EXCELSIOR INSTITUTIONAL TRUST, 485APOS, 1999-05-28

EXCELSIOR INSTITUTIONAL TRUST
485APOS, 1999-05-28

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<PAGE>

As filed with the Securities and Exchange Commission on May 28, 1999
Registration 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. 17

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 19

Excelsior Institutional Trust

(Exact Name of Registrant as Specified in Charter)

73 Tremont Street
Boston, Massachusetts 02108-3913
(Address of Principal Executive Offices)

Registrant's Telephone Number: 617-557-8000

W. Bruce McConnel, III, Esq.
Drinker Biddle & Reath LLP
Philadelphia National Bank Building, 1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)

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

[ ] Immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) 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.
-----------------------------

Title of Securities Being Registered...............Shares of Beneficial Interest
<PAGE>

EXCELSIOR INSTITUTIONAL TRUST

Institutional Shares
PROSPECTUS
AUGUST 1, 1999

EQUITY FUND
VALUE EQUITY FUND
OPTIMUM GROWTH FUND
INCOME FUND
TOTAL RETURN BOND FUND
INTERNATIONAL EQUITY FUND

INVESTMENT ADVISER
UNITED STATES TRUST COMPANY OF NEW YORK
U.S. TRUST COMPANY

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
ANY FUND SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS
ACCURATE OR COMPLETE. IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.

Page 1 of 35
<PAGE>

HOW TO READ THIS PROSPECTUS

Excelsior Institutional Trust is a mutual fund family that offers shares in
separate investment portfolios (Funds). The Funds have individual investment
goals and strategies. United States Trust Company of New York and U.S. Trust
Company (together, U.S. Trust or the Adviser) serve as investment adviser to
each Fund. This prospectus gives you important information about the
Institutional Shares of the Funds that you should know before investing. Please
read this prospectus and keep it for future reference.

THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT
EACH FUND, PLEASE SEE:

<TABLE>
<CAPTION>
PAGE
<S> <C>
EQUITY FUND XXX
VALUE EQUITY FUND XXX
OPTIMUM GROWTH FUND XXX
INCOME FUND XXX
TOTAL RETURN BOND FUND XXX
INTERNATIONAL EQUITY FUND XXX
MORE INFORMATION ABOUT RISK XXX
EACH FUND'S OTHER INVESTMENTS XXX
EACH FUND'S INVESTMENT OBJECTIVE XXX
THE INVESTMENT ADVISER AND PORTFOLIO MANAGERS XXX
PURCHASING, SELLING AND EXCHANGING FUND SHARES XXX
DIVIDENDS, DISTRIBUTIONS AND TAXES XXX
FINANCIAL HIGHLIGHTS XXX
HOW TO OBTAIN MORE INFORMATION ABOUT
EXCELSIOR INSTITUTIONAL TRUST Back Cover
</TABLE>

Page 2 of 35
<PAGE>

INTRODUCTION

Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.

Each Fund has its own investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help a
Fund achieve its goal. Still, investing in each Fund involves risk and there is
no guarantee that a Fund will achieve its goal. An investment manager's
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment. In fact, no matter how good
a job an investment manager does, you could lose money on your investment in a
Fund, just as you could with other investments. A Fund share is not a bank
deposit and it is not insured or guaranteed by the Federal Deposit Insurance
Corporation (FDIC) or any government agency.

The value of your investment in a Fund is based on the market value of the
securities the Fund holds. These prices change daily due to economic and other
events that affect particular companies and other issuers. These price
movements, sometimes called volatility, may be greater or lesser depending on
the types of securities a Fund owns and the markets in which they trade. The
effect on a Fund of a change in the value of a single security will depend on
how widely the Fund diversifies its holdings.

Page 3 of 35
<PAGE>

EQUITY FUND

FUND SUMMARY

INVESTMENT GOAL Long-term capital appreciation

INVESTMENT FOCUS Common stocks of U.S. companies

SHARE PRICE VOLATILITY High

PRINCIPAL INVESTMENT STRATEGY Investing in common stocks that the Adviser
believes are undervalued in the market

INVESTOR PROFILE Investors seeking growth of capital, and
who are willing to accept the risks of
investing in equity securities

INVESTMENT STRATEGY OF THE EQUITY FUND

The Equity Fund invests primarily in larger capitalization common stocks of U.S.
and, to a lesser extent, foreign companies that the Adviser believes have value
that is not currently reflected in their market prices. The Adviser generally
diversifies the Fund's investments over a variety of industries and types of
companies. The Fund may invest in companies of any size, including small, high
growth companies.

The Adviser takes a long-term approach to managing the Fund and tries to
identify companies with characteristics that will lead to future earnings growth
or recognition of their true value. In particular, the Adviser looks for
companies that its fundamental analysis indicates are positioned to provide
solutions to or benefit from complex social and economic trends, or whose
products are early in their life cycle and will experience accelerating growth
in the future.

PRINCIPAL RISKS OF INVESTING IN THE EQUITY FUND

Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate substantially from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.

The Fund is also subject to the risk that large capitalization U.S. equity
securities may underperform other segments of the equity markets or the
equity markets as a whole.

PERFORMANCE INFORMATION

The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.

Page 4 of 35
<PAGE>

This bar chart shows changes in the performance of the Fund's Institutional
Shares from year to year.
<TABLE>
<CAPTION>
<S> <C>
1996 X.XX%
1997 X.XX%
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE AVERAGE ANNUAL TOTAL RETURNS OF THE FUND'S
INSTITUTIONAL SHARES FOR THE PERIODS ENDING DECEMBER 31, 1998 TO THOSE
OF THE [VAR:PORTFOLIO1.PERFORMANCE.TABLE.INDEX1.NAME].

1 YEAR SINCE INCEPTION
- ------------------------------------------------ --------------- --------------------------
<S> <C> <C>
Equity Fund (Institutional Shares) X.XX% X.XX%*
[insert index name] X.XX% X.XX%**
</TABLE>

* Since January 16, 1995
** Since [calc. date for index]

WHAT IS AN INDEX?

An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.

FUND FEES AND EXPENSES

EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE FEES AND
EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- -------------------------------------------------------------------- -----------------------------------
<S> <C> <C>
Investment Advisory Fees .XX%
Other Expenses
Administrative Servicing Fee .XX%
Other Operating Expenses .XX%
Total Other Expenses .XX%
- -------------------------------------------------------------------- -----------------------------------
Total Annual Fund Operating Expenses X.XX%
</TABLE>

THE FUND'S ACTUAL TOTAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE AS A RESULT OF THE ADVISER'S
VOLUNTARY FEE WAIVERS. THE ADVISER HAS VOLUNTARILY AGREED TO WAIVE ITS
INVESTMENT ADVISORY FEE OR OTHER FEES IN AN AMOUNT EQUAL TO THE ADMINISTRATIVE
SERVICING FEE PAID BY THE FUND. THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE
WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING
EXPENSES FOR THE LAST FISCAL YEAR ARE AS FOLLOWS:

Page 5 of 35
<PAGE>

EQUITY FUND (INSTITUTIONAL SHARES) ____%

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER."

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.

The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$ $ $ $
----- ------ ------ -------
</TABLE>

Page 6 of 35
<PAGE>

VALUE EQUITY FUND

FUND SUMMARY

INVESTMENT GOAL Long-term capital appreciation

INVESTMENT FOCUS Common stocks of U.S. companies

SHARE PRICE VOLATILITY High

PRINCIPAL INVESTMENT STRATEGY Investing in common stocks that the
Adviser believes are undervalued by the
market

INVESTOR PROFILE Investors seeking growth of capital, and
who are willing to accept the risks of
investing in equity securities

INVESTMENT STRATEGY OF THE VALUE EQUITY FUND

The Value Equity Fund invests primarily in common stocks of U.S. and, to a
lesser extent, foreign companies that the Adviser believes are undervalued, at
current market prices. The Adviser generally diversifies the Fund's investments
over a variety of industries and may invest in companies of any size.

In selecting investments for the Fund, the Adviser combines fundamental research
with valuation constraints to identify companies trading at what the Adviser
believes are reasonable prices and displaying characteristics expected to lead
to greater recognition of true value. The Adviser believes that events such as
restructuring activities and industry consolidations can be the catalysts
necessary to realize this value.

PRINCIPAL RISKS OF INVESTING IN THE VALUE EQUITY FUND

The Fund is also subject to the risk that undervalued equity securities may
underperform other segments of the equity markets or the equity markets as a
whole.

PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Shares from year to year.

Page 7 of 35
<PAGE>

<TABLE>
<S> <C>
1997 X.XX%
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE AVERAGE ANNUAL TOTAL RETURNS OF THE FUND'S
INSTITUTIONAL SHARES FOR THE PERIODS ENDING DECEMBER 31, 1998 TO THOSE
OF THE [VAR:PORTFOLIO2.PERFORMANCE.TABLE.INDEX1.NAME].

1 YEAR SINCE INCEPTION
- ---------------------------------------------- --------------- ------------------------
<S> <C> <C>
Value Equity Fund (Institutional Shares) X.XX% X.XX%*
[insert index name] X.XX% X.XX%**
</TABLE>

* Since June 1, 1996
** Since [calc. date for index]

WHAT IS AN INDEX?

FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- -------------------------------------------------------------------- ---------------------------------
<S> <C> <C>
Investment Advisory Fees .XX%
Other Expenses
Administrative Servicing Fee .XX%
Other Operating Expenses .XX%
Total Other Expenses .XX%
- -------------------------------------------------------------------- ---------------------------------
Total Annual Fund Operating Expenses X.XX%
</TABLE>

VALUE EQUITY FUND (INSTITUTIONAL SHARES) ____%

Page 8 of 35
<PAGE>

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$ $ $ $
----- ------ ------ -------
</TABLE>

Page 9 of 35
<PAGE>

OPTIMUM GROWTH FUND

FUND SUMMARY

INVESTMENT GOAL Superior, risk-adjusted total return

INVESTMENT FOCUS Common stocks of U.S. companies

SHARE PRICE VOLATILITY High

PRINCIPAL INVESTMENT STRATEGY Invests in common stocks that the Adviser
believes have strong growth prospects

INVESTOR PROFILE Investors seeking total return, and who
are willing to accept the risks of
investing in equity securities

INVESTMENT STRATEGY OF THE OPTIMUM GROWTH FUND

The Optimum Growth Fund invests primarily in common stocks of U.S. companies
that the Adviser believes have growth prospects that exceed those of the overall
market. The Fund generally invests in mid- to large-capitalization companies in
a variety of industries.

The Adviser takes a long-term approach to managing the Fund and tries to
identify high quality companies with consistent or rising earnings growth
records. Typically, these companies are industry leaders with the potential to
dominate their markets by being the low cost, high quality producers of products
or services. In addition to its core portfolio selections, the Adviser further
diversifies Fund investments with a structured segment of issuers included in
the Russell 1000 Growth Index, which includes growth-oriented issuers selected
from among the 1000 largest U.S. issuers. From this universe, the Adviser
systematically selects companies that it believes, based on quantitative
screening, complement the issuers in the Fund's core portfolio.

PRINCIPAL RISKS OF INVESTING IN THE OPTIMUM GROWTH FUND

The Fund is also subject to the risk that large capitalization U.S. equity
securities may underperform other segments of the equity markets or the equity
markets as a whole.

PERFORMANCE INFORMATION

Page 10 of 35
<PAGE>

This bar chart shows changes in the performance of the Fund's Institutional
Shares from year to year.

<TABLE>
<S> <C>
1997 X.XX%
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE AVERAGE ANNUAL TOTAL RETURNS OF THE FUND'S
INSTITUTIONAL SHARES FOR THE PERIODS ENDING DECEMBER 31, 1998 TO THOSE
OF THE [VAR:PORTFOLIO3.PERFORMANCE.TABLE.INDEX1.NAME].

1 YEAR SINCE INCEPTION
- -------------------------------------------------- ------------------ ---------------------
<S> <C> <C>
Optimum Growth Fund (Institutional Shares) X.XX% X.XX%*
[insert index name] X.XX% X.XX%**
</TABLE>

** Since June 1, 1996
** Since [calc. Date for index]

WHAT IS AN INDEX?

FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- -------------------------------------------------------------------- --------------------------------
<S> <C> <C>
Investment Advisory Fees .XX%
Other Expenses
Administrative Servicing Fee .XX%
Other Operating Expenses .XX%
Total Other Expenses .XX%
- -------------------------------------------------------------------- --------------------------------
Total Annual Fund Operating Expenses X.XX%
</TABLE>

Page 11 of 35
<PAGE>

OPTIMUM GROWTH FUND (INSTITUTIONAL SHARES) ____%

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER."

EXAMPLE

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$ $ $ $
----- ------ ------ -------
</TABLE>

Page 12 of 35
<PAGE>

INCOME FUND

FUND SUMMARY

INVESTMENT GOAL Current income

INVESTMENT FOCUS Investment grade fixed income securities

SHARE PRICE VOLATILITY Medium

PRINCIPAL INVESTMENT STRATEGY Investing in investment grade government
and corporate fixed income securities

INVESTOR PROFILE Investors seeking current income, and who
are willing to accept the risks of
investing in fixed income
securities of varying maturities

INVESTMENT STRATEGY OF THE INCOME FUND

The Income Fund invests primarily in fixed income securities issued or
guaranteed by the U.S. government, its agencies and instrumentalities, and
corporate issuers rated at the time of investment in one of the two highest
rating categories by a major rating agency. However, the Fund may invest
without limit in securities rated at the time of investment in one of the
three highest rating categories by a major rating agency and may place up to
35% of its assets in fixed income securities that are rated below investment
grade. These securities are sometimes called "high yield" or "junk" bonds.
The Fund also may invest a portion of its assets in dollar-denominated fixed
income securities of foreign issuers and mortgage-backed securities.

There is no limit on the Fund's average maturity or on the maximum maturity of a
particular security. The Adviser manages the Fund's average portfolio maturity
in light of current market and economic conditions to provide a competitive
current yield and reasonable principal volatility. In selecting particular
investments, the Adviser looks for securities that offer relative value, based
on its assessment of real interest rates and the yield curve. The fixed income
securities held by the Fund also may have the potential for moderate price
appreciation.

Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.

PRINCIPAL RISKS OF INVESTING IN THE INCOME FUND

The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.

Junk bonds involve greater risks of default or downgrade and are more
volatile than investment grade securities. Junk bonds involve greater risk of
default or price declines than investment grade securities due to actual or
perceived changes in an issuer's creditworthiness. In addition, issuers of
junk bonds may be more susceptible than other issuers to economic downturns.
Junk bonds are subject to the risk that the issuer may not be able to pay
interest or dividends and ultimately to

Page 13 of 35
<PAGE>

repay principal upon maturity. Discontinuation of these payments
could substantially adversely affect the market value of the security.

The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates.

Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.

The Fund is also subject to the risk that long-term fixed income securities may
underperform other segments of the fixed income markets or the fixed income
markets as a whole.

PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Shares from year to year.

<TABLE>
<S> <C>
1996 X.XX%
1997 X.XX%
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE AVERAGE ANNUAL TOTAL RETURNS OF THE FUND'S
INSTITUTIONAL SHARES FOR THE PERIODS ENDING DECEMBER 31, 1998 TO THOSE
OF THE [VAR:PORTFOLIO5.PERFORMANCE.TABLE.INDEX1.NAME].

<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
- -------------------------------------------------- -------------- -----------------------------
<S> <C> <C>
Income Fund (Institutional Shares) X.XX% X.XX%*
[insert index name] X.XX% X.XX%**
</TABLE>

* Since January 16, 1995
** Since [calc. date for index]

Page 14 of 35
<PAGE>

WHAT IS AN INDEX?

FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- -------------------------------------------------------------------- -------------------------------
<S> <C> <C>
Investment Advisory Fees .XX%
Other Expenses
Administrative Servicing Fee .XX%
Other Operating Expenses .XX%
Total Other Expenses .XX%
- -------------------------------------------------------------------- -------------------------------
Total Annual Fund Operating Expenses X.XX%
</TABLE>

INCOME FUND (INSTITUTIONAL SHARES) ____%

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$ $ $ $
----- ------ ------ -------
</TABLE>

Page 15 of 35
<PAGE>

TOTAL RETURN BOND FUND

FUND SUMMARY

INVESTMENT GOAL Total return

INVESTMENT FOCUS Investment grade fixed income securities

SHARE PRICE VOLATILITY Medium

PRINCIPAL INVESTMENT STRATEGY Investing in investment grade government
and corporate fixed income securities

INVESTOR PROFILE Investors seeking total return, and who
are willing to accept the risks of
investing in fixed income securities of
varying maturities

INVESTMENT STRATEGY OF THE TOTAL RETURN BOND FUND

The Total Return Bond Fund invests primarily in fixed income securities
issued or guaranteed by the U.S. government, its agencies and
instrumentalities, and corporate issuers rated at the time of investment in
one of the two highest rating categories by a major rating agency. However,
the Fund may invest without limit in securities rated at the time of
investment in one of the three highest rating categories by a major rating
agency. The Fund also may invest a portion of its assets in
dollar-denominated fixed income securities of foreign issuers and mortgage
backed securities.

There is no limit on the Fund's average maturity or on the maximum maturity of a
particular security. The Adviser manages the Fund by balancing yield, average
maturity and risk in light of its assessment of real interest rates and the
yield curve to provide maximum preservation of purchase power. In selecting
particular investments, the Adviser looks for fixed income securities that offer
relative value and potential for moderate price appreciation.

Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.

PRINCIPAL RISKS OF INVESTING IN THE TOTAL RETURN BOND FUND

Page 16 of 35
<PAGE>

others are backed solely by the ability of the agency to borrow from the U.S.
Treasury or by the agency's own resources.

The Fund is also subject to the risk that long-term fixed income securities may
underperform other segments of the fixed income markets or the fixed income
markets as a whole.

PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Shares from year to year.

1996 X.XX%
1997 X.XX%
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE AVERAGE ANNUAL TOTAL RETURNS OF THE FUND'S
INSTITUTIONAL SHARES FOR THE PERIODS ENDING DECEMBER 31, 1998 TO THOSE
OF THE [VAR:PORTFOLIO6.PERFORMANCE.TABLE.INDEX1.NAME].

<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C>
Total Return Bond Fund (Institutional Shares) X.XX% X.XX%*
[insert index name] X.XX% X.XX%**
</TABLE>

* Since January 19, 1995
** Since [calc. Date for index]

WHAT IS AN INDEX?

FUND FEES AND EXPENSES

Page 17 of 35
<PAGE>

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- ----------------------------------------------- -----------------------------
<S> <C> <C>
Investment Advisory Fees .XX%
Other Expenses
Administrative Servicing Fee .XX%
Other Operating Expenses .XX%
Total Other Expenses .XX%
- ----------------------------------------------- -----------------------------
Total Annual Fund Operating Expenses X.XX%
</TABLE>

TOTAL RETURN BOND FUND (INSTITUTIONAL SHARES) ____%

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER"

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$ $ $ $
----- ------ ------ -------
</TABLE>

Page 18 of 35
<PAGE>

INTERNATIONAL EQUITY FUND

FUND SUMMARY

INVESTMENT GOAL Long-term capital appreciation

INVESTMENT FOCUS Foreign equity securities

SHARE PRICE VOLATILITY High

PRINCIPAL INVESTMENT STRATEGY Investing in a diversified
portfolio of equity securities of issuers in
developed foreign countries and, to a lesser
extent, emerging markets

INVESTOR PROFILE Investors seeking total return, who are willing
to accept the risks of investing in companies
located in foreign countries

INVESTMENT STRATEGY OF THE INTERNATIONAL EQUITY FUND

The International Equity Fund invests primarily in equity securities of larger,
more established companies located in developed foreign markets, which include
most nations in western Europe and the more developed nations in the Pacific
Basin and Latin America. The Fund may invest to a lesser extent in less
developed countries and regions to capitalize on opportunities in emerging
markets. The Adviser generally does not attempt to hedge the effects of currency
value fluctuations on the Fund's investments on an on-going basis.

The Adviser selects investments for the Fund by applying a bottom-up investment
approach designed to identify companies that the Adviser expects to experience
sustainable earnings growth and to benefit from global economic trends or
promising technologies or products and whose value is not recognized in the
prices of their securities. The Adviser continuously analyzes companies in a
broad range of foreign markets, giving particular emphasis to each company's
scope of operations and economic ties to one or more specific countries. While
the Fund generally invests in companies in a variety of countries, industries
and sectors, the Adviser does not attempt to invest a specific percentage of the
Fund's assets in a given country, region or industry. The Fund will make
investments in companies located in emerging markets only where the Adviser
believes that such companies' growth/appreciation potential transcends their
location or operations in emerging market countries.

PRINCIPAL RISKS OF INVESTING IN THE INTERNATIONAL EQUITY FUND

Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily

Page 19 of 35
<PAGE>

affect the U.S. economy or similar issuers located in the United States. In
addition, investments in foreign countries are generally denominated in a
foreign currency. As a result, changes in the value of those currencies compared
to the U.S. dollar may affect (positively or negatively) the value of a Fund's
investments. These currency movements may happen separately from and in response
to events that do not otherwise affect the value of the security in the issuer's
home country. These various risks will be even greater for investments in
emerging market countries since political turmoil and rapid changes in economic
conditions are more likely to occur in these countries.

Emerging market countries are countries that the World Bank or the United
Nations considers to be emerging or developing. Emerging markets may be more
likely to experience political turmoil or rapid changes in market or economic
conditions than more developed countries. In addition, the financial stability
of issuers (including governments) in emerging market countries may be more
precarious than in other countries. As a result, there will tend to be an
increased risk of price volatility associated with the Fund's investments in
emerging market countries, which may be magnified by currency fluctuations
relative to the U.S. dollar.

The Fund is also subject to the risk that foreign equity securities may
underperform other segments of the equity markets or the equity markets as a
whole.

PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Shares from year to year.

<TABLE>
<CAPTION>
<S> <C>
1996 X.XX%
1997 X.XX%
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE AVERAGE ANNUAL TOTAL RETURNS OF THE FUND'S
INSTITUTIONAL SHARES FOR THE PERIODS ENDING DECEMBER 31, 1998 TO THOSE
OF THE [VAR:PORTFOLIO7.PERFORMANCE.TABLE.INDEX1.NAME].

<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
- ---------------------------------------------------- ---------- ----------------
<S> <C> <C>
International Equity Fund (Institutional Shares) X.XX% X.XX%*
[insert index name] X.XX% X.XX%**
</TABLE>

* Since January 24, 1995
** Since [calc. Date for index]

WHAT IS AN INDEX?

Page 20 of 35
<PAGE>

FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- ------------------------------------------------ ------------------------------
<S> <C> <C>
Investment Advisory Fees .XX%
Other Expenses
Administrative Servicing Fee .XX%
Other Operating Expenses .XX%
Total Other Expenses .XX%
- ------------------------------------------------ ------------------------------
Total Annual Fund Operating Expenses X.XX%
</TABLE>

INTERNATIONAL EQUITY FUND (INSTITUTIONAL SHARES) ____%

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$ $ $ $
----- ------ ------ -------
</TABLE>

Page 21 of 35
<PAGE>

MORE INFORMATION ABOUT RISK
<TABLE>
<S> <C>
EQUITY RISK - Equity securities include public and privately issued Equity Fund
equity securities, common and preferred stocks, warrants, rights to Value Equity Fund
subscribe to common stock and convertible securities, as well as Optimum Growth Fund
instruments that attempt to track the price movement of equity International Equity Fund
indices. Investments in equity securities and equity derivatives in
general are subject to market risks that may cause their prices to
fluctuate over time. The value of securities convertible into
equity securities, such as warrants or convertible debt, is also
affected by prevailing interest rates, the credit quality of the
issuer and any call provision.

FIXED INCOME RISK - The market value of fixed income investments Income Fund
change in response to interest rate changes and other factors. Total Return Bond Fund
During periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Moreover, while securities
with longer maturities tend to produce higher yields, the prices of
longer maturity securities are also subject to greater market
fluctuations as a result of changes in interest rates.

CALL RISK - During periods of falling interest rates, Income Fund
certain debt obligations with high interest rates may Total Return Bond Fund
be prepaid (or "called") by the issuer prior to
maturity. This may cause a Fund's average weighted
maturity to fluctuate, and may require a Fund to
invest the resulting proceeds at lower interest
rates.

CREDIT RISK - The possibility that an issuer will be Income Fund
unable to make timely payments of either principal or Total Return Bond Fund
interest.

EVENT RISK - Securities may suffer declines in credit Income Fund
quality and market value due to issuer restructurings Total Return Bond Fund
or other factors. This risk should be reduced because
of a Fund's multiple holdings.

HIGH-YIELD, LOWER RATED SECURITIES (or "junk bonds") Income Fund
are subject to additional risks associated with
investing in high-yield securities, including:

* Greater risk of default or price declines due to
changes in the issuer's creditworthiness.

* A thinner and less active market which may increase
price volatility and limit the ability of a

Page 22 of 35
<PAGE>

Fund to sell these securities at their carrying values.

* Prices for high-yield, lower rated securities
may be affected by investor perception of issuer
credit quality and the outlook for economic growth,
such that prices may move independently of interest
rates and the overall bond market.

MORTGAGE-BACKED SECURITIES - Mortgage-backed securities are fixed Income Fund
income securities representing an interest in a pool of underlying Total Return Bond Fund
mortgage loans. They are sensitive to changes in interest rates,
but may respond to these changes differently from other fixed
income securities due to the possibility of prepayment of the
underlying mortgage loans. As a result, it may not be possible to
determine in advance the actual maturity date or average life of a
mortgage-backed security. Rising interest rates tend to discourage
refinancings, with the result that the average life and volatility
of the security will increase, exacerbating its decrease in market
price. When interest rates fall, however, mortgage-backed
securities may not gain as much in market value because of the
expectation of additional mortgage prepayments that must be
reinvested at lower interest rates. Prepayment risk may make it
difficult to calculate the average maturity of a portfolio of
mortgage-backed securities and, therefore, to assess the volatility
risk of that portfolio.

FOREIGN SECURITY RISKS - Investments in securities of foreign All Funds
companies or governments can be more volatile than investments in
U.S. companies or governments. Diplomatic, political, or economic
developments, including nationalization or appropriation, could
affect investments in foreign countries. Foreign securities markets
generally have less trading volume and less liquidity than U.S.
markets. In addition, the value of securities denominated in
foreign currencies, and of dividends from such securities, can
change significantly when foreign currencies strengthen or weaken
relative to the U.S. dollar. Foreign companies or governments
generally are not subject to uniform accounting, auditing, and
financial reporting standards comparable to those applicable to
domestic U.S. companies or governments. Transaction costs are
generally higher than those in the U.S. and expenses for custodial
arrangements of foreign securities may be somewhat greater than
typical expenses for custodial arrangements of similar U.S.
securities. Some foreign governments levy withholding taxes against

Page 23 of 35
<PAGE>

dividend and interest income. Although a portion of these taxes is
recoverable, the non-recovered portion will reduce the income
received from the securities comprising the portfolio.

CURRENCY RISK - Investments in foreign securities denominated in All Funds
foreign currencies involve additional risks, including:

* A Fund may incur substantial costs in connection with
conversions between various currencies.

* Only a limited market currently exists for hedging
transactions relating to currencies in certain emerging
markets.

YEAR 2000 RISK - The Funds depend on the smooth functioning of All Funds
computer systems in almost every aspect of their business. Like
other mutual funds, businesses and individuals around the world,
the Funds could be adversely affected if the computer systems used
by their service providers do not properly process dates on and after
January 1, 2000, and distinguish between the year 2000 and the year
1900. This is commonly known as the "Year 2000 Problem." The Adviser
and the Funds' other service providers advise that they are taking
steps to address the Year 2000 Problem with respect to the computer
systems that they use. Currently, they do not anticipate that the
transition to the 21st Century will have any material impact on their
ability to continue to service the Funds at current levels. At this
time, however, there can be no assurance that their efforts will be
sufficient to avoid any adverse impact on the Funds as a result of the
Year 2000 Problem. In addition, the Funds and their shareholders may
experience losses as a result of computer difficulties experienced by
issuers of portfolio securities or third parties, such as custodians,
banks, broker-dealers or others with which the Funds do business.

Furthermore, many foreign countries are not as prepared as the U.S. All Funds
for the year 2000 transition. As a result, computer difficulties in
foreign markets and with foreign institutions as a result of the
Year 2000 Problem may add to the possibility of losses to the Funds
and their shareholders.
</TABLE>

Page 24 of 35
<PAGE>

EACH FUND'S OTHER INVESTMENTS

In addition to the investments and strategies described in this prospectus,
each Fund also may invest in other securities, use other strategies and
engage in other investment practices. These investments and strategies, as
well as those described in this prospectus, are described in detail in our
Statement of Additional Information. Of course, a Fund cannot guarantee that
it will achieve its investment goal.

The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic or market conditions, or
for temporary defensive or liquidity purposes, each Fund may hold cash and/or
invest up to 100% of its assets in short-term investments that would not
ordinarily be consistent with a Fund's objectives. A Fund will do so only if
the Adviser believes that the risk of loss outweighs the opportunity for
capital gains or higher income.

EACH FUND'S INVESTMENT OBJECTIVE

The Equity Fund seeks to provide long-term capital appreciation. This objective
may be changed without shareholder approval.

The Value Equity Fund seeks long-term capital appreciation. This objective may
be changed without shareholder approval.

The Optimum Growth Fund seeks superior, risk-adjusted total return. This
objective may be changed without shareholder approval.

The Income Fund seeks to provide as high a level of current interest income as
is consistent with moderate risk of capital and maintenance of liquidity. This
objective may be changed without shareholder approval.

The Total Return Bond Fund seeks to maximize the total rate of return consistent
with moderate risk of capital and maintenance of liquidity. This objective may
be changed without shareholder approval.

The International Equity Fund seeks to provide long-term capital
appreciation. This objective may be changed without shareholder approval.

INVESTMENT ADVISER

United States Trust Company of New York and U.S. Trust Company (together, U.S.
Trust or the Adviser) serve as investment adviser to each Fund. United States
Trust Company of New York is a state-chartered bank and trust company and a
member bank of the Federal Reserve System. U.S. Trust Company is a Connecticut
state bank and trust company. Each is a wholly-owned subsidiary of U.S. Trust
Corporation, a registered bank holding company.

Page 25 of 35
<PAGE>

including investment management, estate and trust administration, financial
planning, corporate trust and agency banking, and personal and corporate
banking. On December 31, 1998, U.S. Trust had approximately $65 billion in
aggregate assets under management. United States Trust Company of New York has
its principal offices at 114 W. 47th Street, New York, NY 10036. U.S. Trust
Company has its principal offices at 225 High Ridge Road, East Building,
Stamford, CT 06905.

The Adviser makes investment decisions for the Funds and continuously reviews,
supervises and administers each Fund's investment program.

The Board of Trustees of Excelsior Institutional Trust supervises the Adviser
and establishes policies that the Adviser must follow in its management
activities.

For the fiscal year ended March 31, 1999, U.S. Trust received advisory fees, as
a percentage of average daily net assets, of:

<S> <C>
EQUITY FUND _______%
VALUE EQUITY FUND _______%
OPTIMUM GROWTH FUND _______%
INCOME FUND _______%
TOTAL RETURN BOND FUND _______%
INTERNATIONAL EQUITY FUND _______%
</TABLE>

From June 22, 1998, to December 28, 1998, U.S. Trust Company, N.A. served as the
International Equity Fund's investment adviser, pursuant to an advisory
agreement substantially similar to the advisory agreement currently in effect
for the Fund. Prior to June 22, 1998, U.S. Trust Company of The Pacific
Northwest served as the Fund's investment adviser pursuant to an advisory
agreement substantially similar to the advisory agreement currently in effect
for the Fund. For the fiscal year ended March 31, 1999, U.S. Trust Company, N.A.
received an advisory fee (after voluntary fee waivers) from the Fund at the
effective annual rate of ___% of the Fund's average daily net assets, and U.S.
Trust Company of The Pacific Northwest received an advisory fee (after voluntary
fee waivers) from the Fund at the effective annual rate of ___% of the Fund's
average daily net assets.

Prior to December 28, 1998, Harding Loevner Management, L.P. (Harding) served as
the International Equity Fund's investment sub-adviser and made the day-to-day
investment decisions and portfolio selections for the Fund. For the services it
provided to the Fund, Harding was paid only by the adviser, and did not receive
any fees directly from the Fund.

PORTFOLIO MANAGERS

Leigh H. Weiss has served as portfolio manager for the Equity Fund since January
1996. Mr. Weiss is a Managing Director and Senior Portfolio Manager of U.S.
Trust and has been with U.S. Trust since 1993. Mr. Weiss is primarily
responsible for the day to day management of the Equity Fund's portfolio.
Research, analyses, trade execution and other facilities provided by U.S. Trust
and other personnel also play a significant role in portfolio management and
performance.

David J. Williams has served as portfolio manager for the Value Equity Fund
since its inception. Mr. Williams is a Managing Director and Senior Portfolio
Manager for U.S. Trust and has been with U.S. Trust since 1987. Mr. Williams is
primarily responsible for the day to day management of the Value Equity Fund's
portfolio. Research, analyses, trade execution and other facilities

Page 26 of 35
<PAGE>

provided by U.S. Trust and other personnel also play a significant role in
portfolio management and performance.

All investment decisions for the Optimum Growth Fund are made by a committee
of investment professionals and no persons are primarily responsible for
making recommendations to that committee. United States Trust Company of New
York provides its investment advisory services to the Optimum Growth Fund
primarily through its Campbell Cowperthwait division.

Alexander R. Powers has served as portfolio manager for the Income and Total
Return Bond Funds since December 1996. Mr. Powers is a Managing Director of U.S.
Trust's Taxable Fixed-Income Investments and has been with U.S. Trust since July
1996. Prior to joining U.S. Trust, Mr. Powers was the Manager of Taxable
Fixed-Income Investments at Chase Asset Management. Mr. Powers is primarily
responsible for the day to day management of the Income and Total Return Bond
Funds' portfolios. Research, analyses, trade execution and other facilities
provided by U.S. Trust and other personnel also play a significant role in
portfolio management and performance.

Rosemary Sagar has served as portfolio manager for the International Equity
Fund since December, 1998. Ms. Sagar is the Managing Director of U.S. Trust's
Global Investment Division and she has been with U.S. Trust since 1996. Prior
to joining U.S. Trust, Ms. Sagar was Senior Vice President for international
equity investments for General Electric Investments Corp. in Stamford, CT.
Ms. Sagar is primarily responsible for the day to day management of the
International Equity Fund's portfolio. Research, analyses, trade execution
and other facilities provided by U.S. Trust and other personnel also play a
significant role in portfolio management and performance.

PURCHASING, SELLING AND EXCHANGING FUND SHARES

This section tells you how to buy, sell (sometimes called "redeem") or exchange
Institutional Shares of the Funds.

INSTITUTIONAL SHARES
- No sales charge
- No 12b-1 fees
- No minimum initial or subsequent investment

Institutional Shares are offered only to financial institutions investing for
their own or their customers' accounts. For information on how to open an
account and set up procedures for placing transactions call (800) 909-1989 (from
overseas, call (617) 557-1755). Customers of financial institutions should
contact their institutions for information on their accounts.

HOW TO PURCHASE FUND SHARES

You may purchase shares directly by:
- - Mail
- - Telephone, or
- - Wire

To purchase shares directly from us, please call (800) 909-1989 (from overseas,
call (617) 557-1755) or complete and send in the enclosed application to
Excelsior Funds, c/o Chase Global

Page 27 of 35
<PAGE>

Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. Unless you
arrange to pay by wire, write your check, payable in U.S. dollars, to
"Excelsior Institutional Trust" and include the name of the appropriate
Fund(s) on the check. A Fund cannot accept third-party checks, credit card
checks or cash. To purchase shares by wire, please call us for instructions.
Federal funds and registration instructions should be wired through the
Federal Reserve System to:

The Chase Manhattan Bank
ABA#021000021
Excelsior Institutional Trust
Credit DDA 910-2-733046
[Account Registration]
[Account Number]
[Wire Control Number]

Investors making initial investments by wire must promptly complete the enclosed
application and forward it to the address indicated on the application.
Investors making subsequent investments by wire should follow the above
instructions.

You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its
procedures. Your institution may charge a fee for its services, in addition to
the fees charged by the Fund. You will also generally have to address your
correspondence or questions regarding a Fund to your institution.

The Funds' distributor may institute one or more promotional incentive programs
for dealers, which will be paid for by the distributor out of its own assets and
not out of the assets of the Funds. Under any such program, the distributor may
provide incentives, in the form of cash or other compensation, including
merchandise, airline vouchers, trips and vacation packages, to dealers selling
shares of a Fund. If any such program is made available to any dealer, it
will be made available to all dealers on the same terms.

GENERAL INFORMATION

You may purchase shares on any day that the New York Stock Exchange (NYSE) and
the Adviser are open for business (a "Business Day"). A Fund may reject any
purchase request if it is determined that accepting the request would not be in
the best interests of the Fund or its shareholders.

The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Fund receives your purchase request in good order.
We consider requests to be in "good order" when all required documents are
properly completed, signed and received.

Each Fund calculates its NAV once each Business Day at the regularly-scheduled
close of normal trading on the NYSE (normally, 4:00 p.m., Eastern time). So, for
you to receive the current Business Day's NAV, a Fund must receive your purchase
request in good order before 4:00 p.m., Eastern time.

HOW WE CALCULATE NAV

NAV for one Fund share is the value of that share's portion of all of the assets
in the Fund.

Page 28 of 35
<PAGE>

In calculating NAV, a Fund generally values its investment portfolio at market
price. If market prices are unavailable or the Adviser thinks that they are
unreliable, fair value prices may be determined in good faith using methods
approved by the Board of Trustees. Fixed income investments with remaining
maturities of 60 days or less generally are valued at their amortized cost,
which approximates their market value.

Some Funds may hold securities that are listed on foreign exchanges. These
securities may trade on weekends or other days when the Funds do not
calculate NAV. As a result, the market value of these securities may change
on days when you cannot purchase or sell Fund shares.

HOW TO SELL YOUR FUND SHARES

You may sell shares directly by:
- - Mail, or
- - Telephone

Holders of Institutional Shares may sell shares by following procedures
established when they opened their account or accounts. If you have questions,
call (800) 909-1989 (from overseas, call (617) 557-1755).

You may sell your shares by sending a written request for redemption to:

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

Please be sure to indicate the number of shares to be sold, identify your
account number and sign the request.

If you own your shares directly and previously indicated on your account
application or arranged in writing to do so, you may sell (sometimes called
"redeem") your shares on any Business Day by contacting a Fund directly by
telephone at (800) 909-1989 (from overseas, call (617) 557-1755). We may
reject a telephone redemption request if we deem it advisable to do so.

If you would like to sell $50,000 or more of your shares, or any amount if the
proceeds are to be sent to an address other than the address of record, please
notify the Fund in writing and include a signature guarantee by a bank or other
financial institution (a notarized signature is not sufficient).

The sale price of each share will be the next NAV determined after the Fund
receives your request in good order.

RECEIVING YOUR MONEY

Normally, we will send your sale proceeds the Business Day after we receive your
request in good order. Your proceeds can be wired to your bank account or sent
to you by check. IF YOU

Page 29 of 35
<PAGE>

RECENTLY PURCHASED YOUR SHARES BY CHECK, REDEMPTION PROCEEDS MAY NOT BE
AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS).

REDEMPTIONS IN KIND

We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise, we might pay all or part of
your redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption in kind). It is highly unlikely that your shares
would ever be redeemed in kind, but if they were you would probably have to pay
transaction costs to sell the securities distributed to you, as well as taxes on
any capital gains from the sale as with any redemption.

INVOLUNTARY SALES OF YOUR SHARES

If your account balance drops below $500 because of redemptions, you may be
required to sell your shares. But, we will always give you at least 60 days'
written notice to give you time to add to your account and avoid the sale of
your shares.

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

A Fund may suspend your right to sell your shares if the NYSE restricts trading,
the SEC declares an emergency or for other reasons. More information about this
is in our Statement of Additional Information.

HOW TO EXCHANGE YOUR SHARES

You may exchange your shares on any Business Day for Institutional Shares of any
portfolio of Excelsior Institutional Trust, or for Institutional Shares of the
Money Fund of Excelsior Funds, Inc. In order to protect other shareholders, we
may limit your exchanges to no more than six per year, and we may reject any
exchange request. Shares can be exchanged directly by mail, or by telephone if
you previously selected the telephone exchange option on the account
application.

IF YOU RECENTLY PURCHASED SHARES BY CHECK, YOU MAY NOT BE ABLE TO EXCHANGE YOUR
SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS).
This exchange privilege may be changed or canceled at any time.

When you exchange shares, you are really selling your shares and buying other
Fund shares. So, your sale price and purchase price will be based on the NAV
next calculated after the Fund receives your exchange request in good order.

TELEPHONE TRANSACTIONS

Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Funds have certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, the Funds are not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you

Page 30 of 35
<PAGE>

or your financial institution transact with a Fund over the telephone, you will
generally bear the risk of any loss.

AUTHORIZED INTERMEDIARIES

Certain intermediaries, such as brokers or other shareholder organizations, are
authorized to accept purchase, redemption and exchange requests for Funds
shares. These intermediaries may authorize other organizations to accept
purchase, redemption and exchange requests for Fund shares. These requests are
normally executed at the NAV next determined after the intermediary receives the
request in good order. Authorized intermediaries are responsible for
transmitting requests and delivering funds on a timely basis.

SHAREHOLDER SERVICING

The Funds are permitted to pay a shareholder servicing fee to certain
shareholder organizations for providing services to their customers who hold
shares of the Funds. These services may include assisting in the processing of
purchase, redemption and exchange request and providing periodic account
statements. The shareholder servicing fee may be up to 0.40% of the average
daily net asset value of Fund shares held by clients of a shareholder
organization.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each Fund distributes its income as follows:

Equity Fund Declared and Paid Quarterly
Value Equity Fund Declared and Paid Quarterly
Optimum Growth Fund Declared and Paid Quarterly
Income Fund Declared Daily and Paid Monthly
Total Return Bond Fund Declared Daily and Paid Monthly
International Equity Fund Declared and Paid Quarterly

Each Fund makes distributions of capital gains, if any, at least annually. If
you own Fund shares on a Fund's record date, you will be entitled to receive the
distribution.

Dividends and distributions for shares held of record by U.S. Trust and its
affiliates or correspondent banks will be paid in cash. Otherwise, dividends and
distributions will be paid in the form of additional Fund shares unless you
elect to receive payment in cash. To elect cash payment, you must notify the
Fund in writing prior to the date of the distribution. Your election will be
effective for dividends and distributions paid after the Fund receives your
written notice. To cancel your election, simply send the Fund written notice.

TAXES

PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Funds and their shareholders. This summary is based on current
tax laws, which may change.

Each Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from a Fund may be taxable whether or not you reinvest them. Income
distributions are generally taxable at ordinary income tax rates. Capital

Page 31 of 35
<PAGE>

gains distributions are generally taxable at the rates applicable to
long-term capital gains. EACH SALE OR EXCHANGE IS A TAXABLE EVENT.

Each Fund may be able to pass along a tax credit for foreign income taxes it
pays. The Fund will notify you if it gives you the credit.

MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.

Page 32 of 35
<PAGE>

FINANCIAL HIGHLIGHTS

The tables that follow present performance information about Institutional
Shares of each Fund. This information is intended to help you understand each
Fund's financial performance for the past five years, or, if shorter, the
period of the Fund's operations. Some of this information reflects financial
information for a single Fund share. The total returns in the table represent
the rate that you would have earned (or lost) on an investment in a Fund,
assuming you reinvested all of your dividends and distributions. This
information has been audited by __________________, independent public
accountants. Their report, along with each Fund's financial statements,
appears in the annual report that accompanies our Statement of Additional
Information. You can obtain the annual report, which contains more
performance information, at no charge by calling (800) 909-1989 (from
overseas, call (617) 557-1755).

Page 33 of 35
<PAGE>

EXCELSIOR INSTITUTIONAL TRUST

INVESTMENT ADVISER

United States Trust Company of New York
114 W. 47th Street
New York, New York 10036

U.S. Trust Company
225 High Ridge Road
East Building
Stamford, Connecticut 06905

DISTRIBUTOR

Edgewood Services, Inc.
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-5829

More information about each Fund is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI dated August 1, 1999 includes detailed information about Excelsior
Institutional Trust. The SAI is on file with the SEC and is incorporated by
reference into this prospectus. This means that the SAI, for legal purposes, is
a part of this prospectus.

ANNUAL AND SEMI-ANNUAL REPORTS

These reports list each Fund's holdings and contain information from the Fund's
managers about strategies, and recent market conditions and trends. The reports
also contain detailed financial information about the Funds.

TO OBTAIN MORE INFORMATION:

BY TELEPHONE: CALL (800) 909-1989 (FROM OVERSEAS, CALL (617) 557-1755)

BY MAIL:
Excelsior Institutional Trust
P.O. Box 2798
Boston, Massachusetts 02208-2798

BY E-MAIL: [VAR:Fund.EmailAddress]]

BY INTERNET: [VAR:Fund.InternetAddress]]

Page 34 of 35
<PAGE>

FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about the Excelsior Institutional Trust, from the
SEC's website ("HTTP://WWW.SEC.GOV"). You may review and copy documents at the
SEC Public Reference Room in Washington, DC (for information call
1-800-SEC-0330). You may request documents by mail from the SEC, upon payment of
a duplicating fee, by writing to: Securities and Exchange Commission, Public
Reference Section, Washington, DC 20549-6009. Excelsior Institutional Trust's
Investment Company Act registration number is 811-8490.

Page 35 of 35
<PAGE>

EXCELSIOR FUNDS, INC.

BLENDED EQUITY FUND
VALUE AND RESTRUCTURING FUND
SMALL CAP FUND
LARGE CAP GROWTH FUND
ENERGY AND NATURAL RESOURCES FUND
REAL ESTATE FUND

EXCELSIOR INSTITUTIONAL TRUST

VALUE EQUITY FUND
OPTIMUM GROWTH FUND

PROSPECTUS

AUGUST 1, 1999

INVESTMENT ADVISER
UNITED STATES TRUST COMPANY OF NEW YORK
U.S. TRUST COMPANY

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
ANY FUND SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS
ACCURATE OR COMPLETE. IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.

Page 1 of 41
<PAGE>

HOW TO READ THIS PROSPECTUS

Excelsior Funds, Inc. and Excelsior Institutional Trust are mutual fund families
that offer shares in separate investment portfolios which have individual
investment goals and strategies. This prospectus gives you important information
about the Blended Equity, Value and Restructuring, Small Cap, Large Cap Growth,
Energy and Natural Resources, and Real Estate Funds of Excelsior Funds, Inc. and
the Value Equity and Optimum Growth Funds of Excelsior Institutional Trust
(each, a Fund) that you should know before investing. United States Trust
Company of New York and U.S. Trust Company (together, U.S. Trust or the Adviser)
serve as investment adviser to each Fund. The Value Equity and Optimum Growth
Funds offer two classes of shares: Shares, which are offered in this prospectus,
and Institutional Shares, which are offered in a separate prospectus. Please
read this prospectus and keep it for future reference.

<TABLE>
<CAPTION>
PAGE
<S> <C>
BLENDED EQUITY FUND XXX
VALUE AND RESTRUCTURING FUND XXX
SMALL CAP FUND XXX
LARGE CAP GROWTH FUND XXX
ENERGY AND NATURAL RESOURCES FUND XXX
REAL ESTATE FUND XXX
VALUE EQUITY FUND XXX
OPTIMUM GROWTH FUND XXX
MORE INFORMATION ABOUT RISK XXX
EACH FUND'S OTHER INVESTMENTS XXX
EACH FUND'S INVESTMENT OBJECTIVE XXX
THE INVESTMENT ADVISER AND PORTFOLIO MANAGERS XXX
PURCHASING, SELLING AND EXCHANGING FUND SHARES XXX
DISTRIBUTION OF FUND SHARES XXX
DIVIDENDS, DISTRIBUTIONS AND TAXES XXX
FINANCIAL HIGHLIGHTS XXX
HOW TO OBTAIN MORE INFORMATION ABOUT
EXCELSIOR FUNDS, INC. AND EXCELSIOR INSTITUTIONAL TRUST Back Cover
</TABLE>

Page 2 of 41
<PAGE>

INTRODUCTION

Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.

Each Fund has its own investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help a
Fund achieve its goal. Still, investing in each Fund involves risk and there is
no guarantee that a Fund will achieve its goal. An investment manager's
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment. In fact, no matter how good
a job an investment manager does, you could lose money on your investment in the
Fund, just as you could with other investments. A Fund share is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation (FDIC) or any government agency.

THE ADVISER'S EQUITY INVESTMENT STRATEGY

The Adviser manages each Fund's investments with a view toward long-term
success. The Adviser's strategy generally does not change with short-term
variations in financial markets.

The Adviser begins with a belief that all worthwhile investments are grounded in
value and that it is possible to identify fundamental values that, eventually,
should be reflected in the market prices of Fund investments. The Adviser seeks
to identify these fundamental values through its constant assessment of the
security's value to its market price. The Adviser frequently selects Fund
investments using the following criteria:

OPPORTUNITY: Industries and companies may be positioned to provide
solutions to or benefit from complex problems. Examples of these would be
the aging of the U.S. population or the need to enhance industrial
productivity.

TRANSACTION VALUE: Companies may have real underlying asset values greater
than their market prices. Differences between a company's real asset value
and the price of its shares often are corrected over time through
restructuring or other business combinations.

EARLY LIFE CYCLE: Companies may have products that are in the earlier
stages of development or that seek to exploit new markets. Over time, the
value of such companies may come to be recognized in the market.

Page 3 of 41
<PAGE>

BLENDED EQUITY FUND

FUND SUMMARY

INVESTMENT GOAL Long-term capital appreciation

INVESTMENT FOCUS Common stocks of U.S. companies

SHARE PRICE VOLATILITY High

PRINCIPAL INVESTMENT STRATEGY Invests in common stocks that the Adviser
believes are undervalued in the market

INVESTOR PROFILE Investors seeking growth of capital, and who are
willing to accept the risks of investing in
equity securities

INVESTMENT STRATEGY OF THE BLENDED EQUITY FUND

The Blended Equity Fund invests primarily in large capitalization common stocks
of U.S. and, to a lesser extent, foreign companies that the Adviser believes
have value that is not currently reflected in their market prices. The Adviser
generally diversifies the Fund's investments over a variety of industries and
types of companies. The Fund may invest in companies of any size, including
small, high growth companies.

The Adviser takes a long-term approach to managing the Fund and tries to
identify companies with characteristics that will lead to future earnings growth
or recognition of their true value. The Adviser looks for companies that are
positioned to provide solutions to or benefit from complex social and economic
trends, or whose products are early in their life cycle and will experience
accelerating growth in the future. In addition, the Adviser invests a smaller
portion of the Fund's assets in a quantitatively selected segment of large
capitalization U.S. companies designed to complement the Fund's core holdings
and reduce portfolio volatility. In considering whether to sell one or more
portfolio holdings, the Adviser will generally seek to minimize the tax impact
of any such sale(s).

PRINCIPAL RISKS OF INVESTING IN THE BLENDED EQUITY FUND

The Fund is also subject to the risk that undervalued common stocks may
underperform other segments of the equity markets or the equity markets as a
whole.

Page 4 of 41
<PAGE>

PERFORMANCE INFORMATION

This bar chart shows changes in the Fund's performance from year to year.

<TABLE>
<S> <C>
1989 X.XX%
1990 X.XX%
1991 X.XX%
1992 X.XX%
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE
[VAR:PORTFOLIO1.PERFORMANCE.TABLE.INDEX1.NAME].

<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Blended Equity Fund X.XX% X.XX% X.XX%
[insert index name] X.XX% X.XX% X.XX%
</TABLE>

WHAT IS AN INDEX?

FUND FEES AND EXPENSES

Page 5 of 41
<PAGE>

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX%
Other Expenses
Administrative Servicing Fee .XX%
Other Operating Expenses .XX%
Total Other Expenses .XX%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses X.XX%
</TABLE>

BLENDED EQUITY FUND ____%

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$---- $---- $---- $----
</TABLE>

Page 6 of 41
<PAGE>

VALUE AND RESTRUCTURING FUND

FUND SUMMARY

INVESTMENT GOAL Long-term capital appreciation

INVESTMENT FOCUS Equity securities of U.S. issuers

SHARE PRICE VOLATILITY High

PRINCIPAL INVESTMENT STRATEGY Investing in common stocks of companies
which the Adviser believes are
undervalued by the market and whose
share price are expected to benefit from
the value created through restructuring
or industry consolidation

INVESTOR PROFILE Investors seeking long-term capital
appreciation, and who are willing to
bear the risks of investing in equity
securities of issuers expected to
experience a restructuring or business
combination

INVESTMENT STRATEGY OF THE VALUE AND RESTRUCTURING FUND

The Value and Restructuring Fund invests primarily in common stocks of U.S. and,
to a lesser extent, foreign companies whose share price, in the opinion of the
Adviser, does not reflect the economic value of the company's assets, but where
the Adviser believes restructuring efforts or industry consolidation will serve
to highlight the true value of the company.

In choosing investments for the Fund, the Adviser looks for companies where
restructuring activities, such as consolidations, outsourcing, spin-off or
reorganization, will offer significant value to the issuer and increase its
investment potential. The Adviser may select companies of any size for the Fund
and the Fund invests in a diversified group of companies across a number of
different industries.

PRINCIPAL RISKS OF INVESTING IN THE VALUE AND RESTRUCTURING FUND

The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small cap stocks may be more volatile than those of larger companies.
These securities may be traded over-the-counter or listed on an exchange and may
or may not pay dividends.

Page 7 of 41
<PAGE>

The Fund is also subject to the risk that equity securities of issuers expected
to experience a restructuring or business combination may underperform other
segments of the equity markets or the equity markets as a whole.

PERFORMANCE INFORMATION

This bar chart shows changes in the Fund's performance from year to year.

<TABLE>
<S> <C>
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE
[VAR:PORTFOLIO3.PERFORMANCE.TABLE.INDEX1.NAME].

<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE INCEPTION
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Value and Restructuring Fund X.XX% X.XX% X.XX%*
[insert index name] X.XX% X.XX% X.XX%**
</TABLE>

* Since December 31, 1992
** Since [calc. date for index]

WHAT IS AN INDEX?

FUND FEES AND EXPENSES

Page 8 of 41
<PAGE>

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

VALUE AND RESTRUCTURING FUND ____%

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$---- $---- $---- $----
</TABLE>

Page 9 of 41
<PAGE>

SMALL CAP FUND

FUND SUMMARY

INVESTMENT GOAL Capital appreciation

INVESTMENT FOCUS Equity securities of small cap U.S.
issuers

SHARE PRICE VOLATILITY High

PRINCIPAL INVESTMENT STRATEGY Investing in equity securities of smaller
companies that are expected to achieve
substantial long-term earnings growth

INVESTOR PROFILE Investors seeking capital appreciation,
and who are willing to tolerate the risks
of investing in smaller companies

INVESTMENT STRATEGY OF THE SMALL CAP FUND

The Small Cap Fund invests primarily in equity securities of smaller U.S.-based
companies that are in the early stages of development and which the Adviser
believes have the potential to achieve substantial long-term earnings growth.

In selecting investments for the Fund, the Adviser applies a bottom-up
investment approach designed to identify innovative companies whose potential is
not yet reflected in their market values. Generally, the Fund invests in
companies with market capitalizations of $1.5 billion or less, but the Adviser
also considers to a lesser degree larger or more mature companies engaged in new
or higher growth operations that the Adviser believes will result in accelerated
earnings growth.

PRINCIPAL RISKS OF INVESTING IN THE SMALL CAP FUND

The Fund is also subject to the risk that small capitalization growth stocks may
underperform other segments of the equity markets or the equity markets as a
whole.

Page 10 of 41
<PAGE>

PERFORMANCE INFORMATION

This bar chart shows changes in the Fund's performance from year to year.

<TABLE>
<S> <C>
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE
[VAR:PORTFOLIO4.PERFORMANCE.TABLE.INDEX1.NAME].

<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Small Cap Fund X.XX% X.XX% X.XX%*
[insert index name] X.XX% X.XX% X.XX%**
</TABLE>

* Since December 31, 1992
** Since [calc. date for index]

WHAT IS AN INDEX?

FUND FEES AND EXPENSES

Page 11 of 41
<PAGE>

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

SMALL CAP FUND ____%

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$---- $---- $---- $----
</TABLE>

Page 12 of 41
<PAGE>

LARGE CAP GROWTH FUND

FUND SUMMARY

INVESTMENT GOAL Long-term return

INVESTMENT FOCUS Common stocks of large U.S. companies

SHARE PRICE VOLATILITY High

PRINCIPAL INVESTMENT STRATEGY Invests in common stocks of large companies
that the Adviser believes have above-average
growth prospects

INVESTOR PROFILE Investors seeking growth of capital, and who
are willing to accept the risks of investing
in equity securities of larger companies

INVESTMENT STRATEGY OF THE LARGE CAP GROWTH FUND

The Large Cap Growth Fund invests primarily in common stocks of large U.S.
companies with market capitalizations over $5 billion that the Adviser believes
have above-average growth prospects.

The Adviser takes a long-term approach to managing the Fund and invests in
companies with characteristics that it believes will lead to future earnings
growth or recognition of their true value. In selecting particular investments,
the Adviser applies a bottom-up investment approach designed to identify the
best companies in the most rapidly growing industries. Frequently, these are
well established companies that are positioned to provide solutions to or
benefit from complex social and economic trends. However, the Fund also may
invest in smaller, high growth companies when the Adviser expects their earnings
to grow at an above-average rate.

PRINCIPAL RISKS OF INVESTING IN THE LARGE CAP GROWTH FUND

The Fund is also subject to the risk that large capitalization growth stocks may
underperform other segments of the equity markets or the equity markets as a
whole.

PERFORMANCE INFORMATION

Page 13 of 41
<PAGE>

This bar chart shows changes in the Fund's performance from year to year.

<TABLE>
<S> <C>
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE
[VAR:PORTFOLIO5.PERFORMANCE.TABLE.INDEX1.NAME].

<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------------
<S> <C> <C>
Large Cap Growth Fund X.XX% X.XX%*
[insert index name] X.XX% X.XX%**
</TABLE>

* Since October 1, 1997
** Since [calc. date for index]

WHAT IS AN INDEX?

FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

LARGE CAP GROWTH FUND ____%

Page 14 of 41
<PAGE>

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$---- $---- $---- $----
</TABLE>

Page 15 of 41
<PAGE>

ENERGY AND NATURAL RESOURCES FUND

FUND SUMMARY

INVESTMENT GOAL Long-term capital appreciation

INVESTMENT FOCUS Equity securities of U.S. and foreign energy
and natural resources companies

SHARE PRICE VOLATILITY High

PRINCIPAL INVESTMENT STRATEGY Investing in equity securities of U.S. and
foreign issuers engaged in the energy and
natural resources groups of industries

INVESTOR PROFILE Investors seeking long-term growth of
capital, and who are willing to accept
the risks of investing in a non-diversified
portfolio of energy and natural resources
companies

INVESTMENT STRATEGY OF THE ENERGY AND NATURAL RESOURCES FUND

The Energy and Natural Resources Fund invests primarily in equity securities of
U.S. and foreign companies engaged in the energy and natural resources
industries. These companies include those engaged in the discovery, development,
production or distribution of energy or other natural resources and companies
that develop technologies and furnish supplies and services to these companies.
In selecting investments for the Fund, the Adviser takes a long-term approach
and seeks to identify companies whose value is not recognized in the prices of
their securities or with characteristics that will lead to above-average
earnings growth.

Energy companies normally will constitute a significant portion of the Fund's
investments, and the Fund typically invests at least 50% of its assets in crude
oil, petroleum and natural gas companies. The Fund also may invest a portion of
its assets in precious metals, such as gold bullion, and companies engaged in
the production of precious metals. The Fund invests in companies of any size,
including small, high growth companies.

PRINCIPAL RISKS OF INVESTING IN THE ENERGY AND NATURAL RESOURCES FUND

The Fund is subject to the risk that the securities of issuers in the same
industry that the Fund purchases will underperform other market sectors or the
market as a whole. To the extent that the Fund's investments are concentrated in
issuers conducting business in the same industry, the Fund is subject to
legislative or regulatory changes, adverse market conditions and/or increased
competition affecting that industry.

Page 16 of 41
<PAGE>

Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country. These
various risks will be even greater for investments in emerging market countries
since political turmoil and rapid changes in economic conditions are more likely
to occur in these countries.

The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or political/regulatory occurrence affecting one or more
of these issuers, and may experience increased volatility due to its investments
in those securities.

PERFORMANCE INFORMATION

This bar chart shows changes in the Fund's performance from year to year.

<TABLE>
<S> <C>
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE
[VAR:PORTFOLIO1.PERFORMANCE.TABLE.INDEX1.NAME].

<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Energy and Natural Resources Fund X.XX% X.XX% X.XX%*
[insert index name] X.XX% X.XX% X.XX%**
</TABLE>

* Since December 31, 1992
** Since [calc. date for index]

Page 17 of 41
<PAGE>

WHAT IS AN INDEX?

FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

ENERGY AND NATURAL RESOURCES FUND ____%

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$---- $---- $---- $----
</TABLE>

Page 18 of 41
<PAGE>

REAL ESTATE FUND

FUND SUMMARY

INVESTMENT GOAL Current income and long-term capital
appreciation

INVESTMENT FOCUS Equity securities of companies engaged in the
real estate business

SHARE PRICE VOLATILITY High

PRINCIPAL INVESTMENT STRATEGY Investing in equity securities of real estate
investment trusts (REITs) and other issuers
engaged in the real estate industry

INVESTOR PROFILE Investors seeking current income and long-term
growth of capital, and who are willing to
accept the risks of investing in a
non-diversified portfolio of real estate
issuers

INVESTMENT STRATEGY OF THE REAL ESTATE FUND

The Real Estate Fund invests primarily in REITs and other publicly-traded equity
securities of U.S. and, to a lesser extent, foreign companies engaged in the
real estate industry. REITs pool investors' funds for investment directly in
real estate (equity REITs), real estate loans (mortgage REITs), or a combination
of the two (hybrid REITs). The Fund intends to invest primarily in equity and
hybrid REITs. The Fund also invests in other issuers engaged in the real estate
business, such as developers, mortgage lenders and servicers, construction
companies and building material suppliers.

The Adviser takes a long-term approach to managing the Fund and seeks to
identify companies with characteristics that will lead to above-average earnings
growth. The Adviser analyzes demographic and macroeconomic factors to determine
regional allocations. Based on its regional allocations, the Adviser selects
particular investments based on its analysis of valuation relative to underlying
real estate values.

PRINCIPAL RISKS OF INVESTING IN THE REAL ESTATE FUND

Page 19 of 41
<PAGE>

The Fund's investments in the securities of REITs and companies principally
engaged in the real estate industry may subject the Fund to the risks associated
with the direct ownership of real estate. Risks commonly associated with the
direct ownership of real estate include fluctuations in the value of underlying
properties and defaults by borrowers or tenants. In addition to these risks,
REITs are dependent on specialized management skills and some REITs may have
investments in relatively few properties, or in a small geographic area or a
single type of property. These factors may increase the volatility of the Fund's
investments in REITs.

PERFORMANCE INFORMATION

This bar chart shows changes in the Fund's performance from year to year.

<TABLE>
<S> <C>
1997 X.XX%
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE
[VAR:PORTFOLIO2.PERFORMANCE.TABLE.INDEX1.NAME].

<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------------
<S> <C> <C>
Real Estate Fund X.XX% X.XX%*
[insert index name] X.XX% X.XX%**
</TABLE>

* Since October 1, 1997
** Since [calc. date for index]

WHAT IS AN INDEX?

Page 20 of 41
<PAGE>

FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

REAL ESTATE FUND ____%

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$---- $---- $---- $----
</TABLE>

Page 21 of 41
<PAGE>

VALUE EQUITY FUND

FUND SUMMARY

INVESTMENT GOAL Long-term capital appreciation

INVESTMENT FOCUS Common stocks of U.S. companies

SHARE PRICE VOLATILITY High

PRINCIPAL INVESTMENT STRATEGY Investing in common stocks that the Adviser
believes are undervalued by the market

INVESTOR PROFILE Investors seeking growth of capital, and
who are willing to accept the risks of
investing in equity securities

INVESTMENT STRATEGY OF THE VALUE EQUITY FUND

The Value Equity Fund invests primarily in common stocks of U.S. and, to a
lesser extent, foreign companies that the Adviser believes are undervalued at
current market prices. The Adviser generally diversifies the Fund's investments
over a variety of industries and the Fund may invest in companies of any size,
including small, high growth companies.

PRINCIPAL RISKS OF INVESTING IN THE VALUE EQUITY FUND

The Fund is also subject to the risk that its undervalued equity securities may
underperform other segments of the equity markets or the equity markets as a
whole.

PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Shares from year
to year.

Page 22 of 41
<PAGE>

<TABLE>
<S> <C>
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE AVERAGE ANNUAL TOTAL RETURNS OF THE FUND'S SHARES FOR
THE PERIODS ENDING DECEMBER 31, 1998 TO THOSE OF THE
[VAR:PORTFOLIO1.PERFORMANCE.TABLE.INDEX1.NAME].

<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------------
<S> <C> <C>
Value Equity Fund (Shares) X.XX% X.XX%*
[insert index name] X.XX% X.XX%**
</TABLE>

* Since January 15, 1997
** Since [calc. date for index]

WHAT IS AN INDEX?

FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX%
Distribution (12b-1) Fees .XX%
Other Expenses
Administrative Servicing Fee .XX%
Other Operating Expenses .XX%
Total Other Expenses .XX%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses X.XX%
</TABLE>

Page 23 of 41
<PAGE>

VALUE EQUITY FUND (SHARES) ____%

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF FUND SHARES."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$---- $---- $---- $----
</TABLE>

Page 24 of 41
<PAGE>

OPTIMUM GROWTH FUND

FUND SUMMARY

INVESTMENT GOAL Superior, risk-adjusted total return

INVESTMENT FOCUS Common stocks of U.S. companies

SHARE PRICE VOLATILITY High

PRINCIPAL INVESTMENT STRATEGY Invests in common stocks that the
Adviser believes have strong growth
prospects

INVESTOR PROFILE Investors seeking total return, and who
are willing to accept the risks of
investing in equity securities

INVESTMENT STRATEGY OF THE OPTIMUM GROWTH FUND

PRINCIPAL RISKS OF INVESTING IN THE OPTIMUM GROWTH FUND

The Fund is also subject to the risk that large capitalization U.S. stocks may
underperform other segments of the equity markets or the equity markets as a
whole.

Page 25 of 41
<PAGE>

PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Shares from year
to year.

<TABLE>
<S> <C>
1997 X.XX%
1998 X.XX%

BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
</TABLE>

The Fund's performance from January 1, 1999 to June 30, 1999 was XX.XX%.

THIS TABLE COMPARES THE AVERAGE ANNUAL TOTAL RETURNS OF THE FUND'S SHARES FOR
THE PERIODS ENDING DECEMBER 31, 1998 TO THOSE OF THE
[VAR:PORTFOLIO2.PERFORMANCE.TABLE.INDEX1.NAME].

<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------------
<S> <C> <C>
Optimum Growth Fund (Shares) X.XX% X.XX%*
[insert index name] X.XX% X.XX%**
</TABLE>

* Since July 3, 1996
** Since [calc. date for index]

WHAT IS AN INDEX?

FUND FEES AND EXPENSES

Page 26 of 41
<PAGE>

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

OPTIMUM GROWTH FUND (SHARES) ____%

FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF FUND SHARES."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$---- $---- $---- $----
</TABLE>

Page 27 of 41
<PAGE>

MORE INFORMATION ABOUT RISK

<TABLE>
<S><C>
EQUITY RISK - Equity securities include public and privately issued All Funds
equity securities, common and preferred stocks, warrants, rights to
subscribe to common stock and convertible securities, as well as
instruments that attempt to track the price movement of equity indices.
Investments in equity securities and equity derivatives in general are
subject to market risks that may cause their prices to fluctuate over
time. The value of securities convertible into equity securities, such
as warrants or convertible debt, is also affected by prevailing interest
rates, the credit quality of the issuer and any call provision.

MORTGAGE-BACKED SECURITIES - Mortgage-backed securities are fixed income Real Estate Fund
securities representing an interest in a pool of underlying mortgage
loans. They are sensitive to changes in interest rates, but may respond
to these changes differently from other fixed income securities due to
the possibility of prepayment of the underlying mortgage loans. As a
result, it may not be possible to determine in advance the actual
maturity date or average life of a mortgage-backed security. Rising
interest rates tend to discourage refinancings, with the result that the
average life and volatility of the security will increase, exacerbating
its decrease in market price. When interest rates fall, however,
mortgage-backed securities may not gain as much in market value because
of the expectation of additional mortgage prepayments that must be
reinvested at lower interest rates. Prepayment risk may make it
difficult to calculate the average maturity of a portfolio of
mortgage-backed securities and, therefore, to assess the volatility risk
of that portfolio.

FOREIGN SECURITY RISKS - Investments in securities of foreign companies All Funds
or governments can be more volatile than investments in U.S. companies
or governments. Diplomatic, political, or economic developments,
including nationalization or appropriation, could affect investments in
foreign countries. Foreign securities markets generally have less
trading volume and less liquidity than U.S. markets. In addition, the
value of securities denominated in foreign currencies, and of dividends
from such securities, can change significantly when foreign currencies
strengthen or weaken relative to the U.S. dollar. Foreign companies or
governments generally are not subject to uniform accounting, auditing,
and financial reporting standards comparable to those applicable to
domestic U.S. companies or governments. Transaction costs are generally
higher than those in the U.S. and expenses for custodial arrangements of
foreign securities may be somewhat greater than typical expenses for
custodial arrangements of similar U.S. securities. Some foreign
governments levy withholding taxes against dividend and interest
income. Although a portion of these taxes is

Page 28 of 41
<PAGE>

recoverable, the non-recovered portion will reduce the income received
from the securities comprising the portfolio.

CURRENCY RISK - Investments in foreign securities denominated in foreign All Funds
currencies involve additional risks, including:

- - A Fund may incur substantial costs in connection with
conversions between various currencies.

- - Only a limited market currently exists for hedging transactions relating
to currencies in certain emerging markets.

YEAR 2000 RISK - The Funds depend on the smooth functioning of computer All Funds
systems in almost every aspect of their business. Like other mutual funds,
businesses and individuals around the world, the Funds could be adversely
affected if the computer systems used by their service providers do not
properly process dates on and after January 1, 2000, and distinguish between
the year 2000 and the year 1900. This is commonly known as the "Year 2000
Problem." The Adviser and the Funds' other service providers advise that
they are taking steps to address the Year 2000 Problem with respect to the
computer systems that they use. Currently, they do not anticipate that the
transition to the 21st Century will have any material impact on their ability
to continue to service the Funds at current levels. At this time, however,
there can be no assurance that their efforts will be sufficient to avoid any
adverse impact on the Funds as a result of the Year 2000 Problem. In
addition, the Funds and their shareholders may experience losses as a result
of computer difficulties experienced by issuers of portfolio securities or
third parties, such as custodians, banks, broker-dealers or others with which
the Funds do business.

Furthermore, many foreign countries are not as prepared as the U.S. for All Funds
the year 2000 transition. As a result, computer difficulties in foreign
markets and with foreign institutions as a result of the Year 2000 Problem
may add to the possibility of losses to the Funds and their shareholders.
</TABLE>

Page 29 of 41
<PAGE>

EACH FUND'S OTHER INVESTMENTS

In addition to the investments and strategies described in this prospectus, each
Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information. Of course, a Fund cannot guarantee that it will achieve
its investment goal.

EACH FUND'S INVESTMENT OBJECTIVE

The Blended Equity Fund seeks long-term capital appreciation.

The Value and Restructuring Fund seeks long-term capital appreciation.

The Small Cap Fund seeks long-term capital appreciation.

The Large Cap Growth Fund seeks superior, risk-adjusted total return. This
objective may be changed without shareholder approval.

The Energy and Natural Resources Fund seeks to provide long-term capital
appreciation.

The Real Estate Fund seeks current income and long-term capital appreciation.
This objective may be changed without shareholder approval.

The Value Equity Fund seeks long-term capital appreciation. This objective may
be changed without shareholder approval.

The Optimum Growth Fund seeks superior, risk-adjusted total return. This
objective may be changed without shareholder approval.

INVESTMENT ADVISER

Page 30 of 41
<PAGE>

U.S. Trust Company is a Connecticut state bank and trust company. Each is a
wholly-owned subsidiary of U.S. Trust Corporation, a registered bank holding
company.

U.S. Trust is one of the oldest investment management companies in the country.
Since 1853, U.S. Trust has been a leader in wealth management for sophisticated
investors providing trust and banking services to individuals, corporations and
institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency banking, and personal and corporate banking. On December 31, 1998,
U.S. Trust had approximately $65 billion in aggregate assets under management.
United States Trust Company of New York has its principal offices at 114 W. 47th
Street, New York, NY 10036. U.S. Trust Company has its principal offices at 225
High Ridge Road, East Building, Stamford, CT 06905.

The Adviser makes investment decisions for the Funds and continuously reviews,
supervises and administers each Fund's investment program.

The Board of Directors of Excelsior Funds, Inc. and the Board of Trustees of
Excelsior Institutional Trust supervise the Adviser and establish policies that
the Adviser must follow in its management activities.

For the fiscal year ended March 31, 1999, U.S. Trust received advisory fees, as
a percentage of average daily net assets, of:

<TABLE>
<S> <C>
BLENDED EQUITY FUND ___%
VALUE AND RESTRUCTURING FUND ___%
SMALL CAP FUND ___%
LARGE CAP GROWTH FUND ___%
ENERGY AND NATURAL RESOURCES FUND ___%
REAL ESTATE FUND ___%
VALUE EQUITY FUND ___%
OPTIMUM GROWTH FUND ___%
</TABLE>

PORTFOLIO MANAGERS

Leigh H. Weiss and Bruce Tavel have served as the Blended Equity Fund's
portfolio co-managers since 1997. Mr. Weiss, a Managing Director and Senior
Portfolio Manager, has been with U.S. Trust since 1993. Prior to joining U.S.
Trust, Mr. Weiss was a portfolio manager with Goldman, Sachs & Co. Mr. Tavel, a
Managing Director and head of U.S. Trust's Structured Investments Division, has
been with U.S. Trust since 1980. Mr. Weiss and Mr. Tavel are primarily
responsible for the day to day management of the Blended Equity Fund's
portfolio. Research, analyses, trade execution and other facilities provided by
U.S. Trust and other personnel also play a significant role in portfolio
management and performance.

David J. Williams has served as the Value and Restructuring Fund and Value
Equity Fund portfolio manager since their inceptions. Mr. Williams, a Managing
Director and Senior Portfolio Manager of the Personal Investment Division of
U.S. Trust, has been with U.S. Trust since 1987. Mr. Williams is primarily
responsible for the day to day management of the Value and Restructuring and the
Value Equity Funds' portfolios. Research, analyses, trade execution and other
facilities provided by U.S. Trust and other personnel also play a significant
role in portfolio management and performance.

Page 31 of 41
<PAGE>

Timothy Pettee and Margaret Doyle have served as the Small Cap Fund's
portfolio co-managers since 1998. Mr. Pettee, a Managing Director and
Director of Equity Research, has been with U.S. Trust since 1998. Prior to
joining U.S. Trust, Mr. Pettee was a Vice President and fund manager with
Alliance Capital Management in New York. Ms. Doyle, a Vice President in U.S.
Trust's equity research division, has been with U.S. Trust since 1998. From
1996 to 1998, Ms. Doyle was a Vice President and Investment Officer with J&W
Seligman & Co. in New York. From 19___ to 1996, Ms. Doyle was an Equity
Research Analyst with Solomon Brothers, Inc. in New York. Mr. Pettee and Ms.
Doyle are primarily responsible for the day to day management of the Small
Cap Fund's portfolio. Research, analyses, trade execution and other
facilities provided by U.S. Trust and other personnel also play a significant
role in portfolio management and performance.

All investment decisions for the Large Cap Growth Fund and the Optimum Growth
Fund are made by a committee of investment professionals and no persons are
primarily responsible for making recommendations to that committee. United
States Trust Company of New York provides its investment advisory services to
the Large Cap Growth Fund and the Optimum Growth Fund primarily through its
Campbell Cowperthwait division.

Michael E. Hoover has served as the Energy and Natural Resources Fund's
portfolio manager since 1995. Mr. Hoover, Senior Vice President and Senior
Analyst, has been with U.S. Trust since 1989. Mr. Hoover is primarily
responsible for the day to day management of the Energy and Natural Resources
Fund's portfolio. Research, analyses, trade execution and other facilities
provided by U.S. Trust and other personnel also play a significant role in
portfolio management and performance.

Joan Ellis has served as the Real Estate Fund's portfolio manager or co-manager
since its inception. Ms. Ellis, Senior Vice President in the Investment Research
Division, has been with U.S. Trust since 1984. Ms. Ellis is primarily
responsible for the day to day management of the Real Estate Fund's portfolio.
Research, analyses, trade execution and other facilities provided by U.S. Trust
and other personnel also play a significant role in portfolio management and
performance.

PURCHASING, SELLING AND EXCHANGING FUND SHARES

This section tells you how to buy, sell (sometimes called "redeem") or exchange
shares of the Funds.

HOW TO PURCHASE FUND SHARES

You may purchase shares directly by:
- - Mail
- - Telephone
- - Wire, or
- - Automatic Investment Program

To purchase shares directly from us, please call (800) 446-1012 (from overseas,
call (617) 557-8280), or complete and send in the enclosed application to
Excelsior Funds, c/o Chase Global Funds Services Company, P.O. Box 2798, Boston,
MA 02208-2798. Unless you arrange to pay

Page 32 of 41
<PAGE>

by wire or through the automatic investment program, write your check, payable
in U.S. dollars, to "Excelsior Funds, Inc." (or "Excelsior Institutional Trust"
for Shares of the Value Equity or Optimum Growth Funds) and include the name of
the appropriate Fund(s) on the check. A Fund cannot accept third-party checks,
credit cards, credit card checks or cash. To purchase shares by wire, please
call us for instructions. Federal funds and registration instructions should be
wired through the Federal Reserve System to:

The Chase Manhattan Bank
ABA #021000021
Excelsior Funds, Account Number 9102732915

For Further Credit To:
Excelsior Funds
Wire Control Number
Excelsior Funds Account Registration (including account number)

You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its
procedures, which may be different from the procedures for investing directly.
Your institution may charge a fee for its services, in addition to the fees
charged by the Fund. You will also generally have to address your correspondence
or questions regarding a Fund to your institution.

GENERAL INFORMATION

HOW WE CALCULATE NAV

NAV for one Fund share is the value of that share's portion of all of the assets
in the Fund.

In calculating NAV, a Fund generally values its investment portfolio at market
price. If market prices are unavailable or the Adviser thinks that they are
unreliable, fair value prices may be

Page 33 of 41
<PAGE>

determined in good faith using methods approved by the Board of Directors. Fixed
income investments with remaining maturities of 60 days or less generally are
valued at their amortized cost which approximates their market value.

Some Funds may hold securities that are listed on foreign exchanges. These
securities may trade on weekends or other days when the Funds do not calculate
NAV. As a result, the market value of a Fund's investments may change on
days when you cannot purchase or sell Fund shares.

MINIMUM PURCHASES

To purchase shares for the first time, you must invest at least $500 ($250 for
IRAs) in any Fund (except for the Value Equity or Optimum Growth Funds, where
there is no minimum initial investment).

Your subsequent investments must be made in amounts of at least $50, except that
there is no minimum subsequent investment for the Value Equity or Optimum Growth
Funds.

A Fund may accept investments of smaller amounts at its discretion.

AUTOMATIC INVESTMENT PROGRAM

If you have a checking, money market or NOW account with a bank, you may
purchase shares automatically through regular deductions from your account in
amounts of at least $50 per transaction.

With a $50 minimum initial investment, you may begin regularly scheduled
investments once per month, on either the first or fifteenth day, or twice per
month, on both days.

HOW TO SELL YOUR FUND SHARES

You may sell shares directly by:
- - Mail
- - Telephone, or
- - Systematic Withdrawal Plan

Holders of Fund shares may sell (sometimes called "redeem") shares by following
procedures established when they opened their account or accounts. If you have
questions, call (800) 446-1012 (from overseas, call (617) 557-8280) or for the
Value Equity or Optimum Growth Funds, call (800) 909-1989 (from overseas, call
(617) 557-1755).

You may sell your shares by sending a written request for redemption to:

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

Page 34 of 41
<PAGE>

Please be sure to indicate the number of shares to be sold, identify your
account number and sign the request.

If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares.

If you own your shares directly and previously indicated on your account
application or arranged in writing to do so, you may sell your shares on any
Business Day by contacting a Fund directly by telephone at (800) 446-1012
(from overseas, call (617) 557-8280) or for the Value Equity or Optimum
Growth Funds, call (800) 909-1989 (from overseas, call (617) 557-1755). The
minimum amount for telephone redemptions is $500. We may reject a telephone
redemption request if we deem it advisable to do so.

The sale price of each share will be the next NAV determined after the Fund
receives your request in good order.

SYSTEMATIC WITHDRAWAL PLAN

If you have at least $10,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals from any Fund. The proceeds of each withdrawal
will be mailed to you by check or, if you have a checking or savings account
with a bank, electronically transferred to your account.

RECEIVING YOUR MONEY

Normally, we will send your sale proceeds within five Business Days after we
receive your request in good order. Your proceeds can be wired to your bank
account (if more than $500) or sent to you by check. IF YOU RECENTLY PURCHASED
YOUR SHARES BY CHECK, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK
HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS).

REDEMPTIONS IN KIND

INVOLUNTARY SALES OF YOUR SHARES

Page 35 of 41
<PAGE>

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

HOW TO EXCHANGE YOUR SHARES

You may exchange your shares on any Business Day for shares of any portfolio of
Excelsior Funds, Inc. or Excelsior Tax-Exempt Funds, Inc., or for Shares of any
portfolio of Excelsior Institutional Trust. In order to protect other
shareholders, we may limit your exchanges to no more than six per year, and we
may reject any exchange request. Shares can be exchanged directly by mail, or by
telephone if you previously selected the telephone exchange option on the
account application.

You may also exchange shares through your financial institution. Exchange
requests must be for an amount of at least $500.

IF YOU RECENTLY PURCHASED SHARES BY CHECK YOU MAY NOT BE ABLE TO EXCHANGE YOUR
SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS).
This exchange privilege may be changed or canceled at any time upon 60 days'
notice.

TELEPHONE TRANSACTIONS

AUTHORIZED INTERMEDIARIES

Certain intermediaries, such as brokers or other shareholder organizations, are
authorized to accept purchase, redemption and exchange requests for Fund shares.
These intermediaries may authorize other organizations to accept purchase,
redemption and exchange requests for Fund shares. These requests are normally
executed at the NAV next determined after the intermediary

Page 36 of 41
<PAGE>

receives the request in good order. Authorized intermediaries are responsible
for transmitting requests and delivering funds on a timely basis.

SHAREHOLDER SERVICING

The Funds are permitted to pay a shareholder servicing fee to certain
shareholder organizations for providing services to their customers who hold
shares of the Funds. These services may include assisting in the processing of
purchase, redemption and exchange requests and providing periodic account
statements. The shareholder servicing fee may be up to 0.40% of the average
daily net asset value of Fund shares held by clients of a shareholder
organization.

DISTRIBUTION OF FUND SHARES

The Value Equity and Optimum Growth Funds have adopted a distribution plan
that allows Shares of the Funds to pay distribution out of its own assets and
not out of the assets of the Funds. Because these fees are paid out of a
Fund's assets continuously, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales
charges.

Distribution fees, as a percentage of average daily net assets, are as follows:

<TABLE>
<S> <C>
Value Equity Fund 0.35%
Optimum Growth Fund 0.35%
</TABLE>

The Funds' distributor may institute promotional incentive programs for
dealers, which will be paid for by the distributor out of its own assets and
not out of the assets of the Funds. Under any such program, the distributor
may provide incentives, in the form of cash or other compensation, including
merchandise, airline vouchers, trips and vacation packages, to dealers
selling shares of a Fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each Fund distributes its income quarterly.

Each Fund makes distributions of capital gains, if any, at least annually. If
you own Fund shares on a Fund's record date, you will be entitled to receive the
distribution.

TAXES

Page 37 of 41
<PAGE>

Each Fund may be able to pass along a tax credit for foreign income taxes they
pay. The Fund will notify you if it gives you the credit.

MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.

Page 38 of 41
<PAGE>

FINANCIAL HIGHLIGHTS

The tables that follow present performance information about shares of each
Fund. This information is intended to help you understand each Fund's
financial performance for the past five years, or, if shorter, the period of
the Fund's operations. Some of this information reflects financial
information for a single Fund share. The total returns in the table represent
the rate that you would have earned (or lost) on an investment in a Fund,
assuming you reinvested all of your dividends and distributions. This
information has been audited by ___________________, independent public
accountants. Their report, along with each Fund's financial statements,
appears in the annual report that accompanies our Statement of Additional
Information. You can obtain the annual report, which contains more
performance information, at no charge by calling (800) 446-1012 (from
overseas, call (617) 557-8280).

Page 39 of 41
<PAGE>

EXCELSIOR FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST

INVESTMENT ADVISER

United States Trust Company of New York
114 W. 47th Street
New York, New York 10036

U.S. Trust Company
225 High Ridge Road
East Building
Stamford, Connecticut 06905

DISTRIBUTOR

Edgewood Services, Inc.
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-5829

More information about each Fund is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAIs dated August 1, 1999 include detailed information about Excelsior
Funds, Inc. and Excelsior Institutional Trust. The SAIs are on file with the
SEC and are incorporated by reference into this prospectus. This means that
the SAIs, for legal purposes, are a part of this prospectus.

ANNUAL AND SEMI-ANNUAL REPORTS

TO OBTAIN MORE INFORMATION:

BY TELEPHONE: Excelsior Funds, Inc. call (800) 466-1012 (FROM OVERSEAS, CALL
(617) 557-8280) Excelsior Institutional Trust call (800) 909-1989 (FROM
OVERSEAS, CALL (617) 577-1755)

BY MAIL:
Excelsior Funds, Inc. or Excelsior Institutional Trust
73 Tremont Street
Boston, Massachusetts 02108-3913

Page 40 of 41
<PAGE>

BY E-MAIL: [VAR:FUND.EMAILADDRESS]]

BY INTERNET: [VAR:FUND.INTERNETADDRESS]]

FROM THE SEC: You can also obtain the SAIs or the Annual and Semi-Annual
reports, as well as other information about Excelsior Funds, Inc. and Excelsior
Institutional Trust, from the SEC's website ("HTTP://WWW.SEC.GOV"). You may
review and copy documents at the SEC Public Reference Room in Washington, DC
(for information call 1-800-SEC-0330). You may request documents by mail from
the SEC, upon payment of a duplicating fee, by writing to: Securities and
Exchange Commission, Public Reference Section, Washington, DC 20549-6009.
Excelsior Funds, Inc.'s and Excelsior Institutional Trust's Investment Company
Act registration numbers are 811-4088 and 811-8490, respectively.

Page 41 of 41
<PAGE>

EXCELSIOR INSTITUTIONAL TRUST

Equity Fund
Value Equity Fund
Optimum Growth Fund
International Equity Fund
Income Fund
Total Return Bond Fund

STATEMENT OF ADDITIONAL INFORMATION

August 1, 1999

This Statement of Additional Information pertains to the Shares and
Institutional Shares of the Value Equity and Optimum Growth Funds, and the
Institutional Shares of the Equity, Income, Total Return Bond and International
Equity Funds (each, a "Fund" and collectively, the "Funds") of Excelsior
Institutional Trust. This Statement of Additional Information is not a
prospectus but should be read in conjunction with the current prospectuses for
the Funds dated August 1, 1999 (the "Prospectuses"). Copies of the Prospectuses
may be obtained by writing Excelsior Institutional Trust c/o Chase Global Funds
Services Company, 73 Tremont Street, Boston, MA 02108-3913 or by calling (800)
446-1012 (Shares) or (800) 909-1989 (Institutional Shares). Capitalized terms
not otherwise defined have the same meaning as in the Prospectuses.

The audited financial statements and related reports of _______________,
independent auditors, contained in the annual reports to the Funds' shareholders
for the fiscal year ended ______________ are incorporated herein by reference in
the section entitled "Financial Statements." No other parts of the annual
reports are incorporated herein by reference. Copies of the annual reports may
be obtained upon request and without charge by calling (800) 446-1012 (Shares)
or (800) 909-1989 (Institutional Shares).

<PAGE>

TABLE OF CONTENTS

PAGE

CLASSIFICATION AND HISTORY . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. . . . . . . . . . . . . . . . . 1
Investment Philosophy and Strategies. . . . . . . . . . . . . . . . . . 1
Additional Investment Policies. . . . . . . . . . . . . . . . . . . . . 3
Additional Information on Portfolio Instruments . . . . . . . . . . . . 5
Investment Limitations. . . . . . . . . . . . . . . . . . . . . . . . .27
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .30
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . .34
PORTFOLIO VALUATION AND DETERMINATION OF NET ASSET VALUE . . . . . . . . . .39
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . .40
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . .41
Redemption Procedures . . . . . . . . . . . . . . . . . . . . . . . . .43
Other Redemption Information. . . . . . . . . . . . . . . . . . . . . .45
INVESTOR PROGRAMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Systematic Withdrawal Plan. . . . . . . . . . . . . . . . . . . . . . .46
Exchange Privilege. . . . . . . . . . . . . . . . . . . . . . . . . . .46
Retirement Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Automatic Investment Program. . . . . . . . . . . . . . . . . . . . . .47
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . .48
RULE 12B-1 DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . . . .48
MANAGEMENT OF THE FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . .49
Investment Advisory Services. . . . . . . . . . . . . . . . . . . . . .55
Administrators. . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Banking Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
Shareholder Organizations . . . . . . . . . . . . . . . . . . . . . . .60
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Transfer Agent and Custodian. . . . . . . . . . . . . . . . . . . . . .61
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
TAXATION OF THE FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Taxation of Distributions . . . . . . . . . . . . . . . . . . . . . . .65
Other Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
DESCRIPTION OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . .66
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

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CLASSIFICATION AND HISTORY

Excelsior Institutional Trust (the "Trust") is an open-end, management
investment company. Each Fund is a separate series of the Trust and is
classified as diversified under the Investment Company Act of 1940, as amended
(the "1940 Act"). The Trust was organized as a business trust under the laws of
the State of Delaware on April 27, 1994. Prior to March 15, 1999, the Equity
Fund, Value Equity Fund, Optimum Growth Fund, Income Fund, Total Return Bond
Fund and International Equity Fund were known as the Institutional Equity Fund,
Institutional Value Equity Fund, Institutional Optimum Growth Fund,
Institutional Income Fund, Institutional Total Return Bond Fund and
Institutional International Equity Fund, respectively.

INVESTMENT OBJECTIVES, STRATEGIES AND RISKS

The following information supplements the description of the
investment objectives, strategies and risks of the Funds as set forth in the
Prospectuses. The investment objective of each Fund may be changed without
shareholder approval. Except as expressly noted below, each Fund's investment
policies also may be changed without shareholder approval.

INVESTMENT PHILOSOPHY AND STRATEGIES

In managing investments for the Funds, the Adviser follows a long-term
investment philosophy which generally does not change with the short-term
variability of financial markets or fundamental conditions. Its approach begins
with the conviction that all worthwhile investments are grounded in value. The
Adviser believes that an investor can identify fundamental values that
eventually should be reflected in market prices, such that over time, a
disciplined search for fundamental value will achieve better results than
attempting to take advantage of short-term price movements.

The Adviser'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. The Adviser 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.

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

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

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

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

Income derived from investing in undervalued companies is expected to
be moderately greater than that derived from investments in either the
Problem/Opportunity or Early Life Cycle companies.

3. EARLY LIFE CYCLE COMPANIES. Investments in Early Life Cycle companies
tend to be narrowly focused on an objective of higher rates of capital
appreciation. They correspondingly will involve a significantly greater degree
of risk and the reduction of current income to a negligible level. Such
investments will not be limited to new, small companies engaged only in frontier
technology, but will seek opportunities for maximum appreciation through the
full spectrum of business operations, products, services, and asset values.
Consequently, the Funds' 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.

To complete the Adviser's investment philosophy in managing the Funds,
the three portfolio strategies discussed above are applied in concert with other
longer-term investment "themes" to identify investment opportunities. The
Adviser believes these longer-term themes represent strong and inexorable
trends. The Adviser 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.

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<PAGE>

ADDITIONAL INVESTMENT POLICIES

EQUITY, VALUE EQUITY AND OPTIMUM GROWTH FUNDS

Under normal market and economic conditions, the Equity, Value Equity
and Optimum Growth Funds will invest at least 65% of their respective total
assets in common stock, preferred stock and securities convertible into common
stock. Normally, not more than 35% of each Fund's total assets may be invested
in other securities and instruments including, e.g., investment-grade debt
securities, warrants, options, and futures instruments as described in more
detail below. The Funds 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
the Adviser for temporary defensive purposes.

Portfolio holdings will include equity securities of companies having
capitalizations of varying amounts, and the Funds may invest in the securities
of high growth, small companies when the Adviser expects earnings and the price
of the securities to grow at an above-average rate. The equity securities of
small companies have historically been characterized by greater volatility of
returns, greater total returns and lower dividend yields than equity securities
of large companies. As a result, there may be a greater fluctuation in the
value of a Fund's shares, and a Fund may be required, in order to satisfy
redemption requests or for other reasons, to sell these securities at a discount
from market prices, to sell during periods when such disposition is not
desirable, or to make many small sales over a period of time.

The Equity, Value Equity and Optimum Growth Funds may invest directly
or indirectly in the securities of foreign issuers. The Funds currently do not
expect to invest more than 30% of their respective total assets at the time of
purchase in such securities.

INCOME AND TOTAL RETURN BOND FUNDS

The Income and Total Return Bond Funds may invest in the following
types of securities: corporate debt obligations such as bonds, debentures,
obligations convertible into common stocks and money market instruments;
preferred stocks; and obligations issued or guaranteed by the U.S. government
and its agencies or instrumentalities. The Funds are also permitted to enter
into repurchase agreements, and may from time to time invest in debt obligations
issued by or on behalf of states, territories and possessions of the United
States, the District of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions, the interest of which is, in the
opinion of bond counsel to the issuer, exempt from federal income tax
("Municipal Obligations"). The Adviser will consider investments in Municipal
Obligations for the Funds when the Adviser believes that the total return on
such securities is attractive relative to that of taxable securities.

Under normal market conditions, at least 65% of the Income and Total
Return Bond Funds' respective total assets will be invested in investment-grade
bonds that are rated within the three highest ratings of Moody's Investors
Service, Inc. ("Moody's") or Standard &

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<PAGE>

Poor's Ratings Services ("S&P") (or are unrated obligations considered to be of
comparable credit quality by the Adviser). "Investment-grade bonds" are bonds
and other debt instruments that are rated within the four highest ratings of
Moody's or S&P (or are unrated obligations considered to be of investment grade
by the Adviser) and U.S. government obligations and money market instruments of
the types described below. When, in the opinion of the Adviser, a defensive
investment posture is warranted, each of these Funds may invest temporarily and
without limitation in high quality, short-term money market instruments.

The Income Fund may invest up to 35% of its total assets, and the
Total Return Bond Fund may invest up to 5% of its total assets, in bonds rated
below investment grade. Investments in obligations rated below the four highest
ratings of S&P and Moody's ("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 a Fund's 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 such securities, (e) the impact that legislation may have
on the high yield bond market (and, in turn, on a Fund's net asset value and
investment practices), (f) the operation of mandatory sinking fund or
call/redemption provisions during periods of declining interest rates whereby a
Fund may be required to reinvest premature redemption proceeds in lower yielding
portfolio securities, and (g) the creditworthiness of the issuers of such
securities. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress which
would adversely affect their ability to service their principal and interest
payment obligations, to meet projected business goals and to obtain additional
financing. An economic downturn could also disrupt the market for lower-rated
bonds generally and adversely affect the value of outstanding bonds and the
ability of the issuers to repay principal and interest. If the issuer of a
lower-rated debt obligation held by a Fund defaulted, the Fund could incur
additional expenses to seek recovery. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of lower-rated securities, especially in a thinly traded
market. Finally, a Fund's trading in fixed-income securities to achieve capital
appreciation entails risks that capital losses rather than gains will result.
See Appendix A for a more detailed explanation of these ratings.

The Income and Total Return Bond Funds may invest up to 25% of their
respective total assets in (a) preferred stocks and (b) 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.
The Funds will not invest in common stocks, and any common stocks received
through conversion of convertible debt obligations will be sold in an orderly
manner as soon as possible.

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<PAGE>

INTERNATIONAL EQUITY FUND

Under normal market and economic conditions, the International Equity
Fund will invest at least 75% of its assets in foreign equity securities.
Foreign equity securities may include common stock, preferred stock, securities
convertible into common or preferred stock and warrants issued by companies
domiciled outside of the United States and shares of U.S. registered investment
companies that invest primarily in foreign securities. While there are no
prescribed limits on geographic distributions, the Fund normally will hold
securities of issuers collectively having their principal place of business in
no fewer than three foreign countries. For cash management purposes, the Fund
may invest up to 25% of its assets on a continuous basis in cash or short-term
instruments such as commercial paper, bank obligations, U.S. government and
agency securities maturing within one year, notes and other investment-grade
debt securities of various maturities, and repurchase agreements collateralized
by these securities. Under unusual economic and market conditions, the Fund may
restrict the securities markets in which its assets are invested and may invest
without limitation in any combination of high quality domestic or foreign money
market instruments.

Convertible debt securities purchased by the Fund will be rated
investment grade by Moody's or S&P if such a rating is available. To be deemed
investment grade, debt securities must carry a rating of at least "Baa" from
Moody's or "BBB" from S&P. If unrated, as is the case with most foreign
securities, convertible debt securities purchased by the Fund will be deemed to
be comparable in quality to securities rated investment grade by the Adviser
under the supervision of the Board of Trustees of the Trust. With respect to
securities rated "Baa" by Moody's or "BBB" by S&P (the lowest of the top four
investment rankings), or deemed to be comparable in quality to such securities,
interest and principal payments are regarded as adequate for the present;
however, these securities may have speculative characteristics, and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make interest and principal payments than is the case with higher
grade bonds. The Fund will sell in an orderly fashion as soon as possible any
debt securities it holds if they are downgraded below "Baa" by Moody's or "BBB"
by S&P. The Fund may purchase securities both on recognized stock exchanges and
in over-the-counter markets. Most of the Fund's portfolio transactions will be
effected in the primary trading market for the given security.

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS

GOLD BULLION

The International Equity Fund may invest up to 5% of its total assets
in gold bullion by purchasing gold bars primarily of standard weight
(approximately 400 troy ounces) at the best available prices in the New York
bullion market. However, the Adviser will have discretion to purchase or sell
gold bullion in other markets, including foreign markets, if better prices can
be obtained. Gold bullion is valued by the Fund at the mean between the closing
bid and asked prices in the New York bullion market as of the close of the New
York Stock Exchange each business day. When there is no readily available
market quotation for gold bullion, the bullion will be valued by such method as
determined by the Trust's Board of Trustees to best reflect its fair value. For
purpose of determining net asset value, gold held by the Fund will be valued in
U.S. dollars.

5
<PAGE>

Investments in gold will not produce dividends or interest income, and the Fund
can look only to price appreciation for a return on such investments.

U.S. GOVERNMENT AND AGENCY SECURITIES

Securities issued or guaranteed by the U.S. government or its agencies
or instrumentalities include U.S. Treasury securities, which differ only in
their interest rates, maturities and times of issuance. Treasury Bills have
initial maturities of one year or less; Treasury Notes have initial maturities
of one to ten years; and Treasury Bonds generally have initial maturities of
greater than ten years. Some obligations issued or guaranteed by
U.S. government agencies and instrumentalities, such as 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, are supported by the right of the issuer to borrow from the Treasury;
others, such as those issued by the Federal National Mortgage Association, are
supported by the discretionary authority of the U.S. government to purchase
certain obligations of the agency or instrumentality; and others 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.

SECURITIES LENDING

To increase return on its portfolio securities, each Fund may lend its
portfolio securities to broker/dealers pursuant to agreements requiring the
loans to be continuously secured by collateral equal at all times in value to at
least the market value of the securities loaned. Collateral for such loans may
include cash, securities of the U.S. government, its agencies or
instrumentalities, or an irrevocable letter of credit issued by a bank, or any
combination thereof. Such loans will not be made if, as a result, the aggregate
of all outstanding loans of a Fund exceeds 30% of the value of its total assets.
When a Fund lends its securities, it continues to receive interest or dividends
on the securities lent and may simultaneously earn interest on the investment of
the cash loan collateral, which will be invested in readily marketable,
high-quality, short-term obligations. Although voting rights, or rights to
consent, attendant to lent securities pass to the borrower, such loans may be
called at any time and will be called so that the securities may be voted by a
Fund if a material event affecting the investment is to occur.

There may be risks of delay in receiving additional collateral or in
recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Adviser to be of good standing and when, in the
Adviser's judgment, the income to be earned from the loan justifies the
attendant risks.

VARIABLE RATE AND FLOATING RATE SECURITIES

Each Fund may purchase floating and variable rate demand notes and
bonds, which are obligations ordinarily having stated maturities in excess of
397 days, but which permit the holder to demand payment of principal at any
time, or at specified intervals not exceeding 397 days,

6
<PAGE>

in each case upon not more than 30 days' notice. Variable rate demand notes
include master demand notes which are obligations that permit a Fund to invest
fluctuating amounts, which may change daily without penalty, pursuant to direct
arrangements between the Fund, as lender, and the borrower. The interest rates
on these notes fluctuate from time to time. The issuer of such obligations
normally has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the obligations plus accrued
interest upon a specified number of days' notice to the holders of such
obligations.

The interest rate on a floating rate demand obligation is based on a
known lending rate, such as a bank's prime rate, and is adjusted automatically
each time such rate is adjusted. The interest rate on a variable rate demand
obligation is adjusted automatically at specified intervals. Frequently, such
obligations are collateralized by letters of credit or other credit support
arrangements provided by banks. Because these obligations are direct lending
arrangements between the lender and borrower, it is not contemplated that such
instruments generally will be traded, and there generally is no established
secondary market for these obligations, although they are redeemable at face
value. Accordingly, where these obligations are not secured by letters of
credit or other credit support arrangements, a Fund's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand. Such obligations frequently are not rated by credit rating agencies and
a Fund may invest in obligations which are not so rated only if the Adviser
determines that at the time of investment the obligations are of comparable
quality to the other obligations in which the Fund may invest. The Adviser will
consider on an ongoing basis the creditworthiness of the issuers of the floating
and variable rate demand obligations held by the Funds. Each Fund will not
invest more than 15% of the value of its net assets in floating or variable rate
demand obligations as to which it cannot exercise the demand feature on not more
than seven days' notice if there is no secondary market available for these
obligations, and in other securities that are deemed illiquid. See "Investment
Restrictions" below.

PARTICIPATION INTERESTS

Each Fund may purchase from financial institutions participation
interests in securities in which such Fund may invest. A participation interest
gives a Fund an undivided interest in the security in the proportion that the
Fund's participation interest bears to the total principal amount of the
security. These instruments may have fixed, floating or variable rates of
interest, with remaining maturities of 13 months or less. If the participation
interest is unrated, or has been given a rating below that which is permissible
for purchase by the Fund, the participation interest will be backed by an
irrevocable letter of credit or guarantee of a bank, or the payment obligation
otherwise will be collateralized by U.S. government securities, or, in the case
of unrated participation interests, the Adviser must have determined that the
instrument is of comparable quality to those instruments in which the Fund may
invest. For certain participation interests, a Fund will have the right to
demand payment, on not more than seven days' notice, for all or any part of the
Fund's participation interest in the security, plus accrued interest. As to
these instruments, the Fund intends to exercise its right to demand payment only
upon a default under the terms of the security, as needed to provide liquidity
to meet redemptions, or to maintain or improve the quality of its investment
portfolio. Each Fund will not invest more than 15% of its net assets in
participation interests that do not have this demand feature, and in other
securities that are deemed

7
<PAGE>

illiquid. Currently, no Fund intends to invest more than 5% of its net assets
in participation interests during the current year. See "Investment
Restrictions" below.

ILLIQUID SECURITIES

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

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.

Each Fund may not invest in additional illiquid securities if, as a
result, more than 15% of the market value of its net assets would be invested in
illiquid securities. Each Fund may also purchase Rule 144A securities sold to
institutional investors without registration under the 1933 Act. Rule 144A
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.

Rule 144A securities may be determined to be liquid in accordance with
guidelines established by the Adviser and approved by the Trustees of the Trust.
The Trustees

8
<PAGE>

will monitor the implementation of these guidelines on a periodic basis.
Because Rule 144A is relatively new, it is not possible to predict how markets
in Rule 144A securities will develop. If trading in Rule 144A securities were
to decline, these securities could become illiquid after being purchased,
increasing the level of illiquidity of a Fund. As a result, a Fund holding
these securities might not be able to sell these securities when the Adviser
wishes to do so, or might have to sell them at less than fair value.

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

UNSECURED PROMISSORY NOTES

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

REPURCHASE AGREEMENTS

Each Fund may agree to purchase portfolio securities subject to the
seller's agreement to repurchase them at a mutually agreed upon date and
price ("repurchase agreements"). The Funds will enter into repurchase
agreements only with financial institutions that are deemed to be
creditworthy by the Adviser, pursuant to guidelines established by the
Trust's Board of Trustees. The Funds will not enter into repurchase
agreements with the Adviser or any of its affiliates. Repurchase agreements
with remaining maturities in excess of seven days will be considered illiquid
securities and will be subject to the limitations described above under
"Illiquid Securities." The repurchase price under a repurchase agreement
generally equals the price paid by a Fund plus interest negotiated on the
basis of current short-term rates (which may be more or less than the rate on
the securities underlying the repurchase agreement).

Securities subject to repurchase agreements are held by the Funds'
custodian (or sub-custodian) or in the Federal Reserve/Treasury book-entry
system. The seller under a repurchase agreement will be required to maintain
the value of the securities which are subject to the agreement and held by a
Fund at not less than the repurchase price. Default or bankruptcy of the
seller would, however, expose a Fund to possible delay in connection with the
disposition of the underlying securities or loss to the extent that proceeds
from a sale of the underlying

9
<PAGE>

securities were less than the repurchase price under the agreement. Repurchase
agreements are considered loans by a Fund under the 1940 Act.

BORROWING AND REVERSE REPURCHASE AGREEMENTS

Each Fund 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 Fund 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 Securities and Exchange Commission (the
"SEC") views reverse repurchase agreements as a form of borrowing. At the time
a Fund enters into a reverse repurchase agreement, it will place in a segregated
custodial account liquid assets 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 a Fund may decline below the
repurchase price of those securities.

MUNICIPAL OBLIGATIONS

The Income and Total Return Bond Funds may, when deemed appropriate by
the Adviser in light of the Funds' investment objectives, invest in Municipal
Obligations. Although yields on Municipal Obligations can generally be expected
under normal market conditions to be lower than yields on corporate and
U.S. government obligations, from time to time municipal securities have
outperformed, on a total return basis, comparable corporate and federal debt
obligations as a result of prevailing economic, regulatory or other
circumstances. Dividends paid by the Income and Total Return Bond Funds that
are derived from interest on municipal securities would be taxable to the Funds'
shareholders 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 which may
be held by the Income and Total Return Bond Funds are "general obligation"
securities and "revenue" securities. General obligation securities are secured
by the issuer's pledge of its full faith, credit, and taxing power for the
payment of principal and interest. Revenue securities are payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise tax or other specific revenue
source such as user fees of the facility being financed.

The Income and Total Return Bond Funds' portfolios may also include
"moral obligation" securities, which are usually issued by public authorities.
If the issuer of moral

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<PAGE>

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. There is no limitation on the amount of moral obligation
securities that may be held by the Funds.

There are, of course, variations in the quality of Municipal
Obligations, both within a particular classification and between
classifications, and the yields on Municipal Obligations depend upon a variety
of factors, including general market conditions, the financial condition of the
issuer, conditions of the municipal bond market, the size of a particular
offering, the maturity of the obligation, and the rating of the issue. The
ratings of nationally recognized statistical rating organizations ("NRSROs")
such as Moody's and S&P described in Appendix A hereto represent their opinion
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. Subsequent to its purchase by a
Fund, an issue of Municipal Obligations may cease to be rated, or its rating may
be reduced below the minimum rating required for purchase by that Fund. The
Adviser will consider such an event in determining whether a Fund should
continue to hold the obligation.

The payment of principal and interest on most Municipal Obligations
purchased by the Funds will depend upon the ability of the issuers to meet their
obligations. Each state, the District of Columbia, each of their political
subdivisions, agencies, instrumentalities and authorities, and each multistate
agency of which a state is a member, is a separate "issuer" as that term is used
in this Statement of Additional Information. The non-governmental user of
facilities financed by private activity bonds is also considered to be an
"issuer." An issuer's obligations under its Municipal 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 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. Private activity
bonds held by the Funds are in most cases revenue securities and are not payable
from the unrestricted revenues of the issuer. The principal and interest on
these obligations may be payable from the general revenues of the users of such
facilities. Consequently, the credit quality of these obligations is usually
directly related to the credit standing of the corporate user of the facility
involved.

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<PAGE>

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

Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Funds
nor the Adviser will review the proceedings relating to the issuance of
Municipal Obligations or the bases for such opinions.

STAND-BY COMMITMENTS

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

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

The Income and Total Return Bond Funds intend to enter into stand-by
commitments only with banks and broker/dealers which, in the Adviser's opinion,
present minimal credit risks. In evaluating the creditworthiness of the issuer
of a stand-by commitment, the Adviser will review periodically the issuer's
assets, liabilities, contingent claims and other relevant financial information.
The Funds will acquire stand-by commitments solely to facilitate portfolio
liquidity and do not intend to exercise their rights thereunder for trading
purposes. Stand-by commitments acquired by a Fund will be valued at zero in
determining the Fund's net asset value.

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<PAGE>

FOREIGN SECURITIES

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

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

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

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

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.

Each of the Equity, Value Equity, Optimum Growth and International
Equity Funds may invest indirectly in the securities of foreign issuers through
sponsored and unsponsored American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs"), Global Depository Receipts ("GDRs") and other
similar instruments. ADRs typically are issued by an American bank or trust
company and evidence ownership of underlying securities issued by a foreign
corporation. EDRs, which are sometimes referred to as Continental Depository
Receipts,

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<PAGE>

are receipts issued in Europe, typically by foreign banks and trust companies,
that evidence ownership of either foreign or domestic underlying securities.
GDRs are depository receipts structured like global debt issues to facilitate
trading on an international basis. Unsponsored ADR, EDR and GDR programs are
organized independently and without the cooperation of the issuer of the
underlying securities. As a result, available information concerning the issuer
may not be as current as for sponsored ADRs, EDRs and GDRs, and the prices of
unsponsored ADRs, EDRs and GDRs may be more volatile than if such instruments
were sponsored by the issuer.

The International Equity Fund may also invest indirectly in foreign
securities through share entitlement certificates. Share entitlement
certificates are transferable securities similar to depository receipts which
are structured like global debt issues to facilitate trading on an international
basis. The holder of a share entitlement certificate holds a fully
collateralized obligation of the issuer the value of which is linked directly to
that of the underlying foreign security.

The introduction of a single currency, the euro, on January 1, 1999
for participating nations in the European Economic and Monetary Union presents
unique uncertainties, including the legal treatment of certain outstanding
financial contracts after January 1, 1999 that refer to existing currencies
rather than the euro; the establishment and maintenance of exchange rates for
currencies being converted into the euro; the fluctuation of the euro relative
to non-euro currencies during the transition period from January 1, 1999 to
December 31, 2001 and beyond; whether the interest rate, tax and labor regimes
of European countries participating in the euro will converge over time; and
whether the conversion of the currencies of other countries in the European
Union ("EU"), such as the United Kingdom and Denmark, into the euro and the
admission of other non-EU countries such as Poland, Latvia and Lithuania as
members of the EU may have an impact on the euro. These or other factors,
including political and economic risks, could cause market disruptions and could
adversely affect the value of securities held by a Fund.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

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

A forward foreign currency exchange contract is an obligation by a
Fund to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are transferable in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward foreign
currency

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<PAGE>

exchange contract generally has no deposit requirement and is traded at a net
price without commission. A Fund maintains with its custodian a segregated
account of liquid assets in an amount at least equal to its obligations under
each forward foreign currency exchange contract. Neither spot transactions nor
forward foreign currency exchange contracts eliminate fluctuations in the prices
of the Fund's securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline.

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

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

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

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<PAGE>

value of the prices of or rates of return on a Fund's foreign currency
denominated portfolio securities and the use of such techniques will subject the
Fund to certain risks.

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

GUARANTEED INVESTMENT CONTRACTS

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

WHEN-ISSUED AND FORWARD TRANSACTIONS

Each Fund may purchase eligible securities on a "when-issued"
basis and may purchase or sell securities on a "forward commitment" basis.
These transactions involve a commitment by a Fund to purchase or sell particular
securities with payment and delivery taking place in the future, beyond the
normal settlement date, at a stated price and yield. Securities purchased on a
"forward 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 a Fund agrees to purchase securities on a "when-issued" or "forward
commitment" basis, the custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the custodian will set aside portfolio securities to satisfy a
purchase commitment and, in such case, the Fund may be required subsequently to
place additional assets in the separate account in order to ensure that the
value of the account remains equal to the amount of the Fund's commitment. It
may be expected that a Fund's net assets will fluctuate to a greater degree when
it sets aside portfolio securities to cover such purchase

16
<PAGE>

commitments than when it sets aside cash. Because a Fund will set aside cash or
liquid assets to satisfy its purchase commitments in the manner described, its
liquidity and ability to manage its portfolio might be affected in the event its
forward commitments or commitments to purchase "when-issued" securities ever
exceed 25% of the value of its assets.

It is expected that "forward commitments" and "when-issued" purchases
will not exceed 25% of the value of a Fund's total assets absent unusual market
conditions, and that the length of such commitments will not exceed 45 days.
The Funds do not intend to engage in "when-issued" purchases and "forward
commitments" for speculative purposes, but only in furtherance of their
investment objectives.

A Fund will purchase securities on a "when-issued" or "forward
commitment" basis only with the intention of completing the transaction. If
deemed advisable as a matter of investment strategy, however, a Fund may dispose
of or renegotiate a commitment after it is entered into, and may sell securities
it has committed to purchase before those securities are delivered to the Fund
on the settlement date. In these cases, the Fund may realize a taxable capital
gain or loss.

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

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

ZERO COUPON OBLIGATIONS

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

ASSET-BACKED SECURITIES

If permitted pursuant to its investment objectives and policies, a
Fund may invest in asset-backed securities including, but not limited to,
interests in pools of receivables, such as motor vehicle installment purchase
obligations and credit card receivables, equipment leases, manufactured housing
(mobile home) leases, or home equity loans. These securities may be in the form
of pass-through instruments or asset-backed bonds. The securities are issued by
non-governmental entities and carry no direct or indirect government guarantee.

17
<PAGE>

The credit characteristics of asset-backed securities differ in a
number of respects from those of traditional debt securities. The credit
quality of most asset-backed securities depends primarily upon the credit
quality of the assets underlying such securities, how well the entity issuing
the securities is insulated from the credit risk of the originator or any other
affiliated entities, and the amount and quality of any credit enhancement to
such securities.

Credit card receivables are generally unsecured and debtors are
entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due. Most issuers of
asset-backed securities backed by motor vehicle installment purchase obligations
permit the servicer of such receivable to retain possession of the underlying
obligations. If the servicer sells these obligations to another party, there is
a risk that the purchaser would acquire an interest superior to that of the
holders of the related asset-backed securities. Further, if a vehicle is
registered in one state and is then re-registered because the owner and obligor
moves to another state, such re-registration could defeat the original security
interest in the vehicle in certain cases. In addition, because of the large
number of vehicles involved in a typical issuance and technical requirements
under state laws, the trustee for the holders of asset-backed securities backed
by automobile receivables may not have a proper security interest in all of the
obligations backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.

MORTGAGE PASS-THROUGHS AND COLLATERALIZED MORTGAGE OBLIGATIONS

The Income and Total Return Bond Funds may purchase mortgage and
mortgage-related securities such as pass-throughs and collateralized mortgage
obligations that meet each Fund's selection criteria and are investment grade or
of comparable quality (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 the Government National Mortgage Association
("GNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") and the Federal
National Mortgage Association ("FNMA"). 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.

Mortgage Securities 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 Funds 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 Funds derive from
mortgage-backed securities is reduced. In addition, like other fixed income
securities, Mortgage Securities generally decline in price when interest rates
rise.

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<PAGE>

FUTURES CONTRACTS AND RELATED OPTIONS

Each Fund may invest in futures contracts and options thereon. They
may enter into interest rate futures contracts and other types of financial
futures contracts, including foreign currency futures contracts, as well as any
index or foreign market futures which are available on recognized exchanges or
in other established financial markets. A futures contract on foreign currency
creates a binding obligation on one party to deliver, and a corresponding
obligation on another party to accept delivery of, a stated quantity of a
foreign currency for an amount fixed in U.S. dollars. Foreign currency futures,
which operate in a manner similar to interest rate futures contracts, may be
used by the Funds to hedge against exposure to fluctuations in exchange rates
between the U.S. dollar and other currencies arising from multinational
transactions.

Futures contracts will not be entered into for speculative purposes,
but to hedge risks associated with a Fund's securities investments. The Funds
will engage in futures transactions only to the extent permitted by the
Commodity Futures Trading Commission ("CFTC") and the SEC. When investing in
futures contracts, the Funds must satisfy certain asset segregation requirements
to ensure that the use of futures is unleveraged. When a Fund takes a long
position in a futures contract, it must maintain a segregated account containing
liquid assets equal to the purchase price of the contract, less any margin or
deposit. When a Fund takes a short position in a futures contract, the Fund
must maintain a segregated account containing liquid assets in an amount equal
to the market value of the securities underlying such contract (less any margin
or deposit), which amount must be at least equal to the market price at which
the short position was established. Asset segregation requirements are not
applicable when a Fund "covers" an options or futures position generally by
entering into an offsetting position. Each Fund will limit its hedging
transactions in futures contracts and related options so that, immediately after
any such transaction, the aggregate initial margin that is required to be posted
by the Fund under the rules of the exchange on which the futures contract (or
futures option) is traded, plus any premiums paid by the Fund on its open
futures options positions, does not exceed 5% of the Fund's total assets, after
taking into account any unrealized profits and unrealized losses on the Fund's
open contracts (and excluding the amount that a futures option is "in-the-money"
at the time of purchase). An option to buy a futures contract is "in-the-money"
if the then-current purchase price of the underlying futures contract exceeds
the exercise or strike price; an option to sell a futures contract is
"in-the-money" if the exercise or strike price exceeds the then-current purchase
price of the contract that is the subject of the option. In addition, the use
of futures contracts is further restricted to the extent that no more than 10%
of a Fund's total assets may be hedged.

Positions in futures contracts may be closed out only on an exchange
which provides a secondary market for such futures. However, there can be no
assurance that a liquid secondary market will exist for any particular futures
contract at any specific time. Thus, it may not be possible to close a futures
position. In the event of adverse price movements, a Fund would continue to be
required to make daily cash payments to maintain its required margin. In such
situations, if the Fund has insufficient cash, it may have to sell portfolio
securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, the Fund may be required to make
delivery of the instruments underlying futures contracts it holds.

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<PAGE>

The inability to close options and futures positions also could have an adverse
impact on the Fund's ability to effectively hedge.

Transactions in futures as a hedging device may subject a Fund to a
number of risks. Successful use of futures by a Fund is subject to the ability
of the Adviser to correctly predict movements in the direction of the market.
For example, if a Fund has hedged against the possibility of a decline in the
market adversely affecting securities held by it and securities prices increase
instead, the Fund will lose part or all of the benefit to the increased value of
its securities which it has hedged because it will have approximately equal
offsetting losses in its futures positions. There may be an imperfect
correlation, or no correlation at all, between movements in the price of the
futures contracts (or options) and movements in the price of the instruments
being hedged. In addition, investments in futures may subject a Fund to losses
due to unanticipated market movements which are potentially unlimited. Further,
there is no assurance that a liquid market will exist for any particular futures
contract (or option) at any particular time. Consequently, a Fund may realize a
loss on a futures transaction that is not offset by a favorable movement in the
price of securities which it holds or intends to purchase or may be unable to
close a futures position in the event of adverse price movements. In addition,
in some situations, if a Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements at a time when it may be
disadvantageous to do so. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising market.

As noted above, the risk of loss in trading futures contracts in some
strategies can be substantial, due both to the low margin deposits required, and
the extremely high degree of leverage involved in futures pricing. As a result,
a relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit, before any
deduction for the transaction costs, if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of the
amount invested in the contract.

Utilization of futures transactions involves the risk of loss by a
Fund of margin deposits in the event of bankruptcy of a broker with whom such
Fund has an open position in a futures contract or related option.

Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses.

<PAGE>

The trading of futures contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal trading activity, which could at times make it
difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.

OPTIONS ON FUTURES CONTRACTS

Each Fund may purchase options on the futures contracts described
above. A futures option gives the holder, in return for the premium paid, the
right to buy (call) from or sell (put) to the writer of the option a futures
contract at a specified price at any time during the period of the option. Upon
exercise, the writer of the option is obligated to pay the difference between
the cash value of the futures contract and the exercise price. Like the buyer
or seller of a futures contract, the holder, or writer, of an option has the
right to terminate its position prior to the scheduled expiration of the option
by selling, or purchasing, an option of the same series, at which time the
person entering into the closing transaction will realize a gain or loss.

Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, 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. Depending on the pricing of the option compared to either the
futures contract upon which it is based, or upon the price of the instruments
being hedged, an option may or may not be less risky than ownership of the
futures contract or such instruments. In general, the market prices of options
can be expected to be more volatile than the market prices on the underlying
futures contract. Compared to the purchase or sale of futures contracts,
however, the purchase of call or put options on futures contracts may frequently
involve less potential risk to a Fund because the maximum amount at risk is the
premium paid for the options (plus transaction costs). Although permitted by
their fundamental investment policies, the Funds do not currently intend to
write futures options, and will not do so in the future absent any necessary
regulatory approvals.

OPTIONS

Each Fund may purchase put and call options listed on a national
securities exchange and issued by the Options Clearing Corporation. Such
purchases would be in an amount not exceeding 5% of each such Fund's net assets.
Such options may relate to particular securities or to various stock and bond
indices. Purchase of options is a highly specialized activity which entails
greater than ordinary investment risks, including a substantial risk of a
complete loss of the amounts paid as premiums to the writer of the options.
Regardless of how much the market price of the underlying security increases or
decreases, the option buyer's risk is limited to the amount of the original
investment for the purchase of the option. However, options may be more
volatile than the underlying securities, and therefore, on a percentage basis,
an investment in options may be subject to greater fluctuation than an
investment in the underlying securities. A listed call option gives the
purchaser of the option the right to buy from

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<PAGE>

a clearing corporation, and the writer has the obligation to sell to the
clearing corporation, the underlying security at the stated exercise price at
any time prior to the expiration of the option, regardless of the market price
of the security. The premium paid to the writer is in consideration for
undertaking the obligations under the option contract. A listed put option
gives the purchaser the right to sell to a clearing corporation the underlying
security at the stated exercise price at any time prior to the expiration date
of the option, regardless of the market price of the security. Put and call
options purchased by the Funds will be valued at the last sale price or, in the
absence of such a price, at the mean between bid and asked prices.

Each Fund may engage in writing covered call options (options on
securities owned by the particular Fund) and enter into closing purchase
transactions with respect to such options. Such options must be listed on a
national securities exchange and issued by the Options Clearing Corporation.
The aggregate value of the securities subject to options written by each Fund
may not exceed 25% of the value of its net assets. By writing a covered call
option, a Fund forgoes the opportunity to profit from an increase in the market
price of the underlying security above the exercise price except insofar as the
premium represents such a profit, and it will not be able to sell the underlying
security until the option expires or is exercised or the Fund effects a closing
purchase transaction by purchasing an option of the same series.

When a Fund writes a covered call option, it may terminate its
obligation to sell the underlying security prior to the expiration date of the
option by executing a closing purchase transaction, which is effected by
purchasing on an exchange an option of the same series (i.e., same underlying
security, exercise price and expiration date) as the option previously written.
Such a purchase does not result in the ownership of an option. A closing
purchase transaction will ordinarily be effected to realize a profit on an
outstanding call option, to prevent an underlying security from being called, to
permit the sale of the underlying security or to permit the writing of a new
call option containing different terms on such underlying security. The cost of
such a liquidation purchase plus transaction costs may be greater than the
premium received upon the original option, in which event the writer will have
incurred a loss on the transaction. An option position may be closed out only
on an exchange which provides a secondary market for an option of the same
series. There is no assurance that a liquid secondary market on an exchange
will exist for any particular option. A covered option writer, unable to effect
a closing purchase transaction, will not be able to sell the underlying security
until the option expires or the underlying security is delivered upon exercise,
with the result that the writer in such circumstances will be subject to the
risk of market decline in the underlying security during such period. A Fund
will write an option on a particular security only if the Adviser believes that
a liquid secondary market will exist on an exchange for options of the same
series, which will permit the Fund to make a closing purchase transaction in
order to close out its position.

When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by that Fund is included in the liability
section of that Fund's statement of assets and liabilities as a deferred credit.
The amount of the deferred credit will be subsequently marked to market to
reflect the current value of the option written. The current value of the
traded option is the last sale price or, in the absence of a sale, the average
of the closing bid and asked prices. If an option expires on the stipulated
expiration date, or if the Fund involved enters into a closing purchase
transaction, the Fund will realize a gain (or loss if the cost

22
<PAGE>

of a closing purchase transaction exceeds the net premium received when the
option is sold), and the deferred credit related to such option will be
eliminated. If an option is exercised, the Fund involved may deliver the
underlying security from its portfolio or purchase the underlying security in
the open market. In either event, the proceeds of the sale will be increased by
the net premium originally received, and the Fund involved will realize a gain
or loss. Premiums from expired call options written by the Funds and net gains
from closing purchase transactions are treated as short-term capital gains for
Federal income tax purposes, and losses on closing purchase transactions are
short-term capital losses. The use of covered call options is not a primary
investment technique of the Funds and such options will normally be written on
underlying securities as to which the Adviser does not anticipate significant
short-term capital appreciation.

SHORT SALES "AGAINST THE BOX"

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

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

A Fund will not engage in short sales against the box for investment
purposes. A Fund may, however, make a short sale as a hedge, when it believes
that the price of a security may decline, causing a decline in the value of a
security (or a security convertible or exchangeable for such security), or when
a Fund wants to sell the security at an attractive current price, but also
wishes to defer recognition of gain or loss for federal income tax purposes or
for purposes of satisfying certain tests applicable to regulated investment
companies under the Internal Revenue Code of 1986, as amended (the "Code"). In
such case, any future losses in a Fund's long position should be reduced by a
gain in the short position. Conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which such gains or
losses are reduced depends upon the amount of the security sold short relative
to the amount a Fund owns. There are certain additional transaction costs
associated with short sales against the box, but a Fund will endeavor to offset
these costs with the income from the investment of the cash proceeds of short
sales.

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

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<PAGE>

INVESTMENT COMPANY SECURITIES

Each Fund may invest in securities issued by other investment
companies which invest in high quality, short-term debt securities and which
determine their net asset value per share based on the amortized cost or
penny-rounding method. In addition to the advisory fees and other expenses a
Fund bears directly in connection with its own operations, as a shareholder of
another investment company, a Fund would bear its pro rata portion of the other
investment company's advisory fees and other expenses. As such, the Fund's
shareholders would indirectly bear the expenses of the Fund and the other
investment company, some or all of which would be duplicative. Such securities
will be acquired by each Fund within the limits prescribed by the 1940 Act,
which include, subject to certain exceptions, a prohibition against a Fund
investing more than 10% of the value of its total assets in such securities.

SHORT-TERM INSTRUMENTS

Each Fund may invest in short-term income securities in accordance
with its investment objective and policies. The Funds may also make money
market investments pending other investments or settlement, or to maintain
liquidity to satisfy redemption requests. In adverse market conditions and for
temporary defensive purposes only, each Fund may temporarily invest its assets
without limitation in short-term investments. Short-term investments include:
obligations of the U.S. government and its agencies or instrumentalities;
commercial paper, variable amount master demand notes and other debt securities,
including high quality U.S. dollar-denominated short-term bonds and notes issued
by domestic and foreign corporations; variable and floating rate securities;
bank obligations; repurchase agreements collateralized by these securities; and
shares of other investment companies that primarily invest in any of the
above-referenced securities.

The Funds may invest in commercial paper issued by major corporations
in reliance on the exemption from registration afforded by Section 3(a)(3) of
the 1933 Act. Commercial paper consists of short-term (usually from 1 to 270
days) unsecured promissory notes issued by corporations in order to finance
their current operations. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under an agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts. Each Fund may purchase three types of
commercial paper, as classified by exemption from registration under the 1933
Act. Commercial paper consists of short-term (usually from 1 to 270 days)
unsecured promissory notes issued by corporations in order to finance their
current operations. A variable amount master demand note (which is a type of
commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under an agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts. Each Fund may purchase three types of
commercial paper, as classified by exemption from registration under the 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" commercial paper refers to the commercial paper of
any

24
<PAGE>

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

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

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

Obligations of foreign branches and subsidiaries of domestic banks and
domestic and foreign branches of foreign banks, such as certificates of deposit
("Cds") and time deposits ("Tds"), may be general obligations of the parent
banks in addition to the issuing branch, or may be limited by the terms of a
specific obligation and governmental regulation. Such obligations are subject
to different risks than are those of domestic banks. These risks include
foreign economic and political developments, foreign governmental restrictions
that may adversely affect payment of

25
<PAGE>

principal and interest on the obligations, foreign exchange controls and foreign
withholding and other taxes on interest income. Foreign branches and
subsidiaries are not necessarily subject to the same or similar regulatory
requirements that apply to domestic banks, such as mandatory reserve
requirements, loan limitations, and accounting, auditing and financial record
keeping requirements. In addition, less information may be publicly available
about a foreign branch of a domestic bank or about a foreign bank than about a
domestic bank.

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

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

The Funds will limit their short-term investments to those
U.S. dollar-denominated instruments which are determined by or on behalf of the
Board of Trustees of the Trust to present minimal credit risks and which are of
"high quality" as determined by an NRSRO (e.g., 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 by the Adviser under the supervision of the Board of Trustees
of the Trust. The Funds may invest in obligations of banks which at the date of
investment have capital, surplus and undivided profits (as of the date of their
most recently published financial statements) in excess of $100 million.
Investments in high quality short-term instruments may, in many circumstances,
result in a lower yield than would be available from investments in instruments
with a lower quality or longer term.

DERIVATIVE CONTRACTS AND SECURITIES

The term "derivative" has traditionally been applied to certain
contracts (including futures, forward, option and swap contracts) that derive
their value from changes in the value of an underlying security, currency,
commodity or index. Certain types of securities that incorporate the
performance characteristics of these contracts are also referred to as
"derivatives." The term has also been applied to securities derived from the
cash flows from underlying securities, mortgages or other obligations.

Derivative contracts and securities can be used to reduce or increase
the volatility of a Fund's total performance. While the response of certain
derivative contracts and securities to market changes may differ from
traditional investments such as stocks and bonds, derivatives do not necessarily
present greater market risks than traditional investments. To the extent that a
Fund invests in securities that could be characterized as derivatives, such as
mortgage pass-

26
<PAGE>

throughs and collateralized mortgage obligations, it will only do so in a manner
consistent with its investment objective, policies and limitations.

CERTAIN OTHER OBLIGATIONS

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

PORTFOLIO TURNOVER RATE

Each Fund may sell a portfolio investment immediately after its
acquisition if the Adviser believes that such a disposition is consistent with
the investment objective of the particular Fund. Portfolio investments may be
sold for a variety of reasons, such as a more favorable investment opportunity
or other circumstances bearing on the desirability of continuing to hold such
investments. A high rate of portfolio turnover may involve correspondingly
greater brokerage commission expenses and other transaction costs, which must be
borne directly by a Fund and ultimately by its shareholders. High portfolio
turnover may result in the realization of substantial net capital gains. To the
extent net short-term capital gains are realized, any distributions resulting
from such gains are considered ordinary income for federal income tax purposes.
See "Taxation" below.

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 Adviser also makes its own evaluations of these
securities, subject to review by the Board of Trustees of the Trust. After
purchase by a Fund, an obligation may cease to be rated or its rating may be
reduced below the minimum required for purchase by the Fund. Neither event
would require a Fund to dispose of the obligation, but the Adviser will consider
such an event in its determination of whether the Fund should continue to hold
the obligation. A description of the ratings used herein is set forth in the
Appendix to this Statement of Additional Information.

INVESTMENT LIMITATIONS

The investment limitations enumerated below are matters of
fundamental policy. Fundamental investment limitations may be changed with
respect to a Fund only by a vote of the holders of a majority of such Fund's
outstanding shares. As used herein, a "vote of the holders of a majority of the
outstanding shares" of the Trust or a particular Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental
investment policy, the affirmative vote of the lesser of (a) more than 50% of
the outstanding shares of the Trust or such Fund, or (b) 67% or more of the
shares of the Trust or such Fund present at a meeting if more than 50% of the
outstanding shares of the Trust or such Fund are represented at

27
<PAGE>

the meeting in person or by proxy. Investment limitations which are "operating
policies" with respect to a Fund may be changed by the Trust's Board of Trustees
without shareholder approval.

As a matter of fundamental policy, each Fund may not:

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

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

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

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

(5) invest 25% or more of its assets in any one industry (excluding
U.S. government securities); 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.

With respect to the Equity, Income, Total Return Bond and
International Equity Funds, none of the above-referenced fundamental investment
restrictions 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.

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<PAGE>

Each Fund will not as a matter of operating policy:

(7) 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;

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

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

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

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

(12) invest more than 5% of the Fund's net assets in warrants (valued at
the lower of cost or market);

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

29
<PAGE>

(14) 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.

Policies (7) through (14) may be changed by the Board of Trustees of
the Trust without shareholder approval.

As diversified portfolios, 75% of the assets of each Fund are
represented by cash and cash items (including receivables), government
securities, securities of other investment companies, and other securities which
for purposes of this calculation are subject to the following fundamental
limitations: (a) the Fund may not invest more than 5% of its total assets in
the securities of any one issuer, and (b) the Fund may not own more than 10% of
the outstanding voting securities of any one issuer. In addition, each Fund may
not invest 25% or more of its assets in the securities of issuers in any one
industry. These are fundamental investment policies of each Fund which may not
be changed without shareholder approval. For purposes of these policies and
limitations, each Fund considers certificates of deposit and demand and time
deposits issued by a U.S. branch of a domestic bank or savings association
having capital, surplus and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items."

If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in value
of a Fund's securities will not constitute a violation of such limitation.

PORTFOLIO TRANSACTIONS

Subject to the general control of the Trust's Board of Trustees, the
Adviser is responsible for, makes decisions with respect to, and places orders
for all purchases and sales of all portfolio securities of the Funds.

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

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<PAGE>

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

Allocations of transactions, including their frequency, to various
dealers is determined by the Adviser in its best judgment and in a manner deemed
to be in the best interest of the investors in the applicable Fund rather than
by any formula. The primary consideration is prompt execution of orders in an
effective manner at the most favorable price. In executing portfolio
transactions for the Funds, the Adviser may use affiliated brokers in accordance
with the requirements of the 1940 Act. The Adviser may also take into account
the sale of Fund shares in allocating brokerage transactions.

To the extent that a Fund effects brokerage transactions with any
broker-dealer affiliated directly or indirectly with the Adviser, such
transactions, including the frequency thereof, the receipt of any commissions
payable in connection therewith, and the selection of the affiliated
broker-dealer effecting such transactions, will be fair and reasonable to the
shareholders of the Fund.

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

In addition, the Advisory Agreements authorize the Adviser, to the
extent permitted by law and subject to the review of the Trust's Board of
Trustees, to cause the Funds to pay a broker which furnishes brokerage and
research services a higher commission than that which might be charged by
another broker for effecting the same transaction, provided that the Adviser
determines 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 Adviser 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.

31
<PAGE>

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

During the fiscal year ended March 31, 1999, the Adviser directed Fund
brokerage transactions to brokers because of research services provided. The
amounts of such transactions and their related commissions were as follows:

<TABLE>
<CAPTION>
Fund Amount of Transactions Related Commission
---- ---------------------- ------------------
<S> <C> <C>
Equity Fund $________ $________
Value Equity Fund $________ $________
Optimum Growth Fund $________ $________
International Equity Fund $________ $________
Income Fund $________ $________
Total Return Bond Fund $________ $________

</TABLE>

Portfolio securities will not be purchased from or sold to the
Adviser, the distributor, or any of their affiliated persons (as such term is
defined in the 1940 Act) acting as principal, except to the extent permitted by
the SEC.

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

For the fiscal years ended March 31, 1999 and 1998, the Equity Fund
paid brokerage commissions aggregating $______, and $118,960, respectively, of
which $______, and $9,474, respectively, was paid to UST Securities Corp., an
affiliate of the Adviser. For the same periods, the percentages of total
commissions paid by the Fund to UST Securities Corp. were ____%, and 7.96%,
respectively, and the percentages of the total amount of the Fund's brokerage
transactions involving the payment of commissions that was effected through UST
Securities Corp. were ____% and 8.44%, respectively. For the same periods, the
average commissions per share paid by the Fund to UST Securities Corp. and other
unaffiliated brokers were $______ and $______, and $0.09 and $0.07,
respectively. For the fiscal period ended

32
<PAGE>

March 31, 1997 the Fund paid brokerage commissions aggregating $71,134, none of
which was paid to affiliates of the Adviser.

For the fiscal years or periods ended March 31, 1999, 1998 and 1997, the
Value Equity Fund paid brokerage commissions aggregating $______, $43,969 and
$59,569, respectively, of which $______, $1,377 and $2,177, respectively, was
paid to UST Securities Corp. For the same periods, the percentages of total
commissions paid by the Fund to UST Securities Corp. were ____%, 3.13% and
3.65%, respectively, and the percentages of the total amount of the Fund's
brokerage transactions involving the payment of commissions that was effected
through UST Securities Corp. were ____%, 3.93% and 6.16%, respectively. For
the same periods, the average commissions per share paid by the Fund to UST
Securities Corp. and other unaffiliated brokers were $______ and $______, $0.09
and $0.06 and $0.09 and $0.08, respectively.

For the fiscal year ended March 31, 1999, the Optimum Growth Fund paid
brokerage commissions aggregating $______, of which $______ was paid to UST
Securities Corp. For the same period, the percentage of total commissions paid
by the Fund to UST Securities Corp. was ____%, and the percentage of the total
amount of the Fund's brokerage transactions involving the payment of commissions
that was effected through UST Securities Corp. was ____%. For the same period,
the average commissions per share paid by the Fund to UST Securities Corp. and
other unaffiliated brokers were $______ and $______, respectively. For the
fiscal year ended March 31, 1998 and for the fiscal period ended March 31, 1997,
the Optimum Growth Fund paid brokerage commissions aggregating $15,289 and
$11,787, respectively, none of which was paid to affiliates of the Adviser.

For the fiscal year ended March 31, 1999, the International Equity Fund
paid brokerage commissions aggregating $______, of which $______ was paid to UST
Securities Corp. For the same period, the percentage of total commissions paid
by the Fund to UST Securities Corp. was ____%, and the percentage of the total
amount of the Fund's brokerage transactions involving the payment of commissions
that was effected through UST Securities Corp. was ____%. For the same period,
the average commissions per share paid by the Fund to UST Securities Corp. and
other unaffiliated brokers were $______ and $______, respectively. For the
fiscal year ended March 31, 1998 and for the fiscal period ended March 31, 1997,
the International Equity Fund paid brokerage commissions aggregating $108,548
and $95,258, respectively, none of which was paid to affiliates of the Adviser.

The Trust is required to identify any securities of its regular brokers or
dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by
the Funds as of the close of the most recent fiscal year. As of March 31, 1999,
the following Funds held the following securities of the Trust's regular brokers
or dealers or their parents:

33
<PAGE>

PERFORMANCE INFORMATION

STANDARD PERFORMANCE INFORMATION

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

YIELD. The Trust may provide annualized "yield" quotations for
Institutional Shares of the Income and Total Return Bond Funds. 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
Institutional Shares of 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. The
Income and Total Return Bond Funds may quote the standardized effective 30-day
(or one month) yield for their respective Institutional Shares, calculated in
accordance with the method prescribed by the SEC for mutual funds. Such yield
will be calculated for each Fund's Institutional Shares according to the
following formula:

6
Yield = 2 (ab/cd + 1)

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

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

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

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

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

34
<PAGE>

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).

For the 30-day period ended March 31, 1999, the standardized effective
yield for Institutional Shares of the Income and Total Return Bond Funds was as
follows: Income Fund, ______%; and Total Return Bond Fund, ______%.

TOTAL RETURN. The Trust may provide period and annualized "total
rates of return" and non-standardized total return data for Institutional Shares
or Retail Shares of a Fund. The "total rate of return" refers to the change in
the value of an investment in Institutional Shares or Retail Shares of a Fund
over a stated period which reflects any change in net asset value per share and
includes the value of any such 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 in Shares of the same class. The "average annual total return" for
Institutional Shares and Retail Shares of a Fund 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:

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

Where: T = average annual total return.

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

P = hypothetical initial payment of $1,000.

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

A Fund may also advertise the "aggregate total return" for its
Institutional Shares and Retail Shares which is computed by determining the
aggregate compounded rates of return during specified periods that likewise
equate the initial amount invested to the ending redeemable value of such
investment. The formula for calculating aggregate total return is as follows:

Aggregate Total Return = [(ERV/P)] - 1

35
<PAGE>

The above calculations are 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 a
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.

Based on the foregoing calculations, the average annual total returns
for Institutional Shares of the Equity, Value Equity, Optimum Growth,
International Equity, Income and Total Return Bond Funds for the one year period
ended March 31, 1999 and the period from commencement of operations* to March
31, 1999 were: ______% and ______%; ______% and ______%; ______% and ______%;
______% and ______%; ______% and ______%; and ______% and ______%,
respectively.

The average annual total returns for Retail Shares of the Value Equity
and Optimum Growth Funds for the one year period ended March 31, 1999 and the
period from commencement of operations* to March 31, 1999 were: ______% and
______%; and ______% and ______%, respectively.
____________

* Institutional Shares of the Equity and Income Funds commenced
operations on January 16, 1995; Institutional Shares of the Total Return
Bond Fund commenced operations on January 19, 1995; Institutional Shares of
the Optimum Growth Fund commenced operations on June 1, 1996; Retail Shares
of the Optimum Growth Fund commenced operations on July 3, 1996;
Institutional Shares of the Value Equity Fund commenced operations on June
1, 1996; Retail Shares of the Value Equity Fund commenced operations on
January 15, 1997; and Institutional Shares of the International Equity Fund
commenced operations on January 24, 1995.

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

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.

36
<PAGE>

The distribution rate of a Fund will not be used in advertising unless
accompanied by standard performance measures.

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 Institutional
Shares and Retail Shares of a Fund with performance quoted with respect to other
investment companies or types of investments.

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

ASIAN WALL STREET JOURNAL, a weekly Asian newspaper that often reviews
U.S. mutual funds investing internationally.

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

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

CHANGING TIMES, THE KIPLINGER MAGAZINE, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.

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

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

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

37
<PAGE>

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

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

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

INVESTOR'S DAILY, a daily newspaper that features financial, economic and
business news.

LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND PERFORMANCE ANALYSIS, a weekly
publication of industry-wide mutual fund averages by type of fund.

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

NEW YORK TIMES, a nationally distributed newspaper which regularly covers
financial news.

PERSONAL INVESTING NEWS, a monthly news publication that often reports on
investment opportunities and market conditions.

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

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

U.S. NEWS AND WORLD REPORT, a national business weekly that periodically reports
mutual fund performance data.

WALL STREET JOURNAL, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.

WEISENBERGER INVESTMENT COMPANIES SERVICES, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records, and price ranges.

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

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

38
<PAGE>

PORTFOLIO VALUATION AND DETERMINATION OF NET ASSET VALUE

The Trust determines the net asset value of the Institutional Shares
and Retail Shares of a Fund each day both the New York Stock Exchange (the
"NYSE") and the Adviser are open for business (a "Business Day"). As a result,
each Fund will normally determine its net asset value every weekday except for
the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving Day and Christmas.

Daily determinations of net asset value for each Fund are made at the
close of regular trading hours on the NYSE, currently 4:00 p.m. (Eastern time)
and are calculated separately for each class of Shares by dividing the total
assets of a Fund that are allocated to a particular class of Shares less all of
its liabilities charged to that class, by the total number of Shares of the
class that are outstanding at the time the determination is made. As discussed
below, purchases, exchanges and redemptions will be effected at the net asset
value per share next computed after a request is received in good order.

Assets in the Funds which are traded on a recognized domestic stock
exchange or are quoted on a national securities market are valued at the last
sale price on the securities exchange on which such securities are primarily
traded or at the last sale price on such national securities market. Securities
in the Funds which are traded only on over-the-counter markets are valued on the
basis of closing over-the-counter bid prices, and securities in such Funds for
which there were no transactions are valued at the average of the most recent
bid and asked prices. Restricted securities and securities or other assets for
which market quotations are not readily available are valued at fair value,
pursuant to guidelines adopted by the Board of Trustees of the Trust. Absent
unusual circumstances, debt securities maturing in 60 days or less are valued at
amortized cost.

Securities of the Funds which are primarily traded on foreign
securities exchanges are generally valued at the preceding closing values of
such securities on their respective exchanges, except that when an event
subsequent to the time when value was so established is likely to have changed
such value, then the fair value of those securities will be determined after
consideration of such events and other material factors, all under the direction
and guidance of the Board of Trustees of the Trust. A security which is listed
or traded on more than one exchange is valued at the quotation on the exchange
determined to be the primary market for such security. Absent unusual
circumstances, investments in foreign debt securities having a maturity of 60
days or less are valued based upon the amortized cost method. All other foreign
securities are valued at the last current bid quotation if market quotations are
available, or at fair value as determined in accordance with policies
established by the Board of Trustees of the Trust. For valuation purposes,
quotations of foreign securities in foreign currency are converted to
U.S. dollars equivalent at the prevailing market rate on the day of conversion.
Some of the securities acquired by the Funds may be traded on foreign exchanges
or over-the-counter markets on days which are not Business Days. In such cases,
the net asset value of the Shares may be significantly affected on days when
investors can neither purchase nor redeem a Fund's Shares. The administrators
have undertaken to price the securities held by the Funds, and may use one or

39
<PAGE>

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 the Adviser and the administrators under the general supervision of the Board
of Trustees of the Trust.

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

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares are continuously offered for sale by Edgewood Services, Inc.
(the "Distributor"), a registered broker-dealer and the Trust's sponsor and
distributor. The Distributor is a wholly-owned subsidiary of Federated
Investors, Inc. and is located at 5800 Corporate Drive, Pittsburgh, PA
15237-5829. The Distributor has agreed to devote its best efforts to effect the
sale of Shares, but is not obligated to sell any certain number of Shares.

At various times the Distributor may implement programs under which a
dealer's sales force may be eligible to win nominal awards for certain sales
efforts or under which the Distributor will make payments to any dealer that
sponsors sales contests or recognition programs conforming to criteria
established by the Distributor, or that participates in sales programs sponsored
by the Distributor. The Distributor in its discretion may also from time to
time, pursuant to objective criteria established by the Distributor, pay fees to
qualifying dealers for certain services or activities which are primarily
intended to result in sales of Shares of the Funds. If any such program is made
available to any dealer, it will be made available to all dealers on the same
terms and conditions. Payments made under such programs will be made by the
Distributor out of its own assets and not out of the assets of the Funds.

In addition, the Distributor may offer to pay a fee from its own
assets to financial institutions for the continuing investment of customers'
assets in the Funds or for providing substantial marketing, sales and
operational support. The support may include initiating customer accounts,
participating in sales, educational and training seminars, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Funds. Such assistance will be predicated upon the amount of
Shares the financial institution

40
<PAGE>

sells or may sell, and/or upon the type and nature of sales or marketing support
furnished by the financial institution.

As described below, Shares may be sold to customers ("Customers") of
financial institutions ("Shareholder Organizations"). Shares are also offered
for sale directly to institutional investors or to members of the general
public. Different types of Customer accounts at the Shareholder Organizations
may be used to purchase Shares, including eligible agency and trust accounts.
In addition, Shareholder Organizations may automatically "sweep" a Customer's
account not less frequently than weekly and invest amounts in excess of a
minimum balance agreed to by the Shareholder Organization and its Customer in
Shares selected by the Customer. Investors purchasing Shares may include
officers, directors, or employees of the particular Shareholder Organization.

The Trust has authorized certain brokers to accept on its behalf
purchase, exchange and redemption requests. Such brokers are authorized to
designate other intermediaries to accept purchase, exchange and redemption
requests on behalf of the Trust . The Trust will be deemed to have received a
purchase, exchange or redemption request when the request is received by an
authorized broker or designated intermediary in good order.

PURCHASE OF SHARES

Shares of the Funds are offered for sale at their net asset value per
Share next computed after a purchase request is received in good order by the
Trust's transfer agent or by an authorized broker or designated intermediary.
The Distributor has established several procedures for purchasing Shares in
order to accommodate different types of investors.

Institutional Shares may be purchased directly only by financial
institutions ("Institutional Investors"). Retail Shares may be purchased
directly by individuals ("Direct Investors") or by Institutional Investors
(collectively with Direct Investors, "Investors"). Retail Shares may also be
purchased by Customers of the Adviser, its affiliates and correspondent banks,
and other Shareholder Organizations that have entered into agreements with the
Trust.

A Shareholder Organization may elect to hold of record Shares for its
Customers and to record beneficial ownership of Shares on the account statements
provided by it to its Customers. If it does so, it is the Shareholder
Organization's responsibility to transmit to the Distributor all purchase
requests for its Customers and to transmit, on a timely basis, payment for such
requests to Chase Global Funds Services Company ("CGFSC"), the Funds' transfer
agent, in accordance with the procedures agreed to by the Shareholder
Organization and the Distributor. Confirmations of all such Customer purchases
(and redemptions) will be sent by CGFSC to the particular Shareholder
Organization. As an alternative, a Shareholder Organization may elect to
establish its Customers' accounts of record with CGFSC. In this event, even if
the Shareholder Organization continues to place its Customers' purchase (and
redemption) requests with the Funds, CGFSC will send confirmations of such
transactions and periodic account statements directly to the shareholders of
record. Shares in the Funds bear the expense of fees payable to Shareholder
Organizations for such services. See "Shareholder Organizations."

41
<PAGE>

Customers wishing to purchase Shares through their Shareholder
Organization should contact such entity directly for appropriate instructions.
(For a list of Shareholder Organizations in your area, call (800) 446-1012.) An
Investor purchasing Shares through a registered investment adviser or certified
financial planner may incur transaction charges in connection with such
purchases. Such Investors should contact their registered adviser or certified
financial planner for further information on transaction fees. Investors may
also purchase Shares directly from the Distributor in accordance with procedures
described in the Prospectus.

Investors may purchase Shares by completing the Application
accompanying the Prospectus and mailing it, together with a check payable to
Excelsior Institutional Trust, to:

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

Subsequent investments in an existing account in a Fund may be made at
any time by sending to the above address a check payable to Excelsior
Institutional Trust along with: (a) the detachable form that regularly
accompanies the confirmation of a prior transaction; (b) a subsequent order form
which may be obtained from CGFSC; or (c) a letter stating the amount of the
investment, the name of the Fund and the account number in which the investment
is to be made. Institutional Investors may purchase Shares by transmitting their
purchase orders to CGFSC by telephone at (800) 446-1012 or by terminal access.
Institutional Investors must pay for Shares with federal funds or funds
immediately available to CGFSC.

Investors may also purchase Shares by wiring federal funds to CGFSC.
Prior to making an initial investment by wire, an Investor must telephone CGFSC
at (800) 446-1012 (from overseas, call (617) 557-8280) for instructions. Federal
funds and registration instructions should be wired through the Federal Reserve
System to:

The Chase Manhattan Bank
ABA #021000021
Excelsior Funds, Account No. 9102732915
For further credit to:
Excelsior Funds
Wire Control Number
Account Registration
(including account number)

Investors making initial investments by wire must promptly complete
the Application accompanying the Prospectus and forward it to CGFSC. Redemptions
by Investors will not be processed until the completed Application for purchase
of Shares has been received by CGFSC and accepted by the Distributor. Investors
making subsequent investments by wire should follow the above instructions.

42
<PAGE>

Except as provided below, the minimum initial investment by an
Investor or initial aggregate investment by a Shareholder Organization investing
on behalf of its Customers in Retail Shares is $500 per Fund. The minimum
subsequent investment in Retail Shares for both types of investors is $50 per
Fund. There is no minimum initial or subsequent investment for an Institutional
Investor investing in Institutional Shares of a Fund. Customers may agree with a
particular Shareholder Organization to make a minimum purchase with respect to
their accounts. Depending upon the terms of the particular account, Shareholder
Organizations may charge a Customer's account fees for automatic investment and
other cash management services provided. The Trust reserves the right to reject
any purchase order, in whole or in part, or to waive any minimum investment
requirements. Third party checks will not be accepted as payment for Fund
Shares.

REDEMPTION PROCEDURES

A request for the redemption of Shares will receive the net asset
value per share next computed after the request is received in good order by the
Trust's transfer agent or an authorized broker or designated intermediary.

Customers of Shareholder Organizations holding Shares of record may
redeem all or part of their investments in a Fund in accordance with procedures
governing their accounts at the Shareholder Organizations. It is the
responsibility of the Shareholder Organizations to transmit redemption requests
to CGFSC and credit such Customer accounts with the redemption proceeds on a
timely basis. Redemption requests for Institutional Investors must be
transmitted to CGFSC by telephone at (800) 446 1012 or by terminal access. No
charge for wiring redemption payments to Shareholder Organizations or
Institutional Investors is imposed by the Trust, although Shareholder
Organizations may charge a Customer's account for wiring redemption proceeds.
Information relating to such redemption services and charges, if any, is
available from the Shareholder Organizations. An Investor redeeming Shares
through a registered investment adviser or certified financial planner may incur
transaction charges in connection with such redemptions. Such Investors should
contact their registered investment adviser or certified financial planner for
further information on transaction fees. Investors may redeem all or part of
their Shares in accordance with any of the procedures described below (these
procedures also apply to Customers of Shareholder Organizations for whom
individual accounts have been established with CGFSC).

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

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

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

43
<PAGE>

redeemed were issued in certificate form, the certificates must be endorsed for
transfer (or accompanied by a duly executed stock power) and must be submitted
to CGFSC together with the redemption request. A redemption request for an
amount in excess of $50,000 per account, or for any amount if the proceeds are
to be sent elsewhere than the address of record, must be accompanied by
signature guarantees from any eligible guarantor institution approved by CGFSC
in accordance with its Standards, Procedures and Guidelines for the Acceptance
of Signature Guarantees ("Signature Guarantee Guidelines"). Eligible guarantor
institutions generally include banks, broker/dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. All eligible guarantor institutions must participate in
the Securities Transfer Agents Medallion Program ("STAMP") in order to be
approved by CGFSC pursuant to the Signature Guarantee Guidelines. Copies of the
Signature Guarantee Guidelines and information on STAMP can be obtained from
CGFSC at (800) 446-1012 or at the address given above.

CGFSC may require additional supporting documents for redemptions. A
redemption request will not be deemed to be properly received until CGFSC
receives all required documents in good order. Payment for Retail Shares
redeemed will ordinarily be made by mail within five Business Days after receipt
by CGFSC of the redemption request in good order. Payment for Institutional
Shares redeemed will normally be sent the next Business Day after receipt by
CGFSC of the redemption request in good order. Questions with respect to the
proper form for redemption requests should be directed to CGFSC at (800)
446-1012 (from overseas, call (617) 557-8280).

Investors who have so indicated on the Application, or have
subsequently arranged in writing to do so, may redeem Shares by instructing
CGFSC by wire or telephone to wire the redemption proceeds directly to the
Investor's account at any commercial bank in the United States. Direct Investors
who are shareholders of record may also redeem Shares by instructing CGFSC by
telephone to mail a check for redemption proceeds of $500 or more to the
shareholder of record at his or her address of record. Institutional Investors
may also redeem Shares by instructing CGFSC by telephone at (800) 446-1012 or by
terminal access. Only redemptions of $500 or more will be wired to a Direct
Investor's account. The redemption proceeds for Direct Investors must be paid to
the same bank and account as designated on the Application or in written
instructions subsequently received by CGFSC.

In order to arrange for redemption by wire or telephone after an
account has been opened or to change the bank or account designated to receive
redemption proceeds, an Investor must send a written request to the Trust c/o
CGFSC, at the address listed above. Such requests must be signed by the
Investor, with signatures guaranteed, as discussed above. Further documentation
may be requested.

CGFSC and the Distributor reserve the right to refuse a wire or
telephone redemption if it is believed advisable to do so. Procedures for
redeeming Shares by wire or telephone may be modified or terminated at any time
by the Trust, CGFSC or the Distributor. The Trust, CGFSC and the Distributor
will not be liable for any loss, liability, cost or expense for acting upon
telephone instructions that are reasonably believed to be genuine. In attempting
to confirm that telephone instructions are genuine, the Trust will use such
procedures as are

44
<PAGE>

considered reasonable, including recording those instructions and requesting
information as to account registration.

If any portion of the Shares to be redeemed represents an investment
made by personal check, the Trust and CGFSC reserve the right not to honor the
redemption until CGFSC is reasonably satisfied that the check has been collected
in accordance with the applicable banking regulations, which may take up to 15
days. Investors who anticipate the need for more immediate access to their
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 cancelled and CGFSC will charge a
fee of $25.00 to the Investor's account.

During periods of substantial economic or market change, telephone
redemptions may be difficult to complete. If an Investor is unable to contact
CGFSC by telephone, the Investor may also deliver the redemption request to
CGFSC in writing at the address noted above.

OTHER REDEMPTION INFORMATION

Except as described in "Investor Programs" below, Investors may be
required to redeem Shares in a Fund after 60 days' written notice if due to
Investor redemptions the balance in the particular account with respect to the
Fund remains below $500. If a Customer has agreed with a particular Shareholder
Organization to maintain a minimum balance in his or her account at the
institution 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 his or her Shares to the extent necessary
to maintain the required minimum balance.

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 SEC; (b) the
NYSE is closed for other than customary weekend and holiday closings; (c) the
SEC has by order permitted such suspension; or (d) an emergency exists as
determined by the SEC.

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.

The Trust reserves the right to honor any request for redemption or
repurchase of a Fund's Shares by making payment in whole or in part in
securities chosen by the Trust and valued in the same way as they would be
valued for purposes of computing a Fund's net asset value (a "redemption in
kind"). If payment is made in securities, a shareholder may incur transaction
costs in converting these securities into cash.

Under certain circumstances, the Trust may, in its discretion, accept
securities as payment for Shares. Securities acquired in this manner will be
limited to securities issued in transactions involving a BONA FIDE
reorganization or statutory merger, or other transactions

45
<PAGE>

involving securities that meet the investment objective and policies of any Fund
acquiring such securities.

INVESTOR PROGRAMS

SYSTEMATIC WITHDRAWAL PLAN

An Investor who owns Retail Shares with a value of $10,000 or more may
begin a Systematic Withdrawal Plan. The withdrawal can be on a monthly,
quarterly, semiannual or annual basis. There are four options for such
systematic withdrawals. The Investor may request:

(1) A fixed-dollar withdrawal;

(2) A fixed-share withdrawal;

(3) A fixed-percentage withdrawal (based on the current value of
the account); or

(4) A declining-balance withdrawal.

Prior to participating in a Systematic Withdrawal Plan, the Investor
must deposit any outstanding certificates for Retail Shares with CGFSC. Under
this Plan, dividends and distributions are automatically reinvested in
additional Retail Shares of a Fund. Amounts paid to investors under this Plan
should not be considered as income. Withdrawal payments represent proceeds from
the sale of Retail Shares, and there will be a reduction of the shareholder's
equity in the Fund involved if the amount of the withdrawal payments exceeds the
dividends and distributions paid on the Retail Shares and the appreciation of
the Investor's investment in the Fund. This in turn may result in a complete
depletion of the shareholder's investment. An Investor may not participate in a
program of systematic investing in a Fund while at the same time participating
in the Systematic Withdrawal Plan with respect to an account in the same Fund.
Customers of Shareholder Organizations may obtain information on the
availability of, and the procedures and fees relating to, the Systematic
Withdrawal Plan directly from their Shareholder Organizations.

EXCHANGE PRIVILEGE

Investors and Customers of Shareholder Organizations may exchange
Retail Shares having a value of at least $500 for Retail Shares of any other
portfolio of the Trust or for Shares of any portfolio of Excelsior Funds, Inc.
or Excelsior Tax-Exempt Funds, Inc. Institutional Shares may be exchanged for
Institutional Shares of any portfolio of Excelsior Institutional Trust [or
Excelsior Funds, Inc.]. An exchange involves a redemption of all or a portion of
the shares in a Fund and the investment of the redemption proceeds in shares of
another portfolio. The redemption will be made at the per share net asset value
of the shares being redeemed next determined after the exchange request is
received in good order. The shares

46
<PAGE>

of the portfolio to be acquired will be purchased at the per share net asset
value of those shares next determined after receipt of the exchange request in
good order.

Shares may be exchanged by wire, telephone or mail and must be made to
accounts of identical registration. There is no exchange fee imposed by the
Trust, Excelsior Funds, Inc. or Excelsior Tax-Exempt Funds, Inc. In order to
prevent abuse of this privilege to the disadvantage of other shareholders, the
Trust, Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. reserve the
right to limit the number of exchange requests of Investors to no more than six
per year. The Trust, Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc.
may modify or terminate the exchange program at any time upon 60 days' written
notice to shareholders, and may reject any exchange request. Customers of
Shareholder Organizations may obtain information on the availability of, and the
procedures and fees relating to, such program directly from their Shareholder
Organizations.

For federal income tax purposes, exchanges are treated as sales on
which the shareholder will realize a gain or loss, depending upon whether the
value of the shares to be given up in exchange is more or less than the basis in
such shares at the time of the exchange.

RETIREMENT PLANS

Shares are available for purchase by Investors in connection with
the following tax-deferred prototype retirement plans offered by United States
Trust Company of New York ("U.S. Trust New York"):

IRAs (including "rollovers" from existing retirement plans)for
individuals and their spouses;

Profit Sharing and Money-Purchase Plans for corporations and
self-employed individuals and their partners to benefit themselves
and their employees; and

Keogh Plans for self-employed individuals.

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

AUTOMATIC INVESTMENT PROGRAM

The Automatic Investment Program permits Investors to purchase Retail
Shares (minimum of $50 per Fund per transaction) at regular intervals selected
by the Investor. The minimum initial investment for an Automatic Investment
Program account is $50 per Fund.

47
<PAGE>

Provided the Investor's financial institution allows automatic withdrawals,
Retail Shares are purchased by transferring funds from an Investor's checking,
bank money market or NOW account designated by the Investor. At the Investor s
option, the account designated will be debited in the specified amount, and
Retail Shares will be purchased, once a month, on either the first or fifteenth
day, or twice a month, on both days.

ADDITIONAL INFORMATION

Customers of Shareholder Organizations may obtain information on the
availability of, and the procedures and fees relating to, the above programs
directly from their Shareholder Organizations.

RULE 12B-1 DISTRIBUTION PLAN

Pursuant to Rule 12b-1 of the 1940 Act, the Trust has adopted a
Distribution Plan (the "Distribution Plan") which permits the Retail Shares of
the Value Equity and Optimum Growth Funds to bear certain expenses in connection
with the distribution of such Shares. As required by Rule 12b-1, the Funds'
Distribution Plan and related distribution agreement have been approved, and are
subject to annual approval by, a majority of the Trust's Board of Trustees, and
by a majority of the trustees who are not interested persons of the Trust and
have no direct or indirect interest in the operation of the Distribution Plan or
any agreement relating to the Distribution Plan, by vote cast in person at a
meeting called for the purpose of voting on the Distribution Plan and related
agreement. Rule 12b-1 also requires that persons authorized to direct the
disposition of monies payable by a Fund (in the Funds' case, the Distributor)
provide for the trustees' review of quarterly reports on the amounts expended
and the purposes for the expenditures.

Under the Distribution Plan, the Retail Shares of the Value Equity and
Optimum Growth Funds may compensate the Distributor monthly for its services
which are intended to result in the sale of Retail Shares. The compensation may
not exceed the annual rate of 0.75% of the average daily net asset value of each
Fund's outstanding Retail Shares. Retail Shares of the Funds currently bear the
expenses of such distribution fees at the annual rates of 0.25% of the average
daily net asset value of the outstanding Retail Shares of each of the Value
Equity and Optimum Growth Funds. The Distributor may also use the distribution
fees to defray direct and indirect marketing expenses such as: (i) the expense
of preparing, printing and distributing promotional materials and prospectuses
(other than prospectuses used for regulatory purposes or for distribution to
existing shareholders); (ii) the expense of other advertising via radio,
television or other print or electronic media; and (iii) the expense of payments
to financial institutions ("Distribution Organizations") for distribution
assistance (including sales incentives). Payments under the Distribution Plan
are not tied directly to out-of-pocket expenses and therefore may be used by the
Distributor as it chooses (for example, to defray its overhead expenses).

Any material amendment to the Trust's arrangements with Distribution
Organizations must be approved by a majority of the Trust's Board of Trustees
(including a majority of the disinterested trustees). Any change in the
Distribution Plan that would materially increase the distribution expenses of
Retail Shares requires approval by holders of those Shares, but

48
<PAGE>

otherwise, the Distribution Plan may be amended by the trustees, including a
majority of the disinterested trustees. So long as the Distribution Plan is in
effect, the selection and nomination of the members of the Trust's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust will be committed to the discretion of such non-interested trustees.

The Distribution Plan will continue in effect for successive one year
periods, provided that such continuance is specifically approved by the vote of
a majority of the trustees who are not parties to the Distribution Plan or
interested persons of any such party and who have no direct or indirect
financial interest in the Distribution Plan or any related agreement and the
vote of a majority of the entire Board of Trustees. The Distribution Plan and
related agreement may be terminated as to a particular Fund by a vote of a
majority of the Trust's disinterested trustees or by vote of the holders of a
majority of the Retail Shares of the Fund.

For the fiscal year ended March 31, 1999, the Retail Shares of the
Value Equity and Optimum Growth Funds bore distribution fees under the
Distribution Plan of $______ and $______, respectively, to compensate the
Distributor for distribution-related services.

MANAGEMENT OF THE FUNDS

TRUSTEES AND OFFICERS
The business and affairs of the Funds are managed under the direction
of the Trust's Board of Trustees. The trustees and executive officers of the
Trust, their addresses, ages, principal occupations during the past five years,
and other affiliations are as follows:

<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATION
WITH THE DURING PAST 5 YEARS AND
NAME AND ADDRESS TRUST OTHER AFFILIATIONS
- ---------------- ------- -----------------------

<S> <C> <C>
Frederick S. Wonham* Chairman of the Retired; Director of Excelsior Funds,
238 June Road Board, President Inc. and Excelsior Tax-Exempt Funds,
Stamford, CT 06903 and Treasurer Inc. (since 1995); Trustee of Excelsior
Age: 67 Funds and the Trust (since 1995); Vice
Chairman of U.S. Trust Corporation and
U.S. Trust New York (from February 1990
until September 1995); and Chairman,
U.S. Trust Company (from March 1993 to
May 1997).

Alfred C. Tannachion* Trustee Retired; Director of
6549 Pine Meadows Drive Excelsior Funds, Inc. and Excelsior
Tax-Exempt
</TABLE>

* This trustee is considered to be an "interested person" of the Trust as
defined in the 1940 Act.

49
<PAGE>

POSITION PRINCIPAL OCCUPATION
WITH THE DURING PAST 5 YEARS AND
NAME AND ADDRESS TRUST OTHER AFFILIATIONS
- ---------------- ------- -----------------------
<S> <C> <C>
Spring Hill, FL 34606 Funds,Inc. (since 1985);
Age 72 Chairman of the Board of Excelsior
Funds, Inc. and Excelsior Tax-Exempt
Funds, Inc. (1991-1997) and the Trust
(1996-1997); President and Treasurer of
Excelsior Funds, Inc. and Excelsior
Tax-Exempt Funds, Inc. (1994-1997) and
the Trust (1996-1997); Chairman of the
Board, President and Treasurer of UST
Master Variable Series, Inc. (1994-
1997); and Trustee of the Trust
(since 1995).

Donald L. Campbell Trustee Retired; Director of Excelsior Funds,
333 East 69th Street Inc. and Excelsior Tax-Exempt Funds,
Apt. 10-H Inc. (Since 1984); Director of UST
New York, NY 10021 Master Variable Series, Inc. (from 1994
Age: 72 to June 1997); Trustee of the Trust
(since 1995); and Director, Royal Life
Insurance Co. of New York (since 1991).

</TABLE>

50
<PAGE>

<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATION
WITH THE DURING PAST 5 YEARS AND
NAME AND ADDRESS TRUST OTHER AFFILIATIONS
- ---------------- ------- -----------------------
<S> <C> <C>
Rodman L. Drake Trustee Trustee, Excelsior Funds and the Trust
Continuation Investments (since 1994); Director of Excelsior
Group, Inc. Funds, Inc. and Excelsior Tax-Exempt
1251 Avenue of the Americas, Funds, Inc. (since December 1996);
9th Floor Director, Parsons Brinkerhoff Energy
New York, NY 10020 Services Inc.(since 1996); Director,
Age: 55 Parsons Brinkerhoff, Inc. (engineering
firm) (since1995); President,
Continuation Investments Group, Inc.
(since 1997); President, Mandrake
Group (investment and consulting firm)
(1994-1997); Director, Hyperion
Total Return Fund, Inc. and four other
funds for which Hyperion Management,
Inc. serves as investment adviser
(since 1991); Co-Chairman, KMR Power
Corporation (power plants) (from 1993
to 1996); Director, The Latin America
Smaller Companies Fund, Inc. (since
1993); Member of Advisory Board,
Argentina Private Equity Fund L.P.
(from 1992 to 1996) and Garantia L.P
(Brazil) (from 1993 to 1996); and
Director, Mueller Industries, Inc
(from 1992 to 1994).

Joseph H. Dugan Trustee Retired; Director of Excelsior Funds,
913 Franklin Lake Road Inc.and Excelsior Tax-Exempt Funds,
Franklin Lakes, NJ 07417 Inc. (since 1984); Director of UST
Age: 73 Master Variable Series, Inc. (from
1994 to June 1997); and Trustee of
the Trust (since 1995).

Wolfe J. Frankl Trustee Retired; Director of Excelsior Funds,
2320 Cumberland Road Inc. and Excelsior Tax-Exempt Funds,
Charlottesville, VA 22901 Inc. (since 1986); Director of UST
Age: 77 Master Variable Series, Inc. (from
1994 to June 1997); Trustee of the
Trust (since 1995); Director, Deutsche
Bank Financial, Inc. (since 1989);
Director, The Harbus Corporation
(since 1951); and
</TABLE>

51
<PAGE>

W. Wallace McDowell, Jr. Trustee Director of Excelsior Funds, Inc.
c/o Prospect Capital and Excelsior Tax-Exempt Funds, Inc.
Corp. (since 1996); Trustee of Excelsior
43 Arch Street Funds and the Trust (since 1994);
Greenwich, CT 06830 Private Investor (since 1994);
Age: 61 Managing Director, Morgan Lewis
Githens & Ahn (from 1991 to 1994);
and Director, U.S. Homecare Corporation
(since 1992), Grossmans, Inc.(from
1993 to 1996), Children's Discovery
Centers (since 1984), ITI Technologies,
Inc. (since 1992) and Jack Mort
Productions (since 1987).

Jonathan Piel Trustee Director of Excelsior Funds, Inc. and
558 E. 87th Street Excelsior Tax-Exempt Funds, Inc.
New York, NY 10128 (since 1996); Trustee of Excelsior
Age: 59 Funds and the Trust (since 1994);
Vice President and Editor, Scientific
American, Inc. (from 1986 to 1994);
Director, Group for The South Fork,
Bridgehampton, New York (since 1993);
and Member, Advisory Committee, Knight
Journalism Fellowships, Massachusetts
Institute of Technology (since 1984).
</TABLE>

52
<PAGE>

<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATION
WITH THE DURING PAST 5 YEARS AND
NAME AND ADDRESS TRUST OTHER AFFILIATIONS
- ---------------- ------- -----------------------
<S> <C> <C>
Robert A. Robinson Trustee Director of Excelsior Funds, Inc. and
Church Pension Fund Excelsior Tax-Exempt Funds, Inc. (since
800 Second Avenue 1987); Director of UST Master Variable
New York, NY 10017 Series, Inc. (from 1994 to June 1997);
Age: 72 Trustee of the Trust (since 1995);
President Emeritus, The Church Pension
Fund and its affiliated companies (since
1966); Trustee, H.B. and F.H. Bugher
Foundation and Director of its wholly
owned subsidiaries -- Rosiclear Lead
and Flourspar Mining Co. and The Pigmy
Corporation (since 1984); Director,
Morehouse Publishing Co. (1974-1998);
Trustee, HSBC Funds Trust and HSBC
Mutual Funds Trust (since 1982); and
Director, Infinity Funds, Inc. (since 1995).

W. Bruce McConnel, III Secretary Partner of the law firm of Drinker
Philadelphia National Biddle & Reath LLP.
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Age: 55

Michael P. Malloy Assistant Partner of the law firm of Drinker
Philadelphia National Secretary Biddle & Reath LLP.
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Age: 40

Edward Wang Assistant Manager of Blue Sky Compliance,
Chase Global Funds Secretay Chase Global Funds Services
Services Company Company (November 1996 to present);
73 Tremont Street and Officer and Manager of Financial
Boston, MA 02108-3913 Reporting, Investors Bank & Trust
Age: 37 Company (January 1991 to November 1996).
</TABLE>

53
<PAGE>

<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATION
WITH THE DURING PAST 5 YEARS AND
NAME AND ADDRESS TRUST OTHER AFFILIATIONS
- ---------------- ------- -----------------------
<S> <C> <C>
John M. Corcoran Assistant Vice President, Director of Fund
Chase Global Funds Treasurer Administration, Chase Global Funds
Services Company Services Company (since April 1998);
73 Tremont Street Vice President, Senior Manager of
Boston, MA 02108-3913 Fund Administration, Chase Global
Age: 33 Funds Services Company (from July
1996 to April 1998); Second Vice
President, Manager of Fund
Administration, Chase Global Funds
Services Company (from October 1993
to July 1996); and Audit Manager,
Ernst & Young LLP (from August 1987
to September 1993).
</TABLE>

Each trustee of the Trust receives an annual fee of $4,000 plus a
meeting fee of $250 for each meeting attended and is reimbursed for expenses
incurred in connection with service as a trustee. The trustees may hold various
other directorships unrelated to the Funds. Drinker Biddle & Reath LLP, of which
Messrs. McConnel and Malloy are partners, receives legal fees as counsel to the
Trust. The employees of CGFSC do not receive any compensation from the Trust for
acting as officers of the Trust. No person who is currently an officer, director
or employee of the Adviser serves as an officer, director or employee of the
Trust. As of _________, 1999, the trustees and officers of the Trust as a group
owned beneficially less than 1% of the outstanding shares of each Fund, and less
than 1% of the outstanding shares of all Funds in the aggregate.

The following chart provides certain information about fees received
by the trustees in the most recently completed fiscal year.

54
<PAGE>

<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS FROM THE
ACCRUED AS ESTIMATED TRUST AND
AGGREGATE PART OF ANNUAL FUND
COMPENSATION TRUST BENEFITS UPON COMPLEX* PAID
FROM THE TRUST EXPENSES RETIREMENT TO TRUSTEES
-------------- --------- ------------- -------------

<S> <C> <C> <C> <C>
Frederick S. Wonham $_____ None None $_____(4)**
Rodman L. Drake $_____ None None $_____(4)**
W. Wallace McDowell $_____ None None $_____(4)**
Jonathan Piel $_____ None None $_____(4)**
Alfred Tannachion $_____ None None $_____(3)**
Donald L. Campbell $_____ None None $_____(3)**
Joseph C. Dugan $_____ None None $_____(3)**
Wolfe J. Frankl $_____ None None $_____(3)**
Robert A. Robinson $_____ None None $_____(3)**
</TABLE>

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

* The "Fund Complex" consists of the Trust, Excelsior Funds, Excelsior
Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. The Trust has no pension plan.

** Number of investment companies in the Fund Complex for which trustee
served as director or trustee.

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.

INVESTMENT ADVISORY SERVICES

U.S. Trust New York and U.S. Trust Company (collectively with U.S.
Trust New York, "U.S. Trust" or the "Adviser") serve as investment advisers to
the Funds, subject to the

55
<PAGE>

general supervision and guidance of the Board of Trustees of the Trust. In the
Advisory Agreements, the Adviser has agree to provide the services described in
the Prospectuses.

Each Advisory Agreement will continue in effect with respect to each
Fund as long as such continuance is specifically approved at least annually by
the Board of Trustees of the Trust or by a majority vote of the shareholders in
the applicable Fund and, in either case, by a majority of the Trustees of the
Trust 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 investment adviser and administrator has agreed to waive certain
fees.

Each Advisory Agreement provides that the Adviser may render services
to others, and each Advisory Agreement is terminable by the Trust without
penalty on not more than 60 days' nor less than 30 days' written notice when
authorized either by majority vote of the Fund or by a vote of a majority of the
Board of Trustees of the Trust, or by the 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 Adviser nor
its personnel shall be liable for any error of judgment or mistake of law or for
any loss arising out of any investment, or for any act or omission in the
execution of security transactions for a Fund, except that U.S. Trust New York
and U.S. Trust Company shall be jointly, but not severally, liable for willful
misfeasance, bad faith, gross negligence or reckless disregard of their
obligations and duties under the Advisory Agreement.

For the services provided and expenses assumed pursuant to the
Advisory Agreements, the Adviser is entitled to be paid a fee computed daily and
paid monthly, at the annual rate of 0.65% of the average daily net assets of
each of the Equity, Value Equity, Optimum Growth, Income and Total Return Bond
Funds, and 1.00% of the average daily net assets of the International Equity
Fund.

From time to time, the Adviser may voluntarily waive all or a portion
of the advisory fees payable to it by a Fund, which waiver may be terminated at
any time.

Prior to May 16, 1997, U.S. Trust New York served as investment
adviser to the Equity, Income, Total Return Bond, Value Equity and Optimum
Growth Funds pursuant to an advisory agreement substantially similar to the
Advisory Agreement currently in effect for such Funds.

For the fiscal year ended March 31, 1999, U.S. Trust received advisory
fees of $______, $______, $______, $______ and $______ with respect to the
Equity, Value Equity, Optimum Growth, Income and Total Return Bond Funds,
respectively. For the same period, U.S. Trust waived advisory fees of $______,
$______, $______, $______ and $______, with respect to the Equity, Value Equity,
Optimum Growth, Income and Total Return Bond Funds, respectively.

For the fiscal year ended March 31, 1998, U.S. Trust received advisory
fees of $573,251, $104,281, $162,368, $129,938 and $375,215 with respect to the
Equity, Value Equity, Optimum Growth, Income and Total Return Bond Funds,
respectively. For the same period,

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<PAGE>

U.S. Trust waived advisory fees of $250,968, $91,692, $119,069, $219,452 and
$600,960, with respect to the Equity, Value Equity, Optimum Growth, Income and
Total Return Bond Funds, respectively.

For the fiscal period ended March 31, 1997, U.S. Trust New York
received advisory fees of $438,147, $41,543, $48,831, $71,647, and $252,506 with
respect to the Equity, Value Equity, Optimum Growth, Income and Total Return
Bond Funds, respectively. For the same period, U.S. Trust New York waived
advisory fees of $223,185, $76,512, $82,357, $173,417 and $457,871 with respect
to the Equity, Value Equity, Optimun Growth, Income and Total Return Bond Funds,
respectively.

From June 22, 1998 to December 28, 1998, U.S. Trust Company, N.A.
("U.S. Trust, N.A.") served as the International Equity Fund's investment
adviser, pursuant to an advisory agreement substantially similar to the Advisory
Agreement currently in effect for such Fund. Prior to June 22, 1998, U.S. Trust
Company of The Pacific Northwest ("U.S. Trust Pacific") served as investment
adviser to the International Equity Fund pursuant to an advisory agreement
substantially similar to the Advisory Agreement currently in effect for the
Fund.

For the period from December 28, 1998 to March 31, 1999, U.S. Trust
received advisory fees of $______ with respect to the International Equity Fund.
For the same period, U.S. Trust waived advisory fees of $______ with respect to
the International Equity Fund.

For the period from June 22, 1998 to December 28, 1998, U.S. Trust,
N.A. received advisory fees of $______ with respect to the International Equity
Fund. For the same period, U.S. Trust, N.A. waived advisory fees of $______ with
respect to the International Equity Fund.

For the period from April 1, 1998 to June 21, 1998, U.S. Trust Pacific
received advisory fees of $______ with respect to the International Equity Fund.
For the same period, U.S. Trust Pacific waived advisory fees of $______ with
respect to the International Equity Fund.

For the fiscal year ended March 31, 1998, U.S. Trust Pacific received
advisory fees of $215,112 with respect to the International Equity Fund. For the
same period, U.S. Trust Pacific waived advisory fees of $221,324 with respect to
the International Equity Fund.

For the fiscal period ended March 31, 1997, U.S. Trust Pacific
received advisory fees of $119,788 with respect to the International Equity
Fund. For the same period, U.S. Trust Pacific waived advisory fees of $173,028
with respect to the International Equity Fund.

Prior to December 28, 1998, Harding, Loevner Management, L.P.
("Harding Loevner") served as the International Equity Fund's sub-adviser,
pursuant to an investment sub-advisory agreement (a "Sub-Advisory Agreement")
with U.S. Trust, N.A. Under the Sub-Advisory Agreement, Harding Loevner was
entitled to receive from U.S. Trust, N.A. fees at a maximum annual rate equal to
0.50% of the International Equity Fund's average daily net assets.

57
<PAGE>

Harding Loevner made the day-to-day investment decisions for the
International Equity Fund and placed the purchase and sales orders for
securities transactions of such Fund, subject in all cases to the general
supervision of U.S. Trust, N.A. Harding Loevner furnished at its own expense all
services, facilities and personnel necessary in connection with managing the
International Equity Fund's investments and effecting securities transactions
for such Fund.

For the fiscal year ended March 31, 1999, Harding Loevner received
sub-advisory fees of $______ with respect to the International Equity Fund. For
the same period, Harding Loevner waived sub-advisory fees of $______ with
respect to the International Equity Fund.

For the fiscal year ended March 31, 1998, Harding Loevner received
sub-advisory fees of $216,523 with respect to the International Equity Fund.

For the fiscal period ended March 31, 1997, Harding Loevner received
sub-advisory fees of $145,572 with respect to the International Equity Fund.

ADMINISTRATORS

CGFSC, Federated Administrative Services (an affiliate of the
Distributor) and U.S. Trust Company (collectively, the "Administrators") serve
as the Trust's administrators and provide the Funds with general administrative
and operational assistance. Under the Administration Agreement, the
Administrators have agreed to maintain office facilities for the Funds, furnish
the Funds with statistical and research data, clerical, accounting, and
bookkeeping services, and certain other services required by the Funds, and to
compute the net asset values, net income and realized capital gains or losses,
if any, of the Funds. The Administrators prepare semiannual reports to the SEC,
prepare federal and state tax returns, prepare filings with state securities
commissions, arrange for and bear the cost of processing Share purchase and
redemption orders, maintain the Funds' financial accounts and records, and
generally assist in the Funds' operations.

The Administrators also provide administrative services to the
investment portfolios of Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds,
Inc., which are also advised by U.S. Trust and its affiliates and distributed by
the Distributor. For services provided to all of the investment portfolios of
the Trust, Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. (except
for the international portfolios of Excelsior Funds, Inc. and Excelsior
Institutional Trust), the Administrators are entitled jointly to fees, computed
daily and paid monthly, based on the combined aggregate average daily net assets
of the three companies (excluding the international portfolios of the Trust and
Excelsior Funds, Inc.) as follows:

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<PAGE>

COMBINED AGGREGATE AVERAGE DAILY NET ASSETS
OF THE TRUST, EXCELSIOR FUNDS, INC. AND
EXCELSIOR TAX-EXEMPT FUNDS, INC. (EXCLUDING
THE INTERNATIONAL PORTFOLIOS OF THE TRUST
AND EXCELSIOR FUNDS, INC.)

<TABLE>
<CAPTION>
ANNUAL FEE
<S> <C>
First $200 million............................................ 0.200%
Next $200 million............................................. 0.175%
Over $400 million............................................. 0.150%
</TABLE>

Administration fees payable to the Administrators by each portfolio of
the Trust, Excelsior Funds, Inc., and Excelsior Tax-Exempt Funds, Inc. are
allocated in proportion to their relative average daily net assets at the time
of determination. From time to time, the Administrators may voluntarily waive
all or a portion of the administration fee payable to them by a Fund, which
waivers may be terminated at any time.

Prior to May 16, 1997, CGFSC, Federated Administrative Services and
U.S. Trust New York served as the Trust's administrators pursuant to an
administration agreement substantially similar to the administration agreement
currently in effect for the Trust.

For the fiscal year ended March 31, 1999, the Administrators received
administration fees of $______, $______, $______, $______, $______ and $______
with respect to the Equity, Value Equity, Optimum Growth, International Equity,
Income and Total Return Bond Funds, respectively. For the same period, the
Administrators waived fees of $_________ for the ______________ Fund(s).

For the fiscal year ended March 31, 1998, CGFSC, Federated
Administrative Services and U.S. Trust received administration fees of $194,009,
$46,129, $66,246, $75,044, $82,241 and $229,777 with respect to the Equity,
Value Equity, Optimum Growth, International Equity, Income and Total Return Bond
Funds, respectively. For the same period, CGFSC, Federated Administrative
Services and U.S. Trust waived administration fees of $12,243 for the
International Equity Fund.

For the fiscal period ended March 31, 1997, CGFSC, Federated
Administrative Services and U.S. Trust New York received administration fees of
$155,310, $27,893, $30,991, $58,563, $57,907 and $167,883 with respect to the
Equity, Value Equity, Optimum Growth, International Equity, Income and Total
Return Bond Funds, respectively.

BANKING LAWS

Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company continuously engaged in the issuance of
its shares, and prohibit banks generally from

59
<PAGE>

issuing, underwriting, selling or distributing securities such as shares of the
Funds, but such banking laws and regulations do not prohibit such a holding
company or affiliate or banks generally from acting as investment adviser,
transfer agent, or custodian to such an investment company, or from purchasing
shares of such company for and upon the order of customers. The Adviser, CGFSC
and certain Shareholder Organizations may be subject to such banking laws and
regulations. State securities laws may differ from the interpretations of
federal law discussed in this paragraph and banks and financial institutions may
be required to register as dealers pursuant to state law.

Should legislative, judicial, or administrative action prohibit or
restrict the activities of the Adviser or other Shareholder Organizations in
connection with purchases of Fund shares, the Adviser and such Shareholder
Organizations might be required to alter materially or discontinue the
investment services offered by them to Customers. It is not anticipated,
however, that any resulting change in the Funds' method of operations would
affect their net asset values per share or result in financial loss to any
shareholder.

SHAREHOLDER ORGANIZATIONS

The Trust has entered into agreements with certain Shareholder
Organizations. Such agreements require the Shareholder Organizations to provide
shareholder administrative services to their Customers who beneficially own
Shares in consideration for a Fund's payment of not more than the annual rate of
0.40% of the average daily net assets of the Fund's Shares beneficially owned by
Customers of the Shareholder Organization. Such services may include: (a) acting
as recordholder of Shares; (b) assisting in processing purchase, exchange and
redemption transactions; (c) transmitting and receiving funds in connection with
Customer orders to purchase, exchange or redeem Shares; (d) providing periodic
statements showing a Customer's account balances and confirmations of
transactions by the Customer; (e) providing tax and dividend information to
shareholders as appropriate; (f) transmitting proxy statements, annual reports,
updated prospectuses and other communications from the Trust to Customers; and
(g) providing or arranging for the provision of other related services. It is
the responsibility of Shareholder Organizations to advise Customers of any fees
that they may charge in connection with a Customer's investment. Until further
notice, the Adviser and Administrators have voluntarily agreed to waive fees
payable by a Fund in an aggregate amount equal to administrative service fees
payable by that Fund.

The Trust's agreements with Shareholder Organizations are governed by
an Administrative Services Plan (the "Plan") adopted by the Trust. Pursuant to
the Plan, the Trust's Board of Trustees will review, at least quarterly, a
written report of the amounts expended under the Trust's agreements with
Shareholder Organizations and the purposes for which the expenditures were made.
In addition, the arrangements with Shareholder Organizations will be approved
annually by a majority of the Trust's Trustees, including a majority of the
Trustees who are not "interested persons" of the Trust (as defined in the 1940
Act) and have no direct or indirect financial interest in such arrangements (the
"Disinterested Trustees").

Any material amendment to the Trust's arrangements with Shareholder
Organizations must be approved by a majority of the Trust's Board of Trustees
(including a

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<PAGE>

majority of the Disinterested Trustees). So long as the Trust's arrangements
with Shareholder Organizations are in effect, the selection and nomination of
the members of the Trust's Board of Trustees who are not "interested persons" of
the Trust (as defined in the 1940 Act) will be committed to the discretion of
such Disinterested Trustees.

For the fiscal year ended March 31, 1999, payments to Shareholder
Organizations totaled $____, $____, $____, $____, $____, and $____ with respect
to the Equity, Value Equity, Optimum Growth, Income, Total Return Bond and
International Equity Funds. Of these amounts, $____, $____, $____, $____, $____,
and $____ was paid to affiliates of U.S. Trust with respect to the Equity, Value
Equity, Optimum Growth, Income, Total Return Bond and International Equity
Funds, respectively. For the fiscal year or period ended March 31, 1998 and
1997, the Funds did not make any payments to Shareholder Organizations.

EXPENSES

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

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

TRANSFER AGENT AND CUSTODIAN

The Chase Manhattan Bank ("Chase"), a wholly-owned subsidiary of The
Chase Manhattan Corporation, serves as custodian of the Funds' assets. Under the
Custodian Agreement, Chase has agreed to: (i) maintain a separate account or
accounts in the name of the Funds; (ii) make receipts and disbursements of money
on behalf of the Funds; (iii) collect and receive all income and other payments
and distributions on account of the Funds' portfolio 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's Board of Trustees concerning the Funds' operations. Chase may, at
its own expense, open and maintain custody accounts with respect to the Funds
with other banks or trust companies, provided that Chase shall remain liable for
the performance of all its custodial duties under the Custodian Agreement,
notwithstanding any delegation. Communications to the custodian should be
directed to Chase, Mutual Funds Service Division, 3 Chase MetroTech Center, 8th
Floor, Brooklyn, NY 11245.

CGFSC serves as transfer agent for the Funds pursuant to a Transfer
Agency Agreement. Under this Agreement, CGFSC has agreed to perform the
following functions, among

61
<PAGE>

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

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

INDEPENDENT AUDITORS

______________, independent auditors, [address], serve as auditors of
the Trust. The Funds' Financial Highlights included in the Prospectuses and the
financial statements for the fiscal year ended ______________ incorporated by
reference in this Statement of Additional Information have been audited by
______________ for the periods included in their reports thereon which appear
therein.

COUNSEL

Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary of the
Trust, and Mr. Malloy, Assistant Secretary of the Trust, are partners), One
Logan Square, 18th and Cherry Streets, Philadelphia, Pennsylvania 19103, is
counsel to the Trust and will pass upon the legality of the Shares offered by
the Prospectuses.

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

62
<PAGE>

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 investment company taxable income,
and the Fund's distributions would generally be taxable as ordinary dividend
income to shareholders.

To satisfy various requirements in the Code, each Fund expects to
distribute virtually all of its net income each year. 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.

In the case of corporate shareholders, distributions (other than
capital gain dividends) will qualify for the dividends received deduction to the
extent of the gross amount of "qualifying dividends" received by a Fund for the
year. Generally, a "qualifying dividend" is a dividend that has been received
from a domestic corporation. 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 before the end of the year
will be deemed for tax purposes 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 who holds such shares as a capital asset will
be treated as long-term or short-term capital gain or loss, depending on the
shareholder's holding period for the shares. 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.

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

63
<PAGE>

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.

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

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

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

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

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

<PAGE>

TAXATION OF DISTRIBUTIONS

Dividends from ordinary income and any distributions from net
short-term capital gains are taxable to shareholders as ordinary income for
federal income tax purposes. Distributions of net capital gains (the excess of
net long-term capital gains over net short-term capital losses), if any, are
taxable to shareholders as long-term capital gains without regard to the length
of time the shareholders have held their shares. In the case of corporate
shareholders, distributions (other than capital gains dividends) will qualify
for the amount of "qualifying dividends" received by a Fund for the year.
Generally, a "qualifying dividend" is a dividend that has been received from a
domestic corporation. 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 declared by a
Fund in October, November or December with a record date before the end of the
year will be deemed for tax purposes to have been paid by the Fund and received
by the shareholder during that year, so long as the dividends are actually paid
during January of the following calendar year. Accordingly, those distributions
will be taxable to shareholders for the taxable year in which that December 31
falls.

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

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. Fund shareholders may be subject to state and
local taxes on Fund distributions to them by a Fund.

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<PAGE>

* * *

The foregoing discussion is based on federal tax laws and regulations
which are in effect on the date of this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action. Shareholders are advised to consult their tax advisers concerning their
specific situations and the application of state and local taxes.

DESCRIPTION OF THE TRUST

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 class of each Fund and to divide or
combine the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interest in each Fund. The Trust reserves
the right to create and issue any number of series or classes; 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 six active
series, although additional series may be established from time to time.

The shares of the Value Equity and Optimum Growth Funds are classified
into two separate classes of shares representing Retail Shares and Institutional
Shares. Retail Shares have different expenses than Institutional Shares which
may affect performance.

Each share (irrespective of class designation) 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 and will vote in the aggregate and not by class
or series, except as otherwise expressly required by law. Separate votes,
however, are taken by each class or series on matters affecting an individual
class or series. For example, a change in investment policy for a series would
be voted upon only by shareholders of the series involved. Shareholders of all
series of the Trust will vote together to elect Trustees of the Trust and for
certain other matters. Under certain circumstances, the shareholders of one or
more series of the Trust could control the outcome of these votes.

The 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 a 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.

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<PAGE>

The assets of the Trust received for the issue or sale of the
shares of each class of each series and all income, earnings, profits and
proceeds thereof, subject only to the rights of creditors, are specifically
allocated to such class and series and constitute the underlying assets of such
class and series. The underlying assets of each series are segregated on the
books of account, and are to be charged with the liabilities in respect to such
series and with such a share of the general liabilities of the Trust. Expenses
with respect to any two or more series are to be allocated in proportion to the
asset value of the respective series except where allocations of direct expenses
can otherwise be fairly made. The officers of the Trust, subject to the general
supervision of the Trustees, have the power to determine which liabilities are
allocable to a given class or 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, (i) 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 (ii) cause the Trust to
incorporate under the laws of the State of Delaware.

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

Under Delaware law, shareholders of a Delaware business trust are
entitled to the same limitation on personal liability which is extended to
shareholders of private for profit corporations organized under the General
Corporation Law of the State of Delaware. However, the courts of other states
may not apply Delaware law 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

67
<PAGE>

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. 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.

MISCELLANEOUS

As of May 19, 1999, the name, address and percentage ownership of each
person that owned beneficially or of record 5% or more of the outstanding
Institutional Shares of a Fund were as follows: EQUITY FUND: Olympus America
Inc. Pension Plan, c/o United States Trust Company of New York, 114 West 47th
Street, New York, New York 10036, 5.67%; and PJM Interconnection DB Plan, c/o
United States Trust Company of New York, 114 West 47th Street, New York, New
York 10036, 10.24%; VALUE EQUITY FUND: U.S. Trust Retirement Fund, c/o United
States Trust Company of New York, 114 West 47th Street, New York, New York
10036, 80.42%; OPTIMUM GROWTH FUND: Education Association Pension Plan, c/o
United States Trust Company of New York, 114 West 47th Street, New York, New
York 10036, 5.16%; and U.S. Trust Retirement Fund, c/o United States Trust
Company of New York, 114 West 47th Street, New York, New York 10036, 53.67%;
INTERNATIONAL EQUITY FUND: The Liberty Fund, c/o United States Trust Company of
New York, 114 West 47th Street, New York, New York 10036, 13.11%; The Flourence
Gould Foundation, c/o United States Trust Company of New York, 114 West 47th
Street, New York, New York 10036, 12.97%; and Natwest DEF Comp. Intl. Fund Rabbi
Trust, c/o United States Trust Company of New York, 114 West 47th Street, New
York, New York 10036, 5.12%; INCOME FUND: Eugene Higgins Residuary, c/o United
States Trust Company of New York, 114 West 47th Street, New York, New York
10036, 69.83%; P.M. Paine Foundation, c/o United States Trust Company of New
York, 114 West 47th Street, New York, New York 10036, 8.72%; and Planned
Parenthood N.Y., c/o United States Trust Company of New York, 114 West 47th
Street, New York, New York 10036, 10.17%; TOTAL RETURN BOND FUND: The Flourence
Gould Foundation, c/o United States Trust Company of New York, 114 West 47th
Street, New York, New York 10036, 15.08%; and The Liberty Fund, c/o United
States Trust Company of New York, 114 West 47th Street, New York, New York
10036, 11.82%.

As of May 19, 1999, the name, address and percentage ownership of each
person that owned beneficially or of record 5% or more of the outstanding Retail
Shares of a Fund were as follows: VALUE EQUITY FUND: K. Firth Trust, c/o United
States Trust Company of New York, 114 West 47th Street, New York, New York
10036, 56.42%.

FINANCIAL STATEMENTS

The audited financial statements and notes thereto in the Trust's
Annual Report to Shareholders for the fiscal year ended _______________ (the
"_______ Annual Report") are

68
<PAGE>

incorporated into this Statement of Additional Information by reference. No
other parts of the _____ Annual Report are incorporated by reference herein. The
financial statements included in the ______ Annual Report have been audited by
the Trust's independent auditors, __________, whose reports thereon also appear
in the __________ Annual Report and are incorporated herein by reference. Such
financial statements have been incorporated herein in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
Additional copies of the ______ Annual Report may be obtained at no charge by
telephoning CGFSC at the telephone number appearing on the front page of this
Statement of Additional Information.

69
<PAGE>

APPENDIX A

COMMERCIAL PAPER RATINGS

A Standard & Poor's ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:

"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.

"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.

"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.

"C" - Obligations are currently vulnerable to nonpayment and are
dependent on favorable business, financial, and economic conditions for the
obligor to meet its financial obligation.

"D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.

Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually debt obligations not having an original maturity in
excess of one year, unless explicitly noted. The following summarizes the rating
categories used by Moody's for commercial paper:

"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be

A-1
<PAGE>

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

"Prime-2" - Issuers (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 (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions 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 do not fall within any of the Prime rating
categories.

The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:

"D-1+" - Debt possesses the 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.

"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.

"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.

"D-2" - Debt possesses 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.

"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.

A-2
<PAGE>

"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.

"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.

Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:

"F1" - Securities possess the highest credit quality. This designation
indicates the strongest capacity for timely payment of financial commitments and
may have an added "+" to denote any exceptionally strong credit feature.

"F2" - Securities possess good credit quality. This designation
indicates a satisfactory capacity for timely payment of financial commitments,
but the margin of safety is not as great as in the case of the higher ratings.

"F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.

"B" - Securities possess speculative credit quality. This designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.

"C" - Securities possess high default risk. This designation indicates
that default is a real possibility and that the capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment.

"D" - Securities are in actual or imminent payment default.

Thomson BankWatch short-term ratings assess the likelihood of an
untimely payment of principal and interest of debt instruments with original
maturities of one year or less. The following summarizes the ratings used by
Thomson BankWatch:

"TBW-1" - This designation represents Thomson BankWatch's highest
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.

"TBW-2" - This designation represents Thomson BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1."

A-3
<PAGE>

"TBW-3" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.

"TBW-4" - This designation represents Thomson BankWatch's lowest
rating category and indicates that the obligation is regarded as non-investment
grade and therefore speculative.

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS

The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:

"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.

"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.

"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.

"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as
having significant speculative characteristics. "BB" indicates the least degree
of speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

"BB" - An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation.

"B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB", but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.

A-4
<PAGE>

"CCC" - An obligation rated "CCC" is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the obligation.
In the event of adverse business, financial or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation.

"CC" - An obligation rated "CC" is currently highly vulnerable to
nonpayment.

"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.

"D" - An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The "D" rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.

"r" - This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include
obligations linked or indexed to equities, currencies or commodities;
obligations exposed to severe prepayment risk - such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.

The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:

"Aaa" - Bonds 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 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 possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest

A-5
<PAGE>

are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.

"Baa" - Bonds 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," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.

Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.

Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic
rating classification from "Aa" through "Caa." The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of its generic rating category.

The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:

"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.

"AA" - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.

"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.

"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.

"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated
"B" possesses the risk that obligations

A-6
<PAGE>

will not be met when due. Debt rated "CCC" is well below investment grade and
has considerable uncertainty as to timely payment of principal, interest or
preferred dividends. Debt rated "DD" is a defaulted debt obligation, and the
rating "DP" represents preferred stock with dividend arrearages.

To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.

The following summarizes the ratings used by Fitch IBCA for corporate
and municipal bonds:

"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of credit risk and
are assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.

"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and indicate
very strong capacity for timely payment of financial commitments. This capacity
is not significantly vulnerable to foreseeable events.

"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of credit risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.

"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this category.

"BB" - Bonds considered to be speculative. These ratings indicate that
there is a possibility of credit risk developing, particularly as the result of
adverse economic changes over time; however, business or financial alternatives
may be available to allow financial commitments to be met. Securities rated in
this category are not investment grade.

"B" - Bonds are considered highly speculative. These ratings indicate
that significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.

"CCC", "CC" and "C" - Bonds have high default risk. Default is a real
possibility, and capacity for meeting financial commitments is solely reliant
upon sustained, favorable business or economic developments. "CC" ratings
indicate that default of some kind appears probable, and "C" ratings signal
imminent default.

A-7
<PAGE>

"DDD," "DD" and "D" - Bonds are in default. Securities are not meeting
obligations and are extremely speculative. "DDD" designates the highest
potential for recovery of amounts outstanding on any securities involved, and
"D" represents the lowest potential for recovery.

To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "B" may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major rating
categories.

Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes the
rating categories used by Thomson BankWatch for long-term debt ratings:

"AAA" - This designation indicates that the ability to repay principal
and interest on a timely basis is extremely high.

"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk compared
to issues rated in the highest category.

"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.

"BBB" - This designation represents the lowest investment-grade
category and indicates an acceptable capacity to repay principal and interest.
Issues rated "BBB" are more vulnerable to adverse developments (both internal
and external) than obligations with higher ratings.

"BB," "B," "CCC" and "CC" - These designations are assigned by Thomson
BankWatch to non-investment grade long-term debt. Such issues are regarded as
having speculative characteristics regarding the likelihood of timely payment of
principal and interest. "BB" indicates the lowest degree of speculation and "CC"
the highest degree of speculation.

"D" - This designation indicates that the long-term debt is in
default.

PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.

MUNICIPAL NOTE RATINGS

A-8
<PAGE>

A Standard and Poor's rating reflects the liquidity concerns and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:

"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess very
strong characteristics are given a plus (+) designation.

"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.

"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.

Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:

"MIG-1"/"VMIG-1" - This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.

"MIG-2"/"VMIG-2" - This designation denotes high quality, with margins
of protection that are ample although not so large as in the preceding group.

"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with
all security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.

"MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.

"SG" - This designation denotes speculative quality. Debt obligations
in this category lack margins of protection.

Fitch IBCA and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.

A-9
<PAGE>
<PAGE>

EXCELSIOR INSTITUTIONAL TRUST

FORM N-1A

PART C. OTHER INFORMATION

ITEM 23. Exhibits

(a) (1) Trust Instrument of the Registrant dated as of April 27,
1994 (2).

(2) Amended and Restated Schedule A to Trust Instrument of the
Registrant (11).

(b) By-Laws of the Registrant (2).

(d) (1) Investment Advisory Agreement dated December 28,
1998 among the Registrant, U.S. Trust Company of Connecticut
and United States Trust Company of New York with respect to
the International Equity Fund (11).

(2) Investment Advisory Agreement dated May 16, 1997 among the
Registrant, U.S. Trust Company of Connecticut and United
States Trust Company of New York with respect to the Equity,
Income, Total Return Bond, Value Equity and Optimum Growth
Funds (8).

(3) Investment Advisory Agreement dated November 15, 1995
between the Registrant and U.S. Trust Company of The Pacific
Northwest with respect to the Balanced and International
Equity Funds (7).

(4) Assumption Agreement dated June 19, 1998 among the
Registrant, U.S. Trust Company of The Pacific Northwest and
U.S. Trust Company of California (11).

(5) Investment Sub-Advisory Agreement dated November 15, 1995
between U.S. Trust Company of The Pacific Northwest and
Becker Capital Management, Inc. with respect to the Balanced
Fund (7).

(6) Assumption Agreement dated June 19, 1998 among the
Registrant, U.S. Trust Company of the Pacific Northwest,
U.S. Trust Company of California and Becker Capital
Management, Inc. (11).

<PAGE>

(e) Distribution Agreement dated August 1, 1995 (as amended and
restated on February 9, 1996, July 25, 1997 and July 31,
1998) between the Registrant and Edgewood Services, Inc.
(11).

(f) None.

(g) (1) Custody Agreement dated September 1, 1995 (as amended and
restated on August 1, 1997) between the Registrant and The
Chase Manhattan Bank (9).

(2) Amendment No. 1 dated May 22, 1998 to the Custody Agreement
dated September 1, 1995 (as amended and restated on August
1, 1997) between the Registrant and The Chase Manhattan Bank
(11).

(3) Amendment No. 2 dated May 22, 1998 to the Custody Agreement
dated September 1, 1995 (as amended and restated on August
1, 1997) between the Registrant and The Chase Manhattan Bank
(11).

(4) Amendment No. 3 dated July 31, 1998 to the Custody Agreement
dated September 1, 1995 (as amended and restated on August
1, 1997) between the Registrant and The Chase Manhattan Bank
(11).

(h) (1) Amended and Restated Administration Agreement dated July 31,
1998 among the Registrant, Chase Global Funds Services
Company, Federated Administrative Services and U.S. Trust
Company of Connecticut (11).

(2) Amended and Restated Mutual Funds Transfer Agency Agreement
dated July 31, 1998 between the Registrant and Chase Global
Funds Services Company (11).

(3) Amended and Restated Administrative Services Plan and
Related Form of Shareholder Servicing Agreement (9).

(i) Opinion of Counsel (10).

(j) Consent of Drinker Biddle & Reath LLP (11).

(k) None.

(l) (1) Investor Representation Letter of Initial Shareholder (1).

<PAGE>

(2) Purchase Agreement between the Registrant and Edgewood
Services, Inc. dated March 1, 1996 relating to shares of the
Optimum Growth and Value Equity Funds (7).

(3) Purchase Agreement between the Registrant and Edgewood
Services, Inc. dated August 22, 1997 relating to Trust
Shares of the Balanced and International Equity Funds (9).

(m) Amended and Restated Distribution Plan and Form of
Distribution Agreement (9).

(n) To be filed by Amendment.

(o) Amended and Restated Plan Pursuant to Rule 18f-3 for
Operation of a Multi-Class System (11).

Notes:
------

(1) Incorporated herein by reference to Pre-Effective Amendment
No. 2 to Registrant's Registration Statement, as filed with
the SEC on June 22, 1994.

(2) Incorporated herein by reference to Post-Effective Amendment
No. 3 to Registrant's Registration Statement, as filed with
the SEC on June 13, 1995.

(3) Incorporated herein by reference to Post-Effective Amendment
No. 4 to Registrant's Registration Statement, as filed with
the SEC on October 2, 1995.

(4) Incorporated herein by reference to Post-Effective Amendment
No. 5 to Registrant's Registration Statement, as filed with
the SEC on December 19, 1995.

(5) Incorporated herein by reference to Post-Effective Amendment
No. 7 to Registrant's Registration Statement, as filed with
the SEC on February 23, 1996.

(6) Incorporated herein by reference to Post-Effective Amendment
No. 10 to Registrant's Registration Statement, as filed with
the SEC on March 7, 1996.

(7) Incorporated herein by reference to Post-Effective Amendment
No. 11 to Registrant's Registration Statement, as filed with
the SEC on September 30, 1996.

<PAGE>

(8) Incorporated herein by reference to Post-Effective Amendment
No. 14 to Registrant's Registration Statement, as filed with
the SEC on July 31, 1997.

(9) Incorporated herein by reference to Post-Effective Amendment
No. 15 to Registrant's Registration Statement, as filed with
the SEC on September 30, 1997.

(10) Incorporated herein by reference to Post-Effective Amendment
No. 16 to Registrant's Registration Statement, as filed with
the SEC on July 29, 1998.

(11) Filed herewith.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Registrant is controlled by its Board of Trustees.

ITEM 25. INDEMNIFICATION

Article IX of Registrant's Trust Instrument, incorporated herein by
reference to Exhibit (a)(1) hereto, provides for the indemnification of
Registrant's trustees and officers.

Indemnification of Registrant's principal underwriter against certain
losses is provided for in Section IV of the Distribution Agreement incorporated
herein by reference to Exhibit (e) hereto. Limitations on the liability of the
Registrant's investment advisers are provided for in Section 9 of the Investment
Advisory Agreements incorporated herein by reference to Exhibits (d)(1), (d)(2)
and (d)(3) hereto. Indemnification of Registrant's sub-adviser against certain
losses is provided for in Section 9 of the Investment Sub-Advisory Agreement
incorporated herein by reference to Exhibit (d)(6) hereto.

The trustees and officers of the Registrant and the personnel of the
Registrant's administrators 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

<PAGE>

the Registrant and the principal underwriter in connection with the successful
defense of any action, suit 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 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER

(a) U.S. Trust Company of Connecticut:

U.S. Trust Company of Connecticut ("U.S. Trust CT") is a
Connecticut state bank and trust company located in Stamford, Connecticut. Set
forth below are the names and principal businesses of the directors and certain
senior executive officers of U.S. Trust CT, including those who are engaged in
any other business, profession, vocation or employment of a substantial nature.

<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust CT Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Director John N. Irwin Lawyer
1133 Avenue of the
Americas
New York, NY 10035

Director June Noble Larkin Foundation Not-for-Profit
Edward John Noble Director Organization
Foundation, Inc.
32 East 57th Street
New York, NY 10022

Director Tucker H. Warner Co-Founder, Consulting Firm
The Nutmeg Financial Partner &
Group, LLC Director
1157 Highland Avenue
West
Cheshire, CT 06903

Director Thomas C. Clark Managing Director, Asset Management,
United States Trust United States Trust Investment and
Company of New York Company of New York Fiduciary Services

<PAGE>

11 West 54th Street
New York, NY 10019

Position
with U.S. Principal Type of
Trust CT Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>

Director Maribeth S. Rahe Vice Chairman, Asset Management,
United States Trust United States Trust Investment and
Company of New York Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10036

Director Frederick B. Taylor Vice Chairman, Asset Management,
United States Trust United States Trust Investment and
Company of New York Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10036

Director Kenneth G. Walsh Executive Vice Asset Management,
United States Trust President, United Investment and
Company of New York States Trust Company Fiduciary Services
114 West 47th Street of New York
New York, NY 10036

Director, William V. Ferdinand Managing Director Asset Management,
Managing U.S. Trust Company & CIO Fiduciary Services
Director & of Connecticut and Private Banking
CIO 225 High Ridge Road
Stamford, CT 06905

Director, W. Michael Funck President & CEO Asset Management,
President & U.S. Trust Company Fiduciary Services
CEO of Connecticut and Private Banking
225 High Ridge Road
Stamford, CT 06905

Vice Presi- Neil M. McDonnell Vice President & Asset Management,
dent & U.S. Trust Company Treasurer Fiduciary Services
Treasurer of Connecticut and Private Banking
225 High Ridge Road
Stamford, CT 06905

<PAGE>

Vice Presi- Alberto Rodriguez Vice President & Asset Management,
dent & U.S. Trust Company Secretary Fiduciary Services
Secretary of Connecticut and Private Banking
225 High Ridge Road
Stamford, CT 06905
</TABLE>

(b) United States Trust Company of New York:

United States Trust Company of New York ("U.S. Trust NY") is a full-service
state-chartered bank located in New York, New York. Set forth below are the
names and principal businesses of the directors and certain senior executive
officers of U.S. Trust NY, including those who are engaged in any other
business, profession, vocation, or employment of a substantial nature.

<PAGE>

<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NY Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Director Eleanor Baum Dean of School Academic
The Cooper Union for of Engineering
the Advancement
of Science & Art
4 Arleigh Road
Great Neck, NY 11021

Director Samuel C. Butler Partner in Cravath, Law Firm
Cravath, Swaine Swaine & Moore
& Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019

Director Peter O. Crisp Chairman of Venture
Venrock Inc. Venrock, Inc.; Capital
103 Horseshoe Road Retired
Mill Neck, NY 11765

Director Antonia M. Grumbach Partner in Patter- Law Firm
Patterson, Belknap, son, Belknap, Webb
Webb & Tyler LLP & Tyler
1133 Avenue of the
Americas
New York, NY 10036

Director, H. Marshall Schwarz Chairman of the Asset Management,
Chairman United States Trust Board & Chief Exe- Investment and
of the Board Company of New York cutive Officer of Fiduciary Services
and Chief 114 West 47th Street U.S. Trust Corp. and
Executive New York, NY 10036 U.S. Trust NY
Officer

Director Philippe de Montebello Director of the Art Museum
The Metropolitan Museum Metropolitan
of Art Museum of Art
1000 Fifth Avenue
New York, NY 10028-0198

<PAGE>

Position
with U.S. Principal Type of
Trust NY Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Director Paul W. Douglas Retired Chairman of Coal Mining,
60 E. 42nd Street The Pittston Company Transportation
Suite 4603 and Security
New York, NY 10165 Services

Director Frederic C. Hamilton Chairman of the Investment and
The Hamilton Companies Board Venture Capital
1560 Broadway
Suite 2000
Denver, CO 80202

Director John H. Stookey Corporate Director
Per Scholas Inc. and Trustee
131 Walnut Avenue
Bronx, New York 10454

Director Robert N. Wilson Vice Chairman of Health Care
Johnson & Johnson the Board of Johnson Products
One Johnson & & Johnson
Johnson Plaza
New Brunswick, NJ 08933

Director Peter L. Malkin Chairman of Law Firm
Wein, Malkin LLP Wein, Malkin & Bettex
Lincoln Building
60 East 42nd Street
New York, NY 10165

Director David A. Olsen Retired Chairman of Risk & Insurance
1120 Park Avenue Johnson & Higgens Services
New York, NY 10128

Director Richard F. Tucker Retired Vice Chairman- Petroleum
11 Over Rock Lane Mobil Oil Corporation and Chemicals
Westport, CT 06880

<PAGE>

<CAPTION>
Position
with U.S. Principal Type of
Trust NY Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Director Ruth A. Wooden President & CEO Not for
The Advertising Profit Public
Council, Inc. Service
261 Madison Avenue Advertising
11th Floor
New York, NY 10016

Executive Paul K. Napoli Executive Asset Management,
Vice United States Trust Vice President Investment and
President Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10036

Director and Maribeth S. Rahe Vice Chairman Asset Management,
Vice Chair- United States Trust Investment and
man Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10036

Director, Frederick B. Taylor Vice Chairman and Asset Management,
Vice Chair- United States Trust Chief Investment Of- Investment and
man and Company of New York ficer of U.S. Trust Fiduciary Services
Chief Invest- 114 West 47th Street Corporation and U.S.
ment Officer New York, NY 10036 Trust NY

Director, Jeffrey S. Maurer President and Asset Management,
President United States Trust Chief Operating Investment and
and Chief Company of New York Officer Fiduciary Services
Operating 114 West 47th Street
Officer New York, NY 10036

Executive John L. Kirby Executive Asset Management,
Vice United States Trust Vice President Investment and
President Company of New York Chief Financial Fiduciary Services
114 West 47th Street Officer
New York, NY 10030

<PAGE>

Position
with U.S. Principal Type of
Trust NY Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Executive Kenneth G. Walsh Executive Asset Management,
Vice United States Trust Vice President Investment and
President Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10030

Director Philip L. Smith Corporate Director and
P.O. Box 386 Trustee
Ponte Verde Beach, FL 32004

Executive John C. Hover, II Executive Investment
Vice United States Trust Vice President Management,
President Company of New York Fiduciary Services
114 West 47th Street and Private
New York, NY 10030 Banking

Executive John M. Deignan Executive Investment
Vice United States Trust Vice President Management,
President Company of New York Fiduciary Services
114 West 47th Street and Private
New York, NY 10030 Banking
</TABLE>

U.S. Trust Company, N.A. ("U.S. Trust N.A.") is a national bank located in
Los Angeles, California. The name, position with U.S. Trust N.A., address,
principal occupation and type of business are set forth below for the trustees
and certain senior executive officers of U.S. Trust N.A. including those who are
engaged in any other business, profession, vocation, or employment of a
substantial nature.

<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust N.A. Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Director and William R. Barrett, Jr. Managing Director Asset
Managing Director Management,
Investment and
Fiduciary Services

<PAGE>

<CAPTION>
Position
with U.S. Principal Type of
Trust N.A. Name Occupation Business
- -------- ---- ---------- --------
<S> <C> <C> <C>
Director Thomas C. Clark Managing Director Asset Management,
Investment

Director Jeffrey S. Maurer President and Asset Management,
Chief Operating Investment and
Officer Fiduciary Services

Director/Managing Robert M. Raney Managing Director Asset Management,
Director and Chief and Chief Investment and
Investment Officer Investment Officer Fiduciary Services

Director /President Gregory F. Sanford President and Chief Asset Management,
and Chief Operating Operating Officer Investment and
Fiduciary Services

Director/Chairman Franklin E. Ulf Chairman of the Asset Management,
of the Board Board Investment and
Fiduciary Services

Director and Charles E. Wert Executive Vice Asset Management,
Executive Vice President Investment and
President Fiduciary Services

Director Maribeth S. Rahe Vice Chairman Asset Management,
Investment and
Fiduciary Services
</TABLE>

(d) Becker Capital Management, Inc. (Investment Sub-Adviser to the
Balanced Fund):

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

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

<PAGE>

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

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

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

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

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

WARREN HASTINGS III -- Vice President - Fixed Income; Becker Capital
Management, Inc., 1211 SW Fifth Avenue, Suite 2185, Portland, OR 97204; Vice
President --Fixed Income of Becker Capital Management, Inc. (investment
advisory).

ITEM 27. PRINCIPAL UNDERWRITERS

(a) Edgewood Services, Inc., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following open-end
investment companies: Deutsche Portfolios, Deutsche Funds, Inc., Excelsior
Funds, Inc., Excelsior Tax-Exempt Funds, Inc., Excelsior Funds, FTI Funds,
FundManager Portfolios, Great Plains Funds, Old Westbury Funds, Inc., The
Riverfront Funds, Robertsons Stephens Investment Trust, WesMark Funds and WCT
Funds.

<PAGE>

<TABLE>
<CAPTION>
(b) Names and Principal Positions and Offices with Offices with
Business Addresses the Distributor Registrant
------------------- -------------------------- ------------
<S> <C> <C>
Lawrence Caracciolo Director and President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

Arthur L. Cherry Director, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

J. Christopher Donahue Director, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

Thomas P. Sholes Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

Ernest L. Linane Assistant Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

Christine T. Johnson Assistant Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

Denis McAuley Treasurer, --
5800 Corporate Drive Edgewood Services, Inc
Pittsburgh, PA 15237-2829

Leslie K. Ross Secretary, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-2829

Amanda J. Reed Assistant Secretary, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-2829
</TABLE>

<PAGE>

ITEM 28. LOCATIONS 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:

(1) UNITED STATES TRUST COMPANY OF NEW YORK, 114 West 47th Street, New York,
New York 10036 (records relating to its functions as investment adviser and
transfer agent).

(2) U.S. TRUST COMPANY OF CONNECTICUT, 225 High Ridge Road, East Building,
Stamford, Connecticut 06905 (records relating to its function as investment
adviser and co-administrator).

(3) U.S. TRUST COMPANY, N.A., 515 South Flower Street, Los Angeles, California
90071 (records relating to its function as investment adviser).

(4) BECKER CAPITAL MANAGEMENT, INC., 2185 PacWest Center, Portland, Oregon
97204 (records relating to its function as investment sub-adviser).

(5) EDGEWOOD SERVICES, INC., Clearing Operations, 5800 Corporate Drive,
Pittsburgh, PA 15237-5829 (records relating to its function as
distributor).

(6) CHASE GLOBAL FUNDS SERVICES COMPANY, 73 Tremont Street, Boston, MA
02108-3913 (records relating to its functions as co-administrator and
transfer agent).

(7) FEDERATED ADMINISTRATIVE SERVICES, Federated Investors Tower, Pittsburgh,
PA 15222-3779 (records relating to its function as co-administrator).

(8) THE CHASE MANHATTAN BANK, 3 Chase MetroTech Center, 8th Floor, Brooklyn, NY
11245 (records relating to its function as custodian).

(9) DRINKER BIDDLE & REATH LLP, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107-3496 (Registrant's
Articles of Incorporation, Bylaws, and Minute Books).

ITEM 29. MANAGEMENT SERVICES

Inapplicable.

ITEM 30. UNDERTAKINGS

Not Applicable.

Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest available Annual Report to
Shareholders upon request and without charge.

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 (the "1933
Act") and the Investment Company Act of 1940, Excelsior Institutional Trust has
duly caused this Post-Effective Amendment No. 17 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Philadelphia and the
Commonwealth of Pennsylvania on the 28th day of May, 1999.

EXCELSIOR INSTITUTIONAL TRUST
Registrant

* Frederick S. Wonham
--------------------------------------------
Frederick S. Wonham, President and Treasurer
(Signature and Title)

Pursuant to the requirements of the 1933 Act, this Post-Effective
Amendment No. 17 to Excelsior Institutional Trust's Registration Statement on
Form N-1A has been signed below by the following persons in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Frederick S. Wonham Chairman of the
- ----------------------------- Board, President May 28, 1999
Frederick S. Wonham and Treasurer

* Joseph H. Dugan
- -----------------------------
Joseph H. Dugan Trustee May 28, 1999

- -----------------------------
Donald L. Campbell Trustee

* Wolfe J. Frankl
- -----------------------------
Wolfe J. Frankl Trustee May 28, 1999

* Robert A. Robinson
- -----------------------------
Robert A. Robinson Trustee May 28, 1999

* Alfred Tannachion
- -----------------------------
Alfred Tannachion Trustee May 28, 1999

<PAGE>

- -----------------------------
Rodman L. Drake Trustee

* Jonathan Piel
- -----------------------------
Jonathan Piel Trustee May 28, 1999
</TABLE>

*By: /s/ W. Bruce McConnel, III
----------------------------------
W. Bruce McConnel, III
Attorney-in-Fact

<PAGE>

EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST

POWER OF ATTORNEY

KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s and Excelsior Institutional Trust's
(collectively, the "Companies") respective Registration Statements on Form N-1A
pursuant to the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended (the "Acts") and all instruments necessary or incidental
in connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and said attorney
shall have full power and authority, to do and perform in the name and on behalf
of the undersigned in any and all capacities, every act whatsoever requisite or
necessary to be done, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorney may
lawfully do or cause to be done by virtue hereof.

Dated: May 21, 1999 /s/ Alfred C. Tannachion
------------------------
Alfred C. Tannachion

<PAGE>

EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST

POWER OF ATTORNEY

KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s and Excelsior Institutional Trust's
(collectively, the "Companies") respective Registration Statements on Form N-1A
pursuant to the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended (the "Acts") and all instruments necessary or incidental
in connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that either
of said attorneys may lawfully do or cause to be done by virtue hereof.

Dated: May 21, 1999 /s/ Joseph H. Dugan
-------------------
Joseph H. Dugan

<PAGE>

EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST

POWER OF ATTORNEY

KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s and Excelsior Institutional Trust's
(collectively, the "Companies") respective Registration Statements on Form N-1A
pursuant to the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended (the "Acts") and all instruments necessary or incidental
in connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that either
of said attorneys may lawfully do or cause to be done by virtue hereof.

Dated: May 21, 1999 /s/ Robert A. Robinson
----------------------
Robert A. Robinson

<PAGE>

EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST

POWER OF ATTORNEY

KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s and Excelsior Institutional Trust's
(collectively, the "Companies") respective Registration Statements on Form N-1A
pursuant to the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended (the "Acts") and all instruments necessary or incidental
in connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that either
of said attorneys may lawfully do or cause to be done by virtue hereof.

Dated: May 21, 1999 /s/ Wolfe J. Frankl
-------------------
Wolfe J. Frankl
<PAGE>

EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS

POWER OF ATTORNEY

KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
W. Bruce McConnel, III his true and lawful attorney-in-fact and agent with full
power of substitution and resubstitution, for him and in his name, place and
stead, in his capacity as director/trustee or officer, or both, to execute
amendments to Excelsior Funds, Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s,
Excelsior Institutional Trust's and Excelsior Funds' (collectively, the
"Companies") respective Registration Statements on Form N-1A pursuant to the
Investment Company Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "Acts") and all instruments necessary or incidental in connection
therewith pursuant to said Acts and any rules, regulations, or requirements of
the Securities and Exchange Commission in respect thereof, and to file the same
with the Securities and Exchange Commission, and said attorney shall have full
power and authority, to do and perform in the name and on behalf of the
undersigned in any and all capacities, every act whatsoever requisite or
necessary to be done, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorney may
lawfully do or cause to be done by virtue hereof.

Dated: May 21, 1999 /s/ Frederick S. Wonham
-----------------------
Frederick S. Wonham
<PAGE>

EXCELSIOR FUNDS, INC.
EXCELSIOR TAX-EXEMPT FUNDS, INC.
EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR FUNDS

POWER OF ATTORNEY

KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Frederick S. Wonham and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
director/trustee or officer, or both, to execute amendments to Excelsior Funds,
Inc.'s, Excelsior Tax-Exempt Funds, Inc.'s, Excelsior Institutional Trust's and
Excelsior Funds' (collectively, the "Companies") respective Registration
Statements on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts") and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in any
and all capacities, every act whatsoever requisite or necessary to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that either of said attorneys may lawfully do or
cause to be done by virtue hereof.

Dated: May 21, 1999 /s/ Jonathan Piel
-----------------
Jonathan Piel

<PAGE>

EXHIBIT INDEX

Exhibit No. Description
- ----------- -----------

(a) (2) Amended and Restated Schedule A to Trust Instrument of the
Registrant.

(d) (1) Investment Advisory Agreement dated December 28, 1998
among Registrant, United States Trust Company of Connecticut and
United States Trust Company of New York with respect to the
International Equity Fund.

(4) Assumption Agreement dated June 19, 1998 between Registrant,
United States Trust Company of the Pacific Northwest and United
States Trust Company of California.

(6) Assumption Agreement dated June 19, 1998 between Registrant,
United States Trust Company of the Pacific Northwest, United
States Trust Company of California and Becker Capital Management.

(e) Distribution Agreement dated August 1, 1995 (as amended and
restated on February 9, 1996, July 25, 1997 and July 31, 1998)
between the Registrant and Edgewood Services, Inc.

(g) (2) Amendment No. 1 dated May 22, 1998 to the Custody Agreement dated
September 1, 1995 (as amended and restated on August 1, 1997)
between Registrant and The Chase Manhattan Bank.

(3) Amendment No. 2 dated May 22, 1998 to the Custody Agreement dated
September 1, 1995 (as amended and restated on August 1, 1997)
between Registrant and The Chase Manhattan Bank.

(4) Amendment No. 3 dated July 31, 1998 to the Custody Agreement
dated September 1, 1995 (as amended and restated on August 1,
1997) between Registrant and The Chase Manhattan Bank.

(h) (1) Amended and Restated Administration Agreement dated July 31, 1998
among the Registrant, Chase Global Funds Services Company,
Federated Administrative Services

<PAGE>

and United States Trust Company of Connecticut.

(2) Amended and Restated Mutual Funds Transfer Agency Agreement dated
July 31, 1998 between Registrant and Chase Global Funds Services
Company.

(j) Consent of Drinker Biddle & Reath LLP.

(o) Amended and Restated Plan Pursuant to Rule 18f-3 for Operation of
a Multi-Class System.

<PAGE>

AMENDED AND RESTATED SCHEDULE A
TO TRUST INSTRUMENT DATED APRIL 27, 1994
OF EXCELSIOR INSTITUTIONAL TRUST

Excelsior Equity Fund
Excelsior Optimum Growth Fund
Excelsior Balanced Fund
Excelsior Value Equity Fund
Excelsior Income Fund
Excelsior Total Return Bond Fund
Excelsior International Equity Fund

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Schedule A to the Trust Instrument of Excelsior Institutional Trust.

/s/ Frederick S. Wonham
-----------------------
Frederick S. Wonham
Chairman, President and Treasurer

Dated as of: February 18, 1999

<PAGE>

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made as of December 28, 1998 by and among EXCELSIOR INSTITUTIONAL
TRUST (the "Trust"), a Delaware business trust registered as an open-end
management investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), UNITED STATES TRUST COMPANY OF NEW YORK
("USTNY"), a state-chartered bank and trust company, and U.S. TRUST COMPANY OF
CONNECTICUT ("USTCT"), a Connecticut state bank and trust company (USTCT and
USTNY are collectively referred to herein as the "Adviser").

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

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

2. DUTIES OF THE ADVISER. Subject to the direction and control of the Board
of Trustees of the Trust, the Adviser shall:

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

<PAGE>

transaction or of the overall responsibilities of the Adviser with
respect to the accounts as to which it exercises investment discretion.

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

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

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

5. EXPENSES.

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

(b) It is understood that the Trust will pay all of its expenses and
liabilities, including compensation of its independent Trustees; taxes and
governmental fees; interest charges; fees and expenses of the Trust's
independent auditors and legal counsel; trade association membership dues; fees
and expenses of any custodian (including safekeeping of funds and securities,
maintenance of books and accounts and calculation of the net

<PAGE>

asset value of beneficial interests of the Series), transfer agent and registrar
and dividend disbursing agent of the Trust; expenses of preparing and mailing
reports to investors and regulatory agencies; expenses relating to the issuance,
registration and qualification of shares of the Series, and the preparation,
printing and mailing of prospectuses for such purposes; insurance premiums;
brokerage and other expenses of executing portfolio transactions; expenses of
investors' and Trustees' meetings; organization expenses; and extraordinary
expenses.

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

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

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

9. LIMITATIONS ON LIABILITY.

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

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

<PAGE>

under this Agreement or for any losses that may be sustained in the purchase,
holding or sale of any security. The liability of the Adviser hereunder shall be
joint, but not several.

10. EFFECTIVE DATE; TERMINATION; AMENDMENTS.

(a) This Agreement shall be effective as of the date hereof and unless
terminated sooner as provided herein, shall continue until July 31, 1999.
Thereafter, unless terminated sooner as provided herein, this Agreement shall
continue in effect as to the Series for successive annual periods, provided that
such continuance is specifically approved at least annually by the vote of a
majority of the Board of Trustees of the Trust who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such continuance, and either: (i) the vote
of a majority of the outstanding voting securities of the Series; or (ii) the
vote of a majority of the full Board of Trustees.

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

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

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

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

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

<PAGE>

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

EXCELSIOR INSTITUTIONAL TRUST

By: /s/ F.S. Wonham
--------------------------------

Name: F.S. Wonham

Title: President and Treasurer

UNITED STATES TRUST COMPANY
OF NEW YORK

By: /s/ Kenneth G. Walsh
--------------------------------

Name: Kenneth G. Walsh

Title: Executive Vice President

U.S. TRUST COMPANY OF
CONNECTICUT

By: /s/ W. Michael Funck
--------------------------------

Name: W. Michael Funck

Title: President & CEO

<PAGE>

Exhibit A
to Investment
Advisory Agreement

SCHEDULE OF SERIES AND FEES UNDER INVESTMENT
ADVISORY AGREEMENT

Annual Fee (as a percentage of the
average daily net assets of the
Series Names Series)
- ------------ -------

Excelsior Institutional
International Equity Fund 1.00%

<PAGE>

ASSUMPTION AGREEMENT

AGREEMENT made as of June 19, 1998 among EXCELSIOR INSTITUTIONAL TRUST
(the "Trust"), U.S. TRUST COMPANY OF THE PACIFIC NORTHWEST ("U.S. Trust
Pacific"), a wholly-owned subsidiary of U.S. TRUST CORPORATION, and U.S. TRUST
COMPANY OF CALIFORNIA ("U.S. Trust California"), a wholly-owned subsidiary of
U.S. TRUST CORPORATION.

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

WHEREAS, U.S. Trust Pacific has been previously appointed as
investment adviser to the Balanced and International Equity Funds (the "Funds")
of the Trust pursuant to an Investment Advisory Agreement by and between U.S.
Trust Pacific and the Trust dated as of November 15, 1995 (the "Investment
Advisory Agreement");

WHEREAS, U.S. Trust Pacific intends to reorganize into U.S. Trust
California (the "Reorganization");

WHEREAS, U.S. Trust California intends to change its name to U.S.
Trust Company, N.A. in connection with the Reorganization;

WHEREAS, U.S. Trust Pacific and U.S. Trust California desire to have
U.S. Trust California assume the rights, responsibilities, liabilities and
obligations of U.S. Trust Pacific under the Investment Advisory Agreement with
respect to the Funds.

NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:

1. U.S. Trust California, in consideration for the right to receive
payment of fees under the Investment Advisory Agreement, hereby assumes
the rights, responsibilities, liabilities and obligations of U.S. Trust Pacific
under the Investment Advisory Agreement with respect to the Funds.

2. U.S. Trust Pacific and U.S. Trust California hereby represent to
the Trust that following the Reorganization (i) the management personnel of U.S.
Trust Pacific responsible for providing investment advisory services to the
Funds under the Investment Advisory Agreement, including the portfolio managers
and the supervisory personnel, will be employees of U.S. Trust California and
that they will continue to provide such services for the Funds, (ii) U.S. Trust
California will remain a wholly-owned subsidiary of U.S. Trust Corporation, and
(iii) U.S. Trust Pacific believes that the proposed assumption does not involve
a change in actual control or actual management with respect to the investment
adviser or the Funds.

3. This Assumption Agreement shall be attached to and made a part of
the

<PAGE>

Investment Advisory Agreement.

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

U.S. TRUST COMPANY OF THE PACIFIC NORTHWEST

/s/Douglas F. Adams
-------------------
Name: Douglas F. Adams
Title: President

U.S. TRUST COMPANY OF CALIFORNIA

/s/Gregory F. Sanford
---------------------
Name: Gregory F. Sanford
Title:President and CEO

EXCELSIOR INSTITUTIONAL TRUST
on behalf of the International Equity Fund
and Balanced Fund

/s/F.S. Wonham
--------------
Name: F.S. Wonham
Title: President and CEO

<PAGE>

ASSUMPTION AGREEMENT

AGREEMENT made as of June 19, 1998 among U.S. TRUST COMPANY OF THE
PACIFIC NORTHWEST ("U.S. Trust Pacific"), a wholly-owned subsidiary of U.S.
TRUST CORPORATION, U.S. TRUST COMPANY OF CALIFORNIA ("U.S. Trust California"), a
wholly-owned subsidiary of U.S. TRUST CORPORATION, and BECKER CAPITAL
MANAGEMENT, INC. ("Becker Capital").

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

WHEREAS, U.S. Trust Pacific has been previously appointed as
investment adviser to the Balanced Fund (the "Fund") of the Trust pursuant to an
Investment Advisory Agreement dated November 15, 1995 and Becker Capital has
been previously appointed as sub-investment adviser to the Trust pursuant to a
Investment Sub-Advisory Agreement by and between U.S. Trust Pacific and Becker
Capital dated November 15, 1995 (the "Sub-Advisory Agreement");

WHEREAS, U.S. Trust Pacific intends to reorganize into U.S. Trust
California;

WHEREAS, U.S. Trust Pacific and U.S. Trust California desire to have
U.S. Trust California assume the rights, responsibilities, liabilities, and
obligations of U.S. Trust Pacific under the Sub-Advisory Agreement with respect
to the Fund.

NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:

1. U.S. Trust California, in consideration for the right to receive
payment of fees under the Investment Advisory Agreement, hereby assumes all the
rights, responsibilities, liabilities and obligations of U.S. Trust Pacific
under the Sub-Advisory Agreement with respect to the Fund.

2. This Assumption Agreement shall be attached to and made a part of
the Sub-Advisory Agreement.

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

U.S. TRUST COMPANY OF THE PACIFIC NORTHWEST

/s/Douglas F. Adams
-------------------

<PAGE>

Name: Douglas F. Adams
Title: President

U.S. TRUST COMPANY OF CALIFORNIA

/s/Gregory F. Sanford
---------------------
Name: Gregory F. Sanford
Title: President and CEO

BECKER CAPITAL MANAGEMENT, INC.

/s/Janeen S. McAninch
---------------------
Name: Janeen S. McAninch
Title: President and C.O.O.

<PAGE>

AMENDED AND RESTATED
DISTRIBUTION AGREEMENT

Distribution Agreement made as of August 1, 1995, as amended and restated
on February 9, 1996, July 25, 1997, and July 31, 1998 between EXCELSIOR
INSTITUTIONAL TRUST, a Delaware business trust having its principal office and
place of business at 73 Tremont Street, Boston, Massachusetts 02108 (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

Page 1 July 31, 1998

<PAGE>

(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.

Page 2 July 31, 1998
<PAGE>

(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-1 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.

Page 3 July 31, 1998
<PAGE>

(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-1 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

Page 4 July 31, 1998
<PAGE>

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

Page 5 July 31, 1998

<PAGE>

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 of 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

Page 6 July 31, 1998
<PAGE>

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, 1999, and thereafter shall
continue automatically for successive annual periods ending on July 31 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

Page 7 July 31, 1998
<PAGE>

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 45 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.

Page 8 July 31, 1998
<PAGE>

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: /s/ F.S. Wonham
---------------------------------
Name: Frederick S. Wonham
Title: President and Treasurer

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

By: /s/ Kenneth W. Pegher, Jr.
---------------------------------
Name: Kenneth W. Pegher, Jr.
Title: Treasurer

Page 9 July 31, 1998
<PAGE>

SCHEDULE I

Name of Series
- --------------

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

EXCELSIOR INSTITUTIONAL TRUST

By: /s/ F.S. Wonham
----------------------------------
Name: Frederick S. Wonham
Title: President and Treasurer

EDGEWOOD SERVICES, INC.

By: /s/ Kenneth W. Pegher, Jr.
----------------------------------
Name: Kenneth W. Pegher, Jr.
Title: Treasurer

Agreed to and accepted on: July 31, 1998

Page 10 July 31, 1998

<PAGE>

SCHEDULE II

The following provisions are hereby incorporated and made part of the
Distribution Agreement dated as of August 1, 1995, as amended and restated on
February 9, 1996, July 25, 1997, and July 31, 1998, 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.

Page 11 July 31, 1998

<PAGE>

Witness the due execution hereof as of the 31st day of July, 1998.

EXCELSIOR INSTITUTIONAL TRUST

By: /s/ F.S. Wonham
----------------------------------
Name: Frederick S. Wonham
Title: President and Treasurer

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

By: /s/ Kenneth W. Pegher, Jr.
----------------------------------
Name: Kenneth W. Pegher, Jr.
Title: Treasurer

Page 12 July 31, 1998

<PAGE>

AMENDMENT No. 1, dated as of May 22, 1998 to the September 1, 1995 custody
agreement ("Agreement") (as amended and restated on August 1, 1997), between
Excelsior Institutional Trust ("Customer") on behalf of the investment
portfolios of the Customer listed on Exhibit A to the Agreement, having a place
of business at 73 Tremont St., Boston, MA 02108, and The Chase Manhattan Bank
("Bank"), having a place of business at 270 Park Ave., New York, N. Y.
10017-2070.

It is hereby agreed as follows:

Section 1. Except as modified hereby, the Agreement is confirmed in all
respects. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Agreement.

Section 2. The Agreement is amended as follows by adding the following as
new Section 24:

Unless the context clearly requires otherwise, the following words shall
have the meanings set forth below when used herein:

(a) "CMBI" shall mean Chase Manhattan Bank International, an indirect
wholly-owned subsidiary of Bank, located in Moscow, Russia, and any nominee
companies appointed by it.

(b) "International Financial Institution" shall mean any bank in the
top 1,000 (together with their affiliated companies) as measured by "Tier 1"
capital or any broker/dealer in the top 100 as measured by capital.

(d) "No-Action Letter" shall mean the response of the Securities
and Exchange Commission's Office of Chief Counsel of Investment Management,
dated April 18, 1995, in respect of the Templeton Russia Fund, Inc. (SEC Ref.
No. 95-151-CC, File No. 811-8788) providing "no-action" relief under Section
17(f) of The Investment Company Act of 1940, as amended, and SEC Rule 17f-5
thereunder, in connection with custody of such Templeton Russia Fund, Inc.'s
investments in Russian Securities.

(e) "Reasonable Care" shall mean the use of reasonable custodial
practices under the applicable circumstances as measured by the custodial
practices then prevailing in Russia of International Financial Institutions
acting as custodians for their institutional investor clients in Russia.

(f) "Registrar Company" shall mean any entity providing share
registration services to an issuer of Russian Securities.

(g) "Registrar Contract" shall mean a contract between CMBI and a
Registrar Company (and as the same may be amended from time to time) containing,
INTER ALIA, the contractual provisions described at paragraphs (a)-(e) on pps.
5-6 of the No-Action Letter.

<PAGE>

(h) "Russian Security" shall mean an equity Security issued by a
Russian issuer.

(i) "Share Extract" shall mean: (1) an extract of its share
registration books issued by a Registrar Company indicating an investor's
ownership of a security; and (2) a form prepared by CMBI or its agent in those
cases where a Registrar Company is unwilling to issue a Share Extract.

Section 3. Section 6 of the Agreement is amended by adding the following
paragraph at the end thereof: "With respect to Russia, payment for Russian
Securities shall not be made prior to the issuance and receipt of the Share
Extract (as defined in Section 24(i)(1)) relating to such Russian Security.
Delivery of Russian Securities may be made in accordance with the customary or
established securities trading or securities processing practices and procedures
in Russia. Delivery of Russian Securities may also be made in any manner
specifically required by Instructions acceptable to the Bank. Customer shall
promptly supply such transaction and settlement information as may be requested
by Bank or CMBI in connection with particular transactions."

Section 4. Section 12(a)(i) of the Agreement is amended with respect to
Russian custody by deleting the phrase "reasonable care" wherever it appears and
substituting, in lieu thereof, the phrase "Reasonable Care."

Section 5. Section 12(a)(i) of the Agreement is further amended with
respect to Russian custody only by only inserting the following at the end of
the first sentence thereof: "; provided that, with respect to Russian
Securities, Bank's responsibilities shall be limited to safekeeping relevant
Share Extracts."

Section 6. Section 12(a)(i) of the Agreement is further amended with
respect to Russian custody by inserting the following after the second sentence
thereof: "Delegation by Bank to CMBI shall not relieve Bank of any
responsibility to Customer for any loss due to such delegation, and Bank shall
be liable for any loss or claim arising out of or in connection with the
performance by CMBI of such delegated duties to the same extent as if Bank had
itself provided the custody services hereunder. In connection with the
foregoing, neither Bank nor CMBI shall assume responsibility for, and neither
shall be liable for, any action or inaction of any Registrar Company not
affiliated with Bank or CMBI and no Registrar Company shall be, or shall be
deemed to be, Bank, CMBI, a Subcustodian, a securities depository or the
employee, agent or personnel of any of the foregoing. To the extent that CMBI
employs agents unaffiliated with CMBI to perform any of the functions to be
performed by Bank or CMBI with respect to Russian Securities, neither Bank nor
CMBI shall be responsible for any act, omission, default or for the solvency of
any such agent unless the appointment of such agent was made with Negligence or
in bad faith, except that where Bank or CMBI uses (i) an affiliated nominee or
(ii) an agent to perform the share registration or share confirmation functions
described in Paragraphs (a)-(e) on pps. 5-6 of the No-Action Letter, and, to the
extent applicable to CMBI, the share registration functions described on pps.
2-3 of the No-Action Letter, Bank and CMBI shall be liable to Customer as if
CMBI were responsible for performing such services itself."

<PAGE>

Section 7. Section 12(a)(ii) is amended with respect to Russian custody by
deleting the word "negligently" and substituting, in lieu thereof, the word
"Negligently."

Section 8. Section 12(a)(iii) is amended with respect to Russian custody by
deleting the word "negligence" and substituting, in lieu thereof, the word
"Negligence."

Section 9. Section 14(b) of the Agreement is amended by adding a new
subparagraph to the end thereof as follows: "(iv) It is understood and agreed
that Bank need only use its reasonable efforts with respect to performing the
functions described in this Section 14(b) with respect to Russian Securities
(except that Bank shall use Reasonable Care with respect to its duties to
transmit information to Customer).

Section 10. Add a new Section 25 to the Agreement as follows:

(a) Bank will advise Customer (and will update such advice from time
to time as changes occur) of those Registrar Companies with which CMBI has
entered into a Registrar Contract. Bank shall cause CMBI both to monitor each
Registrar Company and to promptly advise Customer and its investment advisor
when CMBI has actual knowledge of the occurrence of any one or more of the
events described in paragraphs (i)-(v) on pps. 8-9 of the No-Action Letter with
respect to a Registrar Company that serves in that capacity for any issuer the
shares of which are held by Customer.

(b) Where Customer is considering investing in the Russian Securities
of an issuer as to which CMBI does not have a Registrar Contract with the
issuer's Registrar Company, Customer may request that Bank ask that CMBI both
consider whether it would be willing to attempt to enter into such a Registrar
Contract and to advise Customer of its willingness to do so. Where CMBI has
agreed to make such an attempt, Bank will advise Customer of the occurrence of
any one or more of the events described in paragraphs (i)-(iv) on pps. 8-9 of
the No-Action Letter of which CMBI has actual knowledge.

(c) Where Customer is considering investing in the Russian Securities
of an issuer as to which CMBI has a Registrar Contract with the issuer's
Registrar Company, Customer may advise Bank of its interest in investing in such
issuer and, in such event, Bank will advise Customer of the occurrence of any
one or more of the events described in paragraphs (i)-(v) on pps. 8-9 of the
No-Action Letter of which CMBI has actual knowledge.

Section 11. Add a new Section 26 to the Agreement as follows: "Customer
shall pay for and hold Bank and CMBI harmless from any liability or loss
resulting from the imposition or assessment of any taxes (including, but not
limited to, state, stamp and other duties) or other governmental charges, and
any related expenses incurred by Bank, CMBI or their respective agents with
respect to income on Customer's Russian Securities.

Section 12. Add a new Section 27 to the Agreement as follows: "Customer
acknowledges and agrees that CMBI may not be able, in given cases and despite
its reasonable efforts, to obtain a Share

<PAGE>

Extract from a Registrar Company and CMBI shall not be liable in any such event
including with respect to any losses resulting from such failure."

Section 13. Add a new Section 28 to the Agreement as follows: "Customer
acknowledges that it has received, reviewed and understands Bank's market report
for Russia, including, but not limited to, the risks described therein."

Section 14. Add a new Section 29 to the Agreement as follows: "Subject to
the cooperation of a Registrar Company, for at least the first two years
following CMBI's first use of a Registrar Company, Bank shall cause CMBI to
conduct share confirmations on at least a quarterly basis, although thereafter
confirmations may be conducted on a less frequent basis if Customer's Board of
Directors, in consultation with CMBI, determines it to be appropriate."

Section 15. Add a new Section 30 to the Agreement as follows: "Bank shall
cause CMBI to prepare for distribution to Customer's Board of Directors a
quarterly report identifying: (i) any concerns it has regarding the Russian
share registration system that should be brought to the attention of the Board
of Directors; and (ii) the steps CMBI has taken during the reporting period to
ensure that Customer's interests continue to be appropriately recorded."

Section 16. Add a new Section 31 to the Agreement as follows: "Except as
provided in new Section 25(b), the services to be provided by Bank hereunder
with respect to Russian Securities will be provided only in relation to
Russian Securities for which CMBI has entered into a Registrar Contract with
the relevant Registrar Company."

Section 17. Add a new Section 32 to the Agreement as follows: "Bank
confirms that its procedures and arrangements as set forth herein are designed
to comply with the No-Action Letter."

* * * * * * *

IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.

EXCELSIOR INSTITUTIONAL TRUST THE CHASE MANHATTAN BANK

By: /s/ F. S. Wonham By: /s/ Robert Boyles
---------------- -----------------
Name: Frederick S. Wonham Name: Robert Boyles
Title: President and Treasurer Title: Chairman and CEO

<PAGE>

AMENDMENT No. 2, dated as of May 22, 1998, to the September 1, 1995 custody
agreement (as amended and restated on August 1, 1997) ("Agreement"), between
Excelsior Institutional Trust ("Fund") on behalf of the investment portfolios of
the Fund listed on Exhibit A to the Agreement (each a "Portfolio" and
collectively the "Portfolios"), having a place of business at 73 Tremont St.,
Boston, MA 02108 and The Chase Manhattan Bank ("Bank"), having a place of
business at 270 Park Ave., New York, N.Y. 10017-2070.

It is hereby agreed as follows:

Section 1. Except as modified hereby, the Agreement is confirmed in all
respects. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Agreement.

Section 2. The Agreement is amended as follows:

A. Delete the phrase "the second paragraph of" in the seventh line of
Section 1 of the Agreement.

B. Section 3 of the Agreement is amended and restated as follows:

3. ELIGIBLE FOREIGN CUSTODIANS AND SECURITIES DEPOSITORIES

(a) Fund's board of directors (hereinafter "Board") on behalf of each
Portfolio hereby delegates to Bank, and Bank hereby accepts the delegation to
it, of the obligation to perform as Fund's "Foreign Custody Manager' (as that
term is defined in SEC rule 17f-5(a)(2)), both for the purpose of selecting
Eligible Foreign Custodians (as that term is defined in SEC rule 17f-5(a)(1),
and as the same may be amended from time to time, or that have otherwise been
made exempt pursuant to an, SEC exemptive order) to hold Property and of
evaluating the contractual arrangements with such Eligible Foreign Custodians
(as set forth in SEC rule 17f-5(c)(2)); provided that, the term Eligible Foreign
Custodian shall not include any "Compulsory Depository." A Compulsory Depository
shall mean a securities depository or clearing agency the use of which is
compulsory because: (1) its use is required by law or regulation, (2) securities
cannot be withdrawn from the depository, or (3) maintaining securities outside
the depository is not consistent with prevailing custodial practices in the
country which the depository serves. For each Compulsory Depository used or
intended to be used by Fund of which Bank is advised, Bank shall provide Fund
from time to time with information addressing the factors set forth in SEC Rule
17f-5(c)(1) to the extent reasonably available to Bank, together with Bank's
analysis of the same (an example of which is set forth in Appendix 1-C hereto)
to assist Fund in determining the appropriateness of placing Assets therein.
Compulsory Depositories used by Bank as of the date hereof are set forth in
Appendix 1-A hereto, and as the same may be amended on notice to Fund from time
to time.

(b) In connection with the foregoing, Bank shall:

(i) provide written reports notifying Fund's Board of the placement of

<PAGE>

Property with particular Eligible Foreign Custodians and of any
material change in the arrangements with such Eligible Foreign
Custodians, with such reports to be provided to Fund's Board at such
times as the Board deems reasonable and appropriate based on the
circumstances of Fund's foreign custody arrangements (and until
further notice from Fund such reports shall be provided not less than
quarterly with respect to the placement of Property with particular
Eligible Foreign Custodians and with reasonable promptness (but not
less than quarterly) upon the occurrence of any material change in the
contracts or arrangements with or procedures or practices of such
Eligible Foreign Custodians);

(ii) exercise such reasonable care, prudence and diligence in
performing as Fund's Foreign Custody Manager as a person having
responsibility for the safekeeping of Property would exercise;

(iii) in selecting an Eligible Foreign Custodian, first have
determined that Property placed and maintained in the safekeeping of
such Eligible Foreign Custodian shall be subject to reasonable care,
based on the standards applicable to custodians in the relevant
market, after having considered all factors relevant to the
safekeeping of such Property, including, without limitation, those
factors set forth in SEC rule 17f-5(c)(1)(i)-(iv);

(iv) determine that the written contract with the Eligible Foreign
Custodian (or, in the case of an Eligible Foreign Custodian that is a
securities depository or clearing agency, such contract, the rules or
established practices or procedures of the depository, or any
combination of the foregoing) requires that the Eligible Foreign
Custodian will provide reasonable care for Property based on the
standards applicable to custodians in the relevant market; and

(v) have established a system to monitor the continued appropriateness
of maintaining Property with particular Eligible Foreign Custodians
and of the governing contractual arrangements.

Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Property on behalf of Fund with Eligible Foreign Custodians pursuant to a
written contract deemed appropriate by Bank.

(c) Except as expressly provided herein, Fund shall be solely responsible
to assure that the maintenance of Property hereunder complies with the rules,
regulations, interpretations and exemptive orders promulgated by or under the
authority of the SEC.

(d) Bank represents to Fund that it is a U.S. Bank as defined in Rule
17f-5(a)(7). Fund, on behalf of each Portfolio, represents to Bank that: (1) the
Property being placed and maintained in Bank's custody are subject to the
Investment Company Act of 1940, as amended (the "1940 Act"), as the same may be
amended from time to time; (2) its Board has determined that it is reasonable to
rely on Bank to perform as Fund's Foreign Custody Manager; and (3) its

<PAGE>

Board or its investment adviser shall have determined that Fund may maintain
Property in each country in which Fund's Property shall be held hereunder and
determined to accept the risks arising therefrom (including, but not limited to,
a country's financial infrastructure (and including any Compulsory Depository
operating in such country), prevailing custody and settlement practices, laws
applicable to the safekeeping and recovery of Property held in custody, and the
likelihood of nationalization, currency controls and the like) (collectively,
"Country Risk"). Nothing contained herein shall require Bank to make any
selection or to engage in any monitoring on behalf of Fund that would entail
consideration of Country Risk.

(e) Bank shall provide to Fund such information relating to Country Risk as
is specified in Appendix 1-B hereto. Fund hereby acknowledges that: (i) such
information is solely designed to inform Fund of market conditions and
procedures and is not intended as a recommendation to invest or not invest in
particular markets; and (ii) Bank has gathered the information from sources it
considers reliable, but that Bank shall have no responsibility for inaccuracies
or incomplete information.

(f) At the request of Fund, Bank may, but need not, add an Eligible Foreign
Custodian that is either a bank or a non-Compulsory Depository where Bank has
not acted as Foreign Custody Manager with respect to the selection thereof. Bank
shall notify Fund in the event that it elects to add any such entity.

(g) The term "subcustodian" as used herein shall mean the following:

(i) a "U.S. Bank," which shall mean a U.S. bank as defined in SEC rule
17f-5(a)(7); and

(ii) an "Eligible Foreign Custodian," which shall mean (i) a banking
institution or trust company, incorporated or organized under the laws
of a country other than the United States, that is regulated as such
by that country's government or an agency thereof, (ii) a
majority-owned direct or indirect subsidiary of a U.S. bank or bank
holding company which subsidiary is incorporated or organized under
the laws of a country other than the United States; (iii) a securities
depository or clearing agency (other than a Compulsory Depository),
incorporated or organized under the laws of a country other than the
United States, that acts as a system for the central handling of
securities or equivalent book-entries in that country and that is
regulated by a foreign financial regulatory authority as defined under
section 2(a)(50) of the 1940 Act, (iv) a securities depository or
clearing agency organized under the laws of a country other than the
United States when acting as a transnational system ("Transnational
Depository") for the central handling of securities or equivalent
book-entries, and (v) any other entity that shall have been so
qualified by exemptive order, rule or other appropriate action of the
SEC.

C. In the fourth line of Section 4(e) of the Agreement replace the word
"its" with "their" and after the word "administration" add the following
language: "or, in the case of cash

<PAGE>

deposits, except for liens or rights in favor of creditors of the subcustodian
arising under bankruptcy, insolvency or similar laws".

D. Insert the following language at the beginning of the second sentence of
Section 12(a)(i): "Except with respect to those countries as to which the
parties may from time to time in the future agree in writing otherwise".

E. Insert the following at the beginning of Section 12(a)(ii) of the
Agreement: "Absent negligence, bad faith or willful misconduct in performing as
Fund's Foreign Custody Manager with respect to the affected subcustodian, Bank
shall not be responsible for the insolvency of any subcustodian which is not a
branch or affiliate of Bank."

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.

EXCELSIOR INSTITUTIONAL THE CHASE MANHATTAN BANK
TRUST

By: /s/ F.S. Wonham By: /s/ Robert Boyles
------------------------------ --------------------------------
Name: Frederick S. Wonham Name: Robert Boyles
Title: President and Treasurer Title: Chairman and CEO

<PAGE>

Appendix 1-A

COMPULSORY DEPOSITORIES

<PAGE>

Appendix 1-B

INFORMATION REGARDING COUNTRY RISK

1. To aid Fund's board in its determinations regarding Country Risk, Bank
shall furnish board annually and upon the initial placing of Property into a
country the following information (check items applicable):

A. Opinions of local counsel concerning:

___ i. Whether applicable foreign law would restrict the access afforded
Fund's independent public accountants to books and records kept by an
eligible foreign custodian located in that country.

___ ii. Whether applicable foreign law would restrict the Fund's ability to
recover its Property in the event of the bankruptcy of an Eligible
Foreign Custodian located in that country.

___ iii. Whether applicable foreign law would restrict the Fund's ability to
recover Property that are lost while under the control of an Eligible
Foreign Custodian located in the country.

B. Written information concerning:

___ i. The likelihood of expropriation, nationalization, freezes, or
confiscation of Fund's Property.

___ ii. Whether difficulties in converting Fund's cash and cash equivalents to
U.S. dollars are reasonably foreseeable.

C. A market report with respect to the following topics:

(i) securities regulatory environment, (ii) foreign ownership
restrictions, (iii) foreign exchange, (iv) securities settlement and
registration, (v) taxation, and (vi) compulsory depositories
(including depository evaluation).

2. Bank shall furnish the following additional information:

Market flashes, including with respect to changes in the information in
market reports.

<PAGE>

EXCELSIOR INSTITUTIONAL TRUST
AMENDMENT NO. 3
TO
CUSTODY AGREEMENT

WHEREAS, The Chase Manhattan Bank (the "Bank") and Excelsior Institutional
Trust (the "Fund") desire to amend the Custody Agreement (the "Agreement") dated
as of September 1, 1995 (as amended and restated on August 1, 1997) by and
between them to change the time period required for notice of termination of the
Agreement from 60 to 45 days.

NOW THEREFORE, the parties hereto, intending to be legally bound hereby,
agree that the Agreement is amended as follows:

1. Paragraph No. 17 shall henceforth read:

"17. TERMINATION. This Agreement may be terminated by the Fund or the
Bank by 45 days' written notice to the other, sent by registered mail. If
notice of termination is given by the Bank, the Fund shall, within 60 days
following the giving of such notice, deliver to the Bank a certified copy
of a resolution of the Board of Trustees of the Fund specifying the names
of the persons to whom the Bank shall deliver such Securities and cash,
after deducting therefrom any amounts which the Bank determines to be owed
to it under Section 15 hereof. If within 60 days following the giving of a
notice of termination by the Bank, the Bank does not receive from the Fund
a certified copy of a resolution of the Board of Trustees of the Fund
specifying the names of the persons to whom the cash in each Deposit
Account shall be paid and to whom the Securities in each Custody Account
shall be delivered, the Bank, at its election, may deliver such Securities
and pay such cash to a bank or trust company doing business in the State of
New York and qualified as a custodian under the Investment Company Act of
1940 and other applicable rules and regulations to be held and disposed of
pursuant to the provisions of this Agreement, or to Authorized Persons, or
may continue to hold such Securities and cash until a certified copy of one
or more resolutions as aforesaid is delivered to the Bank. The obligations
of the parties hereto regarding the use of reasonable care, indemnities and
payment of fees and expenses shall survive the termination of this
Agreement, and the obligations of each Portfolio of the Fund to indemnify
and/or hold harmless other persons or entities under this Agreement shall
be the several (and not the joint or joint and several) obligation of each
Portfolio of the Fund."

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of July 31, 1998.

EXCELSIOR INSTITUTIONAL TRUST

By: /s/ F.S Wonham
---------------
Title: President and Treasurer
-----------------------

THE CHASE MANHATTAN BANK

By: /s/ Donald P. Hearn
--------------------

Title: Senior Vice President
---------------------

<PAGE>
AMENDED AND RESTATED
ADMINISTRATION AGREEMENT

This AGREEMENT made as of July 31, 1998 by and among EXCELSIOR
INSTITUTIONAL TRUST, a Delaware business trust (the "Company"), CHASE GLOBAL
FUNDS SERVICES COMPANY, a Delaware corporation ("CGFSC"), FEDERATED
ADMINISTRATIVE SERVICES ("FAS"), a Delaware trust, and U.S. TRUST COMPANY OF
CONNECTICUT ("U.S. Trust"), a Connecticut state bank and trust company (CGFSC,
FAS and U.S. Trust are collectively referred to as the "Administrators").

WITNESSETH:

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

WHEREAS, the Company wishes to retain the Administrators to provide,
as co-administrators, certain administration services with respect to one or
more of the Company's investment portfolios (individually, a "Fund," and
collectively, the "Funds"), as described and set forth on one or more exhibits
to this Agreement, and the Administrators are willing to furnish such services;

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:

1. APPOINTMENT. The Company hereby appoints the Administrators to
provide administration services to the Funds for the period and on the terms set
forth in this Agreement. The Administrators accept such appointment and agree
to furnish the services herein set forth in return for the compensation as
provided in Section 4 of this Agreement. In the event that the Company
establishes one or more investment portfolios other than the Funds with respect
to which it decides to retain the Administrators to act as co-administrators
hereunder, the Company shall notify the Administrators in writing. If the
Administrators are willing to render such services to a new investment
portfolio, they shall so notify the Company in writing whereupon such investment
portfolio shall become a Fund hereunder and shall be subject to the provisions
of this Agreement to the same extent as the Funds, except to the extent that
said provisions (including those relating to the compensation payable by the
Company) may be modified with respect to such investment portfolio in writing by
the Company and the Administrators at the time of the addition of such new
investment portfolio.

2. DELIVERY OF DOCUMENTS. The Company has furnished each of the
Administrators with copies, properly certified or authenticated, of each of the
following:

(a) Resolutions of the Company's Board of Trustees authorizing
the appointment of the Administrators to provide certain administration services
to the Company and approving this Agreement;

<PAGE>

(b) The Company's Trust Instrument ("Charter");

(d) The Company's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission ("SEC");

(e) The Company's most recent Post-Effective Amendment to its
Registration Statement on Form N-1A (File Nos. 33-78264, 811-8490) (the
"Registration Statement") under the Securities Act of 1933 and the 1940 Act, as
filed with the SEC;

(f) The Company's Administrative Services and Distribution
Plans; and

(g) The Company's most recent Prospectuses and Statements of
Additional Information and all amendments and supplements thereto (such
Prospectuses and Statements of Additional Information and supplements thereto,
as presently in effect and as from time to time amended and supplemented, herein
called the "Prospectus").

The Company will timely furnish each of the Administrators from
time to time with copies, properly certified or authenticated, of all amendments
of or supplements to the foregoing, if any.

3. SERVICES AND DUTIES. Subject to the supervision and control of the
Company's Board of Trustees, and as delineated on one or more Exhibit to the
Agreement, the Administrators agree to assist in supervising various aspects of
each Fund's administrative operations, including the performance of the
following specific services for each Fund:

(a) Providing office facilities (which may be in the offices of
any of the Administrators or a corporate affiliate of any of them, but shall be
in such location as the Company shall reasonably approve);

(b) Furnishing statistical and research data, clerical services,
and stationery and office supplies;

(c) Keeping and maintaining all financial accounts and records
(other than those required to be maintained by the Company's Custodian and
Transfer Agent);

(d) Computing each Fund's net asset value, net income and net
capital gain (loss) in accordance with the Company's Prospectus and resolutions
of its Board of Trustees;

(e) Compiling data for and preparing for execution and filing
with the SEC required reports and notices to shareholders of record and the SEC
including, without limitation, Semi-Annual and Annual Reports to Shareholders,
Semi-Annual Reports on Form N-SAR and timely Rule 24f-2 Notices;

(f) Compiling data for, and preparing for execution and filing,
all reports or other documents required by Federal, state and other applicable
laws and regulations, including those required by

<PAGE>

applicable laws and regulations, including those required by applicable Federal
and state tax laws (other than those required to be filed by the Company's
Custodian or Transfer Agent);

(g) Reviewing and providing advice with respect to all sales
literature (advertisements, brochures and shareholder communications) for each
of the Funds and any class or series thereof;

(h) Assisting in developing and monitoring compliance procedures
for each Fund and any class or series thereof, including, without limitation,
procedures to monitor compliance with applicable law and regulations, each
Fund's investment objectives, policies and restrictions, its continued
qualification as a regulated investment company under the Internal Revenue Code
of 1986, as amended, and other tax matters;

(i) Monitoring the Company's arrangements with respect to
services provided by certain organizations ("Organizations") under its
Distribution Plan. With respect to Organizations, the Administrators shall
specifically monitor and review the services rendered under the Distribution
Plan by Organizations to their customers who are the beneficial owners of
shares, pursuant to agreements between the Company and such Organizations
("Agreements"), including, without limitation, reviewing the qualifications of
financial institutions wishing to be Organizations, assisting in the execution
and delivery of Agreements, reporting to the Company's Board of Trustees with
respect to the amounts paid or payable by the Company from time to time under
the Agreements and the nature of the services provided by Organizations, and
maintaining appropriate records in connection with such duties;

(j) Monitoring the Company's arrangements with respect to
services provided by certain organizations ("Service Organizations") under its
Administrative Services Plan, provided that each Administrator will only be
responsible for monitoring arrangements with Service Organizations with whom the
Administrator has established the servicing relationship on behalf of the
Company. With respect to such Service Organizations, the Administrators shall
specifically monitor and review the services rendered by Service Organizations
to their customers who are the beneficial owners of shares, pursuant to
agreements between the Company and such Service Organizations ("Servicing
Agreements"), including, without limitation, reviewing the qualifications of
financial institutions wishing to be Service Organizations, assisting in the
execution and delivery of Servicing Agreements, reporting to the Company's Board
of Trustees with respect to the amounts paid or payable by the Company from time
to time under the Servicing Agreements and the nature of the services provided
by Service Organizations, and maintaining appropriate records in connection with
such duties;

(k) Determining, together with the Company's Board of Trustees,
the jurisdictions in which the Company's shares shall be registered or qualified
for sale and, in connection therewith, maintaining the registration or
qualification of shares for sale under the securities laws of any state.
Payment of share registration fees and any fees for qualifying or continuing the
qualification of any Fund as a dealer or broker, if applicable, shall be made by
that Fund;

(l) Assisting to the extent requested by the Company and its
outside counsel with the preparation of the Company's Registration Statement on
Form N-1A or any replacement therefor; and

<PAGE>

(m) Assisting in the monitoring of regulatory and legislative
developments which may affect the Company and, in response to such developments,
counseling and assisting the Company in routine regulatory examinations or
investigations of the Company, and working with outside counsel to the Company
in connection with regulatory matters or litigation.

In performing their duties as co-administrators of the Company, the
Administrators (a) will act in accordance with the Company's Charter, Bylaws,
Prospectus and the instructions and directions of the Company's Board of
Trustees and will conform to, and comply with, the requirements of the 1940 Act
and all other applicable Federal or state laws and regulations, and (b) will
consult with outside legal counsel to the Company, as necessary or appropriate.

The Administrators will preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under said Act in connection with the services required to be performed
hereunder. The Administrators further agree that all such records which they
maintain for the Company are the property of the Company and further agree to
surrender promptly to the Company any of such records upon the Company's
request.

4. FEES; EXPENSES; EXPENSE REIMBURSEMENT.

For the services rendered pursuant to this Agreement for all Funds,
the Administrators shall be entitled jointly to a fee based on the average net
assets of the Company, determined at the following annual rates applied to the
average combined daily net assets of all of the Funds (except the International
Equity Fund) and all of the investment portfolios of Excelsior Funds, Inc.
("Excelsior Fund") and Excelsior Tax-Exempt Funds, Inc. (except the
International, Pacific/Asia, Pan European, Latin America and Emerging Markets
Funds of Excelsior Fund): .20% of the first $200 million; .175% of the next
$200 million; and .15% of any amount in excess of $400 million. Each Fund
(except the International Equity Fund) will pay a portion of the total fee
payable by the Company in an amount equal to the proportion that such Fund's
average daily net assets bears to the total average daily net assets of all the
Funds of the Company (except the International Equity Fund). For the services
provided to the International Equity Fund, the Administrators shall be entitled
jointly to a fee at the annual rate of .20% of the average daily net assets of
such Fund. The fee attributable to each Fund shall be the several (and not
joint or joint and several) obligation of each Fund. Such fees are to be
computed daily and paid monthly on the first business day of the following
month. Upon any termination of this Agreement before the end of any month, the
fee for such part of the month shall be pro-rated according to the proportion
which such period bears to the full monthly period and shall be payable upon the
date of termination of this Agreement.

For purposes of determining fees payable to the Administrators, the
value of each Fund's net assets shall be computed as required by its Prospectus,
generally accepted accounting principles, and resolutions of the Company's Board
of Trustees.

The Administrators will from time to time employ or associate with
themselves such person or persons as they may believe to be fitted to assist
them in the performance of this

<PAGE>

Agreement. Such person or persons may be officers and employees who are
employed by both the Administrators and the Company. The compensation of such
person or persons for such employment shall be paid by the Administrators and no
obligation may be incurred on behalf of the Company in such respect.

The Administrators will bear all expenses in connection with the
performance of their services under this Agreement except as otherwise expressly
provided herein. Other expenses to be incurred in the operation of the Funds,
including taxes, interest, brokerage fees and commissions, if any, salaries and
fees of officers and trustees who are not officers, directors, shareholders or
employees of the Administrators, or the Company's investment adviser or
distributor for the Funds, Securities and Exchange Commission fees and state
Blue Sky qualification fees, advisory and administration fees, charges of
custodians, transfer and dividend disbursing agents' fees, certain insurance
premiums, outside auditing and legal expenses, payments to Organizations and
Service Organizations, costs of maintenance of corporate existence, typesetting
and printing of prospectuses for regulatory purposes and for distribution to
current shareholders of the Funds, costs of shareholders' reports and corporate
meetings and any extraordinary expenses, will be borne by the Company, PROVIDED,
HOWEVER, that, except pursuant to the Distribution Plan, the Company will not
bear, directly or indirectly, the cost of any activity which is primarily
intended to result in the distribution of shares of the Funds, and FURTHER
PROVIDED that the Administrators may utilize one or more independent pricing
services, approved from time to time by the Board of Trustees of the Company, to
obtain securities prices in connection with determining the net asset value of
each Fund and that each Fund will reimburse the Administrators for its share of
the cost of such services based upon its actual use of the services.

If in any fiscal year any Fund's aggregate expenses (as defined under
the securities regulations of any state having jurisdiction over the Fund)
exceed the expense limitations of any such state, the Administrators agree to
reimburse such Fund for a portion of any such excess expenses in an amount equal
to the proportion that the fees otherwise payable to the Administrators bears to
the total amount of investment advisory and administration fees otherwise
payable by the Fund. The expense reimbursement obligation of the Administrators
is limited to the amount of their fees hereunder for such fiscal year, PROVIDED,
HOWEVER, that notwithstanding the foregoing, the Administrators shall reimburse
such Fund for a portion of any such excess expenses in an amount equal to the
proportion that the fee otherwise payable to the Administrators bears to the
total amount of investment advisory and administration fees otherwise payable by
the Fund regardless of the amount of fees paid to the Administrators during such
fiscal year to the extent that the securities regulations of any state having
jurisdiction over the Funds so require. Such expense reimbursement, if any,
will be estimated, reconciled and paid on a monthly basis. With respect to the
amounts required to be reimbursed under this Section 4 in any fiscal year, the
parties to this Agreement agree that U.S. Trust alone shall reimburse such
amounts up to the amount of fees received by CGFSC and U.S. Trust under this
Agreement for such year. FAS shall only be obligated to reimburse expenses to
the extent that the amounts required to be reimbursed under this Section 4 in
any fiscal year exceed the amount of fees received by CGFSC and U.S. Trust under
this Agreement for such year and to the extent

<PAGE>

that U.S. Trust makes reimbursements equalling the amount of all such fees
received by CGFSC and U.S. Trust, provided that the reimbursement obligation of
FAS shall be limited to the amount of fees received by it under this Agreement
for such year.

5. PROPRIETARY AND CONFIDENTIAL INFORMATION. The Administrators
agree on behalf of themselves and their employees to treat confidentially and as
proprietary information of the Company all records and other information
relative to the Funds and prior, present or potential shareholders, and not to
use such records and information for any purpose other than performance of their
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Company, which approval shall not be unreasonably
withheld and may not be withheld where the Administrators may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Company.

6. LIMITATION OF LIABILITY. Each Administrator shall not be liable
for any error of judgment or mistake of law or for any loss or expense suffered
by the Company in connection with the matters to which this Agreement relates,
except for a loss or expense resulting from willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, partner, employee or agent of any of the
Administrators, who may be or become an officer, trustee, employee or agent of
the Company shall be deemed when rendering services to the Company or acting on
any business of the Company (other than services or business in connection with
the Administrators' duties hereunder) to be rendering such services to or acting
solely for the Company and not as an officer, partner, employee or agent or one
under the control or direction of the Administrators even though paid by any of
them. The Administrators agree that this Agreement shall not create any joint
and/or several liability among the Administrators with respect to services
provided by any particular Administrator as set forth herein.

7. TERM. This Agreement shall become effective on July 31, 1998
and, unless sooner terminated as provided herein, shall continue until July 31,
1999, and thereafter shall continue automatically with respect to each Fund for
successive annual periods ending on July 31 of each year, provided such
continuance is specifically approved at least annually by the Company's Board of
Trustees. This Agreement is terminable with respect to each Fund, without
penalty, on not less than forty-five (45) days' notice by the Company's Board of
Trustees or by CGFSC, FAS or U.S. Trust. This Agreement will terminate
automatically in the event of its "assignment" (as defined in the Investment
Company Act 1940). The parties agree that an assignment includes the transfer
of "control" of more than 25% of the outstanding voting securities of FAS to a
company that is not a subsidiary of Federated Investors, Inc. The parties also
agree that the merger between The Chase Manhattan Corporation and Chemical
Banking Corporation and the merger between The Chase Manhattan Bank, N.A. and
Chemical Bank will not constitute an assignment under this Agreement.

8. GOVERNING LAW. This Agreement shall be governed by New York law.

<PAGE>

9. NOTICES. All notices required or permitted herein shall be in
writing and shall be deemed to be properly given when delivered personally or by
telecopier to the party entitled to receive the notice or when sent by certified
or registered mail, postage prepaid, or delivered to an internationally
recognized overnight courier service, in each case properly addressed to the
party entitled to receive such notice at the address or telecopier number stated
below or to such other address or telecopier number as may hereafter be
furnished in writing by notice similarly given by one party to the other party
hereto:

If to the Company:

Excelsior Institutional Trust
73 Tremont Street
Boston, Massachusetts 02108-3913
Telecopier Number: (617) 557-8617

With copies to:

W. Bruce McConnel, III, Esq.
Drinker Biddle & Reath LLP
1345 Chestnut Street, Suite 1100
Philadelphia, Pennsylvania 19107
Telecopier Number: (215) 988-2757

If to CGFSC:

Chase Global Funds Services Company
73 Tremont Street
Boston, Massachusetts 02108-3913
Telecopier Number: (617) 557-8617

If to FAS:

Federated Administrative Services
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Telecopier Number: (412) 288-8141

If to U.S. Trust:

U.S. Trust Company of Connecticut

<PAGE>

225 High Ridge Road
East Building
STAMFORD, CT 06905
TELECOPIER NUMBER: (203) 352-4488

10. MISCELLANEOUS. No provisions of this Agreement may be changed,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, discharge or termination is
sought. If a change or discharge is sought against the Company, the instrument
must be signed by each Administrator. This Agreement may be executed in one or
more counterparts and all such counterparts will constitute one and the same
instrument.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date indicated above.

EXCELSIOR INSTITUTIONAL TRUST

/s/ F.S. Wonham
---------------
Name: F.S. Wonham
Title: President and Treasurer

CHASE GLOBAL FUNDS SERVICES COMPANY

/s/ Donald P. Hearn
-------------------
Name: Donald P. Hearn
Title: Vice Chairman

FEDERATED ADMINISTRATIVE SERVICES

/s/ Joseph A. Machi
---------------------
Name: Joseph A. Machi
Title:

U.S. TRUST COMPANY OF CONNECTICUT

/s/ W. Michael Funck
--------------------
Name: W. Michael Funck
Title: President and CEO

<PAGE>

Exhibit A
to the
Amended and Restated Administration Agreement

EXCELSIOR INSTITUTIONAL TRUST
Income Fund
Equity Fund
Total Return Bond Fund
Balanced Fund
International Equity Fund
Optimum Growth Fund
Value Equity Fund

In consideration of the mutual covenants set forth in the Amended and
Restated Administration Agreement dated as of July 31, 1998 among Excelsior
Institutional Trust (the "Company"), Chase Global Funds Services Company
("CGFSC"), Federated Administrative Services ("FAS") and U.S. Trust Company of
Connecticut ("U.S. Trust"), the Company executes and delivers this Exhibit on
behalf of the Funds, and with respect to any class or series thereof, first set
forth in this Exhibit.

Pursuant to Section 3 of the Agreement, FAS agrees to provide facilities,
equipment, and personnel to carry out the following administrative services to
the Funds, with the understanding that CGFSC will provide all other services and
duties set forth in said Section 3 but not otherwise listed below:

(a) Performing a due diligence review of SEC required reports and
notices to shareholders of record and to the SEC including, without limitation,
Semi-Annual and Annual Reports to Shareholders, Semi-Annual Reports on Form
N-SAR, Proxy Statements and SEC share registration notices;

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

(c) Reviewing and filing with the National Association of Securities
Dealers, Inc. all sales literature (advertisements, brochures and shareholder
communications) for each of the Funds and any class or series thereof;

(d) Preparing distributor's reports to the Company's Board of
Trustees;

(e) Performing internal audit examinations in accordance with a
charter to be adopted by FAS and the Company;

(f) Upon request, providing individuals reasonably acceptable to the
Company's Board of Trustees for nomination, appointment, or election as officers
of the Company, who will be responsible for the management of certain of the
Funds' affairs as determined by the Company;

<PAGE>

(g) Consulting with the Funds and the Company's Board of Trustees, as
appropriate, on matters concerning the distribution of Funds;

(h) Monitoring the Company's arrangements with respect to services
provided by certain organizations ("Organizations") under its Distribution Plan.
With respect to Organizations, FAS shall specifically monitor and review the
services rendered under the Distribution Plan by Organizations to their
customers who are the beneficial owners of shares, pursuant to agreements
between the Company and such Organizations ("Agreements"), including, without
limitation, reviewing the qualifications of financial institutions wishing to be
Organizations, assisting in the execution and delivery of Agreements, reporting
to the Company's Board of Trustees with respect to the amounts paid or payable
by the Company from time to time under the Agreements and the nature of the
services provided by Organizations, and maintaining appropriate records in
connection with such duties;

(i) Monitoring the Company's arrangements with respect to services
provided by certain organizations ("Service Organizations") under its
Administrative Services Plan, provided that FAS will only be responsible for
monitoring arrangements with Service Organizations with whom FAS has established
the servicing relationship on behalf of the Company. With respect to such
Service Organizations, FAS shall specifically monitor and review the services
rendered by Service Organizations to their customers who are the beneficial
owners of shares, pursuant to agreements between the Company and such Service
Organizations ("Servicing Agreements"), including, without limitation, reviewing
the qualifications of financial institutions wishing to be Service
Organizations, assisting in the execution and delivery of Servicing Agreements,
reporting to the Company's Board of Trustees with respect to the amounts paid or
payable by the Company from time to time under the Servicing Agreements and the
nature of the services provided by Service Organizations, and maintaining
appropriate records in connection with such duties; and

(j) Consulting with CGFSC and the Company regarding the jurisdictions
in which the Company's shares shall be registered or qualified for sale and, in
connection therewith, reviewing and monitoring the actions of CGFSC in
maintaining the registration or qualification of shares for sale under the
securities laws of any state. Payment of share registration fees and any fees
for qualifying or continuing the qualification of any Fund as a dealer or
broker, if applicable, shall be made by that Fund.

Witness the due execution hereof this 31st day of July, 1998.

EXCELSIOR INSTITUTIONAL TRUST

/s/ F.S. Wonham
---------------
Name: F.S. Wonham
Title: President and CEO

<PAGE>

FEDERATED ADMINISTRATIVE SERVICES

/s/ Joseph A. Machi
-------------------
Name: Joseph A. Machi
Title:

CHASE GLOBAL FUNDS SERVICES COMPANY

/s/ Donald P. Hearn
-------------------
Name: Donald P. Hearn
Title: Vice Chairman

<PAGE>
Exhibit B
to the
Amended and Restated Administration Agreement

EXCELSIOR INSTITUTIONAL TRUST
Income Fund
Equity Fund
Total Return Bond Fund
Balanced Fund
International Equity Fund
Optimum Growth Fund
Value Equity Fund

Pursuant to Section 3 of the Agreement, U.S. Trust agrees to provide
facilities, equipment, and personnel to carry out the following administrative
services to the Funds:

(a) Providing guidance and assistance in the preparation of SEC
required reports and notices to shareholders of record and to the SEC including,
without limitation, Semi-Annual and Annual Reports to Shareholders, Semi-Annual
Reports on Form N-SAR, Proxy Statements and SEC share registration notices;

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

(c) Consulting with the Funds and the Company's Board of Trustees, as
appropriate, on matters concerning the administration and operation of the
Funds;

(d) Monitoring the Company's arrangements with respect to services
provided by certain organizations ("Service Organizations") under its
Administrative Services Plan, provided that U.S. Trust will only be responsible
for monitoring arrangements with Service Organizations with whom U.S. Trust has
established the servicing relationship on behalf of the Company. With respect
to such Service Organizations, U.S. Trust shall specifically monitor and review
the services rendered by Service Organizations to their customers who are the
beneficial owners of shares, pursuant to agreements between the Company and such
Service Organizations ("Servicing Agreements"), including, without limitation,
reviewing the qualifications of financial institutions wishing to be Service
Organizations, assisting in the execution and delivery of Servicing Agreements,
reporting to the Company's Board of Trustees with respect to the amounts paid or
payable by the Company from time to time under the Servicing Agreements and the
nature of the services provided by Service Organizations, and maintaining

<PAGE>

appropriate records in connection with such duties.

Witness the due execution hereof this 31st day of July, 1998.

EXCELSIOR INSTITUTIONAL TRUST

/s/ F.S. Wonham
---------------
Name: F.S. Wonham
Title: President and Treasurer

U.S. TRUST COMPANY OF CONNECTICUT

/s/ W. Michael Funck
--------------------
Name: W. Michael Funck
Title: President and CEO

<PAGE>
AMENDED AND RESTATED MUTUAL FUNDS
TRANSFER AGENCY AGREEMENT

AGREEMENT made as of July 31, 1998 by and between Excelsior Institutional
Trust (the "Fund"), a Delaware business trust, and Chase Global Funds Services
Company (the "Transfer Agent"), a Delaware Corporation.

WITNESSETH:

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

WHEREAS, the Fund wishes to retain the Transfer Agent to provide certain
transfer agent services with respect to the Fund, and the Transfer Agent is
willing to furnish such services;

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:

1. APPOINTMENT. The Fund hereby appoints the Transfer Agent to provide
transfer agent services for the Fund, subject to the supervision of the Board of
Trustees of the Fund (the "Board"), for the period and on the terms set forth in
this Agreement. The Transfer Agent accepts such appointment and agrees to
furnish the services set forth herein in return for the compensation as provided
in Schedule A to this Agreement. The Fund will initially consist of the
portfolios, funds and/or classes of shares (each an "Investment Fund";
collectively the "Investment Funds") listed in Schedule B, attached hereto. The
Fund shall notify the Transfer Agent in writing of each additional Investment
Fund established by the Fund. Each new Investment Fund shall be subject to the
provisions of this Agreement, except to the extent that the provisions
(including those relating to the compensation and expenses payable by the Fund
and its Investment Funds) may be modified with respect to each new Investment
Fund in writing by the Fund and the Transfer Agent at the time of the addition
of the new Investment Fund.

2. REPRESENTATIONS AND WARRANTIES.

(a) The Transfer Agent represents and warrants to the Fund that:

(i) the Transfer Agent is a corporation organized and existing and
in good standing under the laws of the State of Delaware;

(ii) the Transfer Agent is duly qualified to carry on its business
in the State of New York;

(iii) the Transfer Agent is empowered under applicable laws and by
its charter

<PAGE>

document and By-Laws to enter into and perform this Agreement;

(iv) all requisite corporate proceedings have been taken to
authorize the Transfer Agent to enter into and perform this Agreement;

(v) the Transfer Agent has, and will continue to have, access to
the facilities, personnel and equipment required to fully perform its duties and
obligations hereunder;

(vi) no legal or administrative proceedings have been instituted or
threatened which would impair the Transfer Agent's ability to perform its duties
and obligations under this Agreement; and

(vii) the Transfer Agent's entrance into this Agreement shall not
cause a material breach or be in material conflict with any other agreement or
obligation of the Transfer Agent or any law or regulation applicable to the
Transfer Agent;

(b) The Fund represents and warrants to the Transfer Agent that:

(i) the Fund is an open-end diversified management investment
company duly organized as a business trust under the laws of the State of
Delaware;

(ii) the Fund is empowered under applicable laws and by its Charter
Document and By-Laws to enter into and perform this Agreement;

(iii) all requisite proceedings have been taken to authorize the
Fund to enter into and perform this Agreement;

(iv) the Fund is an investment company properly registered under
the 1940 Act;

(v) a registration statement under the Securities act of 1933, as
amended ("1933 Act") and the 1940 Act on Form N-IA has been filed and will be
effective and will remain effective during the term of this Agreement, and all
necessary filings under the laws of the states will have been made and will be
current during the term of this Agreement;

(vi) no legal or administrative proceedings have been instituted or
threatened which would impair the Fund's ability to perform its duties and
obligations under this Agreement; and

(vii) the Fund's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligation of the Fund or any law or regulation applicable to it.

3. DELIVERY OF DOCUMENTS. The Fund will promptly furnish to the Transfer
Agent such copies, properly certified or authenticated, of contracts, documents
and other related information that the Transfer Agent may request or requires to
properly discharge its duties. Such documents may include but are not limited
to the following:

<PAGE>

(a) Resolutions of the Board authorizing the appointment of the Transfer
Agent to provide certain transfer agency services to the Fund and approving this
Agreement;

(b) The Fund's Charter Document;

(d) The Fund's Notification of Registration on Form N-8A under the 1940
Act as filed with the Securities and Exchange Commission ("SEC");

(e) The Fund's registration statement including exhibits, as amended, on
Form N-1A (the "Registration Statement") under the 1933 Act and the 1940 Act, as
filed with the SEC:

(f) Copies of the Investment Advisory Agreement between the Fund and its
investment adviser (the "Advisory Agreement");

(g) Opinions of counsel and auditors reports;

(h) The Fund's Prospectus(es) and Statement(s) of Additional Information
relating to all Investment Funds and all amendments and supplements thereto
(such Prospectus(es) and Statement(s) of Additional Information and supplements
thereto, as presently in effect and as from time to time hereafter amended and
supplemented, herein called the "Prospectuses"); and

(i) Such other agreements as the Fund may enter into from time to time
including securities lending agreements, futures and commodities account
agreements, brokerage agreements, and options agreements.

4. SERVICES PROVIDED BY THE TRANSFER AGENT.

(a) The Transfer Agent will provide the following services subject to the
control, direction and supervision of the Board and in compliance with the
objectives, policies and limitations set forth in the Fund's Registration
Statement, Charter Document and By-Laws; applicable laws and regulations; and
all resolutions and policies implemented by the Board;

(i) Transfer Agency

A detailed description of the above service is contained in Schedule C to this
Agreement.

(ii) Dividend Disbursing. The Transfer Agent will serve as the
Fund's dividend disbursing agent. The Transfer Agent will prepare and mail
checks, place wire transfers of credit income and capital gain payments to
shareholders. The Fund will advise the Transfer Agent of the declaration of any
dividend or distribution and the record and payable date thereof at least five
(5) days prior to the record date. The Transfer Agent will, on or before the
payment date of any such dividend or distribution, notify the Fund's Custodian
of the estimated amount required

<PAGE>

to pay any portion of such dividend or distribution payable in cash, and on or
before the payment date of such distribution, the Fund will instruct its
Custodian to make available to the Transfer Agent sufficient funds for the cash
amount to be paid out. If a shareholder is entitled to receive additional
shares by virtue of any such distribution or dividend, appropriate credits will
be made to each shareholder's account and/or certificates delivered where
requested. A shareholder not electing issuance of certificates will receive a
confirmation from the Transfer Agent indicating the number of shares credited to
his/her account.

(b) The Transfer Agent will also:

(i) provide office facilities with respect to the provision of the
services contemplated herein (which may be in the offices of the Transfer Agent
or a corporate affiliate of the Transfer Agent);

(ii) provide the services of individuals to serve as officers of
the Fund who will be designated by the Transfer Agent and elected by the Board
subject to reasonable Board approval;

(iii) provide or otherwise obtain personnel sufficient, in the
Transfer Agent's sole discretion, for provision of the services contemplated
herein;

(iv) furnish equipment and other materials, which the Transfer
Agent, in its sole discretion, believes are necessary or desirable for provision
of the services contemplated herein; and

(v) keep records relating to the services provided hereunder in
such form and manner as set forth in Schedule C, and as the Transfer Agent may
otherwise deem appropriate or advisable, all in accordance with the 1940 Act.
To the extent required by Section 31 of the 1940 Act and the rules thereunder,
the Transfer Agent agrees that all such records prepared or maintained by the
Transfer Agent relating to the services provided hereunder are the property of
the Fund and will be preserved for the periods prescribed under Rule 31a-2 under
the 1940 Act, maintained at the Fund's expense, and made available in accordance
with such Section and rules. The Transfer Agent further agrees to surrender
promptly to the Fund upon its request and cease to retain in its records and
files those records and documents created and maintained by the Transfer Agent
pursuant to this Agreement.

5. FEES; EXPENSES; EXPENSE REIMBURSEMENT.

(a) As compensation for the services rendered to the Fund pursuant to this
Agreement the Fund shall pay the Transfer Agent monthly fees determined as set
forth in Schedule A to this Agreement. Such fees are to be billed monthly and
shall be due and payable upon receipt of the invoice. Upon any termination of
this Agreement before the end of any month, the fee for the part of the month
before such termination shall be prorated according to the proportion which such
part bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.

<PAGE>

(b) For the purpose of determining fees calculated as a function of the
Fund's assets, the value of the Fund's assets and net assets shall be computed
as required by its Prospectuses, generally accepted accounting principles and
resolutions of the Board.

(c) The Transfer Agent will from time to time employ or associate with
such person or persons as may be appropriate to assist the Transfer Agent in the
performance of this Agreement. Such person or persons may be officers and
employees who are employed or designated as officers by both the Transfer Agent
and the Fund. The compensation of such person or persons for such employment
shall be paid by the Transfer Agent and no obligation will be incurred by or on
behalf of the Fund in such respect.

(d) The Transfer Agent will bear all of its own expenses in connection
with the performance of the services under this Agreement except as otherwise
expressly provided herein. The Fund agrees to promptly reimburse the Transfer
Agent for any equipment and supplies specially ordered by or for the Fund
through the Transfer Agent and for any other expenses not contemplated by this
Agreement that the Transfer Agent may incur on the Fund's behalf at the Fund's
request or as consented to by the Fund. Such other expenses to be incurred in
the operation of the Fund and to be borne by the Fund, include, but are not
limited to: taxes; interest; brokerage fees and commissions; salaries and fees
of officers and directors who are not officers, directors, shareholders or
employees of the Service Agent, or the Fund's investment adviser or distributor;
SEC and state Blue Sky registration and qualification fees, levies, fines and
other charges; advisory and administration fees; charges and expenses of
custodians; insurance premiums including fidelity bond premiums; auditing and
legal expenses; costs of maintenance of corporate existence; expenses of
typesetting and printing of prospectuses for regulatory purposes and for
distribution to current shareholders of the Fund (the Fund's distributor to bear
the expense of all other printing, production, and distribution of prospectuses,
statements of additional information, and marketing materials); expenses of
printing and production costs of shareholders' reports and proxy statements and
materials; costs and expenses of Fund stationery and forms; costs and expenses
of special telephone and data lines and devices; costs associated with
corporate, shareholder, and Board meetings; and any extraordinary expenses and
other customary Fund expenses. In addition, the Service Agent may utilize one
or more independent pricing services, approved from time to time by the Board,
to obtain securities prices and to act as backup to the primary pricing
services, in connection with determining the net asset values of the Fund, and
the Fund will reimburse the Service Agent for the Fund's share of the cost of
such services based upon the actual usage, or a pro-rata estimate of the use, of
the services for the benefit of the Fund.

(e) The Fund may request additional services , additional processing, or
special reports. Such requests may be provided by the Transfer Agent at
additional charges. In this event, the Fund shall submit such requests in
writing together with such specifications as may be reasonably required by the
Transfer Agent, and the Transfer Agent shall respond to such requests in the
form of a price quotation. The Fund's written acceptance of the quotation must
be received prior to implementation of such request. Additional services will
be charged at the Transfer Agent's standard rates.

<PAGE>

(f) All fees, out-of-pocket expenses, or additional charges of the
Transfer Agent shall be billed on a monthly basis and shall be due and payable
upon receipt of the invoice.

The Transfer Agent will render, after the close of each month in which
services have been furnished, a statement reflecting all of the charges for such
month. Charges remaining unpaid after thirty (30) days shall bear interest in
finance charges equivalent to, in the aggregate, the Prime Rate (as determined
by U.S. Trust Company of New York) plus two (2) points per year and all costs
and expenses of effecting collection of any such sums, including reasonable
attorney's fees, shall be paid by the Fund to the Transfer Agent.

In the event that the Fund is more than sixty (60) days delinquent in its
payments of monthly billings in connection with this Agreement (with the
exception of specific amounts which may be contested in good faith by the Fund),
this Agreement may be terminated upon thirty days' written notice to the Fund by
the Transfer Agent. The Fund must notify the Transfer Agent in writing of any
contested amounts within thirty (30) days of receipt of a billing for such
amounts. Disputed amounts are not due and payable while they are being
investigated.

6. PROPRIETARY AND CONFIDENTIAL INFORMATION. The Transfer Agent agrees
on behalf of itself and its employees to treat confidentially and as proprietary
information of the Fund, all records and other information relative to the
Fund's prior, present of potential shareholders, and to not use such records and
information for any purpose other than performance of the Transfer Agent's
responsibilities and duties hereunder. The Transfer Agent may seek a waiver of
such confidentiality provisions by furnishing reasonable prior notice to the
Fund and obtaining approval in writing from the Fund, which approval shall not
be unreasonably withheld and may not be withheld where the Transfer Agent may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities. Waivers
of confidentiality are automatically effective without further action by the
Transfer Agent with respect to Internal Revenue Service levies, subpoenas and
similar actions, or with respect to any request by the Fund.

7. DUTIES, RESPONSIBILITIES, AND LIMITATION OF LIABILITY.

(a) In the performance of its duties hereunder, the Transfer Agent shall
be obligated to exercise due care and diligence, and to act in good faith in
performing the services provided for under this Agreement. In performing its
services hereunder, the Transfer Agent shall be entitled to rely on any oral or
written instructions, notices or other communications from the Fund and its
custodians, officers and directors, investors, agents and other service
providers which the Transfer Agent reasonably believes to be genuine, valid and
authorized. The Transfer Agent shall also be entitled to consult with and rely
on the advice and opinions of outside legal counsel retained by the Fund, as
necessary or appropriate.

(b) The Transfer Agent shall not be liable for any error of judgment or
mistake of law or for any loss or expense suffered by the Fund, in connection
with the matters to which this Agreement relates, except for a loss or expense
solely caused by or resulting from willful misfeasance, bad faith or gross
negligence on the Transfer Agent's part in the performance of its

<PAGE>

duties or from reckless disregard by the Transfer Agent of its obligations and
duties under this Agreement. The Transfer Agent's liability under this
Agreement for any cause whatsoever shall be limited to the total amount of fees
paid to the Transfer Agent under this Agreement for the prior year. Any person,
even though also an officer, director, partner, employee or agent of the
Transfer Agent, who may be or become an officer, director, partner, employee, or
agent of the Fund, shall be deemed when rendering services to the Fund or acting
on any business of the Fund (other than services or business in connection with
the Transfer Agent's duties hereunder) to be rendering such services to or
acting solely for the Fund and not as an officer, director, partner, employee or
agent or person under the control or direction of the Transfer Agent even though
paid by the Transfer Agent.

(c) Subject to Paragraph 7(b) above, the Transfer Agent shall not be
responsible for, and the Fund shall indemnify and hold the Transfer Agent
harmless from and against, any and all losses, damages, costs, reasonable
attorneys' fees and expenses, payments, expenses and liabilities arising out of
or attributable to:

(i) all actions of the Transfer Agent or its officers or agents
required to be taken pursuant to this Agreement;

(ii) the reliance on or use by the Transfer Agent or its officers
or agents of information, records, or documents which are received by the
Transfer Agent or its officers or agents and furnished to it or them by or on
behalf of the Fund, and which have been prepared or maintained by the Fund or
any third party on behalf of the Fund;

(iii) the Fund's refusal or failure to comply with the terms of this
Agreement or the Fund's lack of good faith, or its actions, or lack thereof,
involving negligence or willful misfeasance;

(iv) the breach of any representation or warranty of the Fund
hereunder;

(v) the taping or other form of recording of telephone
conversations or other forms of electronic communications with investors and
shareholders, or reliance by the Transfer Agent on telephone or other electronic
instructions of any person acting on behalf of a shareholder or shareholder
account for which telephone or other electronic services have been authorized;

(vi) the reliance on or the carrying out by the Transfer Agent or
its officers or agents of any proper instructions reasonably believed to be duly
authorized, or requests of the Fund or recognition by the Transfer Agent of any
share certificates which are reasonably believed to bear the proper signatures
of the officers of the Fund and the proper countersignature of any transfer
agent or registrar of the Fund;

(vii) any delays, inaccuracies, errors in or omissions from data
provided to the Transfer Agent by data and pricing services;

(viii) the offer or sale of shares by the Fund in violation of any
requirement under the

<PAGE>

Federal securities laws or regulations or the securities laws or regulations of
any state, or in violation of any stop order or other determination or ruling by
any Federal agency or any state agency with respect to the offer or sale of such
shares in such state resulting from activities, actions, or omissions by the
Fund's distributor or existing or arising out of activities, actions or
omissions by or on behalf of the Fund prior to the effective date of this
Agreement; and

(ix) the compliance by the Fund, its investment adviser, and its
distributor with applicable securities, tax, commodities and other laws, rules
and regulations.

8. TERM. This Agreement shall become effective on the date first herein
above written. This Agreement may be modified or amended from time to time by
mutual agreement between the parties hereto. This Agreement shall continue in
effect unless terminated by either party on forty-five (45) days' prior notice.
Upon termination of this Agreement, the Fund shall pay to the Transfer Agent
such compensation and any reimbursable expenses as may be due under the terms
hereof as of the date of termination or the date that the provision of services
ceases, whichever is later.

9. HIRING OF EMPLOYEES. The Fund and the Transfer Agent agree that they
will not enter into discussions of employment or make offers of employment to
each others' employees without written approval from the other.

10. NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be deemed to have been given when delivered in person or by
certified mail, return receipt requested, to the parties at the following
address (or such other address as a party may specify by notice to the other):

If to the Fund:

Excelsior Institutional Trust
73 Tremont Street
Boston, MA 02108-3913
Attn: Assistant Treasurer
Fax: (617) 557-8816

With a copy to:

Drinker Biddle & Reath LLP
1345 Chestnut Street, Suite 1100
Philadelphia, PA 19107
Attn: W. Bruce McConnel, III
Fax: (215) 988-2757

If to the Transfer Agent:

Chase Global Funds Services Company

<PAGE>

73 Tremont Street
Boston, MA 02108-3913
Attn: President
Fax: (617) 557-8816

Notice shall be effective upon receipt if by mail, on the date of personal
delivery (by private messenger, courier service or otherwise) or upon confirmed
receipt of telex or facsimile, whichever occurs first.

11. ASSIGNABILITY. This Agreement shall not be assigned by any of the
parties hereto without the prior consent in writing of the other party;
provided, however, that the Transfer Agent may in its own discretion and without
limitation or prior consent of the Fund, whenever and on such terms and
conditions as the Transfer Agent deems necessary or appropriate, subcontract,
delegate or assign its rights, duties, obligations and liabilities to
subsidiaries or affiliates of the Transfer Agent; provided, further, that any
such subcontract, agreement or understanding shall not discharge the Transfer
Agent or its affiliates or subsidiaries, as the case may be, from its
obligations hereunder. Similarly, the Transfer Agent or its affiliated
subcontractor, designee, or assignee may at its discretion, without notice to
the Fund, enter into such subcontracts, agreements and understandings, whenever
and on such terms and conditions as the Transfer Agent or they deem necessary or
appropriate to perform services hereunder, with non-affiliated third parties;
provided, that such subcontract, agreement or understanding shall not discharge
the Transfer Agent, or its subcontractor, designee, or assignee, as the case may
be, from the Transfer Agent's obligations hereunder. The Transfer Agent or its
affiliated subcontractor, designee, or assignee shall, however, be discharged
from the Transfer Agent's obligations hereunder, if the Fund or its sponsor,
investment adviser or distributor require the Transfer Agent or its affiliated
subcontractor, designee, or assignee to enter into any subcontractor, agreement
or understanding to perform services hereunder with any non-affiliated third
party; and the Fund shall indemnify and hold harmless the Transfer Agent and its
affiliated subcontractor, designee, or assignee from and against, any and all
losses, damages, costs, reasonable attorneys' fees and expenses, payments,
expenses and liabilities arising out of or attributable to such subcontract,
agreement or understanding.

12. WAIVER. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver nor
shall it deprive such party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver must be in
writing signed by the waiving party.

13. FORCE MAJEURE. The Transfer Agent shall not be responsible or liable
for any failure or delay in performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
control, including without limitation, acts of God, earthquakes, fires, floods,
wars, acts of civil or military authorities, or governmental actions, not shall
say such failure or delay give the Fund the right to terminate this Agreement.

14. USE OF NAME. The Fund and the Transfer Agent agree not to use the
other's name nor the names of such other's affiliates, designees, or assignees
in any prospectus, sales literature, or

<PAGE>

other printed material written in a manner not previously, expressly approved in
writing by the other or such other's affiliates, designees, or assignees except
where required by the SEC or any state agency responsible for securities
regulation.

15. AMENDMENTS. This Agreement may be modified or amended from time to
time by mutual written agreement between the parties. No provision of this
Agreement may be changed, discharged, or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, discharge or termination is sought.

16. SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance it shall nevertheless
remain applicable to all other persons and circumstances.

17. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York.

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

EXCELSIOR INSTITUTIONAL TRUST

/s/ F.S. Wonham
------------------------
Frederick S. Wonham
President and Treasurer

CHASE GLOBAL FUNDS SERVICES COMPANY

/s/ Donald P. Hearn
------------------------
Name: Donald P. Hearn
Title: Vice Chairmen

<PAGE>

AMENDED AND RESTATED MUTUAL FUNDS TRANSFER AGENCY AGREEMENT
EXCELSIOR INSTITUTIONAL TRUST

SCHEDULE A

FEES AND EXPENSES

$ 18,000 per annum/per Fund.

<PAGE>
AMENDED AND RESTATED MUTUAL FUNDS TRANSFER AGENCY AGREEMENT
EXCELSIOR INSTITUTIONAL TRUST

SCHEDULE B

LISTING OF INVESTMENT FUNDS SUBJECT TO THIS AGREEMENT

Excelsior Institutional Balanced Fund

Excelsior Institutional Optimum Growth Fund

Excelsior Institutional Value Equity Fund

Excelsior Institutional Income Fund

Excelsior Institutional Equity Fund

Excelsior Institutional Total Return Bond Fund

Excelsior Institutional International Equity Fund

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AMENDED AND RESTATED MUTUAL FUNDS TRANSFER AGENCY AGREEMENT
EXCELSIOR INSTITUTIONAL TRUST

SCHEDULE C

DESCRIPTION OF TRANSFER AGENCY SERVICES

The following is a general description of the transfer agency services
the Transfer Agent shall provide to the Fund.

A. SHAREHOLDER RECORDKEEPING. Maintain records showing for each Fund
shareholder the following: (i) name, address and tax identifying number;
(ii) number of shares of each Investment Fund; (iii) historical information
including, but not limited to, dividends paid and date and price of all
transactions including individual purchases and redemptions; and (iv) any
dividend reinvestment order, application, dividend address and
correspondence relating to the current maintenance of the account.

B. SHAREHOLDER ISSUANCE. Record the issuance of shares of each
Investment Fund. Except as specifically agreed in writing between the
Transfer Agent and the Fund, the Transfer Agent shall have no obligation
when countersigning and issuing and/or crediting shares to take cognizance
of any other laws relating to the issue and sale of such shares except
insofar as policies and procedures of the Stock Transfer Association
recognize such laws.

C. PURCHASE ORDERS. Process all orders for the purchase of shares of the
Fund in accordance with the Fund's current registration statement. Upon
receipt of any check or other payment for purchase of shares of the Fund
from an investor, the Transfer Agent will (i) stamp the envelope with the
date of receipt, (ii) forthwith process the same for collection, (iii)
determine the amounts thereof due the Fund, and notify the Fund of such
determination and deposit, such notification to be given on a daily basis
of the total amounts determined and deposited to the Fund's custodian bank
account during such day. The Transfer Agent shall then credit the share
account of the investor with the number of Investment Fund shares to be
purchased made on the date such payment is received by the Transfer Agent,
as set forth in the Fund's current prospectus and shall promptly mail a
confirmation of said purchase to the investor, all subject to any
instructions which the Fund may give to the Transfer Agent with respect to
the timing or manner of acceptance of orders for shares relating to
payments so received by it.

D. REDEMPTION ORDERS. Receive and stamp with the date of receipt all
requests for

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redemptions or repurchase of shares held in certificate or non-certificate
form, and process redemptions and repurchase requests as follows: (I) if
such certificate or redemption request complies with the applicable
standards approved by the Fund, the Transfer Agent shall on each business
day notify the Fund of the total number of shares presented and covered by
such requests received by the Transfer Agent on such day; (ii) on or prior
to the seventh calendar day succeeding any such requests received by the
Transfer Agent shall notify the Custodian, subject to instructions from the
Fund, to transfer moneys to such account as designated by the Transfer
Agent for such payment to the redeeming shareholder of the applicable
redemption or repurchase price; (iii) if any such certificate or request
for redemption of repurchase does not comply with applicable standards, the
Transfer Agent shall promptly notify the investor of such fact, together
with the reason therefor, and shall effect such redemption at the Fund's
price next determined after receipt of documents complying with said
standards of, at such other time as the Fund shall so direct.

E. TELEPHONE ORDERS. Process redemptions, exchanges and transfers of
Fund shares upon telephone instructions from qualified shareholders in
accordance with the procedures set forth in the Fund's current prospectus.
The Transfer Agent shall be permitted to redeem, exchange and/or transfer
Fund shares from any account for which such services have been authorized.

F. TRANSFER FOR SHARES. Upon receipt by the Transfer Agent of
documentation in proper form to effect a transfer of shares, including in
the case of shares for which certificates have been issued the share
certificates in proper form for transfer, the Transfer Agent will register
such transfer on the Fund's shareholder record maintained by the Transfer
Agent pursuant to instructions received from the transferor, cancel the
certificates representing such shares, if any, and if so requested,
countersign, register, issue and mail by first class mail new certificates
for the same or a smaller whole number of shares.

G. SHAREHOLDER COMMUNICATIONS AND MEETING. Address and mail all
communications by the Fund to its shareholders promptly following the
delivery by the Fund of the material to be mailed. Prepare shareholder
lists, mail and certify as to the mailing of proxy materials, receive the
tabulated proxy cards, render periodic reports to the Fund on the progress
of such tabulation, and provide the Fund with inspectors of election at any
meeting of shareholders.

H. SHARE CERTIFICATES. If a shareholder of the Fund requests a
certificate representing his shares, the Transfer Agent, will countersign
and mail by first class mail with receipt confirmed, a share certificate to
the investor at his/her address as it appears on the Fund's transfer books.
The Transfer Agent shall supply, at the expense of the Fund, a supply of
blank share certificates. The certificates shall be properly signed,
manually or by facsimile, as authorized by the Fund, and shall bear the
Fund's seal or facsimile; and notwithstanding the death, resignation or
removal of any officers of the Fund authorized to sign certificates, the
Transfer Agent may, until otherwise directed by

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the Fund, continue to countersign certificates which bear the manual or
facsimile signature of such officer.

I. RETURNED CHECKS. In the event that any check or other order for the
payment of money is returned unpaid for any reason, the Transfer Agent will
take such steps, including redepositing the check for collection or
returning the check to the investor, as the Transfer Agent may, at its
discretion, deem appropriate and notify the Fund of such action, or as the
Fund may instruct.

J. SHAREHOLDER CORRESPONDENCE. Acknowledge all correspondence from
shareholders relating to their share accounts and undertake such other
shareholder correspondence as may from time to time be mutually agreed
upon.

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CONSENT OF COUNSEL

We hereby consent to the use of our name and to the reference to
our Firm under the caption "Counsel" in the Statement of Additional Information
that is included in Post-Effective Amendment No. 17 and Amendment No. 19 to the
Registration Statement (No. 33-78264; 811-8490) on Form N-1A of Excelsior
Institutional Trust under the Securities Act of 1933 and the Investment Company
Act of 1940, respectively. This consent does not constitute a consent under
Section 7 of the Securities Act of 1933, and in consenting to the use of our
name and the references to our Firm under such caption we have not certified any
part of the Registration Statement and do not otherwise come within the
categories of persons whose consent is required under said Section 7 or the
rules and regulations of the Securities and Exchange Commission thereunder.

/s/ DRINKER BIDDLE & REATH LLP
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DRINKER BIDDLE & REATH LLP

Philadelphia, Pennsylvania
May 28, 1999

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EXCELSIOR INSTITUTIONAL TRUST
(THE "TRUST")

AMENDED AND RESTATED PLAN PURSUANT TO RULE 18f-3 FOR OPERATION OF
A MULTI-CLASS SYSTEM

I. INTRODUCTION

On February 23, 1995, the Securities and Exchange Commission (the
"Commission") promulgated Rule 18f-3 under the Investment Company Act of 1940,
as amended (the "1940 Act"), which permits the creation and operation of a
multi-class distribution structure without the need to obtain an exemptive order
under Section 18 of the 1940 Act. Rule 18f-3, which became effective on April
3, 1995, requires an investment company to file with the Commission a written
plan specifying all of the differences among the classes, including the various
services offered to shareholders, the different distribution arrangements for
each class, the methods for allocating expenses relating to those differences
and any conversion features or exchange privileges. On May 7, 1996, the Board
of Trustees of the Trust initially authorized the Trust to operate a multi-class
distribution structure in compliance with Rule 18f-3. This Plan pursuant to
Rule 18f-3 for operation of a multi-class system is hereby amended and restated
as of February 18, 1999.

II. ATTRIBUTES OF CLASSES

A. GENERALLY

Each investment portfolio of the Trust (each a "Fund" and,
collectively, the "Funds") shall initially offer two classes of shares: Shares
("Retail Shares") and Institutional Shares (collectively referred to as
"Shares").

In general, Shares shall be identical except for different expense
variables (which may result in different yields or total returns for each
class), certain related rights and certain shareholder services. More
particularly, the Retail Shares and Institutional Shares of each Fund shall
represent interests in the same portfolio of investments of the particular Fund,
and shall be identical in all respects, except for: (a) the impact of (i)
expenses assessed to the Retail Shares pursuant to the Distribution Plan adopted
for such class and (ii) other incremental expenses identified from time to time
that should be properly allocated to one class so long as any changes in expense
allocations are reviewed and approved by a vote of the Board of Trustees,
including a majority of the non-interested trustees; (b) the fact that (i)
Retail Shares shall vote separately on any matter submitted to shareholders that
pertains to the Distribution Plan adopted for such class and (ii) each class
shall vote separately on any matter submitted to shareholders that pertains to
the class expenses borne by such class; (c) the exchange privileges of each
class of Shares; (d)

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the designation of each class of Shares; and (e) the different shareholder
services relating to each class of Shares.

B. EXPENSES AND DISTRIBUTION ARRANGEMENTS

RETAIL SHARES

Retail Shares of each Fund shall be available for purchase by
individual investors.

Retail Shares of each Fund initially shall not be subject to a
sales charge but shall be subject to a fee payable pursuant to the Distribution
Plan adopted for that class which shall not initially exceed .75% (on an annual
basis) of the average daily net asset value of the Fund's outstanding Retail
Shares. Payments under the Distribution Plan will be used to compensate the
Trust's distributor for its services which are intended to result in the sale of
Retail Shares.

Retail Shares of each Fund shall initially be subject to a fee
payable pursuant to the Administrative Services Plan adopted for such Shares
which shall not initially exceed .40% (on an annual basis) of the average daily
net asset value of the Fund's Retail Shares held by customers of institutions
that have entered into agreements with the Trust pursuant to such Plan.
Shareholder services provided under the Administrative Services Plan may
include: (i) assisting in processing purchase, exchange and redemption requests;
(ii) transmitting and receiving funds in connection with customer orders to
purchase, exchange or redeem Shares; and (iii) providing periodic statements.

INSTITUTIONAL SHARES

Institutional Shares of each Fund shall be available for purchase
by institutional investors.

Institutional Shares of each Fund initially shall not be subject
to any sales charge or fee payable pursuant to a distribution plan.

Institutional Shares of each Fund shall initially be subject to a
fee payable pursuant to the Administrative Services Plan adopted for such Shares
which shall not initially exceed .40% (on an annual basis) of the average daily
net asset value of the Fund's Institutional Shares held by customers of
institutions that have entered into agreements with the Trust pursuant to such
Plan. Shareholder services provided under the Administrative Services Plan may
include: (i) assisting in processing purchase, exchange and redemption requests;
(ii) transmitting and receiving funds in connection with customer orders to
purchase, exchange or redeem Shares; and (iii) providing periodic statements.

C. EXCHANGE PRIVILEGES

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RETAIL SHARES

Holders of Retail Shares generally shall be permitted to exchange
those Shares for: (i) Retail Shares of another Fund offered by the Trust; (ii)
non-Trust Shares of any investment portfolio of Excelsior Funds, Inc. and
Excelsior Tax-Exempt Funds, Inc. (provided that the Retail Shares being
exchanged were not received in an exchange for Trust Shares of any investment
portfolio of Excelsior Funds, Inc. or Excelsior Tax-Exempt Funds, Inc.); and
(iii) in the case of Retail Shares of the Trust that were received in an
exchange for Trust Shares of any investment portfolio of Excelsior Funds, Inc.
and Excelsior Tax-Exempt Funds, Inc., Trust Shares of any investment portfolio
of Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc. without paying any
exchange fee or sales charge.

INSTITUTIONAL SHARES

Holders of Institutional Shares generally shall be permitted to
exchange those Shares for: (i) Institutional Shares of another Fund offered by
the Trust; and (ii) shares of any investment portfolio of Excelsior Funds
without paying any exchange fee or sales charge.

D. CONVERSION FEATURES

The Trust shall not initially offer a conversion feature to holders of
Shares.

E. SHAREHOLDER SERVICES

1. AUTOMATIC INVESTMENT PROGRAM

The Trust shall initially offer an automatic investment program
whereby, in general, an individual investor may arrange to have Retail Shares
purchased automatically by authorizing the Trust's transfer agent to withdraw
funds from the investor's bank account.

2. SYSTEMATIC WITHDRAWAL PLAN

The Trust shall initially offer a systematic withdrawal plan
whereby, in general, an individual investor may arrange to have Retail Shares
redeemed automatically.

F. METHODOLOGY FOR ALLOCATING EXPENSES BETWEEN CLASSES

Class-specific expenses of a Fund shall be allocated to the specific
class of Shares of that Fund. Non-class-specific expenses of the Funds shall be
allocated in accordance with paragraph (c) of Rule 18f-3.