EXCELSIOR INSTITUTIONAL TRUST, 485BPOS, 2000-07-31

EXCELSIOR INSTITUTIONAL TRUST
485BPOS, 2000-07-31

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<PAGE>

As filed with the Securities and Exchange Commission on July 28, 2000
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 [X]

POST-EFFECTIVE AMENDMENT NO. 21 [X]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

AMENDMENT NO. 23 [X]

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
One Logan Square, 18/th/ and Cherry Streets
Philadelphia, Pennsylvania 19103-6996
(Name and Address of Agent for Service)

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

[X] Immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(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.

The Statements of Additional Information contained in Excelsior Funds, Inc.'s
(the "Company") (file nos. 2-92665 and 811-4088) Post-Effective Amendment No. 40
filed with the Securities and Exchange Commission on July 28, 2000, which
include the Company's Blended Equity, Large Cap Growth, Small Cap, Value and
<PAGE>

Restructuring, Energy and Natural Resources, Real Estate and Technology Funds,
are incorporated herein by reference to Registrant's Post-Effective Amendment
No. 21.
<PAGE>

Institutional Shares

Prospectus

August 1, 2000

Excelsior Institutional Trust

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 these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.

[LOGO OF EXCELSIOR FUNDS]
<PAGE>

Table of Contents

Excelsior Institutional Trust is a mutual fund family that offers shares in
separate investment portfolios (Funds). The Funds have individual investment
goals, strategies and risks. This prospectus gives you important information
about the Institutional Shares of the Funds that you should know before invest-
ing. Please read this prospectus and keep it for future reference.

This prospectus has been arranged into different sections so that you can eas-
ily review this important information. On the next page, there is some general
information you should know about risk and return that is common to each of the
Funds. For more detailed information about each Fund, please see:

<TABLE>
<CAPTION>
Page
<S> <C>
Equity Fund.......................................................... 4
Value Equity Fund.................................................... 6
Optimum Growth Fund.................................................. 8
Income Fund.......................................................... 10
Total Return Bond Fund............................................... 12
International Equity Fund............................................ 14
More Information About Risk.......................................... 16
More Information About Fund Investments.............................. 17
Purchasing, Selling and Exchanging Fund Shares....................... 19
Dividends and Distributions.......................................... 21
Taxes................................................................ 22
Financial Highlights................................................. 23
Excelsior Institutional Trust........................................ Back Cover
</TABLE>
<PAGE>

Introduction--Risk/Return Information Common To All Funds
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.

Each Fund has its own investment goal, strategies and risks 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 man-
ager's judgments about the markets, the economy, or companies may not antici-
pate 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 invest-
ment 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 Insur-
ance Corporation (FDIC) or any government agency.

The value of your investment in a Fund is based on the market prices of the se-
curities the Fund holds. These prices change daily due to economic and other
events that affect particular companies and other issuers. These price move-
ments, 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.

The Adviser's Equity Investment Philosophy

The Adviser manages the Equity Fund, Value Equity Fund and Optimum Growth Fund
with a view toward long-term success. To achieve this success, the Adviser
utilizes two fundamental investment strategies, value and growth. These strate-
gies are combined with "longer-term investment themes" to assess the investment
potential of individual companies. Specific investment selection is a "bottom-
up" approach, guided by these strategies and themes to ensure proper diversifi-
cation, risk control and market focus.

Value
This long-term strategy consists of searching for, identifying and obtaining
the benefits of present or future investment values. For example, such values
may be found in a company's future earnings potential or in its existing re-
sources and assets. Accordingly, the Adviser is constantly engaged in assess-
ing, comparing and judging the worth of companies, particularly in comparison
to the price the markets place on such companies' shares.

Growth

This long-term strategy consists of buying and holding equity securities of
companies which it believes to be of high quality and high growth potential.
Typically, these companies are industry leaders with the potential to dominate
their markets by being low-cost, high-quality producers of products or servic-
es. Usually these companies have an identifiable competitive advantage. The Ad-
viser believes that the earnings growth rate of these companies is the primary
determinant of their stock prices and that efficient markets will reward con-
sistently above average earnings growth with greater-than-average capital ap-
preciation over the long-term.

Themes

To complete the Adviser's investment philosophy in managing the funds, the in-
vestment strategies discussed above are applied in concert with long-term in-
vestment themes to identify investment opportunities. These longer-term themes
are the strong and inexorable trends that arise from time to time from econom-
ic, social, demographic and cultural forces. The Adviser also believes that un-
derstanding the instigation, catalysts and effects of these long-term trends
will enable them to identify companies that are currently or will soon benefit
from these trends.

3
<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 Objective
The Equity Fund seeks to provide long-term capital appreciation. This objective
may be changed without shareholder approval.

Investment Strategy of the Equity Fund
The Equity Fund invests primarily (at least 65% of its assets) in larger capi-
talization (i.e., companies with market capitalizations over $5 billion) common
stocks of U.S. and, to a lesser extent, foreign companies that the Adviser be-
lieves have value that is not currently reflected in their market prices. The
Adviser generally diversifies the Fund's investments over a variety of indus-
tries and types of companies. The Fund may invest in companies of any size, in-
cluding small, high growth companies.

The Adviser takes a long-term approach to managing the Fund and tries to iden-
tify 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 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 also may be subject to risks particular to its investments in foreign,
medium and smaller capitalization companies. These risks are discussed in
greater detail in the section entitled "More Information About Risk."

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

4
<PAGE>

Performance Information
The bar chart and the performance table below illustrate the risks and volatil-
ity 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.

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

[GRAPH]
1996 19.86%
1997 31.72%
1998 24.95%
1999 31.93%

Best Quarter Worst Quarter
22.45% (15.60)%
(12/31/98) (9/30/98)

The Fund's performance for the six month period ending June 30, 2000 was 2.11%.

This table compares the average annual total return of the Fund's Institutional
Shares for the periods ended December 31, 1999 to those of the Standard & Poors
500 Composite Stock Price Index.

<TABLE>
<CAPTION>
1 Since
Year Inception
----------------------------------------------------------------------------------
<S> <C> <C>
Equity Fund (Institutional Shares) 31.93% 25.73%*

Standard & Poor's 500 Composite Stock Price Index 21.04% 28.54%**
</TABLE>

* Since January 16, 1995 ** Since December 31, 1994

What is an Index?
An index measures the market prices of a specific group of securities in a par-
ticular 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
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

(expenses that are deducted from Fund assets)
<TABLE>
<S> <C> <C>
Management Fees 0.65%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.25%
Total Other Expenses 0.65%
-----------------------------------------------------
Total Annual Fund Operating Expenses 1.30%
Fee Waivers and Expense Reimbursements (0.60)%
-----------------------------------------------------
Net Annual Fund Operating Expenses 0.70%*
</TABLE>

* The Adviser has contractually agreed to waive fees and reimburse expenses in
order to keep total operating expenses from exceeding 0.70%, for the period
commencing on the date of this prospectus and ending March 31, 2001. For more
information about these fees, see "Investment Adviser and Portfolio Manag-
ers."

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, Fund
operating expenses remain the same and you reinvest all dividends and distribu-
tions. Although your actual costs might be different, your approximate costs of
investing $10,000 in the Fund would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------
<S> <C> <C> <C> <C>
$72 $224 $390 $871
</TABLE>

5
<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 in the market

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

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

Investment Strategy of the Value Equity Fund
The Value Equity Fund invests primarily (at least 65% of its assets) in common
stocks of U.S. and, to a lesser extent, foreign companies that the Adviser be-
lieves are undervalued, at current market prices. The Adviser generally diver-
sifies 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 re-
search with valuation constraints to identify companies trading at what the Ad-
viser 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 cata-
lysts necessary to realize this value.

Principal Risks of Investing in the Value 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 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 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 ex-
change.

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

6
<PAGE>

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

[GRAPH]
1997 27.31%
1998 20.52%
1999 34.73%

Best Quarter Worst Quarter
26.81% (16.32)%
(12/31/99) (9/30/98)

The Fund's performance for the six month period ending June 30, 2000 was
(1.91)%.

This table compares the average annual total returns of the Fund's Institu-
tional Shares for the periods ended December 31, 1999 to those of the Russell
1000 Value Index and the Russell Mid Cap Value Index.

<TABLE>
<CAPTION>
Since
1 Year Inception
--------------------------------------------------------------------------------------
<S> <C> <C>
Value Equity Fund (Institutional Shares) 34.73% 27.64%*

Russell 1000 Value Index** 7.34% 19.62%***

Russell Mid Cap Value Index** (0.11)% 13.56%***
</TABLE>

* Since June 1, 1996

** The Russell 1000 Value Index measures the performance of the 1,000 largest
U.S. companies based on total market capitalization with lower price-to-book
ratios and lower forecasted growth values. The Russell Mid Cap Value Index
measures the performance of medium-sized, value-oriented securities. The In-
dexes are unmanaged and do not reflect any fees or expenses.

*** Since December 31, 1992

Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

Annual Fund Operating Expenses

(expenses that are deducted from Fund assets)
<TABLE>
<S> <C> <C>
Management Fees 0.65%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.30%
Total Other Expenses 0.70%
------------------------------------------------------
Total Annual Fund Operating Expenses 1.35%
Fee Waivers and Expense Reimbursements (0.55)%
------------------------------------------------------
Net Annual Fund Operating Expenses 0.80%*
</TABLE>

* The Adviser has contractually agreed to waive fees and reimburse expenses in
order to keep total operating expenses from exceeding 0.80%, for the period
commencing on the date of this prospectus and ending March 31, 2001. For more
information about these fees, see "Investment Adviser and Portfolio Manag-
ers."

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------
<S> <C> <C> <C> <C>
$82 $255 $444 $990
</TABLE>

7
<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 Objective
The Optimum Growth Fund seeks superior, risk-adjusted total return. This objec-
tive may be changed without shareholder approval.

Investment Strategy of the Optimum Growth Fund
The Optimum Growth Fund invests primarily (at least 65% of its assets) in com-
mon 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 (i.e., companies with market capitalizations
over $1.5 billion) in a variety of industries.

The Adviser takes a long-term approach to managing the Fund and tries to iden-
tify 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 di-
versifies 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 systemati-
cally selects companies that it believes, based on quantitative screening, com-
plements the Fund's core holdings by reducing portfolio volatility and further
diversifying the Fund.

Principal Risks of Investing in the Optimum Growth 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 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 also may be subject to risks particular to its investments in medium
capitalization companies. These risks are discussed in greater detail in the
section entitled "More Information About Risk."

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

8
<PAGE>

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

[GRAPH]
1997 33.51%
1998 65.23%
1999 44.70%

Best Quarter Worst Quarter
36.46% (6.27)%
(12/31/98) (9/30/98)

The Fund's performance for the six month period ending June 30, 2000 was 1.41%.

This table compares the average annual total returns of the Fund's Institu-
tional Shares for the periods ended December 31, 1999 to those of the Russell
1000 Growth Index.

<TABLE>
<CAPTION>
Since
1 Year Inception
---------------------------------------------------------------------------------------
<S> <C> <C>
Optimum Growth Fund (Institutional Shares) 44.70% 39.85%*

Russell 1000 Growth Index 33.14% 31.25%**
</TABLE>

* Since June 1, 1996 ** Since May 31, 1996

Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)

<TABLE>
<S> <C> <C>
Management Fees 0.65%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.31%
Total Other Expenses 0.71%
------------------------------------------------------
Total Annual Fund Operating Expenses 1.36%
Fee Waivers and Expense Reimbursements (0.56)%
------------------------------------------------------
Net Annual Fund Operating Expenses 0.80%*
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------
<S> <C> <C> <C> <C>
$82 $255 $444 $990
</TABLE>

9
<PAGE>

Income Fund

FUND SUMMARY

Investment Goal Current income, consistent with moderate risk of capital and
liquidity

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 Objective
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.

Investment Strategy of the Income Fund
The Income Fund invests primarily (at least 65% of its assets) in fixed income
securities issued or guaranteed by the U.S. government, its agencies and in-
strumentalities, 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 matu-
rity in light of current market and economic conditions to provide a competi-
tive 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 ap-
preciation.

Due to its investment strategy, the Fund may buy and sell securities frequent-
ly. This may result in higher transaction costs and additional capital gains
tax liabilities and may affect the Fund's performance.

Principal Risks of Investing in the Income Fund
The prices of the Fund's fixed income securities respond to economic develop-
ments, particularly interest rate changes, as well as to perceptions about the
creditworthiness of individual issuers, including governments. Generally, the
Fund's fixed income securities will decrease in value if interest rates rise,
and the volatility of lower rated securities is even greater than that of
higher rated securities.

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 divi-
dends and ultimately to 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 cal-
culate how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates.

10
<PAGE>

The Fund's U.S. government securities are not guaranteed against price move-
ments due to changing interest rates. Obligations issued by some U.S. govern-
ment agencies are backed by the U.S. Treasury, while others are backed solely
by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.

The Fund also may be subject to risks particular to its investments in foreign
fixed income securities as well as credit risk. These risks are discussed in
greater detail in the section entitled "More Information About Risk."

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

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

[GRAPH]
1996 2.51%
1997 9.28%
1998 8.46%
1999 -1.67%

Best Quarter Worst Quarter
4.85% (2.03)%
(6/30/95) (3/31/96)

The Fund's performance for the six month period ending June 30, 2000 was 3.87%.

This table compares the average annual total returns of the Fund's Institu-
tional Shares for the periods ended December 31, 1999 to those of the Lehman
Brothers Intermediate Govt/Credit Bond Index.

<TABLE>
<CAPTION>
1 Since
Year Inception
-------------------------------------------------------------------------------
<S> <C> <C>
Income Fund (Institutional Shares) (1.67)% 6.56%*

Lehman Brothers Intermediate Govt/Credit Bond Index 0.39% 7.09%**
</TABLE>

* Since January 16, 1995

** Since December 31, 1994

Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

Annual Fund Operating Expenses

(expenses that are deducted from Fund assets)

<TABLE>
<S> <C> <C>
Management Fees 0.65%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.25%
Total Other Expenses 0.65%
--------------------------------------------
Total Annual Fund Operating
Expenses 1.30%
Fee Waivers and Expense
Reimbursements (0.80)%
--------------------------------------------
Net Annual Fund Operating Expenses 0.50%*
</TABLE>

* The Adviser has contractually agreed to waive fees and reimburse expenses in
order to keep total operating expenses from exceeding 0.50%, for the period
commencing on the date of this prospectus and ending March 31, 2001. For more
information about these fees, see "Investment Adviser and Portfolio Manag-
ers."

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------
<S> <C> <C> <C> <C>
$51 $160 $280 $628
</TABLE>

11
<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 Objective
The Total Return Bond Fund seeks to maximize the total rate of return consis-
tent with moderate risk of capital and maintenance of liquidity. This objective
may be changed without shareholder approval.

Investment Strategy of the Total Return Bond Fund
The Total Return Bond Fund invests primarily (at least 65% of its assets) in
fixed income securities issued or guaranteed by the U.S. government, its agen-
cies and instrumentalities, and corporate issuers rated at the time of invest-
ment in one of the two highest rating categories by a major rating agency. How-
ever, the Fund may invest without limit in securities rated at the time of in-
vestment in one of the three highest rating categories by a major rating agen-
cy. 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 of-
fer relative value and potential for moderate price appreciation.

Principal Risks of Investing in the Total Return Bond Fund
The prices of the Fund's fixed income securities respond to economic develop-
ments, particularly interest rate changes, as well as to perceptions about the
creditworthiness of individual issuers, including governments. Generally, the
Fund's fixed income securities will decrease in value if interest rates rise,
and the volatility of lower rated securities is even greater than that of
higher rated securities.

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

12
<PAGE>

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

[GRAPH]
1996 2.66%
1997 9.23%
1998 9.22%
1999 -2.57%

Best Quarter Worst Quarter
7.03% (2.47)%
(6/30/95) (3/31/96)

The Fund's performance for the six month period ending June 30, 2000 was 4.47%.

This table compares the average annual total returns of the Fund's Institu-
tional Shares for the periods ended December 31, 1999 to those of the Lehman
Brothers Govt/Credit Bond Index.

<TABLE>
<CAPTION>
Since
1 Year Inception
-------------------------------------------------------------------------------------
<S> <C> <C>
Total Return Bond Fund (Institutional Shares) (2.57)% 7.17%*

Lehman Brothers Govt/Credit Bond Index (2.15)% 7.60%**
</TABLE>

* Since January 19, 1995 ** Since December 31, 1994

Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

Annual Fund Operating Expenses

(expenses that are deducted from Fund assets)

<TABLE>
<S> <C> <C>
Management Fees 0.65%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.23%
Total Other Expenses 0.63%
--------------------------------------------
Total Annual Fund Operating
Expenses 1.28%
Fee Waivers and Expense
Reimbursements (0.78)%
--------------------------------------------
Net Annual Fund Operating Expenses 0.50%*
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------
<S> <C> <C> <C> <C>
$51 $160 $280 $628
</TABLE>

13
<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 long-term capital appreciation, who are
willing to accept the risks of investing in companies located in foreign
countries

Investment Objective
The International Equity Fund seeks to provide long-term capital appreciation
through investment in a diversified portfolio of marketable foreign securities.
This objective may be changed without shareholder approval.

Investment Strategy of the International Equity Fund
The International Equity Fund invests primarily (at least 65% of its assets) in
equity securities of larger, more established companies located in developed
foreign markets, which include most nations in western Europe and the more de-
veloped 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 oppor-
tunities in emerging markets. Emerging market countries are countries that the
World Bank or the United Nations considers to be emerging or developing. The
Adviser generally does not attempt to hedge the effects of currency value fluc-
tuations 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 prom-
ising 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 sec-
tors, 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 in-
vestments in companies located in emerging markets only where the Adviser be-
lieves that such companies' growth/appreciation potential transcends their lo-
cation or operations in emerging market countries.

Principal Risks of Investing in the International 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 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.

Investing in foreign countries poses additional risks since political and eco-
nomic 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 coun-
tries 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 (posi-
tively or negatively) the value of a Fund's investments. These currency move-
ments may happen separately from and in response to events that do not other-
wise affect the value of the security in the issuer's home country. These vari-
ous 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.

14
<PAGE>

Emerging markets may be more likely to experience political turmoil or rapid
changes in market or economic conditions than more developed countries. In ad-
dition, 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 cur-
rency 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 market or the equity markets as a
whole.

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

[GRAPH]
1996 14.75%
1997 -4.59%
1998 10.13%
1999 53.00%

Best Quarter Worst Quarter
40.28% (16.37)%
(12/31/99) (9/30/98)

The Fund's performance for the six month period ending June 30, 2000 was
(4.99)%.

This table compares the average annual total returns of the Fund's Institu-
tional Shares for the periods ended December 31, 1999 to those of the FT/S&P--
Actuaries World Indices--World Excluding U.S. Index.

<TABLE>
<CAPTION>
1 Since
Year Inception
-----------------------------------------------------------------------------
<S> <C> <C>
International Equity Fund (Institutional Shares) 53.00% 17.44%*

FT/S&P--Actuaries World Indices--World Excluding U.S. Index 31.82% 12.67%**
</TABLE>

* Since January 24, 1995 ** Since December 31, 1994

Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

Shareholder Fees (paid directly from your investment)

Redemption Fee (as a percentage of amount redeemed, if applicable)* 2.00%

Annual Fund Operating Expenses

(expenses that are deducted from Fund assets)

<TABLE>
<S> <C> <C>
Management Fees 1.00%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.45%
Total Other Expenses 0.85%
---------------------------------------------
Total Annual Fund Operating
Expenses 1.85%
Fee Waivers and Expense
Reimbursements (0.95)%
---------------------------------------------
Net Annual Fund Operating Expenses 0.90%**
</TABLE>

* This redemption fee is charged if you redeem or exchange your shares within
30 days of the date of purchase. See "How to Sell Your Shares" for more in-
formation.

** The Adviser has contractually agreed to waive fees and reimburse expenses in
order to keep total operating expenses from exceeding 0.90%, for the period
commencing on the date of this prospectus and ending March 31, 2001. For
more information about these fees, see "Investment Adviser and Portfolio
Managers."

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------
<S> <C> <C> <C> <C>
$92 $287 $498 $1,108
</TABLE>

15
<PAGE>

More Information About Risk

Equity Risk
(Equity Fund--Value Equity Fund--Optimum Growth Fund--International Equity
Fund)--Equity securities include public and privately issued 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 these securities in general are sub-
ject 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.

Small Cap Risk
(Equity Fund--Value Equity Fund)--The smaller capitalization companies in which
the Funds may invest may be more vulnerable to adverse business or economic
events than larger, more established companies. In particular, these small com-
panies 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.

Mid Cap Risk
(Equity Fund--Value Equity Fund--Optimum Growth Fund)--The medium capitaliza-
tion companies that the Funds may invest in may be more vulnerable to adverse
business or economic events than larger companies. In particular, these compa-
nies may have limited product lines, markets and financial resources, and may
depend on a relatively small management group. Therefore, medium capitalization
stocks may be more volatile than those of larger companies.

Fixed Income Risk

(Income Fund--Total Return Bond Fund)--The market value of fixed income invest-
ments change in response to interest rate changes and other factors. During pe-
riods of falling interest rates, the values of outstanding fixed income securi-
ties generally rise. During periods of rising interest rates, the values of
outstanding fixed income securities generally fall. Moreover, while securities
with longer maturities tend to produce higher yields, the prices of longer ma-
turity securities are also subject to greater market fluctuations as a result
of changes in interest rates. As the average maturity or duration of a security
lengthens, the risk that the price of such security will become more volatile
increases. Duration approximates the price sensitivity of a security to changes
in interest rates. In contrast to maturity which measures only time until final
payment, duration combines consideration of yield, interest payments, final ma-
turity and call features.

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

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

Event Risk
(Income Fund--Total Return Bond Fund)--Securities may suffer declines in
credit quality and market value due to issuer restructurings or other fac-
tors. This risk should be reduced because of a Fund's multiple holdings.

(Income Fund)--High-Yield, Lower Rated Securities (or "junk bonds") are sub-
ject 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 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
(Income Fund--Total Return Bond Fund)--Mortgage-backed securities are fixed in-
come 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 possi-
bility 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.

16
<PAGE>

Rising interest rates tend to discourage refinancings, with the result that the
average life and volatility of the security will increase, exacerbating its de-
crease in market price. When interest rates fall, however, mortgage-backed se-
curities may not gain as much in market value because of the expectation of ad-
ditional mortgage prepayments that must be reinvested at lower interest rates.
Prepayment risk may make it difficult to calculate the average maturity of a
portfolio of mortgage-backed securities and, therefore, to assess the volatil-
ity risk of that portfolio.

Technology Risk
(Equity Fund--Value Equity Fund--Optimum Growth Fund--Income Fund)--The Funds
may invest in securities of issuers engaged in the technology sector of the
economy. These securities may underperform stocks of other issuers or the mar-
ket as a whole. To the extent that the Funds invest in issuers conducting busi-
ness in the technology market sector, the Funds are subject to legislative or
regulatory changes, adverse market conditions and/or increased competition af-
fecting the market sector. Competitive pressures may significantly impact the
financial condition of technology companies. For example, an increasing number
of companies and new product offerings can lead to price cuts and slower sell-
ing cycles, and many of these companies may be dependent on the success of a
principal product, may rely on sole source providers and third-party manufac-
turers, and may experience difficulties in managing growth. In addition, secu-
rities of technology companies may experience dramatic price movements that
have little or no basis in fundamental economic conditions. As a result, a
Fund's investment in technology companies may subject it to more volatile price
movements.

Foreign Security Risks
(All Funds)--Investments in securities of foreign companies or governments can
be more volatile than investments in U.S. companies or governments. Diplomatic,
political, or economic developments, including nationalization or appropria-
tion, could affect investments in foreign countries. Foreign securities markets
generally have less trading volume and less liquidity than U.S. markets. In ad-
dition, the value of securities denominated in foreign currencies, and of divi-
dends from such securities, can change significantly when foreign currencies
strengthen or weaken relative to the U.S. dollar. Foreign companies or govern-
ments 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. secu-
rities. Some foreign governments levy withholding taxes against dividend and
interest income. Although in some countries a portion of these taxes is recov-
erable, the non-recovered portion will reduce the income received from the se-
curities comprising the portfolio.

Currency Risk
(All Funds)--Investments in foreign securities denominated in foreign curren-
cies 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.

More Information About Fund 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.

The investments and strategies described in this prospectus are those that we
use under normal conditions. During adverse economic, market or other condi-
tions, each Fund may take temporary defensive positions such as investing up to
100% of its assets in investments that would not ordinarily be consistent with
a Fund's objective. The Fund may not achieve its objective when so invested. A
Fund will do so only if the Adviser believes that the risk of loss outweighs
the opportunity for capital gains or higher income. Of course, a Fund cannot
guarantee that it will achieve its investment goal.

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

17
<PAGE>

U.S. Trust Corporation is a wholly-owned subsidiary of The Charles Schwab Cor-
poration ("Schwab"). Charles R. Schwab is the founder, Chairman and Co-Chief
Executive Officer and a Director and significant shareholder for Schwab. As a
result of his positions and share ownership, Mr. Schwab may be deemed to be a
controlling person of Schwab and its subsidiaries. Through its principal sub-
sidiary Charles Schwab & Co., Inc., Schwab is one of the nation's largest fi-
nancial services firms and the nation's largest electronic brokerage firm, in
each case measured by customer assets. At December 31, 1999, Schwab served 6.6
million active accounts with $725 billion in customer assets.

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 manage-
ment, estate and trust administration, financial planning, corporate trust and
agency banking, and personal and corporate banking. On December 31, 1999, U.S.
Trust had approximately $86 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.

U.S. Trust and its affiliates advise and manage assets for their private cli-
ents and funds, some of which have investment objectives and policies similar
to Excelsior Funds. U.S. Trust and its affiliates will not have any obligation
to make available or use any information regarding these proprietary investment
activities for the benefit of the Funds. The research department of U.S. Trust
prepares research reports that are utilized by these Funds, wealth managers of
U.S. Trust and Schwab and its affiliates. It is U.S. Trust's intention to dis-
tribute this information as simultaneously as possible to all recipients. How-
ever, where the investment manager of an Excelsior Fund prepares such research,
that Fund may and often does receive and act upon that information before it is
disseminated to other parties, which in turn may have a negative effect on the
price of the securities subject to research.

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

For the fiscal year ended March 31, 2000, U.S. Trust received advisory fees, as
a percentage of average daily net assets, of:

<TABLE>
<S> <C>
Equity Fund 0.45%
Value Equity Fund 0.50%
Optimum Growth Fund 0.52%
Income Fund 0.25%
Total Return Bond Fund 0.27%
International Equity Fund 0.44%
</TABLE>

Portfolio Managers
Leigh H. Weiss has served as portfolio manager for the Equity Fund since Janu-
ary 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 responsi-
ble 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.

All investment decisions for the Optimum Growth Fund and Value Equity 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. From 1988 to 1996, 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. From
1991 to 1996, Ms. Sagar was Senior Vice President for international equity in-
vestments for General Electric Investments Corp. in Stamford, CT. Ms. Sagar is

18
<PAGE>

primarily responsible for the day to day management of the International Equity
Fund's portfolio. Research, analyses, trade execution and other facilities pro-
vided by U.S. Trust and other personnel also play a significant role in portfo-
lio management and performance.

Purchasing, Selling and Exchanging Fund Shares
This section tells you how to purchase, sell (sometimes called "redeem") and
exchange Institutional Shares of the Funds.

Institutional Shares
. No sales charge
. No 12b-1 fees
. No minimum initial or subsequent investment

Institutional Shares are offered only to financial institutions investing for
their own or their customers' accounts. For information on how to open an ac-
count and set up procedures for placing transactions call (800) 881-9358 (from
overseas, call (617) 557-1755). Customers of financial institutions should con-
tact their institutions for information on their accounts.

How to Purchase Fund Shares
You may purchase shares directly by:
. Mail
. Telephone

To purchase shares directly from us, please call (800) 881-9358 (from overseas,
call (617) 557-1755), or complete and send in the enclosed application to Ex-
celsior Funds, c/o Chase Global Funds Services Company, P.O. Box 2798, Boston,
MA 02208-2798. Unless you arrange to pay by wire, write your check, payable in
U.S. dollars, to "Excelsior 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 in-
structions. 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 en-
closed application and forward it to the address indicated on the application.
Investors making subsequent investments by wire should follow the above in-
structions.

You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its proce-
dures. Your broker or institution may charge a fee for its services, in addi-
tion 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 promotional incentive programs for deal-
ers, which will be paid for by the distributor out of its own assets and not
out of the assets of the Funds. Under any such program, the distributor may
provide incentives, in the form of cash or other compensation, including mer-
chandise, airline vouchers, trips and vacation packages, to dealers selling
shares of a Fund. If any such program is made available to any dealer, it will
be made available to all dealers on the same terms.

General Information

You may purchase shares on any day that the New York Stock Exchange (NYSE) and
the Adviser are open for business (a "Business Day"). Presently, the only Busi-
ness Days on which the Adviser is closed and the NYSE is open are Veterans' Day
and Columbus 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 or-
der. We consider requests to be in "good order" when all required documents are
properly completed, signed and received.

Each Fund calculates its NAV 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.

19
<PAGE>

How We Calculate NAV
NAV for one Fund share is the value of that share's portion of the net assets
of 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 un-
reliable, fair value prices may be determined in good faith using methods ap-
proved by the Board of Trustees. Fixed income investments with remaining matu-
rities 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 se-
curities 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 the procedures es-
tablished when they opened their account or accounts. If you have questions,
call (800) 881-9358 (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 ac-
count number and sign the request.

If you own your shares directly and previously indicated on your account appli-
cation or arranged in writing to do so, you may sell (sometimes called "re-
deem") your shares on any Business Day by contacting a Fund directly by tele-
phone at (800) 881-9358 (from overseas, call (617) 557-1755). Shares will not
be redeemed by the Fund unless all required documents have been received by the
Fund.

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 re-
ceives your request in goodorder.

A redemption fee of 2% of the value of the shares redeemed or exchanged will be
imposed on shares in the International Equity Fund redeemed or exchanged 30
days or less after their date of purchase. The redemption fee is intended to
limit short-term trading in the Fund or, to the extent that short-term trading
persists, to impose the costs of that type of activity on the shareholders who
engage in it. The redemption fee will be paid to the Fund. The Fund reserves
the right, at its discretion, to waive, modify or terminate the redemption fee.
No redemption fee will be charged on redemptions and exchanges involving (i)
those that occur as a result of a bona fide investment policy committee deci-
sion of a recognized financial institution with respect to an asset allocation
program, (ii) shares acquired through the reinvestment of dividends or capital
gains distributions, (iii) shares redeemed as part of a systematic withdrawal
plan that represent 4% or less of the investor's investment subject to the plan
accounts, or (iv) shares maintained through employee pension benefit plans sub-
ject to the Employee Retirement Income Security Act that offer the Excelsior
Funds as an investment vehicle. For purposes of omnibus accounts, the redemp-
tion fee will be determined at the sub-account level.

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 recently purchased your shares by check, redemp-
tion proceeds may not be available until your check has cleared (which may take
up to 15 days from your date of purchase).

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 proba-

20
<PAGE>

bly have to pay transaction costs to sell the securities distributed to you, as
well as taxes on any capital gains from the sale as with any redemption.

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

Suspension of Your Right to Sell Your Shares

A Fund may suspend your right to sell your shares if the NYSE restricts trad-
ing, the SEC declares an emergency or when U.S. Trust and the custodian are
closed. More information about this is in our Statement of Additional Informa-
tion.

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 or Government Money Funds of Excelsior Funds, Inc. In order to pro-
tect other shareholders, we may limit your exchanges to no more than six per
year. We may also reject any exchange request. Shares can be exchanged directly
by mail, or by telephone if you previously selected the telephone exchange op-
tion 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 days from your
date of purchase). 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.

There is a 2.00% redemption fee on shares exchanged within 30 days of purchase.
See "How to Sell Your Fund Shares" above for more information.

Telephone Transactions
Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Funds have certain safeguards
and procedures to confirm the identity of callers and the authenticity of in-
structions, the Funds are not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you or
your financial institution transact with a Fund over the telephone, you will
generally bear the risk of any loss.

Authorized Intermediaries
Certain intermediaries, such as brokers or other shareholder organizations, are
authorized to accept purchase, redemption and exchange requests for Funds
shares. Some of these organizations may charge a fee for these transactions.
These intermediaries may authorize other organizations to accept purchase, re-
demption and exchange requests for Fund shares. These requests are normally ex-
ecuted at the NAV next determined after the intermediary receives the request
in good order. Authorized intermediaries are responsible for transmitting re-
quests and delivering funds on a timely basis.

Shareholder Servicing

The Funds are permitted to pay an administrative 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 state-
ments. 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 and Distributions
Each Fund distributes its income as follows:

<TABLE>
<S> <C>
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 Semi-annually
</TABLE>

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

Dividends and distributions for shares held of record by U.S. Trust and its af-
filiates or correspondent banks will be paid in cash. Otherwise, dividends and
distributions

21
<PAGE>

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 div-
idends and distributions paid after the Fund receives your written notice. To
cancel your election, simply send the Fund written notice.

Taxes
Each Fund will distribute substantially all of its taxable income including its
net capital gain (the excess of long-term capital over short-term capital
loss), if any. Distributions you receive from a Fund will generally be taxable
regardless of whether they are paid in cash or reinvested in additional shares.
Distributions attributable to the net capital gain of a Fund will be taxable to
you as long-term capital gain, regardless of how long you have held your
shares. Other fund distributions will generally be taxable as ordinary income.

You should note that if you purchase shares just before a distribution, the
purchase price will reflect the amount of the upcoming distribution, but you
will be taxed on the entire amount of the distribution received, even though,
as an economic matter, the distribution simply constitutes a return of capital.
This is known as "buying into a dividend."

You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, based on the
difference between your tax basis in the shares and the amount you receive for
them. To aid in computing your tax basis, you generally should retain your ac-
count statements for the periods during which you held shares.

Any loss realized on shares held for six months or less will be treated as a
long-term capital loss to the extent of any capital gain dividends that were
received on the shares.

It is expected that the Funds will be subject to foreign withholding taxes with
respect to dividends or interest, if any, received from sources in foreign
countries. In the case of the International Equity Fund, it may make an elec-
tion to treat a proportionate amount of such taxes as constituting a distribu-
tion to each shareholder, which would allow each shareholder either (1) to
credit such proportionate amount of taxes against U.S. federal income tax lia-
bility or (2) to take such amount as an itemized deduction.

Shareholders may also be subject to state and local taxes on distributions and
redemptions. State income taxes may not apply however, to the portions of each
Fund's distributions, if any, that are attributable to interest on federal se-
curities or interest on securities of the particular state or localities within
the state.

The foregoing is only a summary of certain tax considerations under current
law, which may be subject to change in the future. Shareholders who are nonres-
ident aliens, foreign trusts or estates, or foreign corporations or partner-
ships, may be subject to different United States federal income tax treatment.
You should consult your tax adviser for further information regarding federal,
state, local and/or foreign tax consequences relevant to your specific situa-
tion.

More information about taxes is in the Statement of Additional Information.

22
<PAGE>

Financial Highlights

The tables that follow present performance information about Institutional
Shares of the Fund. This information is intended to help you understand the
Fund's financial performance for the past five years, or, if shorter, the pe-
riod of the Fund's operations. Some of this information reflects financial in-
formation 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 Ernst & Young LLP, independent public auditors. Their report,
along with the Fund's financial statements, are incorporated by reference into
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).

EQUITY FUND

<TABLE>
<CAPTION>
Year
Year Ended March 31, Ten Months Ended Ended May
------------------------- March 31, 31,
2000 1999 1998 1997(/1/) 1996(/2/)
------- ------- ------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 14.96 $ 12.69 $ 9.65 $ 8.93 $ 7.73
------- ------- ------- ------- ------
Investment Operations:
Net investment income.. 0.02 0.04 0.05 0.05 0.11
Net realized and
unrealized gain....... 3.73 2.47 4.67 0.86 1.20
------- ------- ------- ------- ------
Total from Investment
Operations............ 3.75 2.51 4.72 0.91 1.31
------- ------- ------- ------- ------
Distributions:
From net investment
income................ (0.03) (0.04) (0.06) (0.07) (0.11)
From net realized
gains................. (1.20) (0.20) (1.62) (0.12) --
------- ------- ------- ------- ------
Total Distributions.... (1.23) (0.24) (1.68) (0.19) (0.11)
------- ------- ------- ------- ------
Net Asset Value, End of
Period................. $ 17.48 $ 14.96 $ 12.69 $ 9.65 $ 8.93
======= ======= ======= ======= ======
Total Return............ 25.75% 20.13% 51.58% 10.22%(/3/) 17.04%
Ratios/Supplemental Data
Ratios to Average Net
Assets
Net Expenses........... 0.70% 0.70% 0.70% 0.70%(/5/) 0.36%
Gross Expenses(/4/).... 0.90% 0.90% 0.90% 0.92%(/5/) 1.49%
Net Investment Income.. 0.13% 0.28% 0.46% 0.70%(/5/) 1.32%
Portfolio Turnover
Rate................... 27% 37% 26% 32%(/5/) 113%
Net Assets at End of
Period (in millions)... $211.60 $180.11 $138.33 $118.56 $23.50
</TABLE>
------
Notes:
(1) The Fund changed its fiscal year end to March 31.
(2) Commencement of operations.
(3) Not annualized.
(4) Expense ratios before waiver of fees and reimbursement of expenses (if any)
by the investment adviser and administrators.
(5) Annualized.

23
<PAGE>

VALUE EQUITY FUND

<TABLE>
<CAPTION>
Year Ended March 31,
---------------------- June 1, 1996(/1/)
2000 1999 1998 to March 31, 1997
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $15.33 $16.12 $11.33 $10.00
------ ------ ------ ------
Investment Operations:
Net investment income.............. 0.06 0.13 0.11 0.08
Net realized and unrealized gain... 6.34 0.52 5.59 1.31
------ ------ ------ ------
Total from Investment Operations... 6.40 0.65 5.70 1.39
------ ------ ------ ------
Distributions:
From net investment income......... (0.09) (0.12) (0.11) (0.06)
From net realized gains............ (0.32) (1.32) (0.80) --
------ ------ ------ ------
Total Distributions................ (0.41) (1.44) (0.91) (0.06)
------ ------ ------ ------
Net Asset Value, End of Period...... $21.32 $15.33 $16.12 $11.33
====== ====== ====== ======
Total Return........................ 41.92% 4.80% 51.67% 13.91%(/2/)
Ratios/Supplemental Data
Ratios to Average Net Assets
Net Expenses....................... 0.80% 0.70% 0.70% 0.70%(/3/)
Gross Expenses(/4/)................ 0.95% 0.97% 1.00% 1.12%(/3/)
Net Investment Income.............. 0.31% 0.87% 0.81% 0.94%(/3/)
Portfolio Turnover Rate............. 45% 55% 51% 64%(/3/)
Net Assets at End of Period (in
millions).......................... $53.98 $39.31 $34.77 $23.69
</TABLE>
------
Notes:
(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) Expense ratios before waiver of fees and reimbursement of expenses (if any)
by the investment adviser and administrators.

24
<PAGE>

OPTIMUM GROWTH FUND

<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------- June 1, 1996(/1/) To
2000 1999 1998 March 31, 1997
------- ------ ------ --------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period.................. $ 27.55 $16.33 $10.19 $10.00
------- ------ ------ ------
Investment Operations:
Net investment income...... (0.05) (/5/) 0.03 0.05
Net realized and unrealized
gain (loss)............... 7.21 11.22 6.15 0.17
------- ------ ------ ------
Total from Investment
Operations................ 7.16 11.22 6.18 0.22
------- ------ ------ ------
Distributions:
From net investment
income.................... -- (/5/) (0.04) (0.03)
From net realized gains.... (3.88) (/5/) -- --
------- ------ ------ ------
Total Distributions........ (3.88) (/5/) (0.04) (0.03)
------- ------ ------ ------
Net Asset Value, End of
Period..................... $ 30.83 $27.55 $16.33 $10.19
======= ====== ====== ======
Total Return................ 27.66% 68.74% 60.85% 2.23%(/2/)
Ratios/Supplemental Data
Ratios to Average Net Assets
Net Expenses............... 0.80% 0.71% 0.70% 0.70%(/3/)
Gross Expenses(/4/)........ 0.93% 0.93% 0.97% 1.11%(/3/)
Net Investment Income...... (0.18%) 0.00% 0.23% 0.66%(/3/)
Portfolio Turnover Rate..... 44% 22% 19% 20%(/3/)
Net Assets at End of Period
(in millions).............. $ 85.89 $88.05 $51.44 $27.18
</TABLE>
------
Notes:
(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) Expense ratios before waiver of fees and reimbursement of expenses (if any)
by the investment adviser and administrators.

(5) Amount represents less than $0.01 per share.

25
<PAGE>

Income Fund

<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------- Ten Months Ended Year Ended
2000 1999 1998 March 31, 1997(/1/) May 31, 1996(/2/)
------ ------ ------ ------------------- -----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 7.00 $ 7.23 $ 6.90 $ 6.99 $ 7.33
------ ------ ------ ------ ------
Investment Operations:
Net investment income.. 0.41 0.40 0.44 0.38 0.51
Net realized and
unrealized gain
(loss)................ (0.33) 0.03 0.35 (0.01) (0.27)
------ ------ ------ ------ ------
Total from Investment
Operations............ 0.08 0.43 0.79 0.37 0.24
------ ------ ------ ------ ------
Distributions:
From net investment
income................ (0.41) (0.41) (0.44) (0.38) (0.51)
In excess of net
investment income..... -- -- (/6/) -- (/6/) -- --
From net realized
gains................. -- (0.25) (0.02) (0.08) (0.07)
------ ------ ------ ------ ------
Total Distributions.... (0.42) (0.66) (0.46) (0.46) (0.58)
------ ------ ------ ------ ------
Net Asset Value, End of
Period................. $ 6.66 $ 7.00 $ 7.23 $ 6.90 $ 6.99
====== ====== ====== ====== ======
Total Return............ 1.16% 5.94% 11.78% 5.39%(/3/) 3.18%
Ratios/Supplemental Data
Ratios to Average Net
Assets
Net Expenses........... 0.50% 0.50% 0.50% 0.50%(/5/) 0.26%
Gross Expenses(/4/).... 0.90% 0.91% 0.91% 0.96%(/5/) 1.35%
Net Investment Income.. 6.08% 5.57% 6.14% 6.50%(/5/) 6.99%
Portfolio Turnover
Rate................... 125% 196% 190% 107%(/5/) 67%
Net Assets at End of
Period (in millions)... $99.21 $67.24 $61.38 $51.08 $24.01
</TABLE>
------
Notes:
(1) The Fund changed its fiscal year end to March 31.
(2) Commencement of operations.
(3) Not annualized.
(4) Expense ratios before waiver of fees and reimbursement of expenses (if any)
by the investment adviser and administrators.
(5) Annualized.
(6) Amount represents less than $0.01 per share.

26
<PAGE>

Total Return Bond Fund

<TABLE>
<CAPTION>
Year Ended March 31,
------------------------- Ten Months ended Year Ended
2000 1999 1998 March 31, 1997(/1/) May 31, 1996(/2/)
------- ------- ------- ------------------- -----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 7.32 $ 7.51 $ 7.16 $ 7.18 $ 7.47
------- ------- ------- ------- ------
Investment Operations:
Net investment income.. 0.41 0.42 0.44 0.37 0.48
Net realized and
unrealized gain
(loss)................ (0.31) 0.03 0.41 0.01 (0.17)
------- ------- ------- ------- ------
Total from Investment
Operations............ 0.10 0.45 0.85 0.38 0.31
------- ------- ------- ------- ------
Distributions:
From net investment
income................ (0.41) (0.42) (0.44) (0.37) (0.48)
From net realized
gains................. -- (0.20) (0.06) (0.03) (0.12)
In excess of net
realized gains........ -- (0.02) -- -- --
------- ------- ------- ------- ------
Total Distributions.... (0.41) (0.64) (0.50) (0.40) (0.60)
------- ------- ------- ------- ------
Net Asset Value, End of
Period................. $ 7.01 $ 7.32 $ 7.51 $ 7.16 $ 7.18
======= ======= ======= ======= ======
Total Return............ 1.47% 6.07% 12.21% 5.29%(/3/) 4.20%
Ratios/Supplemental Data
Ratios to Average Net
Assets
Net Expenses........... 0.50% 0.50% 0.50% 0.50%(/5/) 0.32%
Gross Expenses(/4/).... 0.88% 0.89% 0.90% 0.92%(/5/) 1.33%
Net Investment Income.. 5.85% 5.53% 5.95% 6.08%(/5/) 6.47%
Portfolio Turnover
Rate................... 115% 234% 196% 200%(/5/) 127%
Net Assets at End of
Period (in millions)... $264.67 $251.61 $167.71 $138.40 $65.02
</TABLE>
------
Notes:
(1) The Fund changed its fiscal year end to March 31.
(2) Commencement of operations.
(3) Not annualized.
(4) Expense ratios before waiver of fees and reimbursement of expenses (if any)
by the investment adviser and administrators.
(5) Annualized.

27
<PAGE>

International Equity Fund

<TABLE>
<CAPTION>
Year Ended March 31,
------------------------ Ten Months Ended Year Ended
2000 1999 1998 March 31, 1997(/1/) May 31, 1996(/2/)
------- ------- ------ ------------------- -----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 8.45 $ 9.67 $ 9.03 $ 8.99 $ 7.88
------- ------- ------ ------ ------
Investment Operations:
Net investment income.. 0.01 0.16 0.09 0.01 0.09
Net realized and
unrealized gain
(loss)................ 5.39 (0.79) 0.79 0.21 1.20
------- ------- ------ ------ ------
Total from Investment
Operations............ 5.40 (0.63) 0.88 0.22 1.29
------- ------- ------ ------ ------
Distributions:
From net investment
income................ (0.03) (0.16) (0.07) (0.06) (0.12)
In excess of net
investment income..... -- -- (0.02) (0.03) --
From net realized
gains................. (0.04) (0.30) (0.15) (0.09) (0.06)
In excess of net
realized gains........ -- (0.13) -- -- --
------- ------- ------ ------ ------
Total Distributions.... (0.07) (0.59) (0.24) (0.18) (0.18)
------- ------- ------ ------ ------
Net Asset Value, End of
Period................. $ 13.78 $ 8.45 $ 9.67 $ 9.03 $ 8.99
======= ======= ====== ====== ======
Total Return............ 64.29% (6.60)% 9.90% 2.41%(/3/) 16.58%
Ratios/Supplemental Data
Ratios to Average Net
Assets
Net Expenses........... 0.90% 0.90% 0.90% 0.90%(/5/) 0.60%
Gross Expenses(/4/).... 1.45% 1.53% 1.43% 1.49%(/5/) 2.05%
Net Investment Income.. 0.11% 1.18% 1.05% 0.45%(/5/) 1.71%
Portfolio Turnover
Rate................... 43% 107% 52% 45%(/5/) 19%
Net Assets at End of
Period (in millions)... $124.06 $ 78.80 $40.44 $38.47 $24.52
</TABLE>
------
Notes:
(1) The Fund changed its fiscal year end to March 31.
(2) Commencement of operations.
(3) Not annualized.
(4) Expense ratios before waiver of fees and reimbursement of expenses (if any)
by the investment adviser and administrators.
(5) Annualized.

28
<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 fol-
lowing:

Statement of Additional Information (SAI)
The SAI dated August 1, 1999 includes detailed information about Excelsior In-
stitutional Trust. The SAI is on file with the SEC and is incorporated by ref-
erence into this prospectus. This means that the SAI, for legal purposes, is a
part of this prospectus.

Annual and Semi-Annual Reports
These reports contain additional information about the Funds' investments. The
Annual Report also lists each Fund's holdings and contains information from the
Funds' managers about strategies, and recent market conditions and trends.

To Obtain an SAI, Annual or Semi-Annual Report, or More Information:

By Telephone: Call (800) 446-1012 (from overseas, call (617) 557-8280)

By Mail: Excelsior Institutional Trust P.O. Box 2798 Boston, Massachusetts
02208-2798

By Internet: http://www.excelsiorfunds.com

From the SEC: You can also obtain the SAI or the Annual and Semi-Annual re-
ports, as well as other information about Excelsior Institutional Trust, from
the EDGAR Database on the SEC's website ("http://www.sec.gov"). You may review
and copy documents at the SEC Public Reference Room in Washington, DC (for in-
formation on the operation of the Public Reference Room, call 202-942-8090).
You may request documents by mail from the SEC, upon payment of a duplicating
fee, by writing to: Securities and Exchange Commission, Public Reference Sec-
tion, Washington, DC 20549-0102. You may also obtain this information, upon
payment of a duplicating fee, by e-mailing the SEC at the following address:
[email protected]. Excelsior Institutional Trust's Investment Company Act reg-
istration number is 811-8490.
<PAGE>

Domestic Equity Funds

Prospectus

August 1, 2000

Excelsior Funds, Inc.

Excelsior Institutional Trust

Blended Equity Fund
Large Cap Growth Fund
Optimum Growth Fund
Small Cap Fund
Value and Restructuring Fund
Value Equity Fund
Energy and Natural Resources Fund
Real Estate Fund
Technology Fund

Investment Adviser
United States Trust Company of New York
U.S. Trust Company

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.

[LOGO OF EXCELSIOR FUNDS]
<PAGE>

Table of Contents

Excelsior Funds, Inc. and Excelsior Institutional Trust are mutual fund fami-
lies that offer shares in separate investment portfolios which have individual
investment goals, strategies and risks. This prospectus gives you important in-
formation about the Blended Equity, Large Cap Growth, Small Cap, Value and Re-
structuring, Energy and Natural Resources, Real Estate and Technology Funds of
Excelsior Funds, Inc. and the Optimum Growth and Value Equity Funds of Excel-
sior Institutional Trust (each, a Fund) that you should know before investing.
The Optimum Growth and Value Equity Funds offer two classes of shares: Shares,
which are offered in this prospectus, and Institutional Shares, which are of-
fered in a separate prospectus. Please read this prospectus and keep it for fu-
ture reference.

<TABLE>
<CAPTION>
Page
<S> <C>
Blended Equity Fund.................................................. 4
Large Cap Growth Fund................................................ 6
Optimum Growth Fund.................................................. 8
Small Cap Fund....................................................... 10
Value Equity Fund.................................................... 12
Value And Restructuring Fund......................................... 14
Energy And Natural Resources Fund.................................... 16
Real Estate Fund..................................................... 18
Technology Fund...................................................... 20
More Information About Risk.......................................... 22
More Information About Fund Investments.............................. 23
Investment Adviser................................................... 23
Portfolio Managers................................................... 24
Purchasing, Selling And Exchanging Fund Shares....................... 24
Distribution Of Fund Shares.......................................... 27
Dividends And Distributions.......................................... 27
Taxes................................................................ 28
Financial Highlights................................................. 29
How to Obtain More Information About Excelsior Funds................. Back Cover
</TABLE>
<PAGE>

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

Introduction -- Risk/Return
Information Common to the Funds

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

Each Fund has its own investment goal, strategies and risks 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 man-
ager's judgments about the markets, the economy, or companies may not antici-
pate 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 invest-
ment 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 Insur-
ance Corporation (FDIC) or any government agency.

The Adviser's Equity Investment Philosophy:
The Adviser manages each of the Fund's investments with a view toward long-term
success. To achieve this success, the Adviser utilizes two fundamental invest-
ment strategies, value and growth. These strategies are combined with "longer-
term investment themes" to assess the investment potential of individual compa-
nies. Specific investment selection is a "bottom-up" approach, guided by these
strategies and themes to ensure proper diversification, risk control and market
focus.

Value:
This long-term strategy consists of searching for, identifying and obtaining
the benefits of present or future investment values. For example, such val-
ues may be found in a company's future earnings potential or in its existing
resources and assets. Accordingly, the Adviser is constantly engaged in as-
sessing, comparing and judging the worth of companies, particularly in com-
parison to the price the markets place on such companies' shares.

Growth:
This long-term strategy consists of buying and holding equity securities of
companies which it believes to be of high quality and high growth potential.
Typically, these companies are industry leaders with the potential to domi-
nate their markets by being low-cost, high-quality producers of products or
services. Usually these companies have an identifiable competitive advan-
tage. The Adviser believes that the earnings growth rate of these companies
is the primary determinant of their stock prices and that efficient markets
will reward consistently above average earnings growth with greater-than-av-
erage capital appreciation over the long-term.

Themes:

To complete the Adviser's investment philosophy in managing the funds, the
investment strategies discussed above are applied in concert with long-term
investment themes to identify investment opportunities. These longer-term
themes are the strong and inexorable trends arising from time to time from
economic, social, demographic and cultural forces. The Adviser also believes
that understanding the instigation, catalysts and effects of these long-term
trends will enable them to identify companies that are currently or will
soon benefit from these trends.

3
<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 Objective
The Blended Equity Fund seeks long-term capital appreciation by investing in
companies that represent good long-term values not currently recognized in the
market prices of their securities.

Investment Strategy of the Blended Equity Fund
The Blended Equity Fund invests primarily (at least 65% of its assets) in large
capitalization (i.e., companies with market capitalizations over $5 billion)
common stocks of U.S. and, to a lesser extent, foreign companies that the Ad-
viser believes have value that is not currently reflected in their market pric-
es. 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 iden-
tify companies with characteristics that will lead to future earnings growth or
recognition of their true value. The Adviser looks for companies that are posi-
tioned to provide solutions to or benefit from complex social and economic
trends, or whose products are early in their life cycle and will experience ac-
celerating growth in the future. In addition, the Adviser invests a smaller
portion of the Fund's assets in a quantitatively selected segment of large cap-
italization U.S. companies designed to complement the Fund's core holdings by
reducing portfolio volatility and further diversifying the Fund. 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
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 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 undervalued common stocks may
underperform other segments of the equity market or the equity markets as a
whole.

4
<PAGE>

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

This bar chart shows changes in the Fund's performance from year to year.
[GRAPH]
1990 -12.28%
1991 34.98%
1992 16.56%
1993 16.34%
1994 0.22%
1995 28.93%
1996 19.88%
1997 29.73%
1998 28.70%
1999 22.74%

Best Quarter Worst Quarter
24.92% (25.56)%
(12/31/85) (12/31/87)

The Fund's performance for the six month period ending June 30, 2000 was 3.30%.

This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Standard & Poor's 500 Composite Stock
Price Index.

<TABLE>
<CAPTION>
5 10
1 Year Years Years
-----------------------------------------------------------------------
<S> <C> <C> <C>
Blended Equity Fund 22.74% 25.93% 17.64%
Standard & Poor's 500 Composite Stock Price Index 21.04% 28.54% 18.20%
</TABLE>

Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

Annual Fund Operating Expenses

(expenses that are deducted from Fund assets)

<TABLE>
<S> <C> <C>
Management Fees 0.75%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.21%
Total Other Expenses 0.61%
-----------------------------------------------------
Total Annual Fund Operating
Expenses 1.36%
Fee Waivers and Expense Reimbursements (0.31)%
-----------------------------------------------------
Net Annual Fund Operating Expenses 1.05%*
</TABLE>

* The Adviser has contractually agreed to waive fees and reimburse expenses in
order to keep total operating expenses from exceeding 1.05%, for the period
commencing on the date of this prospectus and ending March 31, 2001. For more
information about these fees, see "Investment Adviser" and "Distribution of
Fund Shares."

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------
<S> <C> <C> <C> <C>
$107 $334 $579 $1,283
</TABLE>

5
<PAGE>

Large Cap Growth Fund
-----------------------------------------------------------------

FUND SUMMARY

Investment Goal Superior,
risk-adjusted total 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 total return, and who
are willing to accept the
risks of investing in equity
securities of larger companies

Investment Objective
The Large Cap Growth Fund seeks superior, risk-adjusted total return by invest-
ing in larger companies whose growth prospects, in the opinion of the Adviser,
appear to exceed that of the overall market. This objective may be changed
without shareholder approval.

Investment Strategy of the Large Cap Growth Fund
The Large Cap Growth Fund invests primarily (at least 65% of its assets) in
common stocks of large U.S. companies with market capitalizations over $5 bil-
lion that the Adviser believes have above-average growth prospects.

The Adviser takes a long-term approach to managing the Fund and invests in com-
panies 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 bene-
fit 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
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 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 also may be subject to risks particular to its investments in smaller
capitalization companies. These risks are discussed in greater detail in the
section entitled "More Information About Risk."

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

6
<PAGE>

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

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

[GRAPH]
1998 67.04%
1999 47.47%

Best Quarter Worst Quarter
39.37% (9.28)%
(12/31/98) (9/30/98)

The Fund's performance for the six month period ending June 30, 2000 was 2.92%.

This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Russell 1000 Growth Index.

<TABLE>
<CAPTION>
1 Since
Year Inception
----------------------------------------------------------------------------------------------
<S> <C> <C>
Large Cap Growth Fund 47.47% 50.22%*

Russell 1000 Growth Index 33.14% 32.20%**
</TABLE>

* Since October 1, 1997

** Since September 30, 1997

Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

Annual Fund Operating Expenses

(expenses that are deducted from Fund assets)

<TABLE>
<S> <C> <C>
Management Fees 0.75%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.26%
Total Other Expenses 0.66%
------------------------------------------------------
Total Annual Fund Operating Expenses 1.41%
Fee Waivers and Expense Reimbursements (0.36)%
------------------------------------------------------
Net Annual Fund Operating Expenses 1.05%*
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------
<S> <C> <C> <C> <C>
$107 $334 $579 $1,283
</TABLE>

7
<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 Objective
The Optimum Growth Fund seeks superior, risk-adjusted total return. This
objective may be changed without shareholder approval.

Investment Strategy of the Optimum Growth Fund
The Optimum Growth Fund invests primarily (at least 65% of its assets) in com-
mon 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 (i.e., companies with market capitalizations
over $1.5 billion) 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, complements the Fund's core holdings by reducing
portfolio volatility and further diversifying the Fund.

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

The Fund also may be subject to risks particular to its investment in medium
capitalization companies. These risks are discussed in greater detail in the
section entitled "More Information About Risk."

8
<PAGE>

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

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

[GRAPH]
1997 33.08%
1998 64.66%
1999 44.26%

Best Quarter Worst Quarter
36.33% (6.08)%
(12/31/98) (9/30/98)

The Fund's performance for the six month period ending June 30, 2000 was 1.29%.

This table compares the average annual total returns of the Fund's shares for
the periods ended December 31, 1999 to those of the Russell 1000 Growth Index.

<TABLE>
<CAPTION>
Since
1 Year Inception
--------------------------------------------------------------------------------------------
<S> <C> <C>
Optimum Growth Fund (Shares) 44.26% 39.41%*
Russell 1000 Growth Index 33.14% 31.25%**
</TABLE>

* Since June 1, 1996

** Since May 31, 1996

Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

Annual Fund Operating Expenses

(expenses that are deducted from Fund assets)

<TABLE>
<S> <C> <C>
Management Fees 0.65%
Distribution (12b-1) Fees 0.25%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.31%
Total Other Expenses 0.71%
------------------------------------------------------
Total Annual Fund Operating Expenses 1.61%
Fee Waivers and Expense Reimbursements (0.56)%
------------------------------------------------------
Net Annual Fund Operating Expenses 1.05%*
</TABLE>

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

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------
<S> <C> <C> <C> <C>
$107 $334 $579 $1,283
</TABLE>

9
<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 Objective
The Small Cap Fund seeks long-term capital appreciation by investing primarily
in companies with capitalization of $1.5 billion or less.

Investment Strategy of the Small Cap Fund
The Small Cap Fund invests primarily (at least 65% of its assets) in equity se-
curities of smaller U.S.-based companies that are in the early stages of devel-
opment 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 invest-
ment 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 con-
siders, 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
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 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 se-curities issued by such companies may suffer a
decline in response. These fac-tors contribute to price volatility, which is
the principal risk of investing in the Fund.

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

10
<PAGE>

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

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

[GRAPH]
1993 27.91%
1994 5.30%
1995 22.81%
1996 -2.30%
1997 14.21%
1998 -12.38%
1999 29.71%

Best Quarter Worst Quarter
25.80% (24.77)%
(12/31/99) (9/30/98)

The Fund's performance for the six month period ending June 30, 2000 was
20.95%.

This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Russell 2000 Index.

<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Small Cap Fund 29.71% 9.26% 11.17%*
Russell 2000 Index 21.26% 16.70% 14.16%*
</TABLE>

* Since December 31, 1992

Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

Annual Fund Operating Expenses

(expenses that are deducted from Fund assets)

<TABLE>
<S> <C> <C>
Management Fees 0.60%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.32%
Total Other Expenses 0.72%
------------------------------------------------------
Total Annual Fund Operating Expenses 1.32%
Fee Waivers and Expense Reimbursements (0.27)%
------------------------------------------------------
Net Annual Fund Operating Expenses 1.05%*
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------
<S> <C> <C> <C> <C>
$107 $334 $579 $1,283
</TABLE>

11
<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 Objective
The Value Equity Fund seeks long-term capital appreciation. This objective may
be changed without shareholder approval.

Investment Strategy of the Value Equity Fund
The Value Equity Fund invests primarily (at least 65% of its assets) in common
stocks of U.S. and, to a lesser extent, foreign companies that the Adviser be-
lieves are undervalued at current market prices. The Adviser generally diversi-
fies the Fund's investments over a variety of industries and the Fund may in-
vest in companies of any size, including small, high growth companies.

The Fund also may be subject to risks particular to its investments in foreign
and medium capitalization companies. These risks are discussed in greater de-
tail in the section entitled "More Information About Risk."

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

12
<PAGE>

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

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

[GRAPH]
1998 20.11%
1999 34.44%

Best Quarter Worst Quarter
26.76% (16.39)%
(12/31/99) (9/30/98)

The Fund's performance for the six month period ending June 30, 2000 was
(2.00)%.

This table compares the average annual total returns of the Fund's shares for
the periods ended December 31, 1999 to those of the Russell 1000 Value Index.

<TABLE>
<CAPTION>
Since
1 Year Inception
--------------------------------------------------
<S> <C> <C>
Value Equity Fund (Shares) 34.44% 27.36%*
Russell 1000 Value Index** 7.34% 19.62%***
Russell Mid Cap Value Index ** (0.11)% 13.56%***
</TABLE>

* Since June 1, 1996

** The Russell 1000 Value Index measures the performance of the 1,000 largest
U.S. companies based on total market capitalization, with lower price-to-
book ratios and lower forecasted growth values. The Russell Mid Cap Value
Index measures the performance of medium-sized, value-oriented securities.
The Indexes are unmanaged and do not reflect any fees or expenses.

*** Since May 31, 1996

Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

Annual Fund Operating Expenses

(expenses that are deducted from Fund assets)

<TABLE>
<S> <C> <C>
Management Fees 0.65%
Distribution (12b-1) Fees 0.25%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.30%
Total Other Expenses 0.70%
------------------------------------------------------
Total Annual Fund Operating Expenses 1.60%
Fee Waivers and Expense Reimbursements (0.55)%
------------------------------------------------------
Net Annual Fund Operating Expenses 1.05%*
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------
<S> <C> <C> <C> <C>
$107 $334 $579 $1,283
</TABLE>

13
<PAGE>

Value and Restructuring 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 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

Investment Objective
The Value and Restructuring Fund seeks long-term capital appreciation by in-
vesting in companies which will benefit from their restructuring or redeploy-
ment of assets and operations in order to become more competitive or profit-
able.

Investment Strategy of the Value and Restructuring Fund
The Value and Restructuring Fund invests primarily (at least 65% of its assets)
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 re-
structuring activities, such as consolidations, outsourcing, spin-offs or reor-
ganizations, will offer significant value to the issuer and increase its in-
vestment 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
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 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 equity securities of issuers expected
to experience a restructuring or business combination may underperform other
segments of the equity market or the equity markets as a whole.

14
<PAGE>

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

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

[GRAPH]

1993 39.95%
1994 2.60%
1995 38.80%
1996 25.05%
1997 33.56%
1998 10.32%
1999 41.97%

Best Quarter Worst Quarter
28.03% (20.46)%
(12/31/99) (9/30/98)

The Fund's performance for the six month period ending June 30, 2000 was
(0.65)%.

This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Russell 1000 Value Index.

<TABLE>
<CAPTION>
5 Since
1 Year Years Inception
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Value and Restructuring Fund 41.97% 29.42% 26.61%*
Russell 1000 Value Index 7.34% 23.07% 18.44%*
</TABLE>

* Since December 31, 1992

Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

Annual Fund Operating Expenses

(expenses that are deducted from Fund assets)

<TABLE>
<S> <C> <C>
Management Fees 0.60%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.36%
Total Other Expenses 0.76%
------------------------------------------------------
Total Annual Fund Operating Expenses 1.36%
Fee Waivers and Expense Reimbursements (0.31)%
------------------------------------------------------
Net Annual Fund Operating Expenses 1.05%*
</TABLE>

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.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------
<S> <C> <C> <C> <C>
$107 $334 $579 $1,283
</TABLE>

15
<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 Objective
The Energy and Natural Resources Fund seeks long-term capital appreciation by
investing primarily in companies that are in the energy and other natural re-
sources groups of industries. The Fund may also invest, to a more limited ex-
tent, in gold and other precious metal bullion and coins.

Investment Strategy of the Energy and Natural Resources Fund
The Energy and Natural Resources Fund invests primarily (at least 65% of its
assets) in equity securities of U.S. and, to a lesser extent, foreign companies
engaged in the energy and natural resources industries. These companies include
those engaged in the discovery, development, production or distribution of en-
ergy or other natural resources and companies that develop technologies and
furnish energy and natural resource 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 earn-
ings 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 engaged in the
energy and natural resources industries 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, ad-
verse market conditions and/or increased competition affecting that industry.
The values of natural resources are affected by numerous factors including
events occurring in nature and international politics. For instance, events in
nature (such as earthquakes or fires in prime natural resources areas) and po-
litical events (such as coups or military confrontations) can affect the over-
all supply of a natural resource and thereby the value of companies involved in
such natural resource.

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 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 also may be subject to risks particular to its investments in foreign,
medium and smaller

16
<PAGE>

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

capitalization companies. These risks are discussed in greater detail in the
section entitled "More Information About Risk."

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 in-
vestments in those securities.

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

[GRAPH]
1993 14.69%
1994 -2.70%
1995 20.11%
1996 38.38%
1997 18.31%
1998 -15.87%
1999 27.40%

Best Quarter Worst Quarter
20.04% (13.83)%
(9/30/97) (9/30/98)

The Fund's performance for the six month period ending June 30, 2000 was
25.49%.

This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Standard & Poor's 500 Composite Stock
Price Index.

<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Energy and Natural Resources
Fund 27.40% 16.08% 13.00%*

Standard & Poor's 500
Composite Stock Price Index 21.04% 28.54% 21.52%*
</TABLE>

* Since December 31, 1992

Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
<TABLE>
<S> <C> <C>
Management Fees 0.60%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.37%
Total Other Expenses 0.77%
------------------------------------------------------
Total Annual Fund Operating
Expenses 1.37%
Fee Waivers and Expense Reimbursements (0.12)%
------------------------------------------------------
Net Annual Fund Operating
Expenses 1.25%*
</TABLE>

* The Adviser has contractually agreed to waive fees and reimburse expenses in
order to keep total operating expenses from exceeding 1.25%, for the period
commencing on the date of this prospectus and ending March 31, 2001. For more
information about these fees, see "Investment Adviser" and "Distribution of
Fund Shares."

<TABLE>
<CAPTION>
1 10
Year 3 Years 5 Years Years
--------------------------------
<S> <C> <C> <C> <C>
$127 $397 $686 $1,511
</TABLE>

17
<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 Objective
The Real Estate Fund seeks current income and long-term capital appreciation by
investing in real estate investment trusts and other companies principally en-
gaged in the real estate business. This objective may be changed without share-
holder approval.

Investment Strategy of the Real Estate Fund
The Real Estate Fund invests primarily (at least 65% of its assets) 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. REITs generally are income pro-
ducing investments. The Fund also invests in other issuers engaged in the real
estate business, such as developers, mortgage lenders and servicers, construc-
tion companies and building material suppliers.

The Adviser takes a long-term approach to managing the Fund and seeks to iden-
tify 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 under-
lying real estate values.

Principal Risks of Investing in the Real Estate Fund
The Fund is subject to the risk that the securities of issuers in the real es-
tate 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 concen-
trated in issuers conducting business in the same industry, the Fund is subject
to legislative or regulatory changes, adverse market conditions and/or in-
creased competition affecting that industry.

The Fund's investments in the securities of REITs and companies principally en-
gaged 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.

18
<PAGE>

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

The Fund also may be subject to risks particular to its investments in foreign
companies. These risks are discussed in greater detail in the section entitled
"More Information About Risk."

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

[GRAPH]

1998 -13.55%
1999 -7.30%

Best Quarter Worst Quarter
10.79% (8.87)%
(6/30/99) (9/30/98)

The Fund's performance for the six month period ending June 30, 2000 was
12.91%.

This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Morgan Stanley REIT Index.

<TABLE>
<CAPTION>
Since
1 Year Inception
---------------------------------------------
<S> <C> <C>
Real Estate Fund (7.30)% (8.02)%*
Morgan Stanley REIT Index (4.55)% (9.39)%**
</TABLE>

* Since October 1, 1997
** Since September 30, 1997

Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

Annual Fund Operating Expenses

(expenses that are deducted from Fund assets)

<TABLE>
<S> <C> <C>
Management Fees 1.00%
Other Expenses
Administrative Servicing Fee 0.40%
Other Operating Expenses 0.32%
Total Other Expenses 0.72%
----------------------------------------------------
Total Annual Fund Operating Expenses 1.72%
Fee Waivers and Expense Reimbursements 0.52%
----------------------------------------------------
Net Annual Fund Operating Expenses 1.20%*
</TABLE>

* The Adviser has contractually agreed to waive fees and reimburse expenses in
order to keep total operating expenses from exceeding 1.20%, for the period
commencing on the date of this prospectus and ending March 31, 2001. For more
information about these fees, see "Investment Adviser" and "Distribution of
Fund Shares."

<TABLE>
<CAPTION>
1 10
Year 3 Years 5 Years Years
--------------------------------
<S> <C> <C> <C> <C>
$122 $381 $660 $1,455
</TABLE>

19
<PAGE>

Technology Fund

FUND SUMMARY

Investment Goal Superior long-term growth of capital

Investment Focus Common stocks of technology companies

Share Price Volatility High

Principal Investment Strategy Invests in common stocks of companies expected
to benefit from the development, advancement and use of technology

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
technology companies

Investment Objective

The Technology Fund seeks superior, long-term growth of capital. This objective
may be changed without shareholder approval.

Investment Strategy of the Technology Fund

The Fund seeks to achieve its objective by investing in companies engaged in
the innovation, development or advancement of technology and whose long-term
growth prospects, in the Adviser's opinion, appear to exceed the overall mar-
ket. These companies may be in a variety of industries, and may include com-
puter hardware, software, electronic components and systems, telecommunica-
tions, internet, biotechnology, media and information services companies or
other companies that use technology extensively in the development of new or
improved products or processes. Under normal market conditions, the Technology
Fund invests at least 65% of its assets in the equity securities of U.S. and,
to a lesser extent, foreign technology companies. The Fund may invest in compa-
nies of any size, including small, high growth companies.

In selecting investments for the Fund, the Adviser takes a long-term approach
and seeks to identify technology companies whose value is not recognized in the
prices of their securities or with characteristics that will lead to above-av-
erage earnings growth.

The Fund seeks capital appreciation as its principal investment strategy.

Principal Risks of Investing in the Technology Fund
The Fund is subject to the risk that the securities of issuers engaged in the
technology sector of the economy 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 tech-
nology market sector, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting that market
sector. Competitive pressures may significantly impact the financial condition
of technology companies. For example, an increasing number of companies and new
product offerings can lead to price cuts and slower selling cycles, and many of
these companies may be dependent on the success of a principal product, may
rely on sole source providers and third-party manufacturers, and may experience
difficulties in managing growth. In addition, securities of technology compa-
nies may experience dramatic price movements that have little or no basis in
fundamental economic conditions. As a result, the Fund's investment in technol-
ogy companies may subject it to more volatile price movements than a more di-
versified securities portfolio.

20
<PAGE>

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 also may be subject to risks particular to its investments in foreign,
medium and smaller capitalization companies. These stocks may be more volatile
than other equity securities, and the risks associated with them are discussed
in greater detail in the section entitled "More Information About Risk."

Performance Information
There is no performance information for the Technology Fund because the Fund
does not have a full calendar year of operations.

Fund Fees and Expenses
Every mutual fund has operating expenses to pay for services such as profes-
sional advisory, shareholder, administration and custody services and other
costs of doing business. This table describes the fees and expenses that you
may pay if you buy and hold shares of the Fund.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

<TABLE>
<S> <C> <C>
Management Fees 1.00%
Other Expenses
Administrative Servicing Fee 0.25%
Other Operating Expenses 0.25%
Total Other Expenses 0.50%
----------------------------------------------------
Total Annual Fund Operating
Expenses 1.50%
Fee Waivers and Expense Reimbursements 0.25%
----------------------------------------------------
Net Annual Fund Operating
Expenses 1.25%*
</TABLE>

* The Fund's total annual fund operating expenses and net annual fund operating
expenses are estimated based on expenses expected to be incurred in the cur-
rent fiscal year. The Adviser has contractually agreed to waive its invest-
ment advisory fee or other fees until March 31, 2001, in an amount equal to
the administrative servicing fee paid by the Fund. Accordingly, Net Fund An-
nual Operating Expenses are expected to be 1.25%. For more information about
these fees, see "Investment Adviser."

The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and distribu-
tions. Although your actual costs and returns might be different, your approxi-
mate costs of investing $10,000 in the Fund would be:

<TABLE>
<CAPTION>
1 Year 3 Years
-------------------
<S> <C> <C>
$127 $397
</TABLE>

21
<PAGE>

More Information About Risk

Equity Risk
(All Funds)--Equity securities include public and privately issued equity secu-
rities, 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 these securities in gen-
eral are subject to market risks that may cause their prices to fluctuate over
time. The value of securities convertible into equity securities, such as war-
rants or convertible debt, is also affected by prevailing interest rates, the
credit quality of the issuer and any call provision.

Small Cap Risk
(Blended Equity Fund, Large Cap Growth Fund, Small Cap Fund, Value and Restruc-
turing Fund, Value Equity Fund, Energy and Natural Resources Fund and Technol-
ogy Fund)--The smaller capitalization companies in which the Funds may invest
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 rela-
tively small management group. Therefore, small cap stocks may be more volatile
than those of larger companies.

Mid Cap Risk
(Blended Equity Fund, Optimum Growth Fund, Value and Restructuring Fund, Value
Equity Fund, Energy and Natural Resources Fund and Technology Fund)--The medium
capitalization companies that the Funds may invest in may be more vulnerable to
adverse business or economic events than larger companies. In particular, these
companies may have limited product lines, markets and financial resources, and
may depend on a relatively small management group. Therefore, medium capital-
ization stocks may be more volatile than those of larger companies.

Mortgage-Backed Securities

(Real Estate Fund)--Mortgage-backed securities are fixed income securities rep-
resenting an interest in a pool of underlying mortgage loans. They are sensi-
tive 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 de-
crease in market price. When interest rates fall, however, mortgage-backed se-
curities may not gain as much in market value because of the expectation of ad-
ditional mortgage prepayments that must be reinvested at lower interest rates.
Prepayment risk may make it difficult to calculate the average maturity of a
portfolio of mortgage- backed securities and, therefore, to assess the volatil-
ity risk of that portfolio.

Technology Risk
(Blended Equity Fund, Large Cap Growth Fund, Optimum Growth Fund, Small Cap
Fund, Value and Restructuring Fund, Value Equity Fund and Technology Fund)--The
Funds may invest in securities of issuers engaged in the technology sector of
the economy. These securities may underperform stocks of other issuers or the
market as a whole. To the extent that the Funds invest in issuers conducting
business in the technology market sector, the Funds are subject to legislative
or regulatory changes, adverse market conditions and/or increased competition
affecting the market sector. Competitive pressures may significantly impact the
financial condition of technology companies. For example, an increasing number
of companies and new product offerings can lead to price cuts and slower sell-
ing cycles, and many of these companies may be dependent on the success of a
principal product, may rely on sole source providers and third-party manufac-
turers, and may experience difficulties in managing growth. In addition, secu-
rities of technology companies may experience dramatic price movements that
have little or no basis in fundamental economic conditions. As a result, a
Fund's investment in technology companies may subject it to more volatile price
movements.

22
<PAGE>

arrangements of similar U.S. securities. Some foreign governments levy with-
holding taxes against dividend and interest income. Although in some countries
a portion of these taxes is recoverable, the non-recovered portion will reduce
the income received from the securities comprising the portfolio.

Currency Risk
(All Funds)--Investments in foreign securities denominated in foreign curren-
cies 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.

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

U.S. Trust and its affiliates advise and manage assets for their private cli-
ents and funds, some of which have investment objectives and policies similar
to Excelsior Funds. U.S. Trust and itsaffiliates will not have any obligation
to make available or use any information regarding these proprietary investment
activities for the benefit of the Funds. The research department of U.S. Trust
prepares research reports that are utilized by these Funds, wealth managers of
U.S. Trust and Schwab and its affiliates. It is U.S. Trust's intention to dis-
tribute this information as simultaneously as possible to all recipients. How-
ever, where the investment manager of an Excelsior Fund prepares such research,
that Fund may and often does receive and act upon that information before it is
disseminated to other parties, which in turn may have a negative effect on the
price of the security subject to research.

23
<PAGE>

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

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, 2000, U.S. Trust received advisory fees, as
a percentage of average daily net assets, of:

<TABLE>
<S> <C>
Blended Equity Fund 0.70%
Large Cap Growth Fund 0.69%
Optimum Growth Fund 0.52%
Small Cap Fund 0.48%
Value and Restructuring Fund 0.50%
Value Equity Fund 0.50%
Energy and Natural Resources Fund 0.51%
Real Estate Fund 0.79%
Technology Fund 1.00%*
</TABLE>
-----
* The Technology Fund commenced operations on March 31, 2000. The fees given
are the contractual rate of advisory fees.

Portfolio Managers
Leigh H. Weiss and Bruce Tavel have served as the Blended Equity Fund's portfo-
lio 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.

Timothy Pettee, Margaret Doyle and Todd Herget served as the Small Cap Fund's
portfolio co-managers. 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 Senior 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 1994 to 1996, Ms. Doyle was an Equity Research Analyst with Salomon Broth-
ers, Inc. in New York. Todd Herget, a Vice President in U.S. Trust's equity re-
search division has been with U.S. Trust since 1998. Mr. Herget is responsible
for the Fund's investments in the healthcare sector. Mr. Herget was previously
a cardiac research assistant with the Westchester County Medical Center and
played professional football. Mr. Pettee, Ms. Doyle and Mr. Herget are primar-
ily responsible for the day to day management of the Small Cap Fund's portfo-
lio. 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, Optimum Growth Fund,
Value Equity and the Technology Fund are made by a committee of investment pro-
fessionals and no persons are primarily responsible for making recommendations
to that committee. United States Trust Company of New York provides its invest-
ment advisory services to the Large Cap Growth Fund, Optimum Growth Fund, and
the Technology Fund primarily through its Campbell Cowperthwait division.

Michael E. Hoover has served as the Energy and Natural Resources Fund's portfo-
lio 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 Re-
search 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 purchase, sell (sometimes called "redeem") and
exchange shares of the Funds.

How to Purchase Fund Shares
You may purchase shares directly by:
. Mail
. Telephone
. Wire, or
. Automatic Investment Program

24
<PAGE>

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

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 Ex-
celsior Funds, c/o Chase Global Funds Services Company, P.O. Box 2798, Boston,
MA 02208-2798. Unless you arrange to pay by wire or through the automatic in-
vestment program, write your check, payable in U.S. dollars, to "Excelsior
Funds" and include the name of the appropriate Fund(s) on the check. A Fund
cannot accept third-party checks, credit 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 proce-
dures, which may be different from the procedures for investing directly. Your
broker or institution may charge a fee for its services, in addition to the
fees charged by the Fund. You will also generally have to address your corre-
spondence or questions regarding a Fund to your institution.

General Information

How We Calculate NAV
NAV for one Fund share is the value of that share's portion of the net assets
of 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 un-
reliable, fair value prices may be determined in good faith using methods ap-
proved by the Board of Directors and the Board of Trustees, as the case may be.
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 se-
curities 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.

Your subsequent investments must be made in amounts of at least $50.

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

25
<PAGE>

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

Automatic Investment Program
If you have a checking, money market or NOW account with a bank, you may pur-
chase 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 in-
vestments 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
the procedures established when they opened their account or accounts. If you
have questions, call (800) 446-1012 (from overseas, call (617) 557-8280).

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

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

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

If you own your shares directly and previously indicated on your account appli-
cation or arranged in writing to do so, you may sell your shares on any Busi-
ness Day by contacting a Fund directly by telephone at (800) 446-1012 (from
overseas, call (617) 557-8280). The minimum amount for telephone redemptions is
$500. Shares will not be redeemed by the Fund unless all required documents
have been received by the Fund.

If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares. Your broker or institu-
tion may charge a fee for its services, in addition to the fees charged by the
Fund.

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

Systematic Withdrawal Plan
If you have at least $10,000 in your account, you may use the systematic with-
drawal 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 ac-
count (if more than $500) or sent to you by check. [If you re cently purchased
your shares by check, redemption proceeds may not be available until your check
has cleared (which may take up to 15 days from your date of purchase).]

Suspension of Your Right to Sell Your Shares

26
<PAGE>

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

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 share-
holders, we may limit your exchanges to no more than six per year. We may also
reject any exchange request. Shares can be exchanged directly by mail, or by
telephone if you previously selected the telephone exchange option on the ac-
count application.

You may also exchange shares through your financial institution. Exchange re-
quests 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 days from your
date of purchase). This exchange privilege may be changed or canceled at any
time upon 60 days' notice.

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

Shareholder Servicing

The Funds are permitted to pay an administrative 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% (0.25% in the case
of the Technology Fund) of the average daily net asset value of Fund shares
held by clients of a shareholder organization.

Distribution of Fund Shares
The Optimum Growth and Value Equity Funds have adopted a distribution plan that
allows shares of the Funds to pay distribution fees for the sale and distribu-
tion of their shares in an amount not to exceed the annual rate of 0.25% of the
average daily net asset value of each Fund's outstanding shares. 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.

Dividends and Distributions
Each Fund distributes dividends from 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.

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

27
<PAGE>

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

Taxes

Each Fund will distribute substantially all of its taxable income including its
net capital gain (the excess of long-term capital gain over short-term capital
loss), if any. Distributions you receive from a Fund will generally be taxable
regardless of whether they are paid in cash or reinvested in additional shares.
Distributions attributable to the net capital gain of a Fund will be taxable to
you as long-term capital gain, regardless of how long you have held your
shares. Other Fund distributions will generally be taxable as ordinary income.

Any loss realized on shares held for six months or less will be treated as a
long-term capital loss to the extent of any capital gain dividends that were
received on the shares.

The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other tax-quali-
fied plan) will generally not be currently taxable.

The foregoing is only a summary of certain tax considerations under current
law, which may be subject to change in the future. Shareholders who are nonres-
ident aliens, foreign trusts or estates, or foreign corporations or partner-
ships, may be subject to different United States federal income tax treatment.
[You should consult your tax adviser for further information regarding federal,
state, local and/or foreign tax consequences relevant to your specific situa-
tion.

More information about taxes is in the Statement of Additional Information.

28
<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 finan-
cial 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
Ernst & Young LLP, independent auditors. Their report, along with each Fund's
financial statements, are incorporated by reference into our Statement of Addi-
tional Information. You can obtain the annual report, which contains more per-
formance information, at no charge by calling (800) 446-1012 (from overseas,
call (617) 557-8280).

BLENDED EQUITY FUND

<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................. $ 42.51 $ 36.12 $ 25.81 $ 24.43 $ 21.40
------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income............ 0.03 0.11 0.16 0.18 0.12
Net Gains on Securities (both
realized and unrealized)........ 9.54 6.90 12.59 2.50 5.21
------- ------- ------- ------- -------
Total From Investment
Operations...................... 9.57 7.01 12.75 2.68 5.33
------- ------- ------- ------- -------
Less Distributions
Dividends From Net Investment
Income.......................... (0.06) (0.13) (0.16) (0.14) (0.11)
Distributions From Net Realized
Gain on Investments and
Options......................... (1.34) (0.49) (2.28) (1.16) (2.19)
------- ------- ------- ------- -------
Total Distributions.............. (1.45) (0.62) (2.44) (1.30) (2.30)
------- ------- ------- ------- -------
Net Asset Value, End of Year...... $ 50.63 $ 42.51 $ 36.12 $ 25.81 $ 24.43
======= ======= ======= ======= =======
Total Return...................... 22.90% 19.65% 50.82% 11.09% 26.45%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)....................... $993.41 $720.27 $594.91 $306.99 $188.57
Ratio of Net Operating Expenses
to Average Net Assets........... 0.97% 0.95% 0.99% 1.01% 1.05%
Ratio of Gross Operating Expenses
to Average Net Assets/1/........ 1.02% 1.01% 1.06% 1.06% 1.12%
Ratio of Net Investment Income to
Average Net Assets.............. 0.08% 0.29% 0.55% 0.71% 0.55%
Portfolio Turnover Rate.......... 24.0% 20.0% 28.0% 39.0% 27.0%
</TABLE>
------
Notes:
1. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

29
<PAGE>

LARGE CAP GROWTH FUND

<TABLE>
<CAPTION>
Year Ended
March 31,
---------------- Period Ended
2000 1999 March 31, 1998/1/
------- ------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period....... $ 14.30 $ 8.51 $ 7.00
------- ------- -------
Income From Investment Operations
Net Investment Income (Loss).............. (0.06) (0.03) 0.00/2/
Net Gains or (Losses) on Securities (both
realized and unrealized)................. 4.74 5.82 1.51
------- ------- -------
Total From Investment Operations........... 4.68 5.79 1.51
------- ------- -------
Net Asset Value, End of Period............. $ 18.98 $ 14.30 $ 8.51
======= ======= =======
Total Return............................... 32.73% 68.04% 21.57%/3/
Ratios/Supplemental Data
Net Assets, End of Period (in millions)... $498.31 $251.55 $ 47.53
Ratio of Net Operating Expenses to Average
Net Assets............................... 1.01% 1.04% 1.05%/4/
Ratio of Gross Operating Expenses to
Average Net Assets/5/.................... 1.07% 1.08% 1.20%/4/
Ratio of Net Investment Income/(Loss) to
Average Net Assets....................... (0.48)% (0.53)% (0.16)%/4/
Portfolio Turnover Rate................... 20% 4% 12%/4/
</TABLE>
------
Notes:
1. Inception date of the Fund was October 1, 1997.
2. Amount represents less than $0.01 per share.
3. Not annualized.
4. Annualized.
5. Expense ratio before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

30
<PAGE>

OPTIMUM GROWTH FUND

<TABLE>
<CAPTION>
Year Ended March 31,
------------------------- Period Ended
2000 1999 1998 March 31, 1997/1/
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 27.40 $ 16.31 $ 10.18 $ 9.87
------- ------- ------- ------
Income From Investment Operations:
Net Investment Income............ (0.11) (0.06) (0.01) 0.02
Net Gains or (losses) on
Securities (both realized and
unrealized)..................... 7.16 11.15 6.15 0.31/2/
------- ------- ------- ------
Total From Investment Operations.. 7.05 11.09 6.14 0.33
------- ------- ------- ------
Less Distributions:
Dividends From Net Investment
Income.......................... 0.00 0.00 (0.01) (0.02)
Distributions From Net Realized
Gains on Investments and
Options......................... $ (3.88) 0.00 0.00 0.00
------- ------- ------- ------
Total Distributions............... (3.88) 0.00 (0.01) (0.02)
------- ------- ------- ------
Net Asset Value, End of Period.... $ 30.57 $ 27.40 $ 16.31 $10.18
======= ======= ======= ======
Total Return...................... 27.40% 68.00% 60.41% 3.31%/3/
Ratios/Supplemental Data
Net Assets at end of Period (in
millions)....................... $ 21.97 $ 12.41 $ 6.60 $ 3.36
Ratio of Net Operating Expenses
to Average Net Assets........... 1.05% 1.05% 1.05% 1.05%/5/
Ratio of Gross Operating Expenses
to Average Net Assets/4/........ 1.18% 1.26% 1.32% 1.47%/5/
Ratio of Net Investment Income
(Loss) to Average Net Assets.... (0.43)% (0.34)% (0.12)% 0.33%/5/
Portfolio Turnover............... 44% 22% 19% 20%/5/
</TABLE>
------
Notes:
1. Inception date of the Fund was July 3, 1996.
2. This amount does not accord with the aggregate net losses on investments
because of the timing of sales and repurchases of the shares in relation to
fluctuating market value of the investments in the Fund.
3. Not annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
5. Annualized.

31
<PAGE>

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

SMALL CAP FUND

<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------------
2000 1999 1998 1997 1996
------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $ 9.27 $ 11.95 $ 8.83 $ 10.78 $ 9.77
------- -------- ------- -------- -------
Income From Investment Operations
Net Investment Income (Loss).... 0.00 0.00 (0.01) (0.03) (0.02)
Net Gains or (Losses) on
Securities (both realized
and unrealized)................ 6.12 (2.56) 3.13 (1.43) 1.72
------- -------- ------- -------- -------
Total From Investment
Operations...................... 6.12 (2.56) 3.12 (1.46) 1.70
------- -------- ------- -------- -------
Less Distributions
Distributions From Net Realized
Gain on Investments
and Options.................... 0.00 (0.12) 0.00 (0.10) (0.69)
Distributions in Excess of Net
Realized Gain on Investments
and Options.................... 0.00 0.00 0.00 (0.39) 0.00
------- -------- ------- -------- -------
Total Distributions.............. 0.00 (0.12) 0.00 (0.49) (0.69)
------- -------- ------- -------- -------
Net Asset Value, End of Period... $ 15.39 $ 9.27 $ 11.95 $ 8.83 $ 10.78
======= ======== ======= ======== =======
Total Return..................... 65.91% (21.41)% 35.33% (14.33)% 18.29%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)...................... $107.94 $ 43.79 $ 68.55 $ 53.26 $ 78.06
Ratio of Net Operating Expenses
to Average Net Assets.......... 0.92% 0.94% 0.94% 0.94% 0.90%
Ratio of Gross Operating
Expenses to Average Net
Assets/1/...................... 1.03% 1.05% 1.01% 1.02% 0.98%
Ratio of Net Investment
Income/(Loss) to Average
Net Assets..................... 0.01% (0.04)% (0.14)% (0.26)% (0.17)%
Portfolio Turnover Rate......... 134.0% 115.0% 73.0% 55.0% 38.0%
</TABLE>
------
Notes:
1. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

32
<PAGE>

VALUE AND RESTRUCTURING FUND

<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------------
2000 1999 1998 1997 1996
--------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $ 23.88 $ 23.79 $ 15.93 $ 14.03 $10.55
--------- ------- ------- ------- ------
Income From Investment Operations
Net Investment Income........... 0.07 0.13 0.10 0.13 0.10
Net Gains on Securities (both
realized and unrealized)....... 10.03 0.21 8.12 2.36 3.71
--------- ------- ------- ------- ------
Total From Investment
Operations...................... 10.10 0.34 8.22 2.49 3.81
--------- ------- ------- ------- ------
Less Distributions
Dividends From Net Investment
Income......................... (0.09) (0.11) (0.09) (0.12) (0.09)
Distributions From Net Realized
Gain on Investments and
Options........................ 0.00 (0.14) (0.27) (0.47) (0.24)
--------- ------- ------- ------- ------
Total Distributions.............. (0.09) (0.25) (0.36) (0.59) (0.33)
--------- ------- ------- ------- ------
Net Asset Value, End of Period... $ 33.89 $ 23.88 $ 23.79 $ 15.93 $14.03
========= ======= ======= ======= ======
Total Return..................... 42.41% 1.48% 52.10% 18.09% 36.48%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)...................... $1,207.24 $594.62 $388.45 $124.01 $74.05
Ratio of Net Operating Expenses
to Average Net Assets.......... 0.90% 0.93% 0.89% 0.91% 0.91%
Ratio of Gross Operating
Expenses to Average Net
Assets/1/...................... 1.03% 1.07% 0.93% 0.95% 0.95%
Ratio of Net Investment Income
to Average Net Assets.......... 0.25% 0.59% 0.54% 0.90% 0.88%
Portfolio Turnover Rate......... 20.0% 43.0% 30.0% 62.0% 56.0%
</TABLE>
------
Notes:
1. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

33
<PAGE>

VALUE EQUITY FUND

<TABLE>
<CAPTION>
Year Ended March 31,
---------------------- Period Ended
2000 1999 1998 March 31, 1997/1/
------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $15.35 $16.11 $11.33 $ 12.08
------ ------ ------ -------
Income From Investment Operations:
Net Investment Income............... 0.01 0.08 0.07 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized)..... 6.35 0.55 5.57 (0.76)
------ ------ ------ -------
Total From Investment Operations..... 6.36 0.63 5.64 (0.75)
------ ------ ------ -------
Less Distributions:
Dividends From Net Investment
Income............................. (0.05) (0.07) (0.06) 0.00
Distributions From Net Realized
Gains on Investments and Options... (0.32) (1.32) (0.80) 0.00
------ ------ ------ -------
Total Distributions.................. (0.37) (1.39) (0.86) 0.00
------ ------ ------ -------
Net Asset Value, End of Period....... $21.34 $15.35 $16.11 $ 11.33
====== ====== ====== =======
Total Return......................... 41.60% 4.59% 51.09% (6.21)%/2/
Ratios/Supplemental Data
Net Assets at end of Period (in
millions).......................... $ 336 $ 125 $ 78 $ 56
Ratio of Net Operating Expenses to
Average Net Assets................. 1.05% 1.05% 1.05% 1.05%/3/
Ratio of Gross Operating Expenses to
Average Net Assets/4/.............. 1.20% 1.32% 1.35% 1.43%/3/
Ratio of Net Investment Income
(Loss) to Average Net Assets....... 0.02% 0.53% 0.47% 0.54%/3/
Portfolio Turnover.................. 45% 55% 51% 64%/3/
</TABLE>
------
Notes:
1. Inception date of the Fund was January 15, 1997.
2. Not annualized.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

34
<PAGE>

ENERGY AND NATURAL RESOURCES FUND

<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------------------
2000 1999 1998 1997 1996
------ -------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $11.02 $ 12.66 $11.12 $ 9.55 $ 7.92
Income From Investment Operations
Net Investment Income............... 0.04 0.10 0.09 0.09 0.07
Net Gains or (Losses) on Securities
(both realized and unrealized)..... 4.72 (1.65) 2.69 2.60 1.63
------ -------- ------ ------ ------
Total From Investment Operations..... 4.76 (1.55) 2.78 2.69 1.70
------ -------- ------ ------ ------
Less Distributions
Dividends From Net Investment
Income............................. (0.06) (0.09) (0.10) (0.09) (0.07)
Distributions From Net Realized Gain
on Investments and Options......... (0.51) 0.00 (1.07) (1.03) 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options............................ 0.00 0.00 (0.07) 0.00 0.00
------ -------- ------ ------ ------
Total Distributions.................. (0.57) (0.09) (1.24) (1.12) (0.07)
Net Asset Value, End of Period....... $15.21 $ 11.02 $12.66 $11.12 $ 9.55
====== ======== ====== ====== ======
Total Return......................... 44.61% (12.23)% 24.97% 28.28% 21.60%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions).......................... $71.13 $ 43.02 $46.17 $33.39 $23.29
Ratio of Net Operating Expenses to
Average Net Assets................. 0.97% 0.98% 0.99% 0.93% 0.96%
Ratio of Gross Operating Expenses to
Average Net Assets/1/.............. 1.08% 1.09% 1.07% 0.98% 1.09%
Ratio of Net Investment Income to
Average Net Assets................. 0.37% 0.97% 0.69% 0.84% 0.88%
Portfolio Turnover Rate............. 138.0% 96.0% 88.0% 87.0% 43.0%
</TABLE>
------
Notes:
1. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

35
<PAGE>

REAL ESTATE FUND

<TABLE>
<CAPTION>
Year Ended
March 31, Period ended
---------------- March 31,
2000 1999 1998/1/
------ -------- ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............ $ 5.50 $ 7.05 $ 7.00
------ -------- ------
Income From Investment Operations
Net Investment Income.......................... 0.34 0.33 0.15
Net Gains or (Losses) on Securities (both
realized and unrealized)...................... (0.31) (1.55) 0.01
------ -------- ------
Total From Investment Operations................ 0.03 (1.22) 0.16
------ -------- ------
Less Distributions
Dividends From Net Investment Income........... (0.32) (0.33) (0.11)
Total Distributions............................. (0.32) (0.33) (0.11)
------ -------- ------
Net Asset Value, End of Period.................. $ 5.21 $ 5.50 $ 7.05
====== ======== ======
Total Return.................................... 0.58% (17.55)% 2.26%/2/
Ratios/Supplemental Data
Net Assets, End of Period (in millions)........ $33.70 $ 32.84 $41.17
Ratio of Net Operating Expenses to Average Net
Assets........................................ 1.20% 1.20% 1.20%/3/
Ratio of Gross Operating Expenses to Average
Net Assets/4/................................. 1.41% 1.43% 1.40%/3/
Ratio of Net Investment Income to Average Net
Assets........................................ 6.17% 5.37% 5.02%/3/
Portfolio Turnover Rate........................ 27.0% 28.0% 30.0%/3/
</TABLE>
------
Notes:
1. Inception date of the Fund was October 1, 1997.
2. Not annualized.
3. Annualized.
4. Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.

36
<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 fol-
lowing:

Statement of Additional Information (SAI)
The SAIs dated August 1, 2000 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.

To Obtain an SAI, Annual or Semi-Annual Report, or More Information:

By Telephone: Call (800) 446-1012 (from overseas, call (617) 557-8280)

By Mail: Excelsior Funds, Inc., 73 Tremont Street, Boston, Massachusetts 02108-
3913

By Internet: http://www.excelsiorfunds.com

From the SEC: You can also obtain the SAIs or the Annual and Semi-Annual re-
ports, as well as other information about Excelsior Funds, Inc. and Excelsior
Institutional Trust, from the EDGAR Database on 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 on the operation of the Pub-
lic Reference Room, call 202-942-8090). You may request documents by mail from
the SEC, upon payment of a duplicating fee, by writing to: Securities and Ex-
change Commission, Public Reference Section, Washington, DC 20549-0102. You may
also obtain this information, upon payment of a duplicating fee, by e-mailing
the SEC at the following address: [email protected]. Excelsior Funds, Inc.'s
and Excelsior Institutional Trust's Investment Company Act registration numbers
are 811-4088 and 811-8490, respectively.
<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, 2000

This Statement of Additional Information pertains to the Shares
("Retail Shares") and Institutional Shares (together with Retail Shares,
"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, 2000
(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 (Retail
Shares) or (800) 881-9358 (Institutional Shares). Capitalized terms not
otherwise defined have the same meaning as in the Prospectuses.

The audited financial statements and related reports of Ernst & Young
LLP, independent auditors, contained in the annual reports to the Funds'
shareholders for the fiscal year ended March 31, 2000 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 (Retail Shares) or (800) 881-9358 (Institutional Shares).
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
CLASSIFICATION AND HISTORY......................................................................... 1

INVESTMENT OBJECTIVES, STRATEGIES AND RISKS........................................................ 1
Investment Philosophy and Strategies...................................................... 1
Additional Investment Policies............................................................ 1
Additional Information on Portfolio Instruments........................................... 4
Investment Limitations.................................................................... 27

PORTFOLIO TRANSACTIONS............................................................................. 30

PERFORMANCE INFORMATION............................................................................ 33

PORTFOLIO VALUATION AND DETERMINATION OF NET ASSET VALUE........................................... 38

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..................................................... 40
Distributor............................................................................... 40
Purchase of Shares........................................................................ 40
Redemption Procedures..................................................................... 41
Other Redemption Information.............................................................. 42

INVESTOR PROGRAMS.................................................................................. 43
Systematic Withdrawal Plan................................................................ 43
Exchange Privilege........................................................................ 44
Retirement Plans.......................................................................... 44
Additional Information.................................................................... 45

RULE 12B-1 DISTRIBUTION PLAN....................................................................... 45

MANAGEMENT OF THE FUNDS............................................................................ 46
Trustees and Officers..................................................................... 46
Investment Advisory Services.............................................................. 53
Administrators............................................................................ 55
Shareholder Organizations................................................................. 57
Expenses.................................................................................. 58
Transfer Agent and Custodian.............................................................. 58

INDEPENDENT AUDITORS............................................................................... 59

COUNSEL............................................................................................ 59

TAXATION........................................................................................... 60

DESCRIPTION OF THE TRUST........................................................................... 62
</TABLE>

-i-
<PAGE>

TABLE OF CONTENTS
(continued)

<TABLE>
<CAPTION>
Page
<S> <C>
CODE OF ETHICS..................................................................................... 64

MISCELLANEOUS..................................................................................... 64

FINANCIAL STATEMENTS.............................................................................. 65

APPENDIX A........................................................................................ A-1
</TABLE>

-ii-
<PAGE>

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.

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

1
<PAGE>

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 & 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.

2
<PAGE>

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.

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.

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

3
<PAGE>

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.

The countries in which the Fund may invest, include but are not
limited to: Japan, France, the United Kingdom, Germany, Italy, the Netherlands,
Switzerland, Singapore, Australia, Canada, Sweden, Ireland, Hong Kong, Thailand,
Spain, Portugal, Israel, Chile, Argentina and Hungary.

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. Investments in gold will not produce dividends or

4
<PAGE>

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

5
<PAGE>

the holder to demand payment of principal at any time, or at specified intervals
not exceeding 397 days, in each case upon not more than 30 days' notice.
Variable rate demand notes include master demand notes which are obligations
that permit a Fund to invest fluctuating amounts, which may change daily without
penalty, pursuant to direct arrangements between the Fund, as lender, and the
borrower. The interest rates on these notes fluctuate from time to time. The
issuer of such obligations normally has a corresponding right, after a given
period, to prepay in its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified number of days' notice to the
holders of such obligations.

The interest rate on a floating rate demand obligation is based
on a known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate on a variable
rate demand obligation is adjusted automatically at specified intervals.
Frequently, such obligations are collateralized by letters of credit or other
credit support arrangements provided by banks. Because these obligations are
direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there generally
is no established secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, a Fund's right to
redeem is dependent on the ability of the borrower to pay principal and interest
on demand. Such obligations frequently are not rated by credit rating agencies
and a Fund may invest in obligations which are not so rated only if 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

6
<PAGE>

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 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.

7
<PAGE>

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 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. 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

8
<PAGE>

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 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.

9
<PAGE>

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 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.

10
<PAGE>

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.

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

11
<PAGE>

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.

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.

12
<PAGE>

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, 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.

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 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.

13
<PAGE>

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 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.

14
<PAGE>

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 commitments than when
it sets aside cash. Because a Fund will set aside cash or liquid assets to

15
<PAGE>

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

16
<PAGE>

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.

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

17
<PAGE>

addition, like other fixed income securities, Mortgage Securities generally
decline in price when interest rates rise.

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

18
<PAGE>

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. 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,

19
<PAGE>

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.

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

20
<PAGE>

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 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.

21
<PAGE>

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 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

22
<PAGE>

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.

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.

The Funds may also invest in SPDRs. SPDRs are interests in a unit
investment trust ("UIT") that may be obtained from the UIT or purchased in the
secondary market (SPDRs are listed on the American Stock Exchange). There is a
5% limit based on total assets on investments by any one Fund in SPDRs. The UIT
will issue SPDRs in aggregations known as "Creation Units" in exchange for a
"Portfolio Deposit" consisting of (a) a portfolio of securities substantially
similar to the component securities ("Index Securities") of the Standard &
Poor's 500 Composite Stock Price Index (the "S&P Index"), (b) a cash payment
equal to a pro rata portion of the dividends accrued on the UIT's portfolio
securities since the last dividend payment by the UIT, net of expenses and
liabilities, and (c) a cash payment or credit ("Balancing Amount") designed to
equalize the net asset value of the S&P Index and the net asset value of a
Portfolio Deposit.

SPDRs are not individually redeemable, except upon termination of the
UIT. To redeem, the Fund must accumulate enough SPDRs to reconstitute a Creation
Unit. The liquidity of small holdings of SPDRs, therefore, will depend upon the
existence of a secondary market. Upon redemption of a Creation Unit, the Fund
will receive Index Securities and cash identical to the Portfolio Deposit
required of an investor wishing to purchase a Creation Unit that day.

The price of SPDRs is derived from and based upon the securities held
by the UIT. Accordingly, the level of risk involved in the purchase or sale of a
SPDR is similar to the risk involved in the purchase or sale of traditional
common stock, with the exception that the pricing mechanism for SPDRs is based
on a basket of stocks. Disruptions in the markets for the securities underlying
SPDRs purchased or sold by the Funds could result in losses on SPDRs.

Short-Term Instruments
----------------------

23
<PAGE>

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. 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 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

24
<PAGE>

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 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

25
<PAGE>

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. To the extent that a Fund invests
in securities that could be characterized as derivatives, such as mortgage pass-
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

26
<PAGE>

distributions resulting from such gains are considered ordinary income for
federal income tax purposes. See "Taxation" below.

The portfolio turnover of the International Equity Fund decreased from
107% in 1999 to 43% in 2000. The portfolio turnover was higher in 1999 because
the Fund changed its investment adviser in 1999, and the new adviser
restructured the Fund's portfolio during that year.

The Total Return Bond Fund's portfolio turnover decreased from 234% in
1999 to 115% in 2000 because fewer investment opportunities were available in
2000 than in 1999.

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 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,

27
<PAGE>

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.

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;

28
<PAGE>

(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

(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.

29
<PAGE>

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.

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.

30
<PAGE>

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.

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.

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, 2000, 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:

31
<PAGE>

Fund Amount of Transactions Related Commission
---- ---------------------- ------------------

Equity Fund $ 87,633 $ 4,067
Optimum Growth Fund $ 48,906 $ 4,083
International Equity Fund $294,694 $12,995

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, 2000, 1999 and 1998, the
Funds paid brokerage commissions as follows:

<TABLE>
<CAPTION>
% of Total
Total Amount of
Brokerage % of Transaction on
Total Commissions Total which
Brokerage Paid to Commission Commissions
Commissions Affiliated Paid to UST Were Paid to UST
Paid Persons Securities Corp./1/ Securities Corp./1/
---- ------- ----------------- -----------------
<S> <C> <C> <C> <C>
Fiscal year ended March 31, 2000
--------------------------------

Equity Fund $ 87,633 $ 0 0 0
Value Equity Fund $ 67,587 $ 0 0 0
Optimum Growth Fund $ 48,906 $ 0 0 0
International Equity Fund $294,694 $ 0 0 0
Income Fund $ 0 $ 0 0 0
Total Return Bond Fund $ 0 $ 0 0 0

Fiscal year ended March 31, 1999:
--------------------------------

Equity Fund $114,325 $ 0 0 0
Value Equity Fund $ 48,291 $ 0 0 0
Optimum Growth Fund $ 20,032 $ 0 0 0
International Equity Fund $248,086 $ 0 0 0

Fiscal year ended March 31, 1998
--------------------------------

Equity Fund $118,960 $9,474 7.96% 8.44%
Value Equity Fund $ 43,969 $1,377 3.13% 3.93%
Optimum Growth Fund $ 15,289 $ 0 0 0
International Equity Fund $108,548 $ 0 0 0
</TABLE>

32
<PAGE>

/1/ UST Securities Corp. is an affiliate 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, 2000, the following Funds held the following securities of the
Trust's regular brokers or dealers or their parents: the Income Fund held an
asset-backed security issued by Merrill Lynch Mortgage Investors, Inc. with a
principal amount of $2,053,056; and the Total Return Bond Fund held a corporate
bond issued by Goldman Sachs Group, Inc. with a principal amount of $4,060,000;
and a corporate bond issued by Bank of America with a principal amount of
$10,380,000.

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:

33
<PAGE>

Yield = 2 (ab/cd + 1)/6/

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

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

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

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

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

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

For the 30-day period ended March 31, 2000, the standardized
effective yield for Institutional Shares of the Income and Total Return Bond
Funds was as follows: Income Fund, 6.56%; and Total Return Bond Fund, 6.50%.

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

34
<PAGE>

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:

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

Where: T = average annual total return.

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

P = hypothetical initial payment of $1,000.

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

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/

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 the Funds were as follows:

<TABLE>
<CAPTION>
Commencement of
One Year Period Five Year Period Operations* until
Ended March 31, 2000 Ended March 31, 2000 March 31, 2000
-------------------- -------------------- -----------------
<S> <C> <C> <C>
Equity Fund
Institutional Shares 25.75% 25.52% 25.59%
Value Equity Fund
Institutional Shares 41.92% N/A 27.92%
</TABLE>

35
<PAGE>

<TABLE>
<S> <C> <C> <C>
Retail Shares 41.60% N/A 27.65%
Optimum Growth Fund
Institutional Shares 27.66% N/A 39.09%
Retail Shares 27.40% N/A 38.67%

International Equity Fund
Institutional Shares 64.29% 16.89% 17.10%

Income Fund
Institutional Shares 1.16% 6.33% 6.68%
Total Return Bond Fund
Institutional Shares 1.47% 7.03% 7.40%
</TABLE>

* 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.

Based on the foregoing calculations, the aggregate annual
total returns for the Funds were as follows:

36
<PAGE>

<TABLE>
<CAPTION>
Five-Year Period Ended Commencement of
3/31/00* Operations* until 3/31/00
---------------------- -------------------------
<S> <C> <C>
Equity Fund
Institutional Shares 211.52% 227.31%

Value Equity Fund
Institutional Shares N/A 156.95%
Retail Shares N/A N/A

Optimum Growth Fund
Institutional Shares N/A 156.95%
Retail Shares N/A N/A

International Equity Fund
Institutional Shares 118.24% 126.66%

Income Fund
Institutional Shares 35.95% 40.04%

Total Return Bond Fund
Institutional Shares 40.45% 44.94%
</TABLE>

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

37
<PAGE>

and dividing such annualized distribution by the net asset value per share on
the last day of such month. The distribution rate of a fund will not be used in
advertising unless accompanied by standard performance measures.

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: Barron's, Business Week, Consumer Digest, Donoghue's Money Fund
Report, Financial Times, Forbes, Fortune, New York Times and Wall Street
Journal.

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

38
<PAGE>

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
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.

39
<PAGE>

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
----------------------------------------------

Distributor
-----------

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

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.

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

40
<PAGE>

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.

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."

Redemption Procedures
---------------------

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. In addition, certain redemptions of
Shares of the International Equity Fund are subject to a 2.00% redemption fee.
See the Funds' prospectus for further details. 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).

41
<PAGE>

As discussed in the Prospectus, 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. Institutional
Investors may also redeem Shares by instructing CGFSC by telephone at (800) 446-
1012 or by terminal access.

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

42
<PAGE>

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 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

43
<PAGE>

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 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 telephone or mail and must be made to
accounts of identical registration. There is no exchange fee imposed by the
Trust. However, certain exchanges are subject to a 2% redemption fee. See
"Redemption Procedures." In order to prevent abuse of this privilege to the
disadvantage of other shareholders, the Trust reserves the right to limit the
number of exchange requests of Investors to no more than six per year. 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.

44
<PAGE>

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.

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 0.25% of the average daily net asset value of each
Fund's outstanding Retail Shares. 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).

45
<PAGE>

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 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, 2000, the Retail Shares of the
Value Equity and Optimum Growth Funds bore distribution fees under the
Distribution Plan of $343 and $45,308, 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:

46
<PAGE>

<TABLE>
<CAPTION>
Position
with the Principal Occupation and Other Affiliations
Name and Address Trust During Past 5 Years
---------------- ----- -------------------
<S> <C> <C>
Frederick S. Wonham* Chairman of the Board, Retired; Chairman of the Boards (since 1997), and President,
238 June Road President and Treasurer Treasurer and Director (since 1995) of Excelsior Funds, Inc. and
Stamford, CT 06903 Excelsior Tax-Exempt Funds, Inc.; Chairman of the Boards (since
Age: 69 1997), President, Treasurer and Trustee (since 1995) of Excelsior
Funds and Excelsior Institutional Trust; 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 Excelsior Funds, Inc. and Excelsior Tax-
6549 Pine Meadows Drive Exempt Funds, Inc. (since 1985); Chairman of the Board of
Spring Hill, FL 34606 Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc.
Age 74 (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).
</TABLE>

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

47
<PAGE>

<TABLE>
<CAPTION>
Position
with the Principal Occupation and Other Affiliations
Name and Address Trust During Past 5 Years
---------------- ----- -------------------
<S> <C> <C>
Rodman L. Drake Trustee Director of Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc.
Continuation Investments (since 1996); Trustee of Excelsior Institutional Trust and Excelsior
Group, Inc. Funds (since 1994); Director, Parsons Brinkerhoff, Inc. (engineering
1251 Avenue of the Americas, firm) (since 1995); President, Continuation Investments Group, Inc.
9/th/ Floor (since 1997); President, Mandrake Group (investment and consulting firm)
New York, NY 10020 (1994-1997); Chairman, MetroCashcard International, Inc. (since 1999);
Age: 57 Director, Hotelivision, Inc. (since 1999); Director, Alliance Group
Services, Inc. (since 1998); Director, Hyperion Total Return Fund, Inc.
and three other funds for which Hyperion Capital 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. (from 1993 to 1998); 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, Inc. and Excelsior Tax-Exempt Funds,
913 Franklin Lake Road Inc. (since 1984); Director of UST Master Variable Series, Inc. (from
Franklin Lakes, NJ 07417 1994 to June 1997); and Trustee of the Trust (since 1995).
Age: 75
</TABLE>

48
<PAGE>

Morrill Melton Hall, Jr. Director Director of Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc.
Comprehensive Health Services, Inc. (since July 30, 2000); Trustee of the Trust (since July 30, 2000); Chief
8229 Boone Blvd., Suite 700 Executive Officer, Comprehensive Health Services, Inc. (health care
Vienna, VA 22182 management and administration).
Age: 55

Jonathan Piel Trustee Director of Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc.
558 E. 87th Street (since 1996); Trustee of the Trust and Excelsior Funds (since 1994); Vice
New York, NY 10128 President and Editor, Scientific American, Inc. (from 1986 to 1994);
Age: 61 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>

49
<PAGE>

<TABLE>
<CAPTION>
Position
with the Principal Occupation and Other Affiliations
Name and Address Trust During Past 5 Years
<S> <C> <C>
Robert A. Robinson Trustee Director of Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc.
Church Pension Group (since 1987); Director of UST Master Variable Series, Inc. (from 1994 to
445 Fifth Avenue June 1997); Trustee of the Trust (since 1995); President Emeritus, The
New York, NY 10016 Church Pension Fund and its affiliated companies (since 1966); Trustee,
Age: 74 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 Biddle & Reath LLP.
One Logan Square
18/th/ and Cherry Streets
Philadelphia, PA 19103-6996
Age: 57

Michael P. Malloy Assistant Partner of the law firm of Drinker Biddle & Reath LLP.
One Logan Square Secretary
18/th/ and Cherry Streets
Philadelphia, PA 19103-6996
Age: 41

Eddie Wang Assistant Manager of Blue Sky Compliance, Chase Global Funds Services Company
Chase Global Funds Secretary (November 1996 to present); and Officer and Manager of Financial
Services Company Reporting, Investors Bank & Trust Company (January 1991 to November 1996).
73 Tremont Street
Boston, MA 02108-3913
Age: 39
</TABLE>

50
<PAGE>

<TABLE>
<CAPTION>
Position
with the Principal Occupation and Other
Name and Address Trust Affiliations During Past 5 Years
---------------- ----- --------------------------------
<S> <C> <C>
Patricia M. Leyne Assistant Vice President, Senior Manager of Fund
Chase Global Funds Treasurer Administration, Chase Global Funds Services
Services Company Company (since August 1999); Assistant Vice
73 Tremont Street President, Senior Manager of Fund
Boston, MA 02108-3913 Administration, Chase Global Funds Services
Age: 33 Company (from July 1998 to August 1999);
Assistant Treasurer, Manager of Fund
Administration, Chase Global Funds
Services Company (from November 1996
to July 1998); Supervisor, Chase Global
Funds Services Company (from September
1995 to November 1996); Fund Administrator,
Chase Global Funds Services Company (from
February 1993 to September 1995).
</TABLE>

Each trustee receives an annual fee of $4,000 from Excelsior
Institutional Trust, and an annual fee of $9,000 from each of Excelsior Funds,
Inc. and Excelsior Tax-Exempt Funds, Inc. plus a meeting fee of $250 from
Excelsior Institutional Trust and $1,500 from each of Excelsior Funds, Inc. and
Excelsior Tax-Exempt Funds, Inc. for each meeting attended and is reimbursed for
expenses incurred in connection with service as a trustee. The Chairman of the
Board is entitled to receive an additional $5,000 per annum from each of the
foregoing Companies for services in such capacity. Prior to December 1999, each
of Messrs. Drake, Piel and Wonham received $4,000 from Excelsior Funds plus a
per-Company meeting fee of $250 and each of these persons was reimbursed for
expenses received in attending meetings of Excelsior Funds. The Chairman of the
Board of Excelsior Funds received $5,000 per annum for services in such
capacity. 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 July 7, 2000, 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.

51
<PAGE>

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

<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS TOTAL COMPENSATION
AGGREGATE ACCRUED AS PART ESTIMATED ANNUAL FROM THE TRUST AND
COMPENSATION OF TRUST BENEFITS UPON FUND COMPLEX* PAID
FROM THE TRUST EXPENSES RETIREMENT TO TRUSTEES
-------------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Frederick S. Wonham $6,500 None None $52,000(4)**
Rodman L. Drake $5,250 None None $38,750(4)**
Jonathan Piel $5,500 None None $42,000(4)**
Alfred Tannachion $5,250 None None $38,250(3)**
Donald L. Campbell*** $4,000 None None $22,000(3)**
Joseph C. Dugan $5,250 None None $38,250(3)**
Wolfe J. Frankl $5,000 None None $35,000(3)**
Robert A. Robinson $5,500 None None $39,500(3)**
</TABLE>

__________________

* The "Fund Complex" consists of the Trust, Excelsior Funds, Inc., Excelsior
Tax-Exempt Funds, Inc., and, until December 15, 1999, Excelsior Funds.

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

*** Donald L. Campbell resigned as a director of the Companies on July 31,
2000.

The Trust Instrument of the Trust provides 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.

52
<PAGE>

Investment Advisory Services
----------------------------

United States Trust Company of New York ("U.S. Trust New York") and
U.S. Trust Company (together with U.S. Trust New York, "U.S. Trust" or the
"Adviser") serve as co-investment advisers to the Funds, subject to the general
supervision and guidance of the Board of Trustees of the Trust. In the Advisory
Agreements, the Adviser has agreed 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.

U.S. Trust Corporation is a wholly-owned subsidiary of The Charles
Schwab Corporation ("Schwab"). Charles R. Schwab is the founder, Chairman and
Co-Chief Executive Officer and a Director and significant shareholder of Schwab.
As a result of his positions and share ownership, Mr. Schwab may be deemed to be
a controlling person of Schwab and its subsidiaries. Through its principal
subsidiary Charles Schwab & Co., Inc., Schwab is the nation's fourth largest
financial services firm and the nation's largest electronic brokerage firm, in
each case measured by customer assets. At December 31, 1999, Schwab served 6.6
million active accounts with $725 billion in customer assets through 340 branch
offices, four regional customer telephone service centers and automated
telephonic and online channels. Approximately 30% of Schwab's customer assets
and approximately 13% of its customer accounts are managed by the 5,800
independent, fee-based investment advisors served by Schwab's institutional
investor segment.

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,

53
<PAGE>

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 years ended March 31, 2000, 1999 and 1998, the Trust
paid the Adviser fees for advisory services as follows:

<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
March 31, 2000 March 31, 1999 March 31, 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Equity Fund $867,099 $684,933 $573,251
Value Equity Fund $236,844 $135,038 $104,281
Optimum Growth Fund $534,005 $304,737 $162,368
Income Fund $197,690 $150,590 $129,938
Total Return Bond Fund $710,288 $530,461 $375,215
International Equity Fund* $483,293 $214,663 $ 0
</TABLE>

* U.S. Trust became the Adviser to the International Equity Fund on December
29, 1998.

For the fiscal years ended March 31, 2000, 1999 and 1998, the Adviser
voluntarily agreed to waive a portion of its advisory fee for certain funds.
During the periods stated, these waivers reduced advisory fees as follows:

<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
March 31, 2000 March 31, 1999 March 31, 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Equity Fund $ 386,474 $ 298,579 $ 250,968
Value Equity Fund $ 71,673 $ 91,255 $ 91,692
Optimum Growth Fund $ 121,458 $ 155,809 $ 119,069
Income Fund $ 324,481 $ 262,853 $ 219,452
Total Return Bond Fund $1,016,516 $ 781,974 $ 600,960
International Equity Fund $ 600,158 $ 355,644 $ 0
</TABLE>

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.

54
<PAGE>

For the period from June 22, 1998 to December 28, 1998, U.S. Trust,
N.A. received advisory fees of $141,527 with respect to the International Equity
Fund. For the same period, U.S. Trust, N.A. waived advisory fees of $209,295
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 $38,550 with respect to the International Equity Fund.
For the same period, U.S. Trust Pacific waived advisory fees of $51,988 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.

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.

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 $135,769 with respect to the International Equity Fund. For
the same period, Harding Loevner waived sub-advisory fees of $84,911 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.

Administrators
--------------

CGFSC, Federated Services Company (an affiliate of the Distributor)
and U.S. Trust Company (together, the "Administrators") serve as the Trust's
administrators and provide the Funds with general administrative and operational
assistance. Until July 31, 2000, Federated Services Company's subsidiary,
Federated Administrative Services, served as administrator to the Trust. On July
31, 2000, Federated Services Company assumed all of its subsidiary's rights and
obligations under the Administration Agreement. 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

55
<PAGE>

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:

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.)
--------------------------

Annual Fee
----------

First $200 million............................................ 0.200%
Next $200 million............................................. 0.175%
Over $400 million............................................. 0.150%

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, a
subsidiary of Federated Services Company 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 years ended March 31, 2000, 1999 and 1998, the
Administrators were paid the following administration fees:

<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
March 31, 2000 March 31, 1999 March 31, 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Equity Fund $293,462 $231,504 $194,009
Value Equity Fund $ 72,228 $ 53,266 $ 46,129
Optimum Growth Fund $153,552 $108,405 $ 66,246
Income Fund $122,299 $ 83,501 $ 87,287
Total Return Bond Fund $404,662 $ 97,318 $ 82,241
International Equity Fund $216,690 $308,927 $229,777
</TABLE>

56
<PAGE>

For the fiscal years ended March 31, 2000, 1999 and 1998, the
Administrators waived the following administration fees:

<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
March 31, 2000 March 31, 1999 March 31, 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Equity Fund $ 0 $ 0 $ 0
Value Equity Fund $ 0 $ 0 $ 0
Optimum Growth Fund $ 0 $ 0 $ 0
Income Fund $ 0 $ 0 $ 0
Total Return Bond Fund $ 0 $ 0 $ 0
International Equity Fund $ 0 $ 0 $12,243
</TABLE>

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 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.

57
<PAGE>

For the fiscal year ended March 31, 2000, the Company made payments to
Shareholder Organizations in the following amounts:

<TABLE>
<CAPTION>
Amounts Paid to Affiliates of
Total Paid U.S. Trust
---------- ----------
<S> <C> <C>
Equity Fund $ 0 $ 0

Value Equity Fund $ 0 $ 0

Optimum Growth $13,786 $ 0

Income Fund $ 0 $ 0

Total Return Bond Fund $ 0 $ 0

International Equity Fund $ 0 $ 0
</TABLE>

For the fiscal years ended March 31, 1999 and 1998, 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

58
<PAGE>

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

Ernst & Young LLP, independent auditors, 200 Clarendon Street, Boston,
MA 02116 serve as auditors of the Trust. The Funds' Financial Highlights
included in the Prospectuses and the financial statements for the fiscal year
ended March 31, 2000 incorporated by reference in this Statement of Additional
Information have been audited by Ernst & Young LLP 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, 18/th/ and Cherry Streets, Philadelphia, Pennsylvania 19103-6996,
is counsel to the Trust and will pass upon the legality of the Shares offered by
the Prospectuses.

59
<PAGE>

TAXATION
--------

The following supplements the tax information contained in the
Prospectus.

For federal income tax purposes, each series of the Trust is treated
as a separate corporate entity and has qualified and intends to continue to
qualify as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"). Such qualification generally relieves a Fund of
liability for federal income taxes to the extent its earnings are distributed in
accordance with applicable requirements. If, for any reason, a Fund does not
qualify for a taxable year for the special federal tax treatment afforded
regulated investment companies, such Fund would be subject to federal tax on all
of its taxable income at regular corporate rates, without any deduction for
distributions to shareholders. In such event, dividend distributions would be
taxable as ordinary income to shareholders to the extent of the Fund's current
and accumulated earnings and profits and would be eligible for the dividends
received deduction in the case of corporate shareholders. Moreover, if a Fund
were to fail to make sufficient distributions in a year, the Fund would be
subject to corporate income taxes and/or excise taxes in respect of the
shortfall or, if the shortfall is large enough, the Fund could be disqualified
as a regulated investment company.

A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to currently distribute an amount equal to specified
percentages of their ordinary taxable income and capital gain net income (excess
of capital gains over capital losses). The Funds intend to make sufficient
distributions or deemed distributions of their ordinary taxable income and any
capital gain net income prior to the end of each calendar year to avoid
liability for this excise tax.

Dividends declared in October, November or December of any year
payable to shareholders of record on a specified date in such months will be
deemed to have been received by shareholders and paid by a Fund on December 31
of such year if such dividends are actually paid during January of the following
year.

Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends or gross proceeds realized upon sale
paid to shareholders who have failed to provide a correct tax identification
number in the manner required, who are subject to withholding by the Internal
Revenue Service for failure properly to include on their return payments of
taxable interest or dividends, or who have failed to certify to the Fund when
required to do so either that they are not subject to backup withholding or that
they are "exempt recipients."

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.

60
<PAGE>

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.

The tax principles applicable to transactions in financial instruments
and futures contacts and options that may be engaged in by the International
Equity Fund, and investments in passive foreign investment companies ("PFICs"),
are complex and, in some cases, uncertain. Such transactions and investments may
cause a Fund to recognize taxable income prior to the receipt of cash, thereby
requiring the Fund to liquidate other positions, or to borrow money, so as to
make sufficient distributions to shareholders to avoid corporate level tax.
Moreover, some or all of the taxable income recognized may be ordinary income or
short-term capital gain, so that the distributions may be taxable to
Shareholders as ordinary income. In addition, in the case of any shares of a
PFIC in which a Fund invests, the Fund may be liable for corporate-level tax on
any ultimate gain or distributions on the shares if the Fund fails to make an
election to recognize income annually during the period of its ownership of the
PFIC shares.

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.

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

61
<PAGE>

changed by legislative or administrative action. Shareholders are advised to
consult their tax advisers concerning their specific situations and the
application of state, local and foreign 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.

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

62
<PAGE>

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 shareholder held personally liable for the obligations
of a Fund solely by reason of his being or

63
<PAGE>

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.

CODE OF ETHICS
--------------

The Fund, U.S. Trust New York, U.S. Trust Company and the Distributor
have adopted codes of ethics that allow for personnel subject to the codes to
invest in securities, including securities that may be purchased or held by the
Funds.

MISCELLANEOUS
-------------

As of July 7, 2000, U.S. Trust and its affiliates held of record
substantially all of the Trust's outstanding shares as agent or custodian for
their customers, but did not own such share beneficially because they did not
have voting investment discretion with respect to such shares.

As of July 7, 2000, 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: PJM Interconnection
DB Plan, c/o United States Trust Company of New York, 114 West 47/th/ Street,
New York, New York, 10036, 9.65%; Value Equity Fund: U.S. Trust Retirement Fund,
c/o United States Trust Company of New York, 114 West 47/th/ Street, New York,
New York, 10036, 81.78%; Optimum Growth Fund: U.S. Trust Retirement Fund, c/o
United States Trust Company of New York, 114 West 47/th/ Street, New York, New
York, 10036, 50.44%; U.S. Trust Company of New York, Trustee FBO U.S. Trust
Plan, U.S. Trust Co. of Pacific Northwest, 4380 S.W. Macadam Avenue, Suite 450,
Portland, Oregon, 97201, 22.00%; International Equity Fund: Planned Parenthood
NY, c/o United States Trust Company of New York, 114 West 47/th/ Street, New
York, New York, 10036, 5.56%; The Liberty Fund, c/o United States Trust Company
of New York, 114 West 47/th/ Street, New York, New York, 10036, 14.87%; and The
Flourence Gould Foundation, c/o United States Trust Company of New York, 114
West 47/th/ Street, New York, New York, 10036, 13.77%; Income Fund: Eugene
Higgins Residuary, c/o United States Trust Company of New York, 114 West 47/th/
Street, New York, New York, 10036, 56.18%; Persimmom Charitable, c/o United
States Trust Company of New York, 114 West 47/th/ Street, New York, New York,
10036, 15.22%; and Planned Parenthood NY, c/o United States Trust Company of New
York, 114 West 47/th/ Street, New York, New York, 10036, 8.77%; Total Return
Bond Fund: The Flourence Gould Foundation, c/o United States Trust Company of
New York, 114 West 47/th/ Street, New York, New York, 10036, 13.16%; and The
Liberty Fund, c/o United States Trust Company of New York, 114 West 47/th/
Street, New York, New York, 10036, 10.32%; and Institutional Money Fund: Robin
Hood Foundation, 111 Broadway, 19/th/ Floor, New York, New York, 10066,
5.36%.

64
<PAGE>

As of July 7, 2000, 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: George S. Warburg, 820
Hartford Turnpike, Hamden, Connecticut, 06517-1600, 43.00%; William P. Cleary,
9343 246/th/ Street, Floral Park, New York, 11001, 18.97%; and Joan M. McClurg,
6-1 Brooke Club Drive, Ossining, New York, 10562-3698, 11.76%; Optimum Growth
Fund: Avrett Free & Ginsberg, Attn: William Lahr, 800 Third Avenue, New York,
New York, 10022, 18.47%; and Charles Schwab & Co., Inc., Special Custody a/c
for, Attn: Mutual Funds, 101 Montgomery Street, San Francisco, California,
94104, 9.14%.

FINANCIAL STATEMENTS
--------------------

The audited financial statements and notes thereto in the Trust's
Annual Report to Shareholders for the fiscal year ended March 31, 2000 (the
"2000 Annual Report") are incorporated into this Statement of Additional
Information by reference. No other parts of the 2000 Annual Report are
incorporated by reference herein. The financial statements included in the 2000
Annual Report have been audited by the Trust's independent auditors, Ernst &
Young LLP, whose reports thereon also appear in the 2000 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 2000
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.

65
<PAGE>

APPENDIX A
----------

Commercial Paper Ratings
------------------------

A Standard & Poor's commercial paper rating is a current
opinion of the creditworthiness of an obligor with respect to financial
obligations 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 upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the 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 Standard & Poor's
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.

Local Currency and Foreign Currency Risks
-----------------------------------------

Country risk considerations are a standard part of Standard &
Poor's analysis for credit ratings on any issuer or issue. Currency of repayment
is a key factor in this analysis. An obligor's capacity to repay foreign
obligations may be lower than its capacity to repay obligations in its local
currency due to the sovereign government's own relatively lower capacity

A-1
<PAGE>

to repay external versus domestic debt. These sovereign risk considerations are
incorporated in the debt ratings assigned to specific issues. Foreign currency
issuer ratings are also distinguished from local currency issuer ratings to
identify those instances where sovereign risks make them different for the same
issuer.

Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually senior 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 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.

A-2
<PAGE>

"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 to investment grade. Risk factors are
larger and subject to more variation. Nevertheless, timely payment is expected.

"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 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 best 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 uncertain 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 a capacity for meeting financial commitments which is highly uncertain
and solely reliant upon a sustained, favorable business and economic
environment.

"D" - Securities are in actual or imminent payment default.

A-3
<PAGE>

Thomson Financial 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 Financial BankWatch:

"TBW-1" - This designation represents Thomson Financial
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 Financial
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."

"TBW-3" - This designation represents Thomson Financial
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 Financial
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.

A-4
<PAGE>

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.

"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 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 Standard &
Poor's 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.

"c" - The "c" subscript is used to provide additional
information to investors that the bank may terminate its obligation to purchase
tendered bonds if the long-term credit rating of the issuer is below an
investment-grade level and/or the issuer's bonds are deemed taxable.

"p" - The letter "p" indicates that the rating is provisional.
A provisional rating assumes the successful completion of the project financed
by the debt being rated and indicates that payment of debt service requirements
is largely or entirely dependent upon the successful, timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of or the risk of

A-5
<PAGE>

default upon failure of such completion. The investor should exercise his own
judgment with respect to such likelihood and risk.

* - Continuance of the ratings is contingent upon Standard & Poor's
receipt of an executed copy of the escrow agreement or closing documentation
confirming investments and cash flows.

"r" - The "r" highlights derivative, hybrid, and certain other
obligations that Standard & Poor's believes may experience high volatility or
high variability in expected returns as a result of noncredit risks. Examples of
such obligations are securities with principal or interest return indexed to
equities, commodities, or currencies; certain swaps and options; and interest-
only and principal-only mortgage securities. The absence of an "r" symbol should
not be taken as an indication that an obligation will exhibit no volatility or
variability in total return.

N.R. Indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular obligation as a matter of policy. Debt obligations of
issuers outside the United States and its territories are rated on the same
basis as domestic corporate and municipal issues. The ratings measure the
creditworthiness of the obligor but do not take into account currency exchange
and related uncertainties.

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 the "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 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

A-6
<PAGE>

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" indicates 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 operating 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 to be 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 in periods of greater 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. This is the
lowest investment grade category.

"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 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.

A-7
<PAGE>

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 capacity. This is the lowest
investment grade 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 change 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.

"DDD," "DD" and "D" - Bonds are in default. The ratings of obligations
in this category are based on their prospects for achieving partial or full
recovery in a reorganization or

A-8
<PAGE>

liquidation of the obligor. While expected recovery values are highly
speculative and cannot be estimated with any precision, the following serve as
general guidelines. "DDD" obligations have the highest potential for recovery,
around 90% - 100% of outstanding amounts and accrued interest. "DD" indicates
potential recoveries in the range of 50% - 90%, and "D" the lowest recovery
potential, i.e., below 50%.

Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.

To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "CCC" may be modified by the addition of a
plus (+) or minus (-) sign to denote relative standing within these major rating
categories.

"NR" indicates the Fitch IBCA does not rate the issuer or issue in
question.

"Withdrawn": A rating is withdrawn when Fitch IBCA deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.

RatingAlert: Ratings are placed on RatingAlert to notify investors
that there is a reasonable probability of a rating change and the likely
direction of such change. These are designated as "Positive," indicating a
potential upgrade, "Negative," for a potential downgrade, or "Evolving," if
ratings may be raised, lowered or maintained. RatingAlert is typically resolved
over a relatively short period.

Thomson Financial 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.

A-9
<PAGE>

"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" - A rating of BB suggests that the likelihood of default is
considerably less than for lower-rated issues, although there are significant
uncertainties that could affect the ability to adequately service debt
obligations.

"B" - Issues rated B show a higher degree of uncertainty and therefore
greater likelihood of default than higher-rated issues. Adverse developments
could negatively affect the payment of interest and principal on a timely basis.

"CCC" - Issues rated CCC clearly have a high likelihood of default,
with little capacity to address further adverse changes in financial
circumstances.

"CC" - This rating is applied to issues that are subordinate to other
obligations rated CCC and are afforded less protection in the event of
bankruptcy or reorganization.

"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 Standard and Poor's note rating reflects the liquidity factors and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's 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 a
very strong capacity to pay debt service 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.

A-10
<PAGE>

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. 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 instruments
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-11
<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 among Registrant, U.S. Trust
Company and United States Trust Company of New York dated
May 31, 2000 with respect to the Equity, Income, Total
Return Bond, Value Equity and Optimum Growth Funds
(14).

(2) Investment Advisory Agreement among Registrant, U.S. Trust
Company and United States Trust Company of New York dated
May 31, 2000 with respect to the International Equity Fund
(14).

(3) 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).

(4) 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).

(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).
<PAGE>

(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) Form of Assumption Agreement among Federated Services
Company and the Registrant (14).

(3) Amended and Restated Mutual Funds Transfer Agency Agreement
dated July 31, 1998 between the Registrant and Chase Global
Funds Services Company (11).

(4) Amended and Restated Administrative Services Plan and
Related Form of Shareholder Servicing Agreement (9).

(5) Credit Agreement dated December 27, 1999 by and among
Registrant, Excelsior Funds, Inc., Excelsior Tax-Exempt
Funds, Inc., The Chase Manhattan Bank and the other lenders
thereunder (13).

-2-
<PAGE>

(6) Waiver Agreement among Registrant, United States Trust
Company of New York and U.S. Trust Company dated July 28,
2000 (14).

(i) Opinion of Counsel (10).

(j) (1) Consent of Drinker Biddle & Reath LLP (14).

(2) Consent of Ernst & Young LLP (14).

(k) None.

(l) (1) 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).

(2) 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 (13).

(n) Amended and Restated Plan Pursuant to Rule 18f-3 for
Operation of a Multi-Class System (13).

(p) (1) Code of Ethics of the Registrant (14).

(2) Code of Ethics of U.S. Trust Corporation (including U.S.
Trust Company and United States Trust Company of New York)
(13).

(3) Code of Ethics of Edgewood Distributors, Inc. (13).

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-
<PAGE>

(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.

(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) Incorporated herein by reference to Post-Effective Amendment
No. 17 to Registrant's Registration Statement, as filed with
the SEC on May 28, 1999.

(12) Incorporated herein by reference to Registrant's Definitive
Proxy Statement pursuant to Section 14 (a) of the Securities
and Exchange Act of 1934, as filed with the SEC on March 22,
2000.

-4-
<PAGE>

(13) Incorporated herein by reference to Post-Effective Amendment
No. 19 to Registrant's Registration Statement, as filed with
the SEC on May 26, 2000.

(14) 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 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.

-5-
<PAGE>

ITEM 26. Business and Other Connections of the Investment Adviser
--------------------------------------------------------

(a) U.S. Trust Company

U.S. Trust Company ("U.S. Trust") 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, including those who are engaged in any other business,
profession, vocation or employment of a substantial nature.

-6-
<PAGE>

<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust Name Occupation Business
----- ---- ---------- --------
<S> <C> <C> <C>
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
11 West 54th Street
New York, NY 10019

Director, Maribeth S. Rahe Vice Chairman, Asset Management,
Chairman United States Trust United States Trust Investment and
of Board 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 Robert C. Bodine Chairman Asset Management,
U.S. Trust Company Investment and
100 West Lancaster Avenue Fiduciary Services
Suite 200
Wayne, PA 19087

Director Howard E.N. Wilson Chairman Asset Management,
U.S. Trust Company Investment and
100 West Lancaster Avenue Fiduciary Services
Suite 200
Wayne, PA 19087
</TABLE>

-7-
<PAGE>

<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust Name Occupation Business
----- ---- ---------- --------
<S> <C> <C> <C>
Director Kenneth G. Walsh Executive Vice Asset Management,
United States Trust President, Investment and
Company of New York United States Fiduciary Services
114 West 47th Street Trust Company of
New York, NY 10036 New York

Director, William V. Ferdinand Managing Director Asset Management,
Managing U.S. Trust Company & CIO Fiduciary Services
Director & 225 High Ridge Road & Private Banking
CIO, CT Stamford, CT 06905
Offices

Director, W. Michael Funck President & CEO Asset Management,
President & U.S. Trust Company Fiduciary Services
CEO, CT 225 High Ridge Road & Private Banking
Offices Stamford, CT 06905
</TABLE>

-8-
<PAGE>

(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 trustees 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.

<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
4 Arleigh Road of Engineering,
Great Neck, NY 11021 The Cooper Union for
the Advancement of
Science & Art

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 Retired Chairman of Venture
103 Horseshoe Road Venrock, Inc. Capital
Mill Neck, NY 11765

Director Antonia M. Grumbach Partner in Patterson, Law Firm
Patterson, Belknap, 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 Investment and
of the Board Company of New York Executive Officer of Fiduciary Services
and Chief 114 West 47th Street U.S. Trust Corp. and
Executive New York, NY 10036 U.S. Trust Company of
Officer New York
</TABLE>

-9-
<PAGE>

<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NY Name Occupation Business
-------- ---- ---------- --------
<S> <C> <C> <C>
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

Director John H. Stookey Chairman of Petrochemicals and
Suburban Propane Pts. Suburban Propane Pts. Propane
P.O. Box 455
Sheffield, MA 01257

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
Wien & Malkin LLP Wien & Malkin LLP
Lincoln Building
60 East 42nd Street
New York, NY 10165

Director David A. Olsen Retired Chairman of Risk & Insurance
1120 Park Avenue Johnson & Higgins Services
New York, NY 10128

Director Ruth A. Wooden President and CEO of Not-for-Profit
60 Gramercy Park North National Parenting
Apt. 2M Association
New York, NY 10016

Executive Paul K. Napoli Executive Asset Management,
Vice United States Trust Vice President of Investment and
President Company of New York U.S. Trust Corporation Private Banking
114 West 47th Street and United States Trust Fiduciary Services
New York, NY 10036 Company of New York
</TABLE>

-10-
<PAGE>

<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NY Name Occupation Business
-------- ---- ---------- --------
<S> <C> <C> <C>
Director and Maribeth S. Rahe Vice Chairman Asset Management,
Vice Chair- United States Trust of U.S. Trust Corporation Investment and
man Company of New York and United States Trust Fiduciary Services
114 West 47th Street Company of New York
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 United
ment Officer New York, NY 10036 States Trust Company
of New York

Director, Jeffrey S. Maurer President and Asset Management,
President, United States Trust Chief Operating Investment and
and Chief Company of New York Officer of U.S. Trust Fiduciary Services
Operating 114 West 47th Street Corporation and United
Officer New York, NY 10036 States Trust Company of
New York

Executive John L. Kirby Executive Asset Management,
Vice United States Trust Vice President and Investment and
President Company of New York Chief Financial Fiduciary Services
and Chief 114 West 47th Street Officer of U.S. Trust
Financial New York, NY 10036 Corporation and United
Officer States Trust Company of
New York

Executive Kenneth G. Walsh Executive Asset Management,
Vice United States Trust Vice President of Investment and
President Company of New York U.S. Trust Corporation Fiduciary Services
114 West 47th Street and United States Trust
New York, NY 10036 Company of New York

Director Philip L. Smith Corporate Director and Consumer Goods
P.O. Box 386 Trustee
Ponte Verde Beach, FL 32004
</TABLE>

-11-
<PAGE>

<TABLE>
<CAPTION>
Position
with U.S. Principal Type of
Trust NY Name Occupation Business
-------- ---- ---------- --------
<S> <C> <C> <C>
Director Robert E. Denham Partner in Manger, Tolls Law Firm
Manger, Tolls & & Olson LLP
Olson LLP
355 South Grand Avenue
35/th/ Floor
Los Angeles, CA 90071-1560

Director Carl H. Pforzheimer, II Managing Partner Broker-Dealer,
Carl H. Pforzheimer & Co. Investment
650 Madison Avenue Adviser
23/rd/ Floor
New York, NY 10022

Executive John M. Deignan Executive Investment
Vice United States Trust Vice President Management and
President Company of New York Fiduciary Services;
114 West 47th Street Private Banking
New York, NY 10036
</TABLE>

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: Excelsior Funds, Inc., Excelsior Tax-Exempt Funds, Inc.,
FTI Funds, Great Plains Funds, Old Westbury Funds, Inc., The Riverfront Funds,
Robertsons Stephens Investment Trust and WesMark Funds.

-12-
<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 15237-7002

Arthur L. Cherry Director, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002

J. Christopher Donahue Director, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002

Thomas R. Donahue Director and Executive Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002

Ernest L. Linane Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002

Christine T. Johnson Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002

Denis McAuley, III Treasurer, --
5800 Corporate Drive Edgewood Services, Inc
Pittsburgh, PA 15237-7002

Timothy S. Johnson Secretary, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002

Victor R. Siclari Assistant Secretary, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-7002
</TABLE>

-13-
<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, 225 High Ridge Road, East Building, Stamford,
Connecticut 06905 (records relating to its function as investment adviser
and co-administrator).

(3) Edgewood Services, Inc., Clearing Operations, 5800 Corporate Drive,
Pittsburgh, PA 15237-5829 (records relating to its function as
distributor).

(4) Chase Global Funds Services Company, 73 Tremont Street, Boston, MA 02108-
3913 (records relating to its functions as co-administrator and transfer
agent).

(5) Federated Services Company, Federated Investors Tower, Pittsburgh, PA
15222-3779 (records relating to its function as co-administrator).

(6) The Chase Manhattan Bank, 3 Chase MetroTech Center, 8th Floor, Brooklyn, NY
11245 (records relating to its function as custodian).

(7) Drinker Biddle & Reath LLP, One Logan Square, 18th and Cherry Streets,
Philadelphia, Pennsylvania 19103-6996 (Registrant's Articles of
Incorporation, Bylaws, and Minute Books).

ITEM 29. Management Services
-------------------

Inapplicable.

ITEM 30. Undertakings
------------
Not Applicable.

-14-
<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 certifies that
it meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the 1933 Act and has duly caused this
Post-Effective Amendment No. 21 to its Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and the State of New York on the 28th day of July, 2000.

EXCELSIOR INSTITUTIONAL TRUST
Registrant

/s/ 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. 21 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>
/s/ Frederick S. Wonham Chairman of the
-----------------------
Frederick S. Wonham Board, President July 28, 2000
and Treasurer

* Joseph H. Dugan
-----------------------
Joseph H. Dugan Trustee July 28, 2000

-----------------------
Donald Campbell Trustee July 28, 2000

* Wolfe J. Frankl
-----------------------
Wolfe J. Frankl Trustee July 28, 2000

* Robert A. Robinson
-----------------------
Robert A. Robinson Trustee July 28, 2000

* Alfred Tannachion
-----------------------
Alfred Tannachion Trustee July 28, 2000

* Rodman L. Drake
-----------------------
Rodman L. Drake Trustee July 28, 2000

* Jonathan Piel
-----------------------
Jonathan Piel Trustee July 28, 2000

*By: /s/ W. Bruce McConnel
---------------------
W. Bruce McConnel
Attorney-in-Fact
</TABLE>

-15-
<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 19, 2000 /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 19, 2000 /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 19, 2000 /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 19, 2000 /s/ Wolfe J. Frankl
-------------------
Wolfe J. Frankl
<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 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 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 19, 2000 /s/ Frederick S. Wonham
-----------------------
Frederick S. Wonham
<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 19, 2000 /s/ Rodman L. Drake
-------------------
Rodman L. Drake
<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 19, 2000 /s/ Jonathon Piel
-----------------
Jonathan Piel
<PAGE>

EXCELSIOR INSTITUTIONAL TRUST

EXHIBIT INDEX

EXHIBIT EXHIBIT NO.
------- -----------

(d)(1) Investment Advisory Agreement among Registrant, U.S. Trust
Company and United States Trust Company of New York dated May 31,
2000 with respect to the Equity, Income, Total Return Bond, Value
Equity, and Optimum Growth Funds.

(d)(2) Investment Advisory Agreement among Registrant, U.S. Trust
Company, and United States Trust Company of New York dated May
31, 2000 with respect to the International Equity Fund.

(h)(2) Form of Assumption Agreement among Federated Services Company and
the Registrant.

(h)(6) Waiver and Reimbursement Agreement among Registrant, United
States Trust Company of New York and U.S. Trust Company dated
July 28, 2000.

(j)(1) Consent of Drinker Biddle & Reath LLP.

(j)(2) Consent of Ernst & Young LLP.

(p)(1) Code of Ethics of the Registrant.