OLD WESTBURY FUNDS INC, 485APOS, 1998-12-22

OLD WESTBURY FUNDS INC
485APOS, 1998-12-22

Previous: USAA FEDERAL SAVINGS BANK, 8-K, 1998-12-22

Next: LINDNER INVESTMENTS, 497, 1998-12-22

1933 Act File No. 33-66528
1940 Act File No. 811-7912

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
------

Pre-Effective Amendment No. ..............................

Post-Effective Amendment No. 11 ............................... X
------ ------

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
------

Amendment No. 12_............................................... X
---- ------

OLD WESTBURY FUNDS, INC.

(Exact Name of Registrant as Specified in Charter)

5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
(Address of Principal Executive Offices)

(412) 288-8160
(Registrant's Telephone Number)

Robert C. Elliott Copies To: Michael R. Rosella, Esquire
Bessemer Trust Company, N.A. Battle Fowler LLP
630 Fifth Avenue 75 East 55th Street
New York, New York 10111 New York, New York 10022
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)

It is proposed that this filing will become effective:

_ immediately upon filing pursuant to paragraph (b)
_ on , pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a) (i) on pursuant to paragraph
(a) (i) 75 days after filing pursuant to paragraph (a)(ii) on
_________________ pursuant to paragraph (a)(ii) of Rule 485

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

OLD WESTBURY FUNDS, INC.

Prospectus
February __, 1999

Old Westbury Core Equities Fund
Old Westbury Growth Opportunity Fund
Old Westbury International Fund
Old Westbury Fixed Income Fund
Old Westbury Municipal Bond Fund

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.

- --------------------------------------------------------------------------------
CONTENTS [To be completed]
- --------------------------------------------------------------------------------

<PAGE>

FUND GOALS, STRATEGIES, RISKS AND PERFORMANCE

================================================================================

The Old Westbury Funds offers five portfolios, including three equity funds and
two income funds. The following describes the investment goals, strategies, and
principal risks of each Fund. There can be no assurance that a Fund will achieve
its goal.

Equity Funds

Old Westbury Core Equities Fund

Goal: The Fund's goal is to seek above-average long-term capital appreciation.

Strategy: The Fund invests in a diversified portfolio of large-sized companies
that have potential for above-average earnings growth. The Fund seeks to invest
primarily in companies which are traded on a recognized national stock exchange
and which, in the Adviser's opinion, will be able to increase their net income
by 15%-20% or more annually over a five year period. The Fund will also invest
in "opportunistic" companies that the Adviser believes have strong earnings
prospects for a limited time period as a result of an economic or new product
cycle or company restructuring. The Fund will invest at least 65% of its total
assets in equity securities of companies with market capitalizations of at least
$4 billion.

Old Westbury Growth Opportunity Fund

Goal: The Fund's goal is to seek capital appreciation.

Strategy: The Fund invests in a diversified portfolio of small- and medium-sized
companies which, in the opinion of the Adviser, have potential to become
industry leaders. The Fund seeks to invest primarily in equity securities of
companies whose market capitalizations are less than $4 billion and which, in
the Adviser's opinion, will be able to increase their rate of growth as a result
of a catalyst, such as new products, changes in consumer preferences, new
management or changes in the economy.

Old Westbury International Fund

Goal: The Fund's goal is to seek long-term growth of capital.

Strategy: The Fund invests in a diversified portfolio of foreign companies
located outside of the U.S., at least 85% of which are listed on recognized
foreign securities exchanges. The Fund will invest at least 65% of its assets in
equity securities of companies representing at least three foreign countries.
The Fund may invest 25% or more of its assets in the securities of a single
country. The Fund may invest up to 50% of its assets in securities of companies
in emerging markets countries. Securities are selected for investment based upon
the Adviser's analysis of (i) the economic prospects for a particular
geographical region or country; (ii) the prospects of a particular industrial
sector within the selected geographical area; and (iii) the prospects of a
particular company within the selected industrial sector.

Income Funds

Old Westbury Fixed Income Fund

Goal: The Fund's goal is to seek total return (consisting of current income and
capital appreciation).

Strategy: The Fund invests in a diversified portfolio of investment grade bonds
and notes. The Fund will invest at least 65% of its total assets in fixed income
securities including corporate, asset-backed, mortgage-backed, and U.S.
government securities. The Adviser attempts to manage the Fund's "total
performance" (which includes both changes in principal value of the Fund's
securities and income earned) by lengthening or shortening the average maturity
of the Fund's securities according to whether the Adviser expects market
interest rates to increase or decline.

Old Westbury Municipal Bond Fund

Goal: The Fund's goal is to provide dividend income that is exempt from federal
regular income tax.

Strategy: The Fund invests in investment-grade municipal securities, which
includes tax-free debt securities of states, territories and possessions of the
U.S., and in political subdivisions and taxing authorities of these entities. At
least 80% of the Fund's income from investments in municipal securities will be
exempt from federal regular income tax.

<PAGE>

Principal Risks of the Funds*
- ------------------------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Core Equities Growth International Fixed Income Municipal Bond
Fund Opportunity Fund Fund Fund Fund
- ------------------------------------- ----------------- ----------------- ----------------- ----------------- -----------------
- ------------------------------------- ----------------- ----------------- ----------------- ----------------- -----------------

Equity Securities Risks X X X

Risks Relating to Company Size X

Loss of money is a risk of investing in any of the Old Westbury Funds. An
investment in any of the Old Westbury Funds is not a deposit of a bank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.

Performance Bar Chart and Total Return-International Fund

The bar chart and table shown below provide an indication of the risks of
investing in the Old Westbury International Fund by showing changes in the
Fund's performance from year to year over a four calendar year period and by
showing how the Fund's average annual total returns for the since inception and
one year periods ended December 31, 1997, compare to those of MSCI EAFE Index
and MSCI EMF Index, two broad-based securities market indices. While past
performance does not necessarily predict future performance, this information
provides you with historical performance information so that you can analyze
whether the Fund's investment risks are balanced by its potential rewards. Bar
charts and performance tables for the other four Funds are not provided since
none of these Funds has been in operation for a full calendar year. The total
return for these Funds from inception through October 31, 1998, is provided
under the section "Financial Highlights" herein.

[GRAPHIC]
The graphic presentations displayed here consists of a bar charts representing
the returns of institutional shares of the International Fund as of the calendar
year-end for 1994, 1995, 1996 and 1997. The `y' axis reflects the "% Total
Return" beginning with "-15.00%" and increasing in increments of 5 up to
"25.00%". The `x' axis represents calculation periods from the earliest calendar
year end of the Fund's start of business through the calendar year ended
December 31, 1997. The light gray shaded chart features four distinct vertical
bars, each shaded in charcoal, and each visually representing by height the
total return percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Fund for each calendar year is stated
directly at the top of each respective bar, for the calendar years 1994 through
1997 are -11.26%, 2.37%, 21.29%, and -1.45%, respectively. The total returns
displayed for the Fund do not reflect the payment of recurring shareholder
account fees. If these charges or fees had been included, the returns shown
would have been lower.

<PAGE>

The International Fund's year to date total return as of the quarter ended
September 30, 1998 was -15.46%.

During the four-year period shown in the bar chart, the highest return for a
quarter was 12.43% (quarter ending June 30, 1997) and the lowest return for a
quarter was -12.78% (quarter ending December 31, 1997).

- ----------------------------------------------- ---------------------------------- -----------------------------------
Average Annual Total Returns Past One year Since Inception

(for the periods ended 12/31/97) (10/22/93)

International Fund -1.45% 4.48%

SUMMARY OF FUND EXPENSES

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

Core Growth Fixed Municipal
Shareholder Fees Equities Opportunity Income International Bond
Fees Paid Directly From Your Investment Fund** Fund* Fund* Fund** Fund**
- ----------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) None None None None None
Annual Fund Operating Expenses(1)
Expenses That are Deducted From Fund Assets
- ---------------------------------------------------------------------------------------------------------------------------
*as a percentage of average net assets
- ---------------------------------------------------------------------
** as a percentage of projected average net assets
Management Fee(2) 0.75% 0.79% 0.45% 0.78% 0.45%
Distribution (12b-1) Fee 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses(3) 1.83% 0.50% 6.15% 0.54% 3.64%
Total Annual Fund Operating Expenses 2.83% 1.54% 6.85% 1.57% 4.34%
- ---------------------------------------------------------

(1) Although not contractually obligated, the adviser waived and distributor
reimbursed certain amounts. These are shown below along with the net
expenses the Fund actually paid for the fiscal year ended October 31, 1998.

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

Waiver/Reimburement of Fund Expenses 1.58% 0.04% 5.80% 0.07% 3.29%
Total Actual Annual Fund Operating Expenses
(After Waivers and Reimbursements) 1.25% 1.50% 1.05% 1.50% 1.05%

- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(2) The adviser voluntarily waived a portion of the management fee. The adviser
can terminate this voluntary waiver at any time. The management fee paid
(after the voluntary waiver) was 0.08%, 0.77%, 0.00%,0.77% and 0.00% for the
Core Equities, Growth Opportunity, Fixed Income, International and Municipal
Bond Funds, respectively, for the year ended October 31, 1998.
(3) Other expenses would have been 1.83%, 6.15%, 0.54% and 3.64% for the Core
Equities, Fixed Income, International and the Municipal Bond Funds,
respectively, absent the voluntary waiver of a portion of the administrative
fee and reimbursement of certain other operating expenses by the adviser.
Other expenses would have been 0.50% for the Growth Opportunity Fund absent
the voluntary waiver of a portion of the administrative fee by the
administrator for the year ended October 31, 1998. The administrator can
terminate these voluntary waivers at any time at its sole discretion.

<PAGE>

Example

The following Example is intended to help you compare the cost of investing in
each Fund's Shares with the cost of investing in other mutual funds. The Example
assumes that you invest $10,000 in each Fund's Shares for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
each Fund's Shares operating expenses are before waivers and reimbursements as
estimated above and remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:

Core Growth Fixed Municipal
- ---------------------------------------------------------------------------------------------------------------------------
Equities Opportunity Income International Bond
- ----------------------------------------------------------------- Fund Fund Fund Fund
Expenses assuming no redemption Fund
1 Year $130 $150 $110 $150 $110
- ----------------------------------------------------
3 Years $400 $470 $330 $470 $330
- ----------------------------------------------------
5 Years $690 $820 $580 $820 $580
- ----------------------------------------------------
10 Years $1,510 $1,790 $1,280 $1,790 $1,280
- ----------------------------------------------------
</TABLE>

PRINCIPAL SECURITIES IN WHICH THE FUNDS INVEST

Equity Securities
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Equity Funds cannot predict the income they
will receive from equity securities because issuers generally have discretion as
to the payment of any dividends or distributions. However, equity securities
offer greater potential for appreciation than many other types of securities,
because their value increases directly with the value of the issuer's business.

Common Stocks
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings
directly influence the value of its common stock.

Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.

Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Typically, states, counties, cities and
other political subdivisions and authorities issue tax exempt securities. The
market categorizes tax exempt securities by their source of repayment.

Municipal Notes
Municipal notes are short-term tax exempt securities. Many municipalities
issue such notes to fund their current operations before collecting taxes
or other municipal revenues. Municipalities may also issue notes to fund
capital projects prior to issuing long-term bonds. The issuers typically
repay the notes at the end of their fiscal year, either with taxes, other
revenues or proceeds from newly issued notes or bonds.

<PAGE>

Foreign Securities
Foreign securities are securities of issuers based outside the United States.
The Funds consider an issuer to be based outside the United States if:
o........it is organized under the laws of, or has a principal office located
in, another country; o........the principal trading market for its securities is
in another country; or o........it (or its subsidiaries) derived in its most
current fiscal year at least 50% of its total assets, capitalization, gross
revenue or profit from goods produced, services performed, or sales made in
another country.

Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject currency risks and risks of foreign investing.

SPECIFIC RISKS OF INVESTING IN THE OLD WESTBURY FUNDS

Equity Securities Risks. The EQUITY FUNDS are subject to fluctuations in the
stock markets, which have periods of increasing and decreasing values. Stocks
have greater volatility than debt securities. While greater volatility increases
risks, it offers the potential for greater reward.

Equity risk is also related to the size of the company issuing stock. Companies
may be categorized as having a small, medium, or large capitalization (market
value). The potential risks are higher with small- and medium-capitalization
companies and lower with large-capitalization companies. Therefore, you should
expect that investments in the GROWTH OPPORTUNITY FUND will be more volatile
than broad stock market indices such as the S&P 500 or funds that invest in
large-capitalization companies such as the CORE EQUITIES FUND.

Foreign Securities Risks. Foreign securities pose additional risks over
U.S.-based securities for a number of reasons. Because the INTERNATIONAL FUND
invests primarily in foreign securities, and the GROWTH OPPORTUNITY FUND can
invest in Canadian Securities, you should expect that these factors may
adversely affect the value of an investment in these Funds. Foreign economic,
governmental, and political systems may be less favorable than those of the U.S.
Foreign governments may exercise greater control over their economies,
industries, and citizen's rights. Specific risk factors related to foreign
securities include: inflation, structure and regulation of financial markets,
liquidity and volatility of investments, taxation policies, currency exchange
rates and regulations, and accounting standards. The INTERNATIONAL FUND and
GROWTH OPPORTUNITY FUND may incur higher costs and expenses when making foreign
investments, which will affect the Funds' total return.

Foreign securities may be denominated in foreign currencies. Therefore, the
value of a Fund's assets and income in U.S. dollars may be affected by changes
in exchange rates and regulations, since exchange rates for foreign currencies
change daily. The combination of currency risk and market risk tends to make
securities traded in foreign markets more volatile than securities traded
exclusively in the U.S. Although the INTERNATIONAL FUND and GROWTH OPPORTUNITY
FUND value their assets daily in U.S. dollars, they will not convert its holding
of foreign currencies to U.S. dollars daily. Therefore, the Funds may be exposed
to currency risks over an extended period of time.

Emerging Market Securities Risks. INTERNATIONAL FUND may invest up to 50% of its
assets in developing or emerging market securities. Investments in developing or
emerging market securities are subject to higher risks than those in developed
market countries because there is greater uncertainty in less established
markets and economies. These risks include political, social or economic
systems, smaller securities markets, lower trading volume, and substantial rates
of inflation.

Fixed Income Securities Risks. Risks of fixed income securities will affect the
INCOME FUNDS.

Prices of fixed-rate debt securities generally move in the opposite direction of
interest rates. The interest payments on fixed-rate debt securities do not
change when interest rates change. Therefore, since the price of these
securities can be expected to decrease when interest rates increase, you can
expect that the value of investments in a Fund may go down. Although the Adviser
attempts to anticipate interest rate movements, there is no guarantee that it
will be able to do so.

In addition, longer-term debt securities will experience greater price
volatility than debt securities with shorter maturities. You can expect the net
asset values of a Fund to fluctuate accordingly.

The credit quality of a debt security is based upon the issuers ability to repay
the security. If payments on a debt security are not paid when due, that may
cause the net asset value of a Fund holding the security to go down.

Fixed income securities may also be subject to call risk. If interest rates
decline, an issuer may repay (or "call") a debt security held by a Fund prior to
its maturity. If this occurs, the Adviser may have to reinvest the proceeds in
debt securities paying lower interest rates. If this happens, a Fund may have a
lower yield.

In addition, FIXED INCOME FUND may invest in "inverse floaters," which are a
form of "derivative" debt security, and whose price may be subject to extreme
fluctuation in the event of interest rate movements.

Municipal Securities Risks. An investment in the MUNICIPAL BOND FUND will be
affected by municipal securities risks. Local political and economic factors may
adversely affect the value and liquidity of municipal securities held by a Fund.
The value of municipal securities also may be affected more by supply and demand
factors or the creditworthiness of the issuer than by market interest rates.
Repayment of municipal securities depends on the ability of the issuer or
project backing such securities to generate taxes or revenues. There is a risk
that the interest on an otherwise tax-exempt municipal security may be subject
to federal income tax.

Asset-Backed/Mortgage-Backed Securities Risks. An investment in the FIXED INCOME
FUND will be subject to asset-backed and mortgage-backed securities risks which
includes prepayment when interest rates fall because many borrowers refinance
mortgages to take advantage of more favorable rates. Prepayments on
mortgage-backed securities are also affected by other factors, such as the
volume of home sales. A Fund's yield will be reduced if cash from prepaid
securities is reinvested in securities with lower interest rates. The risk of
prepayment may also decrease the value of mortgage-backed securities.

Asset-backed securities may have a higher level of default and recovery risk
than mortgage-backed securities. However, both of these types of securities may
decline in value because of mortgage foreclosures or defaults on the underlying
obligations.

Futures and Options Risks. GROWTH OPPORTUNITY FUND, CORE EQUITIES FUND, and
FIXED INCOME FUND may use financial and stock index futures and options
primarily to protect against adverse changes to the value of portfolio
securities due to anticipated changes in interest rates or market conditions.
Similarly, INTERNATIONAL FUND may use foreign currency futures and options to
protect against adverse changes to the value of portfolio securities due to
anticipated changes in foreign currency rates. The successful use of futures,
options and other derivative instruments is based on the Adviser's ability to
correctly anticipate market movements. When the direction of the prices of a
Fund's securities does not correlate with the changes in the value of these
transactions, or when the trading market for derivatives becomes illiquid, a
Fund could lose money.

Risks Related to Company Size. Generally, the smaller the market capitalization
of a company, the fewer the number of hsares traded daily, the less liquied its
stock and the more volatile its price. Market capitalization is determined by
multiplying the number of its outstanding shares by the current market price per
share.

Companies with smaller market capitalizations also tend to have unproven track
records, a limited product or service base and limited access to capital. These
factors also increase risks and make these companies more likely to fail than
larger, well capitalized companies.

Securities Lending Risks. When a Fund lends its portfolio securities, it may not
be able to get them back from the borrower on a timely basis. If this occurs,
the Fund may lose certain investment opportunities. The Funds are also subject
to the risks associated with the investment of cash collateral, usually
fixed-income securities risk.

Temporary Defensive Investments. To minimize potential losses and maintain
liquidity necessary to meet shareholder redemptions during adverse market
conditions, each of the Old Westbury Funds may temporarily depart from its
principal investment strategy by investing up to 100% of Fund assets in cash or
short-term, high quality money market instruments (e.g. commercial paper,
repurchase agreements, etc.). This may cause a Fund to temporarily forgo greater
investment returns for the safety of principal.

Investment Ratings. Some securities in which the Funds invest will be rated in
the lowest investment grade category (e.g. BBB or Baa). Securities rated BBB by
Standard and Poor's or Baa by Moody's Investors Services, Inc. have speculative
characteristics. Unrated securities will be determined by the Adviser to be of
like quality and may have greater risk (but a potentially higher yield) than
comparable rated securities. If a security is downgraded, the Adviser will
re-evaluate the security and determine whether or not the security is an
acceptable investment.

Portfolio Turnover. The Funds do not intend to invest for the purpose of seeking
short-term profits. Securities will be sold without regard to the length of time
they have been held when the Funds' Adviser believes it is appropriate to do so
in light of a Fund's investment goal. A higher portfolio turnover rate involves
greater transaction expenses which must be borne directly by a Fund (and thus,
indirectly by its shareholders), and affect Fund performance. In addition, a
high rate of portfolio turnover may result in the realization of larger amounts
of capital gains which, when distributed to that Fund's shareholders, are
taxable to them.

Year 2000 Readiness. The "Year 2000" problem is the potential for computer
errors or failures because certain computer systems may be unable to interpret
dates after December 31, 1999. The Year 2000 problem may cause systems to
process information incorrectly and could disrupt businesses that rely on
computers, like the Funds.

While it is impossible to determine in advance all of the risks to the Funds,
the Funds could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications. The Funds' service providers are
making changes to their computer systems to attempt to fix any Year 2000
problems. In addition, they are working to gather information from third-party
providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Funds' investments. To
assess the potential effect of the Year 2000 problem, the investment adviser is
reviewing information regarding the Year 2000 readiness of issuers of securities
the Fund may purchase. However, this may be difficult with certain issuers. For
example, funds dealing with foreign service providers or investing in foreign
securities will have difficulty determining the Year 2000 readiness of those
entities. This is especially true of entities or issuers in emerging markets.

The financial impact of these issues for the Funds is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Funds.

HOW TO BUY SHARES
What Do Shares Cost?

You can buy shares of a Fund at net asset value (NAV), without a sales charge,
on any day the New York Stock Exchange (NYSE) is open for business. NAV is
determined at the end of regular trading (normally 4 p.m., Eastern time) each
day the NYSE is open. Your purchase order must be received in proper form by
4:00 p.m. (Eastern time) in order to receive that day's NAV.

Each Fund's NAV is computed by dividing the value of the Portfolio's net assets
(i.e., the value of a portfolios securities and other assets less its
liabilities, including expenses payable or accred but excluding capital stock
and surplus) by the total number of shares outstanding. Portfolio securities for
which market quotations are readily available are valued at market value. All
other investment assets of the Portfolios are valued in such manner as the Board
of Directors in good faith deems appropriate to reflect their fair value. Since
the International Fund has portfolio securities that are primarily listed on
foreign exchanges that may trade on weekends or other days when the Fund does
not price its shares, the NAV for the International Fund may change on days when
shareholders will not be able to purchase or redeem the Fund's shares.

To open an account with one of the Funds, your first investment must be at least
$1,000. However, you can add to your account for as little as $100. In special
circumstances, these minimums may be waived or lowered at the Funds' discretion.

How Do I Purchase Shares?
Shares of each Portfolio may be purchased by mail or by wire through the
Distributor (Edgewood Services Inc.) or through a Shareholder Servicing Agent or
Broker-Dealer (Authorized Dealer) that has an agreement with the Distributor.

If you purchase shares directly from the Distributor, your account will be
maintained by the transfer agent of the Funds, Fundamental Shareholder Services,
Inc. (FSSI or the Transfer Agent). For account balance information and
shareholder services, you may call FSSI at (800) 607-2200.

By Mail
Through an Authorized Dealer
Contact your Authorized Dealer for instructions. Shares will be issued upon
receipt of payment by the Funds.

<PAGE>

Through the Distributor
o Complete the Purchase Application which accompanies this Prospectus; and o
Mail it together with a check payable to name of the Fund to:

Old Westbury Funds, Inc.
P.O. Box 926
New York, NY 10159-0926

Subsequent investments in a Fund do not require a Purchase Application; the
shareholder's account number, however, must be clearly marked on the check to
ensure proper credit.

Subsequent investments may also be made by sending a check with the detachable
coupon that regularly accompanies the confirmation of a previous transaction.

By Wire
Investments may be made directly through the use of wire transfers of federal
funds. Shares purchased by wire will be effected at the public offering price
next determined after acceptance of the order by the Distributor.

Through an Authorized Dealer
Contact your Authorized Dealer for instructions.

Through the Distributor
If you do not have a relationship with an Authorized Dealer, you may purchase
shares directly from the Distributor by federal funds wire.

Investors making initial investments by wire must promptly complete the Purchase
Application accompanying this Prospectus and forward it to the Funds' Transfer
Agent. No Purchase Application is required for subsequent purchases. Complete
applications should be directed to:

Old Westbury Funds, Inc.
P.O Box 926
New York, NY 10159-0926

Please contact FSSI at (800) 607-2200 for complete instructions.

How do I Redeem Shares?
Shares of each Fund may be redeemed by mail or by wire through an Authorized
Dealer or through the Funds' Transfer Agent.

Redemptions will only be made on days when a Fund computes its NAV. When your
redemption request is received in proper form shares of the Fund will be
redeemed at its next determined NAV.

Redemption requests must be received by 4:00 p.m. (Eastern time) in order for
shares to be redeemed at that day's NAV. Redemption proceeds will normally be
mailed the following business day, but in no event more than seven days, after
the request is made.

By Telephone
Through your Authorized Dealer
Contact your Authorized Dealer for complete instructions. Your Authorized Dealer
may accept your redemption request if you have previously elected this service.

Through the Transfer Agent

For shareholders whose accounts are maintained by the Transfer Agent, if you
have authorized the telephone redemption privilege in your Purchase Application,
you may redeem shares by calling the Transfer Agent at (800) 607-2200.

By Mail
Through your Authorized Dealer
Send a letter to your Authorized Dealer, indicating your name, the Fund name,
your account number, and the number of shares or dollar amount you want to
redeem. Your request must be signed in exactly the same way the account is
registered (if there is more than one owner of the shares, all must sign).

Shareholders may also redeem Fund shares through participating organizations
holding such shares who have made arrangements with the Funds permitting them to
redeem such shares by telephone or facsimile transmission and who may charge a
fee for this service.

Through the Transfer Agent
For shareholders whose accounts are maintained by the Transfer Agent,
redemptions may be made by sending a written redemption request indicating your
name, the Fund name, your account number, and the number of shares or the dollar
amount you want to redeem to:

Old Westbury Funds, Inc.
P.O. Box 926
New York, NY 10159-0926

For additional assistance, call (800) 607-2200.

Additional Conditions
Signature Guarantees
You must have a signature guarantee on written redemption requests:

o when you are requesting a redemption of $50,000 or more;
o when you want a redemption to be sent to an address other than the one
you have on record with the Fund; or o when you want the redemption payable
to someone other than the shareholder of record.

Your signature can be guaranteed by any federally insured financial institution
(such as a bank or credit union) or a broker-dealer that is a domestic stock
exchange member, but not by a notary public.

Limitations on Redemption Proceeds
Redemption proceeds normally are mailed within one business day after receiving
a request in proper form. However, payment may be delayed up to seven days:

o to allow your purchase payment to clear;
o during periods of market volatility; or
o when a shareholder's trade activity or amount adversely impacts a Fund's
ability to manage its assets.

How Do I Exchange Shares?

You may exchange shares of a Fund for shares of any of the other Funds free of
charge, provided you meet the $1,000 minimum investment requirement. An exchange
is treated as a redemption and subsequent purchase, and is therefore a taxable
transaction. Signatures must be guaranteed if you request and exchange into
another Fund with a different shareholder registration. The Funds will provide
shareholders with 60 days' written notice prior to any modification of this
exchange privilege.

ACCOUNT AND SHARE INFORMATION

Confirmations and Account Statements
You will receive confirmation of purchases, redemptions and exchanges. In
addition, you will receive periodic statements reporting all account activity,
including dividends and capital gains paid.

Dividends and Capital Gains

Dividends (if any) are paid to shareholders invested in the Funds on the record
date. In addition, each Fund intends to pay dividends and capital gains
distributions, if any, on a quarterly basis. Your dividends and capital gains
distributions will be automatically reinvested in additional shares unless you
elect cash payments.

If you purchase shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the shares and then receive a
portion of the price back in the form of a distribution, whether or not you
reinvest the distribution in shares. Therefore, you should consider the tax
implications of purchasing shares shortly before the Fund declares a dividend or
capital gain.

Tax Information
The Funds send you an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in a Fund. Capital gains distributions are taxable at different rates
depending upon the length of time a Fund holds its assets.

Fund distributions for the Core Equities Fund, Growth Opportunity Fund and
International Fund are expected to be primarily capital gains. Fund
distributions for the Fixed Income Fund and the Municipal Fund are expected to
be primarily dividends. Redemptions and exchanges are taxable sales.

Please consult your tax adviser regarding your federal, state, and local tax
liability.

Municipal Income Fund

The Fund sends you a timely statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Whether or not dividends are exempt from federal income tax, they may be subject
to state and local taxes. You may have to include certain dividends as taxable
income if the federal alternative minimum tax applies to you. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state and local tax liability.

WHO MANAGES THE FUNDS?

The Board of Directors governs the Funds. The Board selects and oversees the
Adviser, Bessemer Trust Company, N.A (Bessemer). The Adviser manages the Funds'
assets, including buying and selling portfolio securities. The Adviser's address
is 630 Fifth Avenue, New York, New York 10111.

The Adviser is a subsidiary of The Bessemer Group, Incorporated. The Adviser,
and other subsidiaries of The Bessemer Group, Incorporated, advise or provide
investment, fiduciary and personal banking services to approximately ___ clients
with total assets under management of over $___ billion on November 30, 1998.

For its services under an Advisory Contract, the Adviser receives an advisory
Fee from each Fund, computed daily and payable monthly, in accordance with the
following schedule:

- -------------------------------- ---------------------- ------------------------- ------------------------
First $100 million Second $100 million of Average net assets
of average net assets average net assets exceeding $200 million
Fund Name
- -------------------------------- ---------------------- ------------------------- ------------------------
Core Equities Fund 0.70% 0.65% 0.60%
- -------------------------------- ---------------------- ------------------------- ------------------------
- -------------------------------- ---------------------- ------------------------- ------------------------

Growth Opportunity Fund 0.80% 0.75% 0.70%

Mr. John D. Chadwick, Executive Vice President and Portfolio Manager, is
primarily responsible for the day-to-day investment management of the Core
Equities Fund. Mr. Chadwick has managed the Fund since _____, 1994. Prior to
joining Bessemer in 1994, Mr. Chadwick served as Senior Vice President and
Senior Portfolio Manager at Kidder Peabody & Co. from 1985 through 1994 where he
started the Equity Income Fund and managed certain index funds. Mr. Chadwick
received a B.A. in Economics from Harvard University and an M.B.A. in Industrial
Management from the Wharton School of Finance & Commerce of the University of
Pennsylvania.

Mr. Harry P. Rekas, (title), is primarily responsible for the day-to-day
investment management of the Growth Opportunity Fund. Mr. Rekas has managed the
Fund since ____. Prior to joining Bessemer in 1996, Mr. Rekas managed the
capital appreciation portfolio of AIG Investment Management Corporation. Mr.
Rekas graduated from the Wharton School of the University of Pennsylvania, where
he majored in Finance, and he earned an MBA degree from Pepperdine University.

[INSERT BIO FOR INTERNATIONAL FUND PORTFOLIO MANAGER-TO COME]

Mr. Harold S. Woolley, (title), is primarily responsible for the day-to-day
investment management of the Fixed Income Fund. Mr. Woolley has managed the Fund
since its inception. Mr. Woolley has headed the fixed income investments group
at Bessemer, N.A. since 1985. Prior to joining Bessemer in 1985, Mr. Woolley was
a managing director and head of fixed income investments for the Equitable
Investment Management Corp. and a Vice President of the Equitable Life Assurance
Society of the U.S. Mr. Woolley graduated with an A.B. from Bucknell University,
and holds an M.B.A. from the Amos Tuck School of Graduate Business, Dartmouth
College. Mr. Woolley is a Chartered Financial Analyst.

Mr. Bruce A. Whiteford, Senior Vice President and Portfolio Manager, is
primarily responsible for the day-to-day investment management of the Municipal
Bond Fund. Mr. Whiteford has managed the Fund since its inception. Prior to
joining Bessemer in 1996, Mr. Whiteford oversaw $5 billion in fixed income
investments as Vice President, Manager--U.S. Fixed Income Funds Group, Chase
Asset Management, a division of Chase Manhattan Bank, N.A. from 1986 to 1996.
Mr. Whiteford graduated from the University of South Carolina with a B.S. in
Finance.

DISTRIBUTION OF FUND SHARES

Edgewood Services, Inc., a subsidiary of Federated Investors, Inc., is the
principal distributor for shares of the Funds and a number of other investment
companies. In addition, the Adviser acts as a shareholder servicing agent to the
Funds.

Rule 12b-1 Plan. The Funds have adopted a Rule 12b-1 Plan which allows them to
pay marketing and shareholder servicing fees to the Distributor, the Adviser,
and financial intermediaries for the sale, distribution and customer servicing
of the Funds' shares. Because these shares pay marketing fees on an ongoing
basis, your investment cost may be higher over time than shares with different
sales charges and marketing fees.

FINANCIAL INFORMATION

Financial Highlights
The following financial highlights are intended to help you understand each
Fund's financial performance for its past five fiscal years, or since inception,
if the life of a Fund is shorter. Some of the information is presented on a per
share basis. Total returns represent the rate an investor would have earned (or
lost) on an investment in a Fund, assuming reinvestment of all dividends and
distributions.

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Funds' audited financial statements, is included in the Annual Report
which is available upon request.

TO COME

<PAGE>

OLD WESTBURY CORE EQUITIES FUND
OLD WESTBURY GROWTH OPPORTUNITY FUND
OLD WESTBURY INTERNATIONAL FUND
OLD WESTBURY FIXED INCOME FUND
OLD WESTBURY MUNICIPAL BOND FUND

Portfolios of Old Westbury Funds, Inc.

A Statement of Additional Information (SAI) dated February __, 1999, is
incorporated by reference into this prospectus. Additional information about
each Fund's investments is available in the Funds' annual and semi-annual
reports to shareholders. The annual report discusses market conditions and
investment strategies that significantly affected each Fund's performance during
their last fiscal year. To obtain the SAI, the annual and semi-annual reports
and other information without charge call (800) 607-2200.

You can obtain information about the Funds by visiting or writing the Public
Reference Room of the Securities and Exchange Commission in Washington, DC
20549-6009 or from the Commission's Internet site at http://www.sec.gov. You can
call 1-800-SEC-0330 for information on the Public Reference Room's operations
and copying charges.

Cusip 680414307
Cusip 680414208
Cusip 680414109
Cusip 680414406
Cusip 680414505
Product Code (2/99)

SEC File No. 811-7912

OLD WESTBURY FUNDS, INC.

Statement of Additional Information
February __, 1999

Old Westbury Core Equities Fund
Old Westbury Growth Opportunity Fund
Old Westbury International Fund
Old Westbury Fixed Income Fund
Old Westbury Municipal Bond Fund

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for the Funds dated February __, 1999.
This SAI incorporates by reference the Funds' Annual Report. You may obtain the
prospectus or Annual Report without charge by calling (800) 607-2200.

CONTENTS [to come]

<PAGE>

414578.1

-47-

414578.1
HOW ARE THE FUNDS ORGANIZED?

Old Westbury Funds, Inc. (Corporation) is an open-end, management investment
company that was established under the laws of the State of Maryland on August
26, 1993.

The Funds are diversified portfolios of the Corporation. The Corporation may
offer separate series of shares representing interests in separate portfolios of
securities.

SECURITIES IN WHICH THE FUNDS INVEST

Following is a table that indicates which types of securities are a: o P =
Principal investment of a Fund; (shaded in chart) o A = Acceptable (but not
principal) investment of a Fund; or o N = Not an acceptable investment of a
Fund.

- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Securities Core Equities Growth International Fixed Municipal
Fund Opportunity Fund Fund Income Fund Bond Fund
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
American Depositary Receipts N N A N N
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Asset-Backed Securities N N N A N
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Bank Obligations A A A A A
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Borrowing A A A A A
- -------------------------------------------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Commercial Paper A A A A A
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------

Common Stock of Domestic Companies P P P N N

Common Stock of Foreign Companies N P P N N

- ------------------------------------------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ------------- ---------------
Convertible Securities A A A A N
- ------------------------------------------------- --------------- ----------------- ----------------
- ------------------------------------------------- ---------------- ------------- ---------------
Corporate Reorganizations A A A A A
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- ----------------- ---------------- ------------- ---------------
Debt Obligations A A A P P
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ---------------
Derivative Contracts and Securities A A A A N
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Emerging Growth Companies N A N N N
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
European Depositary Receipts N N A N N
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Fixed Rate Debt Obligations A A A A A
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Floating Rate Debt Obligations A A A A A
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Foreign Currency Transactions N N A N N
- ------------------------------------------------- --------------- ----------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Foreign Securities A A P A N
- ------------------------------------------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Futures and Options Transactions A A A A A
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- -------------
Global Depositary Receipts N N A N N
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
High Yield Securities A A A A N
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Illiquid and Restricted Securities A A A A A
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Lending of Portfolio Securities A A A A A
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- -------------
Money Market Instruments A A A A A
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- -------------
Mortgage-Backed Securities N N N A N
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Municipal Securities N N N N P
- ------------------------------------------------- --------------- ----------------- ---------------- -------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
Participation Interests N N N N A
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- -------------
Preferred Stocks A A A N N
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------
- ------------------------------------------------- --------------- ----------------- ---------------- ------------- ---------------

Repurchase Agreements A A A A A

Shares of Other Investment Companies A A A A A

</TABLE>

SECURITIES DESCRIPTIONS, TECHNIQUES AND RISKS

The following descriptions, techniques and risks used by the Funds in addition
to those described in the prospectus.

Asset Backed Securities. Asset-Backed Securities are issued by non-governmental
entities and carry no direct or indirect government guarantee. Asset-Backed
Securities represent an interest in a pool of assets such as car loans and
credit card receivables. These securities may be in the form of pass-through
instruments or asset-backed bonds.

Payments on asset-backed securities depend upon assets held by the issuer and
collections of the underlying loans. The value of these securities depends on
many factors, including changing interest rates, the availability of information
about the pool and its structure, the credit quality of the underlying assets,
the market's perception of the servicer of the pool, and any credit enhancement
provided. Also, these securities may be subject to prepayment risk.

Bank Obligations. Bank Obligations include negotiable certificates of deposit,
time deposits and bankers acceptances. The Funds will invest in bank instruments
(i) that have been issued by banks and savings and loans and savings banks that
have more than $2 billion in total assets and are organized under the laws of
the United States or any state; (ii) of foreign branches of these banks or of
foreign banks of equivalent size; and (iii) of U.S. branches of foreign Banks of
equivalent size. The Funds will not invest in obligations for which the Adviser,
or any of its affiliated persons, is the ultimate obligor or accepting bank. The
Funds may also invest in obligations of the European Investment Bank, the
Inter-American Development Bank or the World Bank and other such similar
institutions.

Borrowing. The Funds may borrow money from banks or through reverse repurchase
agreements in amounts up to one-third of total assets and pledge some assets as
collateral. A Fund that borrows will pay interest on borrowed money and may
incur other transaction costs. These expenses could exceed the income received
or capital appreciation realized by the Fund from any securities purchased with
borrowed money. With respect to borrowings, the Funds are required to maintain
continuous asset coverage to 300% of the amount borrowed. If the coverage
declines to less than 300%, the Fund must sell sufficient portfolio securities
to restore the coverage even if it must sell the securities at a loss.

Commercial Paper. The Funds may invest in commercial paper, including master
demand obligations. Master demand obligations are obligations that provide for a
periodic adjustment in the interest rate paid and permit daily changes in the
amount borrowed. The commercial paper in which the Funds may invest must be
rated A-1 or A-2 by Standard & Poor's (S&P), Prime-1 or Prime-2 by Moody's
Investors Service, Inc. (Moody's), or F-1 or F-2 by Fitch IBCA, Inc. (Fitch).
Master demand obligations are governed by agreements between the issuer and
Bessemer Trust Company, N.A., acting as agent, for no additional fee, in its
capacity as investment adviser to the Funds and as fiduciary for other clients
for whom it exercises investment discretion. The monies loaned to the borrower
come from accounts managed by the Adviser or its affiliates, pursuant to
arrangements with such accounts. Interest and principal payments are credited to
such accounts. The Adviser, acting as a fiduciary on behalf of its clients, has
the right to increase or decrease the amount provided to the borrower under an
obligation. The borrower has the right to pay without penalty all or any part of
the principal amount then outstanding on an obligation together with interest to
the date of payment. Since these obligations typically provide that the interest
rate is tied to the Federal Reserve commercial paper composite rate, the rate on
master demand obligations is subject to change. Repayment of a master demand
obligation to participating accounts depends on the ability of the borrower to
pay the accrued interest and principal of the obligation on demand which is
continuously monitored by the Adviser. Since master demand obligations typically
are not rated by credit rating agencies, the Funds may invest in such unrated
obligations only if at the time of an investment the obligation is determined by
the Adviser to have a credit quality which satisfies the Funds' quality
restrictions. Although there is no secondary market for master demand
obligations, such obligations are considered by the Funds to be liquid because
they are payable upon demand. The Funds do not have any specific percentage
limitation on investments in master demand obligations.

Common Stocks are the most prevalent type of equity security. Common
stockholders receive the residual value of the issuer's earnings and assets
after the issuer pays its creditors and any preferred stockholders. As a result,
changes in an issuer's earnings directly influence the value of its common
stock.

Convertible Securities. Certain Funds may, as an interim alternative to
investment in common stocks, purchase investment grade convertible debt
securities having a rating of, or equivalent to, at least "BBB" by S&P or "Baa"
by Moody's, or if unrated, judged by the Adviser to be of comparable quality.
Securities rated BBB or Baa have speculative characteristics. Although lower
rated bonds generally have higher yields, they are more speculative and subject
to a greater risk of default with respect to the issuer's capacity to pay
interest and repay principal than are higher rated debt securities.

In selecting convertible securities, the Adviser relies primarily on its own
evaluation of the issuer and the potential for capital appreciation through
conversion. It does not rely on the rating of the security or sell because of a
change in the rating absent a change in its own evaluation of the underling
common stock and the ability of the issuer to pay principal and interest or
dividends when due without disrupting its business goals. Interest or dividend
yield is a factor only to the extent it is reasonably consistent with prevailing
rates for securities of similar quality and thereby provides a support level for
the market price of the security. The Funds will purchase the convertible
securities of highly leveraged issuers only when, in the judgment of the
Adviser, the risk of default is outweighed by the potential for capital
appreciation. The Funds do not intend to purchase convertible securities in
excess of 5% of the Fund's total assets.

Corporate Reorganizations. Each Fund may invest in securities for which a tender
or exchange offer has been made or announced and in securities of companies for
which a merger, consolidation, liquidation or reorganization proposal has been
announced if, in the judgment of the Adviser, there is reasonable prospect of
capital appreciation significantly greater than the brokerage and other
transaction expenses involved. The primary risk of such investments is that if
the contemplated transaction is abandoned, revised, delayed or becomes subject
to unanticipated uncertainties, the market price of the securities may decline
below the purchase price paid by the Funds.

In general, securities which are the subject of such an offer or proposal sell
at a premium to their historic market price immediately prior to the
announcement of the offer or proposal. However, the increased market price of
such securities may also discount what the stated or appraised value of the
security would be if the contemplated transaction were approved or consummated.
Such investments may be advantageous when the discount significantly overstates
the risk of the contingencies involved; significantly undervalues the
securities, assets or cash to be received by shareholders of the prospective
portfolio company as a result of the contemplated transaction; or fails
adequately to recognize the possibility that the offer or proposal may be
replaced or superseded by an offer or proposal of greater value. The evaluation
of such contingencies requires unusually broad knowledge and experience on the
part of the Adviser which must appraise not only the value of the issuer and its
component businesses as well as the assets or securities to be received as a
result of the contemplated transaction, but also the financial resources and
business motivation of the offerer as well as the dynamics of the business
climate when the offer or proposal is in process.

In making such investments, each Fund will not violate any of its
diversification requirements or investment restrictions (see below, "Investment
Restrictions") including the requirement that, with respect to 75% of its total
assets, not more than 5% of its total assets may be invested in the securities
of any one issuer. Since such investments are ordinarily short term in nature,
they will increase the turnover ratio of the Funds thereby increasing its
brokerage and other transaction expenses. The Adviser intends to select
investments of the type described which, in its view, have a reasonable prospect
of capital appreciation which is significant in relation to both the risk
involved and the potential of available alternate investments as well as monitor
the effect of such investments on the tax qualification tests of the Code. Each
Fund does not intend to purchase these securities in excess of 5% of that Fund's
total assets.

Credit Quality. The fixed income securities in which a Fund invests will be
rated at least investment grade by a nationally recognized statistical ratings
organization (NRSRO). Investment grade securities have received one of an
NRSRO's four highest ratings. Securities receiving the fourth highest rating
(Baa by Moody's or BBB by S&P or Fitch) have speculative characteristics and
changes in the market or the economy are more likely to affect the ability of
the issuer to repay its obligations when due. The Adviser will evaluate
downgraded securities and will sell any security determined not to be an
acceptable investment. International Fund, Core Equities Fund, Growth
Opportunity Fund and the Fixed Income Fund may invest up to 5% of their net
assets in securities rated below investment grade, but not below the sixth
highest rating category. The Growth Opportunity Fund, Core Equities Fund and
Municipal Bond Fund will not invest in securities rated below investment grade.
(See "High Yield Securities")

Debt Obligations. The Funds may invest in debt obligations, including bonds,
notes, and debentures of corporate issuers or governments, which may have fixed
or floating rates of interest.

Fixed Rate Debt Obligations. The Funds may invest in fixed rate debt
obligations, including fixed rate debt securities with short-term
characteristics. Fixed rate securities with short-term characteristics
are long-term debt obligations but are treated in the market as having
short maturities because call features of the securities may make them
callable within a short period of time. A fixed rate security with
short-term characteristics would include a fixed income security priced
close to call or redemption price or a fixed income security approaching
maturity, where the expectation of call or redemption is high.

Fixed rate securities exhibit more price volatility during times of
rising or falling interest rates than securities with floating rates of
interest. This is because floating rate securities, as described below,
behave like short-term instruments in that the rate of interest they pay
is subject to periodic adjustments based on a designated interest rate
index. Fixed rate securities pay a fixed rate of interest and are more
sensitive to fluctuating interest rates. In periods of rising interest
rates the value of a fixed rate security is likely to fall. Fixed rate
securities with short-term characteristics are not subject to the same
price volatility as fixed rate securities without such characteristics.
Therefore, they behave more like floating rate securities with respect to
price volatility.

Floating Rate Debt Obligations. The Funds may invest in floating rate
debt obligations including increasing rate securities. Floating rate
securities are generally offered at an initial interest rate which is at
or above prevailing market rates. The interest rate paid on these
securities is then reset periodically (commonly every 90 days to an
increment over some predetermined interest rate index). Commonly utilized
indices include the three-month Treasury bill rate, the 180-day Treasury
bill rate, the one-month or three-month London Interbank Offered Rate
(LIBOR), the prime rate of a bank, the commercial paper rates, or the
longer-term rates on U.S. Treasury securities. Increasing rate
securities' rates are reset periodically at different levels on a
predetermined scale. These levels of interest are ordinarily set at
progressively higher increments over time. Some increasing rate
securities may, by agreement, revert to a fixed rate status. These
securities may also contain features which allow the issuer the option to
convert the increasing rate of interest to a fixed rate under such terms,
conditions, and limitations as are described in each issuer's prospectus.

Derivative Contracts and Securities. The term derivative has traditionally been
applied to certain contracts (futures, forward, option and swap contracts) that
derive their value from changes in the value of an underlying security,
currency, commodity or index. Derivatives also refer to securities that
incorporate the performance characteristics of these contracts and securities
derived from the cash flows from underlying securities, mortgages or other
obligations. While the response of certain derivatives to market changes may
differ from traditional investments like stocks and bonds, they do not
necessarily present greater market risks than traditional investments.
Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance.

Depositary Receipts. American Depositary Receipts (ADRs) are receipts, issued by
a U.S. bank, that represent an interest in shares of a foreign-based
corporation. ADRs provide a way to buy shares of foreign-based companies in the
U.S. rather than in overseas markets. European Depositary Receipts (EDRs) and
Global Depositary Receipts (GDRs) are receipts, issued by foreign banks or trust
companies, or foreign branches of U.S. banks, that represent an interest in
shares of either a foreign or U.S. corporation. Depositary Receipts may not be
denominated in the same currency as the underlying securities into which they
may be converted, and are subject to currency risks. Depositary Receipts involve
many of the same risks of investing directly in foreign securities.

Emerging Growth Companies. Emerging Growth Companies are companies that are
beyond their initial start-up periods but have not yet reached a state of
established growth or maturity. The nature of investing in emerging growth
companies involves a greater level of risk than would be associated when
investing in more established seasoned companies. The rate of growth of such
companies may at times be dramatic; such companies often provide new products or
services that enable them to capture a dominant or important market position, or
have a special area of expertise, or are able to take advantage of changes in
demographic factors in a more profitable way than other companies. These
companies may have limited product lines, markets or financial resources and may
lack management depth since they have not been tested by time or the
marketplace. The securities of emerging growth companies often have limited
marketability and may be subject to more volatile market movements than
securities of larger, more established growth companies or the market averages
in general. Shares of the Growth Opportunity Fund, therefore, may be subject to
greater fluctuation in value than funds investing entirely in proven growth
stocks.

Foreign Currency Transactions. Foreign currency transactions are generally used
to obtain foreign currencies to settle securities transactions. They can also be
used as a hedge to protect assets against adverse changes in foreign currency
exchange rates or regulations. When the Fund uses foreign currency exchanges as
a hedge, it may also limit potential gain that could result from an increase in
the value of such currencies. The Fund may be affected either favorably or
unfavorably by fluctuations in the relative rates of exchange between the
currencies of different nations.

Foreign Currency Hedging Transactions. Foreign currency hedging
transactions are used to protect against foreign currency exchange rate
risks. These transactions include: forward foreign currency exchange
contracts, foreign currency futures contracts, and purchasing put or
call options on foreign currencies.

Forward Foreign Currency Exchange Contracts (Forward Contracts) are
used to minimize the risks associated with changes in the relationship
between the U.S. dollar and foreign currencies. They are used to lock
in the U.S. dollar price of a foreign security. A Forward Contract is a
commitment to purchase or sell a specific currency for an agreed price
at a future date.

If the Adviser believes a foreign currency will decline against the
U.S. dollar, a Forward Contract may be used to sell an amount of the
foreign currency approximating the value of a Fund's security that is
denominated in the foreign currency. The success of this hedging
strategy is highly uncertain due to the difficulties of predicting the
values of foreign currencies, of precisely matching Forward Contract
amounts, and because of the constantly changing value of the securities
involved. The Fund will not enter into Forward Contracts for hedging
purposes in a particular currency in an amount in excess of the Fund's
assets denominated in that currency. Conversely, if the Adviser
believes that the U.S. dollar will decline against a foreign currency,
a Forward Contract may be used to buy that foreign currency for a fixed
dollar amount, otherwise known as cross-hedging.

In these transactions, the Fund will segregate assets with a market
value equal to the amount of the foreign currency purchased. Therefore,
the Fund will always have cash, cash equivalents or high quality debt
securities available to cover Forward Contracts or to limit any
potential risk. The segregated assets will be priced daily.

Forward Contracts may limit potential gain from a positive change in
the relationship between the U.S. dollar and foreign currencies.
Unanticipated changes in currency prices may result in poorer overall
performance for a Fund than if it had not engaged in such contracts.

Purchasing and Writing Put and Call Options on foreign currencies are
used to protect the Fund's portfolio against declines in the U.S.
dollar value of foreign portfolio securities and against increases in
the dollar cost of foreign securities to be acquired. Writing an option
on foreign currency constitutes only a partial hedge, up to the amount
of the premium received. The Fund could lose money if it is required to
purchase or sell foreign currencies at disadvantageous exchange rates.
If exchange rate movements are adverse to the Fund's position, the Fund
may forfeit the entire amount of the premium plus related transaction
costs. These options are traded on U.S. and foreign exchanges or
over-the-counter. The Fund may write (sell) covered call options and
secured put options on up to 25% of net assets and may purchase put and
call options provided that no more than 5% of net assets may be
invested in premiums on such options.

Foreign Securities. The Funds, other than the Municipal Bond Fund, may invest in
certain foreign securities; however, the only foreign securities the Growth
Opportunity Fund may invest in are securities of Canadian based companies.
Investment in securities of foreign issuers and in obligations of foreign
branches of domestic banks involves somewhat different investment risks from
those affecting securities of U.S. domestic issuers. There may be limited
publicly available information with respect to foreign issuers, and foreign
issuers are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to domestic companies.
Dividends and interest paid by foreign issuers may be subject to withholding and
other foreign taxes which may decrease the net return on foreign investments as
compared to dividends and interest paid to the Funds by domestic companies.

Investors should realize that the value of the Funds' investments in foreign
securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Funds' operations. Furthermore, the economies of individual foreign nations
may differ from the U.S. economy, whether favorably or unfavorably, in areas
such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign
issuer. Any foreign investments made by the Funds must be made in compliance
with U.S. foreign currency restrictions and tax laws restricting the amounts and
types of foreign investments.

Investments are made primarily in those regions where, in the opinion of the
Funds' Adviser, there are opportunities to achieve superior investment returns
relative to other investment opportunities outside the United States. The
International Fund does not, however, generally invest in debt or equity
securities of U.S. issuers. The International Fund emphasizes those industrial
sectors of the world's market which, in the opinion of its Adviser, offer the
most attractive risk/reward relationships. Securities of any given issuer are
evaluated on the basis of such measures as price/earnings ratios, price/book
ratios, cash flows and dividend and interest income.

Since investments in foreign securities may involve foreign currencies, the
value of a Fund's assets as measured in U.S. dollars may be affected favorably
or unfavorably by changes in currency rates and exchange control regulations,
including currency blockage.

In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Funds' foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, may affect portfolio liquidity. In buying and selling
securities on foreign exchanges, purchasers normally pay fixed commissions that
are generally higher than the negotiated commissions charged in the United
States. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers located in foreign
countries than in the United States.

Canadian Companies. The Growth Opportunity Fund may invest more than
10% of its total assets in Canadian Securities. Canadian securities are
sensitive to conditions within Canada, but also tend to follow the U.S.
market. The country's economy relies strongly on the production and
processing of natural resources. Also, the government has attempted to
reduce restrictions against foreign investment, and its trade
agreements with the U.S. and Mexico are expected to increase trade.
Also, demand by many citizens in the Province of Quebec for secession
from Canada may significantly impact the Canadian economy. In addition,
the value in U.S. dollars of the Fund's assets denominated in Canadian
currency may be affected b changes in exchange rates and regulations.

Futures and Options Transactions. As a means of reducing fluctuations in its net
asset value, a Fund may buy and sell futures contracts and options on futures
contracts, and buy put and call options on portfolio securities and securities
indices to hedge its portfolio. A Fund may also write covered put and call
options on portfolio securities to attempt to increase its current income or to
hedge its portfolio. There is no assurance that a liquid secondary market will
exist for any particular futures contract or option at any particular time. The
Fund's ability to establish and close out futures and options positions depends
on this secondary market.

Futures Contracts. A futures contract is a commitment by two parties
under which one party agrees to make delivery of an asset (seller) and
another party agrees to take delivery of the asset at a certain time in
the future. A futures contract may involve a variety of assets including
commodities (such as oil, wheat, or corn) or a financial asset (such as a
security). A Fund may purchase and sell financial futures contracts to
hedge against anticipated changes in the value of its portfolio without
necessarily buying or selling the securities. Although some financial
futures contracts call for making or taking delivery of the underlying
securities, in most cases these obligations are closed out before the
settlement date. The closing of a futures contract is accomplished by
purchasing or selling an identical offsetting futures contract. Other
financial futures contracts call for cash settlements.

A Fund may purchase and sell stock index futures contracts to hedge
against anticipated price changes with respect to any stock index traded
on a recognized stock exchange or board of trade. A stock index futures
contract is an agreement in which two parties agree to take or make
delivery of an amount of cash equal to the difference between the price
of the original contract and the value of the index at the close of the
last trading day of the contract. No physical delivery of the underlying
securities in the index is made. Settlement is made in cash upon
termination of the contract.

Margin In Futures Transactions. Since a Fund does not pay or receive
money upon the purchase or sale of a futures contract, it is required to
deposit an amount of initial margin in cash, U.S. government securities
or highly-liquid debt securities as a good faith deposit. The margin is
returned to the Fund upon termination of the contract. Initial margin in
futures transactions does not involve borrowing to finance the
transactions.

As the value of the underlying futures contract changes daily, the Fund
pays or receives cash, called variation margin, equal to the daily change
in value of the futures contract. This process is known as marking to
market. Variation margin does not represent a borrowing or loan by the
Fund. It may be viewed as settlement between the Fund and the broker of
the amount one would owe the other if the futures contract expired. When
the Fund purchases futures contracts, an amount of cash and/or cash
equivalents, equal to the underlying commodity value of the futures
contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian to collateralize the
position and insure that the use of futures contracts is unleveraged. The
Fund is also required to deposit and maintain margin when it writes call
options on futures contracts.

A Fund will not enter into a futures contract or purchase an option
thereon for other than hedging purposes if immediately thereafter the
initial margin deposits for futures contracts held by it, plus premiums
paid by it for open options on futures contracts, would exceed 5% of the
market value of its net assets, after taking into account the unrealized
profits and losses on those contracts it has entered into. However, in
the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in computing such 5%.

<PAGE>

Put Options on Financial and Stock Index Futures Contracts. A Fund may
purchase listed put options on financial and stock index futures
contracts to protect portfolio securities against decreases in value.
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified
price, the purchase of a put option on a futures contract entitles (but
does not obligate) its purchaser to decide on or before a future date
whether to assume a short position at the specified price.

Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also decrease
in value and the option will increase in value. In such an event, the
Fund will normally close out its option by selling an identical option.
If the hedge is successful, the proceeds received by the Fund upon the
sale of the second option will be large enough to offset both the premium
paid by the Fund for the original option plus the decrease in value of
the hedged securities.

Alternatively, a Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If the Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost.

A Fund may also write (sell) listed put options on financial or stock
index futures contracts to hedge its portfolio against a decrease in
market interest rates or an increase in stock prices. A Fund will use
these transactions to purchase portfolio securities in the future at
price levels existing at the time it enters into the transaction. When a
Fund sells a put on a futures contract, it receives a cash premium in
exchange for granting to the buyer of the put the right to receive from
the Fund, at the strike price, a short position in such futures contract.
This is so even though the strike price upon exercise of the option is
greater than the value of the futures position received by such holder.
As market interest rates decrease or stock prices increase, the market
price of the underlying futures contract normally increases. When the
underlying futures contract increases, the buyer of the put option has
less reason to exercise the put because the buyer can sell the same
futures contract at a higher price in the market. If the value of the
underlying futures position is not such that exercise of the option would
be profitable to the option holder, the option will generally expire
without being exercised. The premium received by the Fund can then be
used to offset the higher prices of portfolio securities to be purchased
in the future.

In order to avoid the exercise of an option sold by it, generally a Fund
will cancel its obligation under the option by entering into a closing
purchase transaction, unless it is determined to be in the Fund's
interest to deliver the underlying futures position. A closing purchase
transaction consists of the purchase by the Fund of an option having the
same term as the option sold by the Fund, and has the effect of canceling
the Fund's position as a seller. The premium which the Fund will pay in
executing a closing purchase transaction may be higher than the premium
received when the option was sold, depending in large part upon the
relative price of the underlying futures position at the time of each
transaction. If the hedge is successful, the cost of buying the second
option will be less than the premium received by the Fund for the initial
option.

Call Options on Financial and Stock Index Futures Contracts. A Fund may
write (sell) listed and over-the-counter call options on financial and
stock index futures contracts to hedge its portfolio. When the Fund
writes a call option on a futures contract, it undertakes to sell a
futures contract at the fixed price at any time during the life of the
option. As stock prices fall or market interest rates rise, causing the
prices of futures to go down, the Fund's obligation to sell a futures
contract costs less to fulfill, causing the value of the Fund's call
option position to increase. In other words, as the underlying futures
price goes down below the strike price, the buyer of the option has no
reason to exercise the call, so that the Fund keeps the premium received
for the option. This premium can substantially offset the drop in value
of the Fund's portfolio securities.

Prior to the expiration of a call written by a Fund, or exercise of it by
the buyer, the Fund may close out the option by buying an identical
option. If the hedge is successful, the cost of the second option will be
less than the premium received by the Fund for the initial option. The
net premium income of the Fund will then substantially offset the
decrease in value of the hedged securities.

A Fund may buy a listed call option on a financial or stock index futures
contract to hedge against decreases in market interest rates or increases
in stock price. A Fund will use these transactions to purchase portfolio
securities in the future at price levels existing at the time it enters
into the transaction. When a Fund purchases a call on a financial futures
contract, it receives in exchange for the payment of a cash premium the
right, but not the obligation, to enter into the underlying futures
contract at a strike price determined at the time the call was purchased,
regardless of the comparative market value of such futures position at
the time the option is exercised. The holder of a call option has the
right to receive a long (or buyer's) position in the underlying futures
contract. As market interest rates fall or stock prices increase, the
value of the underlying futures contract will normally increase,
resulting in an increase in value of the Fund's option position. When the
market price of the underlying futures contract increases above the
strike price plus premium paid, the Fund could exercise its option and
buy the futures contract below market price. Prior to the exercise or
expiration of the call option, the Fund could sell an identical call
option and close out its position. If the premium received upon selling
the offsetting call is greater than the premium originally paid, the Fund
has completed a successful hedge.

Limitation on Open Futures Positions. A Fund will not maintain open
positions in futures contracts it has sold or call options it has written
on futures contracts if together the value of the open positions exceeds
the current market value of the Fund's portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the Fund will take
prompt action to close out a sufficient number of open contracts to bring
its open futures and options positions within this limitation.

Purchasing Put and Call Options on Securities. A Fund may purchase put
options on portfolio securities to protect against price movements in the
Fund's portfolio. A put option gives the Fund, in return for a premium,
the right to sell the underlying security to the writer (seller) at a
specified price during the term of the option. A Fund may purchase call
options on securities acceptable for purchase to protect against price
movements by locking in on a purchase price for the underlying security.
A call option gives the Fund, in return for a premium, the right to buy
the underlying security from the seller at a specified price during the
term of the option.

Writing Covered Call and Put Options on Securities. A Fund may write
covered call and put options to generate income and thereby protect
against price movements in the Fund's portfolio securities. As writer of
a call option, the Fund has the obligation, upon exercise of the option
during the option period, to deliver the underlying security upon payment
of the exercise price. The Fund may only sell call options either on
securities held in its portfolio or on securities which it has the right
to obtain without payment of further consideration (or has segregated
cash or U.S. government securities in the amount of any additional
consideration). As a writer of a put option, the Fund has the obligation
to purchase a security from the purchaser of the option upon the exercise
of the option. In the case of put options, the Fund will segregate cash
or U.S. Treasury obligations with a value equal to or greater than the
exercise price of the underlying securities.

Stock Index Options. A Fund may purchase or sell put or call options on
stock indices listed on national securities exchanges or traded in the
over-the-counter market. A stock index fluctuates with changes in the
market values of the stocks included in the index. Upon the exercise of
the option, the holder of a call option has the right to receive, and the
writer of a put option has the obligation to deliver, a cash payment
equal to the difference between the closing price of the index and the
exercise price of the option. The effectiveness of purchasing stock index
options will depend upon the extent to which price movements in the
Fund's portfolio correlate with price movements of the stock index
selected. The value of an index option depends upon movements in the
level of the index rather than the price of a particular stock.
Accordingly, successful use by a Fund of options on stock indices will be
subject to the Adviser correctly predicting movements in the directions
of the stock market generally or of a particular industry. This requires
different skills and techniques than predicting changes in the price of
individual stocks.

Over-the-Counter Options. Over-the-counter options are two-party
contracts with price and terms negotiated between buyer and seller. In
contrast, exchange-traded options are third-party contracts with
standardized strike prices and expiration dates and are purchased from a
clearing corporation. Exchange-traded options have a continuous liquid
market while over-the-counter options may not. A Fund may generally
purchase and write over-the-counter options on portfolio securities or
securities indices in negotiated transactions with the buyers or writers
of the options when options on the Fund's portfolio securities or
securities indices are not traded on an exchange. The Fund purchases and
writes options only with investment dealers and other financial
institutions deemed creditworthy by Adviser.

Risks. When a Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the securities or foreign
currency subject to the futures contracts may not correlate perfectly
with the prices of the securities or currency in the Fund's portfolio.
This may cause the futures contract and any related options to react
differently to market changes than the portfolio securities or foreign
currency. In addition, the Adviser could be incorrect in its expectations
about the direction or extent of market factors such as stock price
movements or foreign currency exchange rate fluctuations. In these
events, the Fund may lose money on the futures contract or option.

When a Fund purchases futures contracts, an amount of cash and cash
equivalents, equal to the underlying commodity value of the futures
contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian or the broker, to
collateralize the position and thereby insure that the use of such
futures contract is unleveraged. When the Fund sells futures contracts,
it will either own or have the right to receive the underlying future or
security, or will make deposits to collateralize the position as
discussed above.

High Yield Securities. The issuers of debt obligations having speculative
characteristics may experience difficulty in paying principal and interest when
due in the event of a downturn in the economy or unanticipated corporate
developments. The market prices of such securities may become increasingly
volatile in periods of economic uncertainty. Moreover, adverse publicity or the
perceptions of investors over which the Adviser has no control, whether or not
based on fundamental analysis, may decrease the market price and liquidity of
such investments. Although the Adviser will attempt to avoid exposing each Fund
to such risks, there is no assurance that it will be successful or that a liquid
secondary market will continue to be available for the disposition of such
securities. International Fund, Core Equities Fund and Fixed Income Fund may
purchase or hold not more than 5% of its net assets in securities rated below
investment grade (but not lower than the sixth highest rating). Growth
Opportunity Fund may purchase or hold not more than 5% or its assets in
convertible debt securities regardless of their ratings. Municipal Bond Fund
will not invest in securities rated below investment grade.

The market for unrated securities may not be as liquid as the market for rated
securities, which may result in depressed prices for the Funds in the disposal
of such nonrated securities. There is no established secondary market for many
of these securities. The Adviser cannot anticipate whether these securities
could be sold other than to institutional investors. There is frequently no
secondary market for the resale of those debt obligations that are in default.
The limited market for these securities may affect the amount actually realized
by each Fund upon such sale. Such sale may result in a loss to each Fund. There
are certain risks involved in applying credit ratings as a method of evaluating
high yield securities. For example, while credit rating agencies evaluate the
safety of principal and interest payments, they do not evaluate the market risk
of the securities and the securities may decrease in value as a result of credit
developments.

Lower rated and nonrated securities tend to offer higher yields than higher
rated securities with the same maturities because the creditworthiness of the
obligors of lower rated securities may not have been as strong as that of other
issuers. Since there is a general perception that there are greater risks
associated with the lower-rated securities in each Fund, the yields and prices
of such securities tend to fluctuate more with changes in the perceived quality
of the credit of their obligors. In addition, the market value of high yield
securities may fluctuate more than the market value of higher rated securities
since high yield securities tend to reflect short-term market developments to a
greater extent than higher rated securities, which fluctuate primarily in
response to the general level of interest rates, assuming that there has been no
change in the fundamental credit quality of such securities. High yield
securities are also more sensitive to adverse economic changes and events
affecting specific issuers than are higher rated securities. Periods of economic
uncertainty can be expected to result in increased market price volatility of
the high yield securities. High yield securities may also be directly and
adversely affected by variables such as interest rates, unemployment rates,
inflation rates and real growth in the economy and may be more susceptible to
variables such as adverse publicity and negative investor perception than are
more highly rated securities, particularly in a limited secondary market. Lower
rated securities generally involve greater risks of loss of income and principal
than higher rated securities. The obligors of lower rated securities possess
less creditworthy characteristics than the obligors of higher rated securities,
as is evidenced by those securities that have experienced a downgrading in
rating or that are in default. The evaluation of the price of such securities is
highly speculative and volatile. As such, these evaluations are very sensitive
to the latest available public information relating to developments concerning
such securities.

Illiquid and Restricted Securities. The Funds may purchase securities which are
subject to legal or contractual delays, restrictions, and costs on resale.
Because of time limitations, the Funds might not be able to dispose of these
securities at reasonable prices or at times advantageous to the Fund. The Fund
intends to limit the purchase of restricted securities which have not been
determined by the Adviser to be liquid, together with other securities
considered to be illiquid, including repurchase agreements providing for
settlement in more than seven days after notice, to not more than 15% of its
assets.

Inverse Floaters. Certain securities issued by agencies of the U.S. government
(agency securities) that include a class bearing a floating rate of interest
also may include a class whose yield floats inversely against a specified index
rate. These "inverse floaters" are more volatile than conventional fixed income
or floating rate classes of an agency security and the yield thereon, as well as
the value thereof, will fluctuate in inverse proportion to changes in the index
on which interest rate adjustments are based. As a result, the yield on an
inverse floater class of an agency security will generally increase when market
yields (as reflected by the index) decrease and decrease when market yields
increase. The extent of the volatility of inverse floaters depends on the extent
of anticipated changes in market rates of interest. Generally, inverse floaters
provide for interest rate adjustments based upon a multiple of the specified
interest index, which further increases their volatility. The degree of
additional volatility will be directly proportional to the size of the multiple
used in determining interest rate adjustments.

Lending of Portfolio Securities. In order to generate additional income, a Fund
may lend portfolio securities to securities broker-dealers or financial
institutions if: (1) the loan is collateralized in accordance with applicable
regulatory requirements including collateralization continuously at no less than
100% by marking to market daily, (2) the loan is subject to termination by a
Fund at any time, (3) a Fund receives reasonable interest or fee payments on the
loan, (4) a Fund is able to exercise all voting rights with respect to the
loaned securities and (5) the loan will not cause the value of all loaned
securities to exceed one-third of the value of a Fund's assets.

If the borrower fails to maintain the requisite amount of collateral, the loan
automatically terminates and a Fund could use the collateral to replace the
securities while holding the borrower liable for any excess of replacement cost
over the value of the collateral. As with any extension of credit, there are
risks of delay in recovery and in some cases even loss of rights in collateral
should the borrower of the securities fail financially. The International Fund
does not currently intend to lend portfolio securities in excess of 5% of its
total assets. The Core Equities Fund, Growth Opportunity Fund, Fixed Income Fund
and Municipal Bond Fund do not currently intend to lend portfolio securities.

Money Market Instruments. The Funds may invest in money market instruments
including obligations of the U.S. government and its agencies and
instrumentalities, other short-term debt securities, commercial paper, bank
obligations and money market mutual funds.

Mortgage-Backed Securities. Fixed Income Fund may invest in mortgage-backed
securities. Generally, homeowners have the option to prepay their mortgages at
any time without penalty. Homeowners frequently refinance high rate mortgages
when mortgage rates fall. This results in the prepayment of mortgage backed
securities, which deprives holders of the securities of the higher yields.
Conversely, when mortgage rates increase, prepayments due to refinancings
decline. This extends the life of mortgage backed securities with lower yields.
As a result, increases in prepayments of premium mortgage backed securities, or
decreases in prepayments of discount mortgage backed securities, may reduce
their yield and price.

This relationship between interest rates and mortgage prepayments makes the
price of mortgage backed securities more volatile than most other types of fixed
income securities with comparable credit risks. Mortgage backed securities tend
to pay higher yields to compensate for this volatility.
Collateralized Mortgage Obligations (CMOs). The following example
illustrates how mortgage cash flows are prioritized in the case of CMOs -
most of the CMOs in which the Fixed Income Fund invests use the same
basic structure: (1) Several classes of securities are issued against a
pool of mortgage collateral. A common structure may contain four classes
of securities. The first three (A, B, and C bonds) pay interest at their
stated rates beginning with the issue date, and the final class (Z bond)
typically receives any excess income from the underlying investments
after payments are made to the other classes and receives no principal or
interest payments until the shorter maturity classes have been retired,
but then receives all remaining principal and interest payments; (2) The
cash flows from the underlying mortgages are applied first to pay
interest and then to retire securities; (3) The classes of securities are
retired sequentially. All principal payments are directed first to the
shortest-maturity class (or A bond). When those securities are completely
retired, all principal payments are then directed to the next
shortest-maturity security (or B bond). This process continues until all
of the classes have been paid off.

Because the cash flow is distributed sequentially instead of pro rata, as
with pass-through securities, the cash flows and average lives of CMOs
are more predictable, and there is a period of time during which the
investors in the longer-maturity classes receive no principal paydowns.
The interest portion of these payments is distributed by the Funds as
income, and the capital portion is reinvested.

Municipal Securities. Municipal Securities are generally issued to finance
public works such as airports, bridges, highways, housing, hospitals, mass
transpiration projects, schools, streets, and water and sewer works. They are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.

<PAGE>

Municipal securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned corporations. The availability
of this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.

The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.

Municipal Leases. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities and may be considered illiquid. They may take the form of
a lease, an installment purchase contract, or a conditional sales
contract.

Lease obligations may be limited by municipal charter or the nature of
the appropriation for the lease. In particular, lease obligations may be
subject to periodic appropriation. If the entity does not appropriate
funds for future lease payments, the entity cannot be compelled to make
such payments. Furthermore, a lease may provide that the participants
cannot accelerate lease obligations upon default. The participant would
only be able to enforce lease payments as they became due. In the event
of a default or failure of appropriation, unless the participation
interests are credit enhanced, it is unlikely that the participants would
be able to obtain an acceptable substitute source of payment.

Variable Rate Municipal Securities. The Fund may purchase municipal
securities that have variable interest rates. Variable interest rates are
ordinarily stated as a percentage of a published interest rate, interest
rate index, or some similar standard, such as the 91-day U.S. Treasury
bill rate.

Many variable rate municipal securities are subject to payment of
principal on demand by the Fund usually in not more than seven days. All
variable rate municipal securities will meet the quality standards for
the Fund.

Municipal Bond Insurance. The Municipal Bond Fund may purchase municipal
securities covered by insurance which guarantees the timely payment of
principal at maturity and interest on such securities. These insured
municipal securities are either (1) covered by an insurance policy
applicable to a particular security, whether obtained by the issuer of
the security or by a third party (Issuer-Obtained Insurance) or (2)
insured under master insurance policies issued by municipal bond
insurers, which may be purchased by the Fund. The premiums for the
Policies may be paid by the Fund and the yield on the Fund's investments
may be reduced thereby.

The Fund may require or obtain municipal bond insurance when purchasing
municipal securities which would not otherwise meet the Fund's quality
standards. The Fund may also require or obtain municipal bond insurance
when purchasing or holding specific municipal securities, when, in the
opinion of the Fund's Adviser, such insurance would benefit the Fund (for
example, through improvement of portfolio quality or increased liquidity
of certain securities). Issuer-Obtained Insurance policies are
noncancellable and continue in force as long as the municipal securities
are outstanding and their respective insurers remain in business. If a
municipal security is covered by Issuer-Obtained Insurance, then such
security need not be insured by the Policies purchased by the Fund.

Participation Interests. The Municipal Bond Fund may purchase participation
interests from financial institutions such as commercial banks, savings
associations, and insurance companies. These participation interests give the
Fund an undivided interest in municipal securities. The financial institutions
from which the Fund purchases participation interests frequently provide or
secure irrevocable letters of credit or guarantees to assure that the
participation interests are of high quality. The Directors will determine that
participation interests meet the prescribed quality standards of the Fund.

Preferred Stocks have the right to receive specified dividends or distributions
before the payment of dividends or distributions on common stock. Some preferred
stocks also participate in dividends and distributions paid on common stock.
Preferred stocks may provide for the issuer to redeem the stock on a specified
date. The Fund may treat such redeemable preferred stock as a fixed income
security.

Repurchase Agreements. A repurchase agreement is an instrument under which the
purchaser (i.e., a Fund) acquires a debt security and the seller agrees, at the
time of the sale, to repurchase the obligation at a mutually agreed upon time
and price, thereby determining the yield during the purchaser's holding period.
This results in a fixed rate of return insulated from market fluctuations during
such period. The underlying securities are ordinarily U.S. Treasury or other
government obligations or high quality money market instruments. A Fund will
require that the value of such underlying securities, together with any other
collateral held by the Fund, always equals or exceeds the amount of the
repurchase obligations of the vendor. While the maturities of the underlying
securities in repurchase agreement transactions may be more than one year, the
term of such repurchase agreement will always be less than one year. A Fund's
risk is primarily that, if the seller defaults, the proceeds from the
disposition of underlying securities and other collateral for the seller's
obligation are less than the repurchase price. If the seller becomes bankrupt,
the Fund might be delayed in selling the collateral. Under the Investment
Company Act of 1940, as amended (the "1940 Act"), repurchase agreements are
considered loans. Repurchase agreements usually are for short periods, such as
one week or less, but could be longer. The Funds will not enter into repurchase
agreements of a duration of more than seven days if, taken together with other
illiquid securities, more than 15% of that Fund's net assets would be so
invested. Under normal market conditions, the Funds do not intend to purchase
repurchase agreements in excess of 5% of that Fund's net assets.

Shares of Other Investment Companies. The Funds may invest their assets in
securities of other investment companies as an efficient means of carrying out
their investment policies. Investment companies incur certain expenses, such as
management fees, and, therefore, any investment by the Funds in shares of other
investment companies may be subject to such duplicate expenses.

Small and Mid Capitalization Stocks. Small market companies (Small-Cap
Companies) are those with market capitalizations of $4 billion or less at the
time of Growth Opportunity Fund's investment. Many Small-Cap Companies will have
had their securities publicly traded, if at all, for only a short period of time
and will not have had the opportunity to establish a reliable trading pattern
through economic cycles. Investing in small and mid capitalization stocks may
involve greater risk than investing in large capitalization stocks and more
established companies, since they can be subject to greater volatility. The
price volatility of Small-Cap Companies is relatively higher than larger, more
mature companies. The greater price volatility of Small-Cap Companies may result
from the fact that there may be less market liquidity, less information publicly
available or few investors who monitor the activities of these companies.
Further, in addition to exhibiting greater volatility, the stocks of Small-Cap
Companies may, to some degree, fluctuate independently of the stocks of large
companies. That is, the stocks of Small-Cap Companies may decline in price as
the price of large company stocks rise or vice versa. In addition, the market
prices of these securities may exhibit more sensitivity to changes in industry
or general economic conditions. Some Small-Cap Companies will not have been in
existence long enough to experience economic cycles or to know whether they are
sufficiently well managed to survive downturns or inflationary periods. Further,
a variety of factors may affect the success of a company's business beyond the
ability of its management to prepare or compensate for them, including domestic
and international political developments, government trade and fiscal policies,
patterns of trade and war or other military conflict which may affect particular
industries or markets or the economy generally.

Mid capitalization companies (Mid-Cap Companies) are those with market
capitalizations between $1 billion and $4 billion. The risks associated with
investments in Mid-Cap Companies are similar to those associated with Small-Cap
Companies as discussed above.

Short Sales. Core Equities Fund may make short sales. A short sale occurs when a
borrowed security is sold in anticipation of a decline in its price. If the
decline occurs, shares equal in number to those sold short can be purchased at
the lower price. If the price increases, the higher price must be paid. The
purchased shares are then returned to the original lender. Risk arises because
no loss limit can be placed on the transaction. When the Fund enters into a
short sale, assets equal to the market price of the securities sold short or any
lesser price at which the Fund can obtain such securities, are segregated on the
Fund's records and maintained until the Fund meets its obligations under the
short sale.

The Fund will not sell securities short unless it (1) owns, or has a right to
acquire, an equal amount of such securities, or (2) has segregated an amount of
its other assets equal to the lesser of the market value of the securities sold
short or the amount required to acquire such securities. The segregated amount
will not exceed 25% of the Fund's net assets. While in a short position, the
Fund will retain the securities, rights, or segregated assets. Short selling may
accelerate the recognition of gains.

U.S. Government Securities. The Funds may invest in U.S. government securities
which include:

o direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds;
o notes, bonds, and discount notes issued or guaranteed by U.S.
government agencies and instrumentalities supported y the full faith
and credit of the United States;
o notes bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal
funding; and
o notes, bonds and discount notes of other U.S. government
instrumentalities supported by the credit of the instrumentalities.

Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government are backed by the full faith and credit of the U.S. Treasury. No
assurances can be given that the U.S. government will provide financial support
to other agencies or instrumentalities, since it is not obligated to do so.
These instrumentalities are supported by:

o the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury; o the discretionary authority of the U.S.
government to purchase certain obligations of an agency or instrumentality;
or o the credit of the agency or instrumentality.

Temporary Investments. Each Fund may maintain up to 100% of its assets in Money
Market Instruments for temporary, defensive purposes. This reserve position
provides flexibility in meeting redemptions, expenses, and the timing of new
investments, and serves as a short-term defense during periods of unusual market
volatility. The Money Market Instruments for the Core Equities, Growth
Opportunity and Fixed Income Funds include obligations of the U.S. government
and its agencies and instrumentalities, other short-term debt securities which
are rated in the two top categories by Moody's or S&P or, if unrated, are of
comparable quality as determined by the Adviser, commercial paper, bank
obligations and money market mutual funds. The Money Market Instruments for
International Fund include domestic and foreign government obligations, bank
obligations, commercial paper and short-term securities which are rated in the
top two categories by Moody's or S&P or, if unrated, are of comparable quality
as determined by the Adviser. The Money Market Instruments for Municipal Bond
Fund include taxable or tax-exempt obligations of the U.S. government and its
agencies and instrumentalities, short-term debt securities of municipal or
corporate issuers, domestic and foreign government obligations, bank
obligations, commercial paper and short-term securities which are rated in the
two top categories by Moody's or S&P or, if unrated, of comparable quality as
determined by the Adviser. Although Municipal Bond Fund is permitted to take
temporary, taxable investments, there is no current intention of generating
income subject to federal regular income tax.

Variable Rate Demand Notes. Variable rate demand notes are long-term corporate
debt instruments that have variable or floating interest rates and provide a
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear interest
at a rate that is intended to cause the securities to trade at par. The interest
rate may float or be adjusted at regular intervals (ranging from daily to
annually), and is normally based on an interest rate index or a published
interest rate. Many variable rate demand notes allow a Fund to demand the
repurchase of the security on not more than seven days prior notice. Other notes
only permit a Fund to tender the security at the time of each interest rate
adjustment or at other fixed intervals.

Warrants give a Fund the option to buy the issuer's stock or other equity
securities at a specified price. The Fund may buy the designated shares by
paying the exercise price before the warrant expires. Warrants may become
worthless if the price of the stock does not rise above the exercise price by
the expiration date. Rights are the same as warrants, except they are typically
issued to existing stockholders. The Fund's do not intend to purchase warrants
and rights in excess of 5% of each Fund's total assets.

When-Issued and Delayed Delivery Transactions. These transactions are made to
secure what is considered to be an advantageous price or yield. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices. Other than
normal transaction costs, no fees or expenses are incurred. However, liquid
assets of a Fund are segregated on a Fund's records at the trade date in an
amount sufficient to make payment for the securities to be purchased. These
assets are marked to market daily and are maintained until the transaction has
been settled.

Zero Coupon Bonds. Fixed Income Fund may invest in zero coupon bonds. These are
bonds which are sold at a discount to their stated value and do not pay any
periodic interest.

<PAGE>

INVESTMENT RESTRICTIONS

Fundamental Limitations

The following investment limitations are fundamental and cannot be changed
without shareholder approval. The Funds may not:

1. Purchase securities on margin or borrow money, except (a) from banks for
extraordinary or emergency purposes (not for leveraging or investment) or (b)
by engaging in reverse repurchase agreements, provided that (a) and (b) in
the aggregate do not exceed an amount equal to one-third of the value of the
total assets of a Fund less its liabilities (not including the amount
borrowed) at the time of the borrowing, and further provided that 300% asset
coverage is maintained at all times, and except that a deposit or payment by
such Fund of initial or variation margin in connection with futures contracts
or related options transactions is not considered the purchase of a security
on margin.

2. Lend portfolio securities of value exceeding in the aggregate one-third of
the market value of a Fund's total assets less liabilities other than
obligations created by these transactions;

3. Mortgage, pledge or hypothecate any assets except that a Fund may pledge not
more than one-third of its total assets to secure borrowings made in
accordance with paragraph 1 above. With respect to Core Equities Fund, Growth
Opportunity Fund, Fixed Income Fund and Municipal Bond Fund, initial or
variation margin for futures contracts will not be deemed to be pledges of a
Fund's assets.

4. Act as an underwriter of securities of other issuers, except insofar as a
Fund may be deemed an underwriter under the 1933 Act in disposing of a
portfolio security.

5. Purchase or otherwise acquire interests in real estate, real estate mortgage
loans or interests, including limited partnership interests, in oil, gas or
other mineral exploration, leasing or development programs.

6. Purchase or acquire commodities, commodity contracts or futures except for
International Fund which may purchase and write options on foreign currencies
or enter into forward delivery contracts for foreign currencies and may also
purchase foreign index contracts, and Core Equities Fund, Growth Opportunity
Fund, Fixed Income Fund and Municipal Bond Fund may enter into financial
futures contracts.

7. Issue senior securities, except insofar as the Funds may be deemed to have
issued a senior security in connection with any permitted borrowing.

8. With respect to Core Equities Fund, Growth Opportunity Fund, Fixed Income
Fund and Municipal Bond Fund, will not invest 25% or more of the value of its
total assets in any particular industry or groups of related industries; and
Municipal Bond Fund will not invest 25% or more of its total assets in any
one industry or in industrial development bonds or other securities, the
interest on which is paid from reverse as of similar type projects.

9. Participate on a joint, or a joint and several, basis in any securities
trading account.

Non-Fundamental Limitations

The following are investment restrictions that may be changed by a vote of the
majority of the Board of Directors. The Funds will not:

1. Invest more than 15% of the market value of the Funds' net assets in illiquid
investments including repurchase agreements maturing in more than seven days.

2. Invest in securities of other investment companies, except (a) with respect
to International Fund, the Fund may purchase securities of other investment
companies which meet the investment objectives of the Fund and then only up
to 5% of the Fund's net assets, except as they may be acquired as part of a
merger, consolidation or acquisition of assets and further except as
permitted by Section 12(d) of the 1940 Act or by the Securities and Exchange
Commission; and (b) with respect to Core Equities Fund, Growth Opportunity
Fund, Fixed Income Fund and Municipal Bond Fund, (i) not more than 5% of the
value of the Fund's total assets will be invested in the securities of any
one investment company, (ii) not more than 10% of the value of its total
assets will be invested in the aggregate in securities of investment
companies as a group, and (iii) not more than 3% of the outstanding voting
stock of any one investment company will be owned by the Fund, except as such
securities may be acquired as part of a merger, consolidation or acquisition
of assets and further, except as may be permitted by Section 12(d) of the
1940 Act or by the Securities and Exchange Commission. Growth Opportunity
Fund will limit its investments in the securities of other investment
companies consistent with the Fund's investment policies.

3. Purchase securities while borrowings exceed 5% of its total assets.

4. Invest in companies for the purpose of exercising control.

If a percentage restriction (except paragraph 3 of the fundamental restrictions)
is adhered to at the time an investment is made, a later change in percentage
resulting from changes in the value of a Fund's investment securities will not
be considered a violation of a Fund's restrictions.

WHO MANAGES THE FUNDS?

Officers and Directors
The Board of Directors is responsible for managing the Corporation's business
affairs and for exercising all the Corporation's powers except those reserved
for the shareholders. Information about each Board member is provided below and
includes the following: name, address, birthdate, present position(s) held with
the Corporation, principal occupations for the past five years and total
compensation received as a Director of the Corporation for its most recent
fiscal year. The Corporation is comprised of five funds and is the only
investment company in the Fund Complex. Unless otherwise indicated, the address
of each Director and officer is Old Westbury Funds, Inc., c/o Federated
Administrative Services, Federated Investors Tower, Pittsburgh, PA 15222-3779.

As of February 1, 1999, all Directors and officers as a group owned less than 1%
of each Fund's outstanding shares.

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

Name Occupations for past 5 Years Aggregate
(birthdate) Compensation from
Address Corporation
Position with Corporation

Robert M. Kaufman Chairman of the Board and Director; Partner, Proskauer Rose LLP, Attorneys $
November, 11 1929 at Law
1585 Broadway

New York, NY 10036

Director
- ----------------------------- ------------------------------------------------------------------------------ --------------------
- ----------------------------- ------------------------------------------------------------------------------ --------------------

Howard D. Graves Visiting Professor, Lyndon B. Johnson School of Public Affairs, University $
(birthdate) of Texas at Austin (Since 1998); Director of Military Education Programs,
8316 Jancy Drive University of Texas at Austin (1997-1998); Associate, The International
Austin, TX 78750 Foundation, Washington, DC (Since 1997); Adviser, Voyager Extended Learning,

Inc. (Since 1997); Lecturer, IMPAC, Inc. (Since 1997); Director; Chairman of
Director the Board, Recycling Holdings, Inc. (1996-1997); Director, Recycling
Holdings, Inc. (1995-1996); and Superintendent, United States Military
Academy, West Point, New York (Lieutenant General, U.S. Army) (from 1991 to
1996).
- ----------------------------- ------------------------------------------------------------------------------ --------------------
- ----------------------------- ------------------------------------------------------------------------------ --------------------

Edward C. Gonzales Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President, $
October 22, 1930 Federated Advisers, Federated Management, Federated Research, Federated

Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
President, Treasurer and Executive Vice President and Director, Federated Securities Corp.; Trustee,
Principal Financial Officer Federated Shareholder Services Company; Trustee or Director of funds
distributed by Federated Securities Corp. and Edgewood Services, Inc.;
President, Executive Vice President and Treasurer of funds distributed by
Federated Securities Corp. and Edgewood Services, Inc.
- ----------------------------- ------------------------------------------------------------------------------ --------------------
- ----------------------------- ------------------------------------------------------------------------------ --------------------

Eugene P. Beard Vice Chairman - Finance and Operations, The Interpublic Group of Companies, $
(birthdate) Inc.

Whittemore TO COME $

(birthdate)
Director
- ----------------------------- ------------------------------------------------------------------------------ --------------------

<PAGE>

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

C. Christine Thomson Vice President and Assistant Treasurer of funds distributed by Federated $
(birthdate) Securities Corp. and Edgewood Services, Inc.

Vice President and
Assistant Treasurer
- ----------------------------- ------------------------------------------------------------------------------ --------------------
- ----------------------------- ------------------------------------------------------------------------------ --------------------

Joseph S. Machi Vice President, Federated Administrative Services; Director, Private Label $
(birthdate) Management, Federated Investors; Vice President and Assistant Treasurer of

certain funds for which Federated Securities Corp. and Edgewood Services,
Vice President and Inc. are the principal distributors.
Assistant Treasurer
- ----------------------------- ------------------------------------------------------------------------------ --------------------
- ----------------------------- ------------------------------------------------------------------------------ --------------------

C. Grant Anderson Corporate Counsel, Federated Investors $

(birthdate)

Secretary
- ----------------------------- ------------------------------------------------------------------------------ --------------------
</TABLE>

As of February __1999, the following shareholders of record owned 5% or more of
a Fund's outstanding shares:

TO COME

Investment Adviser
The Adviser conducts investment research and makes investment decisions for the
Funds. The Funds' investment adviser is Bessemer Trust Company, N.A., a national
banking association.

The Adviser shall not be liable to the Corporation, the Funds, or any Fund
shareholder for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Corporation.

Administrator
Federated Administrative Services, a subsidiary of Federated Investors, Inc.,
provides all management and administrative services reasonably necessary for
each Fund, other than those provided by the Adviser, subject to the supervision
of the Board of Directors for a fee at an annual rate as specified below:

- ---------------------- -------------------------------------
Maximum Average Aggregate Daily Net Assets
Administrative Fee of the Corporation
- ---------------------- -------------------------------------
.150% on the first $250 million
- ---------------------- -------------------------------------
- ---------------------- -------------------------------------
.125% on the next $250 million
- ---------------------- -------------------------------------
- ---------------------- -------------------------------------
.100% on the next $250 million
- ---------------------- -------------------------------------
- ---------------------- -------------------------------------
.075% on assets in excess of $750 million
- ---------------------- -------------------------------------

The administrative fee received during any fiscal year shall be at least $75,000
per Fund. Federated Administrative Services may choose voluntarily to reimburse
a portion of its fee at any time.

The functions performed by FAS as administrator include, but are not limited to
the following:

o preparation, filing and maintenance of the Corporation's governing
documents, minutes of Directors' meetings and shareholder
meetings;
o preparation and filing with the SEC and state regulatory authorities the
Corporation's registration statement and all amendments, and any other
documents required for the Funds to make a continuous offering of their
shares;
o prepare, negotiate and administer contracts on behalf of the Fund; o
supervision of the preparation of financial reports; o preparation and filing of
federal and state tax returns; o assistance with the design, development and
operation of a Fund; and o providing advice to the Funds and Corporation's
Directors.

<PAGE>

Custodian
Bessemer Trust Company (New Jersey) is the Funds' custodian. Pursuant to its
agreement with the Funds, it is responsible for maintaining the books and
records of each Fund's securities and cash and marketing each Fund's accounting
and portfolio transaction records.

Transfer Agent and Dividend Disbursing Agent
Fundamental Shareholder Services, Inc. is the Funds' transfer and dividend
disbursing agent.

Independent Public Accountants
Deloitte & Touche LLP are the independent public accountants for the Funds.

Brokerage Transactions
The Adviser makes each Fund's portfolio decisions and determines the broker to
be used in each specific transaction with the objective of negotiating a
combination of the most favorable commission and the best price obtainable on
each transaction (generally defined as best execution). When consistent with the
objective of obtaining best execution, brokerage may be directed to persons or
firms supplying investment information to the Adviser or portfolio transactions
may be effected by the Adviser. Neither a Fund nor the Adviser has entered into
agreements or understandings with any brokers regarding the placement of
securities transactions because of research services they provide. To the extent
that such persons or firms supply investment information to the Adviser for use
in rendering investment advice to a Fund, such information may be supplied at no
cost to the Adviser and, therefore, may have the effect of reducing the expenses
of the Adviser in rendering advice to that Fund. While it is impossible to place
an actual dollar value on such investment information, its receipt by the
Adviser probably does not reduce the overall expenses of the Adviser to any
material extent. Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking best execution,
the Adviser may consider sales of shares of a Fund as a factor in the selection
of brokers to execute portfolio transactions for the Funds.

The investment information provided to the Adviser is of the type described in
Section 28(e) of the Securities Exchange Act of 1934 and is designed to augment
the Adviser's own internal research and investment strategy capabilities.
Research services furnished by brokers through which each Fund effects
securities transactions are used by the Adviser in carrying out its investment
management responsibilities with respect to all its clients' accounts. There may
be occasions where the transaction cost charged by a broker may be greater than
that which another broker may charge if the Adviser determines in good faith
that the amount of such transaction cost is reasonable in relation to the value
of brokerage and research services provided by the executing broker. The Adviser
may consider the sale of shares of a Fund by brokers including the Distributor
as a factor in its selection of brokers of Fund transactions.

A Fund may deal in some instances in securities which are not listed on a
national securities exchange but are traded in the over-the-counter market. It
may also purchase listed securities through the third market. Where transactions
are executed in the over-the-counter market or third market, that Fund will seek
to deal with the primary market makers; but when necessary in order to obtain
best execution, it will utilize the services of others. In all cases, each Fund
will attempt to negotiate best execution.

For the fiscal year ended, October 31, 1998, the Fund's adviser directed
brokerage transactions to certain brokers due to research services they
provided. The total amount of these transactions was $______, for which the Fund
paid $______ in brokerage commissions.

Distribution and Service Plan
The Corporation has adopted a distribution and service plan (the Plan) for the
Funds pursuant to Rule 12b-1 of the Investment Company Act of 1940. Pursuant to
the Plan, the Funds entered into a distribution agreement and a shareholder
servicing agreement with the Funds' distributor, Edgewood Services, Inc.
(Edgewood) and a shareholder servicing agreement with Bessemer Trust Company,
N.A. (Bessemer). Under the shareholder servicing agreement, Bessemer may receive
payments from the Funds to permit it to make payments to broker-dealers for
providing shareholder services. Bessemer is permitted (i) to receive a payment
from the Funds attributable to Bessemer's clients (and its affiliates) for
providing shareholder services to such clients and (ii) to receive payments to
permit it to make payments to other financial institutions as shareholder
servicing agents. Under its shareholder servicing agreement, Edgewood receives
payments from the Funds' to permit it to make payments to broker-dealers for
providing shareholder services.

The distribution agreement with Edgewood provides for reimbursement to Edgewood
by the Funds for its distribution, promotional and advertising costs incurred in
connection with the distribution of the Funds' shares.

In addition, each Fund will pay for telecommunications expenses incurred by the
distributor in carrying out its obligations under the distribution agreement and
shareholder servicing agreement and for costs incurred for preparing, printing
and delivering the Funds' prospectus to existing shareholders and preparing and
printing subscription application forms for shareholder accounts.

Fees Paid by the Funds for Services
For the fiscal year ended October 31, 1998
<TABLE>
<CAPTION>

- ----------------------------------------------------------------------------- -------------------------------------------------
12b-1 Fees
- ----------------------------------------------------------------------------- -------------------------------------------------
- ------------------------- -------------- ----------------- ------------------ ----------------- ---------------- --------------
Fund Name Advisory Brokerage Administrative Distribution Shareholder Other
Fee/ Fee Commissions Fee/ Fee Waived Plan Fee Servicing Fee/ Services Fee
Waived Fee Waived
- ------------------------- -------------- ----------------- ------------------ ----------------- ---------------- --------------
- ------------------------- -------------- ----------------- ------------------ ----------------- ---------------- --------------
Core Equities Fund 1 $ $ $ $ $ $
- ------------------------- -------------- ----------------- ------------------ ----------------- ---------------- --------------
- ------------------------- -------------- ----------------- ------------------ ----------------- ---------------- --------------
Growth Opportunity Fund $ $ $ $ $ $
- ------------------------- -------------- ----------------- ------------------ ----------------- ---------------- --------------
- ------------------------- -------------- ----------------- ------------------ ----------------- ---------------- --------------
International Fund $ $ $ $ $ $
- ------------------------- -------------- ----------------- ------------------ ----------------- ---------------- --------------
- ------------------------- -------------- ----------------- ------------------ ----------------- ---------------- --------------
Fixed Income Fund 2 $ $ $ $ $ $
- ------------------------- -------------- ----------------- ------------------ ----------------- ---------------- --------------
- ------------------------- -------------- ----------------- ------------------ ----------------- ---------------- --------------
Municipal Bond Fund 3 $ $ $ $ $ $
- ------------------------- -------------- ----------------- ------------------ ----------------- ---------------- --------------
</TABLE>

1 For the period from March 2, 1998 (commencement of operations). 2 For
the period from March 12, 1998 (commencement of operations). 3 For the period
from March 6, 1998 (commencement of operations).

For the fiscal year ended October 31, 1997
- ------------------------------------------------------------------------------

For the fiscal year ended October 31, 1996
- ------------------------------------------------------------------------------

HOW DO THE FUNDS MEASURE PERFORMANCE?

The Funds may advertise each Fund's share performance by using the Security and
Exchange Commission's (SEC) standard method for calculating performance
applicable to all mutual funds. The SEC also permits this standard performance
information to be accompanied by non-standard performance information.

Unless otherwise stated, any quoted share performance reflects the effect of
non-recurring charges, such as maximum sales charges, which, if excluded would
increase the total return and yield. The performance of shares depends upon such
variables as: portfolio quality; average portfolio maturity; type and value of
portfolio securities; changes in interest rates; changes or differences in the
Fund's expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings and
offering price per share fluctuate daily. Both net earnings and offering price
per share are factors in the computation of yield and total return.

Total Return
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

The average annual total return for a Fund's shares is the average compounded
rate of return for a given period that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable value
is computed by multiplying the number of Shares owned at the end of the period
by the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

When shares of a Fund are in existence for less than a year, the Fund may
advertise cumulative total return for that specific period of time, rather than
annualizing the total return.

Yield
The yield of a Fund's shares is calculated by dividing: (i) the net investment
income per share earned by the shares over a thirty-day period; by (ii) the
maximum offering price per share on the last day of the period. This number is
then annualized using semi-annual compounding. This means that the amount of
income generated during the thirty-day period is assumed to be generated each
month over a 12-month period and is reinvested every six months. The
tax-equivalent yield of Municipal Income Fund's shares is calculated similarly
to the yield, but is adjusted to reflect the taxable yield that shares would
have had to earn to equal the actual yield, assuming a specific tax rate. The
yield and tax-equivalent yield do not necessarily reflect income actually earned
by shares because of certain adjustments required by the SEC and, therefore, may
not correlate to the dividends or other distributions paid to shareholders.

To the extent financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a Fund's
shares, the Fund's share performance is lower for shareholders paying those
fees.

Average Annual Total Returns and Yield
Total returns shown for the one-year, five-year and since inception periods
ended November 30, 1998. Yield shown for the 30-day period ended November
30,1998.

- ----------------------- ------------------ ------------------ -------------------- ----------------- ------------------
Fund Core Equities International Growth Opportunity Fixed Income Municipal Bond
Fund Fund Fund Fund Fund
(inception date) (March 2, 1998) (October 22, (February 28, 1997) (March 12, 1998) (March 6, 1998)
1993)
- ----------------------- ------------------ ------------------ -------------------- ----------------- ------------------
- ----------------------- ------------------ ------------------ -------------------- ----------------- ------------------
One Year Return N/A % % N/A N/A
Five Year Return N/A % N/A N/A N/A
Since Inception Return % % % % %
- ----------------------- ------------------ ------------------ -------------------- ----------------- ------------------
- ----------------------- ------------------ ------------------ -------------------- ----------------- ------------------
Yield % % % % %
- ----------------------- ------------------ ------------------ -------------------- ----------------- ------------------
</TABLE>

Tax Equivalent Yield
The tax-equivalent yield for the Municipal Bond Fund for the 30-day period ended
November 30, 1998 was __%.

Tax Equivalency Table
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature for the Municipal Income Fund. This table is
for illustrative purposes only and is not representative of past or future
performance of the Fund. The interest earned by the municipal securities owned
by the Fund generally remains free from federal regular income tax and is often
free from state and local taxes as well. However, some of the Fund's income may
be subject to the federal alternative minimum tax and state and/or local taxes.

<PAGE>

TAXABLE YIELD EQUIVALENT FOR 1998
MULTISTATE MUNICIPAL FUND
<TABLE>
<CAPTION>

- ----------------------------------------------------------------------------------------------------------------
FEDERAL INCOME TAX BRACKET: 15.00% 28.00% 31.00% 36.00% 39.60%
- ----------------------------------------------------------------------------------------------------------------
JOINT $1- $42,351- $102,301- $155,951- OVER
RETURN 42,350 102,300 155,950 278,450 $278,450
- ----------------------------------------------------------------------------------------------------------------
SINGLE $1- $25,351- $61,401- $128,101- OVER
RETURN 25,350 61,400 128,100 278,450 $278,450
- ----------------------------------------------------------------------------------------------------------------
Tax-Exempt Yield Taxable Yield Equivalent
- ----------------------------------------------------------------------------------------------------------------
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Note:The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent.

Performance Comparisons
Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or performance
comparisons of Shares to certain indices; o charts, graphs and illustrations
using the Fund's returns, or returns in general, that demonstrate investment
concepts such as tax-deferred compounding, dollar-cost averaging and systematic
investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and
o information about the mutual fund industry from sources such as the Investment
Company Institute.

The Funds may compare its performance, or performance for the types of
securities in which it invests, to a variety of other investments, including
federally insured bank products such as bank savings accounts, certificates of
deposit, and Treasury bills.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

You may use financial publications and/or indices to obtain a more complete view
of share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Funds use in advertising may include:

CDA/Wiesenberger Investment Company Services. Mutual fund rankings and data that
ranks and/or compares mutual funds by overall performance, investment
objectives, assets, expense levels, periods of existence and/or other factors.

Dow Jones Industrial Average (DJIA). Represents share prices of selected
blue-chip industrial corporations. The DJIA indicates daily changes in the
average price of stock of these corporations. Because it represents the top
corporations of America, the DJIA index is a leading economic indicator for the
stock market as a whole.

Europe, Australia, and Far East Index is a standard unmanaged foreign securities
index representing major non-U.S. stock markets, as monitored by Morgan Stanley
Capital International. EAFE returns are in U.S. dollars.

Financial publications. The Wall Street Journal, Business Week, Changing Times,
Financial World, Forbes, Fortune and Money magazines, among others--provide
performance statistics over specified time periods.

Lehman Brothers Government/Corporate Bond Index is composed of all bonds that
are investment grade (rated Baa or higher by Moody's or BBB or higher by S&P, if
unrated by Moody's). Issues must have at least one year to maturity. Total
return comprises price appreciation/depreciation and income as a percentage of
the original investment.

Lipper Analytical Services, Inc. Ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specified period of time.

Moody's Investors Service, Inc., Fitch IBCA, Inc. and Standard & Poor's, various
publications.

Morningstar, Inc. An independent rating service, is the publisher of the
bi-weekly Mutual Fund Values, which rates more than 1,000 NASDAQ-listed mutual
funds of all types, according to their risk-adjusted returns. The maximum rating
is five stars, and ratings are effective for two weeks.

Standard & Poor's Daily Stock Price Index of 500 Common Stocks (S&P 500).
Composite index of common stocks in industry, transportation, and financial and
public utility companies. Can be used to compare to the total returns of funds
whose portfolios are invested primarily in common stocks. In addition, the S & P
500 assumes reinvestments of all dividends paid by stocks listed on its index.
Taxes due on any of these distributions are not included, nor are brokerage or
other fees calculated in the S & P figures.

Wilshire Associates. An on-line database for international financial and
economic data including performance measures for a wide range of securities.

Wilshire 2000 Equity Index. consists of nearly 2,000 common equity securities,
covering all stocks in the U.S. for which daily pricing is available, and can be
used to compare to the total returns of funds whose portfolios are invested
primarily in common stocks.

The Adviser may also include performance information in such advertisements or
information furnished to current or prospective shareholders not only regarding
the Adviser's performance since ____, the International Fund's portfolio
manager, joined the Adviser in ____, but also regarding ____ personal investment
performance since ___ when, _____. In addition, the Adviser may also include
performance information regarding the Adviser's performance since Harry Rekas,
the Growth Opportunity Fund's portfolio manager, joined the Adviser in 1996, but
also regarding Mr. Rekas' personal investment performance since 1993 when he
managed the Capital Appreciation portfolio of AIG Investment Management
Corporation, a portfolio which was focused on small and mid-capitalization
equities. Also, the Adviser may include performance information regarding the
Adviser's performance since John D. Chadwick, the Core Equities Fund's portfolio
manager, Harold S. Woolley, the Fixed Income Fund's portfolio manager and Bruce
A. Whiteford, the Municipal Bond Fund's portfolio manager joined the Adviser,
but also regarding Mr. Chadwick's personal investment performance while at
Kidder Peabody & Co., Mr. Woolley's personal investment performance while at
Equitable Investment Management Corp., and Mr. Whiteford's personal investment
performance while at Chase Manhattan Bank, N.A.

ACCOUNT INFORMATION AND PRICING OF SHARES

Net Asset Value
For purposes of determining each Fund's net asset value per share, readily
marketable portfolio securities listed on an exchange are valued, except as
indicated below, at the last sale price reflected at the close of the regular
trading session of the exchange on the business day as of which such value is
being determined. If there has been no sale on such day, the securities are
valued at the mean of the closing bid and asked prices on such day. If no bid or
asked prices are quoted on such day, then the security is valued by such method
as the Board of Directors shall determine in good faith to reflect its fair
market value. Fund securities traded on more than one national securities
exchange are valued at the last sale price on the business day as of which such
value is being determined as reflected on the tape at the close of the exchange
representing the principal market for such securities.

Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Adviser to be
over-the-counter are valued at the mean of the current bid and asked prices from
such sources as the Board of Directors deems appropriate to reflect their fair
value.

United States government obligations and other debt instruments having sixty
days or less remaining until maturity are stated at amortized cost. Debt
instruments having a greater remaining maturity will be valued at the highest
bid price obtained from a dealer maintaining an active market in that security
or on the basis of prices obtained from a pricing service approved as reliable
by the Board of Directors. All other investment assets, including restricted and
not readily marketable securities, are valued under procedures established by
and under the general supervision and responsibility of the Fund's Board of
Directors designed to reflect in good faith the fair value of such securities.

As indicated in the prospectus, the net asset value per share of each Fund's
shares will be determined as of the close of the regular trading session of the
New York Stock Exchange (the "NYSE") on each day that the NYSE is open for
trading. The NYSE annually announces the days on which it will not be open for
trading; the most recent announcement indicates that it will not be open on the
following days: New Year's Day, Martin Luther King Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. However, the NYSE may close on days not included in that
announcement.

Trading in Foreign Securities
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its net asset value,
the International Fund values foreign securities at the latest closing price on
the exchange on which they are traded immediately prior to the closing of the
NYSE. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the NYSE. Foreign securities quoted in
foreign currencies are translated into U.S. dollars at current rates.
Occasionally, events that affect these values and exchange rates may occur
between the times at which they are determined and the closing of the NYSE. If
such events materially affect the value of portfolio securities, these
securities may be valued at their fair value as determined in good faith by the
Directors, although the actual calculation may be done by others.

Voting Rights
Each share of a Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote. All Shares of the Corporation
have equal voting rights, except that in matters affecting only a particular
Fund, only shares of that Fund or class are entitled to vote.

Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of shareholders will be called by the Directors upon
the written request of shareholders who own at least 10% of the Corporation's
outstanding shares of all series entitled to vote.

HOW ARE THE FUNDS TAXED?

Federal Income Tax
The Funds intend to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, they will not receive special tax treatment and will pay federal income
tax.

Each Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Corporation's other portfolios will be separate from those realized by each
Fund.

Foreign Investments
Investment income on certain foreign securities purchased by the Funds may be
subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Funds
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of the Funds' assets to be invested within various countries is
uncertain. However, the Funds intend to operate so as to qualify for
treaty-reduced tax rates when applicable.

Distributions from the Funds may be based on estimates of book income for the
year. Book income generally consists solely of the coupon income generated by
the portfolio, whereas tax basis income includes gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of fixed
income securities denominated in foreign currencies, it is difficult to project
currency effects on an interim basis. Therefore, to the extent that currency
fluctuations cannot be anticipated, a portion of distributions to shareholders
could later be designated as a return of capital, rather than income, for income
tax purposes, which may be of particular concern to simple trusts.

The Funds may invest in the stock of certain foreign corporations which would
constitute a Passive Foreign Investment Company (PFIC). The Funds may be subject
to federal income taxes upon disposition of PFIC investments.

If more than 50% of the value of the Funds' assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund may qualify
for certain Code stipulations that would allow shareholders to claim a foreign
tax credit or deduction on their U.S. income tax returns. The Code may limit a
shareholder's ability to claim a foreign tax credit. Shareholders who elect to
deduct their portion of the Funds' foreign taxes rather than take the foreign
tax credit must itemize deductions on their income tax returns.

FINANCIAL INFORMATION

The Financial Statements for the fiscal year ended October 31, 1998, are
incorporated herein by reference to the Funds' Annual Report to shareholders
dated October 31, 1998.

<PAGE>

APPENDIX

Standard and Poor's Long-Term Debt Rating Definitions
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in 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 in higher rated categories.

BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.

B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or
BB-rating.

CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B-rating.

CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.

C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC-debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

Moody's Investors Service, Inc. Long-Term Bond Rating Definitions
AAA--Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as gilt
edged. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA--Bonds 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.

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 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.

Fitch IBCA, Inc. Long-Term Debt Rating Definitions
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.

A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C--Bonds are imminent default in payment of interest or principal.

Moody's Investors Service, Inc. Commercial Paper Ratings
Prime-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:

o Leading market positions in well established industries.

o High rates of return on funds employed.

o Conservative capitalization structure with moderate reliance on debt
and ample asset protection.

o Broad margins in earning coverage of fixed financial charges and high
internal cash generation.

o Well established access to a range of financial markets and assured
sources of alternate liquidity.

Prime-2--Issuers rated Prime-1 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory 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, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

<PAGE>

Standard and Poor's Commercial Paper Ratings
A-1--This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

Fitch IBCA, Inc. Commercial Paper Rating Definitions
FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.

FITCH-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

<PAGE>

ADDRESSES

Old Westbury Funds, Inc. 5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010

Distributor
Edgewood Services, Inc. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Investment Adviser
Bessemer Trust Company, N.A. 630 Fifth Avenue
New York, New York 10111

Custodian
Bessemer Trust Company (New Jersey) 100 Woodbridge Center Drive
Woodbridge, New Jersey 07095

Transfer Agent and Dividend Disbursing Agent
Fundamental Shareholder Services, Inc. 11 West 25th Street
7th Floor
New York, New York 10010-2001

Independent Auditors
Deloitte & Touche LLP Two World Financial Center
New York, New York 10281

Cusip 680414307
Cusip 680414208
Cusip 680414109
Cusip 680414406
Cusip 680414505
(Product Code) (2/99)

ITEM 23. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Form of Articles of Incorporation of the Registrant.
(b) Copy of By-laws of the Registrant; 3
(c) Not applicable.
(d)(i) Conformed copy of Advisory Contract between the Registrant,
on behalf of theInternational Fund, and Bessemer Trust
Company, N.A.; 3
(ii) Conformed copy of Advisory Contract between the Registrant, on
behalf of the Growth Opportunity Fund, and Bessemer Trust
Company, N.A.; 7
(iii) Conformed copy of Advisory Contract between the Registrant, on
behalf of the Core Equities Fund, and Bessemer Trust
Company,N.A.;8
(iv) Conformed copy of Advisory Contract between the Registrant, on
behalf of the Fixed Income Fund, and Bessemer Trust
Company,N.A.;8
(v) Conformed copy of Advisory Contract between the Registrant, on
behalf of the Municipal Bond Fund, and Bessemer Trust
Company,N.A.;8
(e)(i) See Conformed copy of Distribution Agreement filed as Exhibi
m(iii) herein; 5
(f) Not applicable.
(g) Conformed copy of Custody Agreement between the Registrant
and Bessemer Trust
Company (New Jersey); 1
(h) Conformed copy of Administrative Services Agreement
between the Registrant and Federated Administrative
Services for the Fund, on behalf of the International
Fund and Growth Opportunity Fund; 5
(i) Conformed copy of Opinion of Messrs. Battle Fowler,
as to the legality of the securities being
registered, including their consent to the filing thereof
and to the use of their name under the heading
"Dividends, Distributions and Taxes" in the Prospectus; 1
(j) Not applicable.
(k) Not applicable.
(l) Conformed copy of written assurance of SFG Investors
II Limited Partnership, that its purchase of shares of
the Registrant was for investment purposes without any
present intention of redeeming or reselling; 1

+ All exhibits have been filed electronically.

1. Incorporated herein by reference from Pre-Effective Amendment No. 1 to this
Registration Statement as filed with the SEC on October 5, 1993.

3 Incorporated herein by reference from Post-Effective Amendment No. 3 to
this Registration Statement as filed with the SEC on February 28, 1996.

5. Incorporated by reference from the Post-Effective Amendment No. 7 to this
Registration Statement as filed with the SEC on February 26, 1997.

7. Incorporated by reference from the Post-Effective Amendment No. 9 to this
Registration Statement as filed with the SEC on December 8, 1997.

8. Incorporated by reference from the Post-Effective Amendment No. 10 to this
Registration Statement as filed with the SEC on February 25, 1998.

<PAGE>

(m)(i) Copy of Amended and Restated Distribution and Service Plan
adopted by the Registrant, on behalf of the International
Fund, pursuant to Rule 12b-1 under the Investment Company Act
of 1940; 4
(ii) Copy of Distribution and Service Plan adopted by the
Registrant, on behalf of the Growth Opportunity Fund, pursuant
to Rule 12b-1 under the Investment Company Act of 1940; 4
(iii) Copy of Distribution and Service Plan adopted by the
Registrant, on behalf of the Core Equities Fund, pursuant to
Rule 12b-1 under the Investment Company Act of 1940; 7
(iv) Copy of Distribution and Service Plan adopted by the
Registrant, on behalf of the Fixed Income Fund, pursuant to
Rule 12b-1 under the Investment Company Act of 1940; 7
(v) Copy of Distribution and Service Plan adopted by the
Registrant, on behalf of the Municipal Bond Fund, pursuant to
Rule 12b-1 under the Investment Company Act of 1940; 7
(vi) Conformed copy of Distribution Agreement between the
Registrant and Edgewood Services, Inc., on behalf of
the International Fund (Ex. A), and Growth Opportunity Fund
(Ex. B); 5
(vii) Conformed copy of Exhibit C to Distribution Agreement on
behalf of Fixed Income Fund; 8 (viii) Conformed copy of Exhibit D to
Distribution Agreement on behalf of Core Equities Fund; 8
(ix) Conformed copy of Exhibit E to Distribution Agreement on behalf of
Municipal Bond Fund; 8
(x)Conformedcopy of Shareholder Servicing Agreement between the
Registrant, on behalf of the International Fund, and
Bessemer Trust Company, N.A.; 1

+ All exhibits have been filed electronically.

1. Incorporated herein by reference from Pre-Effective Amendment No. 1 to this
Registration Statement as filed with the SEC on October 5, 1993.

4. Incorporated herein by reference from the Post-Effective Amendment No. to
this Registration Statement as filed with the SEC on November 26, 1996.

5. Incorporated by reference from the Post-Effective Amendment No. 7 to this
Registration Statement as filed with the SEC on February 26, 1997.

7. Incorporated by reference from the Post-Effective Amendment No. 9 to this
Registration Statement as filed with the SEC on December 8, 1997.

8. Incorporated by reference from the Post-Effective Amendment No. 10 to this
Registration Statement as filed with the SEC on February 25, 1998.

<PAGE>

(xi) Conformed copy of Shareholder Servicing Agreement between the
Registrant, on behalf of the Growth Opportunity Fund, and
Bessemer Trust Company, N.A.; 7
(xii) Conformed copy of Shareholder Servicing Agreement between the
Registrant, on behalf of the Core Equities Fund, and Bessemer
Trust Company, N.A.; 8
(xiii) Conformed copy of Shareholder Servicing Agreement between the
Registrant, on behalf of the Fixed Income Fund, and Bessemer
Trust Company, N.A.; 8
(xiv) Conformed copy of Shareholder Servicing Agreement between the
Registrant, on behalf of the Municipal Bond Fund, and Bessemer
Trust Company, N.A.; 8
(xv) Conformed copy of Amended and Restated Shareholder Servicing
Agreement between the Registrant, on behalf of the
International Fund, and Edgewood Services, Inc.; 4
(xvi) Conformed copy of Shareholder Servicing Agreement between the
Registrant, on behalf of the Growth Opportunity Fund, and
Edgewood Services, Inc.; 8
(xvii) Conformed copy of Shareholder Servicing Agreement between the
Registrant, on behalf of the Core Equities Fund, and Edgewood
Services, Inc.; 8
(xviii) Conformed copy of Shareholder Servicing Agreement between the
Registrant, on behalf of the Fixed Income Fund, and Edgewood
Services, Inc.; 8
(xix) Conformed copy of Shareholder Servicing Agreement between the
Registrant, on behalf of the Municipal Bond Fund, and Edgewood
Services, Inc.; 8
(n) Copy of Financial Data Schedules; 8
(o) Not Applicable.
(p) Conformed copy of Power of Attorney; +

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.

ITEM 25. INDEMNIFICATION. 5

+ All exhibits have been filed electronically.

4. Incorporated herein by reference from the Post-Effective Amendment No. 5 to
this Registration Statement as filed with the SEC on November 26, 1996.

5. Incorporated by reference from the Post-Effective Amendment No. 7 to this
Registration Statement as filed with the SEC on February 26, 1997.

7. Incorporated by reference from the Post-Effective Amendment No. 9 to this
Registration Statement as filed with the SEC on December 8, 1997.

8. Incorporated by reference from the Post-Effective Amendment No. 10 to this
Registration Statement as filed with the SEC on February 25, 1998.

<PAGE>

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.

The description of Bessemer Trust Company, N.A. under the
caption "Management of the Fund" in the Prospectus and in the
Statement of Additional Information constituting parts A and
B, respectively, of the Registration Statement are
incorporated herein by reference.

To the knowledge of Registrant, none of the directors or
officers of the Investment Adviser, except those set forth
below, is or has been, at any time during the past two fiscal
years employed by any entity other than the Investment
Adviser.

POSITION WITH
NAME INVESTMENT ADVISOR OTHER BUSINESS CONNECTIONS

William Acquavella Director Principal owner of Acquavella Galleries, Inc.

Stephen A. Baxley Senior Vice Pres. Assistant Director of Taxes, Rockefeller & Co., Inc.

Rolf Brunner Vice President Vice President, Coutts & Co.

Harry Joseph Fenzel Vice President President, Fenzel & Co.

William H. Forsyth, Jr. Exec. Vice Pres. Partner, Lane & Mittendorf

Orion L. Hoch Director Chairman Emeritus, Litton Industries

Preston H. Koster Senior Vice Pres. Client Advisor, V.P., J.P. Morgan

Anne M. McDermott Vice President Investment Analyst, Sovereign Asset Management

David Ellis McNeel Senior Vice Pres. Senior Vice Pres., 1st National Bank of Chicago

Donovan Moore Vice President Director Institutional Marketing, Trevor Stewart Burton & Jacobsen

Michael Popow Vice Pres., Investment Portfolio Manager, Griffin Capital

Harry P. Rekas Senior Vice Pres. Vice Pres., Portfolio Manager, AIG Global Investment

Jennifer C. Shore Vice Pres., Investment Analyst, Evergreen Asset Management

Malcolm P. Travelstead Senior Vice Pres. Relationship Manager, Chase Manhattan Bank

Jack H. Walston Senior Vice Pres. Private Banker/Team Leader/Head of Domestic Private Banking, Union Bank of
Switzerland

Bruce A. Whiteford Senior Vice Pres. Vice President, Chase Manhattan Bank
</TABLE>

ITEM 27.Principal Underwriters:

(a) Edgewood Services, Inc. the Distributor for shares of
the Registrant, acts as principal underwriter for the
following open-end investment companies, including the
Registrant: Deutsche Portfolios, Deutsche Funds, Inc.,
Excelsior Funds, Excelsior Funds, Inc., (formerly, UST
Master Funds, Inc.), Excelsior Institutional Trust,
Excelsior Tax-Exempt Funds, Inc. (formerly, UST Master
Tax-Exempt Funds, Inc.), FTI Funds, FundManager
Portfolios, Great Plains Funds, Old Westbury Funds,
Inc., Robertsons Stephens Investment Trust, WesMark
Funds, WCT Funds.

(b)
<TABLE>
<CAPTION>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Lawrence Caracciolo Director, President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

Arthur L. Cherry Director, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

J. Christopher Donahue Director, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

Thomas P. Sholes Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

Ernest L. Linane Assistant Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

Christine T. Johnson Assistance Vice President, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

Denis McAuley Treasurer, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

Leslie K. Ross Secretary, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829

Amanda J. Reed Assistant Secretary, --
5800 Corporate Drive Edgewood Services, Inc.
Pittsburgh, PA 15237-5829
</TABLE>

ITEM 28. Location of Accounts and Records:

All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:

Registrant Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

5800 Corporate Drive
Pittsburgh, PA 15237-7010

Fundamental Shareholder 11 West 25th Street, 7th Floor
Services, Inc. New York, NY 10010-2001
("Transfer Agent and Dividend
Disbursing Agent")

Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779

Bessemer Trust Company, N.A. 630 Fifth Avenue
("Adviser") New York, NY 10111

Bessemer Trust Company(New Jersey) 100 Woodbridge Center
("Custodian") Woodbridge, NJ 07095

ITEM 29. MANAGEMENT SERVICES.

Not applicable.

ITEM 30. UNDERTAKINGS.

The Registrant undertakes to call a meeting of the
stockholders for purposes of voting upon the question of
removal of a director or directors, if requested to do so by
the holders of at least 10% of the Portfolios' outstanding
shares, and the Registrant shall assist in communications with
other stockholders.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, OLD WESTBURY FUNDS, INC. has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Pittsburgh
and Commonwealth of Pennsylvania, on the 22nd day of December, 1998.

OLD WESTBURY FUNDS, INC.

........By: /s/ C. Grant Anderson
........C. Grant Anderson, Secretary
........Attorney in Fact for Edward C. Gonzales

December 22, 1998

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

NAME ........ TITLE DATE

Edward C. Gonzales* President and Treasurer December 22, 1998
........(Chief Executive Officer and
........Principal Financial and
........Accounting Officer)

Howard D. Graves* Director

Robert M. Kaufman* Director

Eugene P. Beard* Director

</TABLE>

*By: /s/ C. GRANT ANDERSON
C. Grant Anderson
As Attorney-in-fact for Edward C. Gonzales

Exhibit p under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of OLD WESTBURY FUNDS, INC. and
the Assistant General Counsel of Federated Investors, and each of them, their
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution for them and in their names, place and stead, in any and all
capacities, to sign any and all documents to be filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, by means of the
Securities and Exchange Commission's electronic disclosure system known as
EDGAR; and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as each of them
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.

SIGNATURES TITLE DATE

Robert M. Kaufman Chairman and Director

Edward C. Gonzales President and Treasurer
(Chief Executive Officer and Principal
Financial and Accounting Officer)

Howard D. Graves Director

/s/ Eugene F. Beard
Eugene F. Beard Director December 2, 1998

Sworn to and subscribed before me this 2nd day of December, 1998

Cheri S. Good
Notary Public
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries