EXHIBIT 17(c)

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Excelsior Institutional Money Fund

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Excelsior Funds For initial purchase or existing account
73 Tremont Street information, call (800) 909-1989. (From
Boston, Massachusetts 02108-3913 overseas, call (617) 557-1755.)

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This Prospectus describes the Excelsior Institutional Money Fund (the "Fund"),
a diversified mutual fund offered to institutional investors. The Fund is a
separate series of Excelsior Funds (the "Trust"), an open-end management
investment company.

SHARES OF THE FUND ("SHARES") ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK AND THE SHARES ARE NOT FEDERALLY INSURED BY,
GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER GOVERNMENTAL AGENCY. THE FUND SEEKS TO MAINTAIN ITS NET ASSET VALUE PER
SHARE AT $1.00 FOR PURPOSES OF PURCHASES AND REDEMPTIONS, ALTHOUGH THERE CAN BE
NO ASSURANCE THAT IT WILL BE ABLE TO DO SO ON A CONTINUING BASIS. INVESTMENT IN
THE FUND INVOLVES INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

Unlike other mutual funds which directly acquire and manage their own
portfolios of securities, the Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio. Consequently, the
investment experience of the Fund will correspond directly with the investment
experience of the Portfolio. The Fund invests in the Portfolio through
Signature Financial Group, Inc.'s two-tier structure known as the Hub and
Spoke(R) financial services method. The Hub and Spoke(R) investment fund
structure employs a two-tier master/feeder fund structure and is a registered
service mark of Signature Financial Group, Inc. See "Special Information
Concerning Hub and Spoke(R) Structure."

The Fund is distributed by Edgewood Services, Inc. The Portfolio is
advised by Citibank, N.A. ("Citibank" or the "Investment Adviser").

This Prospectus sets forth concisely the information about the Fund that a
prospective investor should consider before investing. Investors should read
this Prospectus carefully and retain it for future reference. Additional
information about the Fund is contained in a Statement of Additional
Information, which has been filed with the Securities and Exchange Commission
and is available without charge upon request by writing to the Trust at its
address shown above or by calling (800) 909-1989. The Statement of Additional
Information bears the same date as this Prospectus and is incorporated by
reference in its entirety into this Prospectus. The Securities and Exchange
Commission maintains a World Wide Web site (http://www.sec.gov) that contains
the Statement of Additional Information and other information regarding the
Trust.

Prospectus dated December 24, 1998

SUMMARY OF EXPENSES

The following tables provide (i) a summary of expenses relating to
purchases and sales of Shares of the Fund and the aggregate annual operating
expenses for the Fund and the Portfolio based on the fiscal year ended August
31, 1998, expressed as a percentage of the average net assets of the Fund, and
(ii) an example illustrating the dollar cost of such expenses on a $1,000
investment in the Fund.

Shareholder Transaction Expenses ............................................ None
Advisory Fees (after fee waivers)(1) ........................................ 0.08%
12b-1 Fees .................................................................. None
Other Expenses
Administration Fees (after fee waivers)(2) ................................. 0.03%
Administrative Servicing Fees .............................................. 0.01%
Other Operating Expenses2 .................................................. 0.13%
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Total Fund Operating Expenses (after fee waivers and expense reimbursements) 0.25%
====

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(1) Reflects fees incurred by the Portfolio for advisory services rendered by
the Investment Adviser. See "Management of the Trust and the Portfolio"
below.
(2) Includes the expenses of the Portfolio that are allocable to the Fund. See
"Management of the Trust and the Portfolio" below.

Example

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

1 Year .............. $ 3
3 Years ............. $ 8
5 Years ............. $14
10 Years ............ $32

The purpose of the foregoing tables is to assist investors in
understanding the various costs and expenses that shareholders of the Fund will
bear directly or indirectly. The Fund's administrators have voluntarily agreed
to waive fees and/or reimburse the Fund for certain expenses, and the
Investment Adviser and the Portfolio's administrator have each voluntarily
agreed to waive a portion of their fees such that, following such waivers and
reimbursements, the total operating expenses for the current fiscal year
(including amortization of organization costs and the Fund's allocated portion
of the Portfolio's expenses, but exclusive of taxes, interest, brokerage
commissions and extraordinary expenses) of the Fund on an annual basis would
not exceed 0.25% of the average daily net assets of the Fund. These fee waivers
and expense reimbursements are reflected in the expense table and example.
These fee waivers and expense reimbursements may be modified or terminated at
any time. Without such waivers and reimbursements, the advisory fee of the
Portfolio would be equal on an annual basis to 0.15% of the Portfolio's average
daily net assets, "Administration Fees" of the Fund, including the Fund's share
of Portfolio administration fees, would be equal on an annual basis to 0.15% of
the Fund's average daily net assets, and "Total Fund Operating Expenses,"
including the Fund's share of Portfolio expenses, would be equal on an annual
basis to 0.83% of the Fund's average daily net assets. For more information
about the expenses of the Fund and the Portfolio, see "Management of the Trust
and the Portfolio."

THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR
LESS THAN THOSE SHOWN IN THE EXPENSE SUMMARY AND EXAMPLE.

The Trustees of the Trust believe that the aggregate per share expenses of
the Fund and the Portfolio will be less than or approximately equal to the
expenses which the Fund would incur if the Trust paid directly for the services
of an investment adviser and the assets of the Fund were invested directly in
the kinds of securities being held by the Portfolio.

FINANCIAL HIGHLIGHTS

The following selected data for a Share of the Fund outstanding for the
indicated periods should be read in conjunction with the financial statements
appearing in the Fund's annual report to shareholders, which are incorporated
by reference into the Statement of Additional Information. The financial
statements and notes, as well as the table below, have been audited by
PricewaterhouseCoopers LLP, independent accountants. Copies of the annual
report may be obtained from the Trust free of charge by calling the number on
the front cover of this Prospectus.

For the period
November 8, 1993
(Commencement of
For the Year Ended August 31, Operations) to
1998 1997 1996 1995 August 31, 1994
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Net Asset Value, Beginning of
Period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income from
operations .......................... 0.0551 0.0543 0.0547 0.0579 0.0308
Dividends from net investment
income .............................. (0.0551) (0.0543) (0.0547) ( 0.0579) (0.0308)
-------- -------- -------- -------- --------
Net Asset Value, End of Period ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return ......................... 5.65% 5.57% 5.61% 5.95% 3.87%(2)
Ratios:
Net investment income to
average net assets(1) ............. 5.52% 5.40% 5.55% 5.59% 4.39%(2)
Expenses to average net assets(1) ... 0.25% 0.25% 0.25% 0.25% 0.19%(2)
Total net assets, end of period
(000's omitted) ..................... $171,819 $315,761 $293,290 $638,111 $770,658

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(1) Reflects the Fund's proportionate share of the Portfolio's expenses as well
as voluntary fee waivers by agents of the Portfolio and the Trust. If the
voluntary fee waivers had not been in place, the ratios of net investment
income and expenses to average net assets would have been as follows:

Net investment income to average
net assets ............................ 4.94% 4.92% 5.11% 5.16% 4.28%(2)
Expenses to average net assets ......... 0.83% 0.74% 0.69% 0.68% 0.31%(2)

(2) Annualized.

INVESTMENT OBJECTIVE AND POLICIES

Introduction

The Trust was organized as a business trust under the laws of the State of
Delaware, with the Fund established as a separate series of the Trust, on
October 25, 1993. Shares of the Fund are continuously sold only to
institutional investors.

Investment Objective

The investment objective of the Fund is to provide shareholders with
liquidity and as high a level of current income as is consistent with the
preservation of capital. The Fund seeks to achieve its investment objective by
investing all of its investable assets in the Cash Reserves Portfolio (the
"Portfolio"), a diversified open-end management investment company with the
same investment objective as the Fund. The Portfolio seeks to achieve its
investment objective by investing in U.S. dollar-denominated money market
obligations with maturities of 397 days or less issued by U.S. and non-U.S.
issuers. The approval of the Fund's shareholders is not required to change its
investment objective and investment policies, and the approval of the investors
in the Portfolio is not required to change the Portfolio's investment objective
or any of the Portfolio's investment policies discussed below, except that the
concentration policy with respect to bank obligations described in paragraph
(1) below is fundamental. Any changes in the Fund's or the Portfolio's
non-fundamental investment objective or policies could result in the Fund
having an investment objective or policies different from those applicable at
the time of a shareholder's investment in the Fund.

Investment Policies and Strategies

Since the investment characteristics of the Fund are the same as those of
the Portfolio, the following is a discussion of the various investment policies
and strategies employed by the Portfolio. The Portfolio uses the amortized cost
method to value its securities.

The Portfolio seeks to achieve its investment objective through
investments limited to the following types of U.S. dollar-denominated money
market instruments. All investments by the Portfolio mature or are deemed to
mature within 397 days from the date of acquisition, and the average maturity
of the investments held by the Portfolio (on a dollar-weighted basis) is 90
days or less. All investments by the Portfolio are in securities of high
quality (i.e., rated or subject to a guarantee rated in the highest rating
category for short-term obligations by at least two nationally recognized
statistical rating organizations (each an "NRSRO") assigning a rating to the
security or guarantee or the issuer of the security or guarantee or, if only
one NRSRO assigns a rating, that NRSRO, or, in the case of an investment which
is not rated, of comparable quality as determined by the Investment Adviser)
and are determined by the Investment Adviser to present minimal credit risks.
Investments in high quality, short-term instruments may, in many circumstances,
result in lower yield than would be available from investments in instruments
with a lower quality or a longer term. Under the Investment Company Act of
1940, as amended (the "1940 Act"), the Fund and the Portfolio are each
classified as "diversified," although in the case of the Fund, all of its
investable assets are invested in the Portfolio. In accordance with the
portfolio diversification requirements of Rule 2a-7 under the 1940 Act, the
Portfolio must be diversified with respect to issuers of securities it
acquires, other than government securities and securities with guarantees
issued by a "non-controlled person" (as defined in Rule 2a-7), so that,
generally, immediately after acquiring a security, the Portfolio will not have
invested more than 5% of its total assets in securities issued by the issuer of
the security.

The Portfolio will limit its investments to the types of instruments
described below:

(1) Bank obligations. The Portfolio invests at least 25% of its assets,
and may invest up to 100% of its assets, in bank obligations. This
concentration policy is fundamental and may not be changed without the approval
of the investors in the Portfolio. These obligations include, but are not
limited to, negotiable certificates of deposit, bankers' acceptances and fixed
time deposits. The Portfolio limits its investments in U.S. bank obligations
(including their non-U.S. branches) to banks having total assets in excess of
$1 billion and which are subject to regulation by an agency of the U.S.
Government. The Portfolio may also invest in certificates of deposit issued by
banks the deposits in which are insured by the Federal Deposit Insurance
Corporation ("FDIC"), through either the Bank Insurance Fund or the Savings
Association Insurance Fund, having total assets of less than $1 billion,
provided that the Portfolio at no time owns more than $100,000 principal amount
of certificates of deposit (or any higher principal amount which in the future
may be fully insured by FDIC insurance) of any one of those issuers. Fixed time
deposits are obligations which are payable at a stated maturity date and bear a
fixed rate of interest. Generally, fixed time deposits may be withdrawn on
demand by the Portfolio, but they may be subject to early withdrawal penalties
which vary depending upon market conditions and the remaining maturity of the
obligation. Although fixed time deposits do not have a market, there are no
contractual restrictions on the Portfolio's right to transfer a beneficial
interest in the deposit to a third party.

The Portfolio limits its investments in non-U.S. bank obligations (i.e.,
obligations of non-U.S. branches and subsidiaries of U.S. banks, and U.S. and
non-U.S. branches of non-U.S. banks) to U.S. dollar-denominated obligations of
banks which at the time of investment are branches or subsidiaries of U.S.
banks which meet the criteria in the preceding paragraph or are branches of
non-U.S. banks which (i) have more than $10 billion, or the equivalent in other
currencies, in total assets; (ii) in terms of assets are among the 75 largest
non-U.S. banks in the world; (iii) have branches or agencies in the United
States; and (iv) in the opinion of the Investment Adviser, are of an investment
quality comparable to obligations of U.S. banks which may be purchased by the
Portfolio. These obligations may be general obligations of the parent bank, in
addition to the issuing branch or subsidiary, but the parent bank's obligations
may be limited by the terms of the specific obligation or by governmental
regulation. The Portfolio also limits its investments in non-U.S. bank
obligations to banks, branches and subsidiaries located in Western Europe
(United Kingdom, France, Germany, Belgium, the Netherlands, Italy,
Switzerland), Scandinavia (Denmark, Norway, Sweden), Australia, Japan, the
Cayman Islands, the Bahamas and Canada. The Portfolio does not purchase any
bank obligation issued by the Investment Adviser or any of its affiliates.

Since the Portfolio invests at least 25% of its assets, and may invest up
to 100% of its assets, in bank obligations, an investment in the Fund should be
made with an understanding of the characteristics of the banking industry and
the risks which such an investment may entail. Banks are subject to extensive
governmental regulation which may limit both the amounts and types of loans and
other financial commitments which may be made and interest rates and fees which
may be charged. The profitability of this industry is largely dependent on the
availability and cost of capital funds for the purpose of financing lending
operations under prevailing money market conditions. Also, general economic
conditions play an important part in the operation of this industry, and
exposure to credit losses arising from possible financial difficulties of
borrowers might affect a bank's ability to meet its obligations.

Since the Portfolio may hold obligations of non-U.S. branches and
subsidiaries of U.S. banks, and U.S. and non-U.S. branches of non-U.S. banks,
an investment in the Fund involves certain additional risks. Such investment
risks include future political and economic developments, the possible
imposition of non-U.S. withholding taxes on interest income payable on such
obligations held by the Portfolio, the possible seizure or nationalization of
non-U.S. deposits, and the possible establishment of exchange controls or other
non-U.S. governmental laws or restrictions applicable to the payment of the
principal of and interest on certificates of deposit or time deposits that
might affect adversely such payment on such obligations held by the Portfolio.
In addition, there may be less publicly-available information about a non-U.S.
branch or subsidiary of a U.S. bank or a U.S. or non-U.S. branch of a non-U.S.
bank than about a U.S. bank, and such branches and subsidiaries may not be
subject to the same or similar

regulatory requirements that apply to U.S. banks, such as mandatory reserve
requirements, loan limitations, and accounting, auditing and financial record
keeping standards and requirements. The Statement of Additional Information
includes more detailed information concerning U.S. and non-U.S. bank
obligations under the caption "Investment Objective, Policies and
Restrictions--Cash Reserves Portfolio."

(2) Obligations of, or guaranteed by, non-U.S. governments. The Portfolio
limits its investments in non-U.S. government obligations to obligations of or
guaranteed by the governments of Western Europe (United Kingdom, France,
Germany, Belgium, the Netherlands, Italy, Switzerland), Scandinavia (Denmark,
Norway, Sweden), Australia, Japan and Canada. Generally, such obligations may
be subject to the additional risks described in paragraph (1) above in
connection with the purchase of non-U.S. bank obligations.

(3) Commercial paper or other short-term instruments rated Prime-1 by
Moody's Investors Service, Inc. ("Moody's") or A-1 by Standard & Poor's Ratings
Services ("Standard & Poor's") or, if not rated, determined to be of comparable
quality by the Investment Adviser, such as unrated commercial paper issued by
corporations having an outstanding unsecured debt issue currently rated Aaa by
Moody's or AAA by Standard & Poor's. For a description of these ratings see the
Appendix to this Prospectus.

(4) Obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. These include issues of the U.S. Treasury, such as bills,
certificates of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an Act of Congress.
Obligations of certain agencies and instrumentalities, such as the Government
National Mortgage Association, 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 U.S. Treasury; others,
such as those of the Federal National Mortgage Association, are supported by
the discretionary authority of the U.S. Government to purchase the agency's
obligations; and others are supported only by the credit of the agency or
instrumentality. Issues of the U.S. Treasury in which the Portfolio may invest
include Treasury Receipts, which are unmatured interest coupons of U.S.
Treasury bonds and notes which have been separated and resold in a custodial
receipt program administered by the U.S. Treasury.

(5) Repurchase agreements providing for resale within 397 days or less,
covering obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities which may have maturities in excess of 397 days. A repurchase
agreement arises when a buyer purchases an obligation and simultaneously agrees
with the vendor to resell the obligation to the vendor at an agreed-upon price
and time, which is usually not more than seven days from the date of purchase.
The resale price of a repurchase agreement is greater than the purchase price,
reflecting an agreed-upon market rate which is effective for the period of time
the buyer's funds are invested in the obligation and which is not related to
the coupon rate on the purchased obligation. Obligations serving as collateral
for each repurchase agreement are delivered to the Portfolio's custodian either
physically or in book entry form and the collateral is marked to market daily
to ensure that each repurchase agreement is fully collateralized at all times.
A buyer of a repurchase agreement runs a risk of loss if, at the time of
default by the vendor, the value of the collateral securing the agreement is
less than the price paid for the repurchase agreement. If the vendor of a
repurchase agreement becomes bankrupt, the Portfolio might be delayed, or may
incur costs or possible losses of principal and income, in selling the
collateral. The Portfolio may enter into repurchase agreements only with a
vendor which is a member bank of the Federal Reserve System or which is a
"primary dealer" (as designated by the Federal Reserve Bank of New York) in
U.S. Government obligations. The restrictions and procedures described above
which govern the Portfolio's investment in repurchase obligations are designed
to minimize the Portfolio's risk of losses in making those investments.

(6) Asset-backed securities may include securities such as Certificates
for Automobile Receivables ("CARS") and Credit Card Receivable Securities
("CARDS"), as well as other asset-backed securities that

may be developed in the future. CARS represent fractional interests in pools of
car installment loans, and CARDS represent fractional interests in pools of
revolving credit card receivables. The rate of return on asset-backed
securities may be affected by early prepayment of principal on the underlying
loans or receivables. Prepayment rates vary widely and may be affected by
changes in market interest rates. It is not possible to accurately predict the
average life of a particular pool of loans or receivables. Reinvestment of
principal may occur at higher or lower rates than the original yield.
Therefore, the actual maturity and realized yield on asset-backed securities
will vary based upon the prepayment experience of the underlying pool of loans
or receivables.

The Portfolio does not purchase securities which it believes, at the time
of purchase, will be subject to exchange controls or non-U.S. withholding
taxes; however, there can be no assurance that such laws may not become
applicable to certain of the Portfolio's investments. In the event exchange
controls or non-U.S. withholding taxes are imposed with respect to any of the
Portfolio's investments, the effect may be to reduce the income received by the
Portfolio on such investments.

Lending of Portfolio Securities. Consistent with applicable regulatory
requirements and in order to generate additional income, the Portfolio may lend
its portfolio securities to broker-dealers and other institutional borrowers.
Such loans must be callable at any time and continuously secured by collateral
(cash or U.S. Government securities) in an amount not less than the market
value, determined daily, of the securities loaned. It is intended that the
value of securities loaned by the Portfolio would not exceed 33 1/3% of the
Portfolio's net assets.

In the event of the bankruptcy of the other party to a securities loan,
the Portfolio could experience delays in recovering the securities loaned. To
the extent that, in the meantime, the value of the securities loaned has
increased, the Portfolio could experience a loss.

Private Placements and Illiquid Investments. The Portfolio may invest up
to 10% of its net assets in securities for which there is no readily available
market. These illiquid securities may include privately placed restricted
securities for which no institutional market exists. The absence of a trading
market can make it difficult to ascertain a market value for illiquid
investments. Disposing of illiquid investments may involve time-consuming
negotiation and legal expenses, and it may be difficult or impossible for the
Portfolio to sell them promptly at an acceptable price.

Year 2000. Like other investment companies, financial and business
organizations and individuals around the world, the Portfolio and the Fund
could be affected adversely if the computer systems used by the Investment
Adviser and the other service providers do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Investment Adviser has informed
the Trust that it and the other service providers are taking steps to address
the Year 2000 Problem with respect to the computer systems that they use. At
this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Portfolio or the Fund as a result
of the Year 2000 Problem.

* * *

The Statement of Additional Information includes further discussion of
investment policies and a listing of investment restrictions which govern the
investment activities of the Fund and the Portfolio. Certain of these
investment restrictions may not be changed, in the case of the Fund, without
the approval of the Fund's shareholders or, in the case of the Portfolio,
without the approval of the Portfolio's shareholders. If a percentage
restriction (other than a restriction as to borrowing) or a rating restriction
on investment or utilization of assets is adhered to at the time an investment
is made or assets are so utilized, a later change in percentage resulting from
changes in the value of the securities held by the Portfolio or a later change
in the rating of a security held by the Portfolio is not considered a violation
of the policy or restriction.

SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R) STRUCTURE

Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, a separate registered
investment company with the same investment objective. In addition to selling a
beneficial interest to the Fund, the Portfolio may sell beneficial interests to
other mutual funds or institutional investors. Such investors will invest in
the Portfolio on the same terms and conditions and will pay a proportionate
share of the Portfolio's expenses. However, the other investors investing in
the Portfolio are not required to issue their shares at the same public
offering price as the Fund due to variations in sales commissions and other
operating expenses. Investors in the Fund should be aware that these
differences may result in differences in returns experienced by investors in
the different funds that invest in the Portfolio. Such differences in returns
are also present in other mutual fund structures. Information concerning other
holders of interests in the Portfolio is available from Signature Financial
Group (Cayman) Ltd. at (345) 945-1824. The Hub and Spoke investment fund
structure has been developed relatively recently, so shareholders should
carefully consider this investment approach.

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

Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk.
(However, this possibility also exists for traditionally structured funds which
have large or institutional investors.) Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. When the Fund is required to vote as an investor
in the Portfolio, current regulations provide that in those circumstances the
Fund may either seek instructions from its shareholders with regard to the
voting of such proxies and vote such proxies in accordance with such
instructions, or the Fund may vote its interests in the Portfolio in the same
proportion of all other investors in the Portfolio.

Certain changes in the Portfolio's investment objective, policies or
restrictions may require the Trust to withdraw the Fund's investment in the
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund.

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

For descriptions of the investment objective, policies and restrictions of
the Portfolio, see "Investment Objective and Policies" herein and in the
Statement of Additional Information. For descriptions of the management of the
Portfolio, see "Management of the Trust and the Portfolio" herein and in the
Statement of Additional Information. For a description of the expenses of the
Portfolio, see "Management of the Trust and the Portfolio" and "Expenses"
below.

PRICING OF SHARES

The net asset value of the Fund is determined and the Shares of the Fund
are priced for purchases and redemptions normally as of 3:00 P.M. (Eastern
time) on each day the New York Stock Exchange and U.S. Trust Company of
Connecticut are open for trading (a "Business Day"). Currently, the days on
which the Fund is closed (other than weekends) are New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day (observed), Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and
Christmas Day. Net asset value per Share for purposes of pricing sales and
redemptions is calculated by dividing the value of all securities and other
assets belonging to the Fund (including its interest in the Portfolio), less
the liabilities charged to the Fund, by the number of Shares of the Fund
outstanding at the time the determination is made. On days when the financial
markets in which the Portfolio invests close early, the Fund's net asset value
is determined as of the close of these markets if such time is earlier than the
time at which the net asset value is normally calculated.

The assets in the Portfolio are valued based upon the amortized cost
method. The Trust seeks to maintain a net asset value per Share of $1.00 for
the Fund, although there can be no assurance the net asset value will not vary.
See "Net Income, Dividends and Distributions" below.

HOW TO PURCHASE AND REDEEM SHARES

Purchase of Shares

Shares of the Fund may be purchased without a sales charge on any Business
Day at the net asset value next determined after an order is transmitted to the
Trust's transfer agent, Chase Global Funds Services Company ("CGFSC"), or
another entity on behalf of the Trust, and received by the distributor,
Edgewood Services, Inc. (the "Distributor"), in good order. Except as provided
under "Investor Programs" below, the minimum initial investment is $1,000.
There is no minimum for subsequent investments. Purchases will be effected on
the same day provided the order is received by 3:00 P.M. (Eastern time). The
Distributor has established procedures for purchasing Shares in order to
accommodate different types of investors (see "Purchase Procedures" below).

Shares of the Fund may be purchased only in those states where they may be
lawfully sold. The Trust reserves the right to cease offering Shares for sale
at any time and the Distributor and the Trust each reserve the right to reject
any order for the purchase of Shares. Third party checks will not be accepted
as payment for Fund Shares.

Purchase Procedures

Shares may be purchased directly only by institutional investors
("Institutional Investors"). An Institutional Investor (a "Shareholder
Organization") that has entered into an agreement with the Trust may elect to
hold of record Shares for its customers ("Customers") and to record beneficial
ownership of Shares on the account statements provided to its Customers. In
that case, it is each Shareholder Organization's responsibility to transmit to
the Distributor all purchase orders for its Customers and to transmit, on a
timely basis, payment for such orders to CGFSC in accordance with the
procedures agreed to

by the Shareholder Organization and the Distributor. Confirmations of all such
purchases and redemptions by Shareholder Organizations for the benefit of their
Customers will be sent by CGFSC to the particular Shareholder Organization. In
the alternative, a Shareholder Organization may elect to establish its
Customers' accounts of record with CGFSC. In this event, even if the
Shareholder Organization continues to place its Customers' purchase and
redemption orders with the Fund, CGFSC will send confirmations of such
transactions and periodic account statements directly to the shareholders of
record. Shares in the Fund bear the expense of fees payable to Shareholder
Organizations for such services. See "Management of the Trust and the
Portfolio--Shareholder Organizations." Certificates will not be issued for
Shares.

Customers may agree with a particular Shareholder Organization to make a
minimum purchase with respect to their accounts. Depending upon the terms of
the particular account, Shareholder Organizations may charge a Customer's
account fees for automatic investment and other cash management services
provided. Customers should contact their Shareholder Organization directly for
further information.

Purchases by Wire

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

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

Shares purchased by federal funds wire will be effected at the net asset
value per Share next determined after acceptance of the order. Orders for Shares
received and accepted no later than 3:00 P.M. (Eastern time) will be entitled to
dividends on that Business Day, provided the federal funds wire has been
received by the Fund's bank on that Business Day. Purchase orders received and
accepted after 3:00 P.M. (Eastern time) will be effected at the net asset value
next determined and will not receive the dividend declared that day even if the
Fund receives federal funds on that day.

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

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

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

Purchases by Telephone

Institutional Investors may place a purchase order by calling CGFSC at
(800) 909-1989 (from overseas, please call (617) 557-1755). The purchase by
telephone will be effected at the net asset value per Share next determined
after receipt of the purchase order in good order. Orders for Shares properly
received and accepted no later than 3:00 P.M. (Eastern time) will be entitled
to dividends on that Business Day provided that the Fund's bank has received
federal funds on that Business Day.

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

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

Purchases by Mail

Institutional Investors may purchase Shares by completing the application
for purchase of Shares accompanying this Prospectus and mailing it, together
with a check payable to Excelsior Funds, to:

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

Subsequent investments in an existing account in the Fund may be made at
any time by sending to the above address a check payable to Excelsior Funds
along with: (a) the detachable form that regularly accompanies the confirmation
of a prior transaction; (b) a subsequent order form which may be obtained from
CGFSC; or (c) a letter stating the amount of the investment, the name of the
Fund and the account number in which the investment is to be made.

Shares purchased by check will be effected at the net asset value next
determined after receipt and acceptance of the order by the Distributor. Such
Shares are entitled to earn dividends on that Business Day. Shares paid for by
check cannot be redeemed until the funds have been collected, which may take up
to fifteen days. Redemption delays may be avoided by purchasing Shares by
federal funds wire.

Redemption of Shares

Institutional Investors may redeem all or any portion of the Shares in
their account at the net asset value per Share next determined after proper
receipt in good form of an order for redemption. Proceeds from redemption
orders received by 3:00 P.M. (Eastern time) will normally be sent the next
Business Day; proceeds are sent in any event within five Business Days. Shares
redeemed will be entitled to dividends up to and including the Business Day
prior to the day of redemption.

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

Redemption Procedures

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

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

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

If any portion of the Shares to be redeemed represents an investment made
by check, the Trust and CGFSC reserve the right not to honor the redemption
until CGFSC is reasonably satisfied that the check has been collected in
accordance with the applicable banking regulations; such collection process may
take up to fifteen days. An Institutional Investor who anticipates the need for
more immediate access to its investment should purchase Shares by federal funds
or bank wire or by certified or cashier's check. Banks normally impose a charge
in connection with the use of bank wires, as well as certified checks,
cashier's checks and federal funds. If a check is not collected, the purchase
will be cancelled and CGFSC will charge a fee of $25.00 to the Institutional
Investor's account.

Redemption by Wire or Telephone

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

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

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

Redemption by Mail

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

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

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

A redemption request for an amount in excess of $50,000, or for any amount
if the proceeds are to be sent elsewhere than the address of record, must be
accompanied by signature guarantees from any eligible guarantor institution
approved by CGFSC in accordance with its Standards, Procedures and Guidelines
for the Acceptance of Signature Guarantees ("Signature Guarantee Guidelines").
Eligible guarantor institutions generally include banks, broker-dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations. All eligible guarantor institutions
must participate in the Securities Transfer Agents Medallion Program ("STAMP")
in order to be approved by CGFSC pursuant to the Signature Guarantee
Guidelines. Copies of the Signature Guarantee Guidelines and information on
STAMP can be obtained from CGFSC at (800) 909-1989 (from overseas, please call
(617) 557-1755) or at the address given above. CGFSC may require additional
supporting documents. A redemption request will not be deemed to be properly
received in good form until CGFSC receives all required documents in proper
form.

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

Other Redemption Information

Institutional Investors may be required to redeem Shares in the Fund after
60 days written notice if due to investor redemptions the balance in the
particular account with respect to the Fund remains below $500. If a Customer
has agreed with a particular Shareholder Organization to maintain a minimum
balance with respect to Shares of the Fund and the balance in such account
falls below that minimum, the Customer may be required by the Shareholder
Organization to redeem all or part of its Shares to the extent necessary to
maintain the required minimum balance.

INVESTOR PROGRAMS

Exchange Privilege

Shares of the Fund may be exchanged without payment of any exchange fee
for Institutional Shares of any investment portfolio of Excelsior Institutional
Trust at their respective net asset values, provided that such other shares may
legally be sold in the state of the investor's residence.

Excelsior Institutional Trust currently offers Institutional Shares in
seven investment portfolios as follows:

Equity Fund, a fund seeking long-term capital appreciation through
investments in companies believed to represent good long-term values not
currently recognized in the market prices of their securities;

Optimum Growth Fund, a fund seeking superior, risk-adjusted total return
through investments in a diversified portfolio of equity securities whose
growth prospects, in the opinion of its investment adviser, appear to exceed
that of the overall market;

Value Equity Fund, a fund seeking long-term capital appreciation through
investments in a diversified portfolio of equity securities whose market value,
in the opinion of its investment adviser, appears to be undervalued relative to
the marketplace;

International Equity Fund, a fund seeking to provide long-term capital
appreciation through investments in a diversified portfolio of marketable
foreign securities;

Balanced Fund, a fund seeking to provide a high total return from a
diversified portfolio of equity and fixed income securities;

Income Fund, a fund seeking to provide as high a level of current interest
income as is consistent with moderate risk of capital and maintenance of
liquidity through investments in a broad range of investment-grade fixed income
securities; and

Total Return Bond Fund, a fund seeking to maximize the total rate of
return consistent with moderate risk of capital and maintenance of liquidity
through investments in a broad range of investment-grade fixed income
securities.

An exchange involves a redemption of all or a portion of the Shares in the
Fund and the investment of the redemption proceeds in Institutional Shares of
an investment portfolio of Excelsior Institutional Trust. 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.

An exchange of shares is treated for Federal and state income tax purposes
as a redemption (sale) of shares given in exchange by the shareholder, and an
exchanging shareholder may, therefore, realize a taxable gain or loss in
connection with the exchange. Shareholders exchanging Shares of the Fund for
Institutional Shares of an investment portfolio of Excelsior Institutional
Trust should carefully review the prospectus for such shares prior to making an
exchange.

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

Exchanges by Telephone. For Institutional Investors who have previously
selected the telephone exchange option, an exchange order may be placed by
calling CGFSC at (800) 909-1989 (from overseas, please call (617) 557-1755). By
establishing the telephone exchange option, the Institutional Investor
authorizes CGFSC and the Distributor to act upon telephone instructions
believed to be genuine. Excelsior Funds, Excelsior Institutional Trust, CGFSC
and the Distributor are not responsible for the authenticity of exchange
requests received by telephone that are reasonably believed to be genuine. In
attempting to confirm that telephone instructions are genuine, Excelsior Funds
and Excelsior Institutional Trust will use such procedures as are considered
reasonable, including recording those instructions and requesting information
as to account registration.

During periods of substantial economic or market change, telephone
exchanges may be difficult to complete. If an Institutional Investor is unable
to contact CGFSC by telephone, the Institutional Investor may also deliver the
exchange request to CGFSC in writing at the address noted above under
"Redemption by Mail."

Retirement Plans

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

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.

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

NET INCOME, DIVIDENDS AND DISTRIBUTIONS

The net income of the Portfolio is determined each Business Day (and on
such other days as are deemed necessary in order to comply with Rule 22c-1
under the 1940 Act). This determination is made once during each such day as of
3:00 P.M. (Eastern time). All the net income of the Portfolio, as defined
below, so determined is allocated pro rata among the Fund and the other
investors in the Portfolio at the time of such determination.

For this purpose the net income of the Portfolio (from the time of the
immediately preceding determination thereof) consists of (i) all income
accrued, less the amortization of any premium, on the assets of the Portfolio,
less (ii) all actual and accrued expenses of the Portfolio determined in
accordance with generally accepted accounting principles. Interest income
includes discount earned (including both original issue and market discount)
accrued ratably to the date of maturity and any net realized gains or losses on
the assets of the Portfolio. Securities are valued at amortized cost, which the
trustees of the Portfolio have determined in good faith constitutes fair value
for the purpose of complying with the 1940 Act. This method provides certainty
in valuation, but may result in periods during which the stated value of a
security held by the Portfolio is higher or lower than the price the Portfolio
would receive if the security were sold. This valuation method will continue to
be used until such time as the Trustees of the Portfolio determine that it does
not constitute fair value for such purposes.

The net income of the Fund is determined at the same time and on the same
days as the net income of the Portfolio is determined. Substantially all of the
net income of the Fund, as defined below, so determined is declared in Shares
as a dividend to shareholders of record at the time of such determination.
Shares begin accruing dividends on the Business Day they are purchased.
Dividends are distributed monthly on or about the last Business Day of each
month. Unless a shareholder elects to receive dividends in cash, dividends are
distributed in the form of additional full and fractional Shares at the rate of
one Share for each one dollar of dividends.

For this purpose the net income of the Fund (from the time of the
immediately preceding determination thereof) consists of (i) all income accrued
on the assets of the Fund (i.e., the Fund's pro rata share of the net income of
the Portfolio), less (ii) all actual and accrued expenses of the Fund
determined in accordance with generally accepted accounting principles.

Since substantially all of the net income of the Fund is declared as a
dividend each time net income is determined, the net asset value per Share of
the Fund (i.e., the value of the net assets of the Fund

divided by the number of Shares of the Fund outstanding) is expected to remain
at $1.00 per Share immediately after each such determination and dividend
declaration. Any increase in the value of a shareholder's investment in the
Fund, representing the reinvestment of dividends, is reflected by an increase
in the number of Shares of the Fund in its account.

It is expected that the Fund will have a positive net income at the time
of each determination thereof. If for any reason the net income of the Fund is
a negative amount, which could occur, for instance, upon default by an issuer
of a security held by the Portfolio, the Trust would first offset the negative
amount with respect to each shareholder account from the dividends declared
during the month with respect to each such account. If and to the extent that
such negative amount exceeds such declared dividends at the end of the month,
the Trust would reduce the number of outstanding Shares of the Fund by treating
each shareholder as having contributed to the capital of the Fund that number
of full and fractional Shares in the account of such shareholder which
represents such shareholder's proportion of the amount of such excess. Each
shareholder would be deemed to have agreed to such contribution in these
circumstances by its investment in the Fund. Thus, the net asset value per
Share of the Fund will, to the extent possible, be maintained at a constant
$1.00.

TAXES

Each year, the Trust intends to qualify the Fund as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Because the Fund intends to distribute all of its net investment
income and net realized capital gains to its shareholders in accordance with
the timing requirements imposed by the Code, it is not expected that the Fund
will be required to pay any federal income or excise taxes, although the Fund's
non-U.S. source income may be subject to non-U.S. withholding taxes. If the
Fund fails to qualify as a "regulated investment company" in any year, the Fund
would incur a regular corporate federal income tax upon its taxable income and
the Fund's distributions would continue to be taxable as ordinary dividend
income to shareholders. The Portfolio believes that it will not be required to
pay any federal income or excise taxes.

Shareholders of the Fund normally will have to pay federal income taxes,
and any state or local taxes, on the dividends and realized net capital gains
distributions, if any, they receive from the Fund. Dividends from income and
any distributions from net short-term capital gains are taxable to shareholders
as ordinary income for federal income tax purposes. Distributions of net
capital gains, if any, are taxable to shareholders as long-term capital gains
without regard to the length of time the shareholders have held their shares.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such month will be deemed to have
been received by shareholders and paid by the Fund on December 31 of such year
in the event such dividends are actually paid during January of the following
year. Dividends and capital gain distributions, if any, paid to shareholders
will be treated in the same manner for federal income tax purposes whether
received in cash or reinvested in additional Shares of the Fund. After the end
of each calendar year, each shareholder will receive information for tax
purposes on the dividends and any realized net capital gains distributions
received during that calendar year including the portion taxable as ordinary
income and the portion taxable as capital gain.

Because all of the Fund's income is expected to be derived from earned
interest or short-term capital gain, it is anticipated that all of the Fund's
distributions will be taxable to shareholders as ordinary income (rather than
capital gain). For the same reason, it is also anticipated that no part of such
distributions will be eligible for the dividends-received deduction for
corporations.

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

The foregoing summarizes some of the important tax considerations
generally affecting the Fund and its shareholders and is not intended as a
substitute for careful tax planning. Accordingly, potential investors in the
Fund should consult their tax advisers with specific reference to their own tax
situation.

Foreign Shareholders. The Fund will withhold tax payments at a rate of 30%
(or any lower applicable tax treaty rate) on taxable dividends and other
payments subject to withholding taxes that are made to persons who are not
citizens or residents of the United States. Distributions received from the
Fund by non-U.S. persons also may be subject to tax under the laws of their own
jurisdiction.

MANAGEMENT OF THE TRUST AND THE PORTFOLIO

The Trust has retained the services of U.S. Trust Company of Connecticut
("U.S. Trust CT"), CGFSC and Federated Administrative Services ("FAS")
(collectively, the "Trust Administrators") as administrators. The Portfolio has
retained the services of Signature Financial Group (Cayman) Ltd. ("SFG") as
administrator. Citibank is the investment adviser for the Portfolio. The Trust
seeks to achieve the investment objective of the Fund by investing all of the
investable assets of the Fund in the Portfolio. Therefore, the Trust relies
primarily on the investment advice which Citibank provides to the Portfolio.
For biographical information relating to each of the Trustees and officers of
the Trust and the Portfolio, see "Management of the Trust and the Portfolio" in
the Statement of Additional Information.

Investment Adviser

The Investment Adviser manages the assets of the Portfolio pursuant to an
Investment Advisory Agreement with the Portfolio. Subject to such policies as
the Trustees of the Portfolio may determine, the Investment Adviser manages the
Portfolio, makes decisions with respect to and places orders for all purchases
and sales of portfolio securities, and maintains records relating to such
purchases and sales. The Investment Adviser maintains its principal offices at
153 East 53rd Street, New York, New York 10043, and is a wholly-owned
subsidiary of Citicorp, a registered bank holding company, which is a
wholly-owned subsidiary of Citigroup Inc. The Investment Adviser offers a wide
range of banking and investment services to customers, and together with its
affiliates currently manages more than $290 billion in assets.

For its services under the Investment Advisory Agreement, the Investment
Adviser is entitled to receive investment advisory fees, which are accrued
daily and paid monthly, of 0.15% of the Portfolio's average daily net assets on
an annualized basis for the Portfolio's then-current fiscal year. The
Investment Adviser may waive portions of this fee. The Portfolio paid advisory
fees to the Investment Adviser at the annual rate of 0.08% of the Portfolio's
average daily net assets, and the Investment Adviser voluntary waived fees at
the annual rate of 0.07% of the Portfolio's average daily net assets, during
the fiscal year ended August 31, 1998.

Administrators

The Portfolio has an Administrative Services Plan which provides that the
Portfolio may obtain the services of an administrator, a transfer agent, a
custodian and a fund accountant, and may enter into agreements providing for
the payment of fees for such services. Under the Portfolio's Administrative
Services Plan, fees paid to the Portfolio's administrator may not exceed 0.05%
of the Portfolio's average daily net assets on an annualized basis for the
Portfolio's then-current fiscal year.

Pursuant to an Administration Agreement and an Administrative Services
Agreement, respectively, the Trust Administrators and SFG (collectively, the
"Administrators") provide the Trust and the Portfolio, respectively, with
general office facilities and supervise the overall administration of the Trust
and the Portfolio, respectively, including, among other responsibilities, the
negotiation of contracts and fees

with, and the monitoring of performance and billings of, the independent
contractors and agents of the Trust and the Portfolio; the preparation and
filing of certain documents required for compliance by the Trust and the
Portfolio with applicable laws and regulations; and arranging for the
maintenance of books and records of the Trust and the Portfolio. The Trust
Administrators also assist in developing and monitoring compliance procedures
for the Fund, including procedures to monitor compliance with the Fund's
investment objective, policies and restrictions. SFG provides persons
satisfactory to the Board of Trustees of the Portfolio to serve as Trustees and
officers of the Portfolio. Such officers and Trustees of the Portfolio may be
directors, officers or employees of SFG or its affiliates.

As compensation for providing these services and facilities to the Trust
and the Portfolio: (i) the Trust Administrators are jointly entitled to an
annual fee from the Fund, computed daily and paid monthly, at the maximum
annual rate of 0.10% of the Fund's average daily net assets; and (ii) SFG is
entitled to fees from the Portfolio, accrued daily and paid monthly, of 0.05%
of the assets of the Portfolio on an annualized basis for the Portfolio's
then-current fiscal year. From time to time, the Administrators may voluntarily
waive all or a portion of the administration fees payable to them, which
waivers may be terminated at any time.

For the fiscal year ended August 31, 1998, SFG waived all administration
fees with respect to the Portfolio. For the fiscal year ended August 31, 1998,
CGFSC, FAS and U.S. Trust CT collectively received an aggregate administration
fee at the effective annual rate of 0.03% of the Fund's average daily net
assets. For the same period, they collectively waived administration fees at
the effective annual rate of 0.07% of the Fund's average daily net assets.

Sub-Administrator

Pursuant to a Sub-Administrative Services Agreement, Citibank performs
such sub-administrative duties for the Portfolio as are from time to time
agreed upon by Citibank and SFG. Citibank's sub-administrative duties may
include providing equipment and clerical personnel necessary for maintaining
the organization of the Portfolio, participation in the preparation of
documents required for compliance by the Portfolio with applicable laws and
regulations, preparation of certain documents in connection with meetings of
Trustees of, and investors in, the Portfolio, and other functions which would
otherwise be performed by SFG as set forth above. For its services as
sub-administrator, Citibank receives such compensation as from time to time is
agreed upon by SFG and Citibank, but not more than 0.05% per annum of the
average daily net assets of the Portfolio. All such compensation is paid by
SFG.

Distributor

Pursuant to a Distribution Agreement, Edgewood Services, Inc. (the
"Distributor"), Clearing Operations, 5800 Corporate Drive, Pittsburgh,
Pennsylvania 15237-5829, acts as principal underwriter for the Shares. Edgewood
Services, Inc., a registered broker-dealer and a wholly-owned subsidiary of
Federated Investors, Inc., is unaffiliated with the Investment Adviser or any
of its affiliates.

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 Fund. 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 Fund.

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 Fund 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 Fund. Such
payments 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.

Shareholder Organizations

As described above under "Purchase Procedures," the Trust may enter into
agreements with certain Shareholder Organizations--firms that provide services,
which may include acting as record shareholder, to their Customers who
beneficially own Shares. As a consideration for these services, the Fund will
pay the Shareholder Organization an administrative service fee up to the annual
rate of 0.40% of the average daily net asset value of its Shares held by the
Shareholder Organization's Customers. Such services may include assisting in
processing purchase, exchange and redemption requests; transmitting and
receiving funds in connection with Customer orders to purchase, exchange or
redeem Shares; and providing periodic statements. 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 Trust
Administrators have voluntarily agreed to waive fees payable by the Fund in an
aggregate amount equal to administrative service fees payable by the Fund.

Custodians and Transfer Agents

U.S. Trust NY serves as custodian of the Fund's assets. Communications to
the custodian should be directed to U.S. Trust NY, 114 West 47th Street, New
York, NY 10036. CGFSC provides transfer agency, dividend disbursement and
registrar services to the Fund. CGFSC has its principal offices at 73 Tremont
Street, Boston, MA 02108-3913.

The Portfolio has entered into a Transfer Agency Agreement and a Custodian
Agreement with State Street Bank and Trust Company ("State Street"), pursuant
to which State Street acts as custodian and State Street Canada, Inc. ("State
Street Canada") acts as transfer agent and provides fund accounting services to
the Portfolio. State Street has its principal offices at 225 Franklin Street,
Boston, MA 02110. State Street Canada has its principal offices at 40 King
Street West, Suite 5700, Toronto, Ontario, Canada. See "Management of the Trust
and the Portfolio--Transfer Agents and Custodians" in the Statement of
Additional Information.

Expenses

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

Expenses of the Trust also include all fees under its Administration
Agreement; expenses of distributing and redeeming Shares and servicing
shareholder accounts; expenses of preparing, printing and

mailing prospectuses, reports, notices, proxy statements and reports to
shareholders and to governmental officers and commissions; expenses of
shareholder and Trustee meetings; expenses relating to the issuance,
registration and qualification of Shares of the Fund and the preparation,
printing and mailing of prospectuses for such purposes; and membership dues in
the Investment Company Institute allocable to the Trust.

Expenses of the Portfolio also include all fees under the Portfolio's
Administrative Services Agreement; the expenses connected with the execution,
recording and settlement of security transactions; fees and expenses of the
Portfolio's custodian for all services to the Portfolio, including safekeeping
of funds and securities and maintaining required books and accounts; expenses
of preparing and mailing reports to investors and to governmental officers and
commissions; expenses of meetings of investors and Trustees; and the advisory
fees payable to the Investment Adviser under the Advisory Agreement.

Banking Laws

Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered open-end investment company continuously engaged in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Shares of the Fund, but such banking laws and
regulations do not prohibit such a holding company or affiliate or banks
generally from acting as investment adviser, transfer agent, or custodian to
such an investment company, or from purchasing shares of such company for and
upon the order of customers. U.S. Trust CT, Citibank and certain Shareholder
Organizations may be subject to such banking laws and regulations. State
securities laws may differ from the interpretations of Federal law discussed in
this paragraph and banks and financial institutions may be required to register
as dealers pursuant to state law.

Should legislative, judicial, or administrative action prohibit or
restrict the activities of U.S. Trust CT, Citibank or other Shareholder
Organizations in connection with purchases of Fund Shares, U.S. Trust CT,
Citibank and such Shareholder Organizations might be required to alter
materially or discontinue the investment services offered by them to Customers.
It is not anticipated, however, that any resulting change in the Fund's method
of operations would affect its net asset value per Share or result in financial
loss to any shareholder.

DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

The Trust Instrument of the Trust permits its Trustees to issue an
unlimited number of full and fractional shares of beneficial interest (par
value $0.00001 per share) and to divide or combine the shares into a greater or
lesser number of shares without thereby changing the proportionate beneficial
interests in the Fund. The Trust reserves the right to create and issue any
number of series, in which case investments in each series would participate
equally in the earnings, dividends and assets of the particular series.
Currently, the Fund is the Trust's only active series.

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

dissolution of the Fund, shareholders of the Fund would be entitled to share
pro rata in the net assets of the Fund available for distribution to
shareholders.

Excelsior Funds is a business trust organized under the laws of the State
of Delaware. Under Delaware law, shareholders of Delaware business trusts are
entitled to the same limitation on personal liability extended to shareholders
of private for-profit corporations organized under the General Corporation Law
of the State of Delaware; the courts of other states may not apply Delaware
law, however, and shareholders may, under certain circumstances, be held
personally liable for the obligations of the Trust. The Trust Instrument
contains an express disclaimer of shareholder liability for acts or obligations
of the Trust and provides for indemnification and reimbursement of expenses out
of Fund property for any shareholder held personally liable for the obligations
of the Fund solely by reason of his being or having been a shareholder.

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 Portfolio is organized as a trust under the laws of the State of New
York. The Portfolio's Declaration of Trust provides that the Fund and other
entities investing in the Portfolio (e.g., other investment companies,
insurance company separate accounts and common and commingled trust funds) will
each be liable for all obligations of the Portfolio. For more information
regarding the Trustees of the Trust and the Portfolio, see "Management of the
Trust and the Portfolio" in the Statement of Additional Information.

YIELD INFORMATION

From time to time, in advertisements or in reports to shareholders, the
yield of the Fund may be quoted and compared to those of other mutual funds
with similar investment objectives and to relevant indices or to rankings
prepared by independent services or other financial or industry publications
that monitor the performance of mutual funds. For example, the yield of the
Fund may be compared to the applicable averages compiled by Donaghue's Money
Fund Report, a widely recognized independent publication that monitors the
performance of money market funds. The yield of the Fund may also be compared
to the average yields reported by the Bank Rate Monitor for money market
deposit accounts offered by the 50 leading banks and thrift institutions in the
top five standard metropolitan statistical areas.

Yield data as reported in national financial publications including, but
not limited to, Money Magazine, Forbes, Barron's, The Wall Street Journal and
The New York Times, or in publications of a local or regional nature, may also
be used in comparing the yield of the Fund.

The Fund may advertise a seven-day yield, which refers to the income
generated over a particular seven-day period identified in the advertisement by
an investment in the Fund. This income is annualized, i.e., the income during a
particular week is assumed to be generated each week over a fifty-two week
period, and is then shown as a percentage of the investment. The Fund may also
advertise its "effective yield," which is calculated similarly except that,
when annualized, income is assumed to be reinvested, thereby making the
effective yield slightly higher because of the compounding effect of the
assumed reinvestment. See "Yield Information" in the Statement of Additional
Information.

Yields will fluctuate and any quotation of yield should not be considered
as representative of the future performance of the Fund. Since yields
fluctuate, yield data cannot necessarily be used to compare an investment in
the Fund with bank deposits, savings accounts and similar investment
alternatives which often provide an agreed or guaranteed fixed yield for a
stated period of time. Shareholders

should remember that yield is generally a function of the kind and quality of
the instruments held in a portfolio, portfolio maturity, operating expenses,
and market conditions. Any fees charged by Shareholder Organizations with
respect to accounts of Customers that have invested in Shares will not be
included in calculations of performance.

MISCELLANEOUS

Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants.

APPENDIX - DESCRIPTION OF RATINGS

Description of the Highest Commercial Paper Ratings

A commercial paper rating by Moody's Investors Service, Inc. ("Moody's")
is an opinion of the ability of issuers to repay punctually senior debt
obligations not having an original maturity in excess of one year, unless
explicitly noted. Prime-1 is the highest commercial paper rating employed by
Moody's. Issuers rated Prime-1 (or related 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: (1) leading market positions in well-established industries;
(2) high rates of return on funds employed; (3) conservative capitalization
structures with moderate reliance on debt and ample asset protection; (4) broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and (5) well-established access to a range of financial markets and
assured sources of alternate liquidity.

A commercial paper rating by Standard & Poor's Ratings Services ("Standard
& Poor's") is a current assessment of the likelihood of timely payment of debt
having an original maturity of no more than 365 days. A-1 is the highest
commercial paper rating employed by Standard & Poor's. An obligation designated
with an A-1 rating indicates that the obligor's capacity to meet its financial
commitment is strong. Obligations designated as A-1+ indicate that the
obligor's capacity to meet its financial commitment is extremely strong.

Description of the Highest Corporate Bond Ratings

Bonds rated Aaa by Moody's are judged by Moody's to be of the best
quality. Together with bonds rated Aa (Moody's second highest rating) they
comprise what are generally known as high-grade bonds.

Debt rated AAA by Standard & Poor's represents the highest rating assigned
by Standard & Poor's. The obligor's capacity to meet its financial commitment
on the obligation is extremely strong.

A-1

Prospectus December 24, 1998

[GRAPHIC OMITTED]

INSTITUTIONAL MONEY FUND
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TABLE OF CONTENTS

PAGE
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SUMMARY OF EXPENSES ............................................ 1
FINANCIAL HIGHLIGHTS ........................................... 2
INVESTMENT OBJECTIVE AND POLICIES .............................. 3
SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R) STRUCTURE ...... 7
PRICING OF SHARES .............................................. 8
HOW TO PURCHASE AND REDEEM SHARES .............................. 8
INVESTOR PROGRAMS .............................................. 12
NET INCOME, DIVIDENDS AND DISTRIBUTIONS ........................ 14
TAXES .......................................................... 15
MANAGEMENT OF THE TRUST AND THE PORTFOLIO ...................... 16
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES ........... 19
YIELD INFORMATION .............................................. 20
MISCELLANEOUS .................................................. 21
APPENDIX - DESCRIPTION OF RATINGS .............................. A-1

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

EIMFP 1298