FTI FUNDS
PRE 14A, 2000-10-06
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                            SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [   ]

Check the appropriate box:

[X]   Preliminary Proxy Statement

[   ] Confidential, for Use of the Commission Only (as permitted by Rule]
          14a-6(e)(2))
[   ] Definitive Proxy Statement
[   ] Definitive Additional Materials
[   ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12

                                    FTI FUNDS

------------------------------------------------------------------------------
                   (Name of Registrant as Specified In Its Charter)

------------------------------------------------------------------------------
       (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X]   No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

      1. Title of each class of securities to which transaction applies:

      2. Aggregate number of securities to which transaction applies:

      3. Per unit price or other underlying value of transaction computed
         pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
         filing fee is calculated and state how it was determined):

      4. Proposed maximum aggregate value of transaction:

      5. Total fee paid:

[ ] Fee paid previously with preliminary proxy materials.

[     ] Check box if any part of the fee is offset as provided by Exchange Act
      Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
      paid previously. Identify the previous filing by registration statement
      number, or the Form or Schedule and the date of its filing.

      1)    Amount Previously Paid:
            ------------------------------------------------------------

      2)    Form, Schedule or Registration Statement No.:
            ------------------------------------------------------------

      3)    Filing Party:
            ------------------------------------------------------------

      4)    Date Filed:
            ------------------------------------------------------------


5

                                    FTI FUNDS

                             FTI MUNICIPAL BOND FUND

                                  FTI BOND FUND

                      FTI LARGE CAPITALIZATION GROWTH FUND

                  FTI LARGE CAPITALIZATION GROWTH AND INCOME FUND

                      FTI SMALL CAPITALIZATION EQUITY FUND

                          FTI INTERNATIONAL EQUITY FUND

PROXY STATEMENT - PLEASE VOTE!

     TIME  IS OF THE  ESSENCE...  VOTING  ONLY  TAKES  A FEW  MINUTES  AND  YOUR
PARTICIPATION IS IMPORTANT! ACT NOW TO HELP THE TRUST AVOID ADDITIONAL EXPENSE.



FTI Funds (the "Trust") will hold a special meeting of shareholders FTI
Municipal Bond Fund, FTI Bond Fund, FTI Large Capitalization Growth Fund, FTI
Large Capitalization Growth and Income Fund, FTI Small Capitalization Equity
Fund and FTI International Equity Fund (collectively, the "Funds") on November
21, 2000. It is important for you to vote on the issues described in this Proxy
Statement. We recommend that you read the Proxy Statement in its entirety; the
explanations will help you to decide on the issues.

Following is an introduction to the proposals and the process.

WHY AM I BEING ASKED TO VOTE?

Mutual funds are required to obtain shareholders' votes for certain types of
changes, like those included in this Proxy Statement. You have a right to vote
on these changes.

WHAT ARE THE ISSUES?

The proposals include the election of Trustees and changes to the Funds'
fundamental investment policies.

WHY ARE INDIVIDUALS RECOMMENDED FOR ELECTION TO THE BOARD OF TRUSTEES? The Trust
is devoted to serving the needs of its shareholders, and the Board is
responsible for managing the Trust's business affairs to meet those needs. The
Board represents the shareholders and can exercise all of the Trust's powers,
except those reserved only for shareholders.

Trustees are selected on the basis of their education and professional
experience. Candidates are chosen based on their distinct interest in, and
capacity for understanding the complexities of, the operation of a mutual fund.
These individuals bring considerable experience to the impartial oversight of a
fund's operation.

The Proxy Statement includes a brief description of each nominee's history and
current position with the Trust, if applicable.

WHY ARE THE FUNDS' "FUNDAMENTAL POLICIES" BEING CHANGED OR ELIMINATED? Every
mutual fund has certain investment policies that can be changed only with the
approval of its shareholders. These are referred to as "fundamental" investment
policies.

In some cases, these policies were adopted to reflect regulatory, business, or
industry conditions that no longer exist or no longer are necessary. In other
cases, advances in the securities markets and the economy have created different
procedures and techniques that affect the Funds' operations.

By reducing the number of "fundamental policies," the Funds may be able to
minimize the costs and delays associated with frequent shareholder meetings.
Also, the investment adviser's ability to manage the Funds' assets may be
enhanced and investment opportunities increased.

The proposed amendments will:

o    reclassify as operating  policies those  fundamental  policies that are not
     required  to be  fundamental  by the  Investment  Company  Act of 1940,  as
     amended ("1940 Act");

o    that are required to be "fundamental" by the 1940 Act; and

o    eliminate   fundamental  policies  that  are  no  longer  required  by  the
     securities laws of individual states.

Federated is a conservative money manager. Our highly trained professionals are
dedicated to making investment decisions in the best interest of the Trust and
its shareholders. The Board believes that the proposed changes will be applied
responsibly by the Funds' investment adviser.

HOW DO I VOTE MY SHARES?

You may vote in person at the special meeting of shareholders or complete and
return the enclosed Proxy Card. IF YOU SIGN AND RETURN THE PROXY CARD WITHOUT
INDICATING A PREFERENCE, YOUR VOTE WILL BE CAST "FOR" ALL THE PROPOSALS.

You may also vote by telephone at 1-800-690-6903, or through the Internet at
WWW.PROXYVOTE.COM. If you choose to help save the Trust time and postage costs
by voting through the Internet or by telephone, please don't return your Proxy
Card. If you do not respond at all, we may contact you by telephone to request
that you cast your vote.

WHO DO I CALL IF I HAVE QUESTIONS ABOUT THE PROXY STATEMENT? Call your
Investment Professional or a Federated Client Service Representative.
Federated's toll-free number is 1-800-341-7400.

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   After careful consideration, the Board of Trustees has unanimously approved
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   these proposals. The Board recommends that you read the enclosed materials
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                      carefully and vote FOR all proposals.
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                                   PRELIMINARY

                                    FTI FUNDS

                             FTI MUNICIPAL BOND FUND

                                  FTI BOND FUND

                      FTI LARGE CAPITALIZATION GROWTH FUND

                    FTI LARGE CAPITALIZATION GROWTH AND INCOME FUND

                      FTI SMALL CAPITALIZATION EQUITY FUND

                          FTI INTERNATIONAL EQUITY FUND

                    NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

                          TO BE HELD NOVEMBER 21, 2000

     A special  meeting of the  shareholders  of FTI Funds (the "Trust"),  which
presently  consists of six  portfolios or series,  FTI Municipal  Bond Fund, FTI
Bond Fund, FTI Large Capitalization Growth Fund, FTI Large Capitalization Growth
and Income  Fund,  FTI Small  Capitalization  Equity Fund and FTI  International
Equity Fund (individually a "Fund," and collectively the "Funds"),  will be held
at the offices of Fiduciary International,  Inc., the Funds' investment adviser,
located at Two World Trade Center, 94th floor, New York, New York, at 10:00 a.m.
(Eastern time), on November 21, 2000 to consider the following proposals:

(1)  To elect five Trustees.

(2)  To amend the Funds' fundamental investment policies:

     (a)Toamend   the   Funds'    fundamental    investment   policy   regarding
          diversification;

     (b)  To amend the Funds'  fundamental  investment  policy regarding issuing
          senior securities and borrowing money;

     (c)  To  amend  the  Funds'   fundamental   investment   policy   regarding
          investments in real estate;

     (d)  To  amend  the  Funds'   fundamental   investment   policy   regarding
          investments in commodities;

     (e)  To  amend  the  Funds'   fundamental   investment   policy   regarding
          underwriting securities;

     (f)  To amend the Funds' fundamental investment policy regarding lending by
          the Funds;

     (g)  To  amend  the  Funds'   fundamental   investment   policy   regarding
          concentration of the Funds' investments in the securities of companies
          in the same industry;

     (h)  To  remove  the  Funds'  fundamental   investment  policy  on  selling
          securities short and to amend, and to make non-fundamental, the Funds'
          fundamental investment policy regarding buying securities on margin;

     (i)Toamend, and to make non-fundamental,  the Funds' fundamental investment
          policy regarding pledging assets.

(3)Toapprove an Amendment to the Funds' Declaration of Trust.

(4)  To ratify the selection of Ernst & Young LLP as independent accountants for
     each of the Funds for the fiscal year ending in 2001.

     To transact such other  business as may properly come before the meeting or
any adjournment thereof.

     The Board of Trustees has fixed  October 11,  2000,  as the record date for
determination of shareholders entitled to vote at the meeting.

                                          By Order of the Board of Trustees,

                                          Gail Cagney
                                          Secretary

October 11, 2000





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YOU CAN HELP THE TRUST  AVOID THE  NECESSITY  AND  EXPENSE OF SENDING  FOLLOW-UP
LETTERS TO ENSURE A QUORUM BY PROMPTLY SIGNING AND RETURNING THE ENCLOSED PROXY.
IF YOU ARE UNABLE TO ATTEND THE MEETING,  PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED  PROXY SO THAT THE NECESSARY  QUORUM MAY BE  REPRESENTED AT THE SPECIAL
MEETING.  THE  ENCLOSED  ENVELOPE  REQUIRES  NO  POSTAGE IF MAILED IN THE UNITED
STATES.

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                                   PRELIMINARY

                                 PROXY STATEMENT

                                    FTI FUNDS

                             FTI MUNICIPAL BOND FUND

                                  FTI BOND FUND

                      FTI LARGE CAPITALIZATION GROWTH FUND

                    FTI LARGE CAPITALIZATION GROWTH AND INCOME FUND

                      FTI SMALL CAPITALIZATION EQUITY FUND

                          FTI INTERNATIONAL EQUITY FUND

                              5800 Corporate Drive

                            Pittsburgh, PA 15237-7010

ABOUT THE PROXY SOLICITATION AND THE MEETING

     The  enclosed  proxy is solicited on behalf of the Board of Trustees of the
Trust (the "Board" or "Trustees") of FTI Funds (the  "Trust"),  which  presently
consists of six portfolios or series,  FTI Municipal  Bond Fund (the  "Municipal
Bond Fund'),  FTI Bond Fund (the "Bond Fund"), FTI Large  Capitalization  Growth
Fund (the "Large  Capitalization  Growth Fund"), FTI Large Capitalization Growth
and Income Fund (the "Large  Capitalization  Growth and Income Fund"), FTI Small
Capitalization  Equity Fund (the  "Small  Capitalization  Equity  Fund") and FTI
International  Equity Fund (the  "International  Equity Fund")  (individually  a
"Fund," and collectively the "Funds").  The proxies will be voted at the special
meeting of  shareholders  of the Trust to be held on November 21,  2000,  at the
offices of Fiduciary International, Inc., the Funds' investment adviser, located
at Two World Trade Center,  94th Floor,  New York, New York, at 10:00 a.m. (such
special meeting and any  adjournment or postponement  thereof are referred to as
the "Meeting").

     The cost of the  solicitation,  including the printing and mailing of proxy
materials,  will be borne by the Trust. In addition to solicitations through the
mails, proxies may be solicited by officers,  employees, and agents of the Trust
or, if necessary,  a  communications  firm retained for this purpose.  [IF IT IS
DETERMINED  THAT A FIRM WILL BE USED,  FURTHER  DISCLOSURE  IS  REQUIRED].  Such
solicitations  may be by  telephone,  through  the  Internet or  otherwise.  Any
telephonic or Internet  solicitations will follow procedures  designed to ensure
accuracy  and  prevent  fraud,   including  requiring  identifying   shareholder
information,  recording the  shareholder's  instructions,  and confirming to the
shareholder after the fact. Shareholders who communicate proxies by telephone or
by other electronic means have the same power and authority to issue, revoke, or
otherwise change their voting instruction as shareholders  submitting proxies in
written form. The Trust may reimburse custodians,  nominees, and fiduciaries for
the reasonable costs incurred by them in connection with forwarding solicitation
materials to the beneficial owners of shares held of record by such persons.

     The Board has reviewed and approved the proposed  changes to the investment
policies of the Funds and  recommends  that the  shareholders  approve them. The
Board has also  reviewed  and  approved  the  proposed  Amendment  to the Funds'
Declaration of Trust and recommends that  shareholders  approve it. The purposes
of the Meeting are set forth in the accompanying Notice. The Trustees know of no
business  other than that  mentioned  in the Notice that will be  presented  for
consideration at the Meeting.  Should other business  properly be brought before
the Meeting,  proxies will be voted in accordance  with the best judgment of the
persons named as proxies.  This Proxy  Statement and the enclosed proxy card are
expected to be mailed on or about October 11, 2000, to shareholders of record at
the close of business on October 11, 2000 (the "Record Date").

      On the Record Date, the Funds had outstanding the following number of
shares of beneficial interest:

MUNICIPAL BOND FUND:                            __________SHARES
BOND FUND:                                      __________SHARES
LARGE CAPITALIZATION GROWTH FUND:               __________SHARES
LARGE CAPITALIZATION GROWTH AND INCOME FUND:    __________SHARES
SMALL CAPITALIZATION EQUITY FUND:               __________SHARES
INTERNATIONAL EQUITY FUND:                      __________SHARES

     The Funds' annual report,  which includes audited financial  statements for
the fiscal year ended November 30, 1999, was previously  mailed to shareholders.
The Funds' semi-annual report, which contains unaudited financial statements for
the period ended May 31, 2000, was also previously  mailed to shareholders.  THE
TRUST WILL PROMPTLY PROVIDE,  WITHOUT CHARGE AND UPON REQUEST, TO EACH PERSON TO
WHOM THIS PROXY  STATEMENT  IS  DELIVERED,  A COPY OF THE FUNDS'  ANNUAL  REPORT
AND/OR SEMI-ANNUAL REPORT. REQUESTS FOR AN ANNUAL REPORT OR A SEMI-ANNUAL REPORT
FOR THE FUNDS MAY BE MADE BY WRITING TO THE TRUST'S PRINCIPAL  EXECUTIVE OFFICES
OR BY CALLING  THE TRUST.  THE  TRUST'S  PRINCIPAL  ADMINISTRATIVE  OFFICES  ARE
LOCATED AT FTI FUNDS, 5800 CORPORATE DRIVE, PITTSBURGH, PENNSYLVANIA 15237-7010.
THE TRUST'S TOLL-FREE TELEPHONE NUMBER IS 1-888-FIDUCIARY (888-343-8242).

                     PROPOSAL #1: ELECTION OF FIVE TRUSTEES

     The Board of Trustees has nominated the  individuals  listed below to serve
as Trustees of the Trust until their successors have been elected and qualified.
The Board presently consists of four Trustees (three of whom are not "interested
persons"  of the Trust (as  defined in the  Investment  Company Act of 1940 (the
"1940 Act")). All of the individuals  presently serving as Trustees are standing
for election.  If authority is granted on the accompanying  proxy to vote in the
election of Trustees,  the persons  named as proxies  intend to vote in favor of
the election of Peter A. Aron, Joseph A. Cajigal, James C. Goodfellow, Burton J.
Greenwald and Kevin J. O'Donnell  (collectively,  the "Nominees") as Trustees of
the Trust.  Messrs.  Aron,  Goodfellow,  Greenwald  and  O'Donnell are presently
serving as  Trustees.  If elected by  shareholders,  Mr.  Cajigal is expected to
assume his responsibilities as a Trustee effective November 21, 2000. Please see
"ABOUT  THE  ELECTION  OF  TRUSTEES"  below for  current  information  about the
Nominees.

     Mr.  O'Donnell  was  appointed  Trustee on July 15, 1999, to fill a vacancy
created by the  resignation  of Nancy L. Close.  Messrs.  Aron,  Goodfellow  and
Greenwald have served as Trustees  since the Trust's  inception and were elected
by the Trust's  initial  shareholder  on December 22, 1995. Mr. Cajigal is being
proposed for election as a Trustee to fill a vacancy  created by the resignation
of Edward C. Gonzales.

     All Nominees have consented to serve if elected.  If elected,  the Trustees
will hold office without limit in time until death, resignation,  retirement, or
removal.

     If any  Nominee for  election  as a Trustee  named above shall by reason of
death or for any other reason become  unavailable as a candidate at the Meeting,
votes pursuant to the enclosed proxy will be cast for a substitute  candidate by
the proxies named on the proxy card, or their substitutes, present and acting at
the Meeting.  Any such  substitute  candidate for election as a Trustee shall be
selected by a majority of the Trustees who are not  "interested  persons" of the
Trust.  The  Board  has no  reason  to  believe  that any  Nominee  will  become
unavailable for election as a Trustee.

     THE  BOARD  OF  TRUSTEES  RECOMMENDS  THAT  SHAREHOLDERS  VOTE TO  ELECT AS
TRUSTEES THE NOMINEES FOR ELECTION TO THE BOARD OF TRUSTEES OF THE TRUST

ABOUT THE ELECTION OF TRUSTEES

     The  Declaration  of Trust  provides  that Trustees will continue in office
during the lifetime of the Trust and until its termination, except that: (a) any
Trustee may resign;  (b) any Trustee may be removed by written instrument signed
by at least two-thirds of the number of Trustees prior to such removal;  (c) any
Trustee  who  requests to be retired or who has become  mentally  or  physically
incapacitated  may be retired by written  instrument signed by a majority of the
other  Trustees;  and (d) a Trustee may be removed at any special meeting of the
shareholders by a vote of two-thirds of the outstanding  shares of the Trust. In
case a vacancy shall exist for any reason, the remaining Trustees will fill such
vacancy by appointment of another Trustee. The Trustees may not fill any vacancy
by appointment if, immediately after filling such vacancy,  less than two-thirds
of the Trustees then holding office would have been elected by the shareholders.
If, at any time,  less than a majority of the Trustees  holding office have been
elected  by  the  shareholders,   the  Trustees  then  in  office  will  call  a
shareholders'  meeting for the purpose of electing  Trustees to fill  vacancies.
Otherwise,  there will  normally  be no meeting of  shareholders  called for the
purpose of electing Trustees.

     Set forth below is a listing of: (i) the Nominees standing for election who
presently serve as Trustees,  and (ii) the Nominee  standing for election who is
not presently  serving as a Trustee,  along with their  addresses,  birth dates,
present positions with the Trust and principal  occupations during the past five
years:

NOMINEES STANDING FOR ELECTION WHO PRESENTLY SERVE AS TRUSTEES

PETER A. ARON

126 East 56th Street
New York, NY  10022

Birth date: May 26, 1946

Trustee

     Vice President,  Lafayette  Enterprises,  Inc.  (privately owned Investment
Advisory Company); President, J. Aron Charitable Foundation, Inc.; Asset Manager
and Trustee of certain private trusts.

JAMES C. GOODFELLOW*

Two World Trade Center
94th Floor
New York, NY  10048-0772

Birth date:  April 6, 1945

Trustee

     Executive Vice President,  Fiduciary Trust Company International,  Managing
Director, J.P. Morgan and Co.

BURTON J. GREENWALD

2009 Spruce Street
Philadelphia, PA  19103

Birth date:  December 6, 1929

Chairman and Trustee

     Managing Director, B.J. Greenwald Associates, Management Consultants to the
Financial Services Industry; Director, Fiduciary Emerging Markets Bond Fund PLC;
Director, Fiduciary International Ireland Limited.


KEVIN J. O'DONNELL

25 Independence Boulevard
Warren, NJ  07059-6747

Birth date:  September 1, 1948


Trustee

     Partner,  Herold & Haines,  PA (a law firm);  previously,  Partner,  Pitney
Hardin Kipp & Szuch (a law firm)

NOMINEE NOT PRESENTLY SERVING AS A TRUSTEE

JOSEPH A. CAJIGAL*

Two World Trade Center
95th Floor
New York, NY  10048-0772

Birth date: November 15, 1953

     Senior Vice  President and Management  Committee  member,  Fiduciary  Trust
Company, International.

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

     * Mr.  Goodfellow and Mr. Cajigal are deemed to be "interested  persons" of
the Trust, as defined in the 1940 Act.

BOARD MEETINGS AND COMMITTEES

     During the fiscal year ended  November  30,  1999,  there were four regular
meetings and one telephonic meeting of the Board of Trustees.  All Trustees were
reimbursed for expenses for attendance at Board meetings and Committee meetings.
All Trustees attended all meetings held during the last fiscal year.

     The Trust has two Board Committees,  the Audit Committee and the Nominating
Committee. Generally, the function of the Audit Committee is to assist the Board
in  fulfilling  its duties  relating to the  Trust's  accounting  and  financial
reporting  practices and to serve as a direct line of communication  between the
Board  and  the  independent  auditors.  The  specific  functions  of the  Audit
Committee  include  recommending  the engagement or retention of the independent
auditors,  reviewing with the  independent  auditors the plan and the results of
the  auditing  engagement,  approving  professional  services  provided  by  the
independent auditors prior to the performance of such services,  considering the
range of audit and non-audit fees, reviewing the independence of the independent
auditors, reviewing the scope and results of the Trust's procedures for internal
auditing, and reviewing the Trust's system of internal accounting controls.

     The function of the Nominating Committee,  which was formed in May 2000, is
to recommend  candidates to serve as Trustees.  The  Nominating  Committee  also
reviews Trustee performance and compensation. The Nominating Committee generally
will  identify  candidates  for  nomination  from  the  Trustees'  own  sources;
therefore,  the Nominating  Committee  will generally not consider  nominees for
Trustees  recommended by shareholders of the Funds.  Mr. O'Donnell was nominated
by the Nominating  Committee  comprised of the Trustees who are not  "interested
persons" of the Trust.

     For the most recently  completed fiscal year, Messrs.  Aron,  Greenwald and
O'Donnell  served on the Audit  Committee and the  Nominating  Committee.  These
Trustees are not "interested persons" of the Trust. During the fiscal year ended
November 30, 1999, each Committee met once.

TRUSTEE COMPENSATION

     Each Trustee (except Messrs.  Greenwald and Goodfellow)  receives an annual
fee of $8,000, paid quarterly, as a retainer.  Since August 2000, Mr. Greenwald,
as Chairman of the Board, receives an annual fee of $11,000, paid quarterly,  as
a retainer. Each Trustee (except Mr. Goodfellow) receives $1,750 as compensation
for  attendance at each  regularly  scheduled  meeting.  In addition,  they each
receive a fee of $500 for attendance at any special  meeting of the Board.  Each
disinterested  Trustee received a "one-time" payment of $5,000 as an orientation
fee upon  becoming  a Trustee.  If  elected,  Mr.  Cajigal  will not  receive an
orientation fee since he will be an interested Trustee.  Mr. Goodfellow does not
receive fees from the Trust, nor will Mr. Cajigal, if elected as a Trustee.

      The following table indicates the compensation received by each Trustee
for the fiscal year ended November 30, 1999:

NAME AND POSITION             AGGREGATE
WITH TRUST                  COMPENSATION
                                FROM
                               TRUST1#

-------------------------------------------
Peter A. Aron

Trustee
James C. Goodfellow*

Trustee
Burton J. Greenwald

Trustee
Kevin J. O'Donnell

Trustee

1 Information is furnished for the fiscal year ended November 30, 1999.

# The aggregate compensation is provided for the Trust which comprises six
portfolios.

* The Trustee is deemed to be an "interested person" of the Trust, as defined in
the 1940 Act.

                     PROPOSAL #2: APPROVE AMENDMENTS TO THE FUNDS'

                         FUNDAMENTAL INVESTMENT POLICIES

INTRODUCTION TO PROPOSALS #2(A) TO #2(I)

     The 1940 Act (which was adopted to protect investment company shareholders)
requires  investment  companies  such as the  Funds  to adopt  certain  specific
investment  policies or  restrictions  that can be changed  only by  shareholder
vote.  An  investment  company  may also elect to  designate  other  policies or
restrictions  that  may be  changed  only by  shareholder  vote.  Both  types of
policies and restrictions are often referred to as "fundamental policies." These
policies  and  restrictions  limit  the  investment  activities  of  the  Funds'
investment adviser.

     After the  Trust was  formed  in 1995,  legal and  regulatory  requirements
applicable to mutual funds changed. For example, certain restrictions imposed by
state laws and  regulations  were preempted by the National  Securities  Markets
Improvement  Act of 1996 ("NSMIA") and no longer apply.  As a result,  the Funds
are  subject to  fundamental  policies  that are (i)  unnecessarily  lengthy and
detailed; (ii) no longer required to be fundamental; or (iii) no longer required
at all.  Accordingly,  the Trustees have authorized the submission to the Funds'
shareholders  for their approval,  and recommend that  shareholders  approve the
amendment,  reclassification or elimination of certain of the Funds' fundamental
policies.

      The proposed amendments would:

     (i)  simplify and modernize the  fundamental  policies that are required to
          be stated under the 1940 Act;

     (ii) reclassify as operating  policies those fundamental  policies that are
          not required to be fundamental under the 1940 Act; and

     (iii)eliminate  a  fundamental  policy  that is no longer  required  by the
          securities laws of the various states.

     By reducing the number of policies that can be changed only by  shareholder
vote,  the  Trustees  believe that the Funds would be able to minimize the costs
and  delays  associated  with  holding  future  shareholder  meetings  to revise
fundamental  policies that become outdated or  inappropriate.  The Trustees also
believe that the investment  adviser's  ability to manage the Funds' assets in a
changing investment  environment will be enhanced and that investment management
opportunities may be increased by these changes.  The chart that follows briefly
describes  the  differences  between  fundamental  policies and  non-fundamental
policies.

                        FUNDAMENTAL POLICIES          NON-FUNDAMENTAL POLICIES

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

Who must approve        Board of Trustees and         Board of Trustees
changes in the          shareholders
policies?

How quickly can a       Fairly slowly, since a        Fairly quickly, because
change in the policies  vote of shareholders is       the change can be
be made?                required                      accomplished by action of
                                                      the Board of Trustees

      The recommended changes are specified below. Each Proposal will be voted
on separately by shareholders of each Fund, and the approval of each Proposal by
each Fund will require the approval of a majority of the outstanding voting
shares of the Fund as defined in the 1940 Act. (See "PROXIES, QUORUM AND VOTING
AT THE MEETING" below.)

DESCRIPTION OF PROPOSED CHANGES

      The fundamental investment policies, in the form proposed, cover those
areas for which the 1940 Act requires the Funds to have a fundamental
restriction. They satisfy current regulatory requirements and are written to
provide flexibility to respond to future legal, regulatory, market or technical
changes. THE PROPOSED STANDARDIZED CHANGES WILL NOT AFFECT THE FUNDS' INVESTMENT
OBJECTIVES OR THE INVESTMENT MANAGEMENT OF THE FUNDS. ALTHOUGH THE PROPOSED
CHANGES IN FUNDAMENTAL POLICIES WILL ALLOW THE FUNDS GREATER FLEXIBILITY TO
RESPOND TO FUTURE INVESTMENT OPPORTUNITIES, THE BOARD DOES NOT ANTICIPATE THAT
THE CHANGES, INDIVIDUALLY OR IN THE AGGREGATE, WILL RESULT AT THIS TIME IN A
MATERIAL CHANGE IN THE LEVEL OF INVESTMENT RISK ASSOCIATED WITH INVESTMENTS IN
THE FUNDS. NOR DOES THE BOARD ANTICIPATE THAT THE PROPOSED CHANGES IN
FUNDAMENTAL INVESTMENT POLICIES WILL, INDIVIDUALLY OR IN THE AGGREGATE, CHANGE
MATERIALLY THE MANNER IN WHICH THE FUNDS ARE MANAGED.

      The following is the text and a summary description of the proposed
changes to the Funds' fundamental policies and restrictions. Any non-fundamental
policy may be modified or eliminated by the Trustees at any future date without
any further approval of shareholders.

      Presently, if the Funds adhere to a fundamental or non-fundamental
percentage restriction at the time of an investment or transaction, a later
increase or decrease in the percentage resulting from a change in the value of
the Funds' portfolio securities or the amount of its total assets does not
create a violation of the policy. This policy will continue to apply for any of
the proposed changes that are approved.

      DEFINED TERM: Several of the proposed fundamental policies include the
      defined term "1940 Act Laws, Interpretations and Exemptions." This term
      means: the Investment Company Act of 1940 as amended, and the rules and
      regulations promulgated thereunder, as such statute, rules and regulation
      are amended from time to time or are interpreted from time to time by the
      staff of the Securities and Exchange Commission ("SEC") and any exemptive
      order or similar relief granted to the Funds.

              PROPOSAL #2(A): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT

                        POLICY REGARDING DIVERSIFICATION

      Under the 1940 Act, the Funds' policy relating to the diversification of
their investments must be fundamental. The 1940 Act prohibits a "diversified"
mutual fund from purchasing securities of any one issuer if, at the time of
purchase, more than 5% of the fund's total assets would be invested in
securities of that issuer or the fund would own or hold more than 10% of the
outstanding voting securities of that issuer, except that up to 25% of the
fund's total assets may be invested without regard to this limitation. The 5%
limitation does not apply to securities issued by or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by other
open-end investment companies.

      The Funds' present policy regarding diversification states:

      "With respect to 75% of the value of its total assets, each Fund will not
      purchase securities issued by any other issuer (other than cash, cash
      items or securities issued or guaranteed by the government of the United
      States or its agencies or instrumentalities and repurchase agreements
      collateralized by such securities), if, as a result, more than 5% of the
      value of its total assets would be invested in the securities of that
      issuer. No Fund will acquire more than 10% of the outstanding voting
      securities of any one issuer."

      In order to afford the Funds' investment adviser maximum flexibility in
managing the Funds' assets, the Trustees propose to amend the Funds'
diversification policy to be consistent with the definition of a diversified
investment company under the 1940 Act. The proposed change in the
diversification policy of the Funds does not constitute a substantive change.

      Upon approval of the Funds' shareholders, the fundamental investment
policy governing diversification will be amended as follows:

      "The Fund is a "diversified company" within the meaning of the 1940 Act.
      The Fund will not purchase the securities of any issuer if, as a result,
      the Fund would fail to be a diversified company within the meaning of the
      1940 Act Laws, Interpretations and Exemptions."

        THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL

           PROPOSAL #2(B): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY
                REGARDING ISSUING SENIOR SECURITIES AND BORROWING MONEY

      The 1940 Act requires the Funds to have a fundamental investment policy
defining their ability to borrow money or issue senior securities. In general,
limitations on borrowing are designed to protect shareholders and their
investments by restricting a Fund's ability to subject its assets to any claims
of creditors or senior security holders who would be entitled to dividends or
rights on liquidation of the Fund prior to the rights of shareholders.

      Shareholders of the Funds are being asked to approve a new fundamental
policy for borrowing and the issuance of senior securities designed to reflect
all current regulatory requirements. The Funds' current policy states:

      "The Funds will not issue senior securities, except that a Fund may borrow
      money directly or through reverse repurchase agreements in amounts up to
      one-third of the value of its total assets, including the amount borrowed;
      and except to the extent that a Fund may enter into futures contracts. The
      Funds will not borrow money or engage in reverse repurchase agreements for
      investment leverage, but rather as a temporary, extraordinary, or
      emergency measure or to facilitate management of the portfolio by enabling
      a Fund to meet redemption requests when the liquidation of portfolio
      securities is deemed to be inconvenient or disadvantageous. A Fund will
      not purchase any securities while any borrowings in excess of 5% of its
      total assets are outstanding. During the period any reverse repurchase
      agreements are outstanding, a Fund will restrict the purchase of portfolio
      securities to money market instruments maturing on or before the
      expiration date of the reverse repurchase agreements, but only to the
      extent necessary to assure completion of the reverse repurchase
      agreements."

SENIOR SECURITIES-GENERALLY. A "senior security" is an obligation of an
investment company with respect to its earnings or assets that takes precedence
over the claims of the fund's shareholders with respect to the same earnings or
assets. The 1940 Act generally prohibits a fund from issuing senior securities,
in order to limit the use of leverage. In general, an investment company uses
leverage when it borrows money to enter into securities transactions, or
acquires an asset without being required to make payment until a later time.

      The Commission's staff interpretations allow a fund to engage in a number
of types of transactions which might otherwise be considered to create "senior
securities" or "leverage," so long as the fund meets certain collateral
requirements designed to protect shareholders. For example, some transactions
that may create senior security concerns include short sales, certain options
and futures transactions, reverse repurchase agreements and securities
transactions that obligate the fund to pay money at a future date (such as
when-issued, forward commitment or delayed delivery transactions). When engaging
in such transactions, the fund must set aside money or securities to meet the
SEC staff's collateralization requirements. This procedure effectively
eliminates the fund's ability to engage in leverage for these types of
transactions.

BORROWING-GENERALLY. Under the 1940 Act, an investment company is permitted to
borrow up to 5% of its total assets for temporary purposes. A fund may borrow
only from banks. If borrowings exceed 5%, the fund must have assets totaling at
least 300% of the borrowing when the amount of the borrowing is added to the
fund's other assets. The effect of this provision is to allow the fund to borrow
from banks in amounts up to one-third (33 1/3%) of its total assets (including
the amount borrowed). Investment companies typically borrow money to meet
redemptions in order to avoid a forced, unplanned sale of portfolio securities.
This technique allows the fund greater flexibility to buy and sell portfolio
securities for investment or tax considerations, rather than for cash flow
considerations. The costs of borrowing, however, can also reduce the fund's
total return.

       The borrowing restrictions of the Funds permit borrowing only as a
temporary measure for extraordinary purposes, and prohibit the purchase of
securities while borrowings in excess of 5% of their total assets are
outstanding. The proposed investment policy would provide greater flexibility to
the Funds, and would permit the Funds to borrow money, directly or indirectly
(such as through reverse repurchase agreements), and issue senior securities
within the limits established under the 1940 Act or under any rule or regulation
of the Commission, or any SEC staff interpretation thereof. If the new policy is
approved by shareholders, the Funds do not presently anticipate changing their
current practices relating to borrowing money and issuing senior securities. As
a matter of operating policy, the Funds have no present intention to engage in
leveraging and will adopt a restrictive non-fundamental policy to that effect.

      Upon shareholder approval, the Funds' fundamental investment policy
governing borrowing money and issuing senior securities will state:

      "The Funds may borrow money, directly or indirectly, and issue senior
      securities to the maximum extent permitted under the 1940 Act, Laws,
      Interpretations and Exemptions."

       THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL

     PROPOSAL #2(C): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY REGARDING
INVESTMENTS IN REAL ESTATE

      Under the 1940 Act, the Funds' policy concerning investments in real
estate must be fundamental. The Funds currently have a fundamental investment
policy prohibiting the purchase or sale of real estate. The current policy,
however, allows the Funds to invest in securities that are secured by real
estate, and states:

      "None of the Funds will purchase or sell real estate, including limited
      partnership interests, although the Funds may invest in securities of
      issuers whose business involves the purchase or sale of real estate or in
      securities which are secured by real estate or interests in real estate."

       The proposed fundamental investment policy will not permit the Funds to
purchase real estate directly, but will permit the purchase of securities whose
payments of interest or principal are secured by mortgages or other rights to
real estate in the event of default. The investment policy will also enable the
Funds to invest in companies within the real estate industry, provided such
investments are consistent with the Funds' investment objectives and policies.
If the new policy is approved by shareholders, the Funds do not presently
anticipate changing their current practices relating to investing in real
estate.

      Upon shareholder approval, the Funds' fundamental investment policy
governing investments in real estate will state:

      "The Funds may not purchase or sell real estate, provided that this
      restriction does not prevent the Funds from investing in issuers which
      invest, deal, or otherwise engage in transactions in real estate or
      interests therein, or investing in securities that are secured by real
      estate or interests therein. The Funds may exercise their rights under
      agreements relating to such securities, including the right to enforce
      security interests and to hold real estate acquired by reason of such
      enforcement until that real estate can be liquidated in an orderly
      manner."

        THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL

           PROPOSAL #2(D): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY

                      REGARDING INVESTMENTS IN COMMODITIES

      Under the 1940 Act, the Funds' policy concerning investments in
commodities must be fundamental. The Funds are currently subject to a
fundamental restriction prohibiting the purchase or sale of commodities and
which provides:

      "None of the Funds will invest in commodities, except to the extent that
      the Funds may engage in transactions involving futures contracts or
      options on futures contracts."

      Historically, the most common types of commodities have been physical
commodities such as wheat, cotton, rice and corn. However, under federal law,
futures contracts are considered to be commodities and, therefore, financial
futures contracts, such as futures contracts related to currencies, stock
indices or interest rates are considered to be commodities. Financial futures
contracts enable an investment company to buy (or sell) the right to receive the
cash difference between the contract price for an underlying asset or index and
the future market price, if the market price is higher. If the future price is
lower, the investment company is obligated to pay (or, if the investment company
sold the contract, the investment company receives) the amount of the decrease.
Investment companies often desire to invest in financial futures contracts and
options related to such contracts for hedging or other investment reasons.

       The proposed policy would provide appropriate flexibility for the Funds
to invest in financial futures contracts and related options. As proposed, the
policy is broad enough to permit investment in financial futures instruments for
either investment or hedging purposes, which is broader than the Funds' current
policies. Using financial futures instruments can involve substantial risks, and
would be utilized only if the Funds' investment adviser determined that such
investments are advisable and such practices were disclosed in the Funds'
prospectus or statement of additional information. Gains or losses on
investments in financial futures instruments depend on the direction of
securities prices, interest rates and other economic factors, and losses from
engaging in these types of transactions are potentially limited. At the present
time, the Funds do not intend to engage in these activities beyond what is
disclosed in the Funds' current prospectus. As a matter of non-fundamental
operating policy, for purposes of the proposed policy, investments in
transactions involving futures contracts and options, forward currency
contracts, swap transactions and other financial contracts that settle by
payment of cash are not deemed to be investments in commodities.

      Upon shareholder approval, the Funds' fundamental investment policy
governing investments in commodities will state:

      "The Funds may not purchase or sell physical commodities, provided that
      the Funds may purchase securities of companies that deal in commodities."

        THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL

              PROPOSAL #2(E): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT

                    POLICY REGARDING UNDERWRITING SECURITIES

      Under the 1940 Act, the Funds' policy relating to underwriting is required
to be fundamental. Each Fund currently is subject to a fundamental investment
policy prohibiting it from acting as an underwriter of the securities of other
issuers, and which states:

      "A Fund will not underwrite any issue of securities, except as a Fund may
      be deemed to be an underwriter under the Securities Act of 1933 in
      connection with the sale of securities in accordance with its investment
      objective, policies, and limitations."

      A person or company generally is considered an underwriter under the
federal securities laws if it participates in the public distribution of
securities of OTHER ISSUERS, usually by purchasing the securities from the
issuer and re-selling the securities to the public. From time to time, a mutual
fund may purchase a security for investment purposes which it later sells or
redistributes to institutional investors or others under circumstances where the
fund could possibly be considered to be an underwriter under the technical
definition of underwriter contained in the securities laws.

      Upon shareholder approval, the Funds' fundamental investment policy
concerning underwriting will state:

      "The Funds may not underwrite the securities of other issuers, except that
      the Funds may engage in transactions involving the acquisition,
      disposition or resale of its portfolio securities, under circumstances
      where it may be considered to be an underwriter under the Securities Act
      of 1933."

      This does not constitute a substantive change in the Funds' policy.

       THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL

           PROPOSAL #2(F): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY

                         REGARDING LENDING BY THE FUNDS

      Under the 1940 Act, the Funds' policy concerning lending must be
fundamental. The Funds currently are subject to a fundamental investment
restriction limiting their ability to make loans, which states:

      "The Funds will not lend any of their respective assets except portfolio
      securities up to one-third of the value of total assets. This shall not
      prevent a Fund from purchasing or holding U.S. government obligations,
      money market instruments, bonds, debentures, notes, certificates of
      indebtedness, or other debt securities, entering into repurchase
      agreements, or engaging in other transactions where permitted by a Fund's
      investment objective, policies, and limitations, or the Trust's
      Declaration of Trust."

      In order to ensure that each Fund may invest in certain debt securities or
repurchase agreements, which could technically be characterized as the making of
loans, the Funds' current fundamental restriction specifically permits such
investments. In addition, the Funds' fundamental policy explicitly permits the
Funds to lend their portfolio securities. Securities lending is a practice that
has become common in the mutual fund industry and involves the temporary loan of
portfolio securities to parties who use the securities for the settlement of
securities transactions. The collateral delivered to a Fund in connection with
such a transaction is then invested to provide the Fund with additional income
it might not otherwise have.

      Securities lending involves certain risks if the borrower fails to return
the securities. However, management believes that with appropriate controls,
such as 100% or greater collateralization of the loan and regular monitoring of
the creditworthiness of the counterparty, the ability to engage in securities
lending does not materially increase the risks to which the Funds currently are
subject. In addition, securities on loan cannot generally be sold until the term
of the loan is over.

      Upon approval of the Funds' shareholders, the Funds' fundamental
investment policy governing the lending of assets will state:

      "The Funds may not make loans, except to the extent permitted by the 1940
      Act Laws, Interpretations and Exemptions. This restriction does not
      prevent the Funds from purchasing debt obligations, entering into
      repurchase agreements, lending its assets to broker/dealers or
      institutional investors and investing in loans, including assignments and
      participation interests. This restriction will not prevent the Funds from
      lending to each other consistent with any exemption the Funds might obtain
      or as permitted by the 1940 Act Laws, Interpretations and Exemptions"

      This does not constitute a substantive change in the Funds' policy.

     THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL

     PROPOSAL #2(G): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY REGARDING
CONCENTRATION  OF THE FUNDS'  INVESTMENTS  IN THE SECURITIES OF COMPANIES IN THE
SAME INDUSTRY

      Under the 1940 Act, the Funds' policy relating to the concentration of
their investments in securities of companies in a single industry must be
fundamental. The SEC staff considers a mutual fund to "concentrate" its
investments if 25% or more of its total assets are invested in a particular
industry (not counting U.S. government securities, bank instruments issued by
domestic banks and municipal securities).

      The Funds currently have a fundamental investment policy prohibiting them
from concentrating their investments in a single industry which states:

      "No Fund will invest 25% or more of the value of its respective total
      assets in any one industry (other than securities issued by the U.S.
      government, its agencies, or instrumentalities or repurchase agreements
      collateralized by these securities and, in the case of the Municipal Bond
      Fund, tax-exempt securities issued by governments or their political
      subdivisions)."

      In order to afford the Funds' investment adviser maximum flexibility in
managing the Funds' assets, the Trustees propose to amend the Funds'
concentration policy. The proposed change does not constitute a substantive
change in the Funds' concentration policy.

      Upon the approval by the Funds' shareholders, the fundamental investment
policy governing concentration will provide:

      "The Funds will not make investments that will result in the concentration
      (as that term may be defined or interpreted by the 1940 Act Laws,
      Interpretations and Exemptions) of their investments in the securities of
      issuers primarily engaged in the same industry. This restriction does not
      limit the Funds' investments in (i) obligations issued or guaranteed by
      the U.S. Government, its agencies or instrumentalities, or (ii) tax-exempt
      obligations issued by governments or political subdivisions of
      governments. In complying with this restriction, the Funds will not
      consider a bank-issued guaranty or financial guaranty insurance as a
      separate security."

        THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL

     PROPOSAL  #2(H):  TO REMOVE THE  FUNDS'  FUNDAMENTAL  INVESTMENT  POLICY ON
SELLING SECURITIES SHORT AND TO AMEND, AND TO MAKE  NON-FUNDAMENTAL,  THE FUNDS'
FUNDAMENTAL INVESTMENT POLICY REGARDING BUYING SECURITIES ON MARGIN

      The Funds currently each have the following fundamental policy concerning
selling securities short and buying securities on margin which states:

      "The Funds will not sell any securities short or purchase any securities
      on margin, but may obtain such short-term credits as are necessary for
      clearance of purchases and sale of securities. The deposit or payment by
      the Funds of initial or variation margin in connection with futures
      contracts or related options transactions is not considered the purchase
      of a security on margin."

SHORT SALES. The Board believes that the Funds' prohibition against short sales
should be eliminated. Restrictions on short sales were imposed by state laws and
NSMIA preempts that requirement. Notwithstanding the elimination of this
restriction, the Funds expect to continue not to engage in short sales, except
to the extent that the Funds contemporaneously own or have the right to acquire,
at no additional cost, securities identical to, or convertible into or
exchangeable for, those sold short. Upon approval by shareholders of this
Proposal 2(h), the existing fundamental restriction prohibiting selling
securities short will be eliminated.

BUYING SECURITIES ON MARGIN. The Funds are not required to have a fundamental
restriction on margin transactions. Accordingly, it is proposed that the Funds'
existing fundamental policy be replaced with a non-fundamental restriction. The
proposed non-fundamental policy makes some changes in wording from the existing
fundamental restriction, and contemplates that the Funds may engage in the same
types of transactions as they are presently authorized to engage in.

Upon the approval of this Proposal 2(h), the Funds would become subject to the
following non-fundamental policy with respect to buying securities on margin:

      "The Funds will not purchase securities on margin, provided that the Funds
      may obtain short-term credits necessary for the clearance of purchases and
      sales of securities, and further provided that the Funds may make margin
      deposits in connection with its use of financial options and futures,
      forward and spot currency contracts, swap transactions and other financial
      contracts or derivative instruments."

The Funds have no present intention in engaging in short selling transactions.

        THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL

     PROPOSAL  #2(I):  TO  AMEND,  AND  TO  MAKE  NON-FUNDAMENTAL,   THE  FUNDS'
FUNDAMENTAL INVESTMENT POLICY REGARDING PLEDGING ASSETS

      The Funds are not required to have a fundamental investment restriction
with respect to the pledging of assets. To maximize the Funds' flexibility in
this area, the Board of the Trust believes that the Funds' policy on pledging
assets should be made non-fundamental. The non-fundamental policy would be
similar to the fundamental policy proposed to be eliminated, which states:

      "The Funds will not mortgage, pledge, or hypothecate any assets, except to
      secure permitted borrowings. In these cases, the Funds may pledge assets
      having a value of 15% of assets taken at cost. For purposes of this
      restriction: (a) the deposit of assets in escrow in connection with the
      writing of covered put or call options and the purchase of securities on a
      when-issued basis, and (b) collateral arrangements with respect to (i) the
      purchase and sale of stock options and (ii) initial or variation margin
      for futures contracts, will not be deemed to be pledges of a Fund's
      assets. Margin deposits for the purchase and sale of futures contracts and
      related options are not deemed to be a pledge."

       The Board does not expect this change to have a material impact on the
Funds' operations. Establishing the policy as non-fundamental, however, would
enable the Board to change this policy in the future without shareholder
approval.

      Upon the approval of the elimination of the existing fundamental policy on
pledging assets, the Funds would become subject to the following non-fundamental
policy:

      "The Funds will not mortgage, pledge, or hypothecate any of their assets,
      provided that this shall not apply to the transfer of securities in
      connection with any permissible borrowing or to collateral arrangements in
      connection with permissible activities."

     THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL

     PROPOSAL #3: APPROVAL OF AN AMENDMENT TO THE FUNDS' DECLARATION OF TRUST

      The Trust was established as a business trust under the laws of the
Commonwealth of Massachusetts in 1995. The operations of the Trust are governed
by a Declaration of Trust dated October 18, 1995 (the "Declaration"). The
Declaration currently provides for shareholder voting rights that are based upon
the number of shares owned by each shareholder. Under this "share-based" system,
each Fund provides shareholders with one vote for each whole share that they own
and a fractional vote for each fractional share that they own. This system
treats shareholders equitably so long as all shares of the various Funds have
approximately the same share price. However, the share prices of the Funds will
vary significantly over time due to their different investment programs.
Consequently, when issues are voted on at the Trust level (such as the election
of Trustees), shareholders who own shares worth lower prices have relatively
greater voting power than shareholders whose shares are valued at a higher
price.

      If approved by shareholders, the amended Declaration would make
shareholders' voting rights "dollar-based." Under this system, each share will
entitle the shareholder to one vote for each dollar (or fraction of a dollar) of
the Trust's assets owned by the shareholder on the Record Date. The Board of
Trustees believes that this change will ensure that shareholders' voting rights
are proportionate to their financial interests in the Funds. The Trust currently
offers only one class of shares; however, dollar-based voting rights would apply
to any additional share classes or funds that the Trust may offer in the future.

      If the proposed amendment is approved by shareholders, the provision of
the Declaration that relates to shareholder voting rights will be removed and
replaced with the following:

            "SECTION 1. VOTING POWERS. Subject to the provisions set forth in
            Article III, Section 5(d), the Shareholders shall have power to
            vote, (i) for the election of Trustees as provided in Article IV,
            Section 2, (ii) for the removal of Trustees as provided in Article
            IV, Section 3(d); (iii) with respect to any investment adviser or
            sub-investment adviser as provided in Article VII, Section 1; (iv)
            with respect to the amendment of this Declaration of Trust as
            provided in Article XII, Section 7; and (v) with respect to such
            additional matters relating to the Trust as may be required by law,
            by this Declaration of Trust, or the By-Laws of the Trust or any
            regulation of the Trust or the Securities and Exchange commission or
            any State, or as the Trustees may consider desirable. Each Share
            shall entitle the holder thereof to one vote for each dollar (and
            each fractional dollar thereof) of net asset value (number of Shares
            owned times net asset value per share) of Shares outstanding in such
            holder's name on the books of the Trust, irrespective of the
            Portfolio or Class thereof, and all Shares shall be voted in the
            aggregate and not by Class; provided, however, that to the extent
            Portfolio or Class voting is required by the 1940 Act, or otherwise
            directed by the Trustees, as to any such matter, Shares shall be
            voted by individual Portfolio or Class. There shall be no cumulative
            voting in the election of Trustees. Shares may be voted in person or
            by proxy. A proxy with respect to Shares held in the name of two or
            more persons shall be valid if executed by any one of them unless at
            or prior to exercise of the proxy the Trust receives a specific
            written notice to the contrary from any one of them. A proxy
            purporting to be executed by or on behalf of a shareholder shall be
            deemed valid unless challenged at or prior to its exercise and the
            burden of proving invalidity shall rest on the challenger. At all
            meetings of Shareholders, unless inspectors of election have been
            appointed, all questions relating to the qualification of votes and
            the validity of proxies and the acceptance or rejection of votes
            shall be decided by the chairman of the meeting. Unless otherwise
            specified in the proxy, the proxy shall apply to all shares of the
            Trust (or each Series or Class) owned by the Shareholder). Any proxy
            may be in written form, telephonic or electronic form, including
            facsimile, and all such forms shall be valid when in conformance
            with procedures established and implemented by the officers of the
            Trust. Until Shares of a Series or Class are issued, the Trustees
            may exercise all rights of Shareholders of such Series or Class with
            respect to matters affecting such Series or Class, and may take any
            action with respect to the Trust or such Series or Class required or
            permitted by law, this Declaration of Trust or any By-Laws of the
            Trust to be taken by Shareholders."

       THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL

           PROPOSAL #4: RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS

      The Board has selected Ernst & Young LLP as independent accountants for
each Fund for its fiscal year ending November 30, 2001. As each Fund's
independent accountant, Ernst & Young LLP will examine and verify the accounts
and securities of the Fund and report on them to the Board and to that Fund's
shareholders. The Board's selection will be submitted for ratification by the
Funds' shareholders at the Meeting.

      The Board expects that a representative of Ernst & Young LLP will be
present at the Meeting. The representative will have an opportunity to make a
statement should he or she desire to do so and will be available to respond to
appropriate questions from the Funds' shareholders.

       THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL

                           INFORMATION ABOUT THE TRUST

PROXIES, QUORUM AND VOTING AT THE MEETING

      Only shareholders of record on the Record Date will be entitled to vote at
the Meeting. Each share of the Trust is currently entitled to one vote.
Fractional shares are entitled to proportionate shares of one vote. Under both
the 1940 Act and the Declaration of Trust, the term "Majority Shareholder Vote"
of the Trust or a Fund means favorable vote of: (a) the holders of 67% or more
of the outstanding voting securities present at the Meeting, if the holders of
50% or more of the outstanding voting securities of the Trust or the Fund are
present or represented by proxy; or (b) the vote of the holders of more than 50%
of the outstanding voting securities, whichever is less. A Majority Shareholder
Vote of each Fund is required to approve Proposals 2(a) through 2(i). The
election of the Trustees requires a plurality vote and the approval of the
Amendment to the Declaration requires the favorable vote of the majority of
shareholders entitled to vote on the Proposal. The ratification of the Board's
selection of Ernst & Young LLP as the Funds' independent accountants requires
the favorable vote of a majority of votes cast.

      Any person giving a proxy has the power to revoke it any time prior to its
exercise by executing a superseding proxy or by submitting a written notice of
revocation to the Secretary of the Trust. In addition, although mere attendance
at the Meeting will not revoke a proxy, a shareholder present at the Meeting may
withdraw his or her proxy and vote in person. All properly executed and
unrevoked proxies received in time for the Meeting will be voted in accordance
with the instructions contained in the proxies. IF NO INSTRUCTION IS GIVEN ON
THE PROXY, THE PERSONS NAMED AS PROXIES WILL VOTE THE SHARES REPRESENTED THEREBY
IN FAVOR OF THE MATTERS SET FORTH IN THE ATTACHED NOTICE.

      In order to hold the Meeting, a "quorum" of shareholders must be present.
Holders of one-third of the total number of outstanding shares of the Trust
entitled to vote, present in person or by proxy, shall be required to constitute
a quorum for the purpose of voting on the election of Trustees and the approval
of the Amendment to the Declaration. Holders of one-half of the total number of
outstanding shares of each Fund entitled to vote, present in person or by proxy,
shall be required to constitute a quorum for the purpose of voting on Proposals
2(a) through 2(i).

      For purposes of determining a quorum for transacting business at the
Meeting, abstentions and broker "non-votes" (that is, proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power)
will be treated as shares that are PRESENT but which have not been VOTED. For
this reason, abstentions and broker non-votes will have the effect of a "no"
vote for purposes of obtaining the requisite approval of some of the proposals.

      If a quorum is not present, the persons named as proxies may vote those
proxies which have been received to adjourn the Meeting to a later date. In the
event that a quorum is present but sufficient votes in favor of one or more of
the proposals have not been received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitations of
proxies with respect to such proposal(s). All such adjournments will require the
affirmative vote of a majority of the shares present in person or by proxy at
the session of the Meeting to be adjourned. The persons named as proxies will
vote AGAINST any such adjournment those proxies which they are required to vote
against the proposal and will vote in FAVOR of the adjournment other proxies
which they are authorized to vote. A shareholder vote may be taken on other
proposals in this Proxy Statement prior to any such adjournment if sufficient
votes have been received for approval.

SHARE OWNERSHIP OF THE TRUSTEES

At the close of business on the Record Date, Officers and Trustees of the Trust
own less than 1% of each Fund's outstanding shares.

 At the close of business on the Record Date, the following persons owned, to
the knowledge of management, more than 5% of the outstanding shares of the
Municipal Bond Fund:

At the close of business on the Record Date, the following persons owned, to the
knowledge of management, more than 5% of the outstanding shares of the Bond
Fund:

At the close of business on the Record Date, the following persons owned, to the
knowledge of management, more than 5% of the outstanding shares of the Large
Capitalization Growth Fund:

At the close of business on the Record Date, the following persons owned, to the
knowledge of management, more than 5% of the outstanding shares of the Large
Capitalization Growth and Income Fund:

At the close of business on the Record Date, the following persons owned, to the
knowledge of management, more than 5% of the outstanding shares of the Small
Capitalization Equity Fund:

At the close of business on the Record Date, the following persons owned, to the
knowledge of management, more than 5% of the outstanding shares of the
International Equity Fund:

OFFICERS OF THE TRUST

       The executive officers of the Trust are elected annually by the Board of
Trustees. Each officer holds the office until qualification of his successor.
The names and birth dates of the executive officers of the Trust, and their
principal occupations during the last five years, are set forth below:

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

NAME                        BIRTH DATE                 PRINCIPAL OCCUPATIONS

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

Peter J. Germain            September 3, 1959          Senior Vice President
                                                       and Director of
President and Treasurer                                Proprietary Funds
                                                       Services, Federated
                                                       Services Company;
                                                       formerly, Senior
                                                       Corporate Counsel,
                                                       Federated Services
                                                       Company.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Jeffrey W. Sterling         February 5, 1947           Vice President and
                                                       Assistant Treasurer of
Vice President                                         certain funds
and Assistant Treasurer                                distributed by Edgewood

                                                       Services, Inc. or its
                                                       affiliates.
------------------------------------------------------------------------------
------------------------------------------------------------------------------

George Polatas              March 3, 1962              Assistant Vice President
------------------------------------------------------------------------------
------------------------------------------------------------------------------
                            October 26, 1953
Gail Cagney                                            Corporate Counsel,
                                                       Federated Services
Secretary                                              Company.

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



             OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY

      The Trust is not required, and does not intend, to hold regular annual
meetings of shareholders. Shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for the next meeting of
shareholders should send their written proposals to FTI Funds, 5800 Corporate
Drive, Pittsburgh, Pennsylvania 15237-7010, so that they are received within a
reasonable time before any such meeting.

      No business other than the matters described above is expected to come
before the Meeting, but should any other matter requiring a vote of shareholders
arise, including any question as to an adjournment or postponement of the
Meeting, the persons named on the enclosed proxy card will vote on such matters
according to their best judgment in the interests of the Trust.

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

     SHAREHOLDERS  ARE REQUESTED TO COMPLETE,  DATE AND SIGN THE ENCLOSED  PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN
THE UNITED STATES.

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

                                              By Order of the Board of Trustees,


                                                                     Gail Cagney
                                                                       Secretary

October 11, 2000



                                    FTI FUNDS

                             FTI MUNICIPAL BOND FUND

                                  FTI BOND FUND

                      FTI LARGE CAPITALIZATION GROWTH FUND

                    FTI LARGE CAPITALIZATION GROWTH AND INCOME FUND

                      FTI SMALL CAPITALIZATION EQUITY FUND

                          FTI INTERNATIONAL EQUITY FUND

INVESTMENT ADVISER

FIDUCIARY INTERNATIONAL, INC.

Two World Trade Center
New York, New York  10048-0772


DISTRIBUTOR

EDGEWOOD SERVICES, INC.

Federated Investors Tower
1001 Liberty Avenue

Pittsburgh, Pennsylvania 15222-3779


TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

FEDERATED SERVICES COMPANY
P.O. Box 8600
Boston, MA  02116-5072

KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of the FTI
Funds (the "Funds"), hereby appoint Gail Cagney, Ruta M. Dragunas, George
Polatas, Jeffrey W. Sterling, or any one of them, true and lawful attorneys,
with the power of substitution of each, to vote all shares of the Funds which
the undersigned is entitled to vote at the Special Meeting of Shareholders (the
"Meeting") to be held on November 21, 2000, at 10:00 a.m. and at any adjournment
thereof, at the offices of Fiduciary International, Inc., the Funds' investment
adviser, located at Two World Trade Center, 94th floor, New York, New York.

The attorneys named will vote the shares represented by this proxy in accordance
with the choices made on this ballot. If no choice is indicated as to the item,
this proxy will be voted affirmatively on the matters. Discretionary authority
is hereby conferred as to all other matters as may properly come before the
Meeting or any adjournment thereof.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF FTI FUNDS. THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR"
THE PROPOSALS.

BY CHECKING THE BOX "FOR" BELOW, YOU WILL VOTE TO APPROVE EACH OF THE PROPOSED
ITEMS IN THIS PROXY, AND TO ELECT EACH OF THE NOMINEES AS TRUSTEES OF THE TRUST

                        FOR                     [   ]

     PROPOSAL  1 TO  ELECT  OF  PETER  A.  ARON,  JOSEPH  A.  CAJIGAL,  JAMES C.
GOODFELLOW, BURTON J. GREENWALD AND KEVIN J. O'DONNELL AS TRUSTEES OF THE TRUST

                        FOR                     [   ]
                        WITHHOLD AUTHORITY
                        TO VOTE                 [   ]
                        VOTE FOR ALL EXCEPT     [   ]
                     If you do not wish your shares to be voted "FOR" a
                     particular nominee, mark the "VOTE FOR ALL EXCEPT" box and
                     strike a line through the name of each nominee for whom you
                     are NOT voting. Your shares will be voted for the remaining
                     nominees.

PROPOSAL 2 TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES:

     2(A)  TO  AMEND  THE  FUNDS'   FUNDAMENTAL   INVESTMENT   POLICY  REGARDING
DIVERSIFICATION

                        FOR                     [   ]
                        AGAINST                 [   ]
                        ABSTAIN                 [   ]

     2(B) TO AMEND THE FUNDS'  FUNDAMENTAL  INVESTMENT  POLICY REGARDING ISSUING
SENIOR SECURITIES AND BORROWING MONEY

                        FOR                     [   ]
                        AGAINST                 [   ]
                        ABSTAIN                 [   ]

     2(C)  TO  AMEND  THE  FUNDS'   FUNDAMENTAL   INVESTMENT   POLICY  REGARDING
INVESTMENTS IN REAL ESTATE

                        FOR                     [   ]
                        AGAINST                 [   ]
                        ABSTAIN                 [   ]

     2(D)  TO  AMEND  THE  FUNDS'   FUNDAMENTAL   INVESTMENT   POLICY  REGARDING
INVESTMENTS IN COMMODITIES

                        FOR                     [   ]
                        AGAINST                 [   ]
                        ABSTAIN                 [   ]

     2(E)  TO  AMEND  THE  FUNDS'   FUNDAMENTAL   INVESTMENT   POLICY  REGARDING
UNDERWRITING SECURITIES

                        FOR                     [   ]
                        AGAINST                 [   ]
                        ABSTAIN                 [   ]

     2(F) TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY REGARDING LENDING BY
THE FUNDS

                        FOR                     [   ]
                        AGAINST                 [   ]
                        ABSTAIN                 [   ]

     2(G)  TO  AMEND  THE  FUNDS'   FUNDAMENTAL   INVESTMENT   POLICY  REGARDING
CONCENTRATION  OF THE FUNDS'  INVESTMENTS  IN THE SECURITIES OF COMPANIES IN THE
SAME INDUSTRY

                        FOR                     [   ]
                        AGAINST                 [   ]
                        ABSTAIN                 [   ]

     2(H)  TO  REMOVE  THE  FUNDS'  FUNDAMENTAL  INVESTMENT  POLICY  ON  SELLING
SECURITIES  SHORT  AND  TO  AMEND,  AND  TO  MAKE  NON-FUNDAMENTAL,  THE  FUNDS'
FUNDAMENTAL INVESTMENT POLICY REGARDING BUYING SECURITIES ON MARGIN

                        FOR                     [   ]
                        AGAINST                 [   ]
                        ABSTAIN                 [   ]

     2(I)  TO  AMEND,  AND  TO  MAKE  NON-FUNDAMENTAL,  THE  FUNDS'  FUNDAMENTAL
INVESTMENT POLICY REGARDING PLEDGING ASSETS.

                        FOR                     [   ]
                        AGAINST                 [   ]
                        ABSTAIN                 [   ]

     PROPOSAL 3 TO APPROVE AN AMENDMENT TO THE FUNDS' DECLARATION OF TRUST

                        FOR                     [   ]
                        AGAINST                 [   ]
                        ABSTAIN                 [   ]

     PROPOSAL  4 TO RATIFY  THE  SELECTION  OF ERNST & YOUNG LLP AS  INDEPENDENT
ACCOUNTANTS FOR EACH OF THE FUNDS FOR THE FISCAL YEAR ENDING 2001.

                        FOR                     [   ]
                        AGAINST                 [   ]
                        ABSTAIN                 [   ]


                                          YOUR VOTE IS IMPORTANT Please
                                          complete, sign and return this card as
                                          soon as possible.


                                          Dated


                                          Signature


                                          Signature (Joint Owners)


Please sign this proxy exactly as your name appears on the books of the Trust.
Joint owners should each sign personally. Directors and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.

     YOU MAY ALSO VOTE YOUR SHARES BY TOUCHTONE PHONE BY CALLING  1-800-690-6903
OR THROUGH THE INTERNET AT WWW.PROXYVOTE.COM



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