction, instruction, or
certification in writing signed by any two Authorized Persons of the Fund.

2.5 Proper Instructions. Proper Instructions shall mean instructions
regarding the services to be provided hereunder, which may be continuing
instructions, given by an Authorized Person as shall have been designated in an
Officers' Certificate, such instructions to be given in such form and manner as
FSC and the Fund shall agree upon from time to time. Oral instructions will be
considered Proper Instructions if FSC reasonably believes them to have been
given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be promptly
confirmed in writing. FSC shall act upon and comply with any subsequent Proper
Instruction which modifies a prior instruction and the sole obligation of FSC
with respect to any follow-up or confirmatory instruction shall be to make
reasonable efforts to detect any discrepancy between the original instruction
and such confirmation and to report such discrepancy to the Fund. The Fund shall
be responsible, at the Fund's expense, for taking any action, including any
reprocessing, necessary to correct any such discrepancy or error, and to the
extent such action requires FSC to act the Fund shall give FSC specific Proper
Instructions as to the action required. Upon receipt of an Officers' Certificate
as to the authorization by the Board accompanied by a detailed description of
procedures approved by the Fund, Proper Instructions may include communication
effected directly between electro-mechanical or electronic devices provided that
the Board and FSC are satisfied that such procedures afford adequate safeguards
for the Fund's assets.

3. Maintenance of Records. The books and records of FSC pertaining to its
actions under this Agreement and reports by FSC or its independent accountants
concerning its accounting systems and internal accounting controls will be open
to inspection and audit at reasonable times by officers of or auditors employed
by the Fund and will be preserved by FSC in the manner and in accordance with
the applicable rules and regulations under the 1940 Act. FSC further agrees that
all such records which it maintains for the Bond Index Fund are the property of
the Fund and further agrees to surrender promptly to the Fund any of such
records upon the Fund's request.

4. Services Provided.

4.1 Fund Evaluation. FSC shall compute and, unless otherwise directed
by the Board, determine as of the close of regular trading on the New York Stock
Exchange on each day on which said Exchange is open for unrestricted trading and
as of such other hours, if any, as may be authorized by the Board, the net asset
value and the public offering price of a share of beneficial interest of the
Bond Index Fund (each, a "Share"), such determination to be made in accordance
with the provisions of the Articles and By-Laws of the Fund and Prospectus and
Statement of Additional Information relating to the Bond Index Fund as they may
from time to time be amended, and any applicable resolutions of the Board at the
time in force and applicable; and promptly to notify the Fund, or such other
persons as the Fund may request of the results of such computation and
determination. In computing the net asset value hereunder, FSC may rely in good
faith upon information furnished to it by any Authorized Person in respect of
(i) the manner of accrual of the liabilities of the Bond Index Fund and in
respect of liabilities of the Bond Index Fund not appearing on its books of
account kept by FSC, (ii) reserves, if any, authorized by the Board or that no
such reserves have been authorized, (iii) the source of the price quotations of
Portfolio Securities to be used in computing the net asset value, (iv) the value
to be assigned to any security for which no price quotations are available, and
(v) the method of computation of the public offering price on the basis of the
net asset value of the Shares, and FSC shall not be responsible for any loss
occasioned by such reliance or for any good faith reliance on any quotations
received from a source pursuant to (iii) above;

4.2 Calculation of Income, Gain and Yield. FSC shall compute Bond
Index Fund's net income and net capital gain (loss), and yield in accordance
with the Trust's Prospectus and resolutions of its Board of Trustees, and
applicable rules and policies of the Securities and Exchange Commission;

4.3 Financial Accounts and Records. FSC shall furnish the Fund daily
with a statement of condition of the Bond Index Fund and keep and maintain all
financial accounts and records of the Bond Index Fund (other than those required
to be maintained by the Fund's Custodian and Transfer Agent); FSC shall maintain
records with respect to the services provided by FSC hereunder in compliance
with the applicable rules and regulations of the 1940 Act;

4.4 Preparation of Reports and Filings With respect to the Bond Index
Fund, FSC shall compile data for and prepare for execution and filing with the
SEC required reports and notices to shareholders of record and the SEC
including, without limitation, Semi-Annual and Annual Reports to Shareholders,
Semi-Annual Reports on Form N-SAR and timely Rule 24f-2 Notices (or such portion
of such reports and filings that pertain specifically to the Bond Index Fund);

4.5 Preparation of Tax Reports and Filings, and other Federal and State
Filings. With respect to the Bond Index Fund, FSC shall compile data for, and
prepare for execution and filing all reports or other documents required by
Federal, state and other applicable laws and regulations, including those
required by applicable Federal and state tax laws (other than those required to
be filed by the Trust's Custodian or Transfer Agent);

4.6 Data and Supplies. FSC shall furnish statistical and research data,
clerical services, and stationery and office supplies in connection with the
performance of its duties with respect to the Bond Index Fund hereunder;

4.7 Compliance Procedures. FSC shall assist in developing and monitoring
compliance procedures for the Bond Index Fund including, without limitation,
procedures to monitor compliance with applicable law and regulations, such
Fund's investment objectives, policies and restrictions, its continued
qualification as a regulated investment company under the Internal Revenue Code
of 1986, as amended, and other tax matters; and

4.8 Registration Statements. FSC shall assist to the extent requested
by the Fund and its outside counsel with the preparation of the Fund's
Registration Statement on Form N-1A or any supplements or amendments thereto, as
the same pertain to the Bond Index Fund.

5. Compensation of FSC. For the services to be rendered and the facilities
to be provided by FSC hereunder, the Fund shall pay to FSC a fund accounting and
servicing fee from the assets of the Bond Index Fund, computed and paid monthly,
and FSC's out-of-pocket expenses incurred in connection with the performance of
its duties hereunder, including legal fees incurred by FSC pursuant to Section
6.1 hereto, all in accordance with the schedule attached hereto, as the same may
be changed by mutual agreement of the parties from time to time.

6. Concerning FSC.

6.1 Performance of Duties and Standard of Care. FSC shall not be
liable for any error of judgment or mistake of law or for any act or omission in
the performance of its duties hereunder, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties hereunder.

FSC will be entitled to receive and act upon the advice of independent
counsel of its own selection, which may be counsel for the Fund, and will be
without liability for any action taken or thing done or omitted to be done in
accordance with this Agreement in good faith in conformity with such advice. In
the performance of its duties hereunder, FSC will be protected and not be
liable, and will be indemnified and held harmless by the Fund for any action
taken or omitted to be taken by it in good faith reliance upon the terms of this
Agreement, any Officers' Certificate, Proper Instructions, resolution of the
Board, telegram, notice, request, certificate or other instrument reasonably
believed by FSC to be genuine and for any other loss to the Fund except in the
case of FSC's gross negligence, willful misfeasance or bad faith in the
performance of its duties or reckless disregard of its obligations and duties
hereunder.

FSC will be under no duty or obligation to inquire into and will not be
liable for:

(a) the validity of the issue of any Portfolio Securities purchased
by or for the Fund, the legality of the purchases thereof or the propriety
of the price incurred therefor;

(b) the legality of any sale of any Portfolio Securities by or for
the Fund or the propriety of the amount for which the same are sold;

(d) the legality of the repurchase of any Shares of the Fund
or the propriety of the amount to be paid therefor;

(e) the legality of any redemption by a shareholder of Shares of a
Fund, or the declaration of any dividend by the Fund or the legality of the
distribution of any Portfolio Securities as payment in kind of such redemption
or dividend; and

Moreover, FSC will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time held by the Fund are such as may
properly be held by the Fund under the provisions of its Declaration of Trust,
By-Laws, the Fund's then current prospectus and statement of additional
information, any federal or state statutes or any rule or regulation of any
governmental agency.

Notwithstanding anything in this Agreement to the contrary, in no event
shall FSC be liable hereunder or to any third party:

(a) for any losses or damages of any kind resulting from acts of God,
earthquakes, fires, floods, storms or other disturbances of nature, epidemics,
strikes, riots, nationalization, expropriation, currency restrictions, acts of
war, civil war or terrorism, insurrection, nuclear fusion, fission or radiation,
the interruption, loss or malfunction of utilities, transportation, or computers
(hardware or software) and computer facilities, the unavailability of energy
sources and other similar happenings or events except as results from FSC's own
gross negligence; or

(b) for special, punitive or consequential damages arising from the
provision of services hereunder, even if FSC has been advised of the possibility
of such damages.

6.2 Subcontractors. FSC may subcontract for the performance of FSC's
obligations hereunder with any one or more persons, including, without
limitation, Investors Bank & Trust Company, a Massachusetts chartered trust
company, provided, however, that unless the Fund otherwise expressly agrees in
writing, FSC shall be as fully responsible to the Fund for the acts and
omissions of any subcontractor as it would be for its own acts or omissions.

6.3 Activities of FSC. The services of FSC to the Fund are not to be
deemed to be exclusive, FSC being free to render administrative, fund accounting
and/or other services to other parties. It is understood that members of the
Board, officers, and shareholders of the fund are or may become similarly
interested in the Fund and that FSC and/or any of it affiliates may be or become
interested in the Fund as a shareholder of the fund or otherwise.

6.4 Insurance. FSC need not maintain any special insurance for the
benefit of the Fund.

7. Termination. This Agreement may be terminated at any time without
penalty upon sixty days written notice delivered by either party to the other by
means of registered mail, and upon the expiration of such sixty days this
Agreement will terminate. At any time after the termination of this Agreement,
the Fund will, at its request, have access to the records of FSC relating to the
performance of its duties hereunder.

8. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of a governmental
agency. The parties further agree that a breach of this provision would
irreparably damage the other party and accordingly agree that each of them is
entitled, without bond or other security, to an injunction or injunctions to
prevent breaches of this provision.

9. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below or telecopied; namely:

(a) In the case of notices sent to the Fund to:

Excelsior Institutional Trust
73 Tremont Street
Boston, MA 02108

(b) In the case of notices sent to FSC to:

Federated Services Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

with copy to:

Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention:

or at such other place as such party may from time to time designate in writing.

10. Amendments. This Agreement may not be altered or amended, except by an
instrument in writing, executed by both parties, and in the case of the Fund,
such alteration or amendment will be authorized and approved by its Board.

11. Limitation of Liability. Notice is hereby given that this Agreement
has been executed on behalf of the Fund by an officer of the Fund as an officer
and not individually and the obligations of the Fund arising out of this
Agreement are not binding upon any of the trustees, officers or shareholders of
the Fund individually but are binding only upon the assets and property of the
Fund.

12. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts.

13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.

Excelsior Institutional Trust

By:____________________________
Name:
Title:
ATTEST:

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

Federated Services Company

By:____________________________
Name:
Title:
ATTEST:

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

DATE:______________________

CONSENT OF PRICE WATERHOUSE LLP, INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporated by reference in the Statement of
Additional Information constituting parts of this Post-Effective Amendment No. 5
under the Securities Act of 1933 to the registration statement on Form N-1A of
Excelsior Institutional Trust (the "Registration Statement") (File Nos.
33-78264, 811-8490) of our report dated July 25, 1995, relating to the financial
statements of the Bond Market Portfolio, Balanced Portfolio, Equity Growth
Portfolio, Equity Portfolio, Income Portfolio, Total Return Bond Portfolio, and
International Equity Portfolio (series of the St. James Portfolios), appearing
in the May 31, 1995 Annual Report to Shareholders of Excelsior Institutional
Trust, which is also incorporated by reference into the Registration Statement.

/S/ PRICE WATERHOUSE LLP
Boston, Massachusetts
December 15, 1995

<PAGE>

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Independent Auditors" in the Statement of
Additional Information in Post-Effective Amendment Number 5 to the Registration
Statement (Form N-1A Nos. 33-78264, 811-8490) of Excelsior Institutional Trust,
and to the incorporation by reference of our report dated July 25, 1995 on the
Excelsior Institutional Equity Fund, Excelsior Institutional Income Fund,
Excelsior Institutional Total Return Bond Fund, Excelsior Institutional Bond
Index Fund, Excelsior Institutional Balanced Fund, Excelsior Institutional
Equity Growth Fund, and Excelsior Institutional International Fund, seven of the
portfolios comprising the Excelsior Institutional Trust, included in the 1995
Annual Report to Shareholders of Excelsior Institutional Trust.

/S/ ERNST & YOUNG LLP
Boston, Massachusetts
December 15, 1995

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretary of FEDERATED INVESTMENT PORTFOLIOS and the
Deputy General Counsel of Federated Investors, and each of them, their true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for them and in their names, place and stead, in any and all
capacities, to sign any and all documents to be filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, by means of the
Securities and Exchange Commission's electronic disclosure system known as
EDGAR; and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as each of them
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.

SIGNATURES TITLE DATE

/s/John F. Donahue Chairman and Trustee October 18, 1995
John F. Donahue (Chief Executive Officer)

/s/J. Christopher Donahue President and Trustee October 18, 1995
- -------------------------
J. Christopher Donahue

/s/David M. Taylor Treasurer October 18, 1995
- ------------------
David M. Taylor (Principal Financial and
Accounting Officer)

/s/Thomas G. Bigley Trustee October 18, 1995
Thomas G. Bigley

/s/John T. Conroy, Jr. Trustee October 18, 1995
John T. Conroy, Jr.

/s/William J. Copeland Trustee October 18, 1995
William J. Copeland

/s/James E. Dowd Trustee October 18, 1995
James E. Dowd

/s/Lawrence D. Ellis, M.D. Trustee October 18, 1995
Lawrence D. Ellis, M.D.

/s/Edward L. Flaherty, Jr. Trustee October 18, 1995
Edward L. Flaherty, Jr.

/s/Peter E. Madden Trustee October 18, 1995
Peter E. Madden

/s/Gregor F. Meyer Trustee October 18, 1995
Gregor F. Meyer

/s/John E. Murray, Jr. Trustee October 18, 1995
John E. Murray, Jr.

/s/Wesley W. Posvar Trustee October 18, 1995
Wesley W. Posvar

/s/Marjorie P. Smuts Trustee October 18, 1995
Marjorie P. Smuts

Sworn to and subscribed before me this 18th day of October, 1995.

/s/Marie M. Hamm
Marie M. Hamm, Notary Public
My Commission Expires: September 16, 1996

[Notarial Seal]

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Excelsior Institutional Trust Annual Report, dated 5/31/95 and is qualified in
its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000922447
<NAME> EXCELSIOR INSTITUTIONAL TRUST
<SERIES>
<NUMBER> 9
<NAME> EXCELSIOR INSTITUTIONAL EQUITY FUND

<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JAN-16-1995
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 15,401,227
<INVESTMENTS-AT-VALUE> 15,401,227
<RECEIVABLES> 16,836
<ASSETS-OTHER> 5,081
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,423,144
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,467
<TOTAL-LIABILITIES> 14,467
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,371,489
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 62,264
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (284,225)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,259,149
<NET-ASSETS> 15,408,677
<DIVIDEND-INCOME> 70,381
<INTEREST-INCOME> 23,003
<OTHER-INCOME> 0
<EXPENSES-NET> 4,381
<NET-INVESTMENT-INCOME> 89,003
<REALIZED-GAINS-CURRENT> (284,225)
<APPREC-INCREASE-CURRENT> 1,259,149
<NET-CHANGE-FROM-OPS> 1,063,927
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 26,739
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,026,411
<NUMBER-OF-SHARES-REDEEMED> 33,335
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 15,408,677
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 33,237
<AVERAGE-NET-ASSETS> 9,799,033
<PER-SHARE-NAV-BEGIN> 7.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.70
<PER-SHARE-DIVIDEND> 0.02
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.73
<EXPENSE-RATIO> 0.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Excelsior
Institutional Trust Annual Report, dated 5/31/95 and is qualified in its
entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000922447
<NAME> EXCELSIOR INSTITUTIONAL TRUST
<SERIES>
<NUMBER> 7
<NAME> EXCELSIOR INSTITUTIONAL INCOME FUND

<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JAN-16-1995
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 33,441,042
<INVESTMENTS-AT-VALUE> 33,441,042
<RECEIVABLES> 13,925
<ASSETS-OTHER> 7,418
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33,462,385
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232,770
<TOTAL-LIABILITIES> 232,770
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31,884,251
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 490
<ACCUMULATED-NET-GAINS> 95,032
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,250,822
<NET-ASSETS> 33,229,615
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 758,404
<OTHER-INCOME> 0
<EXPENSES-NET> 12,476
<NET-INVESTMENT-INCOME> 745,928
<REALIZED-GAINS-CURRENT> 95,032
<APPREC-INCREASE-CURRENT> 1,250,822
<NET-CHANGE-FROM-OPS> 2,091,782
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 745,928
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 490
<NUMBER-OF-SHARES-SOLD> 4,538,335
<NUMBER-OF-SHARES-REDEEMED> 2,294
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 33,229,608
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 59,892
<AVERAGE-NET-ASSETS> 27,902,142
<PER-SHARE-NAV-BEGIN> 7.00
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> 0.33
<PER-SHARE-DIVIDEND> 0.19
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.33
<EXPENSE-RATIO> 0.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Excelsior Institutional Trust Annual Report, dated 5/31/95, and is qualified in
its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000922447
<NAME> EXCELSIOR INSTITUTIONAL TRUST
<SERIES>
<NUMBER> 8
<NAME> EXCELSIOR INSTITUTIONAL TOTAL RETURN BOND FUND

<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JAN-19-1995
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 25,050,453
<INVESTMENTS-AT-VALUE> 25,050,453
<RECEIVABLES> 18,730
<ASSETS-OTHER> 6,076
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,075,259
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 161,760
<TOTAL-LIABILITIES> 161,760
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,574,651
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 289
<ACCUMULATED-NET-GAINS> 127,441
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,211,696
<NET-ASSETS> 24,913,499
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 481,368
<OTHER-INCOME> 0
<EXPENSES-NET> 8,011
<NET-INVESTMENT-INCOME> 473,357
<REALIZED-GAINS-CURRENT> 127,441
<APPREC-INCREASE-CURRENT> 1,211,696
<NET-CHANGE-FROM-OPS> 1,812,494
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 473,357
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 289
<NUMBER-OF-SHARES-SOLD> 3,333,799
<NUMBER-OF-SHARES-REDEEMED> 1,174
<SHARES-REINVESTED> 1,176
<NET-CHANGE-IN-ASSETS> 24,913,492
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 46,732
<AVERAGE-NET-ASSETS> 18,320,790
<PER-SHARE-NAV-BEGIN> 7.00
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 0.47
<PER-SHARE-DIVIDEND> 0.18
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.47
<EXPENSE-RATIO> 0.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains financial information extracted from the Excelsior
Institutional Trust Annual Report, dated 5/31/95 and is qualified in its
entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000922447
<NAME> EXCELSIOR INSTITUTIONAL TRUST
<SERIES>
<NUMBER> 2
<NAME> EXCELSIOR INSTITUTIONAL BOND INDEX FUND

<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUL-8-1994
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 16,280,745
<INVESTMENTS-AT-VALUE> 16,280,745
<RECEIVABLES> 190,221
<ASSETS-OTHER> 8718
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16,479,684
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 915,145
<TOTAL-LIABILITIES> 915,145
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,877,781
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 498
<ACCUMULATED-NET-GAINS> 75,708
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 611,548
<NET-ASSETS> 15,564,539
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,428,523
<OTHER-INCOME> 0
<EXPENSES-NET> 23,008
<NET-INVESTMENT-INCOME> 1,408,515
<REALIZED-GAINS-CURRENT> 136,598
<APPREC-INCREASE-CURRENT> 611,548
<NET-CHANGE-FROM-OPS> 2,153,661
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,405,515
<DISTRIBUTIONS-OF-GAINS> 60,890
<DISTRIBUTIONS-OTHER> 498
<NUMBER-OF-SHARES-SOLD> 4,741,011
<NUMBER-OF-SHARES-REDEEMED> 2,598,235
<SHARES-REINVESTED> 167
<NET-CHANGE-IN-ASSETS> 15,547,872
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 103,935
<AVERAGE-NET-ASSETS> 21,532,793
<PER-SHARE-NAV-BEGIN> 7.00
<PER-SHARE-NII> 0.46
<PER-SHARE-GAIN-APPREC> 0.28
<PER-SHARE-DIVIDEND> 0.46
<PER-SHARE-DISTRIBUTIONS> 0.02
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.26
<EXPENSE-RATIO> 0.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains financial information extracted from Excelsior
Institutional Trust Annual Report, dated 5/31/95 and is qualified in its
entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000922447
<NAME> EXCELSIOR INSTITUTIONAL TRUST
<SERIES>
<NUMBER> 4
<NAME> EXCELSIOR INSTITUTIONAL BALANCED FUND

<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUL-8-1994
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 74,478,964
<INVESTMENTS-AT-VALUE> 74,478,964
<RECEIVABLES> 15,213
<ASSETS-OTHER> 23,423
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 74,517,600
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39,789
<TOTAL-LIABILITIES> 39,789
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67,737,133
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 905,269
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 796,208
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,039,201
<NET-ASSETS> 74,477,811
<DIVIDEND-INCOME> 795,425
<INTEREST-INCOME> 2,401,613
<OTHER-INCOME> 0
<EXPENSES-NET> 67,622
<NET-INVESTMENT-INCOME> 3,129,416
<REALIZED-GAINS-CURRENT> 1,047,160
<APPREC-INCREASE-CURRENT> 5,039,201
<NET-CHANGE-FROM-OPS> 9,215,777
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,224,147
<DISTRIBUTIONS-OF-GAINS> 250,952
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,689,338
<NUMBER-OF-SHARES-REDEEMED> 4,018,895
<SHARES-REINVESTED> 99
<NET-CHANGE-IN-ASSETS> 74,461,144
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 240,817
<AVERAGE-NET-ASSETS> 63,287,214
<PER-SHARE-NAV-BEGIN> 7.00
<PER-SHARE-NII> 0.35
<PER-SHARE-GAIN-APPREC> 0.64
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 0.03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.70
<EXPENSE-RATIO> 0.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUL-8-1994
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 52,352,701
<INVESTMENTS-AT-VALUE> 52,352,701
<RECEIVABLES> 20,340
<ASSETS-OTHER> 19,761
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52,392,802
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46,009
<TOTAL-LIABILITIES> 46,009
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,537,785
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 147,284
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,653,866
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,007,858
<NET-ASSETS> 52,346,793
<DIVIDEND-INCOME> 496,862
<INTEREST-INCOME> 112,874
<OTHER-INCOME> 0
<EXPENSES-NET> 52,811
<NET-INVESTMENT-INCOME> 556,925
<REALIZED-GAINS-CURRENT> 2,653,866
<APPREC-INCREASE-CURRENT> 3,007,858
<NET-CHANGE-FROM-OPS> 6,218,649
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 409,641
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,437,754
<NUMBER-OF-SHARES-REDEEMED> 3,785,559
<SHARES-REINVESTED> 20
<NET-CHANGE-IN-ASSETS> 52,330,126
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 192,166
<AVERAGE-NET-ASSETS> 49,425,689
<PER-SHARE-NAV-BEGIN> 7.00
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 0.85
<PER-SHARE-DIVIDEND> 0.06
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.87
<EXPENSE-RATIO> 0.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JAN-24-1995
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 8,839,921
<INVESTMENTS-AT-VALUE> 8,839,921
<RECEIVABLES> 6,956
<ASSETS-OTHER> 4,974
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,851,851
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47,676
<TOTAL-LIABILITIES> 47,676
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,888,513
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 90,588
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,534
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 815,540
<NET-ASSETS> 8,804,175
<DIVIDEND-INCOME> 66,282
<INTEREST-INCOME> 31,668
<OTHER-INCOME> 0
<EXPENSES-NET> 6,584
<NET-INVESTMENT-INCOME> 91,366
<REALIZED-GAINS-CURRENT> 8,756
<APPREC-INCREASE-CURRENT> 815,540
<NET-CHANGE-FROM-OPS> 915,662
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,189,132
<NUMBER-OF-SHARES-REDEEMED> 72,205
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,804,175
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28,563
<AVERAGE-NET-ASSETS> 7,509,140
<PER-SHARE-NAV-BEGIN> 7.00
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 0.80
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.88
<EXPENSE-RATIO> 0.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0