WORLD FUNDS INC /MD/, N-1A EL, 1997-06-16

WORLD FUNDS INC /MD/
N-1A EL, 1997-06-16

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STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 One Commerce Square
Philadelphia, PA 19103
(215) 564-8000

June 13, 1997
Filed via EDGAR
Filing Desk
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: The World Funds, Inc. (the "Company")
File Numbers 811-______ and 33-______

Gentlemen:

Submitted for filing electronically via the EDGAR
system are the following materials:

1. A Form N-8A for The World Funds, Inc., a new registered
investment company.

2. A Form N-1A Registration Statement of The World Funds,
Inc. under the Securities Act of 1933 (the "1933 Act")
and the Investment Company Act of 1940 (the "1940
Act"). The Form N-1A contains an election to register
an indefinite number of shares pursuant to Rule 24f-2.

3. A letter signed by the Company and its designated agent
for service, and by the chief executive officer of the
National Distributor, requesting acceleration of the
effective date of the registration statement.

The following matters are set forth for the convenience
of the Staff:

a. The administrator of the Fund is Commonwealth Shareholder
Services, Inc., which also serves as the administrator of the
Vontobel Funds, Inc. ("VFI").

b. Prior to changing its name in 1997, VFI was known as The
World Funds, Inc. It has legally changed its name and, in
furtherance of the transaction described in the next sub-
paragraph, acknowledges the use of its former name by the new
Company which is filing this registration statement.

c. VFI and the Company are parties to an Agreement and Plan of
Reorganization (the "Plan") for the benefit of VFI's Sand Hill
Portfolio Manager Fund series (the "Old Fund"). That Plan will
be submitted to the shareholders of the Old Fund for their
approval by a proxy statement which has already been filed with
the Commission. If approved, the Plan will authorize the Old
Fund to engage in a change of domicile transaction pursuant to
1933 Act Rule 145(a)(2). Under the Plan, the Company will issue
shares of a newly created Sand Hill Portfolio Manager Fund series
(the "New Fund") in exchange for the assets of the Old Fund, and
the shareholders of the Old Fund will become the shareholders of
the New Fund. VFI will also execute a consent on behalf of the
shareholders of the Old Fund approving the election of directors
of the Company, ratifying the selection of its accountants, and
approving an advisory agreement.

d. Pursuant to staff interpretive and no-action letters
applicable to such situations, the New Fund will continue to
disclose the finacial and performance information of the
predeccessor entity in its new prospectus and statement of
additional information filed in this registration statement, and
a consent to the use of such financial statements by the
independent accountant is provided in the filing.

e. The Company does not have, and will not have on the proposed
effective date of the registration statement, the minimum capital
required under Section 14 of the 1940 Act. In lieu thereof, the
Company's registration statement contains an undertaking that it
will not engage in a public offering or sale of shares of the New
Fund until the completion of the Reorganization, at which time
the New Fund will have assets substantially in excess of the
minimum capital required by the 1940 Act.

f. The prospectus and statement of additional information for
the New Fund which are included in this filing are the same as
the corresponding materials in the registration statement of the
Old Fund, except for specific disclosure related to the
incorporation of the new entity, the transfer of the Old Fund's
assets into the New Fund, and the use by the New Fund of
historical information relating to the Old Fund.

To assist the staff in the review of this new Form N-1A, we would
be happy to provide the examiner assigned this material with
black-lined copies of the prospectus and statement of additional
information which show in detail the changes made in such
documents from that which is currently effective for the Old
Fund. Please contact the undersigned and the marked materials
will be forwarded by overnight delivery.

It is presently anticipated that the special meeting of
shareholders of the Old Fund will be held at the earliest
convenient date. Given the fact that the New Fund is using the
form of prospectus and statement of additional information now in
use by the Old Fund, we hope that the staff will find that the
disclosure does not require the filing of a pre-effective
amendment, and the registrant respectfully requests acceleration
by the staff at the earliest possible date after the special
meeting of shareholders approves the Plan.

Please direct questions or comments relating to this
filing to me at (215) 564-8095 or, in my absence, to Steven M.
Felsenstein, Esquire at (215) 564-8074.

Sincerely,

/s/Michael V. Farrell

Michael V. Farrell

Enclosure
cc: John Pasco, III
Steven M. Felsenstein, Esquire

<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/X/
Pre-Effective Amendment No.
/_/
Post-Effective Amendment No.
/ /

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No.
(Check appropriate box or boxes)

THE WORLD FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)

1500 Forest Avenue, Suite 223, Richmond, VA 23229
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code (804) 285-8211

John Pasco, III, 1500 Forest Ave., Suite 223, Richmond, VA 23229
(Name and Address of Agent for Service)

Please send copies of communications to
Steven M. Felsenstein, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098

Approximate Date of Proposed Public Offering: Upon effectiveness
of this registration statement.

Registrant hereby elects to register an indefinite number of
shares pursuant to Rule 24f-2. The fee required to be paid in
connection with such election by Rule 24f-2 has been transmitted
to the Commission in accordance with applicable rules.

Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until Registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance
with section 8(a) of the Securities Act of 1933 or until the
registration statement shall become effective on such date as the
Commission acting pursuant to said section 8(a) may determine.

<PAGE>
CROSS-REFERENCE SHEET

Prospectus for Sand Hill Portfolio Manager Fund

Part A
Item No. Information Required in a Prospectus

1. Cover Page.<PAGE>
Cover Page.
2. Synopsis.<PAGE>
Prospectus Summary; Fund Expenses.
3. Condensed Financial
Information.<PAGE>
Financial Highlights.
4. General Description
of Registrant.<PAGE>
Prospectus Summary; Cover Page; General
Information About the Company; The Funds'
Investments and Policies; Additional
Information on Policies and Investments;
Special Risk Considerations; Investment
Restrictions.
5. Management of the
Fund<PAGE>
Prospectus Summary; The Company's Management;
General Information About the Company; To
Obtain More Information.
6. Management's
Discussion of Fund
Performance<PAGE>
1996 Performance
6. Capital Stock and
Other Securities.<PAGE>
Prospectus Summary; Taxes; Dividends and
Capital Gains Distributions; General
Information About the Company; To Obtain More
Information.
7. Purchase of
Securities Being
Offered.<PAGE>
Prospectus Summary; How to Invest; How Net
Asset Value is Determined; Special
Shareholder Services; How to Transfer Shares.
8. Redemption or
Repurchase.<PAGE>
How to Redeem Shares; Special Shareholder
Services; How to Transfer Shares.
9. Legal Proceedings.<PAGE>
Not Applicable.
<PAGE>

Statement of Additional Information for
Sand Hill Portfolio Manager Fund

Part B
Item No. Information Required in a Statement of
Additional Information

10. Cover Page.<PAGE>
Cover Page.
11. Table of Contents. <PAGE>
Table of Contents.
12. General Information
and History.<PAGE>
Not Applicable.
13. Investment
Objectives and
Policies.<PAGE>
The World Funds, Inc.; Investment Policies;
Special Investment Considerations for the
Funds; Investment Restrictions.
14. Management of the
Registrant.<PAGE>
Directors and Officers.
15. Control Persons and
Principal Holders of
Securities.<PAGE>
Directors and Officers.
16. Investment Advisory
and Other Services.<PAGE>
Investment Advisor; Transfer Agent;
Administrator; Distribution.
17. Brokerage Allocation
and Other Practices.<PAGE>
Portfolio Transactions.
18. Capital Stock and
Other Securities.<PAGE>
General Information and History; Dividends
and Distributions.
19. Purchase, Redemption
and Pricing of
Securities Being
Offered.
<PAGE>
Special Shareholder Services; Valuation and
Calculation of Net Asset Value.20.Tax Status.<PAGE>
Taxes.
21. Underwriters.<PAGE>
Distribution.
22. Calculation of
Performance Data.<PAGE>
Performance.
23. Financial
Statements.<PAGE>
Financial Statements.
<PAGE>
Part C

Item No.<PAGE>
Other Information.
24. Financial Statements and Exhibits.

25. Persons Controlled By Or Under Common Control With Registrant.

26. Number of Holders of Securities.

27. Indemnification.

28. Business and Other Connections of Investment Advisor.

29. Principal Underwriters.

30. Location of Accounts and Records.

31. Management Services.

32. Undertakings.
<PAGE>
SAND HILL PORTFOLIO MANAGER FUND

A "SERIES" OF THE WORLD FUNDS, INC.

1500 Forest Avenue
Suite 223
Richmond, Virginia 23229
1-800-527-9500 (Toll Free)

PROSPECTUS
Dated August , 1997

This Prospectus offers shares of the Sand Hill Portfolio Manager Fund (the
"Fund"), a no-load diversified series of The World Funds, Inc. (the
"Company"), an open-end management investment company commonly known as a
"mutual fund." The Company is currently composed of one series.

The Fund is a newly-organized series that was formed to continue the
operations of the Sand Hill Portfolio Manager Fund series (the "Original
Sand Hill Fund") of another investment company pursuant to a Plan of
Reorganization approved by the shareholders of the Original Sand Hill Fund.

This Prospectus sets forth concisely the information about the Fund which a
prospective investor should know before investing. It should be read and
retained for future reference. More information about the Fund has been
filed with the Securities and Exchange Commission and is contained in the
"Statement of Additional Information," dated August , 1997, which is
available at no charge upon written request to the Fund. The Fund's
Statement of Additional Information is incorporated herein by reference.

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 COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS

PROSPECTUS SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

FUND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

FINANCIAL HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .4

1996 PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

THE WORLD FUNDS, INC. . . . . . . . . . . . . . . . . . . . . . . . . . . .5

INVESTMENT OBJECTIVE. . . . . . . . . . . . . . . . . . . . . . . . . . . .5

WHY INVEST IN THE FUND? . . . . . . . . . . . . . . . . . . . . . . . . . .6

ASSET ALLOCATION POLICIES . . . . . . . . . . . . . . . . . . . . . . . . .6

ADDITIONAL INFORMATION ON INVESTMENTS, POLICIES AND RISKS . . . . . . . . .9

PERFORMANCE TERMS AND COMPUTATIONS. . . . . . . . . . . . . . . . . . . . 13

THE FUND'S MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 14

HOW TO INVEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

HOW TO REDEEM SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . 18

HOW TO TRANSFER SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . 20

ACCOUNT STATEMENTS AND SHAREHOLDER REPORTS. . . . . . . . . . . . . . . . 21

SPECIAL SHAREHOLDER SERVICES. . . . . . . . . . . . . . . . . . . . . . . 21

HOW NET ASSET VALUE IS DETERMINED . . . . . . . . . . . . . . . . . . . . 21

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS . . . . . . . . . . . . . . . . 22

TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

GENERAL INFORMATION ABOUT THE FUND. . . . . . . . . . . . . . . . . . . . 24

TO OBTAIN MORE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 25

SAND HILL PORTFOLIO MANAGER FUND

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus.

Investment Objective: The investment objective of the Sand Hill Portfolio
Manager Fund (the "Fund") is to seek to maximize total return (consisting
of realized and unrealized appreciation plus income) consistent with
allocating its investments among equity securities (i.e., stocks), debt
securities (i.e., bonds) and short term investments. As with any mutual
fund, there is no assurance that the Fund will achieve its objective. See
"Investment Objective" on Page .

Investment Advisor: Sand Hill Advisors, Inc. (the "Investment Advisor") is
the investment advisor of the Fund. See "The Fund's Management" on Page .

Distributions/Dividends: Paid annually from available capital gains and
income. See "Dividends and Capital Gains Distributions" on Page .

Reinvestment: Distributions may be reinvested automatically without a
sales charge. See "Dividends and Capital Gains Distributions" on Page .

Initial Purchase: $25,000 minimum (may be waived under certain
circumstances.) See "How to Invest" on Page .

Subsequent Purchases: $50 minimum. See "How to Invest" on Page .

Net Asset Value: The net asset value per share of the Fund is calculated
on each day that the New York Stock Exchange is open for trading. You may
obtain the net asset value per share of the Fund by calling 1-800-________.
See "How Net Asset Value is Determined" on Page .

No Sales Charge or Redemption Fees: The Fund's shares are sold at their
net asset value per share, with no sales charges, Rule 12b-1 fees,
redemption fees (except for wire/telephone redemptions) or exchange fees.

Principal Risk Factors: The Fund invests in different types of securities
issued in the United States or abroad. Its performance will be influenced
by various factors, including market and economic conditions,
company-specific developments and the skill of the Investment Advisor in
allocating investments among stocks, bonds and other investments. See
"Asset Allocation Policies" on page 5. The Fund may invest in foreign
securities, and therefore may be affected by changes in exchange rates
between foreign currencies and the U.S. dollar, different regulatory
standards and taxes, adverse social or political developments and other
factors. See "Foreign Securities and Depositary Receipts" on page 8.

Reorganization: Pursuant to a Plan of Reorganization, the Original Sand
Hill Fund transferred all of its assets to the Fund in exchange for shares
of common stock of the Fund and the Fund's assumption of all liabilities of
the Original Sand Hill Fund (the "Reorganization"). On August ___, 1997,
the effective date of the Reorganization, Fund shares were distributed on a
pro rata basis to the Original Sand Hill Fund's shareholders.

FUND EXPENSES

Shareholder Transaction Expenses
Sales Load Imposed on Purchases<PAGE>
NoneSales Load Imposed on Reinvested
Dividends<PAGE>
NoneRedemption FeesNone*Exchange FeesNone______________
*A shareholder placing a telephone redemption request will be charged $10 for
each such service.

Estimated Annual Fund Operating Expenses (as % of average daily net assets)
Management Fee (after fee waivers and/or
expense reimbursements)**<PAGE>
0.50%<PAGE>
12b-1 FeesNoneOther Operating Expenses (before expense credits)
<PAGE>
1.40% Total Fund Operating Expenses (after fee waivers
and/or expense reimbursements and before
expense credits)<PAGE>

1.90%__________________
**The Investment Advisor has voluntarily undertaken to waive its management
fee, otherwise payable at an
annual rate of 1.00%, or to reimburse expenses of the Fund, so that Total Fund
Operating Expenses do not exceed
an annual rate of 1.90% of average daily net assets.

The purpose of this table is to assist investors in understanding the various
costs and expenses that they will bear
directly or indirectly. The expenses and fees in the table are the estimated
annualized expenses that are expected
to be incurred by the Fund for the fiscal period ending December 31, 1997 and
are based on the Original Sand
Hill Fund's actual expenses for the fiscal year ended December 31, 1996.
Management expects that as the Fund
increases in size its Other Operating Expenses will decline as an annual
percentage rate reflecting economies of
scale.

Example of Expenses

The following example illustrates the expenses that an investor would pay on a
$1,000 investment over various
time periods assuming (1) a 5% annual rate of return, and (2) redemption at
the end of each time period. As
noted in the table above, the Fund charges no redemption fees (apart from
small per transaction charges for wire
and/or telephone redemption services as noted above.)
1 Year<PAGE>
3 Years5 Years10 Years$25$78$133$284

These examples should not be considered a representation of past or future
expenses or performance. Actual expenses may
be greater or lesser than those shown.<PAGE>
FINANCIAL HIGHLIGHTS

The Fund is a newly-organized series that succeeded to the operations of the
Original Sand Hill Fund on August
__, 1997, the effective date of the Reorganization. Set forth below are the
Original Sand Hill Fund's Financial
Highlights for the periods indicated which have been audited by Tait, Weller
and Baker, independent certified
public accountants, whose unqualified report thereon appears with the Original
Sand Hill Fund's audited
financial statements in its Annual Report to Shareholders for the year ended
December 31, 1996 (the "Annual
Report"). The accountant's report and the Original Sand Hill Fund's audited
financial statements and
performance information are included in the Fund's Statement of Additional
Information.

For a share outstanding during the periods indicated:

Per Share Operating Performance<PAGE>
Year Ended
December 31,
1996 <PAGE>
<PAGE>
January 2, 1995*
to December 31,
1995 <PAGE>
Net asset value, beginning period
<PAGE>
$11.11$10.00Income from investment operationsNet investment income
<PAGE>
0.140.06Net investment realized and unrealized
gain on investments<PAGE>
<PAGE>
2.02<PAGE>
<PAGE>
1.10<PAGE>
Total from investment operations2.161.16Less distributions
<PAGE>
Distributions from net investment income(0.15)(0.05)Dist
ributions from capital gains<PAGE>
(0.33) -- Total distributions(0.48)<PAGE>
(0.05)<PAGE>
Net asset value, end of period$12.79$11.11Total Return19.57%
<PAGE>
11.60%
<PAGE>
Ratios/Supplemental DataNet assets, end of period (000's)
$6,459<PAGE>
$4,025Ratio to average net assets-(A)Expense ratio (B)
<PAGE>
2.50%3.03%
**<PAGE>
Expense ratio-net (C)2.00%1.9
___________________
* Commencement of operations.
** Annualized
(A) Management fee waivers reduced the expense ratios and increased the net
investment income ratio by
0.64% in 1996 and 1.00% in 1995.
(B) Expense ratio has been increased to include custodian fees which were
offset by custodian credits.
(C) Expense ratio-net reflects the effect of the custodian fee credits the
Fund received.

1996 PERFORMANCE

The Original Sand Hill Fund's total return for the year ended December 31,
1996 was 19.57%, as compared with
the returns of the following relevant indices:

S&P 500 Index 22.99%
MSCI EAFE (international index) 4.40%
Salomon Treasury Bond Index 2.73%
U.S. Treasury Bills (cash surrogate) 5.50%

At the end of the year, the composition of the Original Sand Hill Fund was
56.0% domestic stocks, 17.2%
international stocks, 20.2% bonds and 6.6% cash. These percentages roughly
correspond to the weightings in the
Original Sand Hill Fund over the course of the year. The domestic stock
portfolio consisted of 38 companies
representing a cross-section of industries and market capitalizations.
Technology (15.9% of the total domestic
stock portfolio), energy (12.9%), consumer non-durable (12.2%), health care
(11.4%) and financial companies
(10.5%) were the sectors with the highest weightings in the Original Sand Hill
Fund.

The international stock allocation consisted of the ADRs of 18 companies.
The international stocks in the
Original Sand Hill Fund were represented by larger companies from a variety
of industries and countries. The
international allocation at the end of the year was as follows: Europe 46.1%,
Southeast Asia 30.4%, Japan 15.3%
and Latin America 8.2%.

THE WORLD FUNDS, INC.

The Fund is a no-load series of The World Funds, Inc. (the "Company"), an
open-end diversified management
investment company incorporated in Maryland in 1997. The Company currently
consists of one series, and the
Board of Directors of the Company may elect to add more series in the future.
A minimum initial investment of
$25,000 is required to open a shareholder account in the Fund, and each
subsequent investment must be $50 or
more.

INVESTMENT OBJECTIVE

The Fund seeks to maximize total return (consisting of realized and
unrealized appreciation plus income)
consistent with allocating its investments among equity securities (i.e.,
stocks), debt securities (i.e., bonds) and
short term investments. By allocating investments across broad asset classes,
the Investment Advisor seeks to
achieve over time a high total return, yet experience lower price volatility
than might be inherent in a more
limited asset mix.

The investment objective of the Fund may not be changed without the approval
of shareholders. Unless
specifically stated otherwise, each of the Fund's other investment policies
may be changed by the Board of
Directors, without shareholder approval. There is no assurance that the
investment objective can be achieved.

Because the value of the securities in which the Fund may invest may fluctuate
from day-to-day, the value of an
investment in the Fund will vary based upon the Fund's investment performance.
When you sell your shares of
the Fund, they may be worth more or less than their cost to you.

WHY INVEST IN THE FUND?

The Fund is designed for investors seeking maximum total return through a
professionally managed portfolio that
provides a mix of domestic and foreign stocks, bonds and short term investments.
The purpose of an investment
in the Fund should be to seek representation in a wide selection of asset
classes and markets with specific
allocations and securities selections set by an experienced portfolio
management organization.

The Fund provides an easy, efficient and low cost way of investing in a
carefully selected, continuously managed
and diversified portfolio of equity securities, debt securities and short
term investments. (See "Equity Securities,
Debt Securities and Short Term Investments" on Page .

ASSET ALLOCATION POLICIES

The Fund seeks to take advantage of investment opportunities using a mix of
asset classes and markets
throughout the world. Investments will be selected not only based upon the
Investment Advisor's evaluation of
the merits of the particular investment, but also based upon the Investment
Advisor's evaluation of the
investment's relationship to other investments in the portfolio. National
economies and their investment markets
change at varying rates and not necessarily in tandem with one another. Many
foreign markets do not have the
maturity, depth, or liquidity of the U.S. market. Therefore, the opportunity
to take advantage of their growth
normally means acceptance of higher price volatility than is usual in the U.S.
The Investment Advisor believes
that by allocating investments among equity, debt and short term asset classes
in different markets, the Fund can
seek to benefit from the faster growth of several markets. In addition,
investing assets in a number of markets
may provide less portfolio volatility than might otherwise result from
investment in a single market.

The Fund's investments are allocated among equity securities, debt securities
and short term investments,
according to the Investment Advisor's anticipation of risks and returns for
each asset class. There are no
limitations on the amount of the Fund's assets which may be allocated to each
of these three asset classes. The
Investment Advisor believes that, over time, common stocks produce the
greatest return among these asset classes.
Therefore, common stocks will normally comprise a large percentage of the
invested assets. Bonds, or other
evidences of indebtedness, will be used to generate income, to seek capital
gains and to dampen portfolio
volatility. While representation in markets and asset classes is the purpose
of the Fund, the Investment Advisor
intends to retain the flexibility necessary to move among asset classes and
markets as changing conditions of the
United States and foreign economies warrant. Asset classes will be considered
both for their total return potential
as well as for the defensive or strategic aspects they offer the portfolio.
In that sense, interest-earning short term
investments will, in varying degrees, be a component of the overall asset
allocation.

Because the Fund invests in different types of securities in proportions
which will vary over time, investors
should not expect the Fund to exhibit stable asset allocations. Investors
should also realize that the Fund's
performance will depend upon the skill of the Investment Advisor to anticipate
the relative risks and return of
stocks, bonds and other securities and to adjust the portfolio accordingly.

Equity Securities, Debt Securities and Short-Term Investments

The three major asset classes in which the Fund will invest, as defined by
the Investment Advisor, are equity
securities, debt securities and short term investments. Short term
investments are debt securities with less than
three years to maturity, and are viewed as comprising a different type of
investment risk than longer term debt
securities, that involve less risk of interest rate volatility, but more risk
of market value volatility.

Within each of these asset classes, the Fund may invest in foreign or domestic
securities.

Equity Securities consist of common stocks as well as warrants, rights, and
securities which are convertible into
common stocks, such as convertible bonds.

The Investment Advisor uses valuation screens for the Fund's equity holdings
primarily involving an analysis of a
company's cash flow return on investment. Specifically, the Investment
Advisor determines the cash flow of a
company and then applies a market derived discount rate to the cash flows.
Next the Investment Advisor
determines the free cash flow that can be reinvested into the company and
applies the same market derived
discount rate. The Investment Advisor also identifies industries that are
positioned to participate in strong
demographic, societal or economic trends and looks for companies within those
industries that have a particular
competitive advantage or niche.

Stocks and other equity securities are subject to the risk that specific
stocks or the prices of equity securities in
general will decline in value over short or even extended periods of time.

Debt Securities consist of the following bonds, obligations and other
evidences of indebtedness denominated in
U.S. or foreign currencies which are issued by governments, companies or other
issuers to borrow money from
investors:

* obligations issued or guaranteed by the U.S. Government or a foreign
national government or the
agencies, instrumentalities or political subdivisions of the U.S.
Government or of a foreign government;

* obligations issued or guaranteed by supranational organizations (e.g.,
European Investment Bank,
Inter-American Development Bank, the World Bank and other
organizations);

* obligations of foreign or domestic corporations;

* long term debt securities issued by banks or bank holding companies;
and

* other debt securities whose purchase is consistent with the investment
objective of the Fund.

Debt securities may pay fixed or variable rates of interest, may have varying
maturity dates at which the issuers
must repay their debt, and have varying degrees of risk. The market values
of debt securities are influenced
primarily by credit risk (the risk that the issuer of the security will not
maintain the financial strength needed to
pay principal and interest on its debt securities) and interest rate risk (the
risk that changes in prevailing interest
rates will increase or decrease the prices of outstanding debt securities.)
Generally, the market values of
fixed-rate debt securities vary inversely with changes in prevailing interest
rates. When interest rates rise,
fixed-rate debt securities fall in market value. Conversely, when interest
rates fall, fixed-rate debt securities
increase in market value.

There is no limit on the maturities of the debt securities that the Investment
Advisor will select. Rather, the
Investment Advisor will select debt securities for the Fund on the basis of,
among other things, credit quality,
yield, potential for capital gains and the Investment Advisor's fundamental
outlook for currency and interest rate
trends around the world.

The Fund will invest in investment grade debt securities, which are debt
securities that bear the rating BBB or
higher by Standard & Poor's Ratings Group ("S&P") or Baa or higher by Moody's
Investors Service, Inc.
("Moody's") or unrated securities that the Investment Advisor deems to be of
comparable quality. However, the
Fund reserves the right to invest its assets in lower quality debt securities,
which are commonly known as "junk
bonds". It will do so to avail itself of the higher yields available with
these securities or to seek to realize capital
gains. The Fund does not currently intend to invest more than 5% of its
assets in securities that are rated below
investment grade or that are unrated but are of comparable quality as
determined by the Investment Advisor. If
that policy should change, the Fund will revise its prospectus and advise
the Fund's shareholders.

After its purchase by the Fund, a debt security may cease to be rated or its
rating may be reduced. Neither event
would require the elimination of the debt security from the portfolio.

Short Term Investments are obligations denominated in U.S. or foreign
currencies consisting of bank deposits,
bankers acceptances, certificates of deposit, commercial paper, short-term
government, government agency,
supranational agency and corporate obligations, and repurchase agreements.
Depending on the Investment
Advisor's assessment of the prospects for the various asset classes, all or a
portion of the Fund's assets may be
invested in high quality short-term investments or cash to protect against
adverse movements of interest rates or
to provide liquidity.

ADDITIONAL INFORMATION ON INVESTMENTS, POLICIES AND RISKS

The Fund may invest in the securities, and engage in the investment practices
described below, each of which
may involve the specific risks which are described. The Fund may not buy all
of these securities or engage in all
of these investment practices at any one point in time or even over an
extended period of time. See the Statement
of Additional Information for more detailed information about these securities
and investment practices,
including limitations designed to reduce related risks.

Foreign Securities and Depositary Receipts

Investing in foreign securities may involve special risks, such as:

Social or Political Risk. Social or political instability,
limitations on the removal of funds from foreign
countries, expropriation, repudiation by a foreign government of its
debt, or confiscatory taxes could
adversely affect the value of the Fund's foreign investments.

Currency Risk. The U.S. dollar value of a foreign security could
decrease when the value of the U.S.
dollar rises against the foreign currency in which the security is
denominated, and could increase when
the U.S. dollar falls against that currency.

Market Risk. Foreign securities may be less liquid and show greater
price volatility than domestic
securities.

Regulatory Risk. Foreign issuers of securities are not generally
subject to the regulatory controls or the
accounting and financial reporting standards imposed on U.S. issuers.
There is generally less publicly
available information about foreign securities than about domestic
securities. Also, judgments may be
more difficult to enforce abroad.

The foreign securities the Fund purchases may be bought directly in their
principal markets abroad or they may
be acquired through the use of depositary receipts. The Fund may invest in
both sponsored and unsponsored
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs")
and other similar depositary
receipts. ADRs are issued by an American bank or trust company and evidence
ownership of underlying
securities of a foreign company. EDRs are issued in Europe, usually by
foreign banks, that evidence ownership
of either foreign or domestic underlying securities. Unsponsored ADRs and
EDRs are organized without the
participation of the issuer of the underlying securities. As a result,
information concerning the issuer may not be
as current as for sponsored ADRs and EDRs.

Convertible Securities

The Fund may invest in convertible securities. A convertible security is a
fixed-income security (a bond or
preferred stock) that may be converted at a stated price within a specified
period of time into a certain quantity
of the common stock of the same or a different issuer. Through their conversion
feature, convertible securities
provide an opportunity to participate in capital appreciation resulting from an
increase in the value of a
convertible security's underlying common stock. The value of a convertible
security is influenced by the market
value of the underlying common stock and tends to increase as the market value
of the underlying stock rises,
and tends to decrease as the market value of the underlying stock declines.
For purposes of considering
convertible securities for purchase by the Fund, the Investment Advisor
evaluates convertible securities by
standards applicable to equity securities and not by debt securities ratings.

Investment Companies

The Fund may invest up to 10% of its total assets in shares of closed-end
investment companies. Because of
restrictions on direct investment by U.S. entities in certain countries,
investment in other investment companies
may be the most practical or only manner in which the Fund can invest in the
securities markets of those
countries. Investment in the shares of other investment companies may involve
duplicative investment advisory
and administrative expenses and is subject to limitations under the Investment
Company Act of 1940, as amended
(the "1940 Act"). See The Statement of Additional Information for a
description of these limitations.

Zero Coupon Securities

The Fund may purchase zero coupon securities (each, a "Zero"). Zeroes pay no
income until maturity and are
sold at substantial discounts from their stated redemption price at maturity.
When held to maturity, the entire
return on Zeroes, comes from the difference between the discounted issue price
and the stated redemption price
at maturity. The annual accretion in value of the Zeroes will constitute
annual taxable income to the Fund which
it is required to distribute to its shareholders at least annually in order to
comply with the Internal Revenue Code
of 1986, as amended (the "Code"), notwithstanding that the Fund will not have
received income until maturity or
until the Zeroes are sold if they are sold prior to maturity. If a Zero is
sold prior to maturity, the amount of
income received will depend on the current market value of the Zero and the
income received may be less than
the accretion in value to date of sale, between the discounted issue price and
the maturity value of the Zero.
Zero coupon securities are subject to greater market value fluctuations from
changing interest rates than debt
obligations of comparable maturities which make current cash distributions of
interest.

Repurchase Agreements

As a means of earning income for periods as short as overnight, the Fund may,
without limit, enter into
repurchase agreements, which are collateralized by U.S. government securities,
with selected banks and
broker/dealers. Under a repurchase agreement, a fund acquires securities,
subject to the seller's agreement to
repurchase the securities at a specified time and price. The Fund requires the
party obligated to repurchase the
securities to provide it with collateral for that obligation.

If the seller under a repurchase agreement becomes insolvent, the Fund's right
to dispose of the securities may be
restricted. In the event of bankruptcy proceedings with respect to the seller
of the securities, before repurchase
of the securities under a repurchase agreement, the Fund may encounter delay
and incur costs before being able
to sell the securities. Also, the value of such securities may decline before
the Fund is able to dispose of them.
For federal tax diversification purposes, repurchase agreements are treated as
securities issued by the seller and
not cash, cash items or receivables or U.S. Government securities.

When-Issued Securities

The Fund may purchase securities on a when-issued or forward delivery basis,
for payment and delivery at a
later date. The price and yield are generally fixed on the date of commitment
to purchase. During the period
between purchase and settlement, no interest accrues to the Fund. At the time
of settlement, the market value of
the security may be more or less than the purchase price. The Fund's net asset
value reflects gains or losses on
such commitments each day, and the Fund segregates assets each day sufficient to
meet the Fund's obligations to
pay for the securities.

Illiquid Securities

Normally, the Fund will not invest more than 5% of its net assets in securities
which are illiquid or not readily
marketable; however, the Fund is permitted to invest up to 15% of its net assets
in illiquid securities.

Strategic Transactions

The Fund may, but is not required to, utilize various other investment
strategies, including the use of derivatives,
as described below to hedge various market risks (such as changes in security
prices, interest rates and currency
exchange rates), or to enhance potential gain. Such strategies are generally
accepted as modern portfolio
management techniques and are regularly utilized by many mutual funds and other
institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory
changes occur.

In the course of pursuing these investment strategies, the Fund may purchase
and sell exchange-listed put and
call options on securities and securities indices, and enter into various
currency transactions such as currency
forward contracts, and options on currencies (collectively, all of the above are
called "Strategic Transactions").

Strategic Transactions involving derivatives may be used to attempt (1) to
protect against possible changes in the
market value of securities held in or to be purchased for the Fund's portfolio
resulting from securities markets or
currency exchange rate fluctuations, (2) to protect its unrealized gains in the
value of its portfolio securities, (3)
to facilitate the sale of such securities for investment purposes, (4) to
establish a position in the options markets
as a temporary substitute for purchasing or selling particular securities, or
(5) as a means efficiently to change
country and/or currency allocations.
The ability of the Fund to utilize these Strategic Transactions successfully
will depend on the Investment
Advisor's ability to predict, which cannot be assured, pertinent market
movements. The Fund will comply with
applicable regulatory requirements when implementing these strategies,
techniques and instruments.

Strategic Transactions have risks associated with them including possible
default by the other party to the
transaction, illiquidity and, to the extent the Investment Advisor's view as to
certain market movements is
incorrect, the risk that the use of such Strategic Transactions could result in
losses greater than if they had not
been used. Use of put and call options may result in losses to the Fund, force
the sale or purchase of portfolio
securities at inopportune times or for prices higher than or lower than current
market values, limit the amount of
appreciation the Fund can realize on its investments or cause the Fund to hold
a security it might otherwise sell.
In addition, options markets may not be liquid in all circumstances. As a
result, in certain markets, the Fund
might not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of
options transactions for hedging should tend to minimize the risk of loss due
to a decline in the value of the
hedged position, at the same time hedging tends to limit any potential gain that
might result from an increase in
value of such position. The use of currency transactions can result in the
Fund incurring losses as a result of a
number of factors, including the imposition of exchange controls, suspension of
settlements, or the inability to
deliver or receive a specified currency. Losses resulting from the use of
Strategic Transactions will reduce net
asset value, and possibly income, and such losses can be greater than if the
Strategic Transactions had not been
utilized. The Strategic Transactions that the Fund may use and the risks of
these techniques are described more
fully in the Statement of Additional Information.

Other Securities

The Fund may also invest in other types of securities which will not
constitute the Fund's principal portfolio
emphasis, such as, mortgage-backed securities, asset-backed securities,
indexed securities and warrants. Each of
these types of securities will, if used, comprise less than 5% of the Fund's
total assets. Please see the Statement of
Additional Information for further details.

Fundamental Limitations

The Fund has adopted certain fundamental limitations which may not be changed
without a shareholder vote and
which are designed to reduce its investment risk. Some of these limitations
are that the Fund may not:

* as to 75% of its assets, purchase the securities of any issuer
(other than obligations issued or
guaranteed as to principal and interest by the Government of the
United States or any agency or
instrumentality thereof) if, as a result of such purchase, more
than 5% of its total assets would be
invested in the securities of such issuer;

* purchase stock or securities of an issuer (other than obligations
issued or guaranteed as to
principal and interest by the Government of the United States or
any agency or instrumentality
thereof) if such purchase would cause the Fund to own more than
10% of any class of the
outstanding stock or securities or more than 10% of any class of
voting securities of such issuer;

* borrow money, except through reverse repurchase agreements or
from banks for temporary or
emergency purposes, and then only in an amount not in excess of
20% of the value of the Fund's
net assets at the time the borrowing is made; or

* purchase the securities of any issuer (other than obligations
issued or guaranteed by the
Government of the United States or any agency or instrumentality
thereof) if, as a result of such
purchase, more than 25% of the Fund's total assets would be
invested in any one industry.

These limitations apply at the time the Fund purchases securities for the
portfolio. See the Statement of
Additional Information for other investment limitations applicable to the
Fund.

PERFORMANCE TERMS AND COMPUTATIONS

From time to time the Fund may advertise information regarding its performance.
All performance figures are
historical, show the performance of a hypothetical investment and are not
intended to indicate future
performance. Advertising may include the following performance measurements.

"Yield" is the ratio of income per share derived from the portfolio investments
to the current maximum offering
price expressed in terms of a percentage.

"Total return" is the total of all income and capital gains paid to
shareholders, assuming reinvestment of all
distributions, plus (or minus) the change in the value of the original
investment, expressed as a percentage of the
purchase price.

"Average annual total return" refers to the average annual compound rate of
return of an investment in the Fund
assuming that the investment has been held for one year and the life of the
Fund.

"Cumulative total return" represents the cumulative change in value of an
investment in the Fund for various
periods. These calculations assume that dividends and capital gains
distributions were reinvested.

"Capital change" measures return from capital, including reinvestment of any
capital gains distributions but not
reinvestment of dividends.

Performance will vary based upon, among other things, changes in market
conditions and the level of the Fund's
expenses. Please refer to the Statement of Additional Information for more
information on performance.

THE FUND'S MANAGEMENT

The Company's Board of Directors is responsible for the supervision of the
general business of the Company and
the Fund. The Directors act as fiduciaries for shareholders under the laws of
the State of Maryland. The Board
appointed John Pasco, III to serve as President of the Company and appointed
Jane H. Williams to serve as
President of the Fund. The Fund employs the following persons to provide it
with investment advice and to
conduct its on-going business:

Investment Advisor

Sand Hill Advisors, Inc. (the "Investment Advisor"), a registered investment
adviser, manages the investments of
the Fund pursuant to an Investment Advisory Agreement (the "Advisory
Agreement"), dated August ___, 1997.
The Advisory Agreement is effective for an initial term of two years and
thereafter may be renewed annually by
the Board of Directors of the Fund.

The Investment Advisor is a privately held corporation. In addition to the
assets of the Fund, the Investment
Advisor manages other assets of approximately $235 million as of the date of
this Prospectus. The Investment
Advisor has approximately two years of experience managing a mutual fund
portfolio, and has approximately 14
years of experience managing investment portfolios for private clients.

Ms. Jane H. Williams has been the portfolio manager of the Fund and the Original
Sand Hill Fund since its
inception in January of 1995. Ms. Williams is also the President of the Fund,
Vice President of the Company,
and Executive Vice President and a Director of the Investment Advisor which was
founded in September of 1982
by Ms. Williams. Ms. Williams owns 35.46% of the stock of the Investment
Advisor.

Effective June 1, 1996, David W. Cost, Jr. began assisting Ms. Williams in the
day-to-day portfolio management
of the Original Sand Hill Fund and now assists in managing the Fund. Mr. Cost
joined the Investment Advisor in
1993 and holds the title of Manager, Equity Research. From July 1985 to May
1990, Mr. Cost held a middle
market commercial banker position with Union Bank in Los Angeles, CA and he
began working on his MBA in
June 1990. He holds a BA from Dartmouth College and an MBA from the University
of California at Los
Angeles. He received his CFA designation in 1995.

Pursuant to the Advisory Agreement, the Investment Advisor provides the Fund
with investment management
services, subject to the supervision of the Company's Board of Directors, and
with office space, and pays the
ordinary and necessary office and clerical expenses relating to investment
research, statistical analysis,
supervision of its portfolio and certain other costs. The Investment Advisor
also bears the cost of fees, salaries
and other remuneration of the Company's Directors, officers or employees who
are officers, Directors, or
employees of the Investment Advisor. The Fund is responsible for all other
costs and expenses, such as, but not
limited to, brokerage fees and commissions in connection with the purchase and
sale of securities, legal, auditing,
bookkeeping and record keeping services, custodian and transfer agency fees and
other costs and fees of
registration of, or filing of notice of, its shares for sale under various
state and Federal securities laws.

Under the Advisory Agreement, the Investment Advisor is entitled to be paid
monthly compensation that is
accrued daily at an annual rate of 1.00% of the average daily net assets of
the Fund. This fee is higher than that
paid by many investment companies. If the assets of the Fund exceed
$100,000,000, the Investment Advisor is
entitled to a fee for such assets computed at an annual rate of 0.75% on such
excess. The Advisory Agreement
requires that the fee be paid monthly, within five (5) business days after the
end of the month. The Advisory
Agreement provides that the fee paid by the Fund will be reduced to the extent
necessary to comply with any
applicable state expense limitation provision to which the Fund may be subject.
The Investment Advisor has
undertaken voluntarily to waive its advisory fee as described in "Fund Expenses"
above. All expenses not
specifically assumed by the Investment Advisor are assumed by the Fund. The
address of the Investment Advisor
is 3000 Sand Hill Road, Building 3, Suite 150, Menlo Park, California 94025.

The Advisory Agreement contemplates the authority of the Investment Advisor to
place orders pursuant to its
investment determinations for the Fund either directly with the issuer or with
any broker or dealer. In placing
orders with brokers or dealers, the Investment Advisor will attempt to obtain
the best net price and the most
favorable execution of its orders. The Investment Advisor may purchase and
sell securities to and from brokers
and dealers who provide research or investment information which benefits the
Fund, the Investment Advisor, or
the Investment Advisor's other clients, or who provide other services to the
Fund or sell its shares.

Administrator

Commonwealth Shareholder Services, Inc. ("CSS"), serves as administrator to the
Fund pursuant to an
Administrative Services Agreement, dated , 1997. CSS provides
certain recordkeeping, administrative
and shareholder servicing functions required of registered investment companies.
CSS may furnish personnel to
act as the Fund's officers to conduct the Fund's business subject to the
supervision and instructions of the Board
of Directors of the Company.

The Administrative Services Agreement provides that CSS will be paid monthly:
(1) the greater of .20% of the
average daily net assets of the Fund or $15,000 per year for administration
(which includes regulatory matters,
backup of the pricing of the Fund, administrative duties in connection with the
execution of portfolio trades, and
certain services in connection with fund accounting); (2) certain out-of-pocket
expenses; and (3) an hourly fee
for shareholder servicing and blue sky matters. The address of CSS is 1500
Forest Avenue, Suite 223, Richmond,
VA 23229.

Custodian and Accounting Services Agent

Star Bank (the "Custodian") in Cincinnati, Ohio is the custodian and accounting
services agent for the Fund. The
Custodian collects income when due and holds all of the Fund's portfolio
securities and cash. The Custodian is
authorized to appoint other entities to act as sub-custodians to provide for
the custody of foreign securities which
may be acquired and held by the Fund outside the U.S. Such appointments are
subject to appropriate review by
the Company's Board of Directors.

Star Bank, as the accounting service agent, maintains and keeps current the
books, accounts, records, journals or
other records of original entry relating to the Fund's business. The address
of Star Bank is 425 Walnut Street,
P.O. Box 1118, Cincinnati, Ohio 45201-1118.

Transfer and Dividend Disbursing Agent

Fund Services, Inc. (the "Transfer Agent" or "FSI") is the Fund's transfer and
dividend disbursing agent. John
Pasco, III, Chairman of the Board of the Company owns one third of the stock
of FSI, and, therefore, FSI may be
deemed to be an affiliate of the Fund. FSI provides all the necessary
facilities, equipment and personnel to
perform the usual and ordinary services of transfer and dividend disbursing
agent, including: receiving and
processing orders and payments for purchases of the Fund's shares, opening
shareholder accounts, preparing
shareholder meeting lists, mailing proxy material, receiving and tabulating
proxies, mailing shareholder reports
and prospectuses, withholding certain taxes on non-resident alien accounts,
disbursing income dividends and
capital distributions, preparing and filing U.S. Treasury Department Form
1099 (or equivalent) for all
shareholders, preparing and mailing confirmation forms to shareholders for all
purchases and redemptions of
shares and all other confirmable transactions in shareholders' accounts, and
recording reinvestment of dividends
and distributions of the Company's shares. Under an Agreement between the
Company and FSI, dated
, 1997, FSI is compensated pursuant to a schedule of services and out-of-
pocket expenses. The schedule calls
for a minimum payment of $16,500 per year. The address of the Transfer
Agent is P.O. Box 26305, Richmond,
VA 23260.

Principal Underwriter/Distributor

First Dominion Capital Corp. (the "Distributor") acts as the principal
underwriter for the Company pursuant to an
agreement dated , 1997. Mr. John Pasco, III, who is
President, Director and Treasurer of the
Distributor, owns 100% of the stock of the Distributor. The address of the
Distributor is 1500 Forest Avenue,
Suite 223, Richmond, VA 23229.

HOW TO INVEST

Purchases of the Fund's shares are made at the net asset value per share. A
minimum initial investment of
$25,000 is required to open a shareholder account, and each subsequent
investment must be $50 or more. Under
certain circumstances, the Fund may waive the minimum initial investment for
purchases by officers, Directors
and employees of the Company and its affiliated entities and for certain
related advisory accounts and retirement
accounts. The offering price per share is equal to the net asset value per
share next determined after the receipt
of a purchase order.

To facilitate the handling of transactions with shareholders, the Company uses
an open account plan. The
Transfer Agent will automatically establish and maintain an open account for
the Fund's shareholders. Under the
open account plan, your shares are reflected in your open account. This
service facilitates the purchase,
redemption or transfer of shares, and eliminates the need to safeguard
certificates and reduces time delays in
executing transactions. Stock certificates are not required and are not
normally issued. Stock certificates for full
shares will be issued, however, by the Transfer Agent upon written request but
only after payment for the shares
is collected by the Transfer Agent.

Purchase by Mail

For initial purchases, the account application form (the "Account Application")
which accompanies this
prospectus should be completed, signed, and mailed to the Transfer Agent,
together with your check or other
negotiable bank draft drawn on and payable by a U.S. Bank and payable to the
Sand Hill Portfolio Manager
Fund. For subsequent purchases, include with your check the tear-off stub
from a prior purchase confirmation,
or otherwise identify the name(s) of the registered owner(s) and the social
security number(s).

Investing by Wire

You may purchase shares by requesting your bank to transmit "Federal Funds" by
wire directly to the Transfer
Agent. To invest by wire please call the Transfer Agent for instructions, then
notify the Distributor by calling
. Your bank may charge you a small fee for this service.
The Account Application which
accompanies this Prospectus should be completed and promptly forwarded to the
Transfer Agent. This
application is required to complete the Fund's records in order to allow you
access to your shares. Once your
account is opened by mail or by wire, additional investments may be made at
any time through the wire
procedure described above. Be sure to include your name and account number in
the wire instructions you
provide your bank.

HOW TO REDEEM SHARES

Shares may be redeemed at any time by mail or telephone. For your protection,
the Transfer Agent will not
redeem your shares until it has received all information and documents necessary
for your request to be in
"proper order." (See "Signature Guarantees.") You will be notified promptly
by the Transfer Agent if your
redemption request is not in proper order.

The Fund's procedure is to redeem shares at the net asset value next determined
after receipt by the Transfer
Agent of the redemption request in proper order as described herein. Payment
will be made promptly, but no
later than the seventh day following receipt of the request in proper order.
Please note that the Transfer Agent
cannot accept redemption requests which specify a particular date for
redemption, or which specify any special
conditions. If the shares you are redeeming were purchased by you less than 15
days prior to the receipt of your
redemption request, the Transfer Agent must ascertain that your check in
payment of the shares you are
redeeming has cleared prior to disbursing the redemption proceeds. If you
anticipate the need to redeem before
15 days, you should make your purchase by Federal Funds wire, or by a certified
, treasurer's or cashier's check.
The Fund may suspend the right to redeem shares for any period during which the
New York Stock Exchange is
closed or the Securities and Exchange Commission determines that there is an
emergency. In such circumstances
you may withdraw your redemption request or permit your request to be held for
processing at the net asset value
per share next computed after the suspension is terminated.

Redemption by Mail

To redeem shares by mail, send the following information to the Transfer Agent:
(1) a written request for
redemption signed by the registered owner(s) of the shares, exactly as the
account is registered; (2) the stock
certificates for the shares you are redeeming, if any stock certificates were
issued; (3) any required signature
guarantees (see "Signature Guarantees"); and (4) any additional documents that
might be required for redemption
by corporations, executors, administrators, trustees, guardians, etc. The
Transfer Agent will mail the proceeds to
your currently registered address, payable to the registered owner(s) unless
you specify otherwise in your
redemption request. There is no charge to shareholders for redemptions by
mail.

Redemption by Telephone

You may redeem your shares by telephone if you request this service on your
Account Application at the time
you complete your initial Account Application. If you do not request this
service at that time, you must request
approval of telephone redemption privileges in writing (sent to the Fund's
Transfer Agent) with a signature
guarantee (see "Signature Guarantees") before you can redeem shares by
telephone. Once your telephone
authorization is in effect, you may redeem shares by calling the Transfer Agent
at (800) 628-4077. By
establishing this service, you authorize the Transfer Agent to act upon any
telephone instructions it believes to be
genuine, to (1) redeem shares from your account and (2) mail or wire redemption
proceeds. There is no charge
for establishing this service, but the Transfer Agent will charge your account
a $10.00 service fee each time you
make a telephone redemption. The amount of this service charge may be changed
at any time, without notice, by
the Transfer Agent.

You cannot redeem shares by telephone if you hold a stock certificate
representing the shares you are redeeming
or if you paid for the shares with a personal, corporate, or government check
and your payment has been on the
books of the Fund for less than 15 days.

If it should become difficult to reach the Transfer Agent by telephone during
periods when market or economic
conditions lead to an unusually large volume of telephone requests, a
shareholder may send a redemption request
to the Transfer Agent by overnight mail.

The Fund employs procedures reasonably designed to confirm the authenticity of
your instructions
communicated by telephone and, if it does not, it may be liable for any losses
due to unauthorized or fraudulent
transactions; however, a shareholder authorizing telephone redemption bears
the risk of loss which may result
from unauthorized or fraudulent transactions which the Fund believes to be
genuine. When you request a
telephone redemption or transfer, you will be asked to respond to certain
questions designed to confirm your
identity as a shareholder of record. Your cooperation with these procedures
will protect your account and the
Fund from unauthorized transactions.

Redemption by Wire

If you request by mail or telephone that your redemption proceeds be wired to
you, please call your bank for
instructions prior to writing or calling the Transfer Agent. Be sure to
include your name, Fund account number,
your account number at your bank and wire information from your bank in your
request to redeem by wire.

Signature Guarantees

To protect you and the Fund (and its agents) from fraud, signature guarantees
are required for: (1) all
redemptions ordered by mail if you require that the check be payable to
another person or that the check be
mailed to an address other than the one indicated on the account registration;
(2) all requests to transfer the
registration of shares to another owner; and (3) all authorizations to establish
or change telephone redemption
service, other than through your initial Account Application.

In the case of redemption by mail, signature guarantees must appear either: (a)
on the written request for
redemption; or (b) on a separate instrument of assignment (usually referred to
as a "stock power") specifying the
total number of shares being redeemed. The Fund may waive these requirements
in certain instances.

The following institutions are acceptable signature guarantors: (a)
participants in good standing of the Securities
Transfer Agents Medallion Program ("STAMP"); (b) commercial banks which are
members of the Federal Deposit
Insurance Corporation ("FDIC"); (c) trust companies; (d) firms which are
members of a domestic stock exchange;
(e) eligible guarantor institutions qualifying under Rule 17Ad-15 of the
Securities Exchange Act of 1934, as
amended, that are authorized by charter to provide signature guarantees; and
(f) foreign branches of any of the
above. In addition, the Fund will guarantee your signature if you personally
visit its offices at 1500 Forest
Avenue, Suite 223, Richmond, VA 23229. The Transfer Agent cannot honor
guarantees from notaries public,
savings and loan associations, or savings banks.

Small Accounts

Due to the relatively higher cost of maintaining small accounts, the Fund may
deduct $10.00 per year from
accounts valued at less than $25,000 unless the account value has dropped below
$25,000 solely as a result of
share value depreciation. Shareholders will receive 60 days' written notice to
increase the account value above
$25,000 before the fee is deducted.

HOW TO TRANSFER SHARES

If you wish to transfer shares to another owner, send a written request to the
Transfer Agent. Your request
should include: (1) the name of the Fund and existing account registration; (2)
signature(s) of the registered
owner(s); (3) the new account registration, address, Social Security Number or
taxpayer identification number
and how dividends and capital gains are to be distributed; (4) any stock
certificates which have been issued for
the shares being transferred; (5) signature guarantees (see "Signature
Guarantees"); and (6) any additional
documents which are required for transfer by corporations, administrators,
executors, trustees, guardians, etc. If
you have any questions about transferring shares, call the Transfer Agent at
(800) 628-4077.

ACCOUNT STATEMENTS AND SHAREHOLDER REPORTS

Each time you purchase, redeem or transfer shares of the Fund, you will receive
a written confirmation. You
will also receive a year-end statement of your account if any dividends or
capital gains have been distributed,
and the Fund's annual and semi-annual reports to shareholders.

SPECIAL SHAREHOLDER SERVICES

The Fund offers the following four services for its shareholders: Regular
Account - allows shareholders to make
voluntary additions and withdrawals to and from their account as often as they
wish; Invest-A-Matic Account -
permits automatic monthly investments into the Fund from your checking account
on a fixed or flexible
schedule; Individual Retirement Accounts (IRA's); and Exchange Privileges
Account - allows the shareholder to
exchange his or her shares for shares of certain other funds having a different
investment objective from the
Fund. More information on any of these services is available upon written
request to the Fund.

HOW NET ASSET VALUE IS DETERMINED

The net asset value ("NAV") of the Fund's shares is determined as of the close
of trading on the New York Stock
Exchange (currently 4:00 p.m., Eastern Time) on each business day from Monday
to Friday or on each day (other
than a day during which no Fund share was tendered for redemption and no order
to purchase or sell a Fund
share was received by the Fund) in which there is a sufficient degree of
trading in the portfolio securities of the
Fund that the current NAV of the shares might be materially affected by changes
in the value of such portfolio
security. The Fund's NAV is calculated at the 4:00 p.m. time set by the Board
of Directors based upon the
Board's determination that this is the most appropriate time to price the
securities.

NAV per share is determined by dividing the total value of the assets, less its
liabilities, by the total number of
shares then outstanding. Generally, securities owned by the Fund are valued at
market value.

The Fund's management may compute the NAV per share more frequently in order to
protect shareholders'
interests.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

Dividends from net investment income are declared annually. The Fund intends
to distribute annually realized
net capital gains, after utilization of capital loss carryforwards, if any, to
prevent application of a federal excise
tax. However, it may make an additional distribution any time prior to the due
date, including extensions, of
filing its tax return, if necessary to accomplish this result. Any dividends
or net capital gain distributed pursuant
to a dividend declaration declared in October, November or December with a
record date in such a month and
paid during the following January will be treated by shareholders for federal
income tax purposes as if received
on December 31 of the calendar year declared. Unless you elect otherwise,
dividends and capital gains
distributions will be reinvested in additional shares of the Fund at no charge.
Changes in your election regarding
receipt of dividends and distributions must be sent to the Transfer Agent.
Shareholders will be subject to tax on
all dividends paid to them or reinvested in shares of the Fund. If an
investment in Fund shares is made by a
retirement plan, all dividends and capital gains distributions must be
reinvested into an account of such plan.

Generally, dividends from net investment income are taxable to investors as
ordinary income. Certain gains or
losses on the sale or retirement of international securities held by the Fund,
to the extent attributable to
fluctuations in currency exchange rates, as well as certain other gains or
losses attributable to exchange rate
fluctuations, must be treated as ordinary income or loss. Such income or loss
may increase or decrease (or
possibly eliminate) the income available for distribution to shareholders. If,
under the rules governing the tax
treatment of foreign currency gains and losses, the income available for
distribution is decreased or eliminated,
all or a portion of the dividends declared by the Fund may be treated for
federal income tax purposes as a return
of capital, or in some circumstances, as capital gain. Generally, a
shareholder's tax basis in his/her Fund shares
will be reduced to the extent that an amount distributed to the shareholder is
treated as a return of capital.

Long-term capital gains distributions, if any, are taxable as net long-term
capital gains when distributed
regardless of the length of time shareholders have owned their shares. Net
short- term capital gains and any
other taxable income distributions are taxable as ordinary income.

The Fund sends detailed tax information about the amount and type of its
distributions to its shareholders by
January 31 of the year following the distributions.

TAXES

The Fund is the successor by a reorganization to a series of another investment
company. The Fund will be
treated as a separate corporation and will seek to qualify and maintain its
qualification as a regulated investment
company under Subchapter M of the Code. Provided it maintains its qualification
as a regulated investment
company under the Code, the Fund will not be liable for federal income taxes on
income distributed as dividends
to its shareholders or on net capital gains that are distributed to its
shareholders or imputed to them under the
Code, or for any excise tax, to the extent its earnings are distributed as
provided in the Code, and assuming it
meets the tax diversification test, 90% gross income test and 30% gross income
test as required by the Code.

In order to meet the tax diversification test, at the close of each quarter of
its fiscal year, (i) at least 50% of the
value of the Fund's total assets must be represented by cash and cash items
including receivables, U.S.
Government securities, and securities of other regulated investment companies,
and other securities limited in
respect of any one issuer to an amount not greater than 5% of the value of its
total assets, and to not more than
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of its total assets
may be invested in the securities of any one issuer (other than U.S. Government
securities and the securities of
other regulated investment companies.)

The Fund will meet the 90% of gross income test if 90% of its gross income is
derived from dividends, interest,
payments with respect to certain securities loans, and gain from the sale or
disposition of stock or securities or
foreign currencies, or other income (including, but not limited to, gains from
options, futures, or forward
contracts) derived with respect to its business of investing in such stock,
securities, or currencies. The Fund will
meet the 30% of gross income test provided that less than 30% of its gross
income for the fiscal year is derived
from the sale or disposition of any of the following held for less than three
months: stock or securities, options,
futures, or forward contracts (other than such contracts on foreign currencies),
and foreign currencies (or
options, futures, or forward contracts on foreign currencies ("hedging
instruments")) but only if such currencies
(and hedging instruments) are not directly related to the Fund's principal
business of investing in stock or
securities (or options and futures with respect to stock or securities.)

The Fund will act and invest so as to comply with the requirements of
Subchapter M outlined above. This may
mean, for example, that the Fund will be required to hold an investment
longer than it otherwise would, or not
engage in a hedging transaction which it otherwise would, in order to avoid
violating one of the tests outlined
above. The distribution to shareholders each year of investment income and
capital gains will represent taxable
income to the shareholders.

The Fund may be subject to foreign withholding taxes on income from certain of
its foreign securities. If more
than 50% of the value of its assets at the close of its taxable year consists
of stock or securities in foreign
corporations, it may elect to pass through to its shareholders the amount of
foreign withholding taxes it paid. If
this election is made, shareholders will be (i) required to include in their
gross income their pro rata share of
foreign source income (including any foreign taxes paid by the Fund), and (ii)
entitled to either deduct (as an
itemized deduction in the case of individuals) their share of such foreign taxes
in computing their taxable income
or to claim a credit for such taxes against their U.S. income tax, subject to
certain limitations under the Code.
The Fund will notify its shareholders of such election within 60 days of the
close of its tax year, which is
December 31. Shareholders may decide whether to utilize such flow through
amount as either a deduction or a
tax credit; individual shareholders will usually find that the credit is more
favorable. Tax exempt investors, such
as pension plans and individual retirement accounts, will not benefit from this
pass through, and therefore the
Fund may not be a suitable investment for such investors.

On the account application, the shareholder must provide the
shareholder's taxpayer identification
number ("TIN"), certify that it is correct and certify that the shareholder is
not subject to backup withholding
under Internal Revenue Service ("IRS") rules. If the shareholder fails to
provide a correct TIN or the proper
certifications, the Fund will withhold 31% of all distributions and redemption
proceeds payable to the
shareholder. The Fund will also begin backup withholding on a shareholder's
Fund account if the IRS instructs
the Fund to do so. The Fund reserves the right not to open a shareholder's
account or, if an account is already
opened, to redeem a shareholder's shares at the current NAV, less any taxes
withheld, if the shareholder fails to
provide a correct TIN, fails to provide the proper certifications, or the IRS
advises the Fund to begin backup
withholding on the shareholder's Fund account.

GENERAL INFORMATION ABOUT THE FUND

The Company is authorized to issue up to 250,000,000 shares of common stock,
par value $0.01 per share, of
which the Company has presently allocated 50,000,000 shares to the Fund. The
Board of Directors can allocate
the remaining authorized but unissued shares to the Fund or may create
additional series and allocate shares to
such series. A share of the Fund has priority in the assets of the Fund in
the event of a liquidation. The shares
of the Fund will be fully paid and nonassessable, will have no preference over
other shares of the Fund as to
conversion, dividends or retirement, and will have no preemptive rights. Shares
of the Fund will be redeemable
from the assets of the Fund at any time, as described in "How to Redeem Shares"
above.

Each outstanding share of the Company is entitled to one vote for each full
share of stock and a fractional vote
for fractional shares of stock. All shareholders vote on matters that concern
the Company as a whole. The
Company is not required to hold a meeting of shareholders each year, and may
elect not to hold a meeting in
years when no meeting is necessary. The shareholders of the Fund shall vote
separately on matters which affect
only the interests of the Fund. The Company's shares do not have cumulative
voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors can
elect all of the Directors if they
choose to do so. Shareholders have the right to call a meeting to consider the
removal of one or more of the
Directors and will be assisted in shareholder communications in such matter.

Limitation on Use of Name - The Advisory Agreement for the Fund authorizes the
Company to utilize the name
"Sand Hill." The Company agrees that if the Advisory Agreement is terminated
it will promptly redesignate the
name of the Sand Hill Portfolio Manager Fund to eliminate any reference to the
name "Sand Hill" or any
derivation thereof unless the Investment Advisor waives this requirement in
writing.<PAGE>
TO OBTAIN MORE INFORMATION

For further information on the Sand Hill Portfolio Manager Fund, please contact
Commonwealth Shareholder
Services, Inc., P.O. Box 8687, Richmond, VA 23226, telephone: (800) 527-9500.
Additional information may also
be obtained by requesting a copy of the Fund's Statement of Additional
Information.

Investment Advisor: Sand Hill Advisors, Inc.
3000 Sand Hill Road
Building 3, Suite 150
Menlo Park, CA 94025

Distributor: First Dominion Capital Corp.
1500 Forest Avenue
Suite 223
Richmond, VA 23229

Independent Auditors: Tait, Weller & Baker
2 Penn Center
Suite 700
Philadelphia, PA 19102

General Information: For general information on the Fund and, call
the Distributor at (800) 776-5455
Toll Free.

Transfer Agent: For account information, wire purchases
or redemptions, call or write to
the Fund's Transfer Agent:

Fund Services, Inc.
P.O. Box 26305
Richmond, VA 23260-6305
(800) 628-4077 Toll Free

More Information: For 24-hour, 7-days-a-week price
information, call 1-800-527-9500.

No dealer, sales representative or any other person has been authorized
to give any information or to
make any representations, other than those contained in this Prospectus, in
connection with the offer made by
this Prospectus and, if given or made, such other information or representations
must not be relied upon as
having been authorized by the Fund or the Distributor. This Prospectus does not
constitute an offer by the Fund
or the Distributor to sell or a solicitation of an offer to buy any of the
securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction.
<PAGE>
SAND HILL PORTFOLIO MANAGER FUND
a Portfolio of
THE WORLD FUNDS, INC.
NEW ACCOUNT APPLICATION

1. NAME:
Individual

First Middle Last
Joint Owner

First Middle Last
Gift to Minors as custodian for

Name of Custodian
Name of Minor
under the Uniform Gifts to Minors Act (show minor's
Soc. Sec. # below)
State
Other

Name of Corporation , Partnership or other Organization. (NOTE: These
accounts require additional information. Please call Fund Services,
Inc. at 1-800-628-4077)
To open a Trust account please include the pages of the Trust document
which shows the date the Trust was established, the name(s) of the
Trustee(s), and the dated signature page.

ADDRESS AND CITIZENSHIP:
( )

Street Area Code
Daytime Telephone

City State Zip
Code

SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER

CITIZENSHIP OF OWNER, MINOR OR TRUST BENEFICIARY: U.S. Citizen
Resident Alien Non-Resident Alien:
Country of Residence

CITIZENSHIP OF JOINT OWNER: U.S. Citizen Resident Alien

Non-Resident Alien: Country of
Residence

2. INITIAL INVESTMENT (Minimum $25,000)

Sand Hill Portfolio Manager Fund $

(Please make check payable to Sand Hill Portfolio Manager Fund.)

3. DISTRIBUTION OPTION: Income dividends and capital gains are automatically
reinvested, unless you check one of the following: All distributions
in cash
Dividends in cash. Capital gains reinvested in shares.

4. TELEPHONE PRIVILEGES: To use the telephone to authorize the transactions
below,
please check the appropriate box(es):

I (we) hereby authorize Fund Services, Inc. to honor telephone
instructions for my
(our) account. Neither the Company nor Fund Services, Inc. will be
liable for properly
acting upon telephone instructions believed to be genuine which are
confirmed in
accordance with the Company's procedures described in this prospectus.
I (we) understand
that redemptions authorized by telephone are paid by check and mailed
to me (us).

To exchange into shares of other Company series. If an exchange is
the initial
investment, the new fund account will automatically carry the same
account
registration, and these telephone privileges will apply.

5. AUTOMATIC INVESTMENT PLAN: To make automatic monthly investments from

your bank account, check the box below (Minimum monthly investment is
$50.00)

This plan allows me (us) to make automatic monthly investments from
my (our)
bank account. Fund Services, Inc. will transfer money from my (our) bank
account
into the Company. There is no charge, and I may cancel at any time.
Invest $
into my (our) account of the 15th day of each month by transfer from my
(our) bank
account. (Please include a blank voided check.)

6. EMPLOYMENT INFORMATION: We are required by the National Association of
Securities Dealers (NASD) to ask for this information.

<PAGE>
Owners Occupation, Employer & Employers Address:

I am affiliated with, or work for, a member firm of the NASD.

Joint Owner's Occupation, Employer & Employers Address:

I am affiliated with, or work for, a member firm of the NASD.

7. SIGNATURES: Each Owner Must Sign This Section.

The undersigned warrants(s) that I (we) have full authority to make this
application, am
(are) of legal age, and have received and read a current prospectus and
agree to be bound
by its terms. I (we) understand that all shares will be held in
uncertificated form. Share
certificates may be requested, but Telephone Privileges will not then be
available. I (we)
understand that it is my (our) responsibility to read the prospectus of
any fund into which
I (we) exchange and that all information provided in sections 1 and 7
will apply to any
new fund into which my (our) shares may be exchanged. I (we) understand
that neither
the Company nor First Dominion Capital Corp. is a bank, and shares of the
Funds are
not backed or guaranteed by any bank or insured by the FDIC. I (we)
ratify any instructions
(including telephone instructions) given on this account and agree that
neither the Company,
First Dominion Capital Corp. or Fund Services, Inc. will be liable for
any loss, cost or
expense for acting upon any instruction (including telephone
instructions) believed to be genuine
which are confirmed in accordance with the procedures described in the
prospectus.

If I (we) am a (are) U.S. Citizen(s) or Resident Alien(s), as indicated
above, I (we) certify under
penalties of perjury that (1) the Social Security or taxpayer
identification number provided above is
correct, and (2) I (we) are not subject to IRS backup withholding because
(a) I (we)
am (are) exempt from backup withholding, or (b) I (we) have not been
notified by the
IRS that I (we) am (are) subject to backup withholding, or (c) I (we)
have been notified
by the IRS that I (we) am (are) no longer subject to backup withholding.
(Please cross
out item 2 if it does not apply to you.) If I (we) am a (are) Non-
Resident Alien(s), as
indicated above, I (we) certify under penalties of perjury that I (we) am
not a (are not)
U.S. Citizen(s) or Resident Alien(s), and that I (we) am an (are) "exempt
foreign
person(s)" as defined under IRS regulations.

This application is not effective until it is received and accepted by
the Company.

The Internal Revenue Service does not require your consent to any
provision of this document
other than the certifications required to avoid backup withholding.

SIGN HERE: DATE:
19
Signature of Individual (or Custodian)

DATE: 19
Signature of Joint Registrant, if any

PLEASE SEND YOUR COMPLETED APPLICATION AND CHECK, MADE PAYABLE
TO SAND HILL PORTFOLIO MANAGER FUND, IN THE ENCLOSED POSTAGE PAID
ENVELOPE. IF YOU HAVE ANY QUESTIONS, PLEASE CALL THE TRANSFER
AGENT AT 1-800-628-4077.

IF YOU WOULD PREFER TO SEND YOUR APPLICATION AND CHECK BY AN
OVERNIGHT SERVICE, PLEASE SEND IT TO:
FUND SERVICES, INC.
1500 FOREST AVENUE, SUITE 111
RICHMOND, VA 23229

Registered Rep. Name REP. Number
Branch Wire Code

( )

Branch Address Telephone
Number

CORRESPONDENT FIRM IDENTIFICATION:

Firm Name and Address

Authorized Signature
<PAGE>
THE WORLD FUNDS, INC.

SAND HILL PORTFOLIO MANAGER FUND

Statement of Additional Information Dated August , 1997

The World Funds, Inc. (the "Company") is an open-end management
investment company commonly known as a "mutual fund." This Statement of
Additional Information is not a Prospectus but supplements the information
contained in the Prospectus of the Sand Hill Portfolio Manager Fund (the
"Fund"), dated August , 1997. It should be read in conjunction with
the Prospectus and has been designed to provide you with further
information which is not contained in the Prospectus. A Prospectus of the
Fund may be obtained at no charge upon request to the Fund. Please retain
this Statement of Additional Information for future reference.

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 COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS STATEMENT OF ADDITIONAL INFORMATION.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>
TABLE OF CONTENTS

Investment Objective and Policies . . . . . . . . . . . . . . . . . . . . . 1

Special Investment Considerations . . . . . . . . . . . . . . . . . . . . . 1

Investment Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Asset Allocation Categories . . . . . . . . . . . . . . . . . . . . 2
Zero Coupon Securities. . . . . . . . . . . . . . . . . . . . . . . 3
Investment Companies. . . . . . . . . . . . . . . . . . . . . . . . 3
Depositary Receipts . . . . . . . . . . . . . . . . . . . . . . . . 4
Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Mortgage-Backed and Asset-Backed Securities . . . . . . . . . . . . 4
Strategic Transactions. . . . . . . . . . . . . . . . . . . . . . . 4
Convertible Securities. . . . . . . . . . . . . . . . . . . . . . . 9
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . 9
Illiquid Securities . . . . . . . . . . . . . . . . . . . . . . . 10
Restricted Securities . . . . . . . . . . . . . . . . . . . . . . .10
Indexed Securities. . . . . . . . . . . . . . . . . . . . . . . . .10

Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . 11

Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . .17

Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . .17

Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . .20

Investment Advisor. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Transfer Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Expenses of the Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Special Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . .23

General Information and History . . . . . . . . . . . . . . . . . . . . . .24

Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . .27

APPENDIX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

<PAGE>
THE WORLD FUNDS, INC.

SAND HILL PORTFOLIO MANAGER FUND

Statement of Additional Information

The Fund is a series of the Company, a Maryland corporation which is
an open-end, management investment company, commonly known as a "mutual
fund." The Fund is a no-load diversified series of the Company.

Investment Objective and Policies

The Fund's investment objective is to seek to maximize total return
(consisting of realized and unrealized appreciation plus income) consistent
with allocating its investments among equity securities (i.e., stocks),
debt securities (i.e., bonds) and short term investments.

The asset allocation and investment policies of the Fund are described
in the Fund's Prospectus. The following discussion supplements the
information in the Fund's Prospectus with respect to the types of
securities in which the Fund may invest and the investment techniques it
may use in pursuit of its investment objective.

Special Investment Considerations

Investors should recognize that the Fund may invest in both domestic
and foreign securities. Investing in foreign securities involves certain
special considerations, including those set forth below, which are not
typically associated with investing in United States securities and which
may favorably or unfavorably affect the performance of the Fund. As
foreign companies are not generally subject to the same uniform standards,
practices and requirements with respect to accounting, auditing and
financial reporting as are domestic companies, there may be less publicly
available information about a foreign company than about a domestic
company. Many foreign securities markets, while growing in volume of
trading activity, have substantially less volume than the U.S. market, and
securities of some foreign issuers are less liquid and more volatile than
securities of domestic issuers. Similarly, volume and liquidity in most
foreign bond markets is less than in the United States and, at times,
volatility of price can be greater than in the United States. Furthermore,
foreign markets have different clearance and settlement procedures and in
certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult
to conduct such transactions. Delays in settlement could result in
temporary periods when assets of a fund are uninvested and no return is
earned thereon. Inability to dispose of portfolio securities due to
settlement problems either could result in losses to a fund due to
subsequent declines in value of the portfolio security or, if a fund has
entered into a contract to sell the security, could result in possible
liability to the purchaser. Fixed commissions on some foreign securities
exchanges and bid-to- asked spreads in foreign bond markets are generally
higher than negotiated commissions on U.S. exchanges and bid-to-asked
spreads in the U.S. bond market, although the Fund will endeavor to achieve
the most favorable net results on its portfolio transactions. Further, a
fund may encounter difficulties or be unable to pursue legal remedies and
obtain judgments in foreign courts. There is generally less government
supervision and regulation of business and industry practices, securities
exchanges, brokers and listed companies than in the United States.
Communications between the United States and foreign countries may be less
reliable than within the United States, thus increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. In addition, with respect to certain foreign countries, there
is the possibility of expropriation or confiscatory taxation, political or
social instability, or diplomatic developments which could affect United
States investments in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the United States
economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. Sand Hill Advisors, Inc. (the "Investment Advisor")
seeks to mitigate the risks associated with the foregoing considerations
through continuous professional management.

Investments in foreign securities usually will involve currencies of
foreign countries. Because of the considerations discussed above, the
value of the assets of the Fund, as measured in U.S. dollars, may be
affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations, and the Fund may incur costs in
connection with conversions between various currencies. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a
profit based on the difference (the "spread") between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to a fund at one rate, while offering a lesser
rate of exchange should the fund desire to resell that currency to the
dealer. The Fund will conduct its foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market, or through entering into forward
contracts to purchase or sell foreign currencies. The Fund may, for
hedging purposes, purchase foreign currencies in the form of bank deposits.

Because the Fund may be invested in both U.S. and foreign securities
markets, changes in its share price may have a low correlation with
movements in the U.S. markets. The Fund's share price will reflect the
movements of the markets in which it is invested and of the currencies in
which the investments are denominated; the strength or weakness of the U.S.
dollar against foreign currencies may account for part of the Fund's
investment performance. Foreign securities such as those purchased by the
Fund may be subject to foreign government taxes which could reduce the
yield on such securities, although a shareholder of the Fund may, subject
to certain limitations, be entitled to claim a credit or deduction for U.S.
federal income tax purposes for his or her proportionate share of such
foreign taxes paid by the Fund (see "Taxes"). U.S. and foreign securities
markets do not always move in step with each other and the total returns
from different markets may vary significantly.

The Fund cannot guarantee a gain or eliminate the risk of loss. The
Fund's net asset value per share will increase or decrease with changes in
the market price of the Fund's investments, and there is no assurance that
the Fund's investment objective will be achieved.

Investment Techniques

Asset Allocation Categories. The Fund invests in three major
categories of investments: equity securities, debt securities and short-
term investments. Each of these categories may include securities of
domestic or foreign issuers.

Equity securities consist of common stocks, securities which are
convertible into common stocks, such as convertible bonds, preferred
stocks, depositary receipts, securities of investment companies, rights and
warrants. The Investment Advisor allocates the Fund's equity investments
to industries it believes will benefit from major trends and to individual
stocks which exhibit superior prospects for enhancing the Fund's total
return.

Debt securities consist of bonds, notes, convertible bonds, asset-
backed and mortgage-backed securities, government and government agency
securities, zero coupon securities, and other debt securities whose
purchase is consistent with the Fund's investment objective. The Fund's
investments may include international bonds that are denominated in foreign
currencies, including the European Currency Unit. International bonds are
defined as bonds issued in countries other than the United States. The
Fund's investments may include debt securities issued or guaranteed by
supranational organizations, corporate debt securities, bank or holding
company debt securities.

The Fund may purchase "investment-grade" bonds, which are those rated
Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB or
higher by Standard & Poor's Ratings Group ("S&P"), or unrated securities
which the Investment Advisor believes are of comparable quality. The Fund
may also invest up to 10% of its assets in lower rated securities or
securities which are unrated but are of comparable quality as determined by
the Investment Advisor. Bonds rated Baa or BBB may have speculative
elements as well as investment-grade characteristics. The Fund may invest
in debt securities which are rated as low as C by Moody's or D by S&P.
Securities rated D may be in default with respect to payment of principal
or interest. See the Appendix for a description of bond ratings.

Short-term investments are debt obligations. For purposes of the
Fund's asset allocation policies, short-term investments are differentiated
from debt securities. Short-term investments are generally used to protect
the Fund against adverse movements of interest rates or currency exchange
rates or to provide the Fund with liquidity. Debt securities, on the other
hand, are generally used to seek superior total return by taking advantage
of yield differentials between different securities.

Zero Coupon Securities. The Fund may invest in zero coupon securities
as described in the Prospectus. Zero coupon securities which are
convertible into common stock offer the opportunity for capital
appreciation as increases (or decreases) in market value of such securities
closely follows the movements in the market value of the underlying common
stock. Zero coupon convertible securities generally are expected to be
less volatile than the underlying common stocks as they usually are issued
with short maturities (15 years or less) and are issued with options and/or
redemption features exercisable by the holder of the obligation entitling
the holder to redeem the obligation and receive a defined cash payment.

Zero coupon securities include securities issued directly by the U.S.
Treasury, and U.S. Treasury bonds or notes and their unmatured interest
coupons and receipts for their underlying principal ("coupons") which have
been separated by their holder, typically a custodian bank or investment
brokerage firm. A holder will separate the interest coupons from the
underlying principal (the "corpus") of the U.S. Treasury security. A
number of securities firms and banks have stripped the interest coupons and
receipts and then resold them in custodial receipt programs with a number
of different names, including Treasury Income Growth Receipts (TIGRS-TM)
and Certificate of Accrual on Treasuries (CATS-TM). The underlying U.S.
Treasury bonds and notes themselves are held in book-entry form at the
Federal Reserve Bank or, in the case of bearer securities (i.e.,
unregistered securities which are owned ostensibly by the bearer or holder
thereof), in trust on behalf of the owners thereof. Counsel to the
underwriters of these certificates, or other evidences of ownership of the
U.S. Treasury securities, has stated that for federal tax and securities
purposes, in their opinion purchasers of such certificates, such as the
Fund, most likely will be deemed the beneficial holder of the underlying
U.S. Government securities. The Fund understands that the staff of the
Division of Investment Management of the SEC no longer considers such
privately stripped obligations to be U.S. Government securities, as defined
in the 1940 Act; therefore, the Fund intends to adhere to this staff
position and will not treat such privately stripped obligations to be U.S.
Government securities for the purpose of determining the Fund's
"diversification."

When U.S. Treasury obligations have been stripped of their unmatured
interest coupons by the holder, the principal or corpus is sold at a deep
discount because the buyer receives only the right to receive a future
fixed payment on the security and does not receive any rights to periodic
interest (cash) payments. Once stripped or separated, the corpus and
coupons may be sold separately. Typically, the coupons are sold separately
or grouped with other coupons with like maturity dates and sold bundled in
such form. Purchasers of stripped obligations acquire, in effect, discount
obligations that are economically identical to the zero coupon securities
that the Treasury sells itself (see "Taxes").

Investment Companies. The Fund may invest up to 10% of its assets in
shares of closed-end investment companies. Investments in such investment
companies are subject to limitations under the Investment Company Act of
1940, as amended (the "1940 Act"). Investment in closed-end funds is
subject to the willingness of investors to sell their shares in the open
market and the Fund may have to pay a substantial premium to acquire shares
of closed-end funds in the open market. The yield of such securities will
be reduced by the operating expenses of such companies. Under the 1940 Act
limitations, the Fund may not own more than 3% of the total outstanding
voting stock of any other investment company nor may it invest more than 5%
of its assets in any one investment company or invest more than 10% of its
assets in securities of all investment companies combined. An investor in
the Fund should recognize that he may invest directly in other investment
companies and that, by investing in investment companies indirectly through
the Fund, he will bear not only his proportionate share of the Fund's
expenses (including operating costs and investment advisory and
administrative fees) but also, indirectly, similar expenses of the
underlying investment company. Finally, an investor should recognize that,
as a result of the Fund's policies of investing in other investment
companies, he may receive taxable capital gains distributions to a greater
extent than would be the case if he invested directly in the underlying
investment companies.

Depositary Receipts. The Fund may utilize depositary receipts, as
described in the Prospectus. For purposes of determining the country of
origin, depositary receipts and closed-end investment companies which
invest primarily in foreign securities will be deemed to be foreign
securities.

Warrants. The Fund may invest up to 5% of its net assets in warrants,
provided that no more than 2% of its net assets may be invested in warrants
that are not listed on the New York Stock Exchange or the American Stock
Exchange. A warrant is a long-term option issued by a corporation that
generally gives the investor the right of buying a specified number of
shares of the underlying common stock of the issuer at a specified exercise
price at any time on or before an expiration date. If the Fund does not
exercise or dispose of a warrant prior to its expiration, it will expire
worthless.

Mortgage-Backed and Asset-Backed Securities. Mortgage-backed
securities include, but are not limited to, securities issued by the
Government National Mortgage Association and The Federal Home Loan Mortgage
Association. Mortgage-backed securities represent ownership in specific
pools of mortgage loans. Unlike traditional bonds which pay principal only
at maturity, mortgage-backed securities make unscheduled principal payments
to the investor as principal payments are made on the underlying loans in
each pool. Like other fixed-income securities, when interest rates rise,
the value of a mortgage-backed security will decline. However, when
interest rates decline, the value of a mortgage-backed security with
prepayment features may not increase as much as other fixed-income
securities.

Asset-backed securities participate in, or are secured by and payable
from, a stream of payments generated by particular assets, such as credit
card, motor vehicle or trade receivables. They may be pass-through
certificates which are similar to mortgage-backed commercial paper, which
is issued by an entity organized for the sole purpose of issuing the
commercial paper and purchasing the underlying assets. The credit quality
of asset-backed securities depends primarily on the quality of the
underlying assets and the level of any credit support provided. The
weighted average lives of mortgage-backed and asset-backed securities are
likely to be substantially shorter than their stated final maturity dates
would imply because of the effect of scheduled and unscheduled principal
prepayments. Pay-downs of mortgage-backed and asset-backed securities may
result in income or loss being realized earlier than anticipated for tax
and accounting purposes.

Strategic Transactions. The Fund may, but is not required to, utilize
various other investment strategies described below which use derivative
investments to hedge various market risks (such as changes in interest
rates, currency exchange rates, and securities prices) or to enhance
potential gain.

In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed put and call options on securities or
securities indices, and enter into various currency transactions such as
currency forward contracts, or options on currencies (collectively, all the
above are called "Strategic Transactions"). Strategic Transactions may be
used to attempt to protect against possible changes in the market value of
securities held in, or to be purchased for, the Fund's portfolio resulting
from securities markets or currency exchange rate fluctuations, to protect
the Fund's unrealized gains in the value of its portfolio securities, to
facilitate the sale of such securities for investment purposes, or to
establish a position in the options markets as a temporary substitute for
purchasing or selling particular securities. Any or all of these
investment techniques may be used at any time and there is no particular
strategy that dictates the use of one technique rather than another, as use
of any Strategic Transaction is a function of numerous variables including
market conditions. The ability of the Fund to utilize these Strategic
Transactions successfully will depend on the Advisor's ability to predict
pertinent market movements, which cannot be assured. The Fund will comply
with applicable regulatory requirements when implementing these strategies,
techniques and instruments.

Strategic Transactions have risks associated with them including
possible default by the other party to the transaction, illiquidity and, to
the extent the Investment Advisor's view as to certain market movements is
incorrect, the risk that the use of such Strategic Transactions could
result in losses greater than if they had not been used. Use of put and
call options may result in losses to the Fund, force the sale or purchase
of portfolio securities at inopportune times or for prices higher than (in
the case of put options) or lower than (in the case of call options)
current market values, limit the amount of appreciation the Fund can
realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the
imposition of exchange controls, suspension of settlements, or the
inability to deliver or receive a specified currency. Although the use of
options transactions for hedging should tend to minimize the risk of loss
due to a decline in the value of the hedged position, at the same time it
tends to limit any potential gain which might result from an increase in
value of such position. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such
losses can be greater than if the Strategic Transactions had not been
utilized.

General Characteristics of Options. Put options and call options
typically have similar structural characteristics and operational mechanics
regardless of the underlying instrument on which they are purchased or
sold. Thus, the following general discussion relates to each of the
particular types of options discussed in greater detail below. In
addition, many Strategic Transactions involving options require segregation
of the Fund's assets in special accounts, as described below under "Use of
Segregated and Other Special Accounts."

A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the
underlying security, currency or other instrument at the exercise price.
For instance, the Fund's purchase of a put option on a security might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market
value by giving the Fund the right to sell such instrument at the option
exercise price. The purchase of a put option will constitute a short sale
for federal tax purposes. The purchase of a put at a time when the
substantially identical security held long has not exceeded the long term
capital gain holding period could have adverse tax consequences. The
holding period of the long position will be cut off so that even if the
security held long is delivered to close the put, short term gain will be
recognized. If substantially identical securities are purchased to close
the put, the holding period of the securities purchased will not begin
until the closing date. The holding period of the substantially identical
securities not delivered to close the short sale will commence on the
closing of the short sale.

A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the
underlying instrument at the exercise price. The Fund's purchase of a call
option on a security, securities index, currency or other instrument might
be intended to protect the Fund against an increase in the price of the
underlying security.
An American style put or call option may be exercised at any time
during the option period while a European style put or call option may be
exercised only upon expiration or during a fixed period prior thereto. The
Fund is authorized to purchase and sell exchange listed options only.
Exchange listed options are issued by a regulated intermediary such as the
Options Clearing Corporation ("OCC"), which guarantees the performance of
the obligations of the parties to such options. The discussion below uses
the OCC as an example, but is also applicable to other financial
intermediaries.

With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or
currency, although in the future cash settlement may become available.
Index options are each settled for the net amounts, if any, by which the
option is "in the money" (i.e., where the value of the underlying
instrument exceeds, in the case of a call option, or is less than, in the
case of a put option, the exercise price of the option) at the time the
option is exercised. Frequently, rather than taking or making delivery of
the underlying security through the process of exercising the option,
listed options are closed by entering into offsetting purchase or sale
transactions that do not result in ownership of the new option.

The Fund's ability to close out its position as a purchaser or seller
of an OCC or exchange listed put or call option is dependent, in part, upon
liquidity of the option market. Among the possible reasons for the absence
of a liquid option market on an exchange are: (i) insufficient trading
interest in certain options; (ii) restrictions on transactions imposed by
an exchange; (iii) trading halts, suspensions or other restrictions imposed
with respect to particular classes or series of options or underlying
securities including reaching daily price limits; (iv) interruption of the
normal operations of the OCC or an exchange; (v) inadequacy of the
facilities of an exchange or OCC to handle current trading volume; or (vi)
a decision by one or more exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the relevant
market for that option on that exchange would cease to exist, although
outstanding options on that exchange would generally continue to be
exercisable in accordance with their terms.

The hours of trading for listed options may not coincide with the
hours during which the underlying financial instruments are traded. To the
extent that the option markets close before the markets for the underlying
financial instruments, significant price and rate movements can take place
in the underlying markets that cannot be reflected in the option markets.

If the Fund sells a call option, the premium that it receives may
serve as a partial hedge, to the extent of the option premium, against a
decrease in the value of the underlying securities or instruments in its
portfolio or will increase the Fund's income. The sale of put options can
also provide income.

The Fund may purchase and sell exchange-listed call options on
securities that are traded in U.S. and foreign securities exchanges and on
securities indices and currencies. All calls sold by the Fund must be
"covered" (i.e., the Fund must own the securities subject to the call) or
must meet the asset segregation requirements described below as long as the
call is outstanding. Even though the Fund will receive the option premium
to help protect it against loss, a call sold by the Fund exposes the Fund
during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security or instrument
and may require the Fund to hold a security or instrument which it might
otherwise have sold.

The Fund may purchase and sell exchange-listed put options on
securities (whether or not it holds the above securities in its
portfolio), and on securities indices and currencies. The Fund will not
sell put options if, as a result, more than 25% of the Fund's assets would
be required to be segregated to cover its potential obligations under such
put options. In selling put options, there is a risk that the Fund may be
required to buy the underlying security at a disadvantageous price above
the market price. For tax purposes, the purchase of a put is treated as a
short sale which may cut off the holding period for the security so it is
treated as generating gain on securities held less than three months or
short term capital gain (instead of long term) as the case may be.

Options on Securities Indices and Other Financial Indices. The Fund
may also purchase and sell call and put options on securities indices and
other financial indices and in so doing can achieve many of the same
objectives it would achieve through the sale or purchase of options on
individual securities or other instruments. Options on securities indices
and other financial indices are similar to options on a security or other
instrument except that, rather than settling by physical delivery of the
underlying instrument, they settle by cash settlement, i.e., an option on
an index gives the holder the right to receive, upon exercise of the option
an amount of cash if the closing level of the index upon which the option
is based exceeds, in the case of a call or is less than, in the case of a
put, the exercise price of the option. This amount of cash is equal to the
excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery
of this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry
or other composite on which the underlying index is based, rather than
price movements in individual securities, as is the case with respect to
options on securities.
Currency Transactions. The Fund may engage in currency transactions
with counterparties in order to hedge the value of portfolio holdings
denominated in particular currencies against fluctuations in relative
value. The Fund's currency transactions may include forward currency
contracts and exchange listed options on currencies. A forward currency
contract involves a privately negotiated obligation to purchase or sell
(with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed
upon by the parties, at a price set at the time of the contract.

The Fund's dealings in forward currency contracts will be limited to
hedging involving either specific transactions or portfolio positions.
Specific transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities
or the receipt of income therefrom. Position hedging is entering into a
currency transaction with respect to portfolio security positions
denominated or generally quoted in that currency.

The Fund will not enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at
the time of entering into the transaction) of the securities held in its
portfolio that are denominated or generally quoted in or currently
convertible into such currency, other than with respect to proxy hedging as
described below.

The Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in
value relative to other currencies to which the Fund has or in which the
Fund expects to have portfolio exposure.

To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, the Fund may also engage
in proxy hedging. Proxy hedging is often used when the currency to which a
fund's portfolio is exposed is difficult to hedge or to hedge against the
dollar. Proxy hedging entails entering into a forward contract to sell a
currency whose changes in value are generally considered to be linked to a
currency or currencies in which some or all of the fund's portfolio
securities are or are expected to be denominated, and to buy U.S. dollars.
The amount of the contract would not exceed the value of the Fund's
securities denominated in linked currencies. For example, if the
Investment Advisor considers that the Austrian schilling is linked to the
German deutschemark (the "D-mark"), the Fund holds securities denominated
in schillings and the Investment Advisor believes that the value of
schillings will decline against the U.S. dollar, the Investment Advisor may
enter into a contract to sell D-marks and buy dollars. Currency hedging
involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to a
fund if the currency being hedged fluctuates in value to a degree or in a
direction that is not anticipated. Further, there is the risk that the
perceived linkage between various currencies may not be present or may not
be present during the particular time that a fund is engaging in proxy
hedging. If the Fund enters into a currency hedging transaction, it will
comply with the asset segregation requirements described below.

Risks of Currency Transactions. Currency transactions are subject to
risks different from those of other portfolio transactions. Because
currency control is of great importance to the issuing governments and
influences economic planning and policy, purchases and sales of currency
and related instruments can be negatively affected by government exchange
controls, blockages, and manipulations or exchange restrictions imposed by
governments. These can result in losses to a fund if it is unable to
deliver or receive currency or funds in settlement of obligations and could
also cause hedges it has entered into to be rendered useless, resulting in
full currency exposure as well as incurring transaction costs. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.

Risks of Strategic Transactions Outside the United States. When
conducted outside the United States, Strategic Transactions may not be
regulated as rigorously as in the United States, may not involve a clearing
mechanism and related guarantees, and are subject to the risk of
governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions
also could be adversely affected by: (i) other complex foreign political,
legal and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in a fund's
ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than
in the United States, and (v) lower trading volume and liquidity.

Use of Segregated and Other Special Accounts. Many Strategic
Transactions, in addition to other requirements, require that a fund
segregate liquid high grade assets with its custodian to the extent fund
obligations are not otherwise "covered" through the ownership of the
underlying security, financial instruments or currency. In general, either
the full amount of any obligation by a fund to pay or deliver securities or
assets must be covered at all times by the securities, instruments or
currency required to be delivered, or, subject to any regulatory
restrictions, an amount of cash or liquid high grade securities at least
equal to the current amount of the obligation must be segregated with the
custodian. The segregated assets cannot be sold or transferred unless
equivalent assets are substituted in their place or it is no longer
necessary to segregate them. For example, a call option written by a fund
will require the fund to hold the securities subject to the call (or
securities convertible into the needed securities without additional
consideration) or to segregate liquid high-grade securities sufficient to
purchase and deliver the securities if the call is exercised. A call
option sold by a fund on an index will require the fund to own portfolio
securities which correlate with the index or segregate liquid high grade
assets equal to the excess of the index value over the exercise price on a
current basis. A put option written by a fund requires the fund to
segregate liquid, high grade assets equal to the exercise price.

Except when a fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates a fund to buy or sell
currency will generally require the fund to hold an amount of that currency
or liquid securities denominated in that currency equal to the fund's
obligations or to segregate liquid high grade assets equal to the amount of
the fund's obligation.

OCC issued and exchange listed index options will generally provide
for cash settlement. As a result, when the Fund sells these instruments it
will only segregate an amount of assets equal to its accrued net
obligations, as there is no requirement for payment or delivery of amounts
in excess of the net amount. These amounts will equal 100% of the exercise
price in the case of a non cash-settled put, the same as an OCC guaranteed
listed option sold by the Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In
addition, when the Fund sells a call option on an index at a time when the
in-the-money amount exceeds the exercise price, the Fund will segregate,
until the option expires or is closed out, cash or cash equivalents equal
in value to such excess. OCC issued and exchange listed options sold by
the Fund other than those generally settle with physical delivery, and the
Fund will segregate an amount of assets equal to the full value of the
option.

Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. The Fund may also enter into
offsetting transactions so that its combined position, coupled with any
segregated assets, equals its net outstanding obligation in related options
and Strategic Transactions. For example, the Fund could purchase a put
option if the strike price of that option is the same or higher than the
strike price of a put option sold by the Fund. Moreover, instead of
segregating assets if the Fund held a forward contract, it could purchase a
put option on the same forward contract with a strike price as high or
higher than the price of the contract held. Other Strategic Transactions
may also be offered in combinations. If the offsetting transaction
terminates at the time of or after the primary transaction no segregation
is required, but if it terminates prior to such time, assets equal to any
remaining obligation would need to be segregated.

The Fund's activities involving Strategic Transactions may be limited
by the requirements of Subchapter M of the Internal Revenue Code for
qualification as a regulated investment company. (See "Taxes.")

Convertible Securities. The Fund may invest in convertible
securities, that is, bonds, notes, debentures, preferred stocks and other
securities which are convertible into common stock. Investments in
convertible securities can provide an opportunity for capital appreciation
and/or income through interest and dividend payments by virtue of their
conversion or exchange features. The Fund will limit its purchases of
convertible securities to debt securities convertible into common stocks.

The convertible securities in which the Fund may invest are either
fixed income or zero coupon debt securities which may be converted or
exchanged at a stated or determinable exchange ratio into underlying shares
of common stock. The exchange ratio for any particular convertible
security may be adjusted from time to time due to stock splits, dividends,
spin-offs, other corporate distributions or scheduled changes in the
exchange ratio. Convertible debt securities and convertible preferred
stocks, until converted, have general characteristics similar to both debt
and equity securities. Although to a lesser extent than with debt
securities generally, the market value of convertible securities tends to
decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion or exchange
feature, the market value of convertible securities typically changes as
the market value of the underlying common stocks changes, and, therefore,
also tends to follow movements in the general market for equity securities.
A unique feature of convertible securities is that as the market price of
the underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the
market price of the underlying common stock increases, the prices of the
convertible securities tend to rise as a reflection of the value of the
underlying common stock, although typically not as much as the underlying
common stock. While no securities investments are without risk,
investments in convertible securities generally entail less risk than
investments in common stock of the same issuer.

As debt securities, convertible securities are investments which
provide for a stream of income (or in the case of zero coupon securities,
accretion of income) with generally higher yields than common stocks. Of
course, like all debt securities, there can be no assurance of income or
principal payments because the issuers of the convertible securities may
default on their obligations. Convertible securities generally offer lower
yields than non-convertible securities of similar quality because of their
conversion or exchange features.
Convertible securities generally are subordinated to other similar but
non-convertible securities of same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment on all
equity securities, and convertible preferred stock is senior to common
stock, of the same issuer. However, because of the subordination feature,
convertible bonds and convertible preferred stock typically have lower
ratings than similar non-convertible securities. Convertible securities
may be issued as fixed income obligations that pay current income or as
zero coupon notes and bonds, including Liquid Yield Option Notes ("LYONs").

Repurchase Agreements. The Fund may enter into repurchase agreements
(which enables it to employ its assets pending investment) during very
short periods of time. Ordinarily these agreements permit the Fund to
maintain liquidity and earn higher rates of return than would normally be
available from other short-term money-market instruments.

Under a repurchase agreement, a fund buys a money-market instrument
and obtains a simultaneous commitment from the seller to repurchase the
investment at a specified time and at an agreed upon yield to the fund.
The seller is required to pledge cash and/or collateral which is equal to
at least 100 percent of the value of the commitment to repurchase. The
collateral is held by the fund's custodian. The Fund will only enter into
repurchase agreements involving U.S. Government securities in which it may
otherwise invest. Repurchase agreements are considered securities issued
by the seller for purposes of the diversification test under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"), and not
cash, a cash item or a U.S. Government security.

The term "U.S. Government securities" refers to a variety of
securities which are issued or guaranteed by the United States Treasury, by
various agencies of the United States Government, and by various
instrumentalities which have been established or sponsored by the United
States Government. U.S. Treasury securities are backed by the "full faith
and credit" of the United States. Securities issued or guaranteed by
Federal agencies and U.S. Government sponsored instrumentalities may or may
not be backed by the full faith and credit of the United States. In the
case of securities not backed by the full faith and credit of the United
States, the investor must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, and may not
be able to assert a claim against the United States itself in the event the
agency or instrumentality does not meet its commitment. An instrumentality
of the U.S. Government is a government agency organized under Federal
charter with government supervision.

It is the Fund's practice to enter into repurchase agreements with
selected banks and securities dealers, depending upon the availability of
the most favorable yields. The Fund will always seek to perfect its
security interest in the collateral. If the seller of a repurchase
agreement defaults, the Fund may incur a loss if the value of the
collateral securing the repurchase agreement declines. The Investment
Advisor monitors the value of the collateral to ensure that its value
always equals or exceeds the repurchase price and also monitors the
financial condition of the issuer of the repurchase agreement. If the
seller defaults, the Fund may incur disposition costs in connection with
liquidating the collateral of that seller. If bankruptcy proceedings are
commenced with respect to the seller, realization upon the collateral by
the Fund may be delayed or limited.

Illiquid Securities. Normally, the Fund will not invest more than 5%
of its net assets in securities which are illiquid or not readily
marketable; however, the Fund is permitted to invest up to 15% of its net
assets in such securities. Illiquid securities are securities that cannot
be sold in the ordinary course of business at approximately the prices at
which they are carried on the Fund's books. The Fund will treat as
illiquid repurchase agreements with maturities in excess of seven days.
Illiquid securities do not include those securities that meet the
requirements of Rule 144A under the Securities Act of 1933, and that have
been determined to be liquid by the Investment Advisor under the
supervision of the Fund's Board of Directors.

In determining the liquidity of the Fund's portfolio securities, the
Investment Advisor will consider all appropriate factors, such as: the
frequency of trading in the security; the number of dealers in, and
potential purchasers of, the security; dealer undertakings to maintain a
market in the security; whether the security is subject to demand or tender
features which enhance its marketability; and the nature of the marketplace
for trading. If market quotations are not available, illiquid securities
are valued at fair value as determined in good faith by the Fund's Board of
Directors or a committee thereof.

Restricted Securities. The Fund may invest in restricted securities.
Generally, "restricted securities" are securities which have legal or
contractual restrictions on their resale. In some cases, these legal or
contractual restrictions may impair the liquidity of a restricted security;
in others, the legal or contractual restrictions may not have a negative
effect on the liquidity of the security. Restricted securities which are
deemed by the Investment Advisor to be illiquid will be included in the
Fund's policy which limits investments in illiquid securities.

Indexed Securities. The Fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
or other financial indicators. Indexed securities, or structured notes,
are usually debt securities whose value at maturity or coupon rate is
determined by reference to a specific instrument or index. Gold-indexed
securities, for example, typically provide for a maturity value that
depends on the price of gold, resulting in a security whose price tends to
rise and fall together with gold prices.

The performance of indexed securities depends to a great extent on the
performance of the security, index, currency or other instrument to which
they are indexed, and may also be influenced by changes in interest rates.
Indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's credit-worthiness deteriorates. Recent issuers of indexed
securities have included banks, corporations, and certain U.S. government
agencies. Indexed securities may be more volatile than their underlying
instruments.

Investment Restrictions

The policies set forth below are fundamental policies of the Fund and
may not be changed without approval of a majority of the outstanding voting
securities of the Fund. As used in this Statement of Additional
Information a "majority of the outstanding voting securities of the Fund"
means the lesser of (1) 67% or more of the voting securities present at
such meeting, if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy; or (2) more
than 50% of the outstanding voting securities of the Fund.

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

1. as to 75% of its assets, purchase the securities of any issuer (other
than obligations issued or guaranteed as to principal and interest by
the Government of the United States or any agency or instrumentality
thereof) if, as a result of such purchase, more than 5% of its total
assets would be invested in the securities of such issuer;

2. purchase stock or securities of an issuer (other than obligations
issued or guaranteed as to principal and interest by the Government of
the United States or any agency or instrumentality thereof) if such
purchase would cause the Fund to own more than 10% of any class of the
outstanding stock or securities or more than 10% of any class of
voting securities of such issuer;

3. borrow money, except through reverse repurchase agreements or from
banks for temporary or emergency purposes, and then only in an amount
not in excess of 20% of the value of the Fund's net assets at the time
the borrowing is made (borrowings in excess of 5% will be subject to
300% asset coverage requirements of the 1940 Act), provided that the
Fund will not purchase portfolio securities when its borrowings exceed
5% of its total assets;

4. purchase the securities of any issuer (other than obligations issued
or guaranteed by the Government of the United States or any agency or
instrumentality thereof) if, as a result of such purchase, more than
25% of the Fund's total assets would be invested in any one industry;

5. act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund;

6. make loans to other persons, except (a) loans of portfolio securities,
and (b) to the extent that the entry into repurchase agreements and
the purchase of debt securities in accordance with its investment
objective and investment policies may be deemed to be loans;

7. issue senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur, and except for shares of
the separate classes or series of the corporation of which the Fund
is a series; provided that the segregation of assets or other
collateral arrangements with respect to currency-related contracts,
futures contracts, options or other permitted investments, including
deposits of initial and variation margin, are not considered to be the
issuance of senior securities for purposes of this restriction, and
obligations for which the Fund segregates assets in accordance with
securities regulatory requirements will not be deemed to be senior
securities;

8. purchase or sell real estate (except that the Fund may invest in (i)
securities of companies which deal in real estate, or mortgages, and
(ii) securities secured by real estate or interests therein, and that
the Fund reserves freedom of action to hold and to sell real estate
acquired as a result of the Fund's ownership of securities) or
purchase or sell physical commodities or contracts relating to
physical commodities.

The Fund has voluntarily adopted certain policies and restrictions
which are observed in the conduct of its affairs. These represent
intentions of the Directors based upon current circumstances. They differ
from fundamental investment policies in that they may be changed or amended
by action of the Directors without requiring prior notice to or approval of
shareholders.

The following policies are not fundamental policies and may be changed
without shareholder approval. The Fund does not currently intend to:

(a) purchase or sell futures contracts or options thereon;

(b) make short sales of securities;

(e) purchase or retain securities of any open-end investment
company; purchase securities of closed-end investment companies
except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase;
however, the Fund may acquire investment company securities in
connection with a plan of merger, consolidation, reorganization
or acquisition of assets; in any event, the Fund may not purchase
more than 3% of the outstanding voting securities of another
investment company, may not invest more than 5% of its assets in
another investment company, and may not invest more than 10% of
its assets in other investment companies;

(f) borrow, pledge, mortgage or hypothecate its assets in excess,
together with permitted borrowings, of 1/3 of its total assets;

(g) purchase securities on margin, except that the Fund may obtain
such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection
with futures contracts and options on futures contracts, if any,
shall not constitute purchasing securities on margin.

(h) invest more than 15% of its net assets in securities which are
illiquid or not readily marketable, including repurchase
agreements which are not terminable within 7 days (normally, no
more than 5% of the Fund's net assets will be invested in such
securities).

*(i) purchase put options or write covered call options if,
as a
result, more than 25% of the Fund's total assets would be
hedged with options;

*(j) write put options if, as a result, the Fund's total
obligations upon exercise of written put options would
exceed 25% of the Fund's total assets;

*(k) purchase call options if, as a result, the current value
of
options premiums for call options purchased by the Fund
would exceed 5% of the Fund's total assets;

(l) purchase warrants, valued at the lower of cost or market, in
excess of 5% of the value of the Fund's net assets; provided that
no more than 2% of the Fund's net assets may be warrants that are
not listed on the New York Stock Exchange or the American Stock
Exchange.

*NOTE: items (i), (j) and (k) above do not apply to options
attached to, or purchased as a part of, their underlying
securities.

If a percentage restriction on investment or utilization of assets as
set forth under "Investment Restrictions" and "Other Investment Policies"
above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the value or the total cost of the
Fund's assets will not be considered a violation of the restriction.

In order to satisfy certain state regulatory requirements the Fund has
agreed that, so long as its shares are offered for sale in such state(s),
it will not:

1. invest in interests in oil, gas, or other mineral exploration or
development programs;

2. invest more than 5% of its total assets in the securities of any
issuers which have (together with their predecessors) a record of
less than three years continuous operations;

3. purchase or retain any securities if (i) one or more officers or
directors of the Fund or its investment advisor individually own
or would own, directly or beneficially, more than 1/2 of 1 per
cent of the securities of such issuer, and (ii) in the aggregate
such persons own or would own more than 5% of such securities.

Taxes

The Fund will seek to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Such qualification does not involve governmental supervision or management
of investment practices or policy.

A regulated investment company qualifying under Subchapter M of the
Code is required to distribute to its shareholders at least 90% of its
investment company taxable income (including net short-term capital gain)
and generally is not subject to federal income tax (assuming the Fund meets
the 90% and 30% of gross income tests and the tax diversification test of
Subchapter M) to the extent that it distributes annually its investment
company taxable income and net realized capital gains in the manner
required under the Code. The Fund intends to distribute at least annually
all of its investment company taxable income and net realized capital gains
and therefore generally does not expect to pay federal income taxes.

The Fund is subject to a 4% nondeductible excise tax on amounts
required to be but which are not distributed under a prescribed formula.
The formula requires payment to shareholders during a calendar year of
distributions representing at least 98% of the Fund's ordinary income for
the calendar year, at least 98% of the excess of its capital gains over
capital losses (adjusted for certain ordinary losses prescribed by the
Code) realized during the one-year period ending October 31 during such
year, and all ordinary income and capital gains for prior years that were
not previously distributed.

Investment company taxable income generally includes dividends,
interest, net short-term capital gains in excess of net long-term capital
losses, and net foreign currency gains, if any, less expenses. Realized
net capital gains for a fiscal year are computed by taking into account any
capital loss carryforward of the Fund.

If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment,
requiring federal income taxes to be paid thereon by the Fund, the Fund
intends to elect to treat such capital gains as having been distributed to
shareholders. As a result, each shareholder will report such capital gains
as long-term capital gains, will be able to claim his/her share of federal
income taxes paid by the Fund on such gains as a credit against his/her own
federal income tax liability, and will be entitled to increase the adjusted
tax basis of his/her Fund shares by the difference between his/her pro rata
share of such gains and his/her tax credit.

Distributions of investment company taxable income are taxable to
shareholders as ordinary income.

Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders as long-term capital
gain, regardless of the length of time the shares of the Fund have been
held by such shareholders. Such distributions are not eligible for a
dividends-received deduction for corporate investors.

Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in
shares or in cash. Shareholders electing to receive distributions in the
form of additional shares will have a cost basis for federal income tax
purposes in each share so received equal to the net asset value of a share
on the reinvestment date.

All distributions of investment company taxable income and realized
net capital gain, whether received in shares or in cash, must be reported
by each shareholder on his or her federal income tax return. Dividends and
capital gains distributions declared in October, November or December and
payable to shareholders of record in such a month will be deemed to have
been received by shareholders on December 31 if paid during January of the
following year. Redemptions of shares, including exchanges for shares of
another fund, may result in tax consequences (gain or loss) to the
shareholder and are also subject to information reporting requirements.

An individual may make a deductible IRA contribution of up to $2,000
or, if less, the amount of the individual's earned income for any taxable
year if (i) neither the individual nor his or her spouse (unless filing
separate returns) is an active participant in an employer's retirement
plan, or (ii) the individual (and his or her spouse, if applicable) has an
adjusted gross income below a certain level ($40,000 for married
individuals filing a joint return, with a phase-out of the deduction for
adjusted gross income between $40,000 and $50,000; $25,000 for a single
individual, with a phase-out for adjusted gross income between $25,000 and
$35,000). However, an individual not permitted to make a deductible
contribution to an IRA for any such taxable year may nonetheless make
nondeductible contributions up to $2,000, or 100% of taxable compensation
if less, to an IRA (up to $2,250 to IRAs for an individual and his or her
nonearning spouse, for years prior to 1997) for that year. Starting in
1997, even a spouse who does not earn compensation can contribute up to
$2,000 per year to his or her own IRA. The deductibility of such
contributions will be determined under the same rules as for contributions
made by individuals with earned income. There are special rules for
determining how withdrawals are to be taxed if an IRA contains both
deductible and nondeductible amounts. In general, a proportionate amount
of each withdrawal will be deemed to be made from nondeductible
contributions; amounts treated as a return of nondeductible contributions
will not be taxable. Also, annual contributions may be made to a spousal
IRA even if the spouse has earnings in a given year if the spouse elects to
be treated as having no earnings (for IRA contribution purposes) for the
year.

Distributions by the Fund result in a reduction in the net asset value
of its shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable
to the shareholder as ordinary income or capital gain as described above,
even though it may constitute a partial return of capital. In particular,
investors should consider the tax implications of buying shares just prior
to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of their invested capital
upon the distribution, which will nevertheless be taxable to them.

The Fund intends to qualify for and may make the election permitted
under Section 853 of the Code so that shareholders may (subject to
limitations) be able to claim a credit or deduction on their federal income
tax returns for, and may be required to treat as part of the amounts
distributed to them, their pro rata portion of qualified taxes paid by the
Fund to foreign countries (which taxes relate primarily to investment
income). The Fund may make an election under Section 853 of the Code,
provided that more than 50% of the value of the total assets of the Fund at
the close of the taxable year consists of securities in foreign
corporations. The foreign tax credit available to shareholders is subject
to certain limitations imposed by the Code.

If the Fund invests in stock of certain foreign investment companies,
the Fund may be subject to U.S. federal income taxation on a portion of any
"excess distribution" with respect to, or gain from the disposition of,
such stock. The tax would be determined by allocating such distribution or
gain ratably to each day of the Fund's holding period for the stock. The
distribution or gain so allocated to any taxable year of the Fund, other
than the taxable year of the excess distribution or disposition, would be
taxed to the Fund at the highest ordinary income rate in effect for such
year, and the tax would be further increased by an interest charge to
reflect the value of the tax deferral deemed to have resulted from the
ownership of the foreign company's stock. Any amount of distribution or
gain allocated to the taxable year of the distribution or disposition would
be included in the Fund's investment company taxable income and,
accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.

The Fund may be able to make an election, in lieu of being taxable in
the manner described above, to include annually in income its pro rata
share of the ordinary earnings and net capital gain of the foreign
investment company, regardless of whether it actually received any
distributions from the foreign company. These amounts would be included in
the Fund's investment company taxable income and net capital gain which, to
the extent distributed by the Fund as ordinary or capital gain dividends,
as the case may be, would not be taxable to the Fund. In order to make
this election, the Fund would be required to obtain certain annual
information from the foreign investment companies in which it invests,
which in many cases may be difficult to obtain. The Fund may make an
election with respect to those foreign investment companies which provide
the Fund with the required information.

Certain forward foreign currency contracts, and all listed nonequity
options written or purchased by the Fund (including options on debt
securities, options on securities indices and options on broad-based stock
indices) will be governed by Section 1256 of the Code. Absent a tax
election to the contrary, gain or loss attributable to the lapse, exercise
or closing out of any such position generally will be treated as 60%
long-term and 40% short-term capital gain or loss, and on the last trading
day of the Fund's fiscal year, all outstanding Section 1256 positions will
be marked to market (i.e., treated as if such positions were closed out at
their closing price on such day), with any resulting gain or loss
recognized as 60% long-term and 40% short-term capital gain or loss. Under
Section 988 of the Code, discussed below, foreign currency gains or losses
from foreign currency related forward contracts and similar financial
instruments entered into or acquired by the Fund will be treated as
ordinary income or loss.

Subchapter M requires that the Fund realize less than 30% of its
annual gross income from the sale or other disposition of stock, securities
and certain options, and forward contracts held for less than three months.
The Fund's options and forward transactions may increase the amount of
gains realized by the Fund that are subject to this 30% limitation.
Accordingly, the amount of such transactions that the Fund may undertake
may be limited.

Positions of the Fund which consist of at least one stock and at least
one stock option or other position with respect to a related security which
substantially diminishes a Fund's risk of loss with respect to such stock
could be treated as a "straddle" which is governed by Section 1092 of the
Code, the operation of which may cause deferral of losses, adjustments in
the holding periods of stock or securities and conversion of short-term
capital losses into long-term capital losses. An exception to these
straddle rules exists for any "qualified covered call options" on stock
written by the Fund.

Positions of the Fund which consist of at least one position not
governed by Section 1256 and at least one forward contract or nonequity
option governed by Section 1256 which substantially diminishes the Fund's
risk of loss with respect to such other position will be treated as a
"mixed straddle." Although mixed straddles are subject to the straddle
rules of Section 1092 of the Code, certain tax elections exist for them
which reduce or eliminate the operation of these rules. The Fund will
monitor its transactions in options and may make certain tax elections in
connection with these investments.

Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues interest or
other receivables, or accrues expenses or other liabilities, denominated in
a foreign currency and the time the Fund actually collects such
receivables, or pays such liabilities, generally are treated as ordinary
income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency and on disposition of certain forward
contracts, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or
contract and the date of disposition are also treated as ordinary gain or
loss. These gains or losses, referred to under the Code as "Section 988"
gains or losses, may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to its shareholders as
ordinary income.

A portion of the difference between the issue price of zero coupon
securities and their stated redemption price at maturity ("original issue
discount") is considered to be income to the Fund each year, even though
the Fund will not receive cash interest payments from these securities.
The original issue discount imputed income will comprise a part of the
Fund's investment company taxable income which must be distributed to
shareholders in order to maintain the Fund's qualification as a regulated
investment company and to avoid federal income tax.

The Fund will be required to report to the IRS all distributions of
investment company taxable income and capital gains as well as gross
proceeds from the redemption or exchange of Fund shares, except in the case
of certain exempt shareholders. Under the backup withholding provisions of
Section 3406 of the Code, distributions of investment company taxable
income and capital gains and proceeds from the redemption or exchange of
the shares of a regulated investment company may be subject to withholding
of federal income tax at the rate of 31% in the case of non-exempt
shareholders who fail to furnish the investment company with their taxpayer
identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required
if the Fund is notified by the IRS or a broker that the taxpayer
identification number furnished by the shareholder is incorrect or that the
shareholder has previously failed to report interest or dividend income.
If the withholding provisions are applicable, any such distributions and
proceeds, whether taken in cash or reinvested in additional shares, will be
reduced by the amounts required to be withheld. Amounts withheld are
applied against the shareholder's tax liability and a refund may be
obtained from the Internal Revenue Service, if withholding results in
overpayment of taxes. A shareholder should contact the Fund or the
Transfer Agent if the shareholder is uncertain whether a proper Taxpayer
Identification Number is on file with the series.

Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's
shares. Each investor should consult his or her own tax adviser as to the
applicability of these taxes.
In January of each year the Company's Transfer Agent issues to each
shareholder a statement of the federal income tax status of all
distributions.

The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign
tax consequences of ownership of Fund shares. Each shareholder who is not
a U.S. person should also consider the U.S. estate tax implications of
holding Fund shares at death. The U.S. estate tax may apply to such
holdings if an investor dies while holding shares of a Fund. Each investor
should consult his or her own tax adviser about the applicability of these
taxes. Distributions of net investment income to non-resident aliens and
foreign corporations that are not engaged in a trade or business in the
U.S. to which the distribution is effectively connected, will be subject to
a withholding tax imposed at the rate of 30% upon the gross amount of the
distribution in the absence of a Tax Treaty providing for a reduced rate or
exemption from U.S. taxation. Distributions of net long-term capital gains
realized by the Fund are not subject to tax unless the distribution is
effectively connected with the conduct of the shareholder's trade or
business within the United States, or the foreign shareholder is a non-
resident alien individual who was physically present in the U.S. during the
tax year for more than 182 days.

The foregoing is a general abbreviated summary of present Federal
income taxes on dividends and distributions. Shareholders should consult
their tax advisers about the application of the provisions of the tax law
described in this Statement of Additional Information in light of their
particular tax situations and about any state and local taxes applicable to
dividends and distributions.

Dividends and Distributions

As stated previously, it is the policy of the Fund to distribute
substantially all of its net investment income and net realized capital
gains, if any, shortly before the close of the fiscal year (December 31st).

All dividend and capital gains distributions, if any, will be
reinvested in full and fractional shares based on net asset value (without
a sales charge) as determined on the ex-dividend date for such
distributions. Shareholders may, however, elect to receive all such
payments, or the dividend or distribution portion thereof, in cash, by
sending written notice to this effect to the Transfer Agent. This written
notice will be effective as to any subsequent payment if received by the
Transfer Agent prior to the record date used for determining the
shareholders' entitlement to such payment. Such an election will remain in
effect unless or until the Transfer Agent is notified by the shareholder in
writing to the contrary.

Portfolio Transactions

It is the policy of the Investment Advisor, in placing orders for the
purchase and sale of the Fund's securities, to seek to obtain the best
possible price and execution for its securities transactions taking into
account such factors as price, commission, where applicable (which is
negotiable in the case of U.S. national securities exchange transactions
but which is generally fixed in the case of foreign exchange transactions),
size of order, difficulty of execution and skill required of the executing
broker/dealer. After a purchase or sale decision is made by the Investment
Advisor, the Investment Advisor then arranges for execution of the
transaction in a manner deemed to provide the best result for the Fund.

While there is no formula, agreement or undertaking to do so, and when
it can be done consistently with the policy of obtaining the most favorable
net results, the Investment Advisor may allocate a portion of its brokerage
commissions to persons or firms providing the Investment Advisor with
investment recommendations, statistical, research or similar services
useful to the daily operation of the Fund or other clients of these
persons. The term "investment recommendations, statistical, research or
similar services" means advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities, and
furnishing analysis and reports concerning issuers, industries, securities,
economic factors and trends, and portfolio strategy. Such services are one
of the many ways the Fund's Investment Advisor can keep abreast of the
information generally circulated among institutional investors by broker-
dealers. While this information is useful in varying degrees, its value is
indeterminable. Such services received on the basis of transactions for
the Fund may be used by the Investment Advisor for the benefit of other
clients, and the Fund may benefit from such transactions effected for the
benefit of other clients. Subject to obtaining best price and execution
the Fund may consider sales of its shares as a factor in the selection of
brokers to execute portfolio transactions. The Investment Advisor
generally does not, when placing portfolio transactions for the Fund, pay a
brokerage commission in excess of that which another broker might have
charged for executing the same transaction on account of the receipt of
research, market or statistical information. The Investment Advisor does
not place orders with brokers or dealers on the basis that the broker or
dealer has sold Fund shares, although transactions may be placed with such
brokers. Except for implementing the policy stated above, there is no
intention to place portfolio transactions with particular brokers or
dealers or groups thereof.

When two or more accounts managed by the Investment Advisor are
simultaneously engaged in the purchase or sale of the same security, the
transactions are allocated in a manner deemed equitable to each account.
It is recognized that in some cases the procedure could have a detrimental
effect on the price or volume of the security as far as the Fund is
concerned. In other cases, however, it is believed that the ability of the
Fund to participate in volume transactions will be beneficial for the Fund.
It is the opinion of the Board of Directors of the Company that these
advantages, when combined with the other benefits available because of the
Investment Advisor's organization, outweigh the disadvantages that may be
said to exist from exposure to simultaneous transactions.

Exchange-listed securities are generally traded on their principal
exchange unless another market offers a better result. Securities traded
only in the over-the-counter market may be executed on a principal basis
with primary market makers in such securities except for fixed price
offerings and except where the Fund may obtain better prices or executions
on a commission basis or by dealing with other than a primary market maker.

The Sand Hill Portfolio Manager Fund series (the "Original Sand Hill
Fund") of another investment company, Vontobel Funds, Inc. , paid $7,070
and $7,086 in brokerage commissions for the years ended December 31, 1995
and 1996, respectively.

Average annual portfolio turnover rate is the ratio of the lesser of
sales or purchases to the monthly average value of the portfolio securities
owned during the year, excluding from both the numerator and the
denominator all securities with maturities at the time of acquisition of
one year or less. A higher rate involves greater transaction expenses to a
fund and may result in the realization of net capital gains, which would be
taxable to shareholders when distributed. Purchases and sales are made for
the Fund's portfolio whenever necessary, in the Investment Advisor's
opinion, to meet the Fund's objective. The Investment Advisor anticipates
that the Fund's average annual portfolio rate will be less than 100%.

Net Asset Value

The Fund's net asset value ("NAV") per share is calculated daily from
Monday through Friday on each business day on which the New York Stock
Exchange (the "Exchange") is open. The Exchange is currently closed on
weekends and on the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving Day and
Christmas Day, and the preceding Friday or subsequent Monday when any of
these holidays falls on a Saturday or Sunday, respectively. The Fund's NAV
is calculated at the time set by the Board of Directors based upon a
determination of the most appropriate time to price the Fund's securities.

The Board of Directors has determined that the Fund's NAV be
calculated as of the close of trading of the Exchange (currently 4:00 p.m.,
Eastern Time) on each business day from Monday to Friday or on each day
(other than a day during which no security was tendered for redemption and
no order to purchase or sell such security was received by the Fund) in
which there is a sufficient degree of trading in the Fund's portfolio
securities that the current NAV of the Fund's shares might be materially
affected by changes in the value of such portfolio security.

NAV per share is determined by dividing the total value of the Fund's
securities and other assets, less liabilities (including proper accruals of
taxes and other expenses), by the total number of shares then outstanding,
and rounding the result to the nearer cent.

The Fund may compute its NAV per share more frequently if necessary to
protect shareholders' interests.

Generally, securities owned by the Fund are valued at market value.
In valuing the Fund's assets, portfolio securities, including ADRs and
EDRs, which are traded on the Exchange, will be valued at the last sale
price prior to the close of regular trading on the Exchange. Lacking any
sales, the security will be valued at the last bid price prior to the close
of regular trading on the Exchange. ADRs and EDRs for which such a value
cannot be readily determined on any day will be valued at the closing price
of the underlying security adjusted for the exchange rate. In cases where
securities are traded on more than one exchange, the securities are valued
on the exchange designated in accordance with procedures approved by the
Board of Directors of the Fund as the primary market. Securities will be
valued using quotations on the exchange and lacking any sales, securities
will be valued at the last reported bid price prior to the Fund's valuation
time, unless the Fund is aware of a material change in the value prior to
the time it values its securities.

Unlisted securities which are quoted on the NASD's National Market
System, for which there have been sales of such securities, shall be valued
at the last sale price reported on such system. If there are no such
sales, the value shall be the high or "inside" bid, which is the bid
supplied by the NASD on its NASDAQ Screen for such securities in the
over-the-counter market. The value of such securities quoted on the NASDAQ
System, but not listed on the NASD's National Market System, shall be
valued at the high or "inside" bid. Unlisted securities which are not
quoted on the NASDAQ System and for which the over-the-counter market
quotations are readily available will be valued at the current bid prices
for such securities in the over-the-counter market. Other unlisted
securities (and listed securities subject to restriction on sale) may be
valued at their fair value as determined in good faith by the Board of
Directors.

The value of a security traded or dealt in upon an exchange may be
valued at what the Company's pricing agent determines is fair market value
on the basis of all available information, including the last determined
value, if the pricing agent determines that the last bid does not represent
the value of the security, or if such information is not available. For
example, the pricing agent may determine that the price of a security
listed on a foreign stock exchange that was fixed by reason of a limit on
the daily price change does not represent the fair market value of the
security. Similarly, the value of a security not traded or dealt in upon
an exchange may be valued at what the pricing agent determines is fair
market value if the pricing agent determines that the last sale, or inside
bid does not represent the value of the security, provided that such amount
is not higher than the current bid price.

Notwithstanding the foregoing, money market investments with a
remaining maturity of less than sixty days shall be valued by the amortized
cost method described below; debt securities are valued by appraising them
at prices supplied by a pricing agent approved by the Fund, which prices
may reflect broker-dealer supplied valuations and electronic data
processing techniques and are representative of market values at the close
of the Exchange; options on securities listed or admitted to trading on a
national exchange shall be valued at their last sale on such exchange prior
to the time of determining net asset value; or if no sales are reported on
such exchange on that day, at the mean between the most recent bid and
asked price; and forward contracts shall be valued at their last sale as
reported by the Fund's pricing service, or lacking a report by the service,
at the value of the underlying currencies at the prevailing currency rates.

The value of an illiquid security which is subject to legal or
contractual delays in or restrictions on resale by the Fund shall be taken
to be the fair value thereof as determined in accordance with procedures
established by the Fund's Board, on the basis of such relevant factors as
the following: the cost of such security to the Fund, the market price of
unrestricted securities of the same class at the time of purchase and
subsequent changes in such market price, potential expiration or release of
the restrictions affecting such security, the existence of any registration
rights, the fact that the Fund may have to bear part or all of the expense
of registering such security, and any potential sale of such security to
another investor. The value of other property owned by the Fund shall be
determined in a manner which, in the discretion of the pricing agent of the
Fund, most fairly reflects fair market value of the property on such date.

Following the calculation of security values in terms of currency in
which the market quotation used is expressed ("local currency"), the
pricing agent shall, prior to the next determination of the NAV of the
Fund's shares, calculate these values in terms of United States dollars on
the basis of the conversion of the local currencies (if other than U.S.
dollars) into United States dollars at the rates of exchange prevailing at
the value time as determined by the pricing agent.

Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close of
business on each business day in New York (i.e., a day on which the New
York Stock Exchange is open). In addition, European or Far Eastern
securities trading generally or in a particular country or countries may
not take place on all business days in New York. Furthermore, trading
takes place in Japanese markets on certain Saturdays and in various foreign
markets on days which are not business days in New York and on which the
Fund's net asset value is not calculated. The Fund calculates net asset
value per share, and therefore, effects sales, redemptions and repurchases
of its shares, as of the close of the Exchange once on each day on which
that Exchange is open. Such calculation does not take place
contemporaneously with the determination of the prices of all of the
portfolio securities used in such calculation. If events materially
affecting the value of a portfolio security occur between the time when its
closing price is determined and the time when the Fund's net asset value is
calculated, such a security will be valued at fair value as determined in
good faith by the Board of Directors.

U.S. Treasury bills, and other short-term obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, with
original or remaining maturities in excess of 60 days are valued at the
mean of representative quoted bid and asked prices for such securities or,
if such prices are not available, are valued at the mean of representative
quoted bid and asked prices for securities of comparable maturity, quality
and type. Short-term securities, with 60 days or less to maturity, are
amortized to maturity based on their cost if acquired within 60 days of
maturity or, if already held, on the 60th day, based on the value
determined on the 61st day.

Any purchase order may be rejected by the Distributor or by the Fund.

The Company has reserved the right to redeem in-kind but does not
intend to do so under normal circumstances.

Directors and Officers

The following is a list of the Company's Directors and Officers, their
dates of birth and a brief statement of their present positions and
principal occupations during the past five years.

*John Pasco, III (4/10/45)
Chairman, Director, and Treasurer
1500 Forest Ave, Suite 223; Richmond, VA 23229

Mr. Pasco is Treasurer and Director of Commonwealth Shareholder
Services, Inc., the Company's Administrator, since 1985. Director,
President and Treasurer of Commonwealth Capital Management, Inc. (a
registered Investment Advisor) since 1983. Director and shareholder
of Fund Services, Inc., the Company's Transfer and Disbursing Agent,
since 1987 and shareholder of Commonwealth Fund Accounting, Inc. which
provides bookkeeping services to Star Bank. Mr. Pasco is also a
certified public accountant.

Samuel Boyd, Jr. (9/18/40)
Director
10808 Hob Nail Court, Potomac, MD 20854

Mr. Boyd is currently the Manager of the Customer Services Operations
and Accounting Division of the Potomac Electric Power Company. Mr.
Boyd is also a certified public accountant.

William E. Poist (6/11/39)
Director
5272 River Road, Bethesda, MD 20816

Mr. Poist is a financial and tax consultant through his firm
Management Consulting for Professionals. Mr. Poist is also a
certified public accountant.

Paul M. Dickinson (11/11/47)
Director
8704 Berwickshire Drive, Richmond, VA 23229

Mr. Dickinson is currently the President of Alfred J. Dickinson, Inc.,
Realtors.

*Jane H. Williams (6/28/48)
Vice President of the Company and President of the Sand Hill Portfolio
Manager Fund
3000 Sand Hill Blvd. Suite 150, Menlo Park, California 94025-7111.

Ms. Williams is Executive Vice President and a Director of Sand Hill
Advisors, Inc. which was founded in September 1982 by Ms.
Williams.

*F. Byron Parker, Jr. (1/26/43)
Secretary
810 Lindsay Court, Richmond, VA 23229

Secretary of Commonwealth Shareholder Services, Inc. since 1986.
Partner in the law firm Mustian & Parker.

* Persons deemed to be "interested" persons of the Company under the 1940
Act.

During the fiscal year ended December 31, 1996, the Directors of the
Company received compensation from the Company, as follows:

Compensation Table<PAGE>
(1)

Name of Person,
Position <PAGE>

(2)

Aggregate
Compensation
From Registrant<PAGE>

(3)

Pension or
Retirement
Benefits Accrued
As Part of Fund
Expenses <PAGE>
(4)

Estimated Annual
Benefits Upon
Retirement <PAGE>

(5)

Total

Compensation

From Registrant

and Fund

Complex Paid to

Directors <PAGE>
John Pasco, III
Director<PAGE>
$0 N/A N/A

$0
<PAGE>
Samuel Boyd, Jr.
Director<PAGE>
$0 N/A N/A

$8,000<PAGE>
William E. Poist
Director<PAGE>
$0 N/A N/A
$8,000<PAGE>
Paul M. Dickinson
Director<PAGE>
$0 N/A N/A

$8,000
The directors and officers of the Company, as a group, do not own 1%
or more of the Fund.

To the best knowledge of the Fund, as of , 1997
the following persons own of record or beneficially 5% or more of the Fund's
shares, and own such shares in the amounts indicated: (1) Marianne Conley
(5.97%); (2) Arthur and Anna Kull (9.37%); and (3) National Financial
Services (20.50%).

Investment Advisor

Sand Hill Advisors, Inc. (the "Investment Advisor") manages the
investment of the assets of the Fund pursuant to an Investment Advisory
Agreement (the "Advisory Agreement"). The Advisory Agreement will be effective
for a period of two years from , 1997 and may be renewed
thereafter only so long as such renewal and continuance is specifically approved
at least annually by the Company's Board of Directors or by vote of a
majority of the outstanding voting securities of the Fund, provided the
continuance is also approved by a majority of the Directors who are not
"interested
persons" of the Company or the Investment Advisor by vote cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement is terminable without penalty on sixty days notice by the Company's
Board of Directors or by the Investment Advisor. The Advisory
Agreement provides that it will terminate automatically in the event of its
assignment.

The Company has designated Jane H. Williams, Executive Vice President
and a Director of the Investment Advisor, as a Vice President of the
Company and President of the Fund.

Under the Advisory Agreement the monthly compensation paid to the
Investment Advisor is accrued daily at an annual rate of 1.00% of the
average daily net assets of the Fund. If the average daily net assets of the
Fund exceed $100,000,000, the fee for such assets will be computed at the annual
rate of 0.75% on such excess. The fee is paid monthly within five (5) business
days after the end of the month. The Advisor received $27,452 from the
Original Sand Hill Fund and waived $27,452 of its fee in the year ended December
31, 1995 and received $53,649 from the Original Sand Hill Fund and
waived $34,043 of its fee in the year ended December 31, 1996.

The Advisory Agreement contemplates the authority of the Investment
Advisor to place orders pursuant to its investment determinations for the
Fund either directly with the issuer or with any broker or dealer. In placing
orders with brokers or dealers, the Investment Advisor will attempt to obtain
the best net price and the most favorable execution of its orders. The
Investment Advisor may purchase and sell securities to and from brokers and
dealers
who provide the Fund with research advice and other services, or who sell shares
of the Fund. See "Portfolio Transactions" above.

The address of the Investment Advisor is 3000 Sand Hill Road, Building
Three, Suite 150, Menlo Park, California 94025.

Transfer Agent

Fund Services, Inc. ("FSI") is the Company's Transfer and Disbursing
Agent, pursuant to a Transfer Agent Agreement. The Transfer Agent
Agreement is dated , 1997. John Pasco, III, Chairman of
the Board of the Company and an officer and shareholder of Commonwealth
Shareholder Services, Inc. (the Administrator of the Fund) owns one third of
the stock of FSI, and, therefore, FSI may be deemed to be an affiliate of the
Company and Commonwealth Shareholder Services Inc.

Pursuant to the Transfer Agent Agreement the minimum annual fee for
the Fund is $16,500. In 1996 the Original Sand Hill Fund paid FSI
$24,190.

Administrator

Commonwealth Shareholder Services, Inc. is the Company's Administrator
pursuant to an Administrative Services Agreement (the "Service
Agreement"), which is dated , 1997. The
Service Agreement is described in the Fund's Prospectus. This agreement
continues in
effect from year to year for a period of one year only if the Board of
Directors, including a majority of the directors who are not interested persons
of the
Company or the Administrator, approve the extension at least annually. In 1996,
the Original Sand Hill Fund paid $17,681 in administrative fees.

Distribution

Shares of the Fund are sold at net asset value on a continuous basis,
without a sales charge.

First Dominion Capital Corp. (the "Distributor"), 1500 Forest Avenue,
Suite 223, Richmond, VA 23229, is the Company's principal underwriter
pursuant to a Distribution Agreement between the Company and the Distributor.
John Pasco, III, Chairman of the Board of the Company owns 100% of
the stock of the Distributor, and is its President, Treasurer and a Director.

Expenses of the Fund

The Fund will pay its expenses not assumed by the Investment Advisor,
including, but not limited to, the following: custodian; stock transfer and
dividend disbursing fees and expenses; taxes; expenses of the issuance and
redemption of Fund shares (including stock certificates, registration and
qualification fees and expenses); legal and auditing expenses; and the cost of
stationery and forms prepared exclusively for the Fund.

The allocation of the general expenses of the Fund is made on a basis
that the Company's Board of Directors deems fair and equitable, which
may be based on the relative net assets of the series of the Company or the
nature of the services performed and relative applicability to each series of
the Company.

Under the Advisory Agreement, the Investment Advisor has agreed to
reimburse the Fund if the annual ordinary operating expenses of the Fund
exceeds the most stringent limits prescribed by any state in which the Fund's
shares are offered for sale. This expense limitation is calculable based on the
aggregate net assets of the Fund. Expenses which are not subject to this
limitation are interest, taxes and extraordinary expenses. Expenditures,
including
costs incurred in connection with the purchase or sale of portfolio securities,
which are capitalized in accordance with generally accepted accounting
principles applicable to investment companies, are accounted for as capital
items and not as expenses. Reimbursement, if any, will be on a monthly basis,
subject to year-end adjustment and limited to the amount of the advisory fee due
from the Fund.

Investors should understand that the Fund's expense ratio can be
expected to be higher than investment companies investing in domestic
securities since the cost of maintaining the custody of foreign securities paid
by the Fund is higher.

Special Shareholder Services

As described briefly in the Prospectus, the Fund offers the following
shareholder services:

Regular Account: The regular account allows for voluntary investments
to be made at any time. Available to individuals, custodians,
corporations, trusts, estates, corporate retirement plans and others, investors
are free to make additions and withdrawals to or from their account as often
as they wish. Simply use the Account Application provided with the Prospectus
to open your account.

Telephone Transactions: You may redeem shares or transfer into another
fund by telephone if you request this service at the time you complete
the initial Account Application. If you do not elect this service at that time,
you may do so at a later date by putting your request in writing to the
Transfer Agent and having your signature guaranteed.

The Fund employs reasonable procedures designed to confirm the
authenticity of your instructions communicated by telephone and, if it does
not, it may be liable for any losses due to unauthorized or fraudulent
transactions. As a result of this policy, a shareholder authorizing telephone
redemption bears the risk of loss which may result from unauthorized or
fraudulent transactions which the Fund believes to be genuine. When you request
a telephone redemption or transfer, you will be asked to respond to certain
questions designed to confirm your identity as a shareholder of record. Your
cooperation with these procedures will protect your account and the Fund from
unauthorized transactions.

Invest-A-Matic Account: Any shareholder may utilize this feature,
which provides for automatic monthly investments into your account. Upon
your request, the Transfer Agent will withdraw a fixed amount each month from
your checking account for investment into your account. This does not
require you to make a commitment for a fixed period of time. You may change
the monthly investment, skip a month or discontinue your Invest-A-Matic
Plan as desired by notifying the Transfer Agent. This feature requires a
separate Plan application, in addition to the Account Application. To obtain
an
application, or to receive more information, please call the offices of the
Company.

Individual Retirement Account (IRA) - All wage earners under 70-1/2,
even those who participate in a company sponsored or government
retirement plan, may establish their own IRA. You can contribute 100% of your
earnings up to $2,000 (or $2,250 with a spouse who is not a wage earner,
for years prior to 1997). Starting in 1997, even a spouse who does not earn
compensation can contribute up to $2,000 per year to his or her own IRA. The
deductibility of such contributions will be determined under the same rules as
for contributions made by individuals with earned income. A special IRA
program is available for corporate employers under which the employers may
establish IRA accounts for their employees in lieu of establishing corporate
retirement plans. Known as SEP-IRA's (Simplified Employee Pension-IRA), they
free the corporate employer of many of the recordkeeping requirements
of establishing and maintaining a corporate retirement plan trust.

If you have received a lump sum distribution from another qualified
retirement plan, you may rollover all or part of that distribution into your
Fund IRA. Your rollover contribution is not subject to the limits on annual IRA
contributions. By acting within applicable time limits of the distribution
you can continue to defer Federal Income Taxes on your lump sum contribution and
on any income that is earned on that contribution.

How to Establish Retirement Accounts: Please call the Company to obtain
information regarding the establishment of individual retirement plan
accounts. The plan custodian charges nominal fees in connection with plan
establishment and maintenance. These fees are detailed in the plan documents.
You may wish to consult with your attorney or other tax advisor for specific
advice concerning your tax status and plans.

General Information and History

The Company is authorized to issue up to 250,000,000 shares of common
stock, par value $0.01 per share, of which it has presently allocated
50,000,000 shares to the Fund. The Board of Directors can allocate the
remaining authorized but unissued shares to the Fund, or may create additional
series and allocate shares to such series. Each series is required to have a
suitable investment objective, policies and restrictions, to maintain a separate
portfolio of securities suitable to its purposes, and to generally operate in
the manner of a separate investment company as required by the 1940 Act.

If additional series were to be formed, the rights of existing series
shareholders would not change, and the objective, policies and investments of
each series would not be changed. A share of any series would continue to have
a priority in the assets of that series in the event of a liquidation.
The shares of each series when issued will be fully paid and nonassessable,
will have no preference over other shares of the same series as to conversion,
dividends, or retirement, and will have no preemptive rights. The shares of any
series will be redeemable from the assets of that series at any time at a
shareholder's request at the current net asset value of that series determined
in accordance with the provisions of the 1940 Act and the rules thereunder.
The Company's general corporate expenses (including administrative expenses)
will be allocated among the series in proportion to net assets or as
determined in good faith by the Board.

The investment advisory fees payable to Sand Hill Advisors, Inc. by the Fund
and the expense limitation guarantee formula of the Fund will be based
upon the assets of the Fund.

Voting and Control - Each outstanding share of the Company is entitled to
one vote for each full share of stock and a fractional share of stock. All
shareholders vote on matters which concern the corporation as a whole. Election
of Directors or ratification of the auditor are examples of matters to be
voted upon by all shareholders. The Company is not required to hold a meeting
of shareholders each year. The Company intends to hold annual
meetings when it is required to do so by the Maryland General Corporate Law or
the 1940 Act. Each series shall vote separately on matters (1) when
required by the General Corporation Law of Maryland, (2) when required by the
1940 Act and (3) when matters affect only the interest of the particular
series. An example of a matter affecting only one series might be a proposed
change in an investment restriction of one series. The shares will not have
cumulative voting rights, which means that the holders of more than 50% of the
shares voting for the election of directors can elect all of the directors if
they choose to do so.

Limitation on Use of Name - The Advisory Agreement for the Fund authorizes
the Company to utilize the name "Sand Hill." The Company agrees that
if the Advisory Agreement is terminated it will promptly redesignate the name of
the Sand Hill Portfolio Manager Fund to eliminate any reference to the
name "Sand Hill" or any derivation thereof unless the Investment Advisor waives
this requirement in writing.

Code of Ethics - The Company has adopted a Code of Ethics which imposes
certain restrictions on the authority of portfolio managers and certain other
personnel of the Fund and its advisors governing personal securities activities
and investments of those persons and has instituted procedures to its Code of
Ethics to require such investment personnel to report such activities to the
compliance officer. The Code is reviewed and updated annually.

Performance

Current yield and total return are the two primary methods of measuring
investment performance. Occasionally, however, the Fund may include
its distribution rate in sales literature. Yield, in its simplest form, is the
ratio of income per share derived from the Fund's portfolio investments to the
current maximum offering price expressed in terms of percent. The yield is
quoted on the basis of earnings after expenses have been deducted. Total
return, on the other hand, is the total of all income and capital gains paid to
shareholders, assuming reinvestment of all distributions, plus (or minus) the
change in the value of the original investment, expressed as a percentage of the
purchase price. The distribution rate is the amount of distributions per
share made by the Fund over a twelve-month period divided by the current maximum
offering price.

Performance quotations by investment companies are subject to certain
rules adopted by the Securities and Exchange Commission (the
"Commission"). These rules require the use of standardized performance
quotations, or alternatively, that every non-standardized performance quotation
furnished by the Fund be accompanied by certain standardized performance
information computed as required by the Commission. Current yield and total
return quotations used by the Fund are based on the standardized methods of
computing performance mandated by the Commission.

Yield. As indicated below, current yield is determined by dividing the
net investment income per share earned during the period by the
maximum offering price per share on the last day of the period and annualizing
the result. Expenses accrued for the period include any fees charged to all
shareholders during the 30 day base period. According to the Commission
formula:

Yield = 2 [(a-b + 1) -1]
cd
where:

a = dividends and interest earned during the period.

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

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

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

Total Return. The Original Sand Hill Fund's average annual total
returns for the periods indicated are as follows:

Fund Name<PAGE>
One-Year Period Ended
12/31/96 <PAGE>
From Inception to
12/31/96
<PAGE>
Sand Hill Portfolio Manager Fund 19.57% 15.51%
As the following formula indicates, the average annual total return is
determined by multiplying a hypothetical initial purchase order of $1,000 by
the average annual compound rate of return (including capital appreciation/
depreciation and dividends and distributions paid and reinvested) for the stated
period less any fees charged to all shareholder accounts and annualizing the
result. The calculation assumes the maximum sales load is deducted from the
initial $1,000 purchase order and that all dividends and distributions are
reinvested at the public offering price on the reinvestment dates during the
period.
The quotation assumes the account was completely redeemed at the end of each
one-, five- and ten-year or since inception period and the deduction of all
applicable charges and fees. According to the Commission formula:

n
P(1+T) = ERV

where:

P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years

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

Sales literature pertaining to the Fund may quote a distribution rate
in addition to the yield or total return. The distribution rate is the amount
of distributions per share made by the Fund over a twelve-month period divided
by the current maximum offering price. The distribution rate differs from
the yield because it measures what the Fund paid to shareholders rather than
what the Fund earned from investments. It also differs from the yield
because it may include dividends paid from premium income from option writing,
if applicable, and short-term capital gains in addition to dividends from
investment income. Under certain circumstances, such as when there has been a
change in the amount of dividend payout, or a fundamental change in
investment policies, it might be appropriate to annualize the distributions paid
over the period such policies were in effect, rather than using the
distributions paid during the past twelve months.

Occasionally, statistics may be used to specify the Fund's volatility
or risk. Measures of volatility or risk are generally used to compare the
Fund's net asset value or performance relative to a market index. One measure
of volatility is beta. Beta is the volatility of a fund relative to the total
market as represented by the Standard & Poor's 500 Stock Index. A beta of more
than 1.00 indicates volatility greater than the market, and a beta of less
than 1.00 indicates volatility less than the market. Another measure of
volatility or risk is standard deviation. Standard deviation is used to measure
variability of net asset value or total return around an average, over a
specified period of time. The premise is that greater volatility connotes
greater risk
undertaken in achieving performance.

Regardless of the method used, past performance is not necessarily
indicative of future results, but is an indication of the return to shareholders
only for the limited historical period used.

Comparisons and Advertisements

To help investors better evaluate how an investment in the Fund might
satisfy their investment objective, advertisements regarding the Fund may
discuss yield, total return, or Fund volatility as reported by various
financial publications. Advertisements may also compare yield, total return,
or volatility
(as calculated above) to yield, total return, or volatility as reported by other
investments, indices, and averages. The following publications, indices, and
averages may be used:

(a) Dow Jones Composite Average or its component averages - an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks (Dow Jones Utilities
Average), and 20 transportation company stocks. Comparisons of performance
assume reinvestment of dividends.

(b) Standard & Poor's 500 Stock Index or its component indices -an unmanaged
index composed of 400 industrial stocks, 40 financial stocks, 40
utilities stocks, and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividends.

(c) The New York Stock Exchange composite or component indices -unmanaged
indices of all industrial, utilities, transportation, and finance stocks
listed on the New York Stock Exchange.

(d) Wilshire 5000 Equity Index - represents the return on the market value
of all common equity securities for which daily pricing is available.
Comparisons of performance assume reinvestment of dividends.

(e) Lipper - Mutual Fund Performance Analysis, Lipper - Fixed Income
Analysis, and Lipper Mutual Fund Indices - measures total return and
average current yield for the mutual fund industry. Ranks individual mutual
fund performance over specified time periods assuming reinvestment of all
distributions, exclusive of sales charges.

(f) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc.
- - analyzes price, current yield, risk, total return, and average rate of
return (average annual compounded growth rate) over specified time periods for
the mutual fund industry.

(g) Mutual Fund Source Book and other material, published by Morningstar,
Inc. - provides proprietary ratings and analyzes price, yield, risk, and
total return for equity funds.

(h) Financial publications: Business Week, Changing Times, Financial World,
Forbes, Fortune, and Money magazines - rate fund performance over
specified time periods.

(i) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics - a statistical measure of change, over time, in
the price of goods and services, in major expenditure groups.

(j) Standard & Poor's 100 Stock Index - an unmanaged index based on the
price of 100 blue-chip stocks, including 92 industrials, 1 utility, 2
transportation companies, and 5 financial institutions. The S&P 100 Stock
Index is a smaller more flexible index for option trading.

In assessing such comparisons of yield, total return, or volatility,
an investor should keep in mind that the composition of the investments in the
reported indices and averages in not identical to the Fund's portfolio, that the
averages are generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the formula used by the
Fund to calculate its figures. In addition there can be no assurance that the
Fund will continue this performance as compared to such other averages.

Financial Statements

Set forth below are the Original Sand Hill Fund's audited financial
statements for the fiscal year ended December 31, 1997.

The books of the Fund will be audited at least once each year by Tait,
Weller and Baker, of Philadelphia, PA, independent public accountants.

SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1996

<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES SECURITY VALUE
- -------- -------- ----------
<S> <C>
COMMON STOCK: 73.16%

BASIC INDUSTRY: 1.97%
7,100 Material Sciences $ 127,800
----------
CAPITAL GOODS: 4.47%
2,000 Dover Corp. 100,500
3,000 Osmonics 66,000
300 Sumitomo Electric ADR 41,871
1,000 W.W. Grainger 80,250
----------
288,621
----------
CONGLOMERATE: 2.74%
6,900 Cheung Kong Holdings ADR 61,328
2,431 Desc, S.A. De C.V. ADR 53,482
15,800 Sime Darby BHD ADR 62,249
----------
177,059
----------
CONSUMER DURABLES: 4.87%
1,000 Johnson Controls 82,875
3,000 Leggett & Platt Inc. 103,875
300 Matsushita Electric ADR 48,975
1,200 Sony Corp ADR 78,750
----------
314,475
----------
CONSUMER NON-DURABLES: 7.39%
3,000 Avery Dennison 106,125
700 Colgate Palmolive 64,575
800 Panamerican Beverage 37,500
700 Procter & Gamble 75,338
3,100 Sara Lee Corp 115,475
1,400 Sherwin Williams 78,400
----------
477,413
----------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES SECURITY VALUE
- -------- -------- ----------
<S> <C>
CONSUMER SERVICES: 4.01%
1,200 Carlton Communications ADR 53,400
3,100 Choice Hotels International 54,637
1,800 Walgreen 72,000
3,500 Whole Foods Markets 78,750
----------
258,787
----------
ENERGY: 8.30%
700 Atlantic Richfield 92,837
500 British Petroleum ADR 70,687
1,200 Mobil 146,700
6,200 Nabors Industries 119,350
1,500 Western Atlas Inc 106,312
----------
535,886
----------
FINANCE: 10.14%
2,900 AXA ADR 91,350
1,100 Banco de Santander ADR 69,850
1,000 Develop Bk of Singapore ADR 54,045
5,000 Hang Seng Bank Ltd ADR 60,763
1,700 MBIA Inc. 172,125
3,500 PXRE Corp. 87,938
2,300 Regions Financial Corp 118,881
----------
654,952
----------
HEALTH CARE: 8.75%
2,200 Astra AB ADR 107,800
2,000 Becton Dickinson & Co. 86,750
3,100 Manor Care 84,088
600 Roche Holdings ADR 46,540
2,100 Schering Plough Corp 135,975
2,300 United Healthcare 103,788
----------
564,941
----------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES SECURITY VALUE
- -------- -------- ---------
<S> <C>
TECHNOLOGY: 10.06%
600 3Com 44,025
2,800 Adaptec 112,000
1,000 Adobe Systems Inc 37,375
2,000 E M C Corp 66,250
2,430 Ericsson ADR 73,356
700 Intel 91,656
1,400 Hewlett Packard 70,350
3,000 Sabre Group Holding A 83,625
1,800 Sungard Data Systems 71,100
----------
649,737
----------
R E I T: 3.94%
4,000 Apartment Investment & Management Co 112,500
5,500 J P Realty 142,313
----------
254,813
----------
UTILITIES: 6.52%
1,800 Ameritech Corp 109,125
4,100 Frontier Corp. 92,762
15,000 Hong Kong Electric ADR 49,837
3,100 Hong Kong Telecom 50,375
3,000 Nipsco Industies 118,875
----------
420,974
----------
TOTAL COMMON STOCKS:
(Cost: $3,704,865) 4,725,458
----------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- --------
<S> <C>
U.S. GOVT. SECURITIES: 20.22%
$100,000 U.S. Treasury Note
maturity date 10/31/99; 7.50% 103,750
200,000 U.S. Treasury Note
maturity date 02/28/01; 5.625% 196,125
200,000 U.S. Treasury Note
maturity date 02/15/03; 6.25% 199,876
200,000 U.S. Treasury Note
maturity date 02/15/04; 5.875% 194,813
300,000 U.S. Treasury Note
maturity date 05/15/05; 6.5% 302,250
300,000 U.S. Treasury Note
maturity date 05/15/06; 6.875% 309,375
----------
TOTAL U.S. GOVERNMENT SECURITIES:
(Cost: $1,294,657) 1,306,189
----------
TOTAL INVESTMENTS:
(Cost: $4,999,522)* 93.38% 6,031,647
Other assets, net 6.62% 427,778
-------- ----------
NET ASSETS 100.00% $6,459,425
-------- ----------
-------- ----------
</TABLE>

*Cost for Federal income tax purpose is $4,999,522 and net unrealized
appreciation consists of:

<TABLE>
<S> <C>
Gross unrealized appreciation $1,090,678
Gross unrealized depreciation (58,553)
----------
Net unrealized appreciation $1,032,125
----------
----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>
STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
_______________________________________________________________________________________________________

DECEMBER 31, 1996
--------------------------------

<S> <C>
ASSETS
Investments at value (Identified cost of $4,999,522)
(Notes 1 & 3) $ 6,031,647
Cash 366,379
Receivables:
Dividend and interest 25,467
Receivable from manager 8,799
--------

34,266
Deferred organization costs
23,305
Prepaid expenses
3,828

-----------------
TOTAL ASSETS
6,459,425

-----------------
NET ASSETS
$ 6,459,425

----------------- -----------------
NET ASSET VALUE OFFERING AND
REDEMPTION PRICE PER SHARE
($6,459,425/504,705 shares outstanding) $ 12.79
-----------------
-----------------
At December 31, 1996 there were 50,000,000 shares of $.01 par
value stock authorized and components of net assets are:
Paid in capital $5,354,034
Undistributed net realized gain on investments 73,266
Net unrealized appreciation of investments 1,032,125
Net Assets $ 6,459,425
-----------
--------/Table>

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>
STATEMENT OF OPERATIONS

</TABLE>
<TABLE>
<CAPTION>
______________________________________________________________________________

YEAR ENDED

DECEMBER 31, 1996

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

<S> <C>
INVESTMENT INCOME
Income:
Interest $81,560
Dividend 94,169
-------
Total income $ 175,729
Expenses:
Investment management fees (Note 2) 53,649
Transfer agent fees (Note 2) 24,190
Custodian and accounting fees (Note 3) 51,123
Legal & audit fees 5,195
Registration fees 2,250
Recordkeeping and administrative services (Note 2) 16,294
Shareholder servicing and reports (Note 2) 6,779
Organization expense amortization 4,140
Other 4,564
-------
168,184
Custodian fee credits (27,040)
Reimbursement by manager (34,049)
----------
Total expenses 107,095
----------
Net investment income 68,634
----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 230,479
Net increase in unrealized appreciation on investments 740,807
----------
Net gain on investments 971,286
----------
Net increase in net assets resulting from operations $1,039,920
----------
----------
</TABLE>

*Commencement of operations

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
________________________________________________________________________________

JANUARY 2, 1995
YEAR ENDED TO
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
S> <C>
OPERATIONS
Net investment income $ 68,634 $ 14,079
Net realized gain on investments 230,479 3,594
Change in unrealized appreciation of investments 740,807 291,318
----------------- -----------------
Net increase in net assets resulting from operations 1,039,920 308,991
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income ($.15 and $.05 per share) (72,905) (17,898)
Capital gains ($.33 per share) (155,461)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets resulting from capital share
transactions* 1,622,851 3,733,927
----------------- -----------------
Net increase in net assets 2,434,405 $ 4,025,020
Net asset at beginning of period 4,025,020 0
----------------- -----------------
NET ASSETS at the end of the period (including
undistributed net investment income of $0 and $4,270) $ 6,459,425 $ 4,025,020
----------------- -----------------
----------------- -----------------

<C>/Table>

*A summary of capital share transactions follows:

</TABLE>
<TABLE>
<CAPTION>

JANUARY 2, 1995*
YEAR ENDED
TO
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------- ----------
SHARES VALUE SHARES VALUE
------- ----------
- ------- ----------
<S> <C> <C>
<C> <C>
Shares sold 199,556 $2,332,804 384,304 $3,964,257
Shares reinvested from dividend17,744 225,708 1,554 17,229
Shares redeemed (75,044) (935,661) (23,410) (247,559)
----- ---------- ------- ----------
Net increase 142,256 $1,622,851 362,448 $3,733,927
------- ---------- ------- ----------
------- ---------- ------- ----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout Each Period

<TABLE>
<CAPTION>
_______________________________________________________________________________

JANUARY 2, 1995*
YEAR ENDED TO
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C>
Per Share Operating Performance
Net asset value, beginning of period $ 11.11 $ 10.00
---------------- -----------------
Income from investment operations- Net investment income
0.14 0.06
Net realized and unrealized gain on investments 2.02 1.10
--------- -----------------
Total from investment operations 2.16 1.16
----------------- -----------------
Less distributions-
Distributions from net investment income (0.15) (0.05)
Distributions from capital gains (0.33)
-------------- -----------------
Total distributions (0.48) (0.05)
----------------- -----------------
Net asset value, end of period (000's) $ 12.79 $ 11.11
---------------- -----------------
----------------- -----------------
Total Return 19.57% 11.60%
Ratios/Supplemental Data
Net assets, end of period(000's) $ 6,459 $ 4,025
Ratio to average net assets-(A)
Expenses (B) 2.50% 3.03%**
Expense ratio-net (C) 2.00% 1.90%**
Net investment income 1.29% 0.52%**
Portfolio turnover rate 32.97% 40.96%
Average brokerage commission per share $0.0581 --
</TABLE>

*Commencement of operations
**Annualized
(A) Management fee waivers reduced the expense ratios and increased the net
investment income ratio by .64% in 1996 and 1.00% in 1995.
(B) Expense ratio has been increased to include custodian fees which were
offset
by custodian credits.
(C) Expense ratio-net reflects the effect of the custodian fee credits the fund
received.

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1996
_______________________________________________________________________________

NOTE 1-SIGNIFICANT ACCOUNTING POLICIES -- The Sand Hill Portfolio Manager Fund
(the "Fund") is a series of The World Funds, Inc. ("TWF") which is registered
under The Investment Company Act of 1940, as amended, as a diversified open-end
management company. The Fund was established in January 2, 1995, as a series of
TWF which has allocated to the Fund 50,000,000 shares of its 500,000,000 shares
of $.01 par value common stock. The following is a summary of significant
accounting policies consistently followed by the Fund. The policies are in
conformity with generally accepted accounting principles.

The investment objective of the Fund is to maximize total return by investing in
equity securities, debt securities and short term investments.

A. SECURITY VALUATION. Investments in securities traded on a national securities
exchange or included in the NASDAQ National Market System are valued at the last
reported sales price; other securities traded in the over-the-counter market and
listed securities for which no sale is reported on that date are valued at the
last reported bid price. Short-term investments (securities with a remaining
maturity of sixty days or less) are valued at cost which, when combined with
accrued interest, approximates market value.

B. FEDERAL INCOME TAXES. The Fund intends to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no federal
income tax provision is required.

C. SECURITY TRANSACTIONS AND DIVIDENDS. As is common in the industry, security
transactions are accounted for on the trade date. Dividend income is recorded on
the ex-dividend date.

D. DEFERRED ORGANIZATIONAL EXPENSES. All of the expenses of TWF incurred in
connection with its organization and the public offering of its shares have been
assumed by the series funds of TWF. The organization expenses allocable to Sand
Hill Portfolio Manager Fund are being amortized over a period of fifty-seven
(57) months.

E. DISTRIBUTIONS TO SHAREHOLDERS. Distributions from net investment income and
realized gains, if any, are recorded on the ex-dividend date. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These distribution differences primarily result from different
treatments of equalization and post-October capital losses.

<PAGE>
F. ACCOUNTING ESTIMATES. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.

NOTE 2-INVESTMENT MANAGEMENT AND DISTRIBUTION AGREEMENTS -- Pursuant to an
Investment Advisory Agreement, the Advisor, Sand Hill Advisors ("SHA") provides
investment services for an annual fee of 1.0% of the first $100 million of
average daily net assets and .75% on average daily net assets over $100 million.
SHA will reimburse the Fund to the extent of its advisory fee to limit the
Fund's aggregate annual operating expenses (excluding taxes and brokerage
commissions), to the lowest applicable percentage limitation prescribed by any
state in which the Fund's shares are qualified for sale. For the year ended
December 31, 1996, a voluntary reimbursement of $34,043 was made.

As provided in the Administrative Agreement, the Fund reimbursed Commonwealth
Shareholder Services, Inc. ("CSS"), its Administrative Agent, $17,681 for
providing shareholder services, recordkeeping, administrative services and
blue-sky filings. The Fund compensates CSS for blue-sky filings and certain
shareholder servicing on an hourly rate basis. For other administrative
services, CSS receives .20% of average daily net assets, with a minimum fee of
$60,000, of which $43,706 has been waived.

Fund Services, Inc. ("FSI") is the Fund's Transfer and Dividend Disbursing
Agent. FSI received $24,190 for its services for the year ended December 31,
1996.

Certain officers and/or directors of the Fund are also officers and/or directors
of CSS and FSI.

NOTE 3-PURCHASES AND SALES OF SECURITIES -- Purchases and sales of securities
other than short-term notes aggregated $3,129,441 and $1,688,861 respectively.
The Custodian has provided credits in the amount of $24,083 against custodian
and accounting charges based on credits on uninvested cash balances of the Fund.

<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of
The World Funds, Incorporated
Richmond, Virginia

We have audited the accompanying statement of assets and liabilities of the Sand
Hill Portfolio Manager Fund, a series of The World Funds, Inc., including the
schedule of portfolio investments as of December 31, 1996, and the related
statements of operations for the year then ended and the statement of changes in
net assets and the financial highlights for each of the two years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Sand Hill Portfolio Manager Fund as of December 31, 1996, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for each of the two years in the period then ended, in
conformity with generally accepted accounting principles.

TAIT, WELLER AND BAKER
Philadelphia, Pennsylvania
January 17, 1997
<PAGE>
APPENDIX

DESCRIPTION OF CORPORATE BOND RATINGS

MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND RATINGS:

Aaa - Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to i
mpair the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in
Aaa securities.

Moody's applies numerical modifiers 1,2 and 3 in the Aa and A rating
categories. The modifier 1 indicates that the security ranks at a higher end
of the rating category, modified 2 indicated a mid-range rating, and the
modifier 3 indicates that the issue ranks at the lower end of the rating
category.

A - Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e. they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative elements, their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of the desirable
investment assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.

Ca - Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

MOODY'S SHORT-TERM DEBT RATINGS:

Moody's short-term debt ratings are opinions of the ability of issuers
to repay punctually senior debt obligations which have an original maturity
not exceeding one year. Obligations relying upon support mechanisms such as
letters-of-credit and bonds of indemnity are excluded unless explicitly rated.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:

Prime-1 - Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of
return on funds employed; conservative capitalization structure with moderate
reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well established access to range of financial markets and assured sources of
alternate liquidity.

Prime-2 - Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will
normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Prime 3 - Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The
effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS:

AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation, indicating an extremely strong capacity to pay
principal and interest.

AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from highest rated issues only to a small degree.

Plus(+) or Minus(-) - The ratings from AA to CCC may be modified by
the addition of a plus or a minus sign, which shows relative standing
within the major rating categories.

A - Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in the higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.

BB, B, CCC, CC - Debt rated BB, B, CCC, and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB is the
lowest and CC is the highest degree of speculation. While such debt will have
some quality and protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions.

C - The rating C is reserved for income bonds on which no interest is being
paid.

D - Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
<PAGE>
Investment Advisor:Sand Hill Advisors, Inc.
3000 Sand Hill Road
Building Three, Suite 150
Menlo Park, CA 94025

Distributor: First Dominion Capital Corp.
1500 Forest Ave., Suite 223
Richmond, VA 23229

Independent Auditors: Tait, Weller & Baker
Two Penn Center Plaza
Suite 700
Philadelphia, PA 19102

Transfer Agent: For account information, wire purchases or redemptions,
call or write to the Fund's Transfer Agent:

Fund Services, Inc.
P.O. Box 26305
Richmond, VA 23260-6305
(800) 628-4077 Toll Free

More Information: For 24-hour, 7-days-a-week price information call
1-800-527-9500.

For information on the Fund, investment plans,
or other shareholder services, call the Company at 1-800-527-9500
during normal business hours, or write the Company
at 1500 Forest Avenue, Suite 223, Richmond, VA 2322

<PAGE>
PART C
OTHER INFORMATION

ITEM 24.FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements.

(1) Included in Part A: Financial Highlights for Registrant's
predecessor, Vontobel Funds, Inc.,
Sand Hill Portfolio Manager Fund

(2) Included in Part B: For Registrant's predecessor,
Vontobel Funds, Inc., Sand Hill Portfolio
Manager Fund:

* Report of Independent Auditors dated January 17, 1997

* Schedule of Portfolio Investments as of December 31, 1996 (audited)

* Statement of Assets and Liabilities at December 31, 1996 (audited)

* Statement of Operations for the years ended December 31, 1995 and 1996
(audited)

* Financial Highlights (audited)
* Notes to Financial Statements dated December 31, 1996 (audited)

(b) Exhibits.

(1) Articles of Incorporation of Registrant filed with the State of
Maryland on May 9, 1997 are filed herewith as
Exhibit A.

(2) By-Laws of Registrant are filed herewith as
Exhibit B.
(3) Not Applicable.

(4) Specimen of certificate of common stock for the
Sand Hill Portfolio Manager Fund series is
filed herewith as Exhibit C.

(5) The proposed form of Investment Advisory Agreement
between Sand Hill Advisors, Inc. and the
Registrant on behalf of the Sand Hill Portfolio Manager Fund is filed herewith
as Exhibit D.

(6) The proposed form of Distribution Agreement
between First Dominion Capital Corp. and the
Registrant is filed herewith as Exhibit E.
(7) Not Applicable.

(8) Proposed form of Custodian Agreement between Star
Bank, N.A. and the Registrant on
behalf of the Sand Hill Portfolio Manager Fund is
filed herewith as Exhibit F.
(9) (a) Proposed form of Transfer Agency Agreement
between Fund Services, Inc. and the
Registrant is filed herewith as Exhibit G.

(b) Proposed form of Administrative Services
Agreement between Commonwealth
Shareholder Services, Inc. and the
Registrant on behalf of the Sand Hill Portfolio
Manager Fund is filed herewith as Exhibit
H.
(c) Proposed form of Fund Accounting Servicing
Agreement between Star Bank, N.A.
and the Registrant on behalf of the Sand
Hill Portfolio Manager Fund series is
filed herewith as Exhibit I.

(d) Proposed form of Fund Expense Agreement
between Commonwealth Shareholder Services,
Inc. and the Registrant is filed herewith as Exhibit J.

(10)Opinion of Counsel (to be filed with Registrant's Rule
24f-2 Notice).

(11)Consent of Independent Accountants is filed herewith as
Exhibit K.

(12)Not applicable.

(13)Not applicable.

(14)(a) Proposed form of IRA Service Agreement, between
Star Bank, N.A. and the Registrant is
filed herewith as Exhibit L.

(15)Not Applicable.

(16)Schedule of computation of performance quotation on
behalf of the Sand Hill Portfolio Manager Fund
is attached hereto as Exhibit M.

(17)Financial Data Schedule is filed herewith as Exhibit N.

(18)Not applicable.

(19)Powers-of-Attorney for Samuel Boyd, Jr., William E.
Poist, and Paul M. Dickinson and Secretary's
Certificate is filed herewith as Exhibit O.

ITEM 25.PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.

ITEM 26.NUMBER OF HOLDERS OF SECURITIES: As of June 12, 1997:

Number of
Title of Class Record Holders
Sand Hill Portfolio Manager Fund0*

*Upon approval by the shareholders of the Sand Hill
Portfolio Manager Fund series of the Vontobel Funds,
Inc. ("VFI"), the Registrant will acquire the assets of VFI in exchange for
shares of the
Registrant. See Item 32-Undertakings, below.

ITEM 27.INDEMNIFICATION.

The Registrant is incorporated under the General Corporation Law
(the "GCL") of the State of Maryland. TheRegistrant's Articles of Incorporation
provide for indemnification of directors, officers and other agents of the
corporation to the
fullest extent permitted under the GCL. The Articles limit such indemnification
so as to comply with the prohibition against
indemnifying such persons under Section 17 of the 1940 Act for certain
conduct set forth in that section ("Disabling Conduct").
Contracts between the Fund and various service providers include provisions for
indemnification, but also forbid the Registrant to
indemnify affiliates for Disabling Conduct.

ITEM 28.BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.

Sand Hill Advisors, Inc, the investment advisor to the Sand Hill
Portfolio Manager Fund series, provides
investment advisory services consisting of portfolio management
for a variety of individuals and institutions and as
of December 31, 1996, had approximately $235 million in assets
under management.

For information as to any other business, profession, vocation
or employment of a substantial nature in which
each director, officer or partner of Sand Hill Advisors, Inc.
(the "Advisor") is or has been, at any time during the
past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee,
reference is made to the Advisor's Form ADV (File #801-17601), currently on
file with the Commission
as required by the Investment Advisors Act of 1940, as amended.

ITEM 29.PRINCIPAL UNDERWRITER.

(a) Vontobel Funds, Inc.

(b)
Positions and Positions and
Name and Principal Offices With Offices with
Business Address Underwriter Registrant

John Pasco, III President, ChiefChairman,
1500 Forest Avenue Financial Officer,President, &
Suite 223 Treasurer, Director Treasurer
Richmond, VA 23229

Mary T. Pasco Director Assistant
1500 Forest Avenue Secretary
Suite 223
Richmond, VA 23229

Lori J. Martin Vice President None
1500 Forest Ave. & Assistant Sec.
Suite 223
Richmond, VA 23229

F. Byron Parker, Jr.Secretary Secretary
Mustian & Parker
Two Paragon Place
Suite 100
6802 Paragon Place
Richmond, VA 23230

The accounts, books or other documents of the Registrant required
to be maintained by 31(a) of the Investment
Company Act of 1940, as amended, and the rules promulgated
thereunder are kept in several locations:

(a) Shareholder account records (including share ledgers,
duplicate confirmations, duplicate account
statements, and applications forms) of the Sand Hill
Portfolio Manager Fund series of the Registrant
are maintained by its transfer agent, Fund Services,
Inc., at 1500 Forest Avenue, Suite 111, Richmond,
VA 23229.

(b) Investment records including research information,
records relating to the placement of brokerage
transactions, memorandums regarding investment
recommendations for supporting and/or authorizing
the purchase or sale of assets, information relating
to the placement of securities transactions, and
certain records concerning investment recommendations
of the Sand Hill Portfolio Manager Fund series
are maintained at the series' investment advisor,
Sand Hill Advisors, Inc., at 3000 Sand Hill Road,
Building 3, Suite 150, Menlo Park, CA 94025.

(c) Accounts and records for portfolio securities and other
investment assets, including cash of the Sand
Hill Portfolio Manager Fund series are maintained in
the custody of the Registrant's custodian bank,
Star Bank N.A., 425 Walnut Street, P.O. Box 1118,
Cincinnati, Ohio 45201-1118.

(d) Accounting records, including general ledgers, supporting
ledgers, pricing computations, etc. of the Sand
Hill Portfolio Manager Fund series are maintained by the
Registrant's accounting services agent, Star
Bank N.A., 425 Walnut Street, P.O. Box 1118,
Cincinnati, Ohio 45201-1118

(e) Administrative records, including copies of the charter,
by-laws, minute books, agreements, compliance
records and reports, certain shareholder
communications, etc., are kept at the Registrant's
principal
office, at 1500 Forest Avenue, Suite 223, Richmond,
VA 23229, by the Registrant's Administrator,
Commonwealth Shareholder Services, Inc., whose address is
the same as Registrant's.

(f) Records relating to distribution of shares of the
Registrant are maintained by the Registrant's
distributor, First Dominion Capital Corp. at 1500 Forest
Avenue, Suite 223, Richmond, VA 23229.

ITEM 31.MANAGEMENT SERVICES. There are no management-related service
contracts not discussed in Parts A or B of this
Form.

ITEM 32.UNDERTAKINGS.

(c) Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of
the Registrant's latest annual report to shareholders,
upon request and without charge.

(d) The Registrant hereunder does not have as of the filing
of this registration statement, and will not have
as of the proposed effective date, assets equal to or in
excess of $100,000. However, the Registrant is
presently a party to an Agreement and Plan of
Reorganization (the "Plan") for the Sand Hill Portfolio
Manager Fund series (the "Original Series") of the
Vontobel Funds, Inc. ("VFI"). Under the Plan, the
Registrant will acquire all of the assets of the
Original Series in exchange for shares of a new series
of
the Registrant (the "New Series"). Upon completion of
the Reorganization, the New Series will have
net assets of approximately $6,459,000 which was the
the net assets of the Original Series on December
31, 1996. The Registrant hereby undertakes that it
will not engage in any offering of the securities of
the New Series to any person, or issue any such
securities other than in connection with the
Reorganization, until the completion of the
Reorganization, and the receipt by the New Series of
assets
with a value in excess of $100,000.
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of
Richmond, and the Commonwealth of Virginia on the 13th day of June, 1997.

THE WORLD FUNDS, INC.
Registrant

By /s/ John Pasco, III
John Pasco, III, Chairman

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the
following persons in the capacities and on the date indicated below.

(Signature) (Title) (Date)

/s/ John Pasco, III Director, Chairman June 13, 1997
John Pasco, III & Treasurer

/s/ Samuel Boyd, Jr. Director June 13, 1997
Samuel Boyd, Jr.

/s/ Paul M. Dickinson Director June 13, 1997
Paul M. Dickinson

/s/ William E. Poist Director June 13, 1997
William E. Poist<PAGE>
EXHIBIT INDEX

Exhibit A Articles of Incorporation

Exhibit B By-Laws

Exhibit C Specimen of certificate of common stock

Exhibit D Proposed Form of Investment Advisory Agreement

Exhibit E Proposed form of Distribution Agreement

Exhibit F Proposed Form of Custodian Agreement

Exhibit G Proposed Form of Transfer Agency Agreement

Exhibit H Proposed Form of Administrative Services Agreement

Exhibit I Proposed Form of Fund Accounting Services Agreement

Exhibit J Proposed Form of Fund Expense Agreement

Exhibit K Consent of Tait, Weller & Baker

Exhibit L Proposed Form of IRA Service Agreement

Exhibit M Schedule of Computation of performance quotation

Exhibit N Financial Data Schedule

Exhibit O Powers of Attorney and Secretary's Certificate

EXHIBIT A

ARTICLES OF INCORPORATION
OF
THE WORLD FUNDS, INC.

FIRST: The undersigned, Steven M. Felsenstein, whose post office
address is One Commerce Square, Philadelphia,
Pennsylvania 19103, and being at least eighteen years of age, does hereby cause
to be filed these Articles of Incorporation for the
purpose of forming a corporation under the General Corporation Law of the State
of Maryland.

SECOND: The name of the corporation is The World Funds, Inc.

THIRD: The purpose for which the corporation is formed is to operate as
an investment company and to exercise all of
the powers and to do any and all of the things as fully and to the same extent
as any other corporation incorporated under the laws of
the State of Maryland, now or hereinafter in force, including, without
limitation, the following:

1. To purchase, hold, invest and reinvest in, sell,
exchange, transfer, mortgage, and otherwise acquire and
dispose of securities of every kind, character and description.

2. To exercise all rights, powers and privileges with
reference to or incident to ownership, use and
enjoyment of any of such securities, including, but without limitation, the
right, power and privilege to own, vote, hold, purchase, sell,
negotiate, assign, exchange, transfer, mortgage, pledge or otherwise deal with,
dispose of, use, exercise or enjoy any rights, title,
interest, powers or privileges under or with reference to any of such
securities; and to do any and all acts and things for the
preservation, protection, improvement and enhancement in value of any of such
securities.

3. To purchase or otherwise acquire, own, hold, sell,
exchange, assign, transfer, mortgage, pledge or
otherwise dispose of, property of all kinds.

4. To buy, sell, mortgage, encumber, hold, own, exchange,
rent or otherwise acquire and dispose of, and to
develop, improve, manage, subdivide, and generally to deal and trade in real
property, improved and unimproved, and wheresoever
situated; and to build, erect, construct, alter and maintain buildings,
structures, and other improvements on real property.

5. To borrow or raise moneys for any of the purposes of the
corporation, and to mortgage or pledge the
whole or any part of the property and franchises of the corporation, real,
personal, and mixed, tangible or intangible, and wheresoever
situated.

6. To enter into, make and perform contracts and
undertakings of every kind for any lawful purpose,
without limit as to amount.

7. To issue, purchase, sell and transfer, reacquire, hold,
trade and deal in, to the extent permitted under
the General Corporation Law of the State of Maryland, capital stock, bonds,
debentures and other securities of the corporation, from
time to time, to such extent as the Board of Directors shall, consistent with
the provisions of these Articles of Incorporation,
determine; and to repurchase, re-acquire and redeem, to the extent permitted
under the General Corporation Law of the State of
Maryland, from time to time, the shares of its own capital stock, bonds,
debentures and other securities.

The foregoing clauses shall each be construed as
purposes, objects and powers, and it is hereby
expressly provided that the foregoing enumeration of specific purposes,
objects and powers shall not be held to limit or restrict in any
manner the powers of the corporation, and that they are in furtherance of, and
in addition to, and not in limitation of, the general
powers conferred upon the corporation by the laws of the State of Maryland
or otherwise; nor shall the enumeration of one thing be
deemed to exclude another, although it be of like nature, not expressed.

FOURTH: The post office address of the principal office of the
corporation in the State of Maryland is:

c/o The Corporation Trust, Incorporated
32 South Street
Baltimore, Maryland 21202

The name and post office address of the initial resident
agent of the corporation in the State of
Maryland is:

The Corporation Trust, Incorporated
32 South Street
Baltimore, Maryland 21202

FIFTH: The total number of shares of stock which the corporation shall
have authority to issue is Two Hundred and Fifty
Million (250,000,000) shares of stock, with a par value of One Cent ($.01) per
share, to be known and designated as Common Stock,
such shares of Common Stock having an aggregate par value of Two Million Five
Hundred Thousand Dollars ($2,500,000).

Subject to the provisions of these Articles of
Incorporation, the Board of Directors shall have the
power to issue shares of Common Stock of the corporation from time to time, at
prices not less than the net asset value or par value
thereof, whichever is greater, for such consideration in such form as may be
fixed from time to time pursuant to the direction of the
Board of Directors.

Pursuant to Section 2-105 of the Maryland General
Corporation Law, the Board of Directors of the
corporation shall have the power to designate one or more series of shares of
Common Stock and sub-series (classes) thereof, and to
classify or reclassify any unissued shares with respect to such series or sub-
series thereof, and such series and sub-series (subject to any
applicable rule, regulation or order of the Securities and Exchange Commission
or other applicable law or regulation) shall have such
preference, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, terms and conditions of
redemption and other characteristics as the Board may determine, unless
inconsistent with this Article FIFTH.

Subject to the aforesaid power of the Board of Directors,
one series of shares is hereby designated and
classified as the Sand Hill Portfolio Manager Fund and Fifty Million
(50,000,000) shares of Common Stock (par value $.01 per share)
are hereby initially classified and allocated to such series. At any time
when there are no shares outstanding or subscribed for a
particular series or sub-series previously established and designated herein
or by the Board of Directors, the series or sub-series may
be eliminated by the Board of Directors by the same means.

Each share of a series shall have equal rights with
each other share of that series with respect to the
assets of the corporation pertaining to that series. The dividends payable
to the holders of any sub-series (subject to any applicable
rules, regulation or order of the Securities and Exchange Commission or any
other applicable law or regulation) may be charged with
any pro rata portion of distribution expenses paid pursuant to a Plan of
Distribution adopted by such sub-series in accordance with
Rule 12b-1 under the Investment Company Act of 1940 (or any successor thereto),
which dividend shall be determined as directed by
the Board and need not be individually declared, but may be declared and paid
in accordance with a formula adopted by the Board.
Except as otherwise provided herein, all references in these Articles of
Incorporation to Common Stock or series of stock shall apply
without discrimination to the shares of each series of stock.

The holder of each share of stock of the corporation shall be
entitled to one vote for each full share,
and a fractional vote for each fractional share of stock then standing in his
or her name in the books of the corporation. On any
matter submitted to a vote of shareholders, all shares of the corporation
then issued and outstanding and entitled to vote, irrespective
of the series, shall be voted in the aggregate and not by series except (1)
when otherwise expressly provided by the Maryland General
Corporation Law; (2) when required by the Investment Company Act of 1940,
as amended, shares shall be voted by individual series,
or sub-series; and (3) when the matter does not affect any interest of any
particular series or sub-series, then only shareholders of
affected series or sub-series shall be entitled to vote thereon. Holders of
shares of stock of the corporation shall not be entitled to
cumulative voting in the election of directors or on any other matter.

Each series of stock of the corporation shall have the
following powers, preferences and participating,
voting, or other special rights and the qualifications, restrictions, and
limitations thereof shall be as follows:

1. All consideration received by the corporation
for the issue or sale of stock of each series,
together with all income, earnings, profits, and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation
thereof, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall
irrevocably belong to the series of shares of stock with respect to which
such assets, payments or funds were received by the
corporation for all purposes, subject only to the rights of creditors, and
shall be so handled upon the books of account of the
corporation. Such assets, income, earnings, profit and proceeds thereof,
including any proceeds derived from the sale, exchange or
liquidation thereof and any assets derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein
referred to as "assets belonging to" such series.

2. The Board of Directors may from time to time
declare and pay dividends or distributions, in
stock or in cash, on any or all series of stock; provided, such dividends or
distributions on shares of any series of stock shall be paid
only out of earnings, surplus, or other lawfully available assets belonging
to such series.

3. The Board of Directors shall have the power in
its discretion to distribute to the
shareholders of the corporation or to the shareholders of any series thereof
in any fiscal year as dividends, including dividends
designated in whole or in part as capital gain distributions, amounts
sufficient, in the opinion of the Board of Directors, to enable the
corporation or any series thereof to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as
amended, or any successor or comparable statute thereof, and regulations
promulgated thereunder (collectively, the "IRC"), and to
avoid liability of the corporation or any series thereof for Federal income
tax in respect of that year and to make other appropriate
adjustments in connection therewith.

4. The Board of Directors shall have the power, in
its discretion, to make such elections as to
the tax status of the corporation or any series or class of the corporation
as may be permitted or required under the IRC as presently
in effect or as amended, without the vote of shareholders of the corporation
or any series thereof.

5. In the event of the liquidation or dissolution
of the corporation, shareholders of each series
shall be entitled to receive, as a series, out of the assets of the corporation
available for distribution to shareholders, but other than
general assets not belonging to any particular series of stock, the assets
belonging to such series, and the assets so distributable to the
shareholders of any series shall be distributed among such shareholders in
proportion to the number of shares of such series held by
them and recorded on the books of the corporation. In the event that there
are any general assets not belonging to any particular
series of stock and available for distribution, such distribution shall be
made to the holders of stock of all series in proportion to the
net asset value of the respective series determined as hereinafter provided.

6. The assets belonging to any series of stock
shall be charged with the liabilities in respect to
such series, and shall also be charged with its share of the general
liabilities of the corporation, in proportion to the net asset value of
the respective series determined as hereinafter provided. The determination
of the Board of Directors shall be conclusive as to the
amount of liabilities, including accrued expenses and reserves, as to the
allocation of the same as to a given series, and as to whether
the same or general assets of the corporation are allocable to one or more
series.

7. The Board of Directors may provide for a holder
of any series of stock of the corporation,
who surrenders his certificate in good form for transfer to the corporation
or, if the shares in question are not represented by
certificates, who delivers to the corporation a request in good order signed
by the shareholder or otherwise authenticated in the
manner required by the corporation, to convert the shares in question on such
basis as the Board may provide, into shares of stock of
any other series of the corporation.

8. The holders of the shares of Common Stock or
other securities of the corporation shall have
no preemptive rights to subscribe to new or additional shares of its Common
Stock or other securities.

SIXTH: The number of directors of the corporation shall be such number
as may from time to time be fixed by the
By-Laws of the corporation or pursuant to authorization contained in such By-
Laws; provided, notwithstanding anything herein to the
contrary, the Board of Directors shall consist initially of four directors
until such time as the number of directors is fixed as stated
above. The names of the directors who shall act as such until successors are
duly chosen and qualified are: John Pasco, III, Samuel
Boyd, Jr., William E. Poist and Paul M. Dickinson.

SEVENTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of
the corporation:

1. The Board of Directors shall have power to fix
an initial offering price for the shares of any
series which shall yield to the corporation not less than the par value
thereof, at which price the shares of the Common Stock of the
corporation shall be offered for sale, and to determine from time to time
thereafter the offering price which shall yield to the
corporation not less than the par value thereof from sales of the shares of
its Common Stock; provided, however, that no shares of the
Common Stock of the corporation shall be issued or sold for a consideration
which shall yield to the corporation less than the net
asset value of shares of such series determined as hereinafter provided, as
of the business day on which such shares are sold, or at such
other times set by the Board of Directors, except in the case of shares of
such Common Stock issued in payment of a dividend
properly declared and payable.

Notwithstanding anything in these Articles of
Incorporation to the contrary, the Board of
Directors shall have power to establish in its absolute discretion the basis
or method for determining the value of the assets belonging
to any class or series, and the net asset value of each share of any class
or series of the corporation for purposes of sales, redemptions,
repurchases of shares or otherwise.

The net asset value of the property and assets
of the corporation shall be determined in
accordance with the Investment Company Act of 1940, as amended, and with
generally accepted accounting principles, and at such
times as the Board of Directors may direct, by deducting from the total market
or appraised value of all of the property and assets of
the corporation, all debts, obligations and liabilities of the corporation
(including, but without limitation of the generality of any of the
foregoing, any or all debts, obligations, liabilities or claims of any and
every kind and nature, whether fixed, accrued, or unmatured,
and any reserves or charges, determined in
accordance with generally accepted accounting principles, for any or all
thereof, whether for taxes, including estimated taxes or
unrealized book profits, expenses, contingencies or otherwise).

The net asset value per share of a series of
the Common Stock of the corporation shall be
determined by adding the total market or appraised value of the property and
assets of the relevant series of the corporation,
subtracting the liabilities determined by the Board of Directors to be
applicable to that series, allocating any general assets and general
liabilities to that series, and dividing the net result by the total number
of shares of its Common Stock then issued and outstanding for
such series, including any shares sold by the corporation up to and including
the date as of which such net asset value is to be
determined whether or not certificates therefor have actually been issued.
In case the net asset value of each share so determined shall
include a fraction of one cent, such net asset value of each share shall be
adjusted to the nearest full cent.

2. To the extent permitted by law, and except in
the case of a national financial emergency, the
corporation shall redeem shares of its Common Stock from its stockholders
upon request of the holder thereof received by the
corporation or its designated agent during business hours of any business day,
provided that such request must be accompanied by
surrender of any outstanding certificate or certificates for such shares in
form for transfer, together with such proof of the authenticity
of signatures as may reasonably be required on such shares (or, on such
request in the event no certificate is outstanding) by, or
pursuant to the direction of the Board of Directors of the corporation, and
accompanied by proper stock transfer stamps, if any.
Shares redeemed upon any such request shall be purchased by the corporation at
the net asset value of such shares determined in the
manner provided in Paragraph (1) of this Article SEVENTH, and in accordance
with the redemption procedures prescribed in the then
current Prospectus for the applicable series of shares of the corporation.

Payments for shares of its Common Stock so
redeemed by the corporation shall be made
from the assets of the applicable series in cash, except payment for such
shares may, at the option of the Board of Directors, or such
officer or officers as they may duly authorize for the purpose in their
complete discretion, be made from the assets of that series in
kind or partially in cash and partially in kind. In case of any payment in
kind the Board of Directors, or their delegate, shall have
absolute discretion as to what security or securities of such series shall
be distributed in kind and the amount of the same; and the
securities shall be valued for purposes of distribution at the value at which
they were appraised in computing the current net asset
value of the series of the corporation's shares, provided that any stockholder
who cannot legally acquire securities so distributed in
kind by reason of the prohibitions of the Investment Company Act of 1940, as
amended, shall receive cash.

Payment for shares of its Common Stock so
redeemed by the corporation shall be made by
the corporation as provided above within seven days after the date which such
shares are deposited in good order, and after
satisfactory compliance with applicable requirements; provided, however, that
if payment shall be made by delivery of assets of the
corporation, as provided above, any securities to be delivered as part of
such payment shall be delivered as promptly as any necessary
transfers of such securities on the books of the several corporations whose
securities are to be delivered may be made, but not
necessarily within such seven day period.

The right of any holder of shares of the Common
Stock of the corporation to receive
dividends thereon and all other rights of such stockholder with respect to the
shares so redeemed by the corporation shall cease and
determine from and after the time as of which the purchase price of such
shares shall be fixed, as provided above, except the right of
such stockholder to receive payment for such shares as provided for herein.

For the purposes of these Articles of
Incorporation, a "national financial emergency" is
defined as the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend
and holiday closings, (ii) during which trading on the New York Stock
Exchange is restricted, (iii) during which an emergency exists as
a result of which disposal by the corporation of securities owned by such
series is not reasonably practicable or it is not reasonably
practicable for the corporation fairly to determine the value of the net
assets of such series, or (iv) during any other period when the
Securities and Exchange Commission (or any succeeding governmental authority)
may for the protection of security holders of the
corporation by order permit suspension of the right of redemption or
postponement of the date of payment on redemption; provided
that applicable rules and regulations of the Securities and Exchange
Commission (or any succeeding governmental authority) shall
govern as to whether the conditions prescribed in (ii), (iii), or (iv) exist.
The Board of Directors may, in its discretion, declare the
suspension described in (iv) above at an end, and such other suspension
relating to a national financial emergency shall terminate as
the case may be on the first business day on which said Stock Exchange shall
have reopened or the period specified in (ii) or (iii) shall
have expired (as to which in the absence of an official ruling by said
Commission or succeeding authority, the determination of the
Board of Directors shall be conclusive).

3. The Board of Directors may, from time to time,
without the vote or consent of stockholders,
establish uniform standards with respect to the minimum net asset value of a
stockholder account or a minimum investment which may
be made by a stockholder. The Board of Directors may authorize the closing
of those stockholder accounts not meeting the specified
minimum standards of net asset value by redeeming all of the shares in such
accounts, provided there is mailed to each affected stock-
holder account, at least thirty (30) days prior to the planned redemption
date,
a notice setting forth the minimum account size
requirement and the date on which the account will be closed if the minimum
size requirement is not met prior to said closing date.

EIGHTH: (a) To the fullest extent that limitations on the
liability of directors and officers are permitted by
the Maryland General Corporation Law, no director or officer of the
corporation shall have any liability to the corporation or its
stockholders for damages. This limitation on liability applies to events
occurring at the time a person serves as a director or officer of
the corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.

(b) No provision of this Article shall be effective
to protect or purport to protect any director or
officer of the corporation against any liability to the corporation or its
security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.

(c) References to the Maryland General Corporation
Law in this Article are to the law as from
time to time amended. No amendment to the Articles of Incorporation of the
corporation shall affect any right of any person under
this Article based on any event, omission or proceeding prior to such
amendment.

NINTH: Subject to the Investment Company Act of 1940, as amended,
each of the following actions, to the extent required
to be approved by the shareholders under Maryland General Corporation Law,
shall be approved by a majority of all votes entitled to
be cast on the matter:

(i)Amendment or amendment and restatement of the Articles;

(ii) Reduction of stated capital;

(iii)Consolidation, merger, share exchange or transfer of assets;

(iv) Distribution in partial liquidation; or

(v)Voluntary dissolution.

TENTH: The corporation expressly reserves the right to amend, alter,
change or repeal any provision contained in these
Articles of Incorporation, and all rights, contract and otherwise, conferred
reservation.

ELEVENTH: The corporation expressly agrees and acknowledges that the
name "The World Funds, Inc." is the sole
property of Commonwealth Shareholder Services, Inc. ("CSS"), that similar
names may be used by funds in the investment business
which are affiliated with CSS, and that the corporation's use of such name
is with permission of CSS. The corporation further
expressly agrees and acknowledges that its use of such name may be terminated
by CSS if the corporation ceases to use CSS as its
administrator (or to use affiliates of CSS for such purposes). The
corporation further expressly agrees and acknowledges that in such
event CSS may require the corporation to present to its shareholders, at
the next annual or special meeting of the corporation held
after such request, a proposal to change the name of the corporation to
delete reference to the name "The World Funds." The
corporation further expressly agrees and acknowledges in such event to use
its best efforts to comply promptly with such request to
change its name and that the Board of Directors of the corporation shall
recommend such a proposal to its shareholders. The
corporation further expressly acknowledges and agrees, upon shareholder
approval of such a proposal, to make and cause to be made
such filings to effect the change of name as may be necessary with the State
of Maryland, the United States Securities and Exchange
Commission, or other regulatory authorities.

IN WITNESS WHEREOF, the undersigned incorporator of The World Funds,
Inc. who executed the foregoing Articles of
Incorporation hereby acknowledges the same to be his act and further
acknowledges that, to the best of his knowledge the matters and
facts set forth therein are true in all material respects, under the penalties
of perjury.

Dated the 8th day of May, 1997.

_______________________________________
Steven M. Felsenstein
<PAGE>

EXHIBIT B
THE WORLD FUNDS, INC.

BY-LAWS

ARTICLE I
OFFICES
Section 1.The principal office of the Corporation shall be in the City
of Richmond, Commonwealth of Virginia. The
Corporation shall also have offices at such other places as the Board of
Directors may from time to time determine or the business of
the Corporation may require.

ARTICLE II
STOCKHOLDERS AND STOCK CERTIFICATES
Section 1. To the extent authorized by the Board of Directors, a
stockholder of record may request a stock
certificate representing the shares owned by him. Stock certificates, if any,
shall be in such form as may be required by law and as the
Board of Directors shall prescribe. Every stock certificate shall be signed
by the Chairman or the President or a Vice President and by
the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary, and sealed with the corporate seal, which may be a
facsimile, either engraved or printed. Stock certificates may bear the
facsimile signatures of the officers authorized to sign such
certificates.

Section 2. A share of capital stock of the Corporation shall be
transferable on the books of the Corporation only
by the person(s) in whose name(s) such share is registered, or by his duly
authorized attorney or representative. In all cases of
transfer by an attorney-in-fact, the original power of attorney, or an
official copy thereof duly certified, shall be deposited and remain
with the Corporation or its duly authorized transfer agent. In case of
transfers by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with
the Corporation or its duly authorized transfer agent. No transfer shall be
made unless and until the certificate issued to the
transferor, if any, shall be delivered to the Corporation or its duly
authorized transfer agent, properly endorsed.

Section 3. Any person desiring a certificate for shares of the
capital stock of the Corporation to be issued in lieu
of one lost or destroyed shall make an affidavit or affirmation setting forth
the loss or destruction of such stock certificate, and shall
advertise such loss or destruction in such manner as the Board of Directors
may require, and shall, if the Board of Directors shall so
require, give the Corporation a bond or indemnity, in such form and with such
security as may be satisfactory to the Board,
indemnifying the Corporation against any loss that may result upon the
issuance of a new stock certificate. Upon receipt of such
affidavit and proof of publication of the advertisement of such loss or
destruction, and the bond, if any, required by the Board of
Directors, a new stock certificate may be issued of the same tenor and for
the number of shares as the one alleged to have been lost
or destroyed.

Section 4. The Corporation shall be entitled to treat the holder
of record of any share or shares of its capital
stock as the owner thereof and, accordingly, shall not be bound to recognize
any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not the Corporation
shall have express or other notice thereof.

Section 5.In the event that the Corporation issues non-certificated
shares of its capital stock, the Board of Directors shall
establish procedures designed to comply with the requirements of the Maryland
General Corporation Law.

ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. (a) The Corporation is not required to hold an Annual
Meeting in any year in which the Corporation
is not required to elect directors under the Investment Company Act of 1940.
If the Corporation is required under the Investment
Company Act of 1940 to hold a stockholder meeting to elect directors, the
meeting may be designated an Annual Meeting of
Stockholders for that year for purposes of Maryland law.

(b) Annual Meetings, if held, shall be held at
such place and time as the Board of Directors
may by resolution establish. In the absence of any specific resolution,
Annual Meetings of Stockholders shall be held at the
Corporation's principal office, or at such other place within or without the
State of Maryland as the Board of Directors may from time
to time prescribe. Meetings of stockholders for any other purpose may be
held at such place and time as shall be fixed by resolution
of the Board of Directors and stated in the Notice of the Meeting, or in a
duly executed Waiver of Notice thereof.

Section 2. Special meetings of the stockholders may be called at
any time by the Chairman, President or a
majority of the members of the Board of Directors and, except as otherwise
required by the Investment Company Act of 1940, shall be
called by the Secretary upon the written request of the holders of at least
fifty percent of the shares of the capital stock of the
Corporation issued and outstanding and entitled to vote at such meeting.
Upon receipt of a written request from such holders as are
entitled to call a special meeting, which shall state the purpose of the
meeting and the matter proposed to be acted on at it, the
Secretary shall issue notice of such meeting. The cost of preparing and
mailing the notice of a special meeting of stockholders shall be
borne by the Corporation. Special meetings of the stockholders shall be held
at the principal office of the Corporation, or at such
other place within or without the State of Maryland as the Board of Directors
may from time to time direct, or at such place within or
without the State of Maryland as shall be specified in the notice of such
meeting.

Section 3. Notice of the time and place of the annual or any
special meeting of the stockholders shall be given to
each stockholder entitled to notice of such meeting not less than ten days nor
more than ninety days prior to the date of such meeting.
In the case of special meetings of the stockholders, the 0notice shall
specify the object or objects of such meeting, and no business shall
be transacted at such meeting other than that mentioned in the notice.

Section 4. The Board of Directors may close the stock transfer
books of the Corporation for a period not
exceeding twenty days preceding the date of any meeting of stockholders, or
the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or for a period of not
exceeding twenty days in connection with the obtaining of the consent of
stockholders for any purpose; provided, however, that in lieu
of closing the stock transfer books as aforesaid, the Board of Directors may
fix in advance a date, not exceeding ninety days preceding
the date of any meeting of stockholders, or the date for payment of any
dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent, as
a record date for the determination of the stockholders entitled to notice of,
and to vote at any such meeting and any adjournment
thereof, or entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of
any such change, conversion or exchange of capital stock or to give such
consent, and in such case such stockholders and only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting and
any adjournment thereof, or to receive payment of such dividend or to receive
such allotment of rights or to exercise such rights, or to
give such consent, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record
date fixed as aforesaid.

Section 5. At all meetings of the stockholders a quorum shall
consist of the holders of a majority of the
outstanding shares of the capital stock of the Corporation entitled to vote
at such meeting. In the absence of a quorum no business
shall be transacted except that the stockholders present in person or by proxy
and entitled to vote at such meeting shall have power to
adjourn the meeting from time to time to a date not more than one hundred
twenty days after the original record date without further
notice other than announcement at the meeting. At any such adjourned meeting
at which a quorum shall be present any business may
be transacted which might have been transacted at the meeting on the date
specified in the original notice. If a quorum is present at
any meeting, the holders of a majority of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote at
the meeting who shall be present in person or by proxy at such meeting shall
have power to approve any matter properly before the
meeting, except as otherwise provided in the Investment Company Act of 1940,
and also except a plurality of all votes cast at a meeting
at which a quorum is present shall be sufficient for the election of a
director. The holders of such majority shall also have power to
adjourn the meeting to any specific time or times, and no notice of any such
adjourned meeting need be given to stockholders absent
or otherwise.

Section 6. At all meetings of the stockholders the following order
of business shall be substantially observed, as
far as it is consistent with the purpose of the meeting, except to the extent
that the Board of Directors shall otherwise provide:
Election of Directors;
Ratification of Selection of Auditors; and
New business.

Section 7. At any meeting of the stockholders of the Corporation
every stockholder having the right to vote shall
be entitled, in person or by proxy appointed by an instrument in writing
subscribed by such stockholder or by his duly authorized
attorney in fact and bearing a date not more than eleven months prior to said
meeting unless such instrument provides for a longer
period, to vote each full and fractional share of stock having voting power
registered in his name on the books of the Corporation.

ARTICLE IV
DIRECTORS
Section 1. The Board of Directors shall consist of not less than
three nor more than twelve members. The Board
of Directors may by a vote of the entire board increase or decrease the number
of directors without a vote of the stockholders;
provided that any such decrease shall not affect the tenure of office of any
director. Directors need not hold any shares of the capital
stock of the Corporation.

Section 2. The directors shall be elected by the stockholders of
the Corporation at an annual meeting, if held, or
at a special meeting called for such purpose, and shall hold office until
their successors shall be duly elected and shall qualify.

Section 3. The Board of Directors shall have the control and
management of the business of the Corporation, and
in addition to the powers and authority expressly conferred upon them by
these By-Laws, may exercise, subject to the provisions of the
laws of the State of Maryland and of the Articles of Incorporation of the
Corporation, all such powers of the Corporation and do all
such acts and things as are not required by law or by the Articles of
Incorporation to be exercised or done by the stockholders.

Section 4. The Board of Directors shall have power to fill
vacancies occurring on the Board, whether by death,
resignation or otherwise. A vacancy on the Board of Directors resulting
from any cause except an increase in the number of directors
may be filled by a vote of the majority of the remaining members of the
Board, though less than a quorum. A vacancy on the Board
of Directors resulting from an increase in the number of directors may be
filled by a majority of the entire Board of Directors. A
director elected by the Board of Directors to fill a vacancy shall serve
until the next annual meeting, whenever held, or special meeting
called for that purpose, and until his successor is elected and qualifies.

Section 5. The Board of Directors shall have power to appoint, and
at its discretion to remove or suspend, any
officers, managers, superintendents, subordinates, assistants, clerks, agents
and employees, permanently or temporarily, as the Board
may think fit, and to determine their duties and to fix, and from time to
time to change, their salaries or emoluments, and to require
security in such instances and in such amounts as it may deem proper.

Section 6. In case of the absence of an officer of the Corporation,
or for any other reason which may seem
sufficient to the Board of Directors, the Board may delegate his powers and
duties for the time being to any other officer of the
Corporation or to any director.

Section 7. The Board of Directors may, by resolution or resolutions
passed by a majority of the whole Board,
designate one or more committees, each committee to consist of two or more of
the directors of the Corporation which, to the extent
provided in such resolution or resolutions and by applicable law, shall have
and may exercise the powers of the Board of Directors in
the management of the business and affairs of the Corporation. Such
committee or committees shall have such name or names as may
be determined from time to time by resolution adopted by the Board of
Directors. Any such committee shall keep regular minutes of
its proceedings, and shall report the same to the Board when required.

Section 8. The Board of Directors may hold their meetings and keep
the books of the Corporation outside of the
State of Maryland, at such place or places as it may from time to time
determine.

Section 9. The Board of Directors shall have power to fix, and from
time to time to change the compensation, if
any, of the directors of the Corporation.

Section 10. Upon retirement of a Director, the Board may elect him
or her to the position of Director Emeritus.
Said Director Emeritus shall serve for one year and may be re-elected by the
Board from year to year thereafter. Said Director
Emeritus shall not vote at meetings of Directors and shall not be held
responsible for actions of the Board but shall receive fees paid
to Board members for serving as such.

ARTICLE V
DIRECTORS MEETINGS
Section 1. The first regular meeting of the Board of Directors
shall be held each year as scheduled by the Board,
and otherwise within seven business days following the annual meeting of
stockholders at which the Directors are elected. Regular
meetings of the Board of Directors shall also be held without notice at such
times and places as may be from time to time prescribed
by the Board.

Section 2. Special meetings of the Board of Directors may be
called at any time by the Chairman, and shall be
called by the Chairman upon the written request of a majority of the members
of the Board of Directors. Unless notice is waived by
all the members of the Board of Directors, notice of any special meeting shall
be given to each director at least twenty-four hours
prior to the date of such meeting, and such notice shall provide the time and
place of such special meeting, and the purpose(s) for
which it is called.

Section 3. One-third of the entire Board of Directors shall
constitute a quorum for the transaction of business at
any meeting; except that if the number of directors on the Board is less than
six, two members shall constitute a quorum for the
transaction of business at any meeting. The act of a majority of the
directors present at any meeting where there is a quorum shall be
the act of the Board of Directors except as may be otherwise required by
Maryland law or the Investment Company Act of 1940.

Section 4. The order of business at meetings of the Board of
Directors shall be prescribed from time to time by
the Board.

ARTICLE VI
OFFICERS AND AGENTS
Section 1. At the first meeting of the Board of Directors after the
election of Directors in each year, the Board
shall elect a Chairman, a President and Chief Executive Officer, one or more
Vice Presidents, a Secretary and a Treasurer. The Board
may elect, or the Chief Executive Officer may appoint, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such
other subordinate officers and agents as the Board may deem necessary and as
the business of the Corporation may require.

Section 2. The Chairman of the Board and the President shall be
elected from the membership of the Board of
Directors, but other officers need not be members of the Board of Directors.
Any two or more offices may be held by the same
person except the offices of President and Vice President. All officers of
the Corporation shall serve for one year and until their
successors shall have been duly elected and shall have qualified; provided,
however, that any officer may be removed at any time, either
with or without cause, by action by the Board of Directors.

ARTICLE VII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. The Corporation shall indemnify each officer and
director made party to a proceeding, by reason of
service in such capacity, to the fullest extent, and in the manner provided,
under Section 2-418 of the Maryland General Corporation
Law: (i) unless it is proved that the person seeking indemnification did not
meet the standard of conduct set forth in subsection (b)(1)
of such section; and (ii) provided, that the Corporation shall not indemnify
any officer or director for any liability to the Corporation
or its security holders arising from the willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such person's office.

Section 2. The provisions of clause (i) of Section 1 of this
Article VII notwithstanding, the Corporation shall
indemnify each officer and director against reasonable expenses incurred in
connection with the successful defense of any proceeding
to which each such officer or director is a party by reason of service in such
capacity.

Section 3. The Corporation, in the manner and to the extent
provided by applicable law, shall advance to each
officer and director who is made party to a proceeding by reason of service in
such capacity the reasonable expenses incurred by such
person in connection therewith.

ARTICLE VIII
DUTIES OF OFFICERS
CHAIRMAN OF THE BOARD
Section 1. The Chairman of the Board shall preside at all meetings
of the stockholders and the Board of Directors
and shall be a member ex officio of all standing committees. He shall have
those duties and responsibilities as shall be assigned to him
by the Board of Directors. In the absence, resignation, disability or death
of the President, the Chairman shall exercise all the powers
and perform all the duties of the President until his return, or until such
disability shall be removed or until a new President shall have
been elected.

PRESIDENT
Section 2. The President shall be the Chief Executive Officer and
head of the Corporation, and in the recess of
the Board of Directors shall have the general control and management of its
business and affairs, subject, however, to the regulations
of the Board of Directors.

The President shall, in the absence of the
Chairman, preside at all meetings of the
stockholders and the Board of Directors. In the event of the absence,
resignation, disability or death of the Chairman, the President
shall exercise all powers and perform all duties of the Chairman until his
return, or until such disability shall have been removed or
until a new Chairman shall have been elected.

VICE PRESIDENTS
Section 3. Vice Presidents shall have those duties and
responsibilities as shall be assigned to them by the
Chairman or the President. In the event of the absence, resignation,
disability or death of the Chairman and President, the Senior
Vice President shall exercise all the powers and perform all the duties of the
President until his return, or until such disability shall be
removed or until a new President shall have been elected.

THE SECRETARY AND ASSISTANT SECRETARIES
Section 4. The Secretary shall attend all meetings of the
stockholders and shall record all the proceedings thereof
in a book to be kept for that purpose, and he shall be the custodian of the
corporate seal of the Corporation. In the absence of the
Secretary, an Assistant Secretary or any other person appointed or elected by
the Board of Directors, as is elsewhere in these By-Laws
provided, may exercise the rights and perform the duties of the Secretary.

Section 5. The Assistant Secretary, or, if there be more than one
Assistant Secretary, then the Assistant
Secretaries in the order of their seniority, shall, in the absence or
disability of the Secretary, perform the duties and exercise the
powers of the Secretary. Any Assistant Secretary elected by the Board shall
also perform such other duties and exercise such other
powers as the Board of Directors shall from time to time prescribe.

THE TREASURER AND ASSISTANT TREASURERS
Section 6. The Treasurer shall keep full and correct accounts of
the receipts and expenditures of the Corporation
in books belonging to the Corporation, and shall deposit all monies and
valuable effects in the name and to the credit of the
Corporation and in such depositories as may be designated by the Board of
Directors, and shall, if the Board shall so direct, give bond
with sufficient security and in such amount as may be required by the Board of
Directors for the faithful performance of his duties.

He shall disburse funds of the Corporation as
may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the
President and Board of Directors at the regular meetings of the
Board, or whenever they may require it, an account of all his transactions
as the chief fiscal officer of the Corporation and of the
financial condition of the Corporation, and shall present each year before the
annual meeting of the stockholders a full financial report
of the preceding fiscal year.

Section 7. The Assistant Treasurer, or, if there be more than one
Assistant Treasurer, then the Assistant
Treasurers in the order of their seniority, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer. Any Assistant Treasurer elected by the Board shall
also perform such duties and exercise such powers as the
Board of Directors shall from time to time prescribe.

ARTICLE IX
CHECKS, DRAFTS, NOTES, ETC.
Section 1. All checks shall bear the signature of such person or
persons as the Board of Directors may from time
to time direct.

Section 2. All notes and other similar obligations and acceptances
of drafts by the Corporation shall be signed by
such person or persons as the Board of Directors may from time to time direct.

Section 3. Any officer of the Corporation or any other employee,
as the Board of Directors may from time to
time direct, shall have full power to endorse for deposit all checks and all
negotiable paper drawn payable to his or their order or to
the order of the Corporation.

ARTICLE X
CORPORATE SEAL
Section 1. The corporate seal of the Corporation shall have
inscribed thereon the name of the Corporation, the
year of its organization, and the words "Corporate Seal, Maryland." Such seal
may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.

ARTICLE XI
DIVIDENDS
Section 1. Dividends upon the shares of the capital stock of the
Corporation may, subject to the provisions of the
Articles of Incorporation of the Corporation, if any, be declared by the Board
of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the
capital stock of the Corporation.

Section 2. Before payment of any dividend there may be set aside out
of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors may, from time to
time, in its absolute discretion, think proper as a reserve
fund to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such
other purpose as the Board of Directors shall deem to be for the best
interests of the Corporation, and the Board of Directors may
abolish any such reserve in the manner in which it was created.

ARTICLE XII
FISCAL YEAR
Section 1. The fiscal year of the Corporation shall be set by
action of the Board of Directors.

ARTICLE XIII
NOTICES
Section 1. Whenever under the provisions of these By-Laws notice is
required to be given to any director or
stockholder, such notice is deemed given when it is personally delivered, left
at the residence or usual place of business of the director
or stockholder, or mailed to such director or stockholder at such address as
shall appear on the books of the Corporation and such
notice, if mailed, shall be deemed to be given at the time it shall be so
deposited in the United States mail postage prepaid. In the
case of directors, such notice may also be given orally by telephone or by
telegraph or cable.

Section 2. Any notice required to be given under these By-Laws may
be waived in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein.

ARTICLE XIV
AMENDMENTS
Section 1. These By-Laws may be amended, altered or repealed by the
affirmative vote of the holders of a
majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote thereon, or by a majority of the
Board of Directors, as the case may be.
EXHIBIT C

Below is the text of a sample of the Stock Certificate for Sand Hill Portfolio
Manager Fund Series of The World Funds, Inc.

CAPITAL STOCK OF CUSIP

THE WORLD FUNDS, INC.
SAND HILL PORTFOLIO MANAGER FUND

INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND

This Certifies that

is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01
EACH OF THE CAPITAL STOCK OF

THE WORLD FUNDS, INC. SAND HILL PORTFOLIO MANAGER FUND

(hereinafter called the "Corporation") transferable on the books of the
Corporation in person or by duly authorized attorney upon
surrender of this Certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be held subject
to all of the provisions of the Certificate of Incorporation and the bylaws of
the Corporation and all amendments thereto, to all of
which the holder by acceptance hereof assents.

This certificate is not valid until countersigned by the Transfer Agent.

Witness the facsimile signatures of the duly authorized officers of the
Corporation

Dated Attest By

Secretary Chairman

EXHIBIT D

INVESTMENT ADVISORY AGREEMENT

Investment Advisory Agreement (the "Agreement") dated ,
1997 by and between THE WORLD FUNDS, INC.,
a Maryland corporation (herein called the "Fund"), and SAND HILL ADVISERS,
INC., a California corporation (the "Advisor") and a
registered investment adviser under the Investment Advisers Act of 1940, as
amended.

WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of
1940, as amended (the "1940 Act"), consisting of several series of shares,
each having its own investment policies; and

WHEREAS, the Fund desires to retain the Advisor to furnish investment
advisory and management services to certain
portfolios of the Fund, subject to the control of the Fund's Board of
Directors, and the Advisor is willing to so furnish such services;

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be bound,
it is agreed between the parties hereto as follows:

1. Appointment. The Fund hereby appoints the Advisor to act as
the advisor to the SAND HILL PORTFOLIO
MANAGER FUND series of the Fund (the "Portfolio") for the period and on the
terms set forth in this Agreement. The Advisor
accepts such appointment and agrees to furnish the services herein set forth,
for the compensation herein provided.

2. Duties of the Advisor. The Fund employs the Advisor to manage
the investments and reinvestment of the assets
of the Portfolio, and to continuously review, supervise, and administer the
investment program of the Portfolio, to determine in its
discretion the securities to be purchased or sold, to provide the Fund and
Commonwealth Shareholder Services, Inc. (the
"Administrator") with records concerning the Advisor's activities which the
Fund is required to maintain, and to render regular reports
to the Fund's Officers and Board of Directors and to the Administrator
concerning the Advisor's discharge of the foregoing
responsibilities.

The Advisor shall discharge the foregoing responsibilities
subject to the control of the Fund's Board of Directors
and in compliance with such policies as the Board may from time to time
establish, and in compliance with the objectives, policies, and
limitations for the Portfolio as set forth in its Prospectus and Statement of
Additional Information, as amended from time to time, and
applicable laws and regulations. The Fund will instruct each of its agents
and contractors to co-operate in the conduct of the business
of the Portfolio.

The Advisor accepts such employment and agrees, at its own
expense, to render the services and to provide the
office space, furnishings, and equipment and the personnel required by it to
perform the services on the terms and for the
compensation provided herein.

3. Portfolio Transactions. The Advisor is authorized to select
the brokers and dealers that will execute the
purchases and sales of portfolio securities for the Portfolio and is directed
to use its best efforts to obtain the best price and execution
for the Portfolio's transactions in accordance with the policies of the Fund
as set forth from time to time in the Portfolio's Prospectus
and Statement of Additional Information. The Advisor will promptly
communicate to the Fund and to the Administrator such
information relating to portfolio transactions as they may reasonably request.

It is understood that the Advisor will not be deemed to have
acted unlawfully, or to have breached a fiduciary
duty to the Fund or be in breach of any obligation owing to the Fund under
this Agreement, or otherwise, by reason of its having
directed a securities transaction on behalf of the Fund to an unaffiliated
broker-dealer in compliance with the provisions of Section
28(e) of the Securities Exchange Act of 1934 or as described from time to time
by the Portfolio's Prospectus and Statement of
Additional Information. Subject to the foregoing, the Advisor may direct any
transaction of the Portfolio to a broker which is
affiliated with the Advisor in accordance with, and subject to, the policies
and procedures approved by the Board of Directors of the
Fund pursuant to Rule 17e-1 under the 1940 Act. Such brokerage services are
not deemed to be provided under this Agreement.

4. Compensation of the Advisor. For the services to be rendered
by the Advisor under this Agreement, the
Portfolio shall pay to the Advisor, and the Advisor will accept as full
compensation a fee, accrued daily and payable within five (5)
business days after the last business day of each month, at an annual rate of
one percent on the first $100 million of the average daily
net assets of the Portfolio and 3/4 of one percent on the Portfolio's average
daily net assets over $100 million.

All rights of compensation under this Agreement for services
performed as of the termination date shall survive
the termination of this Agreement.

5. Expenses. During the term of this Agreement, the Advisor will
pay all expenses incurred by it in connection with
the management of the Fund. Notwithstanding the foregoing, the Portfolio
shall pay the expenses and costs of the Portfolio for the
following:

( 1) Taxes;

( 2) Brokerage fees and commissions with regard to portfolio
transactions;

( 3) Interest charges, fees and expenses of the custodian of
the securities;

( 4) Fees and expenses of the Fund's transfer agent and the
Administrator;

( 5) Its proportionate share of auditing and legal expenses;

( 6) Its proportionate share of the cost of maintenance of
corporate existence;

( 7) Its proportionate share of compensation of directors of
the Fund who are not interested persons of the
Advisor as that term is defined by law;

( 8) Its proportionate share of the costs of corporate
meetings;

( 9) Federal and State registration fees and expenses
incident to the sale of shares of the Portfolio;

(10) Costs of printing and mailing Prospectuses for the
Portfolio's shares, reports and notices to existing
shareholders;

(11) The Advisory fee payable to the Advisor, as provided in
paragraph 4 herein;

(12) Costs of recordkeeping (other than investment records
required to be maintained by the Advisor), and
daily pricing;

(13) Distribution expenses in accordance with any Distribution
Plan as and if approved by the shareholders
of the Portfolio; and

(14) Expenses and taxes incident to the failure of the
Portfolio to qualify as a regulated investment company
under the provisions of the Internal Revenue Code of
1986, as amended, unless such expenses and/or
taxes arise from the negligence of another party.

If the expenses projected to be borne by the Portfolio
(exclusive of interest, brokerage commissions, taxes and
extraordinary items, but inclusive of Advisory fees) in any fiscal year are
expected to exceed any applicable state expense limitation
provision to which the Fund is subject, the Advisory fee payable by the
Portfolio to the Advisor shall be reduced on each day such fee
is accrued to the extent of that day's portion of such excess expenses. The
amount of such reduction shall not exceed the actual
amount of the Advisory fee otherwise payable in such year. Accruals of
expenses and adjustments to advisory fees otherwise payable
under this Agreement, and the amounts payable monthly in accordance with this
Agreement, shall be adjusted as required from month
to month.

It is understood that the Fund will register its shares in
states which impose expense limitations on mutual funds
only with the prior written consent of the Advisor and, if consent is granted,
the Advisor agrees to reimburse the Fund for any excess
expenses incurred over such states' limitation up to a maximum of its Advisory
fee.

6. Reports. The Fund and the Advisor agree to furnish to each
other, if applicable, current information required for
the preparation by such parties of prospectuses, statements of additional
information, proxy statements, reports to shareholders,
certified copies of their financial statements, and to furnish to each other
such other information and documents with regard to their
affairs as each may reasonably request.

7. Status of the Advisor. The services of the Advisor to the Fund
are not to be deemed exclusive, and the Advisor
shall be free to render similar services to others so long as its services to
the Fund are not impaired thereby.

Pursuant to comparable agreements, the Fund may also retain the
services of the Advisor to serve as the
investment advisor of other series of the Fund.

8. Books and Records. In compliance with the requirements of the
1940 Act, the Advisor hereby agrees that all
records which it maintains for the Fund are the property of the Fund, and
further agrees to surrender promptly to the Fund any of
such records upon the Fund's request. The Advisor further agrees to preserve
for the periods prescribed by the 1940 Act, and the
rules or orders thereunder, the records required to be maintained by the
1940 Act.

9. Limitation of Liability of Advisor. The duties of the Advisor
shall be confined to those expressly set forth herein,
and no implied duties are assumed by or may be asserted against the Advisor
hereunder. The Advisor shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of this Agreement, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful
misfeasance, bad faith or negligence on the part of the Advisor in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. (As used in this Paragraph 9,
the term "Advisor" shall include directors, officers,
employees and other corporate agents of the Advisor as well as that
corporation itself).

10. Permissible Interests. Directors, agents, and shareholders of
the Fund are or may be interested in the Advisor (or
any successor thereof) as directors, officers, or shareholders, or otherwise;
directors, officers, agents, and shareholders of the Advisor
are or may be interested in the Fund as directors, officers, shareholders or
otherwise; and the Advisor (or any successor) is or may be
interested in the Fund as a shareholder or otherwise. In addition, brokerage
transactions for the Fund may be effected through
affiliates of the Advisor if approved by the Fund's Board of Directors,
subject to the rules and regulations of the Securities and
Exchange Commission, and the policies and procedures adopted by the Fund.

11. License of Advisor's Name. The Advisor hereby authorizes the
Fund to use the name "Sand Hill" for the
Portfolio. The Fund agrees that if this Agreement is terminated it will
promptly redesignate the name of the Portfolio to eliminate
any reference to the name "Sand Hill" or any derivation thereof unless the
Advisor waives this requirement in writing.

12. Duration and Termination. This Agreement shall become
effective on the date first above written subject to its
approval by the shareholders of the Portfolio and unless sooner terminated as
provided herein, shall continue in effect for two (2)
years from that date. Thereafter, this Agreement shall be renewable for
successive periods of one year each, provided such
continuance is specifically approved annually (a) by the vote of a majority of
those members of the Fund's Board of Directors who are
not parties to this Agreement or interested persons of any such party (as that
term is defined in the 1940 Act), cast in person at a
meeting called for the purpose of voting on such approval, and (b) by vote of
either the Board of Directors or of a majority of the
outstanding voting securities (as that term is defined in the 1940 Act) of the
Portfolio. Notwithstanding the foregoing, this Agreement
may be terminated by the Portfolio or by the Fund at any time on sixty (60)
days written notice, without the payment of any penalty,
provided that termination must be authorized either by vote of the Fund's
Board of Directors or by vote of a majority of the
outstanding voting securities of the Portfolio or by the Advisor on sixty (60)
days written notice. This Agreement will automatically
terminate in the event of its assignment (as that term is defined in the 1940
Act).

13. Amendment of this Agreement. No provision of this Agreement
may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge
or termination is sought. No material amendment of this Agreement shall be
effective until approved by vote of the holders of a
majority of the Portfolio's outstanding voting securities (as defined in the
1940 Act).

14. Notice. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if
sent by registered or certified mail, postage prepaid, addressed by the party
giving notice to the other party at the address stated
below:
(a) To the Fund at: 1500 Forest Avenue
Suite 223
Richmond, VA 23229

(b) To the Advisor at:3000 Sand Hill Road
Building Three, Suite 150
Menlo Park, CA 94025-7111

15. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way
define or limit any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby.
This Agreement shall be binding and shall inure to the benefit of the parties
hereto and their respective successors.

16. Applicable Law. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of
Maryland, and the applicable provisions of the 1940 Act. To the extent that
the applicable laws of the State of Maryland, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act,
the latter shall control.

17. This Agreement may be executed in two or more counterparts,
each of which, when so executed, shall be deemed
to be an original, but such counterparts shall together constitute but one and
the same instrument.

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

SAND HILL ADVISERS, INC.

BY:
Gary K. Conway
President

THE WORLD FUNDS, INC.

BY:
John Pasco, III
Chairman

EXHIBIT E

DISTRIBUTION AGREEMENT

DISTRIBUTION AGREEMENT, made this day of , 1997,
by and between The World Funds, Inc. a
Maryland corporation (the "Fund") and First Dominion Capital Corporation
("FDCC"), a Virginia corporation.

WITNESSETH:

1. DISTRIBUTION SERVICES

The Fund hereby engages FDCC as national distributor to assist the Fund
in promoting the sale and distribution to
investors of shares of common stock of each series of the Fund ("Shares").
In connection therewith, FDCC shall (i) promote the sale
of shares, (ii) act as principal underwriter of shares of various series of
the Fund, (iii) otherwise assist the Fund in the distribution of
shares directly to investors through dealers or otherwise. For this purpose
the Fund agrees to offer shares for sale at all times when,
and in such places as, such shares are to be made available for sale and may
lawfully be offered for sale and sold. As and when
necessary in connection therewith FDCC may act as principal or agent for the
sale of such shares.

2. SALE OF FUND SHARES

Such shares are to be sold only on the following terms:

(a) All subscriptions, offers, or sales shall be subject to acceptance
or rejection by the Fund. Any offer or sale shall be
conclusively presumed to have been accepted by the Fund if the Fund shall fail
to notify FDCC of the rejection of such offer
or sale prior to the computation of the net asset value of the Fund's
shares next following receipt by the Fund of notice of
such offer or sale.

(b) No share of the Fund shall be sold for any consideration other than
cash or, except in instances otherwise provided for by
the Fund's currently effective Prospectus, for any amount less than the
public offering price per share, which shall be
determined in accordance with the Fund's currently effective
Prospectus. No shares may be sold for less than the net asset
value thereof.

3. REGISTRATION OF SHARES

The Fund agrees to make prompt and reasonable efforts to effect and to
keep in effect the registration or qualification of its
shares for sale in such jurisdictions as the Fund may designate. FDCC may
serve as dealer of record to assist the Fund in connection
with any such registration or qualification. The Fund acknowledges that FDCC
may incur expenses in connection with assisting in the
registration or qualification of Fund shares which are sold at net asset
value and the Fund will pay or reimburse expenses of FDCC
which are incurred in connection with such registration or qualification.

4. INFORMATION TO BE FURNISHED TO FDCC

The Fund agrees that it will furnish FDCC with such information with
respect to the affairs and accounts of the Fund as
FDCC may from time to time reasonably require, and further agrees that FDCC,
at all reasonable times, shall be permitted to inspect
the books and records of the Fund.

5. ALLOCATION OF EXPENSES

During the period of this contract, the Fund shall pay or cause to be
paid all expenses, costs, and fees incurred by the Fund
which are not assumed by FDCC or any investment manager or investment advisor
to the Fund. FDCC shall pay advertising and
promotional expenses incurred by FDCC in connection with the distribution of
the Fund's shares which are sold subject to the
imposition of a sales charge including paying for prospectuses for delivery
to prospective shareholders.

6. COMPENSATION TO FDCC

It is understood and agreed by the parties hereto that FDCC will
receive compensation for services it performs hereunder in
accordance with Schedule A hereto.

7. LIMITATION OF FDCC'S AUTHORITY

FDCC shall be deemed to be an independent contractor and, except as
specifically provided or authorized herein, shall have
no authority to act for or represent the Fund. In the performance of its
duties hereunder, FDCC may solicit and enter into selling
dealer agreements with other broker-dealers in a form approved by the Fund.
Such selling dealer agreements shall provide for the sale
of shares of the Fund (or any series of the Fund) on terms consistent with
the registration statement of the Fund as then if effect.
Unless otherwise provided in a selling dealer agreement, any selling dealer
agreement of FDCC in effect as of the date of this
agreement shall be deemed to continue hereunder upon delivery to the selling
dealer of any amendment required by the terms of the
Fund's action eliminating the sales load on sales of affected Fund shares.

8. SUBSCRIPTION FOR SHARES - REFUND FOR CANCELED ORDERS

If FDCC elects to act as a principal, and not as agent, for a sale of
Fund shares, FDCC shall subscribe for the shares of the
Fund only for the purpose of covering purchase orders already received by it
or for the purpose of investment for its own account.
Whether acting as principal or agent, in the event that an order for the
purchase of shares of the Fund is placed with FDCC by a
customer or dealer and subsequently canceled, FDCC shall forthwith cancel the
subscription for such shares entered on the books of
the Fund, and, if FDCC has paid the Fund for such shares, shall be entitled
to receive from the Fund in refund of such payments the
lesser of:

(a) the consideration received by the Fund for said shares; or

(b) the net asset value of such shares at the time of
cancellation by FDCC.

9. INDEMNIFICATION OF THE FUND

FDCC agrees to indemnify the Fund against any and all litigation and
other legal proceedings of any kind or nature and
against any liability, judgment, cost, or penalty imposed as a result of such
litigation or proceedings in any way arising out of or in
connection with the sale or distribution of the shares of the Fund by FDCC.
In the event of the threat or institution of any such
litigation or legal proceedings against the Fund, FDCC shall defend such
action on behalf of the Fund at its own expense, and shall
pay any such liability, judgment, cost, or penalty resulting therefrom,
whether imposed by legal authority on agreed upon by way of
compromise and settlement; provided, however, FDCC shall not be required to
pay or reimburse the Fund for any liability, judgment,
cost, or penalty incurred as a result of information supplied by, or as the
result of the omission to supply information by, the Fund to
FDCC or to FDCC by a director, officer, or employee of the Fund who is not an
interested person of FDCC, unless the information
so supplied or omitted was available to FDCC or the Fund's investment adviser
without recourse to the Fund or any such person
referred to above.

10. FREEDOM TO DEAL WITH THIRD PARTIES

FDCC shall be free to render to others services of a nature either
similar to or different from those rendered under this
contract, except such as may impair its performance of the services and
duties to be rendered by it hereunder.

11. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT

The effective date of this Agreement shall be the date first set forth
above. Wherever referred to in this Agreement, the
vote or approval of the holders of a majority of the outstanding voting
securities of the Fund (or of any series of the Fund) shall mean
the vote of 67% or more of the securities of the Fund (or of any affected
series of the Fund) if the holders of more than 50% of such
securities are present in person or by proxy or the vote of more than 50% of
the securities of the Fund (or an affected series of the
Fund) whichever is the lesser.

Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect from year to year but only so long
as such continuance is specifically approved at least annually by the Board
of Directors of the Fund, including the specific approval of
a majority of the directors who are not interested person of FDCC as defined
by the Investment Company Act of 1940, as amended,
cast in person at a meeting called for the purpose of voting on such approval,
or by the vote of the holders of a majority of the
outstanding voting securities of the Fund or an affected series of the Fund.

This Agreement may be terminated at any time without the payment of
any penalty by the vote of the Board of Directors of
the Fund or by the vote of the holders of a majority of the outstanding voting
securities of the Fund, or by FDCC, upon 60 days'
written notice to the other party.

This Agreement shall automatically terminate in the event of its
assignment (as defined by the provisions of the Investment
Company Act of 1940, as amended).

12. AMENDMENTS TO AGREEMENT

No material amendment to this Agreement shall be effective until
approved by FDCC and by the affirmative vote of a
majority of the Board of Directors of the Fund (including a majority of the
directors who are not interested persons of FDCC or any
affiliate of FDCC).

13. NOTICES

Any notice under this Agreement shall be in writing, addressed,
delivered, or mailed, postage prepaid, to the other party at
such address as such other party may designate in writing for receipt of such
notice.

IN WITNESS WHEREOF, the Fund and FDCC have caused this Agreement to be
executed by their duly authorized
officers affixed hereto all as of the day and year first above written.

THE WORLD FUNDS, INC.

By
John Pasco, III
Chairman

Attested by

FIRST DOMINION CAPITAL CORP.

John Pasco, III
President

Attested by

SCHEDULE A

FDCC shall receive, as compensation for its services pursuant to this
Distribution Agreement:

(a) With respect to any shares of the Fund sold subject to a sales charge,
FDCC shall be entitled to retain the underwriter's
portion of the sales charge for each investment in the Fund's shares, computed
as a percentage of the offering price determined in
accordance with the Fund's currently effective Prospectus and as otherwise
provided in the Fund's registration statement.

(b) With respect to sales of shares of the Fund sold subject to a sales
charge for which FDCC is the selling dealer, FDCC shall
retain the dealer's sales charge for each investment in the Fund's shares,
computed as a percentage of the offering price determined in
accordance with the Fund's currently effective Prospectus and as otherwise
provided in the Fund's registration statement.

(c) With respect to any shares of the Fund sold at net asset value
(without a sales charge), FDCC shall receive from the Fund
reimbursement at the rate of $30 per hour for the cost of personnel involved
with assistance in the promotion of sale of such shares
and for out-of-pocket costs incurred by FDCC.

EXHIBIT F
CUSTODY AGREEMENT

This agreement (the "Agreement") is entered into as of the
_____ day of ___________, 1997, by and between The World Funds,
Inc., (the "Fund"), an open-end diversified investment business
corporation organized under the laws of Maryland and having its
office at 1500 Forest Avenue, Suite 223, Richmond, Virginia,
23229 for the benefit of the Sand Hill Portfolio Manager Fund
series (the "Series"), and Star Bank, National Association, (the
"Custodian"), a national banking association having its principal
office at 425 Walnut Street, Cincinnati, Ohio, 45202.
WHEREAS, the Fund and the Custodian desire to enter into
this Agreement to provide for the custody and safekeeping of the
assets of the Series as required by the Investment Company Act of
1940, as amended (the "Act").
WHEREAS, the Fund hereby appoints the Custodian as custodian
of all the Series' Securities and moneys at any time owned by the
Series during the term of this Agreement (the "Series Assets").
WHEREAS, the Custodian hereby accepts such appointment as
Custodian and agrees to perform the duties thereof as hereinafter
set forth.
THEREFORE, in consideration of the mutual promises
hereinafter set forth, the Fund and the Custodian agree as
follows:

ARTICLE I
Definitions

The following words and phrases, when used in this
Agreement, unless the context otherwise requires, shall have the
following meanings:
Authorized Person - the Chairman, President, Secretary,
Treasurer, Controller, or Senior Vice President of the Fund, or
any other person, whether or not any such person is an officer or
employee of the Fund, duly authorized by the Board of Directors
of the Fund to give Oral Instructions and Written Instructions on
behalf of the Fund, and listed in the Certificate annexed hereto
as Appendix A, or such other Certificate as may be received by
the Custodian from time to time.
Book-Entry System - the Federal Reserve Bank book-entry
system for United States Treasury securities and federal agency
securities.
Depository - The Depository Trust Company ("DTC"), a limited
purpose trust company its successor(s) and its nominee(s) or any
other person or clearing agent.
Dividend and Transfer Agent - the dividend and transfer
agent appointed, from time to time, pursuant to a written
agreement between the dividend and transfer agent and the Fund.
Foreign Securities - a) securities issued and sold primarily
outside of the United States by a foreign government, a national
of any foreign country, or a corporation or other organization
incorporated or organized under the laws of any foreign country
or; b) securities issued or guaranteed by the government of the
United States, by any state, by any political subdivision or
agency thereof, or by any entity organized under the laws of the
United States or of any state thereof, which have been issued and
sold primarily outside of the United States.
Money Market Security - debt obligations issued or
guaranteed as to principal and/or interest by the government of
the United States or agencies or instrumentalities thereof,
commercial paper, obligations (including certificates of deposit,
bankers' acceptances, repurchase agreements and reverse
repurchase agreements with respect to the same), and time
deposits of domestic banks and thrift institutions whose deposits
are insured by the Federal Deposit Insurance Corporation, and
short-term corporate obligations where the purchase and sale of
such securities normally require settlement in federal funds or
their equivalent on the same day as such purchase and sale, all
of which mature in not more than thirteen (13) months.
Officers - the Chairman, President, Secretary, Treasurer,
Controller, and Senior Vice President of the Fund listed in the
Certificate annexed hereto as Appendix A, or such other
Certificate as may be received by the Custodian from time to
time.
Oral Instructions - verbal instructions received by the
Custodian from an Authorized Person (or from a person that the
Custodian reasonably believes in good faith to be an Authorized
Person) and confirmed by Written Instructions in such a manner
that such Written Instructions are received by the Custodian not
later than the business day immediately following receipt of such
Oral Instructions.
Prospectus - the Fund's then currently effective prospectus
and Statement of Additional Information, as filed with and
declared effective from time to time by the Securities and
Exchange Commission.
Security or Securities - Money Market Securities, common
stock, preferred stock, options, financial futures, bonds, notes,
debentures, corporate debt securities, mortgages, and any
certificates, receipts, warrants, or other instruments
representing rights to receive, purchase, or subscribe for the
same or evidencing or representing any other rights or interest
therein, or any property or assets.
Written Instructions - communication received in writing by
the Custodian from an Authorized Person.

ARTICLE II
Documents and Notices to be Furnished by the Fund

A The following documents, including any amendments
thereto, will be provided contemporaneously with the execution of
the Agreement, to the Custodian by the Fund:
1. A copy of the Articles of Incorporation of the Fund
certified by the Secretary.
2. A copy of the By-Laws of the Fund certified by the
Secretary.
3. A copy of the resolution of the Board of Directors of
the Fund appointing the Custodian, certified by the Secretary.
4. A copy of the then current Prospectus of the Series.
5. A Certificate of the President and Secretary of the
Fund setting forth the names and signatures of the Officers of
the Fund.
B. The Fund agrees to notify the Custodian in writing of
the appointment of any Dividend and Transfer Agent.

ARTICLE III
Receipt of Fund Assets

A. During the term of this Agreement, the Fund will
deliver or cause to be delivered to the Custodian all moneys
constituting Series Assets. The Custodian shall be entitled to
reverse any deposits made on the Fund's behalf where such
deposits have been entered and moneys are not finally collected
within 30 days of the making of such entry.
B. During the term of this Agreement, the Fund will
deliver or cause to be delivered to the Custodian all Securities
constituting Series Assets. The Custodian will not have any
duties or responsibilities with respect to such Securities until
actually received by the Custodian.
C. As and when received, the Custodian shall deposit to
the account(s) of the Series any and all payments for shares of
the Series issued or sold from time to time as they are received
from the Fund's distributor or Dividend and Transfer Agent or
from the Fund itself.

ARTICLE IV
Disbursement of Fund Assets

A. The Fund shall furnish to the Custodian a copy of the
resolution of the Board of Directors of the Fund, certified by
the Fund's Secretary, either (i) setting forth the date of the
declaration of any dividend or distribution in respect of shares
of the Series, the date of payment thereof, the record date as of
which Fund shareholders entitled to payment shall be determined,
the amount payable per share to Series shareholders of record as
of that date, and the total amount to be paid by the Dividend and
Transfer Agent on the payment date, or (ii) authorizing the
declaration of dividends and distributions in respect of shares
of the Fund on a daily basis and authorizing the Custodian to
rely on a Certificate setting forth the date of the declaration
of any such dividend or distribution, the date of payment
thereof, the record date as of which Series shareholders entitled
to payment shall be determined, the amount payable per share to
Series shareholders of record as of that date, and the total
amount to be paid by the Dividend and Transfer Agent on the
payment date.
On the payment date specified in such resolution or
Certificate described above, the Custodian shall segregate such
amounts from moneys held for the account of the Series so that
they are available for such payment.
B. Upon receipt of Written Instructions so directing it,
the Custodian shall segregate amounts necessary for the payment
of redemption proceeds to be made by the Dividend and Transfer
Agent from moneys held for the account of the Series so that they
are available for such payment.
C. Upon receipt of a Certificate directing payment and
setting forth the name and address of the person to whom such
payment is to be made, the amount of such payment, and the
purpose for which payment is to be made, the Custodian shall
disburse amounts as and when directed from the Series Assets.
The Custodian is authorized to rely on such directions and shall
be under no obligation to inquire as to the propriety of such
directions.
D. Upon receipt of a Certificate directing payment, the
Custodian shall disburse moneys from the Series Assets in payment
of the Custodian's fees and expenses as provided in Article VIII
hereof.
E. Upon receipt of a Certificate directing payment and
setting forth the name and address of the person to whom such
payment is to be made, the amount of such payment, and the
purpose for which payment is to be made, the Custodian shall
disburse amounts to any imprest account maintained for the Series
as and when directed from the Series Assets. The Custodian is
authorized to rely on such directions and shall be under no
obligation to inquire as to the propriety of such directions.

ARTICLE V
Custody of Fund Assets

A. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund
for the assets of the Series, subject only to draft or order by
the Custodian acting pursuant to the terms of this Agreement, and
shall hold all cash received by it from or for the account of the
Series, other than cash maintained by the Fund in a bank account
established and used by the Series in accordance with Rule 17f-3
under the Act. Moneys held by the Custodian on behalf of the
Series may be deposited by the Custodian to its credit as
Custodian in the banking department of the Custodian. Such
moneys shall be deposited by the Custodian in its capacity as
such, and shall be withdrawable by the Custodian only in such
capacity.
B. The Custodian shall hold all Securities delivered to
it in safekeeping in a separate account or accounts maintained at
Star Bank, N.A. for the benefit of the Series.
C. All Securities held which are issued or issuable only
in bearer form, shall be held by the Custodian in that form; all
other Securities held for the Series shall be registered in the
name of the Custodian or its nominee. The Fund agrees to furnish
to the Custodian appropriate instruments to enable the Custodian
to hold, or deliver in proper form for transfer, any Securities
that it may hold for the account of the Fund and which may, from
time to time, be registered in the name of the Series.
D. With respect to all Securities held for the Series, the
Custodian shall on a timely basis (concerning items 1 and 2
below, as defined in the Custodian's Standards of Service Guide,
as amended from time to time, annexed hereto as Appendix C):
1. Collect all income due and payable with

respect to such Securities;
2. Present for payment and collect amounts payable upon
all Securities which may mature or be called, redeemed,
or retired, or otherwise become payable;
3. Surrender Securities in temporary form for definitive
Securities; and
4. Execute, as agent, any necessary declarations or
certificates of ownership under the Federal income tax
laws or the laws or regulations of any other taxing
authority, including any foreign taxing authority, now
or hereafter in effect.
E. Upon receipt of a Certificate and not otherwise, the
Custodian shall:
1. Execute and deliver to such persons as may be
designated in such Certificate proxies, consents,
authorizations, and any other instruments whereby
the authority of the Fund as beneficial owner of
any Securities may be exercised;
2. Deliver any Securities in exchange for other
Securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing,
merger, consolidation, or recapitalization of any
corporation, or the exercise of any conversion
privilege;
3. Deliver any Securities to any protective
committee, reorganization committee, or other
person in connection with the reorganization,
refinancing, merger, consolidation,
recapitalization, or sale of assets of any
corporation, and receive and hold under the terms
of this Agreement such certificates of deposit,
interim receipts or other instruments or documents
as may be issued to it to evidence such delivery;
4. Make such transfers or exchanges of the assets of
the Fund and take such other steps as shall be
stated in said Certificate to be for the purpose
of effectuating any duly authorized plan of
liquidation, reorganization, merger,
consolidation or recapitalization of the Fund; and
5. Deliver any Securities held for the Series to the
depository agent for tender or other similar
offers.
F. The Custodian shall promptly deliver to the Fund all
notices, proxy material and executed but unvoted proxies
pertaining to shareholder meetings of Securities held by the
Fund. The Custodian shall not vote or authorize the voting of
any Securities or give any consent, waiver or approval with
respect thereto unless so directed by a Certificate or Written
Instruction.
G. The Custodian shall promptly deliver to the Fund all
information received by the Custodian and pertaining to
Securities held by the Fund with respect to tender or exchange
offers, calls for redemption or purchase, or expiration of
rights.

ARTICLE VI
Purchase and Sale of Securities

A. Promptly after each purchase of Securities by the Fund
for the Series, the Fund shall deliver to the Custodian (i) with
respect to each purchase of Securities which are not Money Market
Securities, Written Instructions, and (ii) with respect to each
purchase of Money Market Securities, Written Instructions or Oral
Instructions, specifying with respect to each such purchase the;

1. name of the issuer and the title of the
Securities,
2. principal amount purchased and accrued interest,
if any,
3. date of purchase and settlement,
4. purchase price per unit,
5. total amount payable, and
6. name of the person from whom, or the broker
through which, the purchase was made.
The Custodian shall, against receipt of Securities purchased by
or for the Series, pay out of the Series Assets, the total amount
payable to the person from whom or the broker through which the
purchase was made, provided that the same conforms to the total
amount payable as set forth in such Written Instructions or Oral
Instructions, as the case may be.
B. Promptly after each sale of Securities by the Fund for
the Series, the Fund shall deliver to the Custodian (i) with
respect to each sale of Securities which are not Money Market
Securities, Written Instructions, and (ii) with respect to each
sale of Money Market Securities, Written Instructions or Oral
Instructions, specifying with respect to each such sale the;
1. name of the issuer and the title of the
Securities,
2. principal amount sold and accrued interest, if
any,
3. date of sale and settlement,
4. sale price per unit,
5. total amount receivable, and
6. name of the person to whom, or the broker through
which, the sale was made.
The Custodian shall deliver the Securities against receipt of the
total amount receivable, provided that the same conforms to the
total amount receivable as set forth in such Written Instructions
or Oral Instructions, as the case may be.
C. On contractual settlement date, the account of the
Series will be charged for all purchased Securities settling on
that day, regardless of whether or not delivery is made.
Likewise, on contractual settlement date, proceeds from the sale
of Securities settling that day will be credited to the account
of the Series, irrespective of delivery.
D. Purchases and sales of Securities effected by the
Custodian will be made on a delivery versus payment basis. The
Custodian may, in its sole discretion, upon receipt of a
Certificate, elect to settle a purchase or sale transaction in
some other manner, but only upon receipt of acceptable
indemnification from the Fund.
E. The Custodian shall, upon receipt of a Written
Instructions so directing it, establish and maintain a segregated
account or accounts for and on behalf of the Series. Cash and/or
Securities may be transferred into such account or accounts for
specific purposes, to-wit:
1. in accordance with the provision of any agreement
among the Fund, the Custodian, and a broker-dealer
registered under the Securities and Exchange Act
of 1934, as amended, and also a member of the
National Association of Securities Dealers (NASD)
(or any futures commission merchant registered
under the Commodity Exchange Act), relating to
compliance with the rules of the Options Clearing
Corporation and of any registered national
securities exchange, the Commodity Futures Trading
Commission, any registered contract market, or any
similar organization or organizations requiring
escrow or other similar arrangements in connection
with transactions by the Fund for the Series;
2. for purposes of segregating cash or government
securities in connection with options purchased,
sold, or written by the Fund or commodity futures
contracts or options thereon purchased or sold by
the Fund for the Series;
3. for the purpose of compliance by the Series with
the procedures required for reverse repurchase
agreements, firm commitment agreements, standby
commitment agreements, and short sales by Act
Release No. 10666, or any subsequent release or
releases or rule of the Securities and Exchange
Commission relating to the maintenance of
segregated accounts by registered investment
companies; and
4. for other corporate purposes, only in the case of
this clause 4 upon receipt of a copy of a
resolution of the Board of Directors of the Fund,
certified by the Secretary of the Fund, setting
forth the purposes of such segregated account.
F. Except as otherwise may be agreed upon by the parties
hereto, the Custodian shall not be required to comply with any
Written Instructions to settle the purchase of any Securities on
behalf of the Series unless there is sufficient cash in the
account(s) at the time or to settle the sale of any Securities
from an account(s) unless such Securities are in deliverable
form. Notwithstanding the foregoing, if the purchase price of
such Securities exceeds the amount of cash in the account(s) at
the time of such purchase, the Custodian may, in its sole
discretion, advance the amount of the difference in order to
settle the purchase of such Securities. The amount of any such
advance shall be deemed a loan from the Custodian to the Fund for
the respective Series payable on demand and bearing interest
accruing from the date such loan is made up to but not including
the date such loan is repaid at a rate per annum customarily
charged by the Custodian on similar loans.

ARTICLE VII
Fund Indebtedness

In connection with any borrowings by the Fund for the
Series, the Fund will cause to be delivered to the Custodian by a
bank or broker requiring Securities as collateral for such
borrowings (including the Custodian if the borrowing is from the
Custodian), a notice or undertaking in the form currently
employed by such bank or broker setting forth the amount of
collateral. The Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such borrowing: (a)
the name of the bank or broker, (b) the amount and terms of the
borrowing, which may be set forth by incorporating by reference
an attached promissory note duly endorsed by the Fund, or a loan
agreement, (c) the date, and time if known, on which the loan is
to be entered into, (d) the date on which the loan becomes due
and payable, (e) the total amount payable to the Series on the
borrowing date, and (f) the description of the Securities
securing the loan, including the name of the issuer, the title
and the number of shares or the principal amount. The Custodian
shall deliver on the borrowing date specified in the Certificate
the required collateral against the lender's delivery of the
total loan amount then payable, provided that the same conforms
to that which is described in the Certificate. The Custodian
shall deliver, in the manner directed by the Fund, such
Securities as additional collateral, as may be specified in a
Certificate, to secure further any transaction described in this
Article VII. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian and
the Custodian shall receive from time to time such return of
collateral as may be tendered to it.
The Custodian may, at the option of the lender, keep such
collateral in its possession, subject to all rights therein given
to the lender because of the loan. The Custodian may require
such reasonable conditions regarding such collateral and its
dealings with third-party lenders as it may deem appropriate.

ARTICLE VIII
Concerning the Custodian

A. Except as otherwise provided herein, the Custodian
shall not be liable for any loss or damage resulting from its
action or omission to act or otherwise, except for any such loss
or damage arising out of its own gross negligence or willful
misconduct. The Fund shall defend, indemnify and hold harmless
the Custodian and its directors, officers, employees and agents
with respect to any loss, claim, liability or cost (including
reasonable attorneys' fees) arising or alleged to arise from or
relating to the Fund's duties hereunder or any other action or
inaction of the Fund or its Directors, officers, employees or
agents, except such as may arise from the negligent action,
omission, willful misconduct or breach of this Agreement by the
Custodian. The Custodian may, with respect to questions of law,
apply for and obtain the advice and opinion of counsel, at the
expense of the Fund, and shall be fully protected with respect
to anything done or omitted by it in good faith in conformity
with the advice or opinion of counsel. The provisions under this
paragraph shall survive the termination of this Agreement.
B. Without limiting the generality of the foregoing, the
Custodian, acting in the capacity of Custodian hereunder, shall
be under no obligation to inquire into, and shall not be liable
for:
1. The validity of the issue of any Securities
purchased by or for the account of the Fund, the
legality of the purchase thereof, or the propriety
of the amount paid therefor;
2. The legality of the sale of any Securities by or
for the account of the Series, or the propriety of
the amount for which the same are sold;
3. The legality of the issue or sale of any shares of
the Series, or the sufficiency of the amount to be
received therefor;
4. The legality of the redemption of any shares of
the Series, or the propriety of the amount to be
paid therefor;
5. The legality of the declaration or payment of any
dividend by the Fund in respect of shares of the
Series;
6. The legality of any borrowing by the Series on
behalf of the Fund, using Securities as
collateral;
C. The Custodian shall not be under any duty or obligation
to take action to effect collection of any amount due to the
Series from any Dividend and Transfer Agent of the Fund nor to
take any action to effect payment or distribution by any Dividend
and Transfer Agent of the Fund of any amount paid by the
Custodian to any Dividend and Transfer Agent of the Fund in
accordance with this Agreement.
D. Notwithstanding Section D of Article V, the Custodian
shall not be under any duty or obligation to take action to
effect collection of any amount, if the Securities upon which
such amount is payable are in default, or if payment is refused
after due demand or presentation, unless and until (i) it shall
be directed to take such action by a Certificate and (ii) it
shall be assured to its satisfaction (including prepayment
thereof) of reimbursement of its costs and expenses in connection
with any such action.
E. The Fund acknowledges and hereby authorizes the
Custodian to hold Securities through its various agents described
in Appendix B annexed hereto. The Fund hereby represents that
such authorization has been duly approved by the Board of
Directors of the Fund as required by the Act. The Custodian
acknowledges that although certain Series Assets are held by its
agents, the Custodian remains primarily liable for the
safekeeping of the Series Assets.
In addition, the Fund acknowledges that the Custodian may
appoint one or more financial institutions, as agent or agents or
as sub-custodian or sub-custodians, including, but not limited
to, banking institutions located in foreign countries, for the
purpose of holding Securities and moneys at any time owned by the
Series. The Custodian shall not be relieved of any obligation or
liability under this Agreement in connection with the appointment
or activities of such agents or sub-custodians. Any such agent
or sub-custodian shall be qualified to serve as such for assets
of investment companies registered under the Act. Upon request,
the Custodian shall promptly forward to the Fund any documents it
receives from any agent or sub-custodian appointed hereunder
which may assist directors of registered investment companies
fulfill their responsibilities under Rule 17f-5 of the Act.
F. The Custodian shall not be under any duty or obligation
to ascertain whether any Securities at any time delivered to or
held by it for the account of the Fund are such as properly may
be held by the Series under the provisions of the Articles of
Incorporation and the Fund's By-Laws.
G. The Custodian shall treat all records and other
information relating to the Fund and the Series Assets as
confidential and shall not disclose any such records or
information to any other person unless (i) the Fund shall have
consented thereto in writing or (ii) such disclosure is required
by law.
H. The Custodian shall be entitled to receive and the Fund
agrees to pay to the Custodian from the assets of the Series such
compensation as shall be determined pursuant to Appendix D
attached hereto, or as shall be determined pursuant to amendments
to such Appendix D. The Custodian shall be entitled to charge
against any money held by it for the account of the Series, the
amount of any of its fees, any loss, damage, liability or
expense, including counsel fees relating to such Series. The
expenses which the Custodian may charge against the account of
the Series include, but are not limited to, the expenses of
agents or sub-custodians incurred in settling transactions
involving the purchase and sale of Securities of the Fund.
I. The Custodian shall be entitled to rely upon any Oral
Instructions and any Written Instructions. The Fund agrees to
forward to the Custodian Written Instructions confirming Oral
Instructions in such a manner so that such Written Instructions
are received by the Custodian, whether by hand delivery,
facsimile or otherwise, not later than the following business
day on which such Oral Instructions were given. The Fund agrees
that the failure of the Custodian to receive such confirming
instructions shall in no way affect the validity of the
transactions or enforceability of the transactions hereby
authorized by the Fund. The Fund agrees that the Custodian shall
incur no greater liability to the Fund for acting upon Oral
Instructions given to the Custodian hereunder concerning such
transactions than would arise as to a similar transaction
pursuant to a Written Instruction.
J. The Custodian will (i) set up and maintain proper books
of account and complete records of all transactions in the
accounts maintained by the Custodian hereunder in such manner as
will meet the obligations of the Fund under the Act, with
particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder and those records are the property of the Fund,
and (ii) preserve for the periods prescribed by applicable
Federal statute or regulation all records required to be so
preserved. All such books and records shall be the property of
the Fund, and shall be open to inspection and audit at reasonable
times and with prior notice by Officers and auditors employed by
the Fund.
K. The Custodian shall send to the Fund any report
received on the systems of internal accounting control of the
Custodian, or its agents or sub-custodians, as the Fund may
reasonably request from time to time.
L. The Custodian performs only the services of a custodian
and shall have no responsibility for the management, investment
or reinvestment of the Securities from time to time owned by the
Fund. The Custodian is not a selling agent for shares of the
Series and performance of its duties as custodian shall not be
deemed to be a recommendation to the Fund's depositors or others
of shares of the Series as an investment.
M. The Custodian shall take all reasonable action, that
the Fund may from time to time request, to assist the Fund in
obtaining favorable opinions from the Fund's independent
accountants, with respect to the Custodian's activities
hereunder, in connection with the preparation of the Fund's Form
N-1A, Form N-SAR, or other annual reports to the Securities and
Exchange Commission.
N. The Fund hereby pledges to and grants the Custodian a
security interest in any Series Assets to secure the payment of
any liabilities of the Series to the Custodian, whether acting in
its capacity as Custodian or otherwise, or on account of money
borrowed from the Custodian. This pledge is in addition to any
other pledge of collateral by the Fund to the Custodian.

ARTICLE X
Termination

A. Either of the parties hereto may terminate this
Agreement for any reason by giving to the other party a notice in
writing specifying the date of such termination, which shall be
not less than ninety (90) days after the date of giving of such
notice. If such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board of Directors
of the Fund, certified by the Secretary of the Fund, electing to
terminate this Agreement and designating a successor custodian or
custodians. In the event such notice is given by the Custodian,
the Fund shall, on or before the termination date, deliver to the
Custodian a copy of a resolution of the Board of Directors of the
Fund, certified by the Secretary, designating a successor
custodian or custodians to act on behalf of the Fund. In the
absence of such designation by the Fund, the Custodian may
designate a successor custodian which shall be a bank or trust
company having not less than $100,000,000 aggregate capital,
surplus, and undivided profits. Upon the date set forth in such
notice this Agreement shall terminate, and the Custodian,
provided that it has received a notice of acceptance by the
successor custodian, shall deliver, on that date, directly to the
successor custodian all Securities and moneys then owned by the
Fund and held by it as Custodian. Upon termination of this
Agreement, the Fund shall pay to the Custodian on behalf of the
Fund such compensation as may be due as of the date of such
termination. The Fund agrees on behalf of the Fund that the
Custodian shall be reimbursed for its reasonable costs in
connection with the termination of this Agreement.
B. If a successor custodian is not designated by the Fund,
or by the Custodian in accordance with the preceding paragraph,
or the designated successor cannot or will not serve, the Fund
shall, upon the delivery by the Custodian to the Fund of all
Securities (other than Securities held in the Book-Entry System
which cannot be delivered to the Fund) and moneys then owned by
the Fund, be deemed to be the custodian for the Fund, and the
Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book-Entry System, which
cannot be delivered to the Fund, which shall be held by the
Custodian in accordance with this Agreement.

ARTICLE XI
MISCELLANEOUS
A. Appendix A sets forth the names and the signatures of
all Authorized Persons, as certified by the Secretary of the
Fund. The Fund agrees to furnish to the Custodian a new Appendix
A in form similar to the attached Appendix A, if any present
Authorized Person ceases to be an Authorized Person or if any
other or additional Authorized Persons are elected or appointed.
Until such new Appendix A shall be received, the Custodian shall
be fully protected in acting under the provisions of this
Agreement upon Oral Instructions or signatures of the then
current Authorized Persons as set forth in the last delivered
Appendix A.
B. No recourse under any obligation of this Agreement or
for any claim based thereon shall be had against any organizer,
shareholder, Officer, Director, past, present or future as such,
of the Fund or of any predecessor or successor, either directly
or through the Fund or any such predecessor or successor, whether
by virtue of any constitution, statute or rule of law or equity,
or be the enforcement of any assessment or penalty or otherwise;
it being expressly agreed and understood that this Agreement and
the obligations thereunder are enforceable solely against the
Fund, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, the organizers, shareholders,
Officers, Directors of the Fund or of any predecessor or
successor, or any of them as such. To the extent that any such
liability exists, it is hereby expressly waived and released by
the Custodian as a condition of, and as a consideration for, the
execution of this Agreement.
C. The obligations set forth in this Agreement as having
been made by the Fund have been made by the Board of Directors,
acting as such Directors for and on behalf of the Fund, pursuant
to the authority vested in them under the laws of the State of
Maryland, the Articles of Incorporation and the By-Laws of the
Fund. This Agreement has been executed by Officers of the Fund
as officers, and not individually, and the obligations contained
herein are not binding upon any of the Directors, Officers,
agents or holders of shares, personally, but bind only the
Fund.
D. Provisions of the Prospectus and any other documents
(including advertising material) specifically mentioning the
Custodian (other than merely by name and address) shall be
reviewed with the Custodian by the Fund prior to publication
and/or dissemination or distribution, and shall be subject to the
consent of the Custodian.
E. Any notice or other instrument in writing, authorized
or required by this Agreement to be given to the Custodian, shall
be sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at Star Bank Center, 425 Walnut
Street, M. L. 6118, Cincinnati, Ohio 45202, attention Mutual Fund
Custody Department, or at such other place as the Custodian may
from time to time designate in writing.
F. Any notice or other instrument in writing, authorized
or required by this Agreement to be given to the Fund shall be
sufficiently given when delivered to the Fund or on the second
business day following the time such notice is deposited in the
U.S. mail postage prepaid and addressed to the Fund at its office
at 1500 Forest Avenue, Suite 223, Richmond, Virginia, 23229 or
at such other place as the Fund may from time to time designate
in writing.
G. This Agreement, with the exception of the
Appendices,may not be amended or modified in any manner except by
a written agreement executed by both parties with the same
formality as this Agreement, and authorized and approved by a
resolution of the Board of Directors of the Fund.
H. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund or by the Custodian, and no attempted
assignment by the Fund or the Custodian shall be effective
without the written consent of the other party hereto.
I. This Agreement shall be construed in accordance with
the laws of the State of Ohio.
J. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers, thereunto
duly authorized as of the day and year first above written.

The World Funds, Inc.

ATTEST: By: ______________________
John Pasco, III
________________________ Chairman

Star Bank, N.A.

ATTEST: By: ________________
Marsha A. Croxton
_________________________ Vice President

APPENDIX A

Authorized Persons Specimen Signatures

Chairman:

Secretary:

Treasurer

Controller:

Adviser Employees:

Transfer Agent/Fund Accountant

Employees:

APPENDIX B

The following agents are employed currently by Star Bank, N.A.
for securities processing and control . . .

The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004

The Federal Reserve Bank
Cincinnati and Cleveland Branches

Bankers Trust Company
16 Wall Street
New York, NY 10005
(For Foreign Securities and certain non-DTC eligible
Securities)

APPENDIX C

Standards of Service Guide

APPENDIX D

Schedule of Compensation

EXHIBIT G
FUND SERVICES, INC.

TRANSFER AGENT AGREEMENT

THIS AGREEMENT, dated , 1997 between THE WORLD
FUNDS, INC. (the "Fund"), a corporation operating as an open-end
investment company under the Investment Company Act of 1940, duly
organized and existing under the laws of the State of Maryland,
and FUND SERVICES, INC., a corporation organized under the laws
of the State of Virginia ("FSI"), provides as follows:
WHEREAS, FSI has agreed to act as transfer agent for the
purpose of recording the transfer, issuance and redemption of
Shares of the Fund, transferring the Shares of the Fund,
disbursing dividends and other distributions to Shareholders,
filing various tax forms, mailing shareholder information and
receiving and responding to various shareholder inquiries;
NOW THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, the parties do hereby
agree as follows:
SECTION 1. The Fund hereby appoints FSI as its transfer
agent and FSI agrees to act in such capacity upon the terms set
forth in this Agreement.
SECTION 2. The Fund shall furnish to FSI a supply of
blank Share Certificates of each Series and, from time to time,
will renew such supply upon FSI's request. Blank Share
Certificates shall be signed manually or by facsimile signatures
of officers of the Fund and, if required by FSI, shall bear the
Fund's seal or a facsimile thereof.
SECTION 3. FSI shall make original issues of Shares of
each Series in accordance with SECTIONS 13 and 14 below and the
Fund's then current prospectus, upon receipt of (i) Written
Instructions requesting the issuance, (ii) a certified copy of a
resolution of the Fund's Board of Directors authorizing the
issuance, (iii) necessary funds for the payment of any original
issue tax applicable to such additional Shares, (iv) an opinion
of the Fund's counsel as to the legality and validity of the
issuance, which opinion may provide that it is contingent upon
the filing by the Fund of an appropriate notice with the
Securities and Exchange Commission, as required by Rule 24f-2 of
the Investment Company Act of 1940, as amended from time to time.
If the opinion described in (iv) above is contingent upon a
filing under such rule, the Fund shall fully indemnify FSI for
any liability arising from the failure of the Fund to comply with
such rule.
SECTION 4. Transfers of Shares of each Series shall be
registered and, subject to the provisions of SECTION 10, new
Share Certificates shall be issued by FSI upon surrender of
outstanding Share Certificates in the form deemed by FSI to be
properly endorsed for transfer, which form shall include (i) all
necessary endorsers' signatures guaranteed by a member firm of a
national securities exchange or a domestic commercial bank, (ii)
such assurances as FSI may deem necessary to evidence the
genuineness and effectiveness of each endorsement and (iii)
satisfactory evidence of compliance with all applicable laws
relating to the payment or collection of taxes. FSI shall take
reasonable measures as instructed by the Fund and agreed upon by
FSI to enable the Fund to identify proposed transfers that, if
effected, will likely cause the Fund to fall within the Internal
Revenue Code definitions of a personal holding company and shall
not make such transfers contrary to the Fund's instructions
without the prior written approval of the Fund and its counsel.
SECTION 5. FSI shall forward Share Certificates in "non-
negotiable" form by first-class or registered mail, or by
whatever means FSI deems equally reliable and expeditious. While
in transit to the addressee, all deliveries of Share Certificates
shall be insured by FSI as it deems appropriate. FSI shall not
mail Share Certificates in "negotiable" form, unless requested in
writing by the Fund and fully indemnified by the Fund to FSI's
satisfaction.
SECTION 6. In registering transfers of Shares of each
Series, FSI may rely upon the Uniform Commercial Code or any
other statutes that, in the opinion of FSI's counsel, protect FSI
and the Fund from liability arising from (i) not requiring
complete documentation, (ii) registering a transfer without an
adverse claim inquiry, (iii) delaying registration for purposes
of such inquiry, or (iv) refusing registration whenever an
adverse claim requires such refusal.
SECTION 7. FSI may issue new Share Certificates in place
of those lost, destroyed or stolen, upon receiving indemnity
satisfactory to FSI and may issue new Share Certificates in
exchange for, and upon surrender of, mutilated Share Certificates
as FSI deems appropriate.
SECTION 8. Unless otherwise directed by the Fund, FSI
may issue or register Share Certificates reflecting the
signature, or facsimile thereof, of an officer who has died,
resigned or been removed by the Fund. The Fund shall file
promptly with FSI any approvals, adoptions, or ratifications of
such actions as may be required by law or FSI.
SECTION 9. FSI shall maintain customary stock registry
records for each Series in the Fund, noting the issuance,
transfer or redemption of Shares and the issuance and transfer of
Share Certificates. FSI may also maintain for each Series an
account entitled "Unissued Certificate Account," in which it will
record the Shares, and fractions thereof, issued and outstanding
from time to time for which issuance of Share Certificates has
not been requested. FSI is authorized to keep records for each
Series, containing the names and last known addresses of
Shareholders and Planholders, and the number of Shares, and
fractions thereof, from time to time owned by them for which no
Share Certificates are outstanding. Each Shareholder or
Planholder will be assigned a single account number for each
Series, even though Shares held under each Plan and Shares for
which Certificates have been issued will be accounted for
separately. Whenever a Shareholder deposits Shares represented
by Share Certificates in a Plan that permits the deposit of
Shares thereunder, FSI upon receipt of the Share Certificates
registered in the name of the Shareholder (or if not registered,
in proper form for transfer), shall cancel such Share
Certificates, debit the Shareholder's individual account, credit
the Shares to the Unissued Share Certificate Account pursuant to
SECTION 10 below and credit the deposited Shares to the proper
Plan account.
SECTION 10. FSI shall issue Share Certificates for Shares
of each Series only upon receipt of a written request from a
Shareholder. If Shares are purchased without such request, FSI
shall merely note on its stock registry records the issuance of
the Shares and fractions thereof and credit the Unissued
Certificate Account and the respective Shareholders' accounts
with the Shares. Whenever Shares, and fractions thereof, owned
by Shareholders are surrendered for redemption, FSI may process
the transactions by making appropriate entries in the stock
transfer records, and debiting the Unissued Certificate Account
and the record of issued Shares outstanding; it shall be
unnecessary for FSI to reissue Share Certificates in the name of
the Fund.
SECTION 11. FSI shall also perform the usual duties and
functions required of a stock transfer agent for a corporation,
including but not limited to (i) issuing Share Certificates as
Treasury Shares, as directed by Written Instructions, and (ii)
transferring Share Certificates from one Shareholder to another
in the usual manner. FSI may rely conclusively and act without
further investigation upon any list, instruction, certification,
authorization, Share Certificate or other instrument or paper
reasonably believed by it in good faith to be genuine and
unaltered, and to have been signed, countersigned or executed or
authorized by a duly-authorized person or persons, or by the
Fund, upon the advice of counsel for the Fund or for FSI, or upon
the net asset value quotation of the Service Agent, as
hereinafter defined. FSI may record any transfer of Share
Certificates which it reasonably believes in good faith to have
been duly-authorized, or may refuse to record any transfer of
Share Certificates if, in good faith, it deems such refusal
necessary in order to avoid any liability on the part of either
the Fund or FSI. The Fund agrees to indemnify and hold harmless
FSI from and against any and all losses, costs, claims, and
liability that it may suffer or incur by reason of such good
faith reliance, action or failure to act.
SECTION 12. FSI shall notify the Fund of any request or
demand for the inspection of the Fund's share records. FSI shall
abide by the Fund's instructions for granting or denying the
inspection; provided, however, FSI may grant the inspection
without such instructions if it is advised by its counsel that
failure to do so will result in liability to FSI.
SECTION 13. For purposes of this Section, the Fund hereby
instructs FSI to consider Shareholder and Planholder payments as
federal funds on the day indicated below:
(a) for a wire received prior to 12:00 noon Eastern time,
on the same day;
(b) for a wire received on or after 12:00 noon Eastern
time, on the next business day;
(c) for a check received prior to 12:00 noon Eastern time,
on the second business day following receipt; and
(d) for a check received on or after 12:00 noon Eastern
time, on the third business day following receipt.
Immediately after 4:00 p.m. Eastern time or such other time as
the Fund may reasonably specify for any Series (the "Valuation
Time") on each day that the Fund and FSI are open for business,
FSI shall obtain from the Fund's service agent, as specified by
the Fund in writing to FSI (the "Service Agent"), a quotation (on
which it may conclusively rely) of the net asset value,
determined as of the Valuation Time on that day. On each day FSI
is open for business, it shall use the net asset value determined
by the Service Agent to compute the number of Shares and
fractional Shares to be purchased and the aggregate purchase
proceeds to be deposited with the Custodian. As necessary but no
more frequently than daily (unless a more frequent basis is
agreed to by FSI), FSI shall place a purchase order with the
Custodian for the proper number of Shares and fractional Shares
to be purchased and promptly thereafter shall send written
confirmation of such purchase to the Custodian and the Fund.
SECTION 14. Having made the calculations required by
SECTION 13, FSI shall thereupon pay the Custodian the aggregate
net asset value of Shares of each Series purchased. The
aggregate number of Shares and fractional Shares purchased shall
then be issued daily and credited by FSI to the Unissued
Certificate Account. FSI shall also credit each Shareholder's
separate account with the number of shares purchased by such
Shareholder. FSI shall promptly thereafter mail written
confirmation of the purchase to each Shareholder or Planholder,
and if requested, to a specified broker-dealer and the Fund.
Each confirmation shall indicate the prior Share balance, the new
Share balance, the Shares held under a Plan (if any), the Shares
for which Share Certificates are outstanding (if any), the amount
invested and the price paid for the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each business
day, as specified in accordance with SECTION 13 above, FSI shall
process all requests to redeem Shares of each Series and advise
the Custodian of (i) the total number of Shares of each Series
available for redemption and (ii) the number of Shares and
fractional Shares of each Series requested to be redeemed. Upon
confirmation of the net asset value, FSI shall notify the Fund
and the Custodian of the redemption, apply the redemption
proceeds in accordance with SECTION 16 and the Fund's prospectus,
record the redemption in the stock registry books, and debit the
redeemed Shares from the Unissued Certificate Account and the
individual account of the Shareholder or Planholder.
In lieu of carrying out the redemption procedures described
in the preceding paragraph, FSI may, at the request of the Fund,
sell Shares of each Series to the Fund as repurchases from
Shareholders and/or Planholders, provided that the sales price is
not less than the applicable redemption price. The redemption
procedures shall then be appropriately modified.
SECTION 16. The proceeds of redemption shall be remitted
by FSI in accordance with the Fund's then current prospectus as
follows:
(a) By check mailed to the Shareholder or Planholder at his
last known address. The request and stock certificates, if any,
for Shares being redeemed must reflect a guarantee of the owner's
signature by a domestic commercial bank or trust company or a
member firm of a national securities exchange. If Share
Certificates have not been issued to the redeeming Shareholder or
Planholder, the signature of the Shareholder or Planholder on the
redemption request must be similarly guaranteed. The Fund may
authorize FSI in writing to waive the signature guarantee for any
specific transaction or classes of transactions;
(b) By wire to a designated bank or broker upon telephone
request, without signature guarantee, if such redemption
procedure has been elected on the Shareholder's or Planholder's
account information form. Any change in the designated bank or
broker account will be acted upon by FSI only if made in writing
by the Planholder or Shareholder, with signature guaranteed as
required by paragraph (a) above;
(c) In case of an expedited telephone redemption, by check
payable to the Shareholder or Planholder of record and mailed for
deposit to the bank account designated in the Shareholder account
information form;
(d) By other procedures commonly followed by mutual funds,
as set forth in Written Instructions from the Fund and mutually
agreed upon by the Fund and FSI.
For purposes of redemption of shares of any Series that have
been purchased by check within fifteen (15) days prior to receipt
of the redemption request, the Fund shall provide FSI with
Written Instructions concerning the time within which such
requests may be honored.
The authority of FSI to perform its responsibilities under
SECTIONS 15 and 16 shall be suspended if FSI receives notice of
the suspension of the determination of the Fund's net asset
value.
SECTION 17. Upon the declaration of each dividend and
each capital gains distribution by the Fund's Board of Directors,
the Fund shall notify FSI of the date of such declaration, the
amount payable per share, the record date for determining the
Shareholders entitled to payment, the payment and the
reinvestment date price.
SECTION 18. On or before each payment date the Fund will
transfer, or cause the Custodian to transfer, to FSI the total
amount of the dividend or distribution currently payable. FSI
will, on the designated payment date, reinvest all dividends in
additional shares and shall thereupon pay the Custodian the
aggregate net asset value of the additional shares and shall
promptly mail to each Shareholder or Planholder at his last known
address, a statement showing the number of full and fractional
shares (rounded to three decimal places) then owned by the
Shareholder or Planholder and the net asset value of such shares;
provided, however, that if a Shareholder or Planholder elects to
receive dividends in cash, FSI shall prepare a check in the
appropriate amount and mail it to him at his last known address
within five (5) business days after the designated payment date.
SECTION 19. FSI shall maintain records regarding the
issuance and redemption of Shares of each Series and dividend
reinvestments. Such records will list the transactions effected
for each Shareholder and Planholder and the number of Shares and
fractional Shares owned by each for which no Share Certificates
are outstanding. FSI agrees to make available upon request and
to preserve for the periods prescribed in Rule 31a-2 of the
Investment Company Act of 1940 any records related to services
provided under this Agreement and required to be maintained by
Rule 31a-1 of such Act. FSI acknowledges that these records are
the property of the Fund and will surrender same to the Fund
promptly on request.
SECTION 20. FSI shall maintain those records necessary to
enable the Fund to file, in a timely manner, Form N-SAR (Semi-
annual report) or any successor monthly, quarterly or annual
report required by the Investment Company Act of 1940, or rules
and regulations thereunder.
SECTION 21. FSI shall cooperate with the Fund's
independent public accountants and shall take reasonable action
to make all necessary information available to such accountants
for the performance of their duties.
SECTION 22. In addition to the services described above,
FSI will perform other services for the Fund as mutually agreed
upon in writing from time to time, including but not limited to
preparing and filing federal tax forms with the Internal Revenue
Service, mailing federal tax information to Shareholders, mailing
semi-annual Shareholder reports, preparing the annual list of
Shareholders and mailing notices of Shareholders' meetings,
proxies and proxy statements. FSI shall answer Shareholder
inquiries related to their share accounts and other
correspondence requiring an answer from the Fund. FSI shall
maintain dated copies of written communications from
Shareholders, and replies thereto.
SECTION 23. Nothing contained in this Agreement is
intended to or shall require FSI, in any capacity hereunder, to
perform any functions or duties on any holiday, weekend or
weekday on which day FSI or the New York Stock Exchange is
closed. Functions or duties normally scheduled to be performed
on such days shall be performed on, and as of, the next business
day on which both the New York Stock Exchange and FSI are open,
unless otherwise required by law; provided, however, that all
purchase or redemption requests received by the Fund for a date
on which the Exchange is open but FSI is not shall be priced and
executed "as of" such date on the next business day FSI is open,
unless otherwise required by law.
SECTION 24. The Fund agrees to pay FSI compensation for
its services as set forth in Schedule A attached hereto, or as
shall be set forth in written amendments to such Schedule
approved by the Fund and FSI from time to time.
SECTION 25. FSI shall not be liable for any taxes,
assessments or governmental charges that may be levied or
assessed on any basis whatsoever in connection with the Fund, or
any Plan thereof, Shareholder or Planholder, excluding taxes
assessed against FSI for compensation received by it hereunder.
SECTION 26. FSI shall not be liable for any non-negligent
action taken in good faith and reasonably believed by FSI to be
within the powers conferred upon it by this Agreement. The Fund
shall indemnify FSI and hold it harmless from and against any and
all losses, claims, damages, liabilities or expenses (including
reasonable expenses for legal counsel) arising directly or
indirectly out of or in connection with this Agreement; provided
such loss, claim, damage, liability or expense is not the direct
result of FSI's negligence or willful misconduct, and provided
further that FSI shall give the Fund notice and reasonable
opportunity to defend any such loss, claim, etc. in the name of
the Fund or FSI, or both. Without limiting the foregoing:
(a) FSI may rely upon the advice of the Fund or counsel to
the Fund or FSI, and upon statements of accountants, brokers and
other persons believed by FSI in good faith to be experts in the
matters upon which they are consulted. FSI shall not be liable
for any action taken in good faith reliance upon such advice or
statements;
(b) FSI shall not be liable for any action reasonably taken
in good faith reliance upon any Written Instructions, Oral
Instructions, including the Service Agent's net asset value
quotation, or certified copy of any resolution of the Fund's
Board of Directors; provided, however, that upon receipt of a
Written Instruction countermanding a prior Written or Oral
Instruction that has not been fully executed by FSI, FSI shall
verify the content of the second Written Instruction and honor
it, to the extend possible. FSI may rely upon the genuineness of
any such document, or copy thereof, reasonably believed by FSI in
good faith to have been validly executed; and
(c) FSI may rely, and shall be protected by the Fund in
acting upon any signature, instruction, request, letter of
transmittal, certificate, opinion of counsel, statement,
instrument, report, notice, consent, order, or other paper or
document reasonably believed by it in good faith to be genuine
and to have been signed or presented by the purchaser, Fund or
other proper party or parties.
(d) The Fund shall, as soon as possible, amend its
prospectus to conform with the provisions of this Agreement and
make all necessary filings of the amended prospectus, and shall
indemnify FSI for any loss, claim or expense resulting from FSI's
reliance upon the Fund's representations in this Agreement,
notwithstanding a contrary representation in its prospectus.
SECTION 27. Upon receipt of Written Instructions, FSI is
authorized to make payment upon redemption of Shares without a
signature guarantee. The Fund hereby agrees to indemnify and
hold FSI harmless from any and all expenses, damages, claims,
suits, liabilities, action, demands or losses whatsoever arising
out of or in connection with a payment by FSI for redemption of
Shares without a signature guarantee. Upon the request of FSI,
the Fund shall assume the entire defense of any such action, suit
or claim. FSI shall notify the Fund in a timely manner of any
such action, suit or claim.
SECTION 28. The Fund shall deliver or cause to be
delivered over to FSI (i) an accurate list of Shareholders of the
Fund, showing each Shareholder's last known address, number of
Shares owned and whether such shares are represented by
outstanding Share Certificates or by non-certificated share
accounts, (ii) all records relating to Plans of the Fund,
including original applications signed by the Planholders and
original plan accounts recording payment, deductions,
reinvestments, withdrawals and liquidations and (iii) all
shareholder records, files, and other materials necessary or
appropriate for proper performance of the functions assumed by
FSI under this Agreement (collectively referred to as the
"Materials"). The Fund shall indemnify and hold FSI harmless
from any and all expenses, damages, claims, suits, liabilities,
actions, demands and losses arising out of or in connection with
any error, omission, inaccuracy or other deficiency of such
Materials, or out of the failure of the Fund to provide any
portion of the Materials or to provide any information needed by
FSI to knowledgeably perform its functions.
SECTION 29. FSI shall, at all times, act in good faith
and shall use whatever methods it deems appropriate to ensure the
accuracy of all services performed under this Agreement. FSI
shall be liable only for loss or damage due to errors caused by
FSI's negligence, bad faith or willful misconduct or that of its
employees.
SECTION 30. This Agreement may be amended from time to
time by a written supplemental agreement executed by the Fund and
FSI and without notice to or approval of the Shareholders or
Planholders; provided the intent and purposes of any Plan, as
stated from time to time in the Fund's prospectus, are observed.
The parties hereto may adopt procedures as may be appropriate or
practical under the circumstances, and FSI may conclusively rely
on the determination of the Fund that any procedure that has been
approved by the Fund does not conflict with or violate any
requirement of its Articles of Incorporation, By-Laws or
prospectus, or any rule, regulation or requirement of any
regulatory body.
SECTION 31. The Fund shall file with FSI a certified copy
of the operative resolution of its Board of Directors authorizing
the execution of Written Instructions or the transmittal of Oral
Instructions.
SECTION 32. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or supplement
hereto, shall have the meanings specified below, insofar as the
context will allow:
(a) The Fund: The term Fund shall mean The World Funds,
Inc.
(b) Custodian: The term Custodian shall mean Star Bank, NA
(c) Series: The term Series shall mean The Sand Hill
Portfolio Managers Fund and any series that the Fund shall
subsequently establish.
(d) Securities: The term Securities shall mean bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and
other securities and investments from time to time owned by the
Fund.
(e) Share Certificates: The term Share Certificates shall
mean the stock certificates for the Shares of the Fund.
(f) Shareholders: The term Shareholders shall mean the
registered owners from time to time of the Shares of the Fund, as
reflected on the stock registry records of the Fund.
(g) Shares: The term Shares shall mean the issued and
outstanding shares of common stock of the Fund.
(h) Oral Instructions: The term Oral Instructions shall
mean an authorization, instruction, approval, item or set of
data, or information of any kind transmitted to FSI in person or
by telephone, vocal telegram or other electronic means, by a
person or person reasonably believed in good faith by FSI to be a
person or person authorized by a resolution of the Board of
Directors of the Fund to give Oral Instructions on behalf of the
Fund. Each Oral Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the Fund.
(i) Written Instructions: The term Written Instructions
shall mean an authorization, instruction, approval, item or set
of data, or information of any kind transmitted to FSI in
original writing containing original signatures, or a copy of
such document transmitted by telecopy, including transmission of
such signature, or other mechanical or documentary means, at the
request of a person or persons reasonably believed in good faith
by FSI to be a person or persons authorized by a resolution of
the Board of Directors of the Fund to give Written Instructions
on behalf of the Fund. Each Written Instruction shall specify
whether it is applicable to the entire Fund or a specific Series
of the Fund.
(j) Plan: The term Plan shall include such investment
plan, dividends or capital gains reinvestment plans, systematic
withdrawal plans or other types of plans set forth in the then
current prospectus of the Fund (excluding any qualified
retirement plan that is a Shareholder of the Fund) in form
acceptable to FSI, adopted by the Fund from time to time and made
available to its Shareholders, including plans or accounts by
self-employed individuals or partnerships.
(k) Planholder: The term Planholder shall mean a
Shareholder who, at the time of reference, is participating in a
Plan, including any underwriter, representative or broker-dealer.
SECTION 33. In the event that any check or other order
for the payment of money is returned unpaid for any reason, FSI
shall promptly notify the Fund of the non-payment.
SECTION 34. Either party may give sixty (60) days written
notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice.
SECTION 35. Any notice or other communication required by
or permitted to be given in connection with this Agreement shall
be in writing, and shall be delivered in person or sent by first-
class mail, postage prepaid, to the respective parties.
Notice to the Fund shall be given as follows until further
notice:
THE WORLD FUNDS, INC.
1500 Forest Avenue, Suite 223
Richmond, Virginia 23229
Attention: Mr. John Pasco, III, Chairman
Notice to FSI shall be given as follows until further
notice:
FUND SERVICES, INC.
1500 Forest Avenue, Suite 111
Richmond, Virginia 23229
Attention: Mr. William R. Carmichael, Jr., President
SECTION 36. The Fund represents and warrants to FSI that
the execution and delivery of this Transfer Agent Agreement by
the undersigned officer of the Fund has been duly and validly
authorized by resolution of the Fund's Board of Directors. FSI
represents and warrants to the Fund that the execution and
delivery of this Agreement by the undersigned officer of FSI has
also been duly and validly authorized.
SECTION 37. This Agreement may be executed in more than
one counterpart, each of which shall be deemed to be an original.
SECTION 38. This Agreement shall extend to and shall bind
the parties hereto and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by
the Fund without the written consent of FSI or by FSI without the
written consent of the Fund, authorized or approved by a
resolution of the Fund's Board of Directors.
SECTION 39. This Agreement shall be governed by the laws
of the State of Virginia.

WITNESS the following signatures:

THE WORLD FUNDS, INC.

By:

Title:

Date:

FUND SERVICES, INC.

By:
Title:

Date:

ATTACHMENT A

FEE SCHEDULE

I. Account Maintenance Fees - Per Fund:

0 - 5,000 Accounts - $11.00 per account per year
5,001 - 15,000 Accounts - $10.00 per account per year
Over 15,000 Accounts - $ 9.50 per account per year

Applicable fees billed monthly at 1/12 the annual rate
for each month the account is open. Accounts in each
fund that exceeds minimum billing will be aggregated to
determine pricing break points.

II. Transaction/Processing Fees:
Open New Account - $2.50
Partial or Total Redemption - $2.50
Tax Statement or other Transaction - $1.00
Addition to Account - $1.00
Dividend/Distribution - $1.00
(In excess of two per year)
(Plus statement charges)

Fees incurred will be billed monthly

III. Other Specified Charges:

Blue Sky Reports (Under 1,000 S/H) - $10.00
Blue Sky Reports (Under 5,000 S/H) - $15.00
Blue Sky Reports (Over 5,000 S/H) - $25.00
Shareholder List (Under 2,500 S/H) - $15.00
Shareholder List (Over 2,500 S/H) - $25.00

IV. Minimum Fee:

The minimum annual fee is $16,500.00 per fund and is
payable at the rate $1,375.00 per month. The minimum
covers account maintenance fees and regular
purchase/redemption transaction fees only. Any new
funds started by The World Funds, Inc., will receive a
reduced minimum of $12,000.00 for the first
twelve months of operation.

V. Conversion Fees:

Conversion Fees for acquired funds will be billed at
the new account rate per account converted plus
programming and out of pocket costs.

V. Out of Pocket Costs:

The cost of forms, postage, stationery, outside mailing
services, microfilm or magnetic tape data transfer etc.
will be in addition to the fees listed above.

A-1

ATTACHMENT A

VI. Term of Agreement

Notwithstanding the Notice of Termination provisions of
SECTION 34 of the Basic Agreement, the Initial term of this
contract will be 24 months from the date of execution. The
above fees are guaranteed for the initial term. This
contract may be extended beyond such initial term upon
mutual agreement of the Funds and FSI.

<PAGE>
EXHIBIT H

ADMINISTRATIVE SERVICES AGREEMENT

Administrative Services Agreement (the "Agreement") dated
, 1997, by and between THE WORLD FUNDS, INC. (the
"Fund"), a diversified, open-end management investment company,
duly organized as a corporation in accordance with the laws of
the State of Maryland, and COMMONWEALTH SHAREHOLDER SERVICES,
INC. ("CSS"), a corporation duly organized as a corporation in
accordance with the laws of the Commonwealth of Virginia.

WITNESSETH THAT:

WHEREAS, the Fund desires to appoint CSS as its Administrative
Services Agent, for and on behalf of the SAND HILL PORTFOLIO
MANAGER FUND series (the "Portfolio"), to perform certain
recordkeeping and shareholder servicing functions required of a
duly registered investment company to comply with certain
provisions of federal, state and local law, rules and
regulations, and, as is required, to assist the Fund in preparing
and filing certain financial reports, and further to perform
certain daily functions in connection with on-going operations of
the Fund and the Portfolio, and provide ministerial services to
implement the investment decisions of the Fund and the investment
advisor of the Portfolio, Sand Hill Advisers, Inc. (the
"Advisor"); and

WHEREAS, CSS is willing to perform such functions upon the
terms and conditions herein set forth;

NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto, intending
to be legally bound, agree as follows:

Section 1. CSS shall examine and review all records and
documents of the Portfolio pertaining to its duties under this
Agreement in order to determine and/or recommend how such records
and documents shall be maintained.

Section 2. CSS shall, as necessary for such purposes, advise
the Fund and its agents of the information which is deemed to be
"necessary" for the performance of its duties under this
Agreement, and upon receipt of necessary information and Written
or Oral Instructions from the Fund, shall maintain and keep
current such shareholder relations records.

Unless the information necessary to perform the above
functions is furnished in writing to CSS by the Fund or its
agents (such as Custodians, Transfer Agents, etc.), CSS shall
incur no liability and the Fund shall indemnify and hold harmless
CSS from and against any liability arising from any discrepancy
in the information received by CSS and used in the performance by
CSS of its duties.

It shall be the responsibility of the Fund to furnish CSS with
the net asset value per share, declaration, record and payment
dates and amounts of any dividends or income and any other
special actions required concerning each of its securities.

CSS shall maintain such shareholder records above mentioned as
required by regulation and as agreed upon between the Fund and
CSS.
Section 3. The Fund shall confirm to the Fund's Transfer
Agent all purchases and redemptions of shares of the Portfolio
effected through the Fund or its distributor, as and when such
orders are accepted by the Fund or an authorized agent of the
Fund designated for that purpose. CSS shall receive from the
Fund's Transfer Agent daily reports of share purchases,
redemptions, and total shares outstanding, and shall be
accountable for the information contained in such reports of
purchases and redemptions when received. It is agreed by the
parties that the net asset value per share of the Fund will be
calculated in accordance with Rule 22c-1 under the Investment
Company Act of 1940 and as otherwise directed by the Board of
Directors of the Fund.

CSS shall reconcile its records of outstanding shares and
shareholder accounts with the Fund's Transfer Agent periodically,
and not less frequently than monthly.

Section 4. CSS shall provide assistance to the Fund in the
servicing of shareholder accounts, which may include telephone
and written conversations, assistance in redemptions, exchanges,
transfers and opening accounts as may be required from time to
time. CSS shall, in addition, provide such additional
administrative non-advisory management services as CSS and the
Fund may from time to time agree.

Section 5. The accounts and records maintained by CSS shall
be the property of the Fund, and shall be made available to the
Fund, within a reasonable period of time, upon demand. CSS shall
assist the Fund's independent auditors, or any other person
authorized by the Fund or, upon demand, any regulatory body as
authorized by law or regulation, in any requested review of the
Fund's accounts and records but shall be reimbursed for all
reasonable and documented expenses and employee time invested in
any such review outside of routine and normal periodic reviews.
Upon receipt from the Fund of any necessary information, CSS
shall assist the Fund in organizing necessary data for the Fund's
completion of any necessary tax returns, questionnaires, periodic
reports to shareholders and such other reports and information
requests as the Fund and CSS shall agree upon from time to time.

Section 6. CSS and the Fund may from time to time adopt
procedures they agree upon, and, absent knowledge to the
contrary, CSS may conclusively assume that any procedure approved
by the Fund or directed by the Fund, does not conflict with or
violate any requirements of Fund's Prospectuses, Articles of
Incorporation, By-Laws, registration statements, orders, or any
rule or regulation of any regulatory body or governmental agency.
The Fund (acting through its officers or other agents) shall be
responsible for notifying CSS of any changes in regulations or
rules which might necessitate changes in the Fund's procedures.

Section 7. CSS may rely upon the advice of the Fund and upon
statements of the Fund's lawyers, accountants and other persons
believed by it in good faith to be expert in matters upon which
they are consulted, and CSS shall not be liable for any actions
taken in good faith upon such statements.

Section 8. CSS shall not be liable for any actions taken in
good faith reliance upon any authorized Oral Instructions, any
Written Instructions, and certified copy of any resolution of the
Board of Directors of the Fund or any other document reasonably
believed by CSS to be genuine and to have been executed or signed
by the proper person or persons.

CSS shall not be held to have notice of any change of
authority of any officer, employee or agent of the Fund until
receipt of notification thereof by the Fund.

The Fund shall indemnify and hold CSS harmless from any and
all expenses, damages, claims, suits, liabilities, actions,
demands and losses whatsoever arising out of or in connection
with any error, omission, inaccuracy or other deficiency of any
information provided to CSS by the Fund, or the failure of the
Fund to provide any information needed by CSS knowledgeably to
perform its functions hereunder. Also, the Fund shall indemnify
and hold harmless CSS from all claims and liabilities (including
reasonable documented expenses for legal counsel) incurred by or
assessed against CSS in connection with the performance of this
Agreement, except such as may arise from CSS's own negligent
action, omission or willful misconduct; provided, however, that
before confessing any claim against it, CSS shall give the Fund
reasonable opportunity to defend against such claim in the name
of the Fund or CSS or both.

Section 9. The Fund agrees to pay CSS compensation for its
services and to reimburse it for expenses, as set forth in the
Schedule attached hereto, or as shall be set forth in amendments
to such schedule approved by the Fund's Board of Directors and
CSS.

Section 10. Except as required by laws and regulations
governing investment companies, nothing contained in this
Agreement is intended to or shall require CSS, in any capacity
hereunder, to perform any functions or duties on any holiday or
other day of special observance on which CSS is closed.
Functions or duties normally scheduled to be performed on such
days shall be performed on, and as of, the next business day on
which both the Fund and CSS are open. CSS will be open for
business on days when the Fund is open for business and/or as
otherwise set forth in the Fund's Prospectuses and Statements of
Additional Information.

Section 11. Either the Fund or CSS may give written notice to
the other of the termination of this Agreement, such termination
to take effect at the time specified in the notice, which time
shall be not less than 90 days from the giving of such notice.
Such termination shall be without penalty.

Section 12. Any notice or other communication required by or
permitted to be given in connection with this Agreement shall be
in writing, and shall be delivered in person or sent by
first-class mail, postage prepaid, to the respective parties at
their last known address, except that Oral Instructions may be
given if authorized by the Board of the Fund and preceded by a
certificate from the Fund's secretary so attesting.

Notices to the Fund shall be directed to:

1500 Forest Ave.
Suite 223
Richmond, VA 23229

Notices to CSS shall be directed to:

1500 Forest Ave.
Suite 223
Richmond, VA 23229

Section 13. This Agreement may be executed in two or more
counterparts, each of which, when so executed, shall be deemed to
be an original, but such counterparts shall together constitute
but one and the same instrument.

Section 14. This Agreement shall extend to and shall be
binding upon the parties hereto and their respective successors
and assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of CSS, or by
CSS without the written consent of the Fund, authorized or
approved by a resolution of its Board of Directors.

Section 15. For purposes of this Agreement, the terms Oral
Instructions and Written Instructions shall mean:

Oral Instructions: The term Oral Instruction shall mean an
authorization, instruction, approval, item or set of data, or
information of any kind transmitted to CSS in person or by
telephone, telegram, telecopy, or other mechanical or documentary
means lacking a signature, by a person or persons believed in
good faith by CSS to be a person or persons authorized by a
resolution of the Board of Directors of the Fund, to give Oral
Instructions on behalf of the Fund.

Written Instructions: The term Written Instruction shall mean
an authorization, instruction, approval, item or set of data, or
information of any kind transmitted to CSS in original writing
containing original signatures or a copy of such document
transmitted by telecopy including transmission of such signature
believed in good faith by CSS to be the signature of a person
authorized by a resolution of the Board of Directors of the Fund
to give Written Instructions on behalf of the Fund.

The Fund shall file with CSS a certified copy of each
resolution of its Board of Directors authorizing execution of
Written Instructions or the transmittal of Oral Instructions as
provided above.

Section 16. This Agreement shall be governed by the laws of
the State of Maryland.

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

THE WORLD FUNDS, INC.

By:
John Pasco, III
Chairman

COMMONWEALTH SHAREHOLDER SERVICES, INC.

By:
John Pasco, III
President

SCHEDULE A TO

ADMINISTRATIVE SERVICES AGREEMENT

BY AND BETWEEN

THE WORLD FUNDS, INC. AND

COMMONWEALTH SHAREHOLDER SERVICES, INC.

FOR THE

SAND HILL PORTFOLIO MANAGER FUND

Pursuant to Section 9 of the Administrative Services
Agreement, dated , 1997, by and between The World
Funds, Inc. (the "Fund"), and Commonwealth Shareholder Services,
Inc. ("CSS"), the Sand Hill Portfolio Manager Fund series of the
Fund shall pay CSS a fee calculated and paid monthly as follows:

A. For the performance of Blue Sky matters, CSS shall be
paid at the rate of $30 per hour of actual time used.

B. For shareholder servicing, CSS shall be paid at the rate
of $30 per hour of actual time used.

C. For all other administration, CSS shall be paid a fee at
the rate of 0.2% per annum of the average daily net
assets of the Sand Hill Portfolio Manager Fund series of
the Fund, payable monthly, with a minimum fee of $30,000.

D. In addition to the foregoing, the Fund shall reimburse
CSS, from the assets of the Portfolio, for the
Portfolio's proportionate share of general expenses
incurred for the Fund and for all expenses incurred by
the Portfolio individually. Such out-of-pocket expenses
shall include, but not be limited to: documented fees
and costs of obtaining advice of counsel or accountants
in connection with its services to the Fund; postage;
long distance telephone; special forms required by the
Fund; any travel which may be required in the performance
of its duties to the Fund; and any other extraordinary
expenses it may incur in connection with its services to
the Fund.

<PAGE>
EXHIBIT I

FUND ACCOUNTING SERVICE AGREEMENT

This agreement (the "Agreement") is entered into as of the
day of , 1997 by and between The World
Funds, Inc., (the "Fund"), an open-end diversified investment
business corporation organized under the laws of Maryland and
having its office at 1500 Forest Avenue, Suite 223, Richmond,
Virginia, 23229, for the benefit of the Sand Hill Portfolio
Manager Fund series (the "Series") and Star Bank, National
Association, (the "Star Bank"), a national banking association
having its principal office at 425 Walnut Street, Cincinnati,
Ohio, 45202.
WHEREAS, the Fund desires to appoint Star Bank as an
Accounting Services Agent to maintain and keep current the books,
accounts, records, journals or other records of original entry
relating to the business of the Series as set forth in this
Agreement; and
WHEREAS, the Fund will cause to be provided certain
information to Star Bank as set forth below:
NOW, THEREFORE, in consideration of the premises and mutual
covenants hereafter contained, the parties hereto agree as
follows:

Section 1. DEFINITIONS
For purposes of this Agreement, the terms Oral Instructions
and Written Instructions shall mean:
(a) Oral Instructions: The term Oral Instructions shall mean
an authorization, instruction, approval, item or set of data, or
information of any kind transmitted to Star Bank in person or by
telephone, telegram, telecopy or other mechanical or documentary
means lacking an original signature, by a person or persons
believed in good faith by Star Bank to be a person or persons
authorized by a resolution of the Board of Directors of the Fund,
to give Oral Instructions on behalf of the Fund.
(b) Written Instructions: The term Written Instructions
shall mean an authorization, instruction, approval, item or set
of data or information of any kind transmitted to Star Bank
bearing an original signature of an authorized person, or a copy
of such document transmitted by telecopy including transmission
of such signature believed in good faith by Star Bank to be the
signature of a person authorized by a resolution of the Board of
Directors of the Fund to give Written Instructions of behalf of
the Fund.
(c) The Fund shall file with Star Bank a certified copy of
each resolution of its Board of Directors authorizing execution
of Written Instructions or the transmittal of Oral Instructions
as provided above.

Section 2. SCOPE OF DUTIES OF STAR BANK
(a) Upon receipt of the necessary information from the Fund
or its agents by Written or Oral Instructions, Star Bank shall
maintain and keep current the following Accounts and Records
relating to the business of the Series, in such form as may be
mutually agreed to between the Fund and Star Bank, and as may be
required by the Investment Company Act of 1940 (the "Act"):
(1) Cash Receipts Journal
(2) Cash Disbursements Journal
(3) Dividends Paid and Payable Schedule
(4) Purchase and Sales Journals - Portfolio Securities
(5) Subscription and Redemption Journals
(6) Security Ledgers - Transaction Report and Tax Lot Report
(7) Broker Ledger - Commission Report
(8) Daily Expense Accruals
(9) Daily Interest Accruals
(10) Daily Trial Balance
(11) Portfolio Interest Receivable and Income Journal
(12) Listing of Portfolio Holdings showing cost, market value
and percentage of portfolio comprised of each security.

(b) Star Bank shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent
the Fund in any way or otherwise be deemed an agent of the Fund.

Section 3. LIMITATION OF LIABILITY OF STAR BANK
(a) Unless necessary information to perform the above
functions is furnished by Written or Oral Instructions to Star
Bank in a timely manner to enable the daily calculation of the
Fund's net asset value at the time set by the Fund pursuant to
Rule 22c-1 under the Act, Star Bank shall incur no liability, and
the Fund shall indemnify and hold harmless Star Bank from and
against any liability arising from any failure to provide
complete information or from any discrepancy between the
information received by Star Bank and used in such calculations
and any subsequent information received from the Fund or any of
its designated Agents.
(b) Star Bank may rely upon the advice of the Fund, or of
counsel for the Fund and upon statements of the Fund's
independent accountants, brokers and other persons reasonably
believed by it in good faith to be expert in the matters upon
which they are consulted and for any actions reasonably taken in
good faith reliance upon such statements and without negligence
or willful misconduct, Star Bank shall not be liable to anyone.

Section 4. REPORTS
(a) The Fund shall provide to Star Bank on a quarterly basis
a report of a duly authorized officer of the Fund representing
that all information furnished to Star Bank during the preceding
quarter was true, complete and correct in all material respects.
Star Bank shall not be responsible for the accuracy of any
information furnished to it by the Fund or its authorized agents,
and the Fund shall hold Star Bank harmless in regard to any
liability incurred by reason of the inaccuracy of such
information.
(b) Whenever, in the course of performing its duties under
this Agreement, Star Bank determines, on the basis of information
supplied to Star Bank by the Fund or its authorized agents, that
a violation of applicable law has occurred or that, to its
knowledge, a possible violation of applicable law may have
occurred or, with the passage of time, would occur, Star Bank
shall promptly notify the Fund and its counsel of such violation.

Section 5. PRICING
(a) Star Bank shall perform ministerial calculations
necessary to calculate the Fund's net asset value daily, in
accordance with the Fund's current prospectus and utilizing the
information described in this Section.
(b) Portfolio investments for which market value is to be
determined by the use of an automated financial service (a
"Pricing Service") approved by the Fund shall be valued based on
the prices of the portfolio investment reported by such Pricing
Service except where the Fund has given or caused to be given
specific Written or Oral Instructions to utilize a different
value. Notwithstanding any information obtained from a Pricing
Service, all portfolio securities shall be given such values as
the Fund shall direct by Written or Oral Instructions, including
all restricted securities and other securities requiring
valuation not readily ascertainable solely by the use of such a
Pricing Service.
(c) Star Bank shall have no responsibility or liability for
the accuracy of prices quoted by any recognized Pricing Service
used by it pursuant to the preceding paragraph; for the accuracy
of the information supplied by the Fund; or for any loss,
liability, damage, or cost arising out of any inaccuracy of such
data, unless Star Bank is itself negligent with respect thereto.

Section 6. RELIANCE UPON INSTRUCTIONS
(a) For all purposes under this Agreement, Star Bank is
authorized to act upon receipt of the first of any Written or
Oral Instructions it receives from the Fund or authorized agents
of the Fund. In cases where the first instruction is an Oral
Instruction that is not in the form of a document or written
record, a confirmatory Written Instruction or Oral Instruction in
the form of a document or written record shall be delivered, and
in cases where Star Bank receives an Instruction, whether Written
or Oral, to enter a portfolio transaction on the records, the
Fund shall cause the broker-dealer to send a written confirmation
to Star Bank.
(b) Star Bank shall be entitled to rely on the first
Instruction received by it, and for any act or omission
undertaken in compliance therewith shall be free of liability and
fully indemnified and held harmless by the Fund. If additional
Instructions are received by the bank prior to complying with the
original Instruction, the sole obligation of Star Bank with
respect to any follow-up or confirmatory Written Instruction,
Oral Instruction in documentary or written form, or broker-dealer
written confirmation shall be to make reasonable efforts to
detect any such discrepancy between the original Instruction and
such confirmation and to report such discrepancy to the Fund.
The Fund shall be responsible, at the Fund's expense, for taking
any action, including any reprocessing, necessary to correct any
discrepancy or error.

Section 7. OWNERSHIP OF AND ACCESS TO FUND RECORDS
(a) It is agreed that the Accounts and Records maintained by
Star Bank for the Fund are the property of the Fund, and shall be
made available to the Fund promptly upon request and shall be
maintained for the periods prescribed in Rule 31(a)-2 under the
Act.
(b) Star Bank shall assist the Fund's independent auditors
or, upon lawful demand, any authorized regulatory body, in any
authorized inspection or review of the Fund's Accounts and
Records.

Section 8. PROCEDURES AND COMPLIANCE
Star Bank and the Fund may from time to time adopt such
procedures as they agree upon in writing, and Star Bank may
conclusively assume that any procedure approved or directed by
the Fund does not conflict with or violate any requirements of
its Prospectus, Articles of Incorporation, By-Laws, or any rule
or regulation of any regulatory body or governmental agency. The
Fund shall be responsible for notifying Star Bank of any changes
in regulations or rules which might necessitate changes in Star
Bank's procedures, and for working out such changes with Star
Bank.

Section 9. COMPENSATION
In consideration of the services to be performed by Star Bank,
the Fund agrees to pay Star Bank the fees and reimbursement of
out-of-pocket expenses as set forth in the fee schedule attached
hereto as Schedule A.

Section 10. HOLIDAYS
Nothing contained in this Agreement is intended to or shall
require Star Bank, in any capacity hereunder, to perform any
functions or duties on any holiday, day of special observance or
any other day on which the Custodian or the New York Stock
Exchange is closed. Functions or duties normally scheduled to be
performed on such days shall be performed, and as of, the next
succeeding business day on which both the New York Stock Exchange
and the Custodian are open. Not withstanding the foregoing, Star
Bank shall compute the net asset value of the Fund on each day
required pursuant to Rule 22c-1 promulgated under the Act.

Section 11. AGENTS
Star Bank reserves the right to appoint, in its sole
discretion, agents who may serve as accounting service agents, or
perform any part of the duties and responsibilities of Star Bank
under this Agreement.

Section 12. TERMINATION
Either Party hereto may give written notice to the other party
(the "Termination Notice") of the termination of this Agreement.
Such Termination Notice shall state a date upon which the
termination is effective (the "Termination Date"), which shall be
not less than sixty (60) days after the date of the giving of the
notice unless otherwise agreed by the parties hereto in writing.

Section 13. NOTICE
Any notice or other communication required by or permitted to
be given in connection with this Agreement shall be in writing,
and shall be delivered in person or sent by first class mail,
postage prepaid to the respective parties as follows:

If to the Fund:
The World Funds, Inc.
1500 Forest Avenue, Suite 223
Richmond, VA 23229

If to Star Bank:
Star Bank, N.A.
425 Walnut Street ML 6118
Cincinnati, OH 45202

Section 14. AMENDMENTS TO BE IN WRITING
This Agreement may be amended from time to time by a writing
executed by the Fund and Star Bank. The compensation stated in
Schedule A attached hereto may be adjusted from time to time by
the execution of a new schedule signed by both of the parties.

Section 15. CONTROLLING LAW
This Agreement shall be construed in accordance with the laws
of the State of Ohio.

Section 16. JURISDICTION
Any legal action, suit or proceeding to be instituted by
either party with respect to this Agreement shall be brought by
such party exclusively in the courts of the State of Ohio or in
courts of the United States for the Southern District of Ohio,
and each party, by its execution of this Agreement, irrevocably
(i) submits to such jurisdiction and (ii) consents to the service
of any process or pleadings by first class U.S. mail, postage
prepaid and return receipt requested, or by any other means from
time to time authorized by the laws of such jurisdiction.

Section 17. COUNTERPARTS
This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.

Section 18. HEADINGS
The headings of paragraphs in this Agreement are for
convenience of reference only and shall not affect the meaning or
construction of any provision of this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers, thereunto
duly authorized as of the day and year first above written.

The World Funds, Inc.

ATTEST:
By: ___________________________
______________________ John Pasco III

Title: Chairman

Star Bank, N.A.

ATTEST:
By: ____________________________
____________________ Marsha A. Croxton

Title: Vice President

SCHEDULE A

1. Domestic and ADR Securities Annual Basic Fee per
portfolio (1/12 payable monthly)

$12,000 Minimum up to $5 Million Average Net Assets
$18,000 Minimum up to $10 Million Average Net Assets
$24,000 Minimum up to $25 Million Average Net Assets
.0002 on Next $75 Million of Average Net Assets

Should total assets exceed $100 Million/Fund the fee
schedule will be renegotiated.

2. Should the Series security trading activity exceed an
average of 100 trades per month per portfolio, and
additional fee of $2.50 will be charged per trade.

<PAGE>
EXHIBIT J

FUND EXPENSE AGREEMENT

Agreement dated , 1997.

WHEREAS, The World Funds, Inc. (the "Fund") is a
registered investment company which is obligated to pay
from its assets the just and proper debts of the Fund,
and

WHEREAS, Commonwealth Shareholder Services, Inc. ("CSS")
serves as Administrator for the Fund, and

WHEREAS, as Administrator for the Fund, CSS is charged
with arranging for the payment by the Fund of the Fund's
just and proper debts, and

WHEREAS, the Fund and CSS wish to provide for the
efficient and economical payment of the debts of the
Fund, and

WHEREAS, the Fund and CSS wish to revise the procedures
for the lawful and efficient payment of the Fund's debts,

NOW THEREFORE, in furtherance of the Administrative Agreements
currently in effect between the Fund and CSS, the Fund and CSS,
for good and valid consideration, and intending to be legally
bound, have entered into this Agreement (the "Agreement") that:

1. CSS shall arrange for the payment on behalf of the Fund
of the debts of the Fund. In connection therewith:

1.1 CSS may require and direct the Fund or any duly
authorized custodian of, or agent acting for, the Fund to
deliver a check or draft payable by or from the assets of
the Fund, or otherwise transfer monies, to make payment
of any debt of the Fund.

1.2 CSS may elect to advance monies for the purpose of making
any payment of a debt of the Fund, subject to the right
of CSS promptly to be made whole for such advance.

1.3 Any payment made by or at the instance of CSS under this
paragraph shall only be effected as and when the payment
of the debt in question has been authorized by, and duly
approved in accordance with, procedures set and approved
by the Board of Directors of the Fund.

1.4 Subject to written modification by agreement of the Fund
and CSS, CSS shall arrange for payment of the debts of
the Fund twice each calendar month, or more frequently as
the Fund's payment needs may dictate.

1.5 CSS shall deliver to the Fund's custodian a schedule of
such payments by CSS of debts of the Fund (a
"Certification"), indicating whether such payment has
been made from assets of the Fund, or from amounts
advanced by CSS. Each Certification shall set forth a
written breakdown of the expense category of each item
for which payment has been made, and for which
reimbursement is requested by such certification,
indicating the form of payment thereof.

2. Upon receipt of a Certification from CSS, the Fund shall
promptly reimburse CSS for amounts advanced by CSS for
the payment of the just debts of the Fund. Such
reimbursement shall be made by a wire or comparable
transfer of monies from the Fund to CSS, such transfer in
good funds to be effective five business days following
the payment of the expenses for such Certification.

IN WITNESS WHEREOF, the undersigned, each being duly
authorized, has executed this Agreement on the date first set
forth above:

THE WORLD FUNDS, INC.

By: __________________________________
John Pasco, III
Chairman

COMMONWEALTH SHAREHOLDER SERVICES, INC.

By: ___________________________________
John Pasco, III
President

<PAGE>
EXHIBIT K

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the use of our reports each dated January 17,
1997 on the financial statements and financial highlights of Sand
Hill Portfolio Manager, a series of shares of The World Funds,
Inc. Such financial statements and financial highlights appear
in the 1996 Annual Reports to Shareholders which are incorporated
by reference in the Prospectus filed in the Registration
Statement on Form N-1A of World Funds, Inc. We also consent to
the references to our Firm in such Registration Statement and
Prospectus.

TAIT, WELLER & BAKER

Philadelphia, Pennsylvania
June 13, 1997
<PAGE>
EXHIBIT L

THE WORLD FUNDS, INC. - INDIVIDUAL RETIREMENT ACCOUNTS

SERVICE AGREEMENT

This Agreement is made as of the day of ,
1997, between Star Bank N.A. ("Star Bank"), a national bank
incorporated under Ohio law having a place of business at 425
Walnut Street, Cincinnati, Ohio 45202; The World Funds, Inc. (the
"World Funds"), a Maryland corporation having its principal place
of business at 1500 Forest Avenue, Suite 223, Richmond, Virginia
23229; and Fund Services, Inc. ("FSI"), a Virginia corporation
having its principal place of business at 1500 Forest Avenue, Suite
111, Richmond, Virginia 23229.

WHEREAS, World Funds desires to retain Star Bank as custodian
under World Funds's model Individual Retirement Account ("IRA")
plan for exclusive investment in shares of certain World Funds-
sponsored mutual funds (the "IRA Plan"); and

WHEREAS, FSI is the transfer agent for the Sand Hill Portfolio
Manager Fund series, hereinafter referred to as the "Fund", and
any future funds established as a series of World Funds; and

WHEREAS, Star Bank wishes to retain FSI to provide administrative
and recordkeeping services for the IRA Accounts (as hereafter
defined); and

WHEREAS, FSI, as the World Funds' transfer agent, has agreed that
it can, and will, furnish the necessary administrative and
recordkeeping services applicable to the IRA Accounts on behalf
of Star Bank;

NOW, THEREFORE, in consideration of the respective undertakings and
consents set forth herein, and intending to be legally bound, the
parties do hereby agree as follows:

1. Star Bank will act as custodian under the terms of the
Individual Retirement Account Custodial Account Agreement, a copy
of which is attached hereto, as said agreement may from time to
time hereafter be amended with Star Bank's prior written consent
(the "Custodial Account Agreement") for World Funds' IRA accounts
which are invested exclusively in shares of the Fund and for which
Star Bank is appointed the custodian by the Depositor (as defined
in the Custodian Account Agreement, which term shall accordingly
mean the individual depositor identified in an IRA application)
(the aforesaid accounts being hereinafter referred to as the "IRA
Accounts") and as otherwise provided under such agreement. Under
no circumstances shall Star Bank be required to provide any other
services to the IRA Accounts. Star Bank shall act as such
custodian under the terms of and with the benefit of this Service
Agreement.

2. Star Bank hereby designates FSI as its agent to service
the IRA Accounts. FSI agrees to perform the services set forth in
this Service Agreement, including in Schedule A attached hereto, on
behalf of Star Bank.

3. FSI is responsible for all recordkeeping with
respect to the IRA Plan and IRA Accounts, including existing and
new IRA Accounts, all payment and withdrawal activity, dividend
processing, data changes and file maintenance and the
preparation, reporting and filing on behalf of, and with the
consent and review by, Star Bank of all informational tax returns
and reports and all other filing and reporting requirements
imposed on a custodian pursuant to tax, securities, labor,
banking or any other applicable laws or regulations.

Without limiting the generality of the preceding paragraph,
FSI is responsible for the preparation and filing of all special
tax reports relating to IRA plans and accounts, for delivering to
Depositors information as to the withholding options available to
holders of IRA accounts and for withholding and paying over to
appropriate tax authorities any amounts to be withheld in respect
of any IRA Accounts.

Prior to filing or delivering any of the aforesaid documents
to any Depositors or to tax, securities, labor, banking or other
applicable regulatory authorities, FSI shall provide drafts of
such documents to Star Bank for its examination, it being
understood that this requirement shall not, however, in any way
reduce FSI's responsibility for the accuracy and completeness of
such documents and their compliance with all applicable laws and
regulations relating thereto.

Upon request of Star Bank, FSI shall confirm in writing to
Star Bank, from time to time, performance by FSI of its aforesaid
responsibilities, including compliance with all such filing and
reporting requirements, and FSI shall make such records available
to Star Bank from time to time as Star Bank shall request, in
order to allow Star Bank to satisfy itself as to such performance
and compliance as well as compliance with sound auditing
practices. FSI also agrees to provide at its expense to Star
Bank not less frequently than annually an audit of compliance of
the IRA Plan and IRA Accounts with all recordkeeping, reporting
and filing requirements imposed by applicable laws or
regulations, such audit to be performed by an accounting firm
satisfactory to Star Bank.

FSI represents that it has received assurances from previous
custodians of the IRA Accounts (together World Funds's former IRA
custodians), that all reports and filings required by applicable
law or regulation or by agreement with Depositors have been made
in a timely fashion as of the effective date of this Agreement
and as of the date of actual execution hereof.

4. World Funds is responsible for preparing and
maintaining up to date, including in connection with any changes
in applicable law or regulation, the Individual Retirement
Account Disclosure Statement and the Custodial Account Agreement
and any other documentation pursuant to which the IRA Plan or the
IRA Accounts have been or shall be established, as well as all
prospectuses, statements of additional information, registration
statements and other materials provided to shareholders of the
Fund generally, including to the Depositors. World Funds is
responsible for distribution to the Depositors of prospectuses,
statements of additional information, registration statements and
other materials to be provided to shareholders of the Fund
generally, including to new or existing Depositors.

World Funds shall promptly notify Star Bank and FSI in
writing of any amendments and/or modifications to the IRA Plan
documents and promptly provide both Star Bank and FSI with copies
of the same. World Funds shall also promptly deliver to Star
Bank and FSI copies of any and all annual or semiannual reports
for the Fund or other communications or documents generally
distributed to shareholders of the Fund, as well as copies of all
prospectuses, statements of additional information, registration
statements and amendments thereto relating to the Fund.

5. FSI agrees to fully indemnify, protect and hold
harmless Star Bank from and against any and all losses, damages,
costs, expenses, claims, liabilities and responsibilities of
whatever kind and nature, including reasonable attorney's fees
and costs, which Star Bank may suffer or incur arising from FSI's
failure to perform its duties under this Agreement or FSI's
failure to perform its duties under any other agreement or
document relating to the IRA Plan or the IRA Accounts
(collectively referred to as "FSI-Caused Losses"), including FSI-
Caused Losses which Star Bank may suffer or incur arising from
Star Bank's performance hereunder as custodian of the IRA
Accounts (except in respect of Star Bank's negligence or willful
default), such as but not limited to responsibilities imposed by
law on Star Bank as custodian or liabilities incurred in respect
of the inaccuracy or incompleteness of, or the misstatement of
material fact or failure to state a material fact in, or
noncompliance with applicable law or regulation of, any IRA Plan
documents, IRA Account documents or tax or informational returns,
or other documents delivered or required to be delivered to
Depositors.

FSI hereby agrees to fully indemnify, protect and hold
harmless World Funds from and against any and all losses,
damages, costs, expenses, claims, liabilities and
responsibilities of whatever kind and nature, including
reasonable attorney's fees and costs, which World Funds may
suffer or incur arising from the failure of FSI to properly
perform its duties under the Agreement.

FSI hereby represents and warrants that as of the effective
date of this Agreement and as of the date of execution hereof, it
has no knowledge, direct or indirect, of any outstanding claims
or liabilities relating to prior acts or omissions of any prior
custodian of the IRA Plans and any IRA Account or of any prior
acts or omissions of FSI or World Funds for which Star Bank might
as custodian be asserted to be responsible or liable.

Without limiting the foregoing in any way, FSI agrees that
it shall maintain in effect errors and omissions insurance in the
amount of One Million ($1,000,000) Dollars during the term of
this Agreement and any renewals hereof. FSI shall at least
annually provide Star Bank with written proof that such insurance
is in effect.
6. World Funds agrees to fully indemnify, protect and
hold harmless Star Bank and FSI from and against any and all
losses, damages, costs, expenses, claims, liabilities and
responsibilities of whatever kind and nature, including
reasonable attorney's fees and costs, which Star Bank or FSI may
suffer or incur arising from World Funds' failure to perform its
duties under this Agreement or World Funds' failure to perform
its duties under any other agreement or document relating to the
IRA Plan or the IRA Accounts (collectively referred to as "World
Funds-Caused Losses"), such obligations to indemnify shall
include World Funds-Caused Losses which Star Bank may suffer or
incur arising from Star Bank's performance hereunder or under the
Custodial Account Agreement or its status as custodian of the IRA
Accounts (except in respect of Star Bank's negligence or willful
default), such as but not limited to responsibilities imposed by
law on Star Bank as custodian or liabilities incurred in respect
of the inaccuracy or incompleteness of, or the misstatement of
material fact or failure to state a material fact in, or
noncompliance with applicable law or regulation of, any IRA Plan
documents, IRA Account documents or tax or informational returns,
or World Funds or Fund prospectuses, statements of additional
information, registration statements or other documents delivered
or required to be delivered to Depositors.

World Funds hereby represents and warrants that as of the
effective date of this Agreement and as of the date of execution
hereof, it has no knowledge, direct or indirect, of any
outstanding claims or liabilities relating to prior acts or
omissions of any prior custodian of the IRA Plans and any IRA
Account or of any prior acts or omissions of FSI or World Funds
for which Star Bank might as custodian be asserted to be
responsible or liable.

7. Within one month of the date of this Agreement, FSI
shall deliver to Star Bank a copy of its disaster recovery plan
and FSI shall promptly deliver to Star Bank, from time to time,
copies of any amendments and/or modifications to the disaster
recovery plan.

8. FSI shall promptly deliver to Star Bank copies of
all written correspondence received by FSI from the U.S.
Securities and Exchange Commission, the Internal Revenue Service
or any other governmental agencies regarding any act,
transaction, duty or failure to perform any act or duty which is
the subject matter of or is related to the IRA Accounts, this
Agreement or the performance thereof.

9. FSI shall promptly deliver to Star Bank copies of
any letters or correspondence concerning FSI's performance or
responsibilities under this Agreement received by FSI from its
independent accountants who audit or review FSI's books and
records or from any Depositor.

10. As compensation for its custodial services for the IRA
Accounts, Star Bank will receive from each Depositor an annual
maintenance fee of $20.00 per fund account, per year. This fee
will remain in effect for a three (3) year period and thereafter
may be increased upon thirty days' notice from Star Bank to World
Funds.
11. For its services to Star Bank under this Agreement, FSI
shall be entitled to retain from the aforesaid annual maintenance
fee $10.00 per fund account, per year. Reimbursements for forms,
postage and other out-of-pocket expenses incurred by FSI in
executing its responsibilities under this Agreement will be
billable to the respective Fund as an expense incurred on behalf
of Star Bank chargeable to the Fund.

12. FSI agrees to collect the published annual maintenance
fees from the Depositors (pursuant to Paragraph 10 above) and to
remit to Star Bank the net amount due Star Bank (after deduction
of the fee due FSI pursuant to Paragraph 11) within ten (10)
business days after the end of each month in which such fees are
collected. The annual maintenance fees will ordinarily be
collected during the month of September and remitted to Star Bank
in October. Fees from a complete distribution, exchange or roll-
over/transfer, or similar transaction, will be collected as part
of the transaction processing and remitted within ten (10)
business days after the end of the month in which the transaction
occurred.

13. This Agreement may be terminated by any party, without
prejudice to any obligations or liabilities of a party which have
arisen prior to or relate to a period prior to termination, upon
thirty days' prior written notice to the other parties, provided
that if termination is by FSI or World Funds and Star Bank so
advises them within said thirty-day period, termination of this
Agreement shall not become effective until, and shall occur
simultaneously with, termination of Star Bank's position as
custodian for the IRA Accounts provided that Star Bank shall
promptly notify the Depositors of its determination to cease
acting as custodian.

This Agreement may not be amended except by written agreement
executed by all of the parties hereto. No provision of this
Agreement shall be deemed waived unless said waiver is evidenced
by a writing executed by the party to be bound.

14. The books, records, information and operations of FSI
under this Agreement shall be subject to inspection or audit by
Star Bank, its independent auditors, its agents and appropriate
supervisory authorities, including the National Association of
Securities Dealers and the Securities and Exchange Commission.

15. As of the end of each calendar month, FSI will promptly
supply a report to Star Bank as to the account number, short
name, tax ID number, blue sky state, number of shares held on a
Fund-by-Fund basis, and value of each IRA Account open as of the
end of the month and each IRA Account closed during the month, as
well as the total activity for the month.

In addition, as of June 30th and December 31st, FSI will
promptly supply a similar report for the six months ended that
date, provided that the six-month report shall include the full
name and address of each IRA Account.

16. This Agreement shall be governed by and construed in
accordance with the law of the State of Ohio, without giving
effect to conflicts of laws principles.
17. All notices, requests, consents and other communications
pursuant to this Agreement shall be in writing and shall be
deemed to have been given when sent by first class mail, or by
personal delivery.

(a) Notices to World Funds shall be directed to:

World Funds, Inc.
1500 Forest Avenue
Suite 223
Richmond, VA 23229
Attention: John Pasco, III, Chairman

(b) Notices to FSI shall be directed to:

Fund Services, Inc.
1500 Forest Avenue
Suite 111
Richmond, VA 23229
Attention: William R. Carmichael, President

Star Bank N.A.
425 Walnut Street
Cincinnati, Ohio 45202
Attention: Marsha A. Croxton

IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be duly executed and delivered by their proper
officers as of the day and year first above written.

ATTEST: THE WORLD FUNDS, INC.

_____________________________
________________________________________
John Pasco, III
Chairman

ATTEST: FUND SERVICES, INC.

_____________________________
________________________________________
William R. Carmichael
President

ATTEST: STAR BANK N.A.

_____________________________
________________________________________
Marsha A. Croxton
Vice President

SCHEDULE A

SERVICES TO BE PERFORMED BY FUND SERVICES, INC.
FOR RETIREMENT PLAN ACCOUNTS OF
WORLD FUNDS, INC.

Account Processing:

Opening new accounts
Processing all payments, including transfers and rollovers
Issuing and canceling certificates
Processing partial and complete redemptions and systematic
withdrawal plans
Regular and legal transfers of accounts
Mailing up to four reports; prospectus and proxy annually
Processing dividends and capital gain distributions annually,
if any. This includes mailing of cash dividends and/or
preparing statements to
Depositors for reinvested
distributions
TEFRA withholdings, as applicable
Blue Sky Reports. This includes shares sold to Depositors in
various states
Establish and maintain dealer file
Wire order services
Create purchase or redemption trade confirmations
Provide reports on status of trades
Cashier payments received
Post trades to Depositor accounts to include any
dividends due
Sell shares to collect unpaid IRA maintenance fees
Advise Depositors of withdrawal requirements necessary to
avoid tax penalties

Account Maintenance/Tax Reporting

1. Maintaining Depositor records of certificate and whole and
fractional unissued ("Book") shares.
2. Changing Depositors' addresses.
3. Daily or periodic reports on numbers of shares, accounts, etc.
4. Addressing and tabulating annual proxy cards.
5. Supplying an annual stockholder list.
6. Preparation and reporting of federal tax information (1099
DIV, 1099R, W-2P, 5498, and 1042S as appropriate) to
Depositors and IRS.
7. Issuance of year end annual valuation confirmations for IRA
accounts.
8. Replying to Depositor correspondence other than that for Fund-
related inquiries.
<PAGE>
EXHIBIT M

COMPUTATION OF PERFORMANCE

SAND HILL PORTFOLIO MANAGER FUND

1 Year Inception

P 1,000.00 1,000.00

T 19.56% 15.51%

N 1.0 2.0

ERV 1,195.59 1,334.29

<PAGE>
EXHIBIT N

[ARTICLE] 6
[CIK] 0000705455
[NAME] VONTOBEL FUNDS, INC.
[SERIES]
[NUMBER] 5
[NAME] SAND HILL PORTFOLIO MANAGER FUND
[MULTIPLIER] 1
[CURRENCY] US
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[EXCHANGE-RATE] 1.
[INVESTMENTS-AT-COST] 4,999,522
[INVESTMENTS-AT-VALUE] 6,031,647
[RECEIVABLES] 34,266
[ASSETS-OTHER] 27,133
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 6,459,425
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 5,354,034
[SHARES-COMMON-STOCK] 504,705
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 73,266
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 6,459,425
[DIVIDEND-INCOME] 94,169
[INTEREST-INCOME] 81,560
[OTHER-INCOME] 0
[EXPENSES-NET] 107,095
[NET-INVESTMENT-INCOME] 68,634
[REALIZED-GAINS-CURRENT] 230,479
[APPREC-INCREASE-CURRENT] 740,807
[NET-CHANGE-FROM-OPS] 1,039,920
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 72,905
[DISTRIBUTIONS-OF-GAINS] 155,461
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 199,556
[NUMBER-OF-SHARES-REDEEMED] 75,044
[SHARES-REINVESTED] 17,744
[NET-CHANGE-IN-ASSETS] 2,434,405
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 53,649
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 168,184
[AVERAGE-NET-ASSETS] 5,332,968
[PER-SHARE-NAV-BEGIN] 11.11
[PER-SHARE-NII] .14
[PER-SHARE-GAIN-APPREC] 2.02
[PER-SHARE-DIVIDEND] (.15)
[PER-SHARE-DISTRIBUTIONS] (.33)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.79
[EXPENSE-RATIO] 2.50
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE>
EXHIBIT O

THE WORLD FUNDS, INC.

SECRETARY'S CERTIFICATE

The undersigned Secretary of The World Funds, Inc. (the
"Fund"), does hereby certify that the Board of Directors of the
Fund, at a meeting held on May 12, 1997, approved the following
resolution:

RESOLVED, that the officers of the Fund
are authorized to file with the SEC a
Power of Attorney, substantially in the
form of the Power of Attorney attached
hereto appointing John Pasco III as
attorney-in-fact for the purpose of
filing documents with the SEC, upon the
due execution by each Director and
designated officer of such Power of
Attorney.

IN WITNESS WHEREOF, I have set my hand this 13th day of
June, 1997.

/s/F. Byron Parker
F. Byron Parker
Secretary

THE WORLD FUNDS, INC.

Power of Attorney

KNOW ALL MEN BY THESE PRESENTS that the undersigned officer
and/or director of The World Funds, Inc. hereby appoints John
Pasco, III, his true and lawful attorney to execute in his name,
place and stead and on his behalf a registration statement on
Form N-1A for the registration pursuant to the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, of shares of said Corporation's Common Stock , and any
and all amendments to said Registration Statement (including
post-effective amendments), and all instruments necessary or
incidental in connection therewith and to file the same with the
U.S. Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and
on behalf of the undersigned every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents
and purposes as the undersigned might or could do, the
undersigned hereby ratifying and approving all such acts of said
attorney.

IN WITNESS WHEREOF, the undersigned has executed this
instrument this 12th day of May, 1997.

/s/Paul M. Dickinson
Paul M. Dickinson
Director

THE WORLD FUNDS, INC.

Power of Attorney

IN WITNESS WHEREOF, the undersigned has executed this
instrument this 12th day of May, 1997.

/s/Samuel Boyd, Jr.
Samuel Boyd, Jr.
Director

THE WORLD FUNDS, INC.

Power of Attorney

IN WITNESS WHEREOF, the undersigned has executed this
instrument this 12th day of May, 1997.

/s/William E. Poist
William E. Poist
Director