EXCELSIOR INSTITUTIONAL TRUST, 485BPOS, 1995-10-02

EXCELSIOR INSTITUTIONAL TRUST
485BPOS, 1995-10-02

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As filed with the Securities and Exchange Commission on October 2, 1995
File Nos. 33-78264, 811-8490

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 4

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 6

Excelsior Institutional Trust
(Exact Name of Registrant as Specified in Charter)

6 St. James Avenue, Boston, Massachusetts 02116
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: 617-423-0800

Thomas M. Lenz
6 St. James Avenue, Boston, Massachusetts 02116
(Name and Address of Agent for Service)

Copy To: Roger P. Joseph, Esq.
Bingham, Dana & Gould, 150 Federal Street, Boston, Massachusetts 02110

It is proposed that this filing will become effective (check appropriate box)

[X] Immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

The Registrant has previously registered an indefinite number of its
shares of beneficial interest under the Securities Act of 1933, as amended,
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended. The
Registrant filed the notice required by Rule 24f-2 (for the fiscal year ending
May 31, 1995) on July 30, 1995.

St. James Portfolios has also executed this Registration Statement.

UST205.EDG

<PAGE>
EXCELSIOR INSTITUTIONAL TRUST
CROSS-REFERENCE SHEET
(As Required by Rule 495)

PART A ITEM NUMBER: Prospectus Headings.

1. COVER PAGE: Cover Page.

2. SYNOPSIS: Summary of Expenses.

3. CONDENSED FINANCIAL INFORMATION: Financial Highlights.

4. GENERAL DESCRIPTION OF REGISTRANT: Cover Page; Investment Objectives
and Policies; Special Information Concerning Hub and Spoke(R) Structure.

5. MANAGEMENT OF THE FUND: Management of the Trust and Portfolio Series.

5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: Not applicable.

6. CAPITAL STOCK AND OTHER SECURITIES: Cover Page; Pricing of Shares; How
to Purchase, Exchange and Redeem Shares; Tax Matters; Management of the Trust
and Portfolio Series; Dividends and Capital Gains Distributions; Description
of Shares, Voting Rights and Liabilities.

7. PURCHASE OF SECURITIES BEING OFFERED: How to Purchase, Exchange and
Redeem Shares; Investor Programs.

8. REDEMPTION OR REPURCHASE: How to Purchase, Exchange and Redeem Shares;
Investor Programs.

9. PENDING LEGAL PROCEEDINGS: Not applicable.

PART B ITEM NUMBER: Statement of Additional Information Headings.

10. COVER PAGE: Cover Page.

11. TABLE OF CONTENTS: Table of Contents.

12. GENERAL INFORMATION AND HISTORY: Not applicable.

13. INVESTMENT OBJECTIVES AND POLICIES: Investment Objectives, Policies and
Restrictions.

14. MANAGEMENT OF THE FUND: Management of the Trust and Portfolio Series.

15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Management of the
Trust and Portfolio Series.

16. INVESTMENT ADVISORY AND OTHER SERVICES: Management of the Trust and
Portfolio Series; see Prospectus -- "Management of the Trust and Portfolio
Series".

17. BROKERAGE ALLOCATION AND OTHER PRACTICES: Investment Objectives,
Policies and Restrictions.

18. CAPITAL STOCK AND OTHER SECURITIES: Excelsior Institutional Trust;
Taxation; Description of the Trust; Fund Shares; see Prospectus -- "Management
of the Trust and Portfolio Series" and "Description of Shares, Voting Rights
and Liabilities".

19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED:
Determination of Net Asset Value; Valuation of Securities; Additional
Purchase, Exchange and Redemption Information.

20. TAX STATUS: Taxation; see Prospectus -- "Tax Matters".

21. UNDERWRITERS: Management of the Trust and Portfolio Series; see
Prospectus -- "Management of the Trust and Portfolio Series".

22. CALCULATION OF PERFORMANCE DATA: Performance Information.

23. FINANCIAL STATEMENTS: Financial Statements.

PART C

Information required to be included in Part C is set forth under the
appropriate items, so numbered, in Part C of this Registration Statement.

<PAGE>

EXPLANATORY NOTE

This Post-Effective Amendment No. 4 (the "Amendment") to the
Registrant's registration statement on Form N-1A (the "Registration Statement")
is being filed with respect to Excelsior Institutional Equity Fund, Excelsior
Institutional Income Fund, Excelsior Institutional Total Return Bond Fund,
Excelsior Institutional Equity Index Fund, Excelsior Institutional Bond Index
Fund, Excelsior Institutional Small Capitalization Fund, Excelsior Institutional
Balanced Fund, Excelsior Institutional Equity Growth Fund, Excelsior
Institutional Value Equity Income Fund and Excelsior Institutional International
Equity Fund (collectively, the "Funds"), each a series of the Registrant. The
Amendment is being filed in order to include updated financial information and
other disclosure in (i) the Statement of Additional Information and (ii) the
prospectus which describe the Funds.

<PAGE>

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

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

EXCELSIOR INSTITUTIONAL TRUST
6 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
(617) 423-0800
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

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

This Prospectus describes ten 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 Equity Index Fund,
Excelsior Institutional Bond Index Fund, Excelsior Institutional Small
Capitalization Fund, Excelsior Institutional Balanced Fund, Excelsior
Institutional Equity Growth Fund, Excelsior Institutional Value Equity Income
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 (617) 423-0800. 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
RISK 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 OCTOBER 2, 1995

<PAGE>

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 OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIOS OF SECURITIES, THE TRUST SEEKS TO ACHIEVE EACH FUND'S INVESTMENT
OBJECTIVE BY INVESTING ALL OF THAT FUND'S INVESTABLE ASSETS IN A CORRESPONDING
PORTFOLIO OR SERIES OF ST. JAMES PORTFOLIOS (THE "PORTFOLIO SERIES"), AN
OPEN-END MANAGEMENT INVESTMENT COMPANY (EACH SUCH SERIES IS REFERRED TO HEREIN
AS A "PORTFOLIO"; COLLECTIVELY, THE "PORTFOLIOS"). EACH PORTFOLIO HAS THE SAME
INVESTMENT OBJECTIVE AND POLICIES AS ITS CORRESPONDING FUND. THE FUNDS INVEST IN
THE PORTFOLIOS THROUGH SIGNATURE FINANCIAL GROUP, INC.'S INVESTMENT FUND
STRUCTURE KNOWN AS HUB AND SPOKE(R) . HUB AND SPOKE(R) EMPLOYS A TWO-TIER
MASTER/FEEDER FUND STRUCTURE AND IS A REGISTERED SERVICE MARK OF SIGNATURE
FINANCIAL GROUP, INC. SEE "SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)
STRUCTURE" ON PAGE [__].

United States Trust Company of The Pacific Northwest ("U.S. Trust
Pacific") is the investment adviser for the Portfolios corresponding to the
Funds listed below. U.S. Trust Pacific has delegated the daily management of the
security holdings of the Portfolios for the following Funds to the investment
managers named below, acting as subadvisers.

Equity Index Fund, Bond Index
Fund and Small Cap Fund ................. United States Trust Company of New
York ("U.S. Trust")

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

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

Value Equity Income Fund................. Spare, Kaplan, Bischel & Associates

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

U.S. Trust is the investment adviser for the Portfolios
corresponding to the Equity Fund, Income Fund and Total Return
Bond Fund. U.S. Trust Pacific, U.S. Trust and the
subadvisers are referred to collectively as the "investment

managers".

For more information on the investment advisers and subadvisers of the
Portfolios, please refer below to the section entitled "Management of the Trust
and Portfolio Series - Investment Managers". Signature Financial Services, Inc.
("SFSI") is the servicing and fund accounting agent of the Funds and the
Portfolios.

<PAGE>

EXCELSIOR INSTITUTIONAL TRUST
SUMMARY OF EXPENSES

The following table provides (i) a summary of expenses relating to
purchases and sales of shares of the Funds, and the aggregate annual operating
expenses for the Funds and their corresponding Portfolios, as a percentage of
average net assets of the Funds, and (ii) an example illustrating the dollar
cost of such 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 and its corresponding
Portfolio, as a percentage of the average daily net assets of the Fund. The
Trustees of the Trust believe that the aggregate per share expenses of each Fund
and its corresponding Portfolio will be less than or approximately equal to the
expenses which that Fund would incur if the Trust retained the services of an
investment adviser and the assets of that Fund were invested directly in the
type of securities being held by its corresponding Portfolio. Expenses of the
Funds and Portfolios are discussed below under "Management of the Trust and
Portfolio Series".

SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed onPurchases........................................ None
Sales Load Imposed on Reinvested Dividends............................ None
Deferred Sales Load................................................... None
Redemption Fees....................................................... None
Exchange Fees......................................................... None

EXPENSE TABLE
ANNUAL OPERATING EXPENSES
<TABLE>
<CAPTION>
TOTAL
RETURN EQUITY BOND
EQUITY INCOME BOND INDEX INDEX
FUND FUND FUND FUND FUND

<S> <C> <C> <C> <C> <C>
Advisory Fees (after waiver)............................ * * * * *
12b-1 Fees.............................................. None None None None None
Other Expenses

Administrative Fees ............................... 0.07% 0.07% 0.07% 0.07% 0.07%
Shareholder Servicing Fees (after waiver).......... 0% 0% 0% 0% 0%
Other Operating Expenses (after waivers and
reimbursement)..................................... 0.05% 0.05% 0.05% 0.05% 0.05%
----- ----- ----- ----- -----
Total Operating Expenses (after waivers and
reimbursements)......................................... 0.12% 0.12% 0.12% 0.12% 0.12%
===== ===== ===== ===== =====
</TABLE>

<TABLE>
<CAPTION>
Value Inter-
Small Equity Equity national
Cap Balanced Growth Income Equity
FUND FUND FUND FUND FUND
-------- ------ ------ ------ ----
<S> <C> <C> <C> <C> <C>

Advisory Fees (after waiver) ........................... * * * * *
12b-1 Fees ............................................. None None None None None
Other Expenses

Administrative Fees .............................. 0.07% 0.07% 0.07% 0.07% 0.07%
Shareholder Servicing Fees (after waiver) ........ 0% 0% 0% 0% 0%
Other Operating Expenses (after waivers and
reimbursement) ................................... 0.05% 0.05% 0.05% 0.05% 0.18%
------ ------ ------ ------ ------
Total Operating Expenses (after waivers and
reimbursements) ........................................ 0.12% 0.12% 0.12% 0.12% 0.25%
======== ====== ====== ====== ======
</TABLE>

EXAMPLE

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

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>

Equity Fund, Income Fund, Total
Return Bond Fund, Equity Index
Fund, Bond Index Fund, Small Cap
Fund, Balanced Fund, Equity Growth
Fund and Value Equity Income Fund.......................... $1 $4 $7 $15
International Equity Fund....................................... $3 $8 $14 $32
</TABLE>

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

* Each investment adviser has agreed to waive all investment advisory fees.
While no Portfolio pays any fee to its investment adviser, each institutional
investor enters into an asset management services agreement with U.S. Trust
Pacific and agrees 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 fees paid directly to U.S. Trust Pacific by an
institutional investor or its customers.

THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION

<PAGE>

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 and
the shareholder servicing agents to waive certain of their fees, and (ii) by
U.S. Trust to reimburse the Trust for certain administrative fees and other
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 and its corresponding Portfolio 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 Portfolios for the Equity, Income,
Total Return Bond, Small Cap, Balanced, Equity Growth and Value Equity Income
Funds, (y) 0.25% of the average daily net assets of the Portfolios for the
Equity Index and Bond Index Funds, and (z) 1.00% of the average daily net assets
of the Portfolio for the International Equity Fund; (b) the shareholder
servicing fees would equal 0.25% of the average daily net assets of each Fund ;
(c) other expenses would equal the following percentages of the average daily
net assets of the Funds: Equity Fund - 1.70%, Income Fund - 0.68%, Total Return
Bond Fund - 0.96%, Equity Index Fund - 0.74%, Bond Index Fund - 0.66%, Small Cap
Fund - 1.05%, Balanced Fund - 0.35%, Equity Growth Fund - 0.39%, Value Equity
Income Fund - 0.78%, and International Equity Fund - 2.00%; and (d) aggregate
total operating expenses would equal the following percentages of the average
daily net assets of the Funds: Equity Fund - 2.67%, Income Fund -1.65%, Total
Return Bond Fund - 1.93%, Equity Index Fund - 1.31%, Bond Index Fund - 1.23%,
Small Cap Fund - 2.02%, Balanced Fund - 1.32%, Equity Growth Fund - 1.36%, Value
Equity Income Fund - 1.75%, and International Equity Fund - 3.32%. For more
information with respect to the expenses of each of the Funds and its
corresponding Portfolio, see "Management of the Trust and Portfolio Series". 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.

Total Return Equity Bond
Equity Income Bond Index Index
Fund Fund Fund Fund Fund
--------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>

Net Asset Value, Beginning of Period.................................. $ 7.00 $ 7.00 $ 7.00 $ 7.00 $ 7.00
--------- --------- ------------ --------- ---------
Investment Operations:
Net investment income................................................. 0.05 0.19 0.18 0.26 0.46
Net realized and unrealized gain from Portfolio Series................ 0.70 0.33 0.47 1.18 0.28
--------- --------- ------------ --------- ---------
Total from Investment Operations...................................... 0.75 0.52 0.65 1.44 0.74
--------- --------- ------------ --------- ---------
Distributions:
From net investment income............................................ (0.02) (0.19) (0.18) (0.13) (0.46)
In excess of net investment income.................................... - - - - -
From net realized gains............................................... - - - (0.04) (0.02)
--------- --------- ------------ --------- ---------
Net Asset Value, End of Period........................................ $ 7.73 $ 7.33 $ 7.47 $ 8.27 $ 7.26
========= ========= ============ ========= =========
Total Return (b)(e)................................................... 10.80% 7.51% 9.40% 20.96% 11.03%
Ratios and Supplemental Data:
Ratios to Average Net Assets
Expenses (c)(d)....................................................... 0.12% 0.12% 0.12% 0.12% 0.12%
Net Investment Income (c)............................................. 2.44% 7.17% 7.09% 2.84% 7.33%
Net Assets at end of Period (000's omitted)........................... $15,409 $33,230 $24,913 $13,107 $15,565
- ---------------------------------------------------------------------------------------------------------------------------
(a) Commencement of operations: 01/16/95 01/16/95 01/19/95 07/11/94 07/11/94
(b) Not annualized
(c) Annualized
(d) Reflects the Fund's proportionate share of its corresponding Portfolio's expenses 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% 1.31% 1.23%
Net Investment Income (Loss)........................................... (0.12%) 5.65% 5.28% 1.65% 6.22%
(e) Each investment adviser has agreed to waive all investment advisory fees. While no
Portfolio pays any fee to its adviser, each institutional investor enters into an asset
management services agreement with U.S. Trust Pacific and agrees to pay
annual fees calculated as a specific percentage of average net assets.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Value
Small Equity Equity International
Capitalization Balanced Growth Income Equity
Fund Fund Fund Fund Fund
-------------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>

Net Asset Value, Beginning of Period......................... $ 7.00 $ 7.00 $ 7.00 $ 7.00 $ 7.00
-------------- --------- --------- ------------ -------------
Investment Operations:
Net investment income........................................ 0.11 0.35 0.08 0.34 0.08
Net realized and unrealized gain from Portfolio Series....... 0.66 0.64 0.85 0.97 0.80
-------------- --------- --------- ------------ -------------
Total from Investment Operations............................. 0.77 0.99 0.93 1.31 0.88
-------------- --------- --------- ------------ -------------
Distributions:
From net investment income................................... (0.06) (0.26) (0.06) (0.26) -
In excess of net investment income........................... - - - - -
From net realized gains...................................... (0.01) (0.03) - (0.06) -
-------------- --------- --------- ------------ -------------
Net Asset Value, End of Period............................... $ 7.70 $ 7.70 $ 7.87 $ 7.99 $ 7.88
============== ========= ========= ============ =============
Total Return (b)(e).......................................... 11.10% 14.59% 13.38% 19.32% 12.57%
Ratios and Supplemental Data:
Ratios to Average Net Assets
Expenses (c)(d).............................................. 0.12% 0.12% 0.12% 0.12% 0.25%
Net Investment Income (c).................................... 1.59% 5.55% 1.27% 5.03% 3.47%
Net Assets at end of Period (000's omitted).................. $13,329 $74,478 $52,347 $17,483 $ 8,804
- ---------------------------------------------------------------------------------------------------------------------------
(a) Commencement of operations: 07/11/94 07/11/94 07/11/94 07/11/94 01/24/95
(b) Not annualized
(c) Annualized
(d) Reflects the Fund's proportionate share of its corresponding Portfolio's
expenses 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..................................................... 2.02% 1.32% 1.36% 1.75% 3.32%
Net Investment Income (Loss)................................. (0.31%) 4.35% 0.03% 3.40% 0.40%
(e) Each investment adviser has agreed to waive all investment advisory fees.
While no Portfolio pays any fee to its adviser, each institutional investor enters
into an asset management services agreement with U. S. Trust
Pacific and agrees to pay annual fees calculated as a specific percentage of
average net assets.
</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. The Trust seeks to achieve the investment objective of
each of the Funds by investing all investable assets of that Fund in its
corresponding Portfolio, which has the same investment objective and policies as
that Fund.

Unless otherwise stated, all 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 a Fund and other investors in its
corresponding Portfolio is not required to change that Portfolio's investment
objective or any of the Portfolio's investment policies and strategies. Any
changes in a Fund's or a Portfolio's investment objective, policies or
strategies could result in the 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 the investment objective of the Fund by investing all of the investable
assets of the Fund in Equity Portfolio, a diversified open-end investment
company with the same investment objective and policies as the Equity Fund.
Equity Portfolio seeks to achieve its 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 the investment objective of the Fund by investing all of the
investable assets of the Fund in Income Portfolio, a diversified open-end
investment company with the same investment objective and policies as the Income
Fund. Income Portfolio seeks to achieve its 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 the investment objective of the Fund by investing all of the
investable assets of the Fund in Total Return Bond Portfolio, a diversified
open-end investment company with the same investment objective and policies as
the Total Return Bond Fund. Total Return Bond Portfolio seeks to achieve its
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, Total Return Bond Portfolio will balance yield, average maturity
and risk in seeking to provide maximum preservation of purchase power.

The investment objective of EXCELSIOR INSTITUTIONAL EQUITY INDEX FUND
(the "Equity Index Fund") is to provide investment results that correspond to
the investment performance of the Standard & Poor's 500 Composite Stock Price
Index1 (the "S&P 500 Index"), an index emphasizing large capitalization stocks.
The Trust seeks to achieve the investment objective of the Fund by investing all
the investable assets of the Fund in Equity Market Portfolio, a diversified
open-end management investment company with the same investment objective and
policies as the Equity Index Fund. Equity Market Portfolio seeks to achieve its
investment objective by replicating the yield and total return of the equity
securities composing the S&P 500 Index. The S&P 500 is a broad-based index of
the common stocks of 500 companies from several industrial sectors representing
a significant portion of the market value of all common stocks publicly traded
in the United States.

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 Fund in Bond Market Portfolio, a diversified open-end
management investment company with the same investment objective and policies as
the Bond Index Fund. Bond Market 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 SMALL
CAPITALIZATION FUND (the "Small Cap Fund") is to provide a high total return
from a diversified portfolio of equity securities of small capitalization
companies. The Trust seeks to achieve the investment objective of the Fund by
investing all the investable assets of the Fund in Small Cap Portfolio, a
diversified open-end management investment company with the same investment
objective and policies as the Small Cap Fund. Small Cap Portfolio seeks to
achieve its investment objective by investing in equity securities from the
Russell 2000 Index. The Portfolio invests in index securities whose risk
characteristics and industry group representation are similar to the universe of
securities in the Russell 2000 Index; however, the Portfolio's security
holdings, taken together, will have a lower aggregate price/earnings ratio than
index securities generally. The Russell 2000 Index is a broad index of equity
securities of U.S. companies with common stock market capitalizations below $600
million.

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

<PAGE>

securities. The Trust seeks to achieve the investment objective of the Fund by
investing all the investable assets of the Fund in Balanced Portfolio, a
diversified open-end management investment company with the same investment
objective and policies as the Balanced Fund. Balanced Portfolio 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
the investment objective of the Fund by investing all the investable assets of
the Fund in Equity Growth Portfolio, a diversified open-end management
investment company with the same investment objective and policies as the Equity
Growth Fund. Equity Growth Portfolio seeks to achieve this investment objective
by investing primarily in the common stocks of medium and large capitalization
companies which, in the opinion of its subadviser, will present an opportunity
for significant increases in earnings and/or value, without consideration for
current income.

The investment objective of EXCELSIOR INSTITUTIONAL VALUE EQUITY INCOME
FUND (the "Value Equity Income Fund") is to provide capital appreciation and a
high level of current income by investing principally in a diversified portfolio
of equity securities selected for their potential to generate current income or
long-term growth of capital. The Trust seeks to achieve the investment objective
of the Fund by investing all the investable assets of the Fund in Value Equity
Income Portfolio, a diversified open-end management investment company with the
same investment objective and policies as the Value Equity Income Fund. Value
Equity Income Portfolio seeks to achieve this investment objective by investing
primarily in equity securities which produce a current dividend yield which
generally exceeds the published composite yield of the securities comprising the
S&P 500. The published composite yield of the S&P 500 was 2.45% for the calendar
quarter ended June 30, 1995.

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 the investment objective of the Fund by
investing all of the investable assets of the Fund in International Equity
Portfolio, a diversified open-end investment company with the same investment
objective and policies as the International Equity Fund. International Equity
Portfolio seeks to achieve its 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.

Since the investment policies and strategies of each Fund are the same
as those of its corresponding Portfolio, the following is a discussion of the
various investment policies and strategies employed by each Portfolio.
Additional information about the investment policies and strategies of each
Portfolio appears in the Statement of Additional Information. There can be no
assurance that the investment objective of any Fund or its corresponding
Portfolio will be achieved.

U.S. TRUST'S INVESTMENT PHILOSOPHY AND STRATEGIES

U.S. Trust, the adviser for the Equity, Income and Total Return Bond
Portfolios, and the subadviser for the Equity Market, Bond Market, and Small Cap
Portfolios, was founded in 1853, and 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.

EQUITY PORTFOLIO

INVESTMENT PHILOSOPHY. In managing investments for the Equity
Portfolio, 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 Portfolio 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.

<PAGE>

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. 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 PORTFOLIO AND TOTAL RETURN BOND PORTFOLIO

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 Portfolio, 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 Portfolio will seek to provide
investors with maximum current income commensurate with the credit quality of
the Portfolio and moderate risk of capital.

EQUITY MARKET PORTFOLIO AND BOND MARKET PORTFOLIO

INVESTMENT PHILOSOPHY. The Equity Market Portfolio and Bond Market
Portfolio (collectively, the "Index Portfolios") are 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 Index Portfolios, utilizing a passive or
indexing investment approach, will attempt to duplicate the investment
performance of their respective indexes.

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

The Equity Market Portfolio seeks to replicate the investment results
of the S&P 500 Index by holding all 500 stocks included in the index in
approximately the same proportions as they are represented in the S&P 500 Index.
This indexing technique is known as complete replication. The Equity Market
Portfolio will generally select index stocks by reference to their weighting in
the index, starting with the stocks that are most heavily weighted. Thus, the
Portfolio intends that the percentage of its assets invested in each index stock
will approximate the weighting of that stock in the S&P 500 Index. The Portfolio
may, however, be unable fully to implement the strategy outlined above when its
assets total less than $25 million. At such times, the Portfolio may attempt to
approximate the performance of the index by utilizing a sampling approach.

The Trust expects that there will be a close correlation between a
Portfolio's performance and that of its index in both rising and falling
markets. Each Index Portfolio will attempt to maximize the correlation between
its performance and that of its corresponding index. Over the long term, the
investment managers of the Index Portfolios 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 Portfolio Series will review with the investment
managers methods for increasing such correlation, such as through adjustments in
securities holdings of an Index Portfolio. A correlation of 1.0 would indicate a
perfect correlation, which would be achieved when a Portfolio's net asset value,
including the value of its dividend and capital gains distributions, increases
or decreases in exact proportion to changes in an index. The investment managers
of the Index Portfolios monitor the correlation between the performance of each
Index Portfolio and its corresponding index on a regular basis. Factors such as
the size of a Portfolio's securities holdings, transaction costs, management
fees and expenses, brokerage commissions and fees, the extent and timing of cash
flows into and out of a Portfolio, and changes in the securities markets and the
indexes themselves, are expected to account for any differences between each
Index Portfolio's performance and that of its corresponding index.

INVESTMENT POLICIES

EQUITY PORTFOLIO 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 Portfolio's investments over a variety of
industries and types of companies.

Under normal market and economic conditions, the Portfolio 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 Portfolio'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 Portfolio 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 Market 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 Portfolio, 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.

Portfolio holdings will include common stocks of companies having
capitalizations of varying amounts, and the Portfolio will invest in the
securities of high growth, small companies where U.S. Trust expects earnings and
the price of the

<PAGE>

securities to grow at an above-average rate. See "Small Cap Portfolio" below for
a description of certain risks associated with the securities of small
companies. Certain securities owned by the Portfolio may be traded only in the
over-the-counter market or on a regional securities exchange, may be listed only
in the quotation service commonly known as the "pink sheets", or may not be
traded every day or in the volume typical of trading on a national securities
exchange. As a result, there may be a greater fluctuation in the net asset value
of the Portfolio, and the Portfolio 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.

Equity Portfolio 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 PORTFOLIO seeks as high a level of current interest income as is
consistent with moderate risk of capital and maintenance of liquidity. Income
Portfolio 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 Portfolio 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
Portfolio" below for a description of these securities and a discussion of
certain investment policies of Income Portfolio.

TOTAL RETURN BOND PORTFOLIO seeks to maximize the total rate of return
consistent with moderate risk of capital and maintenance of liquidity. In
selecting investment opportunities, Total Return Bond Portfolio will balance
yield, average maturity and risk in seeking to provide maximum preservation of
purchase power. Total Return Bond Portfolio 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 Portfolios 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 Portfolios 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 Portfolios 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 Portfolios 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 Portfolios 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 Portfolios. U.S. Trust will consider
investments in Municipal Bonds for the Income and the Total Return Bond
Portfolios 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 Portfolios' 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") (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 Market 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 Portfolio, a defensive investment posture is
warranted, each of these Portfolios 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 St. James Portfolios (the
"Portfolio Series"). 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

<PAGE>

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 Portfolios 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 Portfolios 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.

EQUITY MARKET PORTFOLIO invests at least 80% of its assets in a
portfolio of equity securities consisting of all 500 common stocks in the S&P
500 Index of large capitalization common stocks. The Portfolio intends to remain
fully invested, to the extent practicable, in a pool of securities which will
match the investment characteristics of the index. The inclusion of a stock in
the S&P 500 Index in no way implies that Standard & Poor's Corporation ("S&P
Corporation") believes the stock to be an attractive investment.

S&P 500 INDEX. The S&P 500 Index is a well-known stock market index
that includes common stocks of 500 companies from several industrial sectors
representing a significant portion of the market value of all common stocks
publicly traded in the United States, in the following proportions: 400
industrials, 60 transportation and utility companies, and 40 financial services
companies. Stocks in the S&P 500 Index are weighted according to their market
capitalization (i.e., the number of shares outstanding multiplied by the stock's
current price), with the 51 largest stocks currently composing 50% of the
index's value. Typically, companies included in the S&P 500 Index are the
largest and most dominant firms in their respective industries. As of June 30,
1995, the five largest companies in the Index were: General Electric (2.39%),
Exxon Corporation (2.19%), American Telephone & Telegraph (2.52%), Coca-Cola
(2.02%), and Royal Dutch Petroleum (1.63%). As of the same date, the largest
industry categories were: international oil companies (6.8%), telephone
companies (4.9%), electric power companies (3.8%), diversified health care
companies (3.8%), and major regional banks (3.6%). The investment managers of
the Portfolio believe that the performance of the S&P 500 Index is
representative of the performance of publicly traded common stocks in general.
The composition of the S&P 500 Index is determined by S&P Corporation and is
based on such factors as the market capitalization and trading activity of each
stock and its representation of a particular industry group, and may be changed
from time to time.

The Equity Index Fund and the Equity Market Portfolio are not
sponsored, endorsed, sold or promoted by S&P Corporation. S&P Corporation makes
no representation or warranty, express or implied, to investors in the Equity
Index Fund and the Equity Market Portfolio or any member of the public regarding
the advisability of investing in securities generally or in the Fund and
Portfolio particularly or the ability of the S&P 500 Index to track general
stock market performance. S&P Corporation's only relationship to the Trust is
the licensing of certain trademarks and trade names of S&P Corporation and of
the S&P 500 Index which is determined, composed and calculated by S&P
Corporation without regard to the Trust, the Equity Index Fund or the Equity
Market Portfolio. S&P Corporation has no obligation to take the needs of the
Trust or the investors in the Equity Index Fund and the Equity Market Portfolio
into consideration in determining, composing or calculating the S&P 500 Index.
S&P Corporation is not responsible for and has not participated in the
determination of the net asset value of shares of the Equity Index Fund or the
timing of the issuance or sale of shares of the Fund.

S&P CORPORATION DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P CORPORATION SHALL HAVE
NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P
CORPORATION MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED
BY THE TRUST OR INVESTORS IN THE EQUITY INDEX FUND AND THE EQUITY MARKET
PORTFOLIO OR ANY PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA
INCLUDED THEREIN. S&P CORPORATION MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P
CORPORATION HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.

Because of the risks associated with common stock investments, the
Equity 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 stock
market movements. Investors should not consider the Equity Index Fund a complete
investment program.

BOND MARKET PORTFOLIO 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 Portfolio
intends to remain fully invested, to the extent practicable, in a pool of
securities that match the yield and total return of the 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

<PAGE>

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 for U.S. Government and agency issues and $50 million
for all other securities issuers (this limit was raised to $100 million for all
issuers at the end of 1994); and investment grade quality, rated a minimum of
Baa by Moody's or BBB by S&P. The Bond Market Portfolio 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 Market Portfolio 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 Bond Market Portfolio, and their respective net asset values
and yields, 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 Market Portfolio may, from time to time, substitute one type
of investment grade bond for another. For instance, the Bond Market Portfolio
may hold more short-term corporate bonds (and fewer short U.S. Treasury bonds)
than represented in the Aggregate Bond Index so as to increase income.

CORPORATE BONDS. The Bond Market Portfolio may purchase debt securities
of United States corporations 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 of the Portfolio 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 Portfolio 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 Market Portfolio 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 Market Portfolio, 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 Market Portfolio would decline.

MORTGAGE PASS-THROUGHS AND COLLATERALIZED MORTGAGE OBLIGATIONS. The
Bond Market Portfolio may purchase mortgage and mortgage-related securities such
as pass-throughs and collateralized mortgage obligations that meet the Bond
Market Portfolio'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 Market Portfolio 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 Market Portfolio 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 Market Portfolio derives from

<PAGE>

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 Market Portfolio 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.

SMALL CAP PORTFOLIO seeks to provide a high total return from a
portfolio of equity securities of small capitalization companies. Total return
will consist of income plus realized and unrealized capital gains and losses.
The Portfolio will invest at least 65% of its total assets in equity securities
consisting of a selection of the stocks included in the Russell 2000 Index of
small capitalization stocks. The Portfolio intends to remain fully invested, to
the extent practicable, in securities with risk characteristics and industry
group representation similar to the securities in the Russell 2000 Index, but it
is anticipated that the Portfolio's securities, taken together, would have a
lower aggregate price/earnings ratio than index securities generally. To reduce
the risk associated with investments in individual securities, the Portfolio's
investments will be spread over a range of industries and issuers as opposed to
being concentrated in a few individual securities. Stocks of small
capitalization issuers generally have greater illiquidity and price volatility
than stocks of larger capitalization issuers.

The Russell 2000 Index consists of the smallest 2,000 companies from
the Russell 3000 Index (a portfolio of 3,000 securities of U.S. companies
representing approximately 98% of the U.S. equity market). Only common stocks
issued by corporations domiciled in the United States and its territories are
eligible for inclusion in the Russell 2000 Index. As of June 30, 1995, the
market capitalization of stocks in the index ranged in size from $28 million
(smallest company) to $1.07 billion (largest company).

The Portfolio invests in common stocks and other equity securities,
such as preferred stocks, rights and warrants. Because the Portfolio invests in
equity securities of small capitalization issuers, its price volatility may be
greater than if the Portfolio invested exclusively in equity securities of
issuers which have larger market capitalizations. Generally, equity securities
of small capitalization companies have historically been characterized by
greater volatility of returns, greater total returns, and lower dividend yields
than equity securities of large capitalization issuers. The greater price
volatility of equity securities of small capitalization issuers may result from
the fact that there may be less market liquidity, less publicly available
information or fewer investors who monitor the activities of these companies. In
addition, the market prices of these securities may exhibit more sensitivity to
changes in industry or general economic conditions.

The Small Cap Fund may be appropriate for a variety of investment
programs. While the Fund is not a substitute for an investment portfolio
tailored to an investor's particular investment needs and ability to tolerate
risk, it may be used to supplement and diversify an investment portfolio.
Because of the risks associated with investments in equity securities of small
capitalization companies, the Small Cap 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 Small Cap Fund a complete investment program.

BALANCED PORTFOLIO 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
Portfolio 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 Portfolio 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
Portfolio 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 Portfolio are always invested in fixed
income senior securities including debt securities and preferred stock. The
subadviser may allocate the Portfolio's investments between these asset classes
in a manner they believe consistent with the Portfolio'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 Portfolio actively in pursuit of
its investment objective. While the Portfolio 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 Portfolio engages in short-term
trading, it may incur increased transaction costs. See "Tax

<PAGE>

Matters" below.

EQUITY INVESTMENTS. For the equity portion of the Portfolio, the
subadviser seeks to achieve a high total return through fundamental analysis,
systematic stock valuation and disciplined portfolio construction. The
Portfolio'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 Portfolio's equity
investments may also include preferred stock, warrants and similar rights. The
Portfolio may also invest in the equity securities of small companies and of
foreign issuers. The small company holdings of the Portfolio 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 Portfolio'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 "Small Cap
Portfolio" above.

FIXED INCOME INVESTMENTS. For the fixed income portion of the
Portfolio, the subadviser seeks to provide a high total return by actively
managing the duration of the Portfolio'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 Portfolio's fixed income investments in
light of market conditions. The subadviser also actively allocates the
Portfolio'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
Portfolio, and can be used as a measure of the sensitivity of the Portfolio'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 Portfolio 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 Portfolio may vary widely, however.

The Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Market Portfolio - Mortgage Pass-Throughs and Collateralized
Mortgage Obligations" above.

The Portfolio 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 Market Portfolio - U.S.
Government and Agency Securities" above and the Statement of Additional
Information. The Portfolio may also invest in municipal obligations which may be
general obligations of the issuer or payable only from specific revenue sources.
However, the Portfolio 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 Portfolio 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 PORTFOLIO 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. Equity Growth
Portfolio 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 Portfolio's investment objective of increasing the value of a
shareholder's investment. Investments will be

<PAGE>

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 Portfolio will invest at least 65%
of its total assets in common stocks. The remainder of the Portfolio'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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolios" in the
Statement of Additional Information. The Portfolio 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 Portfolio actively in pursuit of
its investment objective. While the Portfolio 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 Portfolio 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 portfolio
tailored to an investor's particular investment needs and ability to tolerate
risk, it may be used to supplement and diversify an investment portfolio.
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.

VALUE EQUITY INCOME PORTFOLIO seeks to provide capital appreciation and
a high level of current income by investing principally in a diversified
portfolio of equity securities selected for their potential to generate current
income or long-term growth of capital. Over the long term, the Portfolio will
seek to maintain its dividend and interest income levels close to those of the
S&P 500 Index. In making portfolio selections, the subadviser follows a value
philosophy: to invest in companies with sound fundamentals the securities of
which are trading at low price-to-earnings ratios. In addition, the subadviser
follows an equity income philosophy: to invest principally in common stocks that
provide high current income and a low level of volatility relative to the market
while seeking to obtain long-term growth of capital. To implement the
Portfolio's investment objective, the subadviser will attempt to (a) build a
diversified portfolio with significantly lower-than-market volatility that
achieves superior return over time, (b) maintain consistent portfolio
characteristics, and (c) provide protection over a falling market cycle.

EQUITY INVESTMENTS. The Portfolio will invest primarily in equity
securities which produce a current dividend yield which generally exceeds the
published composite yield of the securities comprising the S&P 500 Index. The
published composite yield of the S&P 500 Index was 2.45% for the calendar
quarter ended June 30, 1995. The S&P 500 Index is a broad-based index of 500
companies listed on the New York Stock Exchange. The Portfolio invests primarily
in preferred stocks and common stocks listed on the New York Stock Exchange and
on other national securities exchanges and, to a lesser extent, in stocks that
are traded over-the-counter. Provided such securities meet the requirements set
forth below for fixed income investments, the Portfolio may also invest in
securities convertible into common or preferred stocks. The Portfolio allocates
its investments among different industries and companies, seeking to invest in
growing, financially stable and undervalued companies.

Under normal market conditions, the Portfolio will invest at least 65%
of its total assets in income producing equity securities. The remainder of the
Fund's assets may be invested in 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 Portfolio 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 Portfolio 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 Portfolios" in the
Statement of Additional Information.

FIXED INCOME INVESTMENTS. The Portfolio 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. For a more detailed description of these securities, see "Balanced
Portfolio - Fixed Income Investments" above. The Portfolio 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

<PAGE>

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 Portfolio 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.

U.S. GOVERNMENT AND AGENCY SECURITIES. The Portfolio 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 Market Portfolio - U.S. Government and Agency Securities" above and
"U.S. Government and Agency Securities" in the Statement of Additional
Information.

MORTGAGE PASS-THROUGHS AND COLLATERALIZED MORTGAGE OBLIGATIONS. The
Value Equity Income Portfolio may purchase mortgage-related securities such as
mortgage pass-throughs, collateralized mortgage obligations, and mortgage
derivatives that meet the Portfolio's selection criteria. For a description of
these securities and associated risks, see "Bond Market Portfolio - Mortgage
Pass-Throughs and Collateralized Mortgage Obligations" above.

The subadviser intends to manage the Portfolio actively in pursuit of
its investment objective. While the Portfolio 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 Portfolio engages in
short-term trading, it may incur increased transaction costs. See "Tax Matters"
below.

The Value Equity Income Fund may be appropriate for investors seeking a
fund with greater potential for capital appreciation than an income fund and
less price volatility than a growth fund. Investors should not consider the Fund
a complete investment program.

INTERNATIONAL EQUITY PORTFOLIO seeks long-term capital appreciation
through investment in a diversified portfolio of marketable foreign securities.
The Portfolio 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 Portfolio 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 Portfolio's investments generally will be diversified among
geographic regions and countries. While there are no prescribed limits on
geographic distributions, the Portfolio 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 Portfolio'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 Portfolio 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 Portfolio 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 Portfolio may restrict the securities markets in which
its assets are invested.

Under normal market and economic conditions, at least 75% of the
Portfolio's assets will be invested in foreign equity securities. For cash
management purposes, the Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio may purchase when-issued
securities otherwise eligible for purchase by the Portfolio 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 Portfolio 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 Portfolio will be deemed to be comparable in quality to

<PAGE>

securities rated investment grade pursuant to procedures established by the
Board of Trustees of the Portfolio Series. 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 Portfolio may purchase securities both on recognized stock
exchanges and in over-the-counter markets. Most portfolio transactions will be
effected in the primary trading market for the given security. The Portfolio
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 Portfolio can look
only to price appreciation for a return on such investments.

The relative performance of foreign currencies is an important element
in the Portfolio'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 Portfolio from adverse movements in foreign exchange rates, they also may
limit possible gains from favorable movements in such rates.

The Portfolio 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
Portfolio should be considered only as a vehicle for international
diversification and not a complete investment program. Before investing in the
Portfolio, investors should be familiar with the risks associated with foreign
investments. These risks are discussed below under "Additional Investment
Strategies and Techniques; Risk Factors."

ADDITIONAL INVESTMENT STRATEGIES AND TECHNIQUES; RISK FACTORS

The Equity, Income, Total Return Bond, Small Cap, Balanced, Equity
Growth, Value Equity Income and International Equity Portfolios (collectively,
the "Managed Portfolios"), and the Equity Market and Bond Market Portfolios
(collectively, the "Index Portfolios"), may utilize the following investment
strategies and techniques, as described below.

SAMPLING AND TRADING IN THE INDEX PORTFOLIOS. The Bond Market Portfolio
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 Portfolio 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 Index Portfolios' securities holdings
will not be automatically traded or re-balanced to reflect changes in an index.
The Index Portfolios will seek to buy round lots of stocks and may trade large
blocks of securities. These policies may cause a particular security to be over-
or under-represented in a Portfolio relative to its index weighing or result in
its continued ownership by a Portfolio after its deletion from the index,
thereby reducing the correlation between the Portfolio and the index. The Index
Portfolios are 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 Index Portfolios may omit
or remove index securities from their portfolios 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 Index Portfolios
seek a correlation of 0.95 or better. See "U.S. Trust's Investment Philosophy
and Strategies - Equity Market Portfolio and Bond Market Portfolio" above.

INVESTMENTS BELOW INVESTMENT GRADE. As discussed above, investments by
the Income and the Total Return Bond Portfolios 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 Portfolios' 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 Portfolio 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 Portfolio defaulted, the Portfolio 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

<PAGE>

Portfolio'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.

CONVERTIBLE SECURITIES. The Managed Portfolios may invest in investment
grade convertible securities of domestic and foreign issuers, although in the
current fiscal year the Small Cap Portfolio has no intention to invest in
convertible securities of foreign issuers. See "Value Equity Income Portfolio -
Fixed Income Investments" for an explanation of investment grade ratings of debt
securities, including convertible securities. The convertible securities in
which the Portfolios 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 Portfolios 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
Portfolio 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 a Portfolio 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 the Portfolio 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 Portfolio may incur a loss.

In addition, the Income and the Total Return Bond Portfolios 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 Portfolio's option
specified Municipal Bonds at a specified price. The Portfolios will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for speculative purposes. Stand-by
commitments acquired by a Portfolio will be valued at zero in determining the
Portfolio's net asset value.

REPURCHASE AGREEMENTS. Each of the Portfolios may engage in repurchase
agreement transactions with brokers, dealers or banks that meet the credit
guidelines established by the Trustees of the Portfolio Series. In a repurchase
agreement, a Portfolio 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 Portfolio to the seller. The Portfolio
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 Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, the Portfolio'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 Portfolio 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 Portfolio 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
Portfolio 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

<PAGE>

to the repurchase price, including accrued interest. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Portfolio may decline below the repurchase price of those securities.

INVESTMENT COMPANY SECURITIES. In connection with the management of its
daily cash positions, each Portfolio 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 Portfolio 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 Portfolio bears directly in connection with
its own operations, as a shareholder of another investment company, a Portfolio
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 Portfolios to the extent permitted under the 1940 Act, that is,
a Portfolio 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 any Portfolio.
In addition, not more than 5% of the Portfolio's total assets may be invested in
the securities of any one investment company.

FOREIGN INVESTMENTS. In accordance with their respective investment
objectives and policies, the Equity, Balanced, Equity Growth and Value Equity
Income Portfolios may invest, and the International Equity Portfolio will
invest, in common stocks of foreign corporations, and each of such Portfolios
and the Income and Total Return Bond Portfolios 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 Portfolio,
which will invest under normal market and economic conditions at least 75% of
its total assets in foreign securities, none of the Portfolios expects to invest
more than 30% (25% in the case of the Income and Total Return Bond Portfolios)
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 Portfolio'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 portfolio securities and could favorably or unfavorably affect a
Portfolio'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 Portfolio
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 Portfolio'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 portfolio 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 on foreign
markets and additional costs arising from delays in settlements of transactions
involving foreign securities.

The Portfolios 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 Portfolios. Exchange rates are influenced generally by
the forces of supply and demand in the foreign currency markets

<PAGE>

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, Equity Growth and Value Equity Income Portfolios may buy and
sell, and the International Equity Portfolio will buy and sell, securities (and
receive interest and dividends proceeds) in currencies other than the U.S.
dollar. Therefore, these Portfolios may enter from time to time into foreign
currency exchange transactions. The Portfolios 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 Portfolio'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
Portfolio 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 Portfolios 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 Portfolio's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.

The Portfolios 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 Portfolios 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 Portfolio 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 Portfolio will only enter into forward contracts
to sell a foreign currency in exchange for another foreign currency if its
respective subadviser 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 Portfolio 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 Portfolio may purchase put and call
options on securities, indices of securities and futures contracts. The
Portfolios 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 Portfolio 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
Index Portfolios will not invest in futures or options as part of a defensive
strategy to protect against potential stock market declines. The Managed
Portfolios 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 Portfolios 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 Portfolios 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 Portfolio, cannot exceed 15% of the
Portfolio's net assets. The Portfolios intend to comply with this limitation.

The Portfolios 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 Portfolio'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 Portfolio's overall strategy in a manner deemed appropriate
by the Portfolio'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 Portfolio's return. While the use of these techniques
by a Portfolio may reduce certain risks associated with owning its portfolio
securities, these investments entail certain other risks. If Portfolio
investment managers apply a strategy at an inappropriate time or judge

<PAGE>

market conditions or trends incorrectly, options and futures strategies may
lower a Portfolio's return. Certain strategies limit a Portfolio's possibilities
to realize gains as well as limit its exposure to losses. A Portfolio 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 Portfolio 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 Portfolio's turnover rate. For more information
on these investment techniques, see the Statement of Additional Information.

Each of the Portfolios 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 a Portfolio's total net assets, and (ii) the aggregate margin
deposits required on all such futures or options thereon held at any time do not
exceed 5% of a Portfolio's total assets. None of the Portfolios 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 Portfolio 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 Portfolio. The price a
Portfolio 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 Portfolios are subject to
the following non-fundamental policies. Each Portfolio 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
Portfolios 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
Portfolio investment managers and approved by the Trustees. The Trustees of the
Portfolio Series 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 Portfolio. As a
result, a Portfolio 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 Portfolio may invest in short-term income
securities in accordance with its investment objective and policies as described
above. The Portfolios may also make money market investments pending other
investments or settlement, or to maintain liquidity to meet shareholder
redemptions. Although the Index Portfolios normally seek to remain substantially
fully invested in securities selected to match their corresponding index
consistent with seeking a correlation of 0.95 or better between an Index
Portfolio's performance and that of its corresponding index, an Index Portfolio
may invest temporarily up to 20% of its assets in certain short-term fixed
income securities. The Index Portfolios will not invest in short-term
instruments as part of a defensive strategy to protect against potential stock
market declines. Each of the Managed Portfolios is permitted to invest in
short-term instruments, although each intends to stay invested in the equity and
fixed income instruments described above to the extent practical in light of its
respective objective and long-term investment perspective. In addition, in
adverse market conditions and for temporary defensive purposes only, the Managed
Portfolios may temporarily invest their respective assets without limitation in
short-term investments. These securities 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 Portfolio, 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 Portfolios 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 Portfolios 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 Portfolio 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
Portfolios are not insured by the Federal Deposit Insurance Corporation or any
other agency of the U.S. Government. The Portfolios 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

<PAGE>

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 may include
uninsured, direct obligations which have either fixed, floating or variable
interest rates.

The Portfolios 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 Portfolio Series 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 Portfolio Series. The Portfolios 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 Portfolios 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
Portfolio's total assets. In connection with such loans, each Portfolio 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 Portfolio
can increase its income through the investment of such collateral. Such
Portfolio continues to be entitled to payments in amounts equal to the interest
or dividends payable on the loaned security, and in addition receives interest
on the amount of the loan. Such loans will be terminable at any time upon
specified notice. A Portfolio might experience risk of loss if the institution
with which it has engaged in a portfolio loan transaction breaches its agreement
with the Portfolio.

SHORT SALES "AGAINST THE BOX". In a short sale, a Portfolio sells a
borrowed security and has a corresponding obligation to the lender to return the
identical security. A Portfolio 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 Portfolio may make a short sale as a
hedge, when it believes that the value of a security owned by the Portfolio (or
a security convertible or exchangeable for such security) may decline, or when
the Portfolio 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 Portfolio'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 Portfolios 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 Portfolio may invest in obligations other than
those listed previously, provided such investments are consistent with the
Portfolio's and its corresponding Fund's investment objective, policies and
restrictions.

PORTFOLIO TURNOVER RATE. Although the Managed Portfolios generally seek
to invest for the long term, and the Index Portfolios are managed to reflect the
composition of their respective indexes, each Portfolio may sell securities
irrespective of how long such securities have been held. Ordinarily, securities
will be sold from an Index Portfolio only to reflect certain administrative
changes in its corresponding index (including mergers or changes in its
composition) or to accommodate cash flows into and out of an Index Portfolio
while maintaining the similarity of said Portfolio to its benchmark index. Each
Managed Portfolio 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 Portfolio. 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 Portfolio and the Total Return Bond Portfolio, whose
annual portfolio turnover rates are not expected to exceed 400%. The annual
portfolio turnover rate for each other Portfolio is not expected to exceed 100%.
A rate of 100% indicates that the equivalent of all of a Portfolio'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 a Portfolio and ultimately by
the corresponding Fund's shareholders. High portfolio turnover may result in the
realization of substantial net capital gains. To the extent net short-term
capital gains are realized, any distributions resulting from such gains are
considered ordinary income for Federal income tax purposes. See "Tax Matters"
below.

* * *

As diversified investment companies, 75% of the assets of each
Portfolio 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 Portfolio may not invest more than 5% of its
total assets in the securities of any one issuer, and (b) the Portfolio may not
own more than 10% of the outstanding voting securities of any one issuer. In
addition, each Portfolio may not invest 25% or more of its assets in the
securities of issuers in any one industry, unless, for each of the Index
Portfolios, the securities in a single industry were to comprise 25% or more of
its corresponding index, in which case the Index Portfolio will invest 25% or
more of its assets in that industry. These are fundamental investment policies
of each Portfolio which may not be changed without investor approval.

The Statement of Additional Information includes further
discussion of investment strategies and techniques, and a

<PAGE>

listing of other fundamental investment restrictions and non-fundamental
investment policies which govern the investment policies of each Fund and its
corresponding Portfolio. Fundamental investment restrictions may not be changed,
in the case of each Fund, without the approval of that Fund's shareholders or,
in the case of each Portfolio, without the approval of the investors in that
Portfolio. 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 Portfolio or a later change in the rating of a security held by a Portfolio
is not considered a violation of the policy.

SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R) STRUCTURE

Unlike other mutual funds which directly acquire and manage their own
portfolios of securities, the Trust seeks to achieve the investment objective of
each Fund by investing all of the investable assets of the Fund in its
corresponding Portfolio, a separate series of St. James Portfolios (the
"Portfolio Series"), a registered investment company. Each Fund has the same
investment objective and policies as its corresponding Portfolio. In addition to
selling a beneficial interest to a Fund, each Portfolio may sell beneficial
interests to other mutual funds or institutional investors. Such investors will
invest in that Portfolio on the same terms and conditions and will pay a
proportionate share of that Portfolio's expenses. However, the other investors
investing in a Portfolio are not required to issue their shares at the same
public offering price as the corresponding Fund due to variations in sales
commissions and other operating expenses. Investors in each Fund should be aware
that these differences may result in differences in returns experienced by
investors in the different funds that invest in a Portfolio. Such differences in
returns are also present in other mutual fund structures. Information concerning
other holders of interests in each Portfolio is available from SFSI at (617)
423-0800.

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. The investment objective of each
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 shareholders of the corresponding Fund)
thirty days prior to implementing the change. There can, of course, be no
assurance that the investment objective of either a Fund or its corresponding
Portfolio will be achieved. See "Investment Restrictions" in the Statement of
Additional Information for a description of the fundamental investment policies
and restrictions of each Portfolio and 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 Portfolio or Fund. Except as stated otherwise, all investment objectives,
policies, strategies and restrictions described herein and in the Statement of
Additional Information are non-fundamental.

Smaller funds investing in a Portfolio may be materially affected by
the actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from a Portfolio, the remaining funds may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, a
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 a Portfolio could have effective voting control of the operations
of the Portfolio. Whenever the Trust is requested to vote on matters pertaining
to a Portfolio (other than a vote by a Fund to continue the operation of its
corresponding Portfolio upon the withdrawal of another investor in such
Portfolio), the Trust will hold a meeting of shareholders of the corresponding
Fund and will cast all of its votes in the same proportion as the votes of the
Fund's shareholders. Fund shareholders who do not vote will not affect the
Trust's votes at the Portfolio meeting. The percentage of the Trust's votes
representing Fund shareholders not voting will be voted by the Trustees or
officers of the Trust in the same proportion as Fund shareholders who do, in
fact, vote. Certain changes in a Portfolio's investment objective, policies or
restrictions may require the Trust to withdraw the corresponding Fund's
investment in the 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 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 Fund. Notwithstanding the above, there
are other means for meeting shareholder redemption requests, such as borrowing.

The Trust may withdraw the investment of a Fund from its corresponding
Portfolio at any time, if the Board of Trustees of the Trust determines that it
is in the best interests of the 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 such Fund in another pooled
investment entity having the same investment objective and policies as the Fund
or retaining an investment adviser to manage the Fund's assets in accordance
with the investment policies described above with respect to the Portfolio.

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

<PAGE>

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 Portfolios which are traded on a recognized domestic
stock exchange 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 a
national securities market. Securities traded only on over-the-counter markets
are valued on the basis of closing over-the-counter bid prices. Securities for
which there were no transactions are valued at the average of the most recent
bid and asked prices. 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 Portfolio Series' Board of Trustees.
Absent unusual circumstances, debt securities maturing in 60 days or less are
valued at amortized cost.

Portfolio securities which are primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on their respective exchanges, 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 Portfolio Series. 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. 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 Portfolios 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 servicing agent
has undertaken to price the securities held by the Portfolios, 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 Portfolio's investment managers and servicing agent under the
general supervision of the Board of Trustees of the Portfolio Series.

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 Fund Services
("CGFS"), 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
CGFS 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
CGFS to the particular Shareholder Organization.

In the alternative, a Shareholder Organization may elect to establish its
Customers' accounts of record with CGFS. In this event, even if the Shareholder
Organization continues to place its Customers' purchase and redemption orders
with the Funds, CGFS 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
CGFS. Prior to making an initial investment by wire, an investor must telephone
CGFS at (800) 909-1989 (from overseas, please call (617) 557-1755) for
instructions, including a Wire Control Number (see below). Federal funds and
registration instructions should be wired through the Federal Reserve System to:

<PAGE>

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 and its corresponding Portfolio 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 CGFS. No account
application is required for subsequent purchases. Completed applications should
be directed to:

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

The application may also be sent via facsimile. Please contact CGFS 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 CGFS.
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 CGFS 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 CGFS and the Distributor to act upon telephone instructions
believed to be genuine. CGFS 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 CGFS
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 CGFS and the Distributor to act upon telephone instructions
believed to be genuine. CGFS 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

<PAGE>

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
CGFS 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 CGFS. 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 CGFS reserve the right not to honor the redemption
until CGFS 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 CGFS 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 CGFS and have so
indicated on their application, or have subsequently arranged in writing to do
so, may redeem Shares by instructing CGFS, 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 CGFS 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.

CGFS 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. CGFS, 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 Fund Services
P.O. Box 2798
Boston, MA 02208-2798

A written redemption request to CGFS 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 CGFS 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 CGFS pursuant to the Signature Guarantee Guidelines.
Copies of the Signature Guarantee Guidelines and information on STAMP can be
obtained from CGFS at (800) 909-1989 (from overseas, please call (617) 557-1755)
or at the address given above. CGFS may require

<PAGE>

additional supporting documents. A redemption request will not be deemed to be
properly received in good form until CGFS receives all required documents in
proper form.

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

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 CGFS 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. The Portfolios are also not expected to be required to pay any federal
income or excise 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.

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

<PAGE>

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 AND PORTFOLIO SERIES

The Boards of Trustees of Excelsior Institutional Trust (the "Trust")
and St. James Portfolios (the "Portfolio Series") provide general supervision
over the affairs of the Trust and the Portfolio Series, respectively. 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. None of the Trustees common to both the Trust and the Portfolio Series
are "interested persons" (as defined in the 1940 Act) (the "Independent
Trustees") of the Trust or the Portfolio Series.

INVESTMENT MANAGERS

United States Trust Company of The Pacific Northwest ("U.S. Trust
Pacific") is responsible for the management of the assets of the Portfolios
corresponding to the Funds listed below, pursuant to an Investment Advisory
Agreement (the "Advisory Agreement") with St. James Portfolios on behalf of such
Portfolios. U.S. Trust Pacific has delegated the daily management of the
security holdings of these Portfolios to the investment managers named below,
acting as subadvisers (the "Subadvisers"):

Equity Index Fund, Bond Index Fund and
Small Cap Fund............................ United States Trust Company of
New York
Balanced Fund............................... Becker Capital Management, Inc.
Equity Growth Fund.......................... Luther King Capital Management

Value Equity Income Fund.................... Spare, Kaplan, Bischel &
Associates

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

Subject to the general guidance and policies set by the Trustees of the
Portfolio Series, 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 Portfolios'
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 the Portfolios, for the respective Portfolio's current
fiscal year, fees accrued daily and paid monthly at an annual rate equal to the
percentages specified below of the corresponding Portfolio's average daily net
assets: (a) 0.25% for the Equity Index Fund and Bond Index Fund; (b) 0.65% for
the Small Cap Fund, Balanced Fund, Equity Growth Fund and Value Equity Income
Fund; and (c) 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 Portfolio is higher than
advisory fees currently being paid by most investment companies in general, the
advisory fee paid by the International Equity Portfolio 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 all investment
advisory fees with respect to each Portfolio listed above. While no such
Portfolio pays investment advisory fees to U.S. Trust Pacific, each
institutional investor enters into an asset management services agreement with
U.S. Trust Pacific and agrees to pay annual fees calculated as a specified
percentage of average net assets.

Pursuant to separate subadvisory agreements, the Subadvisers make the
day-to-day investment decisions and portfolio selections for the Portfolios
corresponding to the Equity Index, Bond Index, Small Cap, Balanced, Equity
Growth, Value Equity Income and International Equity Funds, consistent with the
general guidelines and policies established by U.S. Trust Pacific and the Board
of Trustees of the Portfolio Series. For the investment management services they
provide to the corresponding Portfolios, the Subadvisers are compensated only by
U.S. Trust Pacific, and receive no fees directly from the Portfolio Series. For
their services under the subadvisory agreements, the Subadvisers receive from
U.S. Trust Pacific, fees at a maximum annual rate equal to the percentages
specified below of the corresponding Portfolio's average daily net assets: (a)
0.25% for the Equity Index Fund and Bond Index Fund, (b) 0.65% for the Small Cap
Fund, (c) 0.40% for the Value Equity Income Fund and Equity Growth Fund, (d)
0.425% for the Balanced Fund, and (e) 0.45% for the International Equity Fund.
The Subadvisers furnish at their own expense all services, facilities and
personnel necessary in connection with managing the corresponding Portfolios'
investments and effecting securities transactions for the Portfolios.

BALANCED FUND, EQUITY GROWTH FUND, VALUE EQUITY INCOME FUND
AND INTERNATIONAL EQUITY FUND

U.S. Trust Pacific has entered into separate Investment
Subadvisory Agreements with Becker Capital Management, Inc.
("Becker") with respect to the Portfolio for the Balanced Fund;
Luther King Capital Management ("Luther King") with respect to

<PAGE>

the Portfolio for the Equity Growth Fund; Spare, Kaplan , Bischel & Associates
("Spare Kaplan") with respect to the Portfolio for the Value Equity Income Fund;
and Harding, Loevner Management, L.P. ("Harding Loevner") with respect to the
Portfolio for the International Equity Fund.

Becker 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 Portfolio 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 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 Portfolio. Mr. Murphy has been an
investment manager with Luther King since 1981. He is also a Chartered Financial
Analyst.

Spare Kaplan maintains its principal offices at 44 Montgomery Street,
San Francisco, CA 94104. As of June 30, 1995, Spare Kaplan had $2.3 billion in
assets under management. The day-to-day management of Value Equity Income
Portfolio is performed by the Value Equity Income Strategy Team, which includes
Anthony E. Spare, Chief Executive Officer and Chief Investment Officer of Spare
Kaplan, and James G. McCluskey, Senior Portfolio Manager at Spare Kaplan. Mr.
Spare co-founded the Value Equity Income Strategy Team in 1975 and has served as
senior strategy team member since 1975; Mr. McCluskey has been with Spare Kaplan
since 1989.

Harding Loevner 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.

EQUITY INDEX FUND, BOND INDEX FUND AND SMALL CAP FUND

U.S. Trust Pacific has entered into an Investment Subadvisory Agreement
with United States Trust Company of New York ("U.S. Trust") with respect to the
Portfolios corresponding to the Equity Index Fund, Bond Index Fund and Small Cap
Fund. U.S. Trust is a state-chartered bank and trust company created by Special
Act of the New York Legislature in 1853. U.S. Trust 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, 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.

Cyril M. Theccanat, Vice President of U.S. Trust, Structured Investment
Management Department, is primarily responsible for the day-to-day management of
the Portfolio corresponding to the Bond Index Fund. 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.

Peter Albanese, Financial Officer in the Structured Investments area of
the Institutional Investment Management Division, U.S. Trust, is primarily
responsible for the day-to-day management of the Portfolios corresponding to the
Equity Index Fund and Small Cap Fund. Mr. Albanese has been with U.S. Trust
since December 1994. Prior to joining U.S. Trust he worked for Kidder, Peabody &
Co., Inc. from March 1991 to December 1994, as a Quantitative Analyst in Equity
Research.

EQUITY FUND, INCOME FUND AND TOTAL RETURN BOND FUND

U.S. Trust is responsible for the management of the assets of the
Portfolios corresponding to the Equity Fund, Income Fund, and Total Return Bond
Fund, pursuant to an Investment Advisory Agreement (the "Advisory Agreement")
with St. James Portfolios on behalf of such Portfolios. With respect to these
Portfolios, 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 Portfolios corresponding to 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 receives from
the Portfolios corresponding to 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 Portfolio's average daily net assets. U.S. Trust has agreed to waive all
investment advisory fees under the Advisory Agreement.
While no such Portfolio pays investment advisory fees to U.S.

<PAGE>

Trust, each institutional investor enters into an asset management services
agreement with U.S. Trust Pacific and agrees to pay annual fees calculated as a
specified percentage of average net assets.

U.S. Trust also serves as investment adviser to the following
registered investment companies: UST Equity Fund; UST Income and Growth Fund;
UST Long-Term Supply of Energy Fund; UST Productivity Enhancers Fund; UST
Environmentally-Related Products and Services Fund; UST Aging of America Fund;
UST Communication and Entertainment Fund; UST Business and Industrial
Restructuring Fund; UST Global Competitors Fund; UST Early Life Cycle Fund; UST
Money Fund; UST Government Money Fund; UST Treasury Money Fund; UST Short-Term
Tax-Exempt Fund; UST New York Intermediate-Term Tax-Exempt Fund; UST
International Fund; UST Emerging Americas Fund; UST Pacific/Asia Fund; UST Pan
European Fund; UST Short-Term Tax-Exempt Securities Fund; UST Intermediate-Term
Tax-Exempt Fund; UST Long-Term Tax-Exempt Fund; UST Short-Term Government
Securities Fund; UST Intermediate-Term Managed Income Fund; and UST Managed
Income Fund.

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.

SERVICING PLAN

The Trust has adopted a Servicing Plan which provides that the Trust
may obtain the services of a servicing and fund accounting agent, a transfer
agent, a custodian and one or more Shareholder Servicing Agents, and may enter
into agreements providing for the payment of fees for such services. Under the
Servicing Plan, the aggregate of the fees paid to the servicing and fund
accounting agent from a Fund and fees paid to Shareholder Servicing Agents from
a Fund may not exceed 0.40% of that Fund's average daily net assets on an
annualized basis for the Fund's then-current fiscal year.

SERVICING AGENT

Signature Financial Services, Inc. ("SFSI"), located at 89 South
Street, Boston, MA 02111, serves as servicing and fund accounting agent to the
Trust and the Portfolio Series pursuant to agreements between SFSI and each of
the Trust and the Portfolio Series (the "Servicing Agent Agreements"). Pursuant
to the Servicing Agent Agreements, SFSI supervises the affairs of the Trust and
the Portfolio Series, 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 or the Portfolio Series; provides
equipment and clerical personnel necessary for maintaining the organization of
the Trust and the Portfolio Series; prepares and distributes all materials in
connection with meetings of Trustees and investors; prepares and files all
documents required for compliance by the Trust or the Portfolio Series with
applicable laws and regulations; and arranges for the maintenance of fund
accounting and record-keeping of the Trust and the Portfolio Series.

SFSI provides persons satisfactory to the respective Boards of Trustees
to serve as officers of the Trust or the Portfolio Series. Such officers, as
well as certain other employees and Trustees of the Trust or the Portfolio
Series, may be directors, officers or employees of SFSI or its affiliates. SFSI
provides similar services to other mutual funds unrelated to the Trust and the
Portfolio Series.

As compensation for providing these services (other than fund
accounting services) and facilities to the Trust and the Portfolio Series, SFSI
receives a fee from the Portfolio Series accrued daily and paid monthly at an
annual rate of up to 0.07% of the average daily net assets of the Portfolios.
This fee is reported in the Expense Table at pages 1-2 as the Administrative
Fees. For its fund accounting services, SFSI receives a per annum fee from each
Fund and each Portfolio equal to $12,000 and $50,000, respectively. SFSI is a
subsidiary of Signature Financial Group, Inc.

DISTRIBUTOR

Pursuant to a Distribution Agreement, Edgewood Services, Inc. (the
"Distributor"), Federated Investors Tower, Pittsburgh, Pennsylvania 15222, 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 acts as distributor and serves as administrator to twenty-four bank
related mutual fund complexes.

SHAREHOLDER SERVICING AGENTS

The Trust expects to enter into shareholder servicing agreements with
one or more 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

<PAGE>

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

U.S. Trust serves as custodian of the Funds' and the Portfolios'
assets. Communications to the custodian should be directed to United States
Trust Company of New York, Chase Global Fund Services, 770 Broadway, New
York, NY 10003. Investors Bank & Trust Company, 79 Milk Street, Boston, MA
02205, has been retained to serve as domestic and foreign subcustodian of the
Funds' and the Portfolios' assets. Chase Global Fund Services ("CGFS"), 73
Tremont Street, Boston, MA 02108, serves as the transfer agent for the Funds,
providing transfer agency, dividend disbursement and registrar services. CGFS is
a subsidiary of Chase Manhattan Bank.

EXPENSES

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

Expenses of the Trust also include all fees under its Servicing Agent
Agreement; 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 officers 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.

Expenses of the Portfolio Series also include all fees under the
Portfolio Series' Servicing Agent Agreement; the expenses connected with the
execution, recording and settlement of security transactions; fees and expenses
of the Portfolio Series' custodian for all services to the Portfolios, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of preparing and mailing reports to investors and to governmental
officers and commissions; expenses of meetings of investors and Trustees; and
the advisory fees, if any, payable to U.S. Trust Pacific under the 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 or the Portfolio Series. 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 Pacific or U.S. Trust under
the Advisory Agreements with St. James Portfolios, the activities performed by
U.S. Trust as shareholder servicing agent for the Funds and subadviser and
custodian for the Portfolios, and the transfer agency and dividend disbursement
activities performed by CGFS for the Funds, 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, shareholder servicing, custodian and transfer agency 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 Portfolios, 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, U.S. Trust Pacific and their affiliates deal, trade and invest for their
own accounts in such obligations and are among the leading dealers of various
types of such obligations. U.S. Trust and U.S. Trust Pacific have informed the
Portfolios 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 for the Portfolios, 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 Portfolio 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.

<PAGE>

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 Small Cap Fund ,
Equity Index Fund and International Equity Fund, dividends will be declared and
paid at least once a year; for the Bond Index Fund, dividends will be declared
daily and paid at least each month; and for the Equity Fund, Income Fund, Total
Return Bond Fund, Balanced Fund, Equity Growth Fund and Value Equity Income Fund
, dividends will be declared and paid at least quarterly (four times 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 a 4% non-deductible federal excise
tax 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 ten 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 Equity Index Fund, Excelsior Institutional Bond Index
Fund, Excelsior Institutional Small Capitalization Fund, Excelsior Institutional
Balanced Fund, Excelsior Institutional Equity Growth Fund, Excelsior
Institutional Value Equity Income Fund and Excelsior Institutional International
Equity Fund. The ten 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.

Each Portfolio is a series of St. James Portfolios, which is organized
as a trust under the laws of the State of New York. The Portfolio Series'
Declaration of Trust provides that the Funds and other entities investing in the
Portfolios (e.g., other investment companies, insurance company separate
accounts and common and commingled trust funds) will each be liable for all
obligations of their corresponding Portfolios. However, the Trustees of the
Trust believe that the risk of the Funds incurring financial loss on account of
such liability is limited to circumstances in which both inadequate insurance
existed and a Portfolio itself was unable to meet its obligations, and that
neither the Funds nor their shareholders will be exposed to a material risk of
liability by reason of a Fund's investment in its corresponding Portfolio. For
more information regarding the Trustees of the Trust and the Portfolio Series,
see "Management of the Trust and Portfolio Series" in the Statement of
Additional Information. The interests in the Portfolio

<PAGE>

Series are divided into separate series. Investors in each series of the
Portfolio Series will vote separately or together in the same manner as
shareholders of the Trust's series.

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 portfolio, portfolio 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
Portfolios, including information related to (i) investment policies and
restrictions of the Funds and the Portfolios, (ii) Trustees and officers of the
Trust and Portfolio Series, (iii) portfolio transactions and brokerage
commissions, (iv) rights and liabilities of shareholders of the Trust and
Portfolio Series, (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 of the Funds
and the Portfolios at May 31, 1995.

<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 Fund Services, 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.

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>

TABLE OF CONTENTS

PAGE

SUMMARY OF EXPENSES............................................
INVESTMENT OBJECTIVES AND POLICIES.............................
EQUITY PORTFOLIO...........................................
INCOME PORTFOLIO...........................................
TOTAL RETURN BOND PORTFOLI0................................
EQUITY MARKET PORTFOLIO....................................
BOND MARKET PORTFOLIO......................................
SMALL CAP PORTFOLIO........................................
BALANCED PORTFOLIO.........................................
EQUITY GROWTH PORTFOLIO....................................
VALUE EQUITY INCOME PORTFOLIO..............................
INTERNATIONAL EQUITY PORTFOLIO.............................
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R) STRUCTURE......
PRICING OF SHARES..............................................
HOW TO PURCHASE, EXCHANGE AND REDEEM SHARES....................
INVESTOR PROGRAMS..............................................
TAX MATTERS....................................................
MANAGEMENT OF THE TRUST AND PORTFOLIO SERIES...................
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS......................
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES...........
PERFORMANCE INFORMATION........................................
MISCELLANEOUS..................................................
INSTRUCTIONS FOR NEW 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 INCORPORATED HEREIN BY REFERENCE, 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.

UST206A

<PAGE>

EXCELSIOR
INSTITUTIONAL
TRUST

Equity Fund
Income Fund
Total Return Bond Fund
Equity Index Fund
Bond Index Fund
Small Capitalization Fund
Balanced Fund
Equity Growth Fund
Value Equity Income Fund

International Equity Fund

PROSPECTUS
OCTOBER 2, 1995

<PAGE>

UST207
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 2, 1995

EXCELSIOR INSTITUTIONAL TRUST

Excelsior Institutional Trust (the "Trust") is comprised of twelve
funds, ten active series and two inactive series. This Statement of Additional
Information describes the shares of ten 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 Equity Index Fund (the "Equity Index Fund"),
Excelsior Institutional Bond Index Fund (the "Bond Index Fund"), Excelsior
Institutional Small Capitalization Fund (the "Small Cap Fund"), Excelsior
Institutional Balanced Fund (the "Balanced Fund"), Excelsior Institutional
Equity Growth Fund (the "Equity Growth Fund"), Excelsior Institutional Value
Equity Income Fund (the "Value Equity Income 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 and Portfolio Series . . . . . . . . . . .
Independent Accountants or Auditors . . . . . . . . . . . . . . .
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of the Trust; Fund Shares . . . . . . . . . . . . . .

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Financial Statements . . . . . . . . . . . . . . . . . . . . . . .

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

Excelsior Institutional Trust
6 St. James Avenue
Boston, Massachusetts 02116
(617) 423-0800

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 (617) 423-0800.
Terms used but not defined herein, which are defined in the Funds' 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 twelve separate
series, ten of which are described herein. Each such series or Fund seeks to
achieve its investment objective by investing all of its investable assets in a
corresponding Portfolio, as follows:

FUND NAME CORRESPONDING PORTFOLIO

Equity Fund Equity Portfolio
Income Fund Income Portfolio
Total Return Bond Fund Total Return Bond
Portfolio
Equity Index Fund Equity Market Portfolio
Bond Index Fund Bond Market Portfolio
Small Capitalization Fund Small Cap Portfolio
Balanced Fund Balanced Portfolio
Equity Growth Fund Equity Growth Portfolio
Value Equity Income Fund Value Equity Income Portfolio
International Equity Fund International Equity Portfolio

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. Each of
the Portfolios is a series of St.

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James Portfolios (the "Portfolio Series").

United States Trust Company of The Pacific Northwest ("U.S. Trust
Pacific") is the investment adviser for the Portfolios corresponding to the
Funds listed below. The daily management of the security holdings of the
Portfolios for the following Funds is supervised by the investment managers
named below, acting as subadvisers:

Equity Index Fund,
Bond Index Fund,
and Small Cap Fund. . . . United States Trust Company of New York
("U.S. Trust")

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

Equity Growth Fund . . . . Luther King Capital Management

Value Equity Income Fund. . Spare, Kaplan , Bischel & Associates

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

U.S. Trust is the investment adviser of the Portfolios corresponding to
the Equity Fund, Income Fund, Total Return Bond Fund, and International Equity
Fund. U.S. Trust makes decisions with respect to and places orders for all
purchases and sales of portfolio securities for these Portfolios.

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

INVESTMENT OBJECTIVES

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

INVESTMENT POLICIES

Each Fund seeks to achieve its investment objective by investing all of
its assets in its corresponding Portfolio, as shown above. The Trust may
withdraw a Fund's investment from its corresponding Portfolio at any time if the
Board of Trustees of the Trust determines that it is in the best interests of
the Fund to do so.

Since the investment characteristics of each Fund correspond directly
to those of its corresponding Portfolio, the following supplements the
discussions of the various investments of and techniques employed by the
Portfolios set forth in the Prospectus

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of the Funds.

OTHER INVESTMENT CONSIDERATIONS - EQUITY PORTFOLIO

Equity Portfolio 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 objective of
long-term capital appreciation, the Series Portfolio 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 very wide range of investment
potential, current income return rates, and exposure to fundamental and market
risks. Income generated by Equity Portfolio'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,

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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 very 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, Equity Portfolio'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.

OTHER INVESTMENT CONSIDERATIONS - INTERNATIONAL EQUITY PORTFOLIO

The Portfolio 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 Portfolio 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 Portfolio Series' 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

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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.
These 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

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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.

The Portfolios 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), which exempts transactions
by an issuer not involving any

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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

The Portfolios have the authority to lend portfolio securities to
brokers, dealers and other financial organizations. By lending its securities, a
Portfolio can increase its income by continuing to receive interest on the
loaned securities as well as by either investing the cash collateral in
short-term securities or obtaining yield in the form of interest paid 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 Portfolio will adhere to the following conditions whenever
its securities are loaned: (i) the Portfolio 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
Portfolio must be able to terminate the loan at any time; (iv) the Portfolio
must receive reasonable interest on the loan, as well as any dividends, interest
or other distributions on the loaned securities, and any increase in market
value; (v) the Portfolio 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 Portfolio would terminate the loan and regain the right to
vote the securities.

VARIABLE RATE AND FLOATING RATE SECURITIES

The Portfolios 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 Portfolio to invest fluctuating
amounts, which may change daily without penalty, pursuant to direct arrangements
between the Portfolio, as lender, and the borrower. The interest rates on these
notes fluctuate from time to time. The issuer of such obligations

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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 Portfolio'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 Portfolio
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 Portfolio may invest. The
respective subadvisers of the Portfolios will consider on an ongoing basis the
creditworthiness of the issuers of the floating and variable rate demand
obligations held by the Portfolios. The Portfolios will not invest more than 15%
of the value of their net assets in floating or variable rate demand obligations
as to which they 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

A Portfolio may purchase from financial institutions participation
interests in securities in which such Portfolio may invest. A participation
interest gives a Portfolio an undivided interest in the security in the
proportion that the Portfolio'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 Portfolio, 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 Portfolio must have determined that the instrument is of
comparable quality to those instruments in which the Portfolio may invest. For
certain participation interests, a Portfolio will have the right to demand
payment, on not more than seven days' notice, for all or

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any part of the Portfolio's participation interest in the security, plus accrued
interest. As to these instruments, the Portfolio 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. A Portfolio 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 Portfolio
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.

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A Portfolio's investment managers will monitor the liquidity of Rule
144A securities for that Portfolio under the supervision of the Portfolio'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

A Portfolio also may 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 the Portfolio's investment
objectives and policies. The Portfolio 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 Portfolio cannot exercise the demand feature described above and as
to which there is no secondary market). Currently, no Portfolio 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 Portfolio'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 Portfolio 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 Portfolios are fully collateralized, with such collateral being marked to
market daily.

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The Portfolios 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 Portfolio 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 Portfolio may decline below the repurchase price
of those securities.

MUNICIPAL OBLIGATIONS - INCOME PORTFOLIO AND TOTAL RETURN BOND PORTFOLIO

Income Portfolio and Total Return Bond Portfolio may, when deemed
appropriate by U.S. Trust in light of the Portfolios' 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 Income Portfolio and Total Return Bond
Portfolio that are derived from interest on municipal securities would be
taxable to the Portfolios' 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 Portfolios' 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

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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 Portfolios 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 Portfolios 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 Portfolios may invest in
long-term tax-exempt instruments, such

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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 Portfolio
Series 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 PORTFOLIO AND TOTAL RETURN BOND PORTFOLIO

Income Portfolio and Total Return Bond Portfolio 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 Portfolio, at
the Portfolio's option, specified municipal obligations at a specified price.
The amount payable to a Portfolio upon its exercise of a stand-by commitment is
normally (i) the Portfolio's acquisition cost of the municipal obligations
(excluding any accrued interest which the Portfolio paid on their acquisition),
less any amortized market premium or plus any amortized market or original issue
discount during the period the Portfolio 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 Portfolio at any time
before the maturity of the underlying municipal obligations, and may be sold,
transferred or assigned by the Portfolio only with the underlying instruments.

Income Portfolio and Total Return Bond Portfolio expect that stand-by
commitments will generally be available without the payment of any direct or
indirect consideration. However, if necessary or advisable, either Portfolio 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
Portfolio 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 Portfolio.

Income Portfolio and Total Return Bond Portfolio 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 their investment objectives and policies, the
Portfolios may invest their assets in securities of foreign issuers. Investing
in securities issued by companies

<PAGE>

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 Portfolio,
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 Portfolio's assets may be released prior
to receipt of payment, may expose a Portfolio 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.

The Portfolios 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 the Portfolios, if consistent with their 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, the Portfolios 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
Portfolios either enter into these transactions on a spot (I.E., cash) basis at
the spot rate

<PAGE>

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
Portfolio 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 Portfolio 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 Portfolio's securities or in foreign exchange
rates, or prevent loss if the prices of these securities should decline.

The Portfolios may enter into foreign currency hedging transactions 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 Portfolios 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 Portfolio'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, a Portfolio 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
Portfolio will obtain, on the same maturity date, the same amount of the
currency which it

<PAGE>

is obligated to deliver. If the Portfolio retains the portfolio security and
engages in an offsetting transaction, the Portfolio, 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 Portfolio'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 Portfolio 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 Portfolio 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 Portfolio'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
Portfolio 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 Portfolio's
foreign currency denominated portfolio securities and the use of such techniques
will subject the Portfolio 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 Portfolio may not always be able to enter into foreign currency
forward contracts at attractive prices and this will limit a Portfolio's ability
to use such contract to hedge or cross-hedge its assets. Also, with regard to a
Portfolio'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
Portfolio's cross-hedges and the movements in the exchange rates of the foreign
currencies in which the Portfolio's assets that are the subject of such
cross-hedges are denominated.

GUARANTEED INVESTMENT CONTRACTS

The Portfolios may invest in guaranteed investment contracts ("GICs")
issued by insurance companies. Pursuant to such contracts, a Portfolio 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

<PAGE>

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 Portfolio 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 Portfolio which are not readily marketable, will not exceed 15%
of the Portfolio'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 Portfolio intends to invest 5% or less of its respective net
assets in GICs during the current year.

WHEN-ISSUED SECURITIES

If permitted pursuant to their investment objectives and policies, the
Portfolios may purchase securities on a "when-issued" or on a "forward delivery"
basis. It is expected that, under normal circumstances, the Portfolios 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 Portfolios will
establish procedures consistent with the relevant policies of the SEC. Those
policies currently recommend that an amount of a Portfolio'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 Portfolios 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 Portfolios 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 Portfolio may have to sell assets which have been set aside in order
to meet redemptions. Also, if a Portfolio determines it is advisable as a matter
of investment strategy to sell the when-issued or forward delivery securities,
the Portfolio 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 Portfolio's payment
obligation).

When a Portfolio 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 Portfolio's incurring a loss or
missing an opportunity to obtain a price considered to be advantageous.

<PAGE>

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
Portfolio starting on the day the Portfolio agrees to purchase the securities.
The Portfolio 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 Portfolio 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 dividend income is accrued throughout the term of the zero
coupon obligation but is not actually received until maturity, a Portfolio may
have to sell other securities to pay said accrued dividends prior to maturity of
the zero coupon obligation.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

GENERAL. The successful use of such instruments by a Portfolio 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 Portfolio 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 their investment objectives
and policies, the Portfolios may enter into contracts for the purchase or sale
for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices including any index of U.S. Government
securities, foreign government securities or corporate debt securities. 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 Portfolio 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
Portfolio may also enter into futures contracts which are based on bonds issued
by entities

<PAGE>

other than the U.S. Government.

Purchases or sales of stock index futures contracts are used to attempt
to protect a Portfolio's current or intended stock investments from broad
fluctuations in stock prices. For example, the Portfolio may sell stock index
futures contracts in anticipation of or during a decline in the market value of
the Portfolio'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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio
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 Portfolio
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
Portfolio will incur brokerage fees when it purchases or sells futures
contracts.

The purpose of the acquisition or sale of a futures

<PAGE>

contract, in the case of a Portfolio which holds or intends to acquire
fixed-income securities, is to attempt to protect the Portfolio 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 Portfolio 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 Portfolio. If
interest rates did increase, the value of the debt security in a Portfolio would
decline, but the value of the futures contracts to the Portfolio would increase
at approximately the same rate, thereby keeping the net asset value of the
Portfolio from declining as much as it otherwise would have. The Portfolio 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 Portfolio 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 Portfolio 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 Portfolio could then buy debt securities
on the cash market. To the extent a Portfolio enters into futures contracts for
this purpose, the assets in the segregated asset account maintained to cover the
Portfolio'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 Portfolio 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

<PAGE>

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 Portfolios, if the
judgment of the investment managers about the general direction of interest
rates is incorrect, a Portfolio's overall performance would be poorer than if it
had not entered into any such contract. For example, if a Portfolio 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 Portfolio 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 Portfolio
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 Portfolio
may have to sell securities at a time when it may be disadvantageous to do so.

OPTIONS ON FUTURES CONTRACTS. If permitted pursuant to their investment
objectives and policies, the Portfolios 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 Portfolio 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 Portfolio will retain
the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Portfolio'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 Portfolio will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of

<PAGE>

securities which the Portfolio intends to purchase. If a put or call option the
Portfolio has written is exercised, the Portfolio 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 Portfolio'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 Portfolio 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 Portfolio 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 Portfolio Series 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
margin deposits on all (non-hedge) futures contracts of the Portfolio and
premiums paid on outstanding (non-hedge) options on futures contracts owned by
the Portfolio does not exceed 5% of the market value of the total assets of the
Portfolio. In addition, the aggregate market value of the outstanding futures
contracts purchased by the Portfolio may not exceed 50% of the market value of
the total assets of the Portfolio. Neither of these restrictions will be changed
by the Portfolio'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 their
investment objectives and policies, the Portfolios 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 Portfolio may purchase put options on the foreign currency. If the value of
the currency does decline, a Portfolio 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.

<PAGE>

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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio may write options on foreign currencies for the same types
of hedging purposes. For example, where a Portfolio 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
Portfolio could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Portfolio 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 Portfolio 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 Portfolio 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.

The Portfolios may write covered call options on foreign currencies. A
call option written on a foreign currency by a Portfolio is "covered" if the
Portfolio 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 Portfolio 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

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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 Portfolio in cash, U.S. Government securities and other high quality liquid
debt securities in a segregated account with its custodian.

The Portfolios 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
Portfolio 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 Portfolio 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 Portfolio
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

<PAGE>

readily available than in the over-the-counter market, potentially permitting a
Portfolio 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
Portfolio'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
Portfolio 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 Portfolio'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.

<PAGE>

OPTIONS ON SECURITIES

If permitted pursuant to their investment objectives and policies, the
Portfolios may write (sell) covered call and put options to a limited extent on
its portfolio securities ("covered options"). However, a Portfolio 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
Portfolio.

When a Portfolio 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 Portfolio 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 Portfolio has no control, the
Portfolio must sell the underlying security to the option holder at the exercise
price. By writing a covered call option, a Portfolio 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 Portfolio writes a covered put option, it gives the purchaser of
the option the right to sell the underlying security to the Portfolio at the
specified exercise price at any time during the option period. If the option
expires unexercised, the Portfolio 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 Portfolio has no control, the Portfolio must purchase the
underlying security from the option holder at the exercise price. By writing a
covered put option, a Portfolio, 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 Portfolio will only write put options involving
securities for which a determination is made at the time the option is written
that the Portfolio wishes to acquire the securities at the exercise price.

A Portfolio 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 Portfolio 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 Portfolio writes an option, an amount equal to the net premium
received by the Portfolio is included in the liability section of the
Portfolio's Statement of Assets and Liabilities as a deferred credit. The amount
of the deferred

<PAGE>

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
Portfolio enters into a closing purchase transaction, the Portfolio 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 Portfolio
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 Portfolio.

A Portfolio may purchase call and put options on any securities in
which it may invest. A Portfolio 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 Portfolio, in exchange for the premium paid,
to purchase a security at a specified price during the option period. A
Portfolio 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 Portfolio 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 Portfolio, in exchange for the premium paid, to sell
a security, which may or may not be held in the Portfolio'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
Portfolio's portfolio securities. Put options also may be purchased by a
Portfolio for the purpose of affirmatively benefiting from a decline in the
price of securities which the Portfolio does not own. A Portfolio 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.

The Portfolios have adopted certain other non-fundamental policies
concerning option transactions which are discussed below. A Portfolio's
activities in options may also be restricted by the requirements of the Internal
Revenue Code of

<PAGE>

1986, as amended (the "Code"), for its corresponding Fund's 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.

The Portfolios 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, the
Portfolios 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 the Portfolios enter into
such options transactions, under the general supervision of the Portfolio
Series' Trustees.

OPTIONS ON SECURITIES INDICES

In addition to options on securities, and if permitted pursuant to
their investment objectives and policies, the Portfolios 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
Portfolio 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

<PAGE>

Portfolio 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 Portfolios' 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 Portfolio's settlement
obligations.

SHORT SALES "AGAINST THE BOX"

In a short sale, a Portfolio sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. A
Portfolio 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 Portfolio 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 Portfolio 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 Portfolio's long position.

The Portfolios will not engage in short sales against the box for
investment purposes. A Portfolio 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 Portfolio 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 Portfolio'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
Portfolio owns. There are certain additional transaction costs associated with
short sales against the box, but the Portfolios endeavor to offset these costs
with the income from the investment of the cash proceeds of short sales.

<PAGE>

As a non-fundamental operating policy, not more than 40% of a
Portfolio'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
Portfolio or Portfolios may invest in obligations other than those listed
previously, provided such investments are consistent with a Fund's and its
corresponding Portfolio'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 Portfolio
Series. After purchase by a Portfolio, an obligation may cease to be rated or
its rating may be reduced below the minimum required for purchase by the
Portfolio. Neither event would require a Portfolio to dispose of the obligation,
but its subadviser will consider such an event in its determination of whether
the Portfolio 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 each Portfolio and may not be changed with respect to a Fund or
Portfolio without the approval of a "majority of the outstanding voting
securities" of the Fund or the Portfolio, as the case may be. "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 the Fund (or
the Portfolio), the lesser of (i) 67% or more of the outstanding voting
securities of the Fund (or of the total beneficial interests of the Portfolio)
present at a meeting, if the holders of more than 50% of the outstanding voting
securities of the Fund (or of the total beneficial interests of the Portfolio)
are present or represented by proxy, or (ii) more than 50% of the outstanding
voting securities of the Fund (or of the total beneficial interests of the
Portfolio). Whenever the Trust is requested to vote on a fundamental policy

<PAGE>

of a Portfolio, the Trust will hold a meeting of the corresponding 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 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 Portfolio's total assets or the value of a
Portfolio'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 Portfolio (or 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 Portfolio (or
Fund), except that in an amount not to exceed 1/3 of the current value of the
Portfolio's (or 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 deposit 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 Portfolio (or Fund) will not purchase
securities while borrowings exceed 5% of the Portfolio's (or Fund's) total
assets.

(2) underwrite securities issued by other persons except insofar as the
Portfolio Series or the Portfolio (or the Trust or the 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
Portfolio's (or Fund's) portfolio securities and provided that any such loans
not exceed 30% of the Portfolio's (or 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

<PAGE>

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 Portfolio Series (or Trust) may hold and sell,
for the Portfolio's (or Fund's) portfolio, real estate acquired as a result of
the Portfolio's (or Fund's) ownership of securities);

(5) invest 25% or more of its assets in any one industry (excluding
U.S. Government securities), unless the stocks in a single industry were to
comprise 25% or more of the S&P 500 Index (in the case of the Equity Index Fund
or Equity Market Portfolio) or the Lehman Brothers Aggregate Bond Index (in the
case of the Bond Index Fund or Bond Market Portfolio), in which case the
corresponding Portfolio (or that 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 Portfolio (or the Trust, on behalf of
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 Portfolio (or Fund) if such purchase at the time thereof
would cause (a) more than 10% of the Portfolio's (or Fund's)
total assets (taken at the

<PAGE>

greater of cost or market value) to be invested in the
securities of such issuers; (b) more that 5% of the
Portfolio's (or 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 Portfolio (or
Fund);

(iv) purchase securities of any issuer if such purchase at the time
thereof would cause the Portfolio (or 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 Portfolio's (or 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 Portfolio (Trust), or is an officer or partner
of the investment adviser or subadviser of the Portfolio, if
after the purchase of the securities of such issuer for the
Portfolio (or 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 Portfolio's (or Fund's) net assets
in warrants (valued at the lower of cost or market), but not
more than 2% of the Portfolio's (or 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 Portfolio (or 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 Portfolio's
(or Fund's) net assets (taken at market value); provided,
however, that the value of the Portfolio's (or 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 Portfolio's (or Fund's) net assets or
more than 2%

<PAGE>

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
Portfolio's (or Fund's) total assets.

Policies (i) through (ix) may be changed by the Board of Trustees of
the Portfolio Series or 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
Portfolio 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 Portfolio's and Total
Return Bond Portfolio'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 Portfolios, portfolio turnover is not expected to have a
material effect on the net asset value of either Portfolio. Each Portfolio's
portfolio turnover rate may also be affected by cash requirements for
redemptions of shares and by regulatory provisions which enable a Portfolio 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 Portfolio if its investment managers believe that a transaction net of
costs (including custodian charges) will help achieve the Portfolio's investment
objective.

A Portfolio'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 Portfolios do
not anticipate paying brokerage commissions in such transactions. Purchases and
sales of the Bond Market Portfolio's, Income Portfolio's and Total Return Bond
Portfolio's portfolio securities will usually be principal transactions without
brokerage commissions. Any transactions for which a Portfolio pays a brokerage
commission will be effected at the best price and execution available. Purchases
from underwriters of

<PAGE>

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 judgement and in
a manner deemed to be in the best interest of the investors in the applicable
Portfolio 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 Portfolio Series' Board of Trustees, to cause the Portfolios 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 Portfolios.
Such information may be useful to the investment managers in serving the
Portfolios 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 Portfolios.

Investment decisions for a Portfolio 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

<PAGE>

Portfolio 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 Portfolio or the size of the position obtainable for
the Portfolio. In addition, when purchases or sales of the same security for a
Portfolio 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 Portfolio. Such an event might also adversely
affect that Portfolio.

The following Portfolios paid the following approximate brokerage
commissions for their respective fiscal periods from commencement of operations1
through May 31, 1995: Equity Portfolio: $27,636; Equity Market Portfolio:
$32,193; Small Cap Portfolio: $16,200; Balanced Portfolio: $43,886; Equity
Growth Portfolio: $163,537; Value Equity Income Portfolio: $25,962;
International Equity Portfolio: $33,014; Bond Market, Income and Total Return
Bond Portfolios: $0.

PORTFOLIO TURNOVER

Set forth below are the portfolio turnover rates for the Portfolios
corresponding to the Funds for the indicated periods. A rate of 100% indicates
that the equivalent of all of a Portfolio'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 operations1 through May 31, 1995 were as follows:
Equity Portfolio, 34%; Income Portfolio, 34%; Total Return Bond Portfolio, 84%;
Equity Market Portfolio, 98%; Bond Market Portfolio, 67%; Small Cap Portfolio,
47%; Balanced Portfolio, 57%; Equity Growth Portfolio, 122%; Value Equity Income
Portfolio, 28%; 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
- --------
1 The Portfolios commenced operations on the following dates: Equity and Income
Portfolios, January 16, 1995; Total Return Bond Portfolio, January 19, 1995;
Equity Market, Bond Market, Small Cap, Balanced, Equity Growth and Value Equity
Income Portfolios, July 11, 1994; and International Equity Portfolio, January
24, 1995.

<PAGE>

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:
a-b
Yield = 2 [(--- + 1)6 - 1]
cd
Where: a = dividends and interest earned during the perio .

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

<PAGE>

(or one month) yield for the fixed income portion of its corresponding
Portfolio, calculated in the same manner as specified above.

TOTAL RETURN. Each Funds' "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:

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

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 in its
corresponding Portfolio, but also on changes in the current value of such
securities and on changes in the expenses of the Fund and the Portfolio. 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

<PAGE>

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: 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: 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 Equity Index Fund: average annual total return,
commencement of operations(*) to period end: 20.96%; aggregate total return,
commencement of operations(*) to period end: 20.96%.

Excelsior Institutional Bond Index Fund: 30-day yield: 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 Small Capitalization Fund: average annual total return,
commencement of operations(*) to period end: 11.10%; aggregate total return,
commencement of operations(*) to period end: 11.10%.

Excelsior Institutional Balanced Fund: 30-day yield: 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 Value Equity Income Fund: average annual total return,
commencement of operations(*) to period end: 19.32%; aggregate total return,
commencement of operations(*) to period end: 19.32%.

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

<PAGE>

period end: 12.57%.

- ----------------
(*) The Funds commenced operations on the following dates: Equity Fund, January
16, 1995; Income Fund, January 16, 1995; Total Return Bond Fund, January 19,
1995; Equity Index, Bond Index, Small Capitalization, Balanced, Equity Growth
and Value Equity Income 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 Portfolios
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

<PAGE>

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.

<PAGE>

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. 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 Portfolio 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 Portfolio Series, 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 Portfolio 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 Portfolio Series.

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
Portfolio Series'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 Portfolio 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

<PAGE>

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.

Each investor in the Portfolio Series, including the Trust, may add to
or reduce its investment in a Portfolio on each day that the NYSE is open for
business ("Portfolio Business Day"). As of 4:00 p.m. (Eastern time) on each such
day, the value of each investor's interest in a 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 a
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 Portfolio
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

<PAGE>

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 AND PORTFOLIO SERIES

The respective Trustees and officers of the Trust and Portfolio Series
and their 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 Trust
or Portfolio Series, as the case may be. Unless otherwise indicated, the address
of each Trustee and officer of the Trust and Portfolio Series is 6 St. James
Avenue, Boston, Massachusetts 02116.

TRUSTEES AND OFFICERS OF THE TRUST

RODMAN L. DRAKE -- Trustee; Director, Mueller Industries, Inc.;
President, Drake & Co. Inc. (investment and consulting firm) (since 1993);
Trustee, Hyperion Total Return Fund, Inc., Hyperion Government Mortgage Trust
II, and other funds for which Hyperion Capital Management, Inc. is the
investment adviser; President and Co-Chairman, KMR Power Corporation (power
plants) (since 1993); 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). His address is
66 East 91st Street, New York, New York 10128.

<PAGE>

W. WALLACE MCDOWELL -- Trustee; Managing Director, Morgan Lewis Githens
& Ahn (since 1991); Chairman and Chief Executive Officer, The Prospect Group,
Inc. (1983-1990) and Director, U.S. Homecare Corporation, Grossmans, Inc.,
Children's Discovery Centers, Interactive Technologies, Inc. and Jack Morton
Productions (1983 to 1990). His address is c/o MLGAL Partners, Two Greenwich
Plaza, Greenwich, Connecticut 06830.

JONATHAN PIEL -- Trustee; Editor, Scientific American; Vice President,
Scientific American, Inc.; Director, Group for The South Fork, Bridgehampton,
New York (since October 1993); Member, Rockefeller Council, Rockefeller
University (since 1988). His address is c/o Scientific American, 415 Madison
Avenue, New York, New York 10017.

PHILIP W. COOLIDGE* -- President of the Trust and Trustee and
Co-Chairman of the Board of Trustees of the Portfolio Series; Chairman, Chief
Executive Officer and President, Signature Financial Group, Inc. ("SFG") (since
December 1988); Chairman, Chief Executive Officer and President, SFSI (since May
1993).

JOHN R. ELDER -- Treasurer; Vice President , SFG (since April 1995);
Treasurer, Phoenix Family of Mutual Funds (Phoenix Home Life Mutual Insurance
Company) (from 1983 to March 1995).

LINDA T. GIBSON -- Assistant Secretary; Legal Counsel, SFG (since June
1991); Assistant Secretary, SFSI (since May 1993); law student, Boston
University School of Law (from September 1989 to May 1992); Product Manager, SFG
(January 1989 to September 1989).

THOMAS M. LENZ -- Secretary; Vice President and Associate General
Counsel, SFG (since November 1989); Assistant Secretary, SFSI (since May 1993);
Attorney, Ropes & Gray (September 1984 to November 1989).

MOLLY S. MUGLER -- Assistant Secretary; Legal Counsel, SFG (since
December 1988); Assistant Secretary, SFSI (since May 1993).

BARBARA M. O'DETTE -- Assistant Treasurer; Assistant Treasurer, SFG
(since December 1988) and SFSI (since May 1993).

ANDRES E. SALDANA -- Assistant Secretary; Legal Counsel, SFG
(since November 1992); Assistant Secretary, SFSI (since May 1993); Attorney,
Ropes & Gray (law firm) (September 1990 to

<PAGE>

November 1992); law student, Yale Law School (September 1987 to May 1990).

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.

AGGREGATE COMPENSATIONPENSION OR RETIREMENT BENEFITS
FROM THE TRUST FOR FY ACCRUED AS PART OF FUND EXPENSES TOTAL COMPENSATION FROM THE TRUST AND FUND COMPLEX PAID TO TRUSTEES FOR
ESTIMATED ANNUAL BENEFFY ENDED 5/31/95 NT
<S> <C> <C> <C> <C>

Rodman L. Drake, Trustee $5,000 None None $5,000

W. Wallace $5,250 None None $5,250
McDowell, Trustee

Jonathan Piel, Trustee $5,250 None $5,250
None

</TABLE>

TRUSTEES OF THE PORTFOLIO SERIES

In addition to Mr. Coolidge, the following persons serve as Trustees of
the Portfolio Series:

STEPHEN D. BARRETT -- Director, President and Chief Operating Officer,
H.C. Wainwright & Co., Inc. (broker-dealer) (since 1990); Director, Alex Brown &
Sons, Inc. (from 1976 to 1989). His address is 33 Marlborough Street, Boston,
Massachusetts 02116.

WILLIAM B. BLUNDIN* -- Co-Chairman of the Board of Trustees; Vice
Chairman, Concord Holding Corporation (since 1987).

DAVID H. CARTER -- Trustee, 1784 Funds (since 1993); Managing Director,
Bearbull (UK) Ltd. (investment advisor) (from 1988 to 1993). His address is
Vasterne Manor, Wootton Bassett, Wiltshire, England SN4 7PB.

RAYMOND L. COLOTTI -- Retired; Executive Vice President, The Equitable
Companies (financial services) (1990-1993); Executive Vice President, Equitable
Investment Corporation (1985-1990). His address is 13 Summit Road, Verone, New
Jersey 07044.

Each Trustee is paid an annual fee as follows for serving as Trustee of
the Portfolio Series, 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

<PAGE>

below. The Trustees may hold various other directorships unrelated
to the Portfolio Series.
<TABLE>
<CAPTION>

AGGREGATE COMPENSATION
FROM THE PORTFOLIO SERPENSION OR RETIREMENT BENEFITS TOTAL COMPENSATION FROM THE PORTFOLIO SERIES AND FUND COMPLEX PAID TO
ACCRUED AS PART OF FUND EXPENSES TRUSTEES FOR FY ENDED 5/31/95
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<S> <C> <C> <C> <C>

Stephen D. Barrett, $8,000 None None $8,000
Trustee

David H. Carter, Trustee $8,000 None None $8,000

$8,000 None None $8,000
Raymond L. Colotti, Trustee
</TABLE>

OFFICERS OF THE PORTFOLIO SERIES

The officers of the Trust listed above hold the same offices with the
Portfolio Series

* * *

Mss. Gibson, Mugler and O'Dette and Messrs. Coolidge, Elder, Lenz and
Saldana may also hold similar positions for other investment companies for which
SBDS

or an affiliate serves as the principal underwriter.

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.

<PAGE>

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 as a group owned less than 1% of
the shares of each Fund. Shareholders owning 25% or more of the outstanding
shares of a Fund may 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 Bond Market, Equity Market, Small Cap, Balanced, Equity Growth, Value Equity
Income and International Equity Portfolios pursuant to an Investment Advisory
Agreement with the Portfolio Series on behalf of said Portfolios, subject to the
general supervision and guidance of the Board of Trustees of the Portfolio
Series. U.S. Trust is responsible for the management of the assets of the
Equity, Income, and Total Return Bond Portfolios pursuant to an Investment
Advisory Agreement with the Portfolio Series on behalf of said Portfolios,
subject to the general supervision and guidance of the Board of Trustees of the
Portfolio Series.

Each Advisory Agreement will continue in effect with respect to each
Portfolio as long as such continuance is specifically approved at least annually
by the Portfolio Series Board of Trustees or by a majority vote of the investors
in the applicable Portfolio (with the vote of each being in proportion to the
respective values of their investments), and, in either case, by a majority of
the Portfolio Series' Trustees 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
Portfolio Series' Board of Trustees on June 30, 1994 or (in the case of the
Equity, Income, Total Return Bond, and International Equity Portfolios) on
September 13, 1994. Each investment adviser has agreed to waive all investment
advisory fees. While no Portfolio pays any fee to its investment adviser, each
institutional investor enters into an asset management services

<PAGE>

agreement with U.S. Trust Pacific and agrees 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.

Each Advisory Agreement provides that the investment adviser may render
services to others, and each Agreement is terminable with respect to one or more
Portfolios by the Portfolio Series without penalty on not more than 60 days' nor
less than 30 days' written notice when authorized either by majority vote of the
Portfolio's corresponding Fund and of the other investors in the Portfolio (with
the vote of each being in proportion to the amount of its investment) or by a
vote of a majority of the Portfolio Series' Board of Trustees, 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 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
corresponding Portfolio. Such reimbursement, if required, will be equal to the
combined aggregate annual expenses of the appropriate Fund and its corresponding
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 each of the Trust and the Portfolio Series 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 Bond Market, Equity Market, Small Cap, Balanced,
Equity Growth, Value Equity Income and International Equity Portfolios, U.S.
Trust Pacific has entered into an Investment Subadvisory Agreement (each a
"Subadvisory Agreement") with the subadviser listed below opposite the name of
the Fund corresponding to that Portfolio. For their services under the
Subadvisory Agreements, the subadvisers receive from U.S. Trust Pacific, fees at
a maximum annual rate equal to the percentages specified in the table below of
the corresponding Portfolio's average daily net assets.

<TABLE>
<CAPTION>
Portfolio Compensation Rate
FUND NAME SUBADVISER FOR
SUBADVISER (%)

<S> <C> <C>
50

<PAGE>

Equity Index Fund U.S. Trust 0.25%
Bond Index Fund U.S. Trust 0.25%
Small Capitalization Fund U.S. Trust 0.65%
Balanced Fund Becker 0.425%
Equity Growth Fund Luther King 0.40%
Value Equity Income Fund Spare Kaplan 0.40%
International Equity Fund Harding Loevner 0.45%
</TABLE>

It is the responsibility of the subadvisers to make the day-to-day
investment decisions for their corresponding Portfolio or Portfolios, and to
place the purchase and sales orders for securities transactions of such
Portfolios, 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 the corresponding
Portfolio's investments and effecting securities transactions for the Portfolio.

SERVICING AGENT

Signature Financial Services, Inc. ("SFSI") serves as servicing agent
and fund accounting agent to the Trust and the Portfolio Series pursuant to
agreements between SFSI and each of the Trust and the Portfolio Series (the
"Servicing Agent Agreements"). For its services under the Servicing Agent
Agreement with the Portfolio Series, SFSI receives a servicing agent fee which
is computed daily and may be paid monthly at the following annual rates of the
average daily net assets of the Portfolios: 0.05% of the first $2 billion in
assets; 0.08% of the next $500 million; 0.07% of the next $500 million; 0.06% of
the next $1 billion; and 0.05% thereafter. The Prospectus contains a description
of the fund accounting fees payable to SFSI under the Servicing Agent
Agreements. SFSI is a wholly-owned subsidiary of Signature Financial Group, Inc.

Pursuant to the Servicing Agent Agreements, SFSI may render fund
accounting and other services to others. The Agreements terminate automatically
if assigned and may be terminated without penalty by vote of a majority of the
outstanding voting securities of the Trust or the Portfolio Series, or by either
party on not more than 60 days' nor less than 30 days' written notice. The
Servicing and Fund Accounting Agreements also provide that neither SFSI nor its
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 or the
Portfolio Series, except for willful misfeasance, bad faith or gross negligence
in the performance of its or 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; Equity Index Fund: $10,677; Bond Index Fund: $10,667;
Small Capitalization Fund: $10,677; Balanced Fund: $10,677; Equity Growth Fund:
$10,677;

<PAGE>

Value Equity Income Fund: $10,677; International Equity Fund: $4,263.

For the period ended May 31, 1995, servicing agent fees for each
Portfolio amounted to the following. Equity Portfolio: $20,368; Income
Portfolio: $23,776; Total Return Bond Portfolio: $21,403; Equity Market
Portfolio: $54,614; Bond Market Portfolio: $54,279; Small Cap Portfolio:
$50,206; Balanced Portfolio: $72,155; Equity Growth Portfolio: $66,174; Value
Equity Income Portfolio: $52,265; International Equity Portfolio: $18,964.

TRANSFER AGENT AND CUSTODIAN

U.S. Trust serves as custodian of the Funds' and the Portfolios' assets
pursuant to separate Custody Agreements between U.S. Trust and the Trust or the
Portfolio Series.

Under such agreements and acting as the Funds' and the Portfolios'
custodian, U.S. Trust has agreed to (i) maintain a separate account or accounts
for each of the Funds and the Portfolios; (ii) make receipts and disbursements
of money on behalf of the Funds and the Portfolios; (iii) collect and receive
income and other payments and distributions on account of the Portfolios'
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, and to
the Portfolio Series concerning the Portfolios' operations. For the services
provided by U.S. Trust under the Custody Agreements, the Trust and the Portfolio
Series have agreed to pay U.S. Trust a fee as agreed upon from time to time.

U.S. Trust may, at its own expense, open and maintain custody accounts
with respect to the Funds or the Portfolios with other banks or trust companies,
provided that U.S. Trust shall remain liable under the applicable Custody
Agreement for the performance of all of its duties under such agreement,
notwithstanding any such delegation. Pursuant to its delegation authority under
the Custody Agreements, U.S. Trust has entered into sub-custody arrangements
with Investors Bank & Trust Company ("IBT") with respect to the Trust and the
Portfolio Series. For the services provided thereunder by IBT, U.S. Trust has
agreed to pay IBT a fee as agreed upon from time to time. IBT receives no fee
directly from the Trust or the Portfolio Series for any of its sub-custody
services.

Chase Global Fund Services ("CGFS") serves as transfer agent for the
Funds pursuant to a Transfer Agency Agreement. Under this agreement, CGFS 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

<PAGE>

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, CGFS is entitled to receive from the
Trust such compensation as may be agreed upon from time to time between the
Trust and CGFS. In addition, CGFS 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.

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

SERVICING PLANS

The Trust and the Portfolio Series have each adopted separate Servicing
Plans (each, a "Plan") which provide that the Trust or the Portfolio Series may
obtain the services of a servicing and fund accounting agent, a transfer agent,
a custodian, and (in the case of the Trust) one or more shareholder servicing
organizations, and may enter into agreements providing for the payment of fees
for such services. Each Plan will continue in effect indefinitely if such
continuance is specifically approved at least annually by a vote of both a
majority of the Trust's or the Portfolio Series' Trustees, as appropriate, and a
majority of the Trustees who are not "interested persons" of the Trust or of the
Portfolio Series, as appropriate, and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to such Plan
(the "Qualified Trustees"). Each Plan requires that the Trust or Portfolio
Series shall provide to the appropriate Board of Trustees, and said Board of
Trustees shall review, at least quarterly, a written report of the amounts
expended (and the purposes therefor) under the Plan. Each Plan may be terminated
at any time (i) by a vote of a majority of the Qualified Trustees or (ii) by a
majority vote of the shareholders of the Trust or the holders of beneficial
interests of the Portfolio Series, as appropriate. Each Plan may not be amended
to increase materially the amount of permitted expenses thereunder without the
approval of a majority of the shareholders of the Trust or the holders of
beneficial interests of the Portfolio Series, as appropriate, and may not be
materially amended in any case without a vote of the majority of both the
Trustees and the Qualified Trustees of the Trust or the Portfolio Series, as
appropriate.

INDEPENDENT ACCOUNTANTS OR AUDITORS

Price Waterhouse LLP are the independent accountants for St. James
Portfolios.

<PAGE>

Ernst & Young LLP are the independent auditors for Excelsior Institutional
Trust. Each 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.

Under interpretations of the Internal Revenue Service, (1) each
Portfolio will be treated for federal income tax purposes as a partnership and
(2) for purposes of determining whether each Fund satisfies the income and
diversification requirements to maintain its status as a RIC, each Fund, as an
investor in its corresponding 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. Each Portfolio has
advised its corresponding Fund that it intends to conduct its operations so as
to enable its investors, including the Fund, to satisfy those requirements.

Any Fund distribution (or, in the case of the Bond Index Fund, 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 the Portfolios in zero coupon bonds, certain
securities purchased at a market discount, and similar instruments will cause a
Fund to recognize income prior to the

<PAGE>

receipt of cash payments with respect to those securities. In order to
distribute this income and avoid a tax on the Fund, a Portfolio 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 Portfolios 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 Portfolio'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 Portfolio in certain "passive foreign investment companies" may
also have to be limited in order to avoid a tax on the Fund. Such a Portfolio
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 Portfolio 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 Portfolio to a reduced rate of tax or an exemption from tax on such
income; the Portfolios intend 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 corresponding Portfolio's assets
invested within various countries is not known.

TAXATION OF THE PORTFOLIOS

The Trust anticipates that the Portfolios will be treated as
partnerships for federal income tax purposes. As such, the Portfolios are not
subject to federal income taxation. Instead, a Fund must take into account, in
computing its federal income tax liability, its share of its corresponding
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

<PAGE>

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 corresponding Portfolio 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's corresponding Portfolio.

<PAGE>

Withdrawals by a Fund from its corresponding 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 a Fund's interest in its corresponding
Portfolio prior to the distribution, (2) income or gain will be realized if the
withdrawal is in liquidation of a Fund's entire interest in its corresponding
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 a Fund's interest in its corresponding
Portfolio generally equals the amount of cash and the basis of any property that
the Fund invests in its corresponding 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 investment by a Fund in its corresponding
Portfolio does not cause the Fund to be liable for any income or franchise tax
in the State of New York.

The Portfolios are organized as series of a New York trust, the
Portfolio Series. The Portfolios are not subject to any income or franchise tax
in the State of New York or the State of Delaware.

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 ten 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

<PAGE>

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,

<PAGE>

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.

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.

<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

A-1

<PAGE>

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

A-2

<PAGE>

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.

A-3

<PAGE>

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

A-4

<PAGE>

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.

A-5

<PAGE>

SERVICING AGENT
SIGNATURE FINANCIAL SERVICES, INC.
6 St. James Avenue
Boston, MA 02116
(617) 423-0800
EXCELSIOR INSTITUTIONAL TRUST
INVESTMENT MANAGERS
UNITED STATES TRUST COMPANY OF NEW YORK EXCELSIOR INSTITUTIONAL
EQUITY FUND
114 West 47th Street EXCELSIOR INSTITUTIONAL INCOME
FUND
New York, NY 10036 EXCELSIOR INSTITUTIONAL TOTAL
RETURN BOND FUND
EXCELSIOR INSTITUTIONAL EQUITY
INDEX FUND
UNITED STATES TRUST COMPANY OF EXCELSIOR INSTITUTIONAL BOND
INDEX FUND
THE PACIFIC NORTHWEST EXCELSIOR INSTITUTIONAL SMALL
CAPITALIZATION FUND
4380 Southwest Macadam Avenue, Suite 450 EXCELSIOR INSTITUTIONAL
BALANCED FUND
Portland, OR 97201 EXCELSIOR INSTITUTIONAL EQUITY
GROWTH FUND
EXCELSIOR INSTITUTIONAL VALUE
EQUITY INCOME FUND

SPARE, KAPLAN , BISCHEL & ASSOCIATES EXCELSIOR INSTITUTIONAL

INTERNATIONAL EQUITY FUND
44 Montgomery Street
San Francisco, CA 94104

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

TRANSFER AGENT STATEMENT OF ADDITIONAL INFORMATION
CHASE GLOBAL FUND SERVICES OCTOBER 2, 1995

73 Tremont Street
Boston, MA 02108

INDEPENDENT ACCOUNTANTS/AUDITORS
TO ST. JAMES PORTFOLIOS:

PRICE WATERHOUSE LLP
160 Federal Street
Boston, MA 02110

TO THE FUNDS:

ERNST & YOUNG LLP
200 Clarendon Street
Boston, MA 02116

DISTRIBUTOR

EDGEWOOD SERVICES, INC.
Federated Investors Tower
Pittsburgh, PA 15222
UST207

<PAGE>

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 Equity Index Fund, Excelsior Institutional Bond Index
Fund, Excelsior Institutional Small Capitalization Fund, Excelsior Institutional
Balanced Fund, Excelsior Institutional Equity Growth Fund, Excelsior
Institutional Value Equity Income 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

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

8. Custodian Agreement between the Registrant and United States Trust Company
of New York ("U.S. Trust"), as custodian.4

8(a). Sub-Custodian Agreement between the Registrant, U.S. Trust, and
Investors Bank & Trust Company.4

9(a). Servicing Plan of the Registrant.4

9(b). Servicing and Fund Accounting Agreement between the Registrant and
Signature Financial Services, Inc.2

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.6

13. Investor Representation Letter of Initial Shareholder.2

16. Schedule for Computation of Performance Quotations.2

17. Financial Data Schedules.6

18. Powers of Attorney for Trustees and officers.2
- ------------------

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 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 September 25, 1995.

Excelsior Institutional Equity Fund: 3
Excelsior Institutional Income Fund: 2
Excelsior Institutional Total Return Bond Fund: 3
Excelsior Institutional Equity Index Fund: 2
Excelsior Institutional Bond Index Fund: 2
Excelsior Institutional Small Capitalization Fund: 2
Excelsior Institutional Balanced Fund: 2
Excelsior Institutional Equity Growth Fund: 2
Excelsior Institutional Value Equity Income Fund: 2
Excelsior Institutional International Equity Fund: 2
Excelsior Institutional Income and Growth Fund: --
Excelsior Institutional Socially Responsible Equity Fund: --

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.

Not Applicable.

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 UST Master Funds, Inc., UST Master 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: Assisant 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:

SIGNATURE FINANCIAL SERVICES, INC. (servicing and fund accounting agent): 89
South Street, Boston, MA 02111.

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

CHASE GLOBAL FUND SERVICES (custodian): 770 Broadway, New York, NY 10003-9598.

INVESTORS BANK & TRUST COMPANY (subcustodian): 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 certifies that it meets all the
requirements for effectiveness of this amendment to its Registration Statement
on Form N-1A ("Registration Statement") pursuant to Rule 485(b) under the
Securities Act of 1933, and 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 29th day of September, 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 September 29, 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*
- ---------------------------------
Trustee
W. Wallace McDowell

*By /s/ PHILIP W. COOLIDGE
----------------------------
Philip W. Coolidge
As attorney-in-fact pursuant to a power of attorney previously filed

<PAGE>

SIGNATURES

St. James Portfolios (the "Portfolio") 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 Boston and the Commonwealth of Massachusetts on the
29th day of September, 1995.

ST. JAMES PORTFOLIOS

By /s/ PHILIP W. COOLIDGE
-----------------------------
Philip W. Coolidge
President of the Portfolio

Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in the
capacities indicated on September 29, 1995.

/s/ PHILIP W. COOLIDGE
- ---------------------------------
Philip W. Coolidge
President of the Portfolio

/s/ JOHN R. ELDER
- ---------------------------------
John R. Elder
Treasurer and Chief Financial and Accounting Officer of the Portfolio

DAVID H. CARTER*
- ---------------------------------
David H. Carter
Trustee of the Portfolio

RAYMOND L. COLOTTI*
- ---------------------------------
Raymond L. Colotti
Trustee of the Portfolio

STEPHEN D. BARRETT*
- ---------------------------------
Stephen D. Barrett
Trustee of the Portfolio

WILLIAM B. BLUDIN*
- ---------------------------------
William B. Bludin
Trustee of the Portfolio

*By /s/ PHILIP W. COOLIDGE
----------------------------
Philip W. Coolidge
As attorney-in-fact pursuant to a power of attorney previously filed

<PAGE>
INDEX TO EXHIBITS

Exhibit Description of Exhibit
No.

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

11. Consents of Independent Accountants.

17. Financial Data Schedules.

DISTRIBUTION AGREEMENT

Distribution Agreement made as of August 1, 1995 between EXCELSIOR
INSTITUTIONAL TRUST, a Delaware business trust having its principal office and
place of business at 6 St. James Avenue, Boston, Massachusetts 02116 (herein
called the "Trust"), and EDGEWOOD SERVICES, INC., a New York corporation having
its principal office and place of business in Pittsburgh, Pennsylvania (herein
called the "Distributor").

WHEREAS, the Trust is an open-end, management investment company and is
so registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and

WHEREAS, the Trust desires to retain the Distributor as distributor for
the shares of beneficial interest, par value $0.00001 per share (the "Shares"),
of the series of the Trust listed on SCHEDULE I hereto, as such Schedule may be
amended from time to time by written agreement of the parties hereto (each, a
"Series"), and the Distributor is willing to render such services;

NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein the parties hereto agree as follows:

I. DELIVERY OF DOCUMENTS

The Trust has delivered to the Distributor copies of the following
documents and will deliver to the Distributor all future amendments and
supplements thereto, if any:

(a) The Trust's Trust Instrument and all amendments thereto (as presently
in effect and as from time to time amended, herein called the "Trust
Instrument");

(b) The Trust's By-laws (as presently in effect and as from time to time
amended, herein called the "By-laws");

(d) The Trust's Registration Statement under the Securities Act of 1933, as
amended (the "1933 Act"), and the 1940 Act on Form N-1A most recently filed with
the Securities and Exchange Commission (the "Commission") relating to the
Shares, and all subsequent amendments or supplements thereto (the "Registration
Statement");

(e) The Trust's Notification of Registration under the 1940 Act on Form
N-8A as filed with the Commission; and

(f) The Trust's current Prospectus and Statement of Additional Information
of the Series (as presently in effect and as from time to time amended and
supplemented herein called collectively the "Prospectus").

In addition, the Trust agrees to timely furnish from time to time, for use
in connection with the sale of Shares, such information with respect to the
Series and Shares as the Distributor may reasonably request; and the Trust
warrants that the statements contained in any such information shall fairly show
or represent what they purport to show or represent. The Trust also agrees to
furnish the Distributor upon request with: (a) audited annual and unaudited
semi-annual statements of the Trust's books and accounts with respect to each
Series, and (b) from time to time such additional information regarding the
Series' financial condition as the Distributor may reasonably request.

Furthermore, the Trust agrees to advise the Distributor as soon as
reasonably practical:

(a) of any request by the Commission for amendments to the Registration
Statement or Prospectus then in effect;

(b) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or Prospectus then in
effect or the initiation of any proceeding for that purpose;

(c) of the happening of any event that makes untrue any statement of a
material fact made in the Registration Statement or Prospectus then in effect or
which requires the making of a change in such Registration Statement or
Prospectus in order to make the statements therein not misleading; and

(d) of all actions of the Commission with respect to any amendment to the
Registration Statement or Prospectus which may from time to time be filed with
the Commission.

For purposes of this section, informal requests by or acts of the Staff of
the Commission shall not be deemed actions of or requests by the Commission.

II. DISTRIBUTION

1. APPOINTMENT OF DISTRIBUTOR. The Trust hereby appoints the Distributor as
principal distributor of the Series' Shares and the Distributor hereby accepts
such appointment and agrees to render the services and duties set forth in this
Section II and on SCHEDULE II attached hereto, as may be supplemented or amended
from time to time by a written agreement of the parties.

2. SERVICES AND DUTIES.

(a) The Trust agrees to sell through the Distributor, as agent, from time
to time during the term of this Agreement, Shares of the Series (whether
authorized but unissued or treasury shares, in the Trust's sole discretion) upon
the terms and at the current offering price as described in the applicable
Prospectus. The Distributor will act only in its own behalf as principal in
making agreements with selected dealers or others for the sale and redemption of
Shares, and shall sell Shares only at the offering price thereof as set forth in
the applicable Prospectus. The Distributor shall devote its best efforts to
effect the sale of Shares of each Series, but shall not be obligated to sell any
certain number of Shares.

(b) In all matters relating to the sale and redemption of Shares, the
Distributor will act in conformity with the Trust's Trust Instrument, By-laws
and Prospectus and with the instructions and directions of the Trust's Board of
Trustees and will conform to and comply with the requirements of the 1933 Act,
the 1940 Act, the regulations of the National Association of Securities Dealers,
Inc. and all other applicable Federal or state laws and regulations. In
connection with the sale of Shares, the Distributor acknowledges and agrees that
it is not authorized to provide any information or make any representation other
than as contained in the Trust's Registration Statement or Prospectus and any
sales literature specifically approved by the Trust.

(c) Unless the Trust has adopted a plan pursuant to Rule 12b-l under the
1940 Act which provides otherwise, the Distributor will bear the costs and
expenses of (i) printing and distributing to prospective investors copies of any
Prospectus (including any supplement thereto) and annual and interim reports of
the Series (after such items have been prepared and set in type by the Trust)
which are used in connection with the offering of Shares of a Series; and (ii)
preparing, printing and distributing any other literature used by the
Distributor in connection with the sale of the Shares; PROVIDED, HOWEVER, that
the Distributor shall not be obligated to bear the expenses incurred by the
Trust in connection with the preparation and printing of Prospectuses used for
regulatory purposes and for distribution to existing shareholders.

(d) All Shares of the Series offered for sale by the Distributor shall be
offered for sale to the public at a price per share (the "offering price") equal
to (i) their net asset value (determined in the manner set forth in the Trust
Instrument and then-current Prospectus) plus (ii) a sales charge (if any) which
shall be the percentage of the offering price of such Shares as set forth in the
Trust's then-current Prospectus. If a sales charge is in effect, the Distributor
shall have the right to pay a portion of the sales charge to broker-dealers and
other persons who have sold shares of the Series. Concessions by the Distributor
to broker-dealers and other persons shall be set forth in either the selling
agreements between the Distributor and such broker-dealers and persons or, if
such concessions are described in the then-current Prospectuses, shall be as so
set forth. No broker-dealer or other person who enters into a selling agreement
with the Distributor shall be authorized to act as agent for the Trust in
connection with the offering or sale of its Shares to the public or otherwise.
The Trust reserves the right to reject any order but will not do so without
reasonable cause.

(e) If any Shares sold by the Distributor under the terms of this Agreement
are redeemed or repurchased by the Trust or by the Distributor as agent or are
tendered for redemption within seven business days after the date of
confirmation of the original purchase of said Shares, the Distributor shall
forfeit the amount (if any) above the net asset value received by it in respect
of such Shares, provided that the portion, if any, of such amount (if any)
re-allowed by the Distributor to broker-dealers or other persons shall be
repayable to the Trust only to the extent recovered by the Distributor from the
broker-dealer or other person concerned. The Distributor shall include in the
forms of agreement with such broker-dealers and persons a corresponding
provision for the forfeiture by them of their concession with respect to Shares
sold by them or their principals and redeemed or repurchased by the Trust or by
the Distributor as agent (or tendered for redemption) within seven business days
after the date of confirmation of such initial purchases.

3. SALES AND REDEMPTIONS.

(a) The Trust shall pay all costs and expenses in connection with the
registration of the Shares under the 1933 Act, and all expenses in connection
with maintaining facilities for the issue and transfer of the Shares and for
supplying information, prices and other data to be furnished by the Trust
hereunder, and all expenses in connection with preparing, printing and
distributing any Prospectus, except as set forth in subsection 2(c) hereof.

(b) The Trust shall execute all documents, furnish all information and
otherwise take all actions which may be reasonably necessary in the discretion
of the Trust's officers in connection with the qualification of the Shares for
sale in such states as the Trust may approve, and the Trust shall pay all fees
which may be incurred in connection with such qualification. The Distributor
shall pay all expenses connected with its qualification as a dealer under state
or Federal laws and, except as otherwise specifically provided in this
Agreement, all other expenses incurred by the Distributor in connection with the
sale of the Shares as contemplated in this Agreement. It is understood that
certain advertising, marketing, shareholder servicing, administration and/or
distribution expenses to be incurred in connection with the Shares may be paid
as provided in any plan which may be adopted by the Trust in accordance with
Rule 12b-l under the 1940 Act.

(c) The Trust shall have the right to suspend the sale of Shares of any
Series at any time in response to conditions in the securities markets or
otherwise, and to suspend the redemption of Shares of any Series at any time
permitted by the 1940 Act or the rules of the Commission.

(d) The Trust reserves the right to reject any order for Shares.

(e) No Shares shall be offered by either the Trust or the Distributor under
any of the provisions of this Agreement and no orders for the purchase or sale
of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the Registration Statement shall be suspended under any of the
provisions of the 1933 Act, or if and so long as a Prospectus as required by
Section 10 of the 1933 Act is not on file with the Commission; provided,
however, that nothing contained in this sub-paragraph shall in any way restrict
or have any application to or bearing upon the Trust's obligation to repurchase
any Shares from any shareholder in accordance with the provisions of the Trust
Instrument or Prospectus.

III. LIMITATION OF LIABILITY

The Distributor shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Trust or any Series in connection with the
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Distributor's 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,
director, partner, employee or agent of the Distributor, who may be or become an
officer, director, employee or agent of the Trust, shall be deemed, when
rendering services to the Trust or to any Series, or acting on any business of
the Trust or of any Series (other than services or business in connection with
the Distributor's duties as distributor hereunder), to be rendering such
services to or acting solely for the Trust or a Series and not as an officer,
director, partner, employee or agent or one under the control or direction of
the Distributor even though paid by the Distributor.

IV. INDEMNIFICATION

1. TRUST REPRESENTATIONS. The Trust represents and warrants to the
Distributor that at all times the Registration Statement and Prospectus will in
all material respects conform to the applicable requirements of the 1933 Act and
the rules and regulations thereunder and will not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation or warranty in this subsection shall apply to statements or
omissions made in reliance upon and in conformity with written information
furnished to the Trust by, or on behalf of, and with respect to, the Distributor
expressly for use in the Registration Statement or Prospectus.

2. DISTRIBUTOR'S REPRESENTATIONS. The Distributor represents and warrants
to the Trust that it is duly organized as a New York corporation and is and at
all times will remain duly authorized and licensed to carry out its services as
contemplated herein.

3. TRUST INDEMNIFICATION. The Trust will indemnify, defend and hold
harmless the Distributor, its several officers and directors, and any person who
controls the Distributor within the meaning of Section 15 of the 1933 Act, from
and against any losses, claims, damages or liabilities, joint or several, to
which any of them may become subject under the 1933 Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, the Prospectus or in an application or other document executed by or
on behalf of the Trust, or arise out of, or are based upon, information
furnished by or on behalf of the Trust filed in any state in order to qualify
the Shares under the securities or blue sky laws thereof ("Blue Sky
Application") or arise out of or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Distributor, its several officers and directors, and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, for any legal or
other expenses reasonably incurred by any of them in investigating, defending or
preparing to defend any such action, proceeding or claim; PROVIDED, HOWEVER,
that the Trust shall not be liable in any case to the extent that such loss,
claim, damage or liability arises out of, or is based upon, any untrue
statement, alleged untrue statement or omission or alleged omission made in the
Registration Statement, the Prospectus, any Blue Sky Application or any
application or other document executed by or on behalf or the Trust in reliance
upon and in conformity with written information furnished to the Trust by or on
behalf of and with respect to the Distributor specifically for inclusion
therein.

Notwithstanding the foregoing, the Trust shall not indemnify any person
pursuant to this subsection 3 unless the court or other body before which the
proceeding was brought has rendered a final decision on the merits that such
person was not liable by reason of his willful misfeasance, bad faith or gross
negligence in the performance of his duties, or his reckless disregard of
obligations and duties, under this Agreement ("disabling conduct") or, in the
absence of such a decision, a reasonable determination (based upon a review of
the facts) that such person was not liable by reason of disabling conduct has
been made by the vote of a majority of a quorum of Trustees of the Trust who are
neither "interested persons" of the Trust (as defined in the 1940 Act) nor
parties to the proceeding, or by an independent legal counsel for the Trust in a
written opinion.

The Trust shall advance attorneys' fees and other expenses incurred by any
person in defending any claim, demand, action or suit which is the subject of a
claim for indemnification pursuant to this subsection 3, so long as such person
shall: (i) undertake to repay all such advances unless it is ultimately
determined that he is entitled to indemnification hereunder; and (ii) provide
security for such undertaking, or the Series shall be insured against losses
arising by reason of any lawful advances, or a majority of a quorum of the
disinterested, non-party Trustees of the Trust (or an independent legal counsel
for the Trust in a written opinion) shall determine based on a review of readily
available facts (as opposed to a full trial-type inquiry) that there is reason
to believe that such person ultimately will be found entitled to indemnification
hereunder.

4. DISTRIBUTOR'S INDEMNIFICATION. The Distributor will indemnify, defend
and hold harmless the Trust, each Series, the Trust's several officers and
Trustees and any person who controls the Trust or any Series within the meaning
of Section 15 of the 1933 Act, from and against any losses, claims, damages or
liabilities, joint or several, to which any of them may become subject under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect hereof) arise out of, or are based upon,
any breach of its representations and warranties in subsection 2 hereof or its
agreements in subsection 2 of Section II of this Agreement, or which arise out
of, or are based upon, any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, the Prospectus, any Blue
Sky Application or any application or other document executed by or on behalf of
the Trust, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, which statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Trust or any of its
several officers and Trustees by or on behalf of and with respect to the
Distributor specifically for inclusion therein, and will reimburse the Trust,
each Series, the Trust's several officers and Directors, and any person who
controls the Trust or any Series within the meaning of Section 15 of the 1933
Act, for any legal or other expenses reasonably incurred by any of them in
investigating, defending or preparing to defend any such action, proceeding or
claim.

5. GENERAL INDEMNITY PROVISION. The indemnified party under the indemnity
agreement contained in subsection 3 or 4 shall notify the indemnifying party in
writing promptly after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
indemnified party (or after the indemnified party shall have received notice of
such service on any designated agent), but failure to notify the indemnifying
party of any such claim shall not relieve it from any liability under such
subsection 3 or 4 except to the extent, if at all, that it shall have been
prejudiced by such failure or from any other liability which it may otherwise
have to the indemnified party. The indemnifying party will be entitled to
participate at its own expense in the defense or, if it so elects, to assume the
defense of any suit brought to enforce any such liability, and if the
indemnifying party elects to assume the defense, such defense shall be conducted
by counsel chosen by it and reasonably satisfactory to the indemnified party. In
the event the indemnifying party elects to assume the defense of any such suit
and retain such counsel, the indemnified party shall bear the fees and expenses
of any additional counsel retained by the indemnified party. If the indemnifying
party does not elect to assume the defense of any such suit, or if the
indemnified party reasonably does not approve of counsel chosen by the
indemnifying party, the indemnifying party will reimburse the indemnified party,
its officers and directors/trustees, or the controlling person or persons named
as defendant or defendants in such suit, for the reasonable fees and expenses of
any counsel retained by the indemnified party or them. The indemnifying party
shall not be liable for any settlement of any such claim of action effected
without its written consent.

6. SUCCESSORS. The indemnification agreement contained in this Section IV
will inure exclusively to the parties' benefit, to the benefit of its several
officers and directors/trustees, and their respective estates, and to the
benefit of the controlling persons and their successors.

V. TERM

This Agreement shall continue until July 31, 1997, and thereafter shall
continue automatically for successive annual periods ending on June 30 of each
year, provided such continuance is specifically approved at least annually by
(a) the Trust's Board of Trustees or (b) vote of a majority (as defined in the
1940 Act) of the Trust's outstanding voting securities, provided that in either
event its continuance also is approved by a majority of the Trust's Trustees who
are not "interested persons" (as defined in the 1940 Act) of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable without penalty, on 60 days' written
notice to the Distributor, by vote of a majority of the Trust's outstanding
voting securities or, as to each Series, by the Trust's Board of Trustees or, on
90 days' written notice to the Trust, by the Distributor. This Agreement will
automatically terminate, as to the relevant Series, in the event of its
assignment (as defined in the 1940 Act).

VI. MISCELLANEOUS

1. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which all enforcement of the change, waiver, discharge or termination is
sought.

2. CONSTRUCTION. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. Subject to the provisions of Section IV hereof, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and shall be governed by Massachusetts law;
PROVIDED, HOWEVER, that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or regulation thereunder.

3. NOTICE. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Trust shall be sufficiently given
if addressed to the Trust and mailed or delivered to it at its office at the
address first above written, or at such other place as the Trust may from time
to time designate in writing. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Distributor shall be
sufficiently given if addressed to the Distributor and mailed or delivered to it
at its office at the address written below, or at such other place as the
Distributor may from time to time designate in writing.

4. LIMITATION OF LIABILITY. This Agreement has been executed by the
undersigned officer of the Trust not individually but solely as such officer.
Pursuant to the Trust Instrument, all persons contracting with or having any
claim against the Trust or a particular Series shall look only to the assets of
the Trust or such Series for payment under such contract or claim, and neither
the Trustees of the Trust nor any of the Trust's officers, employees or agents,
whether past, present or future, shall be personally liable therefor. To the
extent any of the obligations of the Trust hereunder relate to or are allocated
to any particular Series in accordance with the Trust Instrument, such
obligations shall be enforceable against the assets of such Series only, and not
against the assets of the Trust generally or of any other series of the Trust.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.

EXCELSIOR INSTITUTIONAL TRUST

By:
Title:

Attest:

EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, Pennsylvania 15230-0897

By:
Title:

Attest:

<PAGE>

SCHEDULE I

NAME OF SERIES

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

Dated: August 1, 1995

<PAGE>

SCHEDULE II

The following provisions are hereby incorporated and made part of the
Distribution Agreement dated as of August 1, 1995, between Excelsior
Institutional Trust and Edgewood Services, Inc.

Pursuant to Section II, subsection 1 of the Agreement, the Distributor
agrees to provide facilities, equipment, and personnel to carry out the
following additional services to the Trust:

(a) perform a due diligence review of reports required by the Commission
and notices to shareholders of record and the Commission including, without
limitation, Semi-Annual and Annual Reports to Shareholders, Semi-Annual Reports
on Form N-SAR, Proxy Statements and share registration notices under the
Securities Act of 1933;

(b) review the Trust's Registration Statement on Form N-1A or any
replacement therefor;

(c) review and file with NASD all sales literature (advertisements,
brochures and shareholder communications) for each of the Series and any class
of Shares thereof;

(d) prepare distributor's reports to the Trust's Board of Trustees;

(e) perform internal audit examinations in accordance with the Trust
Instrument;

(f) consult with the Trust and the Trust's Board of Trustees, as
appropriate, on matters concerning the distribution of the Shares; and

(g) consult with the Trust and its agents regarding the jurisdictions in
which the Shares shall be registered or qualified for sale and, in connection
therewith, review and monitor the actions of the Trust and its agents 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 the Trust or any of its Series
as a dealer or broker, if applicable, shall be made by the Trust.

Witness the due execution hereof as of the 1st day of August, 1995.

ATTEST: EXCELSIOR INSTITUTIONAL TRUST

- ------------------- ----------------------------------
Title:

ATTEST: EDGEWOOD SERVICES, INC.

- --------------------- ----------------------------------
Title:

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Accountants or Independent Auditors" in the
Statement of Additional Information in Post-Effective Amendment Number 4 to the
Registration Statement (Form N-1A No. 33-78264) 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 Equity
Index Fund, Excelsior Institutional Bond Index Fund, Excelsior Institutional
Small Capitalization Fund, Excelsior Institutional Balanced Fund, Excelsior
Institutional Equity Growth Fund, Excelsior Institutional Value Equity Income
Fund and Excelsior Institutional International Equity Fund, ten of the
portfolios comprising the Excelsior Institutional Trust, included in the 1995
Annual Report to Shareholders of Excelsior Institutional Trust.

/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
September 26, 1995

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 4
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 12, 1995, relating to the financial
statements of the Equity Market Portfolio, Bond Market Portfolio, Small Cap
Portfolio, Balanced Portfolio, Equity Growth Portfolio, Value Equity Income
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.
We also consent to the reference to us under the heading "Independent
Accountants or Auditors" in such Statement of Additional Information.

/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
September 29, 1995

<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>

<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> 13,632,257
<INVESTMENTS-AT-VALUE> 13,632,257
<RECEIVABLES> 67,525
<ASSETS-OTHER> 10,136
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,709,918
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 602,855
<TOTAL-LIABILITIES> 602,855
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,570,077
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 206,245
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,492,764
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,837,977
<NET-ASSETS> 13,107,063
<DIVIDEND-INCOME> 520,064
<INTEREST-INCOME> 61,871
<OTHER-INCOME> 0
<EXPENSES-NET> 23,584
<NET-INVESTMENT-INCOME> 558,351
<REALIZED-GAINS-CURRENT> 1,591,460
<APPREC-INCREASE-CURRENT> 1,837,977
<NET-CHANGE-FROM-OPS> 3,987,788
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 352,106
<DISTRIBUTIONS-OF-GAINS> 98,696
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,842,131
<NUMBER-OF-SHARES-REDEEMED> 3,259,929
<SHARES-REINVESTED> 57
<NET-CHANGE-IN-ASSETS> 13,090,396
<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> 107,701
<AVERAGE-NET-ASSETS> 22,072,244
<PER-SHARE-NAV-BEGIN> 7.00
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 1.18
<PER-SHARE-DIVIDEND> 0.13
<PER-SHARE-DISTRIBUTIONS> 0.04
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.27
<EXPENSE-RATIO> .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>

<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> 13,654,584
<INVESTMENTS-AT-VALUE> 13,654,584
<RECEIVABLES> 87,970
<ASSETS-OTHER> 5,993
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,748,547
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 419,708
<TOTAL-LIABILITIES> 419,708
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,078,956
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 82,703
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 221,734
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 945,446
<NET-ASSETS> 13,328,839
<DIVIDEND-INCOME> 167,292
<INTEREST-INCOME> 31,685
<OTHER-INCOME> 0
<EXPENSES-NET> 80,485
<NET-INVESTMENT-INCOME> 185,012
<REALIZED-GAINS-CURRENT> 247,776
<APPREC-INCREASE-CURRENT> 945,446
<NET-CHANGE-FROM-OPS> 1,378,234
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 102,309
<DISTRIBUTIONS-OF-GAINS> 26,042
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,912,446
<NUMBER-OF-SHARES-REDEEMED> 1,184,175
<SHARES-REINVESTED> 24
<NET-CHANGE-IN-ASSETS> 13,312,172
<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> 80,485
<AVERAGE-NET-ASSETS> 13,069,227
<PER-SHARE-NAV-BEGIN> 7.00
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> 0.66
<PER-SHARE-DIVIDEND> 0.06
<PER-SHARE-DISTRIBUTIONS> 0.01
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.70
<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
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<S> <C>
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