LIPPER FUNDS INC, 485BPOS, 1996-08-29

LIPPER FUNDS INC
485BPOS, 1996-08-29

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As filed with the Securities and Exchange Commission on
August 29, 1996

Registration Nos. 33-97984
811-9108

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /

Pre-Effective Amendment No. __ / /

Post-Effective Amendment No. 2 / X /

and/or

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

Amendment No. 4 / X /

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

101 Park Avenue
New York, NY 10178
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: (212) 883-6333

ABRAHAM BIDERMAN
THE LIPPER FUNDS, INC.
101 Park Avenue
New York, NY 10178
(Name and Address of Agent for Service)

Copies to:

James J. Burns, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017

It is proposed that this filing will become effective
(check appropriate box):
/x/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:
/ / this post-effective amendment designates a new
effective date for a
previously filed post-effective amendment.
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the Registration Statement.

Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
the Registrant has elected to register an indefinite number of shares of
Capital Stock, $.001 par value per share, of all series of the Registrant,
now existing or hereafter created. The amount of the registration fee
required by Rule 24f-2 is $500 and has been paid previously.

<PAGE>
THE LIPPER FUNDS, INC.

Registration Statement on Form N-1A

CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933

N-1A Item No. Location

Part A Prospectus Caption

Item 1. Cover Page . . . . . . . Cover Page

Item 2. Synopsis . . . . . . . . Prospectus Summary; Company Expenses

Item 3. Condensed Financial
Information . . . . . . Not Applicable

Item 4. General Description of
Registrant . . . . . . . Prospectus Summary; Investment Objectives
and Policies; Investment Limitations;
Additional Information

Item 5. Management of the Fund . Management of the Company

Item 5A. Management's Discussion
of Fund Performance . . Not Applicable

Item 6. Capital Stock and Other
Securities . . . . . . . Additional Information; Distribution and
Service Plans; Dividends; Exchange
Privilege

Item 7. Purchase of Securities
Being Offered . . . . . Purchase of Shares; Exchange Privilege;
Distribution and Service Plans; Valuation
of Shares

Item 8. Redemption or
Repurchase . . . . . . . Redemption of Shares; Exchange Privilege

Item 9. Legal Proceedings . . . Not Applicable

N-1A Item No. Location

Part B

Item 10. Cover Page . . . . . . . Cover Page

Item 11. Table of
Contents . . . . . . . . Table of Contents

Item 12. General Information
and History . . . . . . Not Applicable
<PAGE>
Item 13. Investment Objectives and
Policies . . . . . . . . Investment Objectives and Policies;
Investment Limitations

Item 14. Management of the
Fund . . . . . . . . . . Management of the Company

Item 15. Control Persons and
Principal Holders
of Securities . . . . . Not Applicable

Item 16. Investment Advisory and
Other Services . . . . . Management of the Company; Distribution
and Service Plans; Counsel; Auditors

Item 17. Brokerage Allocation and
Other Practices . . . . Investment Objectives and Policies

Item 18. Capital Stock and Other
Securities . . . . . . . Additional Information Concerning Fund
Shares; Distribution and Service Plans

Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered . . . . . Additional Purchase Information;
Additional Redemption Information;
Valuation of Shares

Item 20. Tax Status . . . . . . . Additional Information Concerning Taxes

Item 21. Underwriters . . . . . . Additional Purchase Information;
Management of the Company

Item 22. Calculation of
Performance Data . . . . Performance Data

Item 23. Financial
Statements . . . . . . . Financial Statements

Part C

Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.

<PAGE>
P R O S P E C T U S

LIPPER HIGH INCOME BOND FUND
LIPPER U.S. EQUITY FUND PRIME LIPPER EUROPE EQUITY FUND

Each a no-load portfolio of
The Lipper Funds, Inc.
101 Park Avenue
New York, NY 10178
For information call 1-800-LIPPER9

The Lipper Funds, Inc. (the "Company") is an open-end investment company
which offers three diversified no-load portfolios: Lipper High Income Bond Fund
(the "High Income Fund"), Lipper U.S. Equity Fund (the "U.S. Equity Fund") and
Prime Lipper Europe Equity Fund (the "Europe Equity Fund" and, together with
the High Income Fund and the U.S. Equity Fund, the "Funds"). As described in
this Prospectus, the Company offers the shares of each Fund in three classes:
Premier Shares, Retail Shares and Group Retirement Plan Shares. Shares of each
Fund are available without any sales charge through Lipper & Company, L.P., the
Company's distributor (referred to herein as "Lipper" or the "Distributor"),
the Company's transfer agent and certain investment dealers, banks and
financial services firms that provide distribution, administrative or
shareholder services to the Funds.

. The High Income Fund's investment objective is high current
income, which it seeks to achieve by investing primarily in
a diversified portfolio of high yield securities with
maturities of less than 10 years rated in medium to lower
rating categories or determined to be comparable to
securities rated in medium to lower rating categories.
. The U.S. Equity Fund's investment objective is capital
appreciation, which it seeks to achieve by investing
primarily in a diversified portfolio of common stocks of
issuers with market capitalization in excess of $500
million believed to be selling below their inherent value
based on factors such as fundamental business and financial
prospects, economic forecasts, political factors and market
conditions.
. The Europe Equity Fund's investment objective is capital
appreciation, which it seeks to achieve by investing
primarily in a diversified portfolio of common stocks of
issuers located in Europe believed to have the capacity for
strong levels of growth based on factors such as financial
strength, earnings growth, industry position and
management.

Shares of the U.S. Government Money Market Fund - Vista Shares are also
made available by the Distributor to qualified investors who are investors in
the Funds. Further information regarding the U.S. Government Money Market Fund
<PAGE>
- - - - Vista Shares and its current prospectus may be obtained by writing or
calling the Distributor at the address and telephone number set forth above.
The High Income Fund intends to invest, under normal circumstances, at
least 80% of its total assets in medium and lower rated and comparable unrated
debt securities, commonly referred to as "junk bonds." Bonds of this type are
considered to be speculative with regard to the payment of interest and are
subject to greater risk of loss of principal. Purchasers should carefully
assess the risks associated with an investment in the High Income Fund. See
"Risk Factors and Special Considerations - High Yield Securities."

Lipper & Company, L.L.C., an affiliate of Lipper, serves as the investment
adviser to the High Income Fund and the U.S. Equity Fund (the "U.S. Adviser").
Prime Lipper Asset Management serves as the investment adviser to the Europe
Equity Fund (the "European Adviser" and, together with the U.S. Adviser, the
"Advisers").
The High Income Fund and the Europe Equity Fund were each formed as a
successor investment vehicle for a corresponding limited partnership for which
Lipper or the European Adviser acted as general partner and investment adviser
since inception. On April 1, 1996, each such Fund exchanged Premier Shares for
certain portfolio securities of its corresponding partnership (the
"Transfers"). For further discussion of the Transfers and the potential tax
consequences to new investors in the High Income Fund and the Europe Equity
Fund associated with the Transfers, see "The Transfers" and "Taxes - The
Transfers."
This Prospectus sets forth concisely the information about the Company and
the Funds that a prospective investor should know before investing and it
should be retained for future reference. Additional information about the
Company and the Funds is contained in the Company's Statement of Additional
Information, dated August 29, 1996 (which may be amended or supplemented from
time to time), which is incorporated herein in its entirety by reference. The
Statement of Additional Information is available upon request and without
charge by writing or calling the Company at the address and telephone number
set forth above.

Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency. Shares
of the Funds involve certain investment risks, including the possible loss of
principal.

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

August 29, 1996
<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in the
Statement of Additional Information. Cross references in this summary are to
headings in the Prospectus.

The Company

The Company consists of three no-load portfolios and offers investors a
range of investment choices. Each Fund has its own investment objective and
policies designed to meet specific goals. The investment objective of each of
the Funds is as follows:
. The High Income Fund's investment objective is high current
income, which it seeks to achieve by investing primarily in a
diversified portfolio of high yield securities with maturities
of less than 10 years rated in medium to lower rating categories
or determined to be comparable to securities rated in medium to
lower rating categories.

. The U.S. Equity Fund's investment objective is capital
appreciation, which it seeks to achieve by investing primarily
in a diversified portfolio of common stocks of issuers with
market capitalization in excess of $500 million believed to be
selling below their inherent value based on factors such as
fundamental business and financial prospects, economic
forecasts, political factors and market conditions.

. The Europe Equity Fund's investment objective is capital
appreciation, which it seeks to achieve by investing primarily
in a diversified portfolio of common stocks of European
Companies (as defined below) believed to have the capacity for
strong levels of growth based on factors such as financial
strength, earnings growth, industry position and management.

Investment Advisers

Lipper & Company, L.L.C. serves as the investment adviser to the High
Income Fund and the U.S. Equity Fund. The U.S. Adviser is a recently formed
affiliate of Lipper, the Fund's distributor. The U.S. Adviser was organized by
Lipper in connection with the expansion of its investment management business
to include the management of registered investment companies. Each of the U.S.
Adviser's officers or employees involved in managing the High Income Fund and
the U.S. Equity Fund is also an employee of Lipper. Lipper is a privately
owned investment management and investment banking firm founded in 1987. At
June 30, 1996, Lipper managed assets having an aggregate market value on a
gross basis of $2.7 billion on behalf of more than 225 institutional and high
net worth clients. Lipper offers complementary investment strategies in
intermediate term high yield bonds, hedged convertible securities, investment
grade bonds, and U.S. and European equities and preferred stocks.
<PAGE>
Prime Lipper Asset Management serves as the investment adviser to the
Europe Equity Fund. The European Adviser is a joint venture between Lipper and
Prime S.p.A. Prime, through subsidiaries and affiliates, is among the largest
asset managers in Italy, and specializes in management of portfolios invested
in European issuers, with approximately $4 billion in assets under management
at June 30, 1996 from domestic and international investors. See "The
Investment Advisers" and "Management of the Company."

Risk Factors and Special Considerations

Prospective investors should consider certain risks associated with an
investment in each Fund. There is no assurance that a Fund will achieve its
investment objective. The value of each Fund's investments, and thus the net
asset value of each class of each Fund's shares, can be expected to fluctuate
in response to changes in market and economic conditions, as well as the
financial conditions and prospects of the issuers in which a Fund invests.
Certain Funds may use various investment practices that involve special
considerations, including investing in high yield and/or illiquid securities,
investing in foreign securities, and engaging in hedging and derivatives, each
of which involves special risks. See "Risk Factors and Special Considerations."

How to Invest
Premier Shares, Retail Shares and Group Retirement Plan Shares of each
Fund may be purchased without any sales charge at their next determined net
asset value through the Distributor, through certain investment dealers, banks
and financial services firms that provide distribution, administrative or
shareholder services to the Funds, or by mailing a purchase order directly to
Chase Global Funds Services Company, the Company's transfer agent (the
"Transfer Agent"). See "Purchase of Shares."

Retail Shares of a Fund are offered for sale to purchasers who invest a
minimum of $10,000 in the Fund ($2,000 with respect to Individual Retirement
Accounts). Retail Shares of each Fund are subject to an ongoing 12b-1 fee at an
annual rate of up to 0.25% of their average daily net assets. See "Distribution
and Service Plans."

Due to the continuous nature of Rule 12b-1 fees, long-term shareholders
may pay more than the equivalent of the maximum front-end sales charges
otherwise permitted by the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. (the "NASD").
Group Retirement Plan Shares of a Fund are offered for sale with no
minimum investment requirement to retirement plans including, but not limited
to, qualified 401(k) plans, provided such plans meet the required number of
eligible employees or the required amount of assets, and deferred compensation
plans under 403(b)(7) of the Internal Revenue Code, as amended (the "Code").
<PAGE>
Group Retirement Plan Shares of each Fund are subject to a service fee of up to
0.25% of their average daily net assets. See "Distribution and Service Plans."
Investors should contact the Distributor at the address and telephone number
set forth on the cover of this Prospectus for further information regarding the
eligibility requirements for Group Retirement Plan Shares.

How to Redeem

Shares of each class may be redeemed at their net asset value next
determined after receipt of the redemption request. The redemption price may be
more or less than the purchase price. There is no deferred sales charge imposed
on redemptions. If an investor in Premier Shares or Retail Shares of any Fund
reduces the value of his or her account to below $500,000, in the case of
Premier Shares, or $1,000, in the case of Retail Shares, such account may be
subject to redemption by the Fund, but only after the investor has been given
at least 30 days in which to increase his or her account balance to more than
such required minimum account balance. Investors in Group Retirement Plan
Shares are not subject to such a minimum account balance requirement. To the
extent that shares in an investor's account are redeemed by a Fund, the
investor could reinvest in any class of shares of the Fund at a later date
provided that any eligibility requirements with respect to investing in the
Fund were met at such time. See "Redemption of Shares" and "Valuation of
Shares."

Dividends and Capital Gains

The Company maintains different dividend and distribution policies for
each of its Funds. They are as follows:

The High Income Fund intends to distribute substantially all of its net
investment income, if any, in the form of monthly dividends.

The U.S. Equity Fund and the Europe Equity Fund intend to distribute
substantially all of their net investment income, if any, in the form of annual
dividends.
Each Fund intends to distribute its net realized capital gains, if any, at
least annually.

Unless a shareholder in a Fund instructs that dividend and capital gain
distributions be paid in cash, dividend and capital gain distributions will be
reinvested automatically in additional shares of the same class of shares of
the Fund at the net asset value of that class at the time of reinvestment.

Dividends paid by each class of a Fund's shares will be calculated at the
same time and in the same manner and will be in the same amount, except that
the expenses attributable solely to a particular class will be borne
<PAGE>
exclusively by that class. Retail Shares and Group Retirement Plan Shares of
each Fund will receive lower per share dividends than Premier Shares because of
the distribution and service fees borne by the Retail and Group Retirement Plan
Shares, respectively. See "Distribution and Service Plans."
<PAGE>
COMPANY EXPENSES

Each Fund offers multiple classes of shares. Each share of a Fund accrues
income in the same manner, but certain expenses differ based upon the class.
The following tables are intended to assist investors in understanding the
various costs and expenses applicable to each class of shares of the Funds:

<TABLE>

Shareholder Transaction Expenses High U.S. Europe
- - - -------------------------------- Income Equity Equity
Fund Fund Fund
------ ------ ------

Maximum Sales Charge Imposed on Purchases

Premier Shares None None None
Retail Shares None None None

Group Retirement Plan Shares None None None

Maximum Sales Charge Imposed on Reinvested
Dividends

Premier Shares None None None

Retail Shares None None None
Group Retirement Plan Shares None None None

Maximum Contingent Deferred Sales Charge
Premier Shares None None None

Retail Shares None None None

Group Retirement Plan Shares None None None
Exchange Fees

Premier Shares None None None
Retail Shares None None None

Group Retirement Plan Shares None None None
<PAGE>
Annual Operating Expenses
- - - -------------------------
(as a percentage of average daily net
assets)

Investment Advisory Fees

Premier Shares 0.75% 0.85% 1.10%
Retail Shares 0.75% 0.85% 1.10%

Group Retirement Plan Shares 0.75% 0.85% 1.10%
Administrative Fees

Premier Shares 0.20% 0.20% 0.20%

Retail Shares 0.20% 0.20% 0.20%
Group Retirement Plan Shares 0.20% 0.20% 0.20%

12b-1 Fees
Premier Shares None None None

Retail Shares 0.25% 0.25% 0.25%

Group Retirement Plan Shares None None None
Service Fees

Premier Shares None None None
Retail Shares None None None

Group Retirement Plan Shares 0.25% 0.25% 0.25%

Other Expenses (estimated, after
reimbursement) <F(1)>

Premier Shares 0.05% 0.05% 0.30%
Retail Shares 0.05% 0.05% 0.30%

Group Retirement Plan Shares 0.05% 0.05% 0.30%

Total Annual Operating Expenses (estimated,
after reimbursement) <F(2)>
Premier Shares 1.00% 1.10% 1.60%

Retail Shares 1.25% 1.35% 1.85%
Group Retirement Plan Shares 1.25% 1.35% 1.85%
<PAGE>
__________________________________

<FN>

<F(1)> "Other Expenses" reflects voluntary reimbursement by each Fund's
Adviser of "Other Expenses" in excess of the amounts set forth
in the table, which voluntary reimbursement is limited to the
extent of such Adviser's investment advisory fee. Each Adviser
reserves the right to terminate any voluntary reimbursement at
any time in its sole discretion. Absent voluntary reimbursement,
the ratio of "Other Expenses" to average daily net assets of (i)
High Income Fund would be 0.39%, 0.39% and 0.39% for Premier
Shares, Retail Shares and Group Retirement Shares, respectively,
(ii) U.S. Equity Fund would be 0.36%, 0.36% and 0.36% for
Premier Shares, Retail Shares and Group Retirement Shares,
respectively and (iii) Europe Equity Fund would be 0.41%, 0.41%
and 0.41% for Premier Shares, Retail Shares and Group Retirement
Shares, respectively. The amounts set forth for "Other
Expenses" are based on estimates for the current fiscal year.
"Other Expenses" includes custodial and transfer agency fees,
directors' fees and expenses, amortization of organizational
costs, filing fees, professional fees, and the costs for reports
to shareholders.

<F(2)> Absent voluntary reimbursements, the ratio of "Total Annual
Operating Expenses" to average daily net assets of (i) High
Income Fund would be 1.34%, 1.59% and 1.59% for Premier Shares,
Retail Shares and Group Retirement Shares, respectively, (ii)
U.S. Equity Fund would be 1.41%, 1.66% and 1.66% for Premier
Shares, Retail Shares and Group Retirement Shares, respectively
and (iii) Europe Equity Fund would be 1.71%, 1.96% and 1.96% for
Premier Shares, Retail Shares and Group Retirement Shares,
respectively.

</TABLE>

Based upon payment by each Fund of operating expenses at the levels set
forth in the table above, the following example illustrates the projected
dollar amount of cumulative expenses an investor would pay on a $1,000
investment in each Fund, assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period:
<PAGE>
<TABLE>

High U.S. Europe
Income Equity Equity
Fund Fund Fund
------ ------ ------

Premier Shares
<S> <C> <C> <C>

1 Year $10 $11 $16
3 Years $32 $35 $50

Retail Shares

1 Year $13 $14 $19
3 Years $40 $43 $58

Group Retirement Shares
1 Year $13 $14 $19

3 Years $40 $43 $58
</TABLE>

This example should not be considered a representation of past or future
expenses or rate of return. Actual expenses may be greater or less than those
shown. Moreover, while the example assumes a 5% annual return for each Fund,
each Fund's performance will vary and may result in a return greater or less
than 5%. Each Adviser in its discretion may terminate voluntary reimbursements
at any time.

Due to the continuous nature of Rule 12b-1 fees, long-term shareholders may
pay more than the equivalent of the maximum front-end sales charges otherwise
permitted by the Rules of the NASD.

Certain investment dealers, banks and financial services firms may charge
their customers direct fees for effecting transactions in Fund shares; such
fees are not reflected in the foregoing tables. See "Purchase of Shares,"
"Redemption of Shares" and "Distribution and Service Plans."
<PAGE>
FINANCIAL HIGHLIGHTS

The following tables provide selected per share data and ratios for the
Company's Premier Shares, Retail Shares and Group Retirement Plan Shares
through the periods presented for the U.S. Equity Fund, High Income Fund and
Europe Equity Fund. The complete financial statements for the Funds are
available at no cost and can be requested by writing or calling the telephone
number on the cover of the Prospectus. The following should be read in
conjunction with the financial statements including the notes thereto.

<TABLE>
<CAPTION>
High Income Fund
----------------
Group
Retirement
Premier Shares Retail Shares Plan Shares
-------------- ------------- --------------
April 1, April 11, April 12,
1996<F(2)> 1996<F(3)> 1996<F(3)>
to June 30, to June 30, to June 30,
1996<F(6)> 1996<F(6)> 1996<F(6)>
(Unaudited) (Unaudited) (Unaudited)
-------------- -------------- --------------

<S> <C> <C> <C>
Net Asset Value, Beginning of Period . . . . . . . . $10.00 $ 9.91 $ 9.93
------ ------ ------
Income From Investment Operations:
Net Investment Income (Loss)<F(4)> . . . . . . . 0.21 0.18 0.18
Net Realized and Unrealized Gain
(Loss) On Investments . . . . . . . . . (0.13) (0.01) (0.03)
------ ------ ------

Total from Investment Operations . . . . 0.08 0.17 0.15
------ ------ ------

Distributions:
Net Investment Income . . . . . . . . . . . . . . . . (0.14) (0.14) (0.14)
------ ------ ------

Net Asset Value, End of Period . . . . . . . . . . . $ 9.94 $ 9.94 $ 9.94

====== ====== ======
Total Return<F(5)> . . . . . . . . . . . . . . . . . 0.80% 1.69% 1.48%
====== ====== ======
<PAGE>
Ratios and Supplemental Data:
Net Assets, End of Period (000's) . . . . . . . . . . $110,666 $232 $743
Ratios After Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets . . . . . . . . . 1.00%<F(4)> 1.25%<F(4)> 1.25%<F(4)>

Net Investment Income to Average Net
Assets . . . . . . . . . . . . . . . . . 8.52%<F(4)> 8.26%<F(4)> 8.37%<F(4)>
Ratios Before Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets . . . . . . . . . 1.32%<F(4)> 1.57%<F(4)> 1.57%<F(4)>
Net Investment Income to Average Net
Assets . . . . . . . . . . . . . . . . . 8.20%<F(4)> 7.94%<F(4)> 8.05%<F(4)>
Portfolio Turnover Rate . . . . . . . . . . . . . . . 18% 18% 18%

<F(5)> Total return would have been lower had the Fund's investment adviser not waived and/or reimbursed certain expenses
during the period ended June 30, 1996.
<F(6)> Per share amounts for the period ended June 30, 1996 are based on average outstanding shares.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. Equity Fund
----------------
Group Retirement
Premier Shares Retail Shares Plan Shares
-------------- ------------- ----------------
January 2, 1996<F(2)> January 4, 1996<F(3)> January 4, 1996<F(3)>
to June 30, to June 30, to June 30,
1996<F(6)> 1996<F(6)> 1996<F(6)>
(Unaudited) (Unaudited) (Unaudited)
---------------------- ---------------------- ----------------------

<S> <C> <C> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . $10.00 $10.00 $10.00
------ ------ ------
Income From Investment Operations:
Net Investment Income (Loss)<F(4)> . . . . . . . . . . 0.09 0.07 0.07
Net Realized and Unrealized Gain (Loss)
On Investments . . . . . . . . . . . . . . . . 0.42 0.43 0.43
------ ------ ------
Total from Investment Operations . . . . . . . 0.51 0.50 0.50
------ ------ ------

Net Asset Value, End of Period . . . . . . . . . . . . . . $10.51 $10.50 $10.50
====== ====== ======
Total Return<F(5)> . . . . . . . . . . . . . . . . . . . . 5.10% 5.00% 5.00%
====== ====== ======
Ratios and Supplemental Data:
Net Assets, End of Period (000's) . . . . . . . . . . . . . $10,971 $482 $ 76
Ratios After Expense Waiver and/or Reimbursement:

Expenses to Average Net Assets . . . . . . . . . . . . 1.10%<F(1)> 1.35%<F(1)> 1.35%<F(1)>
Net Investment Income to Average Net Assets . . . . . . 1.81%<F(1)> 1.29%<F(1)> 1.29%<F(1)>
Ratios Before Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets . . . . . . . . . . . . 2.75%<F(1)> 3.00%<F(1)> 3.00%<F(1)>
Net Investment Income to Average Net Assets . . . . . . 0.16%<F(1)> (0.36)%<F(1)> (0.36)%<F(1)>
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . 30% 30% 30%
Average Commission Rate . . . . . . . . . . . . . . . . . . $0.0396 $0.0396 $0.0396

<FN>
<F(1)> Annualized.
<F(2)> Commencement of Fund operations.
<F(3)> Initial offering of shares by the Fund.
<F(4)> The effect to net investment income per share of voluntarily waived fees and/or reimbursed expenses was:
<PAGE>
Period Ended
June 30, 1996
-------------
Premier Shares . . . . . . . . . . . . . . $0.08
Retail Shares . . . . . . . . . . . . . . $0.08
Group Retirement Plan Shares . . . . . . . $0.08
<F(5)> Total return would have been lower had the Fund's investment adviser not waived and/or reimbursed certain expenses
during the period ended June 30, 1996.
<F(6)> Per share amounts for the period ended June 30, 1996 are based on average outstanding shares.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Europe Equity Fund
------------------
Group Retirement
Premier Shares Retail Shares Plan Shares
-------------- ------------- ----------------
April 1, 1996<F(2)> April 11, 1996<F(3)> April 12, 1996<F(3)>
to June 30, to June 30, to June 30,
1996<F(6)> 1996<F(6)> 1996<F(6)>
(Unaudited) (Unaudited) (Unaudited)
---------------------- ---------------------- ----------------------

<S> <C> <C> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . $10.00 $ 9.93 $ 9.92
------ ------ ------
Income From Investment Operations:
Net Investment Income (Loss)<F(4)> . . . . . . . . . . 0.06 0.05 0.06
Net Realized and Unrealized Gain (Loss)
On Investments . . . . . . . . . . . . . . . . 0.28 0.36 0.36

------ ------ ------
Total from Investment Operations . . . . . . . 0.34 0.41 0.42
------ ------ ------
Net Asset Value, End of Period . . . . . . . . . . . . . . $10.34 $10.34 $10.34
====== ====== ======
Total Return<F(5)> . . . . . . . . . . . . . . . . . . . . 3.40% 4.13% 4.23%
====== ====== ======
Ratios and Supplemental Data:

Net Assets, End of Period (000's) . . . . . . . . . . . . . $52,692 $470 $5
Ratios After Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets . . . . . . . . . . . . 1.60%<F(1)> 1.85%<F(1)> 1.85%<F(1)>
Net Investment Income to Average Net Assets . . . . . . 2.31%<F(1)> 2.34%<F(1)> 2.61%<F(1)>
Ratios Before Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets . . . . . . . . . . . . 1.83%<F(1)> 2.08%<F(1)> 2.08%<F(1)>
Net Investment Income to Average Net Assets . . . . . . 2.08%<F(1)> 2.11%<F(1)> 2.38%<F(1)>
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . 8% 8% 8%

Average Commission Rate . . . . . . . . . . . . . . . . . . $0.0635 $0.0635 $0.0635
<FN>
<F(1)> Annualized.
<F(2)> Commencement of Fund operations.
<F(3)> Initial offering of shares by the Fund.
<F(4)> The effect to net investment income per share of voluntarily waived fees and/or reimbursed expenses was:
<PAGE>
Period Ended
June 30, 1996
-------------
Premier Shares . . . . . . . . . . . . . . $0.01
Retail Shares . . . . . . . . . . . . . . $0.01
Group Retirement Plan Shares . . . . . . . $0.01
<F(5)> Total return would have been lower had the Fund's investment adviser not waived and/or reimbursed certain expenses
during the period ended June 30, 1996.
<F(6)> Per share amounts for the period ended June 30, 1996 are based on average outstanding shares.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

The investment objective of each Fund is described below, together with
the policies it employs in seeking to achieve its objective. There is no
assurance that a Fund will attain its objective. Each Fund's investment
objective and the investment policies described below are not fundamental and
may be changed by the Company's Board of Directors without shareholder
approval. In addition to the investment policies described below, each Fund's
Adviser may utilize certain investment strategies and techniques in managing
the Fund, as described below under "Other Investments and Investment
Strategies."

The Funds

The High Income Fund

The High Income Fund's investment objective is high current income. The
High Income Fund seeks to achieve its investment objective by investing
primarily in a diversified portfolio of high yield securities with maturities
of less than 10 years rated in medium to lower rating categories or determined
by the U.S. Adviser to be of comparable quality to securities rated in medium
to lower rating categories.

The Fund intends to invest, under normal market conditions, at least 80%
of its total assets in "bonds" rated at the time of investment "Baa" to "B" by
Moody's Investors Service, Inc. ("Moody's") or "BBB" to "B" by Standard &
Poor's Corporation ("S&P"), or in securities determined by the U.S. Adviser to
be of comparable quality. For purposes of the foregoing policy, the Fund
defines "bonds" to include bonds, notes and debentures issued by U.S. and non-
U.S. issuers. The Fund will not invest any of its assets in securities which,
at the time of investment, are rated "Caa" or lower by Moody's or "CCC" or
lower by S&P, or in comparable unrated securities. To the extent that the
rating of any security held by the Fund falls below "B" by Moody's or S&P, the
U.S. Adviser intends to dispose of such security within a reasonable period of
time depending on market and issuer-specific conditions. The U.S. Adviser
believes that medium- and lower-rated and comparable unrated securities offer
yields that fluctuate over time but that are generally superior to the yields
offered by higher rated securities. However, such securities also involve
significantly greater risks than higher rated securities, including price
volatility and risk of default in the payment of interest and principal. See
"Risk Factors and Special Considerations - High Yield Securities."

The Fund may invest up to 15% of its total assets in non-U.S. dollar-
denominated securities. To the extent that the Fund invests in non-U.S. dollar-
denominated securities, changes in foreign currency exchange rates will affect
the value of the securities in its portfolio and the unrealized appreciation
and depreciation of investments. See "Risk Factors and Special Considerations -
Risk of Investment in Foreign Securities."
As used in this Prospectus, "high yield securities" includes debt
obligations of all types issued by U.S. and non-U.S. corporate and governmental
<PAGE>
issuers, including bonds, debentures and notes, and stocks, such as preferred
stocks, having priority over any other class of stock as to the distribution of
assets or payment of dividends. A high yield security itself may be convertible
into or exchangeable for equity securities, or it may carry with it the right
to acquire equity securities evidenced by warrants attached to the security or
acquired as part of a unit with the security.

Debt securities differ in their interest rates and maturities, among other
factors. The maturity of the debt securities in the Fund's portfolio will be
based in large part on the U.S. Adviser's expectations as to future changes in
interest rates. For example, if the U.S. Adviser expects interest rates to
rise, the Fund might invest more heavily in securities with shorter maturities,
enabling the Fund to benefit from purchases of longer-term securities after
rates have risen. Conversely, if the U.S. Adviser expects interest rates to
fall, the Fund might invest more heavily in securities with longer maturities,
in order to take advantage of the higher rates then available. However, under
normal market conditions, the U.S. Adviser anticipates that the Fund's
portfolio securities will have an assumed dollar-weighted average maturity of
between five and seven years.
The U.S. Adviser emphasizes high yield securities with a target yield of
300-500 basis points above the corresponding U.S. Treasury security, and seeks
to maintain an average credit quality of BB-. The U.S. Adviser seeks to
actively manage credit and interest rate risk through credit analysis, credit
diversity and emphasis on short to intermediate maturities. In addition, in
light of the risks associated with investing in high yield securities, the U.S.
Adviser takes various factors into consideration in evaluating securities for
purchase by the Fund. Those factors will typically include one or more of the
following: (i) yield to maturity, yield to call (where appropriate), current
yield and the price of the security relative to other securities of comparable
quality and maturity, (ii) the issuer's financial resources, its sensitivity to
economic conditions and trends and its operating history, (iii) review of the
terms under which securities are issued and the nature of and coverage under
financial covenants and (iv) the experience and track record of the issuer's
management. In addition, the U.S. Adviser expects to invest the assets of the
Fund in a broad range of issuers and industries.

The Fund may invest up to 20% of its total assets in common stock,
preferred stock (including convertible preferred stock), warrants, convertible
securities or other equity securities. The Fund will generally hold such equity
investments as a result of purchases of unit offerings of fixed income
securities which include such securities or in connection with actual or
proposed conversion or exchange of fixed income securities, but may also
purchase equity securities not associated with fixed-income securities when, in
the opinion of the U.S. Adviser, such purchase is appropriate.

There may be times when, in the judgment of the U.S. Adviser, conditions
in the securities markets would make pursuing the Fund's basic investment
strategy inconsistent with the best interests of the Fund's shareholders. At
such times, the U.S. Adviser may employ alternative strategies, including
investment of a substantial portion of the Fund's assets in securities rated
higher than "Baa" by Moody's or "BBB" by S&P, or in securities of comparable
quality to securities with such ratings.
<PAGE>
The U.S. Equity Fund

The U.S. Equity Fund's investment objective is capital appreciation. The
Fund seeks to achieve its investment objective by investing primarily in a
diversified portfolio of common stocks of issuers with market capitalization in
excess of $500 million which the U.S. Adviser believes are selling below their
inherent value based on factors such as fundamental business and financial
prospects, economic forecasts, political factors and market conditions. Under
normal market conditions, at least 65% of the Fund's total assets will be
invested in common stocks issued by U.S. issuers with market capitalization in
excess of $500 million. The portion of the Fund's assets not invested in common
stocks of U.S. issuers with market capitalization in excess of $500 million may
be invested in preferred stock, convertible securities, rights and warrants,
depositary receipts, Temporary Investments as described below, and in common
stocks of U.S. issuers with market capitalization of $500 million or less.
Issuers with smaller market capitalizations are subject to a greater degree of
changes in earnings and business prospects than larger, more established
companies. In addition, securities of smaller capitalization companies are
traded in lower volume than are those issued by larger companies and are more
volatile than those of larger companies. Up to 15% of the Fund's total assets
may be invested in equity securities issued by non-U.S. issuers and depositary
receipts with respect to such securities. See "Risk Factors and Special
Considerations - Risk of Investments in Foreign Securities."
Although the Fund's portfolio is expected to be comprised primarily of
securities that are publicly traded and registered under the Securities Act of
1933, as amended (the "Securities Act"), and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Fund may also from time to time
invest in securities for which a public market does not exist or whose transfer
will be restricted under the Securities Act. See "Other Investments and
Investment Strategies - Illiquid Securities".

In managing the Fund, the U.S. Adviser utilizes a value-oriented, "bottom-
up" investment approach, focusing on attractive valuations relative to earnings
growth and business prospects. The U.S. Adviser attempts to structure a
portfolio of stocks whose average 5-year estimated earnings per share growth
rate is higher than that of the S&P 500 Index, which the Adviser considers to
be the Fund's benchmark, and whose average price-to-earnings ratio is below
that of the Index. Emphasis is placed on industries undergoing fundamental or
secular changes which the U.S. Adviser believes will ultimately lead to
improved earnings growth. Through fundamental research the U.S. Adviser
establishes a "fair value" for portfolio holdings and actively trades selected
holdings around their established "fair value" to improve returns. In addition,
the U.S. Adviser may employ a "Buy-Write" strategy for equity securities which
are trading within a range which the U.S. Adviser believes already reflects a
fair value for such securities. Under such circumstances, the Fund may write a
call option in an amount up to the number of shares of the underlying security
it has purchased, thereby generating income from the sale of the call option.
This strategy is intended to both enhance the Fund's returns and reduce some of
its risk by lowering the break-even point of the Fund's individual underlying
security position. A "Buy-Write" strategy is generally considered more
conservative than an outright purchase of the underlying security, but limits
potential capital gains by the sale of the call option. For a discussion of the
<PAGE>
Fund's use of call options and other hedging and derivatives transactions, see
"Other Investments and Investment Strategies - Hedging and Derivatives" below
and "Investment Objectives and Policies-Additional Information on Portfolio
Instruments and Certain Investment Strategies" in the Statement of Additional
Information.

The Europe Equity Fund

The Europe Equity Fund's investment objective is long-term capital
appreciation. The Fund intends to invest primarily in a diversified portfolio
of common stocks of "European Companies." Under normal market conditions, at
least 65% of the total assets of the Fund will be invested in common stocks of
"European Companies." "European Companies" include companies that (i) are
organized under the laws of a European country, (ii) regardless of where
organized, derive at least 50% of their revenues from goods produced or sold,
investments made or services performed, in or with a European country or
countries, or have at least 50% of their assets in a European country or
countries, or (iii) have securities which are traded principally on a stock
exchange in a European country. The European Adviser intends under current
market conditions to focus on companies organized under the laws of Austria,
Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, the Netherlands,
Spain, Sweden, Switzerland and the United Kingdom. The Fund may also invest
from time to time in common stocks of issuers organized under the laws of
Greece, Ireland, Norway and Portugal. The European Adviser has no present
intention to invest in common stocks of issuers organized under the laws of
Eastern European countries. The portion of the Fund's assets not invested in
common stocks may be invested in preferred stock, convertible securities,
rights and warrants, depositary receipts, and Temporary Investments as
described below. Although the Fund intends to invest primarily in securities
listed on foreign stock exchanges, it will also invest in securities traded in
over-the-counter markets, and may also from time to time invest in securities
for which a public market does not exist or whose transfer will be restricted.
See "Other Investments and Investment Strategies - Illiquid Securities."

The European Adviser represents a joint venture between Lipper and Prime,
S.p.A., a member of the Fiat group of companies, and combines the investment
approach developed by Lipper with Prime S.p.A.'s European-based investment
management expertise. The European Adviser emphasizes those companies that it
believes will benefit from the political, social and economic changes and
reforms taking place in Europe. Common characteristics shared by such companies
include product lines or services with historical and projected rising demand,
superior historical and projected growth prospects and financial strength to
support long-term growth through capital investment.

The Fund does not intend to concentrate its investments in a particular
industry or group of industries, and expects to invest its assets in a broad
range of issuers. While the Fund is not subject to any specific geographic
diversification requirements, the Fund emphasizes investment in the more liquid
European markets in an effort to reduce risk. In addition, the European Adviser
currently intends to allocate the Fund's investments among major European
markets to reduce currency risk. The Fund will not, under normal circumstances,
invest in the stocks of U.S. issuers. For a description of special
considerations and certain risks associated with investments in foreign
<PAGE>
issuers, see "Risk Factors and Special Considerations - Risk of Investment in
Foreign Securities." The Fund has no current intention of investing in
companies principally based in emerging European countries.

Temporary Investments

For temporary defensive purposes, each Fund may vary from its investment
objective and may invest, without limit (except for the limitations described
under "Investment Limitations"), in cash and/or certain high quality short-term
debt instruments described below. A Fund may also at any time invest its assets
in such instruments for cash management purposes, pending investment in
accordance with the Fund's investment objective and policies and to meet
operating expenses.

The short-term debt instruments in which a Fund may invest include
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities"); obligations issued or
guaranteed by other governments or one of their agencies or instrumentalities;
obligations issued or guaranteed by international organizations designed or
supported by multiple foreign government entities to promote economic
reconstruction or development; bank obligations, such as certificates of
deposit, time deposits and bankers' acceptances; corporate debt obligations,
including commercial paper; and repurchase agreements. To be eligible for
investment under the circumstances described above, such instruments (other
than U.S. Government Securities) must be issued by an issuer having a
short-term debt rating of A-1 or better by S&P, a rating of Prime-1 by Moody's,
a comparable rating from another nationally recognized statistical rating
organization or, if unrated, deemed to be of equivalent quality by the Fund's
Adviser.

Other Investments and Investment Strategies

Depositary Receipts. Each Fund may invest in Depositary Receipts. American
Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), European
Depositary Receipts ("EDRs") and other types of depositary receipts (which,
together with ADRs, GDRs, and EDRs, are collectively referred to as "Depositary
Receipts") evidence ownership of underlying securities issued by either a non-
U.S. or a U.S. corporation that have been deposited with a depositary or
custodian bank. Depositary Receipts may be issued in connection with an
offering of securities by the issuer of the underlying securities or issued by
a depositary bank as a vehicle to promote investment and trading in the
underlying securities. ADRs are receipts issued by U.S. banks or trust
companies in respect of securities of non-U.S. issuers held on deposit for use
in the U.S. securities markets. GDRs, EDRs and other types of Depositary
Receipts are typically issued by a U.S. bank or trust company and traded
principally in the U.S. and other international markets. Each Fund will treat
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. While Depositary Receipts may not necessarily be
denominated in the same currency as the securities into which they may be
converted, they entail certain of the risks associated with investments in
foreign securities. See "Risk Factors and Special Considerations - Risk of
<PAGE>
Investments in Foreign Securities." Each Fund will limit its investment in
Depositary Receipts not sponsored by the issuer of the underlying securities to
no more than 5% of the value of its net assets (at the time of investment). See
the Statement of Additional Information for certain risks related to
unsponsored Depositary Receipts.

Convertible Securities. Each Fund may invest in convertible securities,
which are bonds, debentures, notes, preferred stocks or other securities that
may be converted into or exchanged for a prescribed amount of equity securities
(generally common stock) of the same or a different issuer within a particular
period of time at a specified price or formula. Convertible securities have
general characteristics similar to both fixed income and equity securities.
Although to a lesser extent than with fixed income securities generally, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the
underlying security and therefore also will react to variations in the general
market for equity securities. While no securities investments are without risk,
investments in convertible securities generally entail less risk than
investments in common stock of the same issuer.

Warrants. Each Fund may invest up to 5% of the value of its net assets
(valued at the lower of cost or market) in warrants, which are securities
permitting, but not obligating, their holder to subscribe for other securities.
Warrants do not carry with them the right to dividends or voting rights with
respect to the securities that they entitle their holder to purchase, and they
do not represent any rights in the assets of the issuer. As a result, an
investment in warrants may be considered speculative. In addition, the value of
a warrant does not necessarily change with the value of the underlying
securities and a warrant ceases to have value if it is not exercised prior to
its expiration date. Each Fund will not invest more than 2% of the value of its
net assets (valued as described above) in warrants which are not listed on the
New York or American Stock Exchanges or traded on the NASD National Market
System.

Zero Coupon Securities, Pay-in-Kind Bonds and Discount Obligations. The
High Income Fund may invest in zero coupon securities and pay-in-kind bonds. In
addition, certain of the High Income Fund's debt securities may be acquired at
a discount ("Discount Obligations"). These investments involve special risk
considerations. Zero coupon securities are debt securities that pay no cash
income but are sold at substantial discounts from their value at maturity. When
a zero coupon security is held to maturity, its entire return, which consists
of the amortization of the discount, comes from the difference between its
purchase price and its maturity value. This difference is known at the time of
purchase, so that investors holding zero coupon securities until maturity know
at the time of their investment what the expected return on their investment
will be. Certain zero coupon securities, sold at substantial discounts from
their maturity value, provide for the commencement of regular interest payments
at a deferred date. The High Income Fund also may purchase pay-in-kind bonds.
<PAGE>
Pay-in-kind bonds pay all or a portion of their interest in the form of
additional debt or equity securities.

Zero coupon securities, pay-in-kind bonds and Discount Obligations tend to
be subject to greater price fluctuations in response to changes in interest
rates than are ordinary interest-paying debt securities with similar
maturities. The value of zero coupon securities and Discount Obligations
appreciates more during periods of declining interest rates and depreciates
more during periods of rising interest rates than ordinary interest-paying debt
securities with similar maturities. Under current federal income tax law, the
High Income Fund is required to accrue as income each year the value of
securities received in respect of pay-in-kind bonds and a portion of the
original issue discount with respect to zero coupon securities and other
securities issued at a discount to the stated redemption price. In addition,
the High Income Fund will elect similar treatment for any market discount with
respect to Discount Obligations. Accordingly, the High Income Fund may have to
dispose of portfolio securities under disadvantageous circumstances in order to
generate current cash to satisfy certain distribution requirements. See
"Taxes."

Illiquid Securities. Each Fund will not invest more than 15% of the value
of its total assets in illiquid securities. Illiquid securities are securities
which may not be sold or disposed of in the ordinary course of business within
seven days at approximately the value at which the Fund has valued the
investments. Illiquid securities include securities with legal or contractual
restrictions on resale, time deposits, repurchase agreements having maturities
longer than seven days and securities that do not have readily available market
quotations and may involve the risk that the Fund may be unable to sell such a
security at the desired time. The price at which a Fund values these
securities could be less than that originally paid by the Fund or less than
that which may be considered the fair value of the securities. In addition,
each Fund may invest in securities that are sold in private placement
transactions between their issuers and their purchasers and that are neither
listed on an exchange nor traded over-the-counter. These factors may have an
adverse effect on the Fund's ability to dispose of particular securities and
may limit the Fund's ability to obtain accurate market quotations for purposes
of valuing securities and calculating net asset value and to sell securities at
fair value. If any privately placed securities held by the Fund are required to
be registered under the securities laws of one or more jurisdictions before
being resold, the Fund may be required to bear the expenses of registration. A
Fund may also purchase securities that are not registered under the Securities
Act of 1933 (the "Securities Act") but which can be sold to qualified
institutional buyers in accordance with Rule 144A under the Securities Act
("Rule 144A securities"). Rule 144A securities generally must be sold to other
qualified institutional buyers. A Fund may also invest in commercial
obligations issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors such as the
Funds who agree that they are purchasing the paper for investment and not with
a view to public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) paper normally is resold to other institutional
<PAGE>
investors like the Funds through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. If a particular investment in Rule 144A securities, Section 4(2)
paper or private placement securities is not determined to be liquid, that
investment will be included within the 15% limitation on investment in illiquid
securities. The ability to sell Rule 144A securities to qualified institutional
buyers is a relatively recent development and it is not possible to predict how
this market will mature. A Fund's Adviser will monitor the liquidity of such
restricted securities under the supervision of the Board of Directors of the
Company. See "Investment Objective and Policies - Additional Information on
Portfolio Instruments and Certain Investment Strategies - Illiquid and
Restricted Securities" in the Statement of Additional Information.

Preferred Stock. Each Fund may invest in preferred stocks. Generally,
preferred stocks are non-voting shares of a corporation which pay a fixed or
variable stream of dividends. Preferred stock has a preference over common
stock in liquidation and generally in dividends as well, but is subordinated to
the liabilities of the issuer in all respects. Preferred stock may be or may
not be convertible into common stock. As a general rule, the market value of
preferred stock with a fixed dividend rate and no conversion element varies
inversely with interest rates and perceived credit risk. Because preferred
stock is junior to debt securities and other obligations of the issuer,
deterioration in the credit quality of the issuer will cause greater changes in
the value of a preferred stock than in a more senior debt security with similar
stated yield characteristics.

Repurchase Agreements. Each Fund may purchase instruments from financial
institutions, such as banks and broker-dealers, subject to the seller's
agreement to repurchase them at an agreed upon time and price ("repurchase
agreements"). A Fund would enter into repurchase agreements to generate
additional income. The seller under a repurchase agreement will be required to
maintain the value of the securities subject to the agreement at not less than
the repurchase price. Default by the seller would, however, expose the Fund to
possible loss because of adverse market action or delay in connection with the
disposition of the underlying obligations.

Other Investment Funds. Each Fund may invest in the securities of other
investment funds to the extent permitted by the Investment Company Act of 1940,
as amended (the "1940 Act"). Under the 1940 Act, a Fund may invest up to 10% of
its total assets in shares of other investment funds and up to 5% of its total
assets in any one investment fund, provided that the investment does not
represent more than 3% of the voting stock of the acquired investment fund. By
investing in another investment fund, a Fund bears a ratable share of the other
investment fund's expenses, as well as continuing to bear the Fund's advisory
and administrative fees with respect to the amount of the investment. In
addition, each Fund may, in the future, seek to achieve its investment
objective by investing all of its assets in a no-load, open-end management
investment company having the same investment objective and policies and
substantially the same investment restrictions as those applicable to the Fund,
as described below under "Investment Limitations."
<PAGE>
When-Issued and Delayed Delivery Securities. Each Fund may purchase
securities on a "when-issued" or delayed delivery basis. When-issued and
delayed delivery securities are securities purchased for delivery beyond the
normal settlement date at a stated price. A Fund will generally not pay for
such securities or start earning income on them until they are received. Fixed
income securities purchased on a when-issued or delayed delivery basis are
recorded as an asset and are subject to changes in value based, among other
factors, upon changes in the general level of interest rates. Each Fund will
make commitments to purchase when-issued or delayed delivery securities with
the intention of actually acquiring the securities, but may sell them before
the settlement date if it is deemed advisable. When a Fund purchases securities
on a when-issued or delayed delivery basis, it will set aside securities or
cash with its custodian equal to the payment that will be due.

Borrowing. Each Fund may borrow only from banks or by entering into
reverse repurchase agreements, in aggregate amounts not to exceed 33-1/3% of
its total assets (including the amount borrowed) less its liabilities
(excluding the amount borrowed), and only for temporary or emergency purposes.
Bank borrowings may be from U.S. or foreign banks and may be secured or
unsecured. A Fund may also borrow by entering into reverse repurchase
agreements, pursuant to which it would sell portfolio securities to financial
institutions, such as banks and broker-dealers, and agree to repurchase them at
an agreed upon date and price. A Fund would also consider entering into reverse
repurchase agreements to avoid otherwise selling securities during unfavorable
market conditions to meet redemptions. Reverse repurchase agreements involve
the risk that the market value of the portfolio securities sold by the Fund may
decline below the price at which the Fund is obligated to repurchase such
securities.

Loans of Fund Securities. Each Fund may lend its portfolio securities
consistent with its investment policies, in order to generate additional
income. A Fund may lend portfolio securities against collateral, consisting of
cash or securities which are consistent with its permitted investments, which
is equal at all times to at least 100% of the value of the securities loaned.
There is no limitation on the amount of securities that may be loaned. Such
loans would involve risks of delay in receiving additional collateral or in
recovering the securities loaned or even loss of rights in the collateral
should the borrower of the securities fail financially. However, loans will be
made only to borrowers deemed by the Fund's Adviser to be of good standing and
only when, in the judgment of the Adviser, the income to be earned from the
loans justifies the attendant risks.

Short Sales. Each Fund may make short sales of securities "against the
box." A short sale is a transaction in which the Fund sells a security it does
not own in anticipation that the market price of that security will decline. In
a short sale "against the box," at the time of sale, the Fund owns or has the
immediate and unconditional right to acquire the identical security. Short
sales against the box are a form of hedging to offset potential declines in
long positions in similar securities.
<PAGE>
Hedging and Derivatives. Each Fund is authorized to use various hedging
and investment strategies described below to hedge market risks (such as broad
or specific market movements and interest rates or other factors relevant to
the Fund's investments, such as rates of inflation), to manage the effective
maturity or duration of securities held by the Fund, or to seek to increase the
Fund's income or capital appreciation. Over time, techniques and instruments
may change as new instruments and strategies are developed or regulatory
changes occur. Limitations on the portion of each Fund's assets that may be
used in connection with the investment strategies described below appear in the
Statement of Additional Information.

Subject to the constraints described above, each Fund may purchase and
sell (or write) exchange listed and over-the-counter put and call options on
securities, securities indices, currencies and other financial instruments and
enter into currency forward contracts (collectively, these transactions are
referred to in this Prospectus as "Derivatives"). The Funds will not engage in
transactions in futures or options on futures.
Derivatives may be used to attempt to protect against possible changes in
the market value of securities held in or to be purchased by a Fund resulting
from securities markets or currency exchange rate fluctuations, to protect a
Fund's unrealized gains in the value of its securities, to facilitate the sale
of those securities for investment purposes, to manage the effective maturity
or duration of a Fund's portfolio, to establish a position in the derivatives
markets as a substitute for purchasing or selling particular securities or to
seek to enhance a Fund's income or gain. A Fund may use any or all types of the
above-described Derivatives at any time; no particular strategy will dictate
the use of one type of transaction rather than another, as use of any
authorized Derivative will be a function of numerous variables, including
market conditions. The ability of a Fund to utilize Derivatives successfully
will depend on its Adviser's ability to predict pertinent market movements,
which cannot be assured. These skills are different from those needed to select
securities. The use of Derivatives in certain circumstances will require a Fund
to segregate cash or other liquid assets to the extent a Fund's obligations are
not otherwise "covered" through ownership of the underlying security or
financial instrument. See "Risk Factors and Special Considerations - Other
Investments and Investment Strategies."

A detailed discussion of Derivatives, including the requirement to
segregate assets with respect to these transactions and special risks
associated with such strategies, appears in the Statement of Additional
Information.

The degree of each Fund's use of Derivatives may be limited by certain
provisions of the Code. See "Taxes."

INVESTMENT LIMITATIONS

The investment limitations enumerated below are fundamental and may not be
changed by the Company's Board of Directors without the affirmative vote of the
<PAGE>
holders of a majority of the affected Fund's outstanding shares. However, each
Fund's investment objective and the other investment policies described herein
may be changed by the Board of Directors without shareholder approval at any
time. The percentage limitations set forth below, as well as those contained
elsewhere in this Prospectus and the Statement of Additional Information, apply
at the time a transaction is effected. Subsequent changes in a percentage
resulting from market fluctuations or any other cause other than a direct
action by the Fund will not require the Fund to dispose of Fund securities or
to take other action to satisfy the percentage limitation. If there is a change
in the investment objective of a Fund, shareholders of the affected Fund should
consider whether the Fund remains an appropriate investment for them in light
of their then current financial position and needs. (A complete list of each
Fund's investment limitations that cannot be changed without a vote of
shareholders is contained in the Statement of Additional Information under
"Investment Limitations.")

Each Fund may not purchase the securities of any one issuer if as a result
of such purchase more than 5% of the value of its total assets would be
invested in the securities of such issuer, except that up to 25% of the value
of a Fund's total assets may be invested without regard to this 5% limitation;
provided that there is no limitation with respect to investments in U.S.
Government Securities; and provided further, that each Fund may invest all or
substantially all of its assets in another registered investment company having
the same investment objective and policies and substantially the same
investment restrictions as those with respect to the Fund.
Each Fund may not borrow money, except that each Fund may borrow money
from banks or enter into reverse repurchase agreements, in each case for
temporary or emergency purposes only (not for leveraging or investment), in
aggregate amounts not exceeding 33-1/3% (including the amount borrowed) of the
value of its total assets at the time of such borrowing. For purposes of the
foregoing investment limitation, the term "total assets" shall be calculated
after giving effect to the net proceeds of any borrowings and reduced by any
liabilities and indebtedness other than such borrowings. Additional investments
will not be made by a Fund, including interests in another registered
investment company, when borrowings exceed 5% of total net assets.

A Fund may not purchase any securities which would cause 25% or more of
the value of its total assets at the time of such purchase to be invested in
the securities of one or more issuers conducting their principal business
activities in the same industry; provided that there is no limitation with
respect to investments in U.S. Government Securities; and provided further,
that the Fund may invest all or substantially all of its assets in another
registered investment company having the same investment objective and policies
and substantially the same investment restrictions as those with respect to the
Fund.

Each Fund may, in the future, seek to achieve its investment objective by
investing all of its assets in a no-load, open-end management investment
company having the same investment objective and policies and substantially the
same investment restrictions as those applicable to the Fund. In such event,
the Fund's investment advisory agreement would be terminated since the
<PAGE>
investment management would be performed by or on behalf of such other
investment company.

THE TRANSFERS

Each of the High Income Fund and the Europe Equity Fund were formed as a
successor investment vehicle for a corresponding limited partnership (each
individually a "Partnership" and, collectively, the "Partnerships") for which
Lipper or the European Adviser acted as general partner and investment adviser
since inception. On April 1, 1996, each such Fund exchanged Premier Shares for
certain portfolio securities of its corresponding Partnership (individually a
"Transfer" and, collectively, the "Transfers"). Premier Shares received in the
Transfers were distributed to each Partnership's limited partners who elected
to participate in the Transfers. To the extent that a Fund acquired securities
in a Transfer that have appreciated in value from the date originally acquired
by its corresponding Partnership, the Transfer may have adverse tax
consequences to investors who acquire shares of the Fund in the continuous
offering after the Transfer. If a Fund sells securities acquired in a Transfer
that have appreciated in value from the date they were acquired by its
corresponding Partnership, the amount of any gain with respect to such
securities (including any appreciation in value from the date they were
acquired by the Partnership through the date of the Transfer) would be taxable
to all shareholders, including new shareholders as well as those shareholders
who were former limited partners of the Partnership. The effect of this would
be to tax new shareholders on a distribution that economically represents a
return of a portion of the purchase price of their shares rather than on an
increase in the value of their investment. The amount of any such gain that
would be taxable to a shareholder is dependent on a number of factors, and
there is no assurance that any gains existing at the time of the Transfer would
in fact be recognized. Moreover, any tax liability would affect shareholders
differently, depending on, among other things, individual decisions to redeem
or continue to hold shares, the timing of such decisions, and applicable tax
rates. See "Taxes-The Transfers."

RISK FACTORS AND SPECIAL CONSIDERATIONS

Net Asset Value Fluctuation; Changes in Interest Rates Each Fund's net asset
value, and hence the value of its shares, will fluctuate, reflecting
fluctuations in the market value of its portfolio positions. To the extent that
a Fund invests in fixed income securities, the Fund's net asset value can be
expected to change as general levels of interest rates fluctuate. Except to the
extent that values are affected independently by other factors such as
developments relating to a specific issuer, when interest rates decline, the
value of a fixed income investment can generally be expected to rise.
Conversely, when interest rates rise, the value of a fixed income investment
can generally be expected to decline. These fluctuations can be expected to be
<PAGE>
greater with respect to investments in fixed income securities with longer
maturities than investments in securities with shorter maturities. Other
factors affecting the value of a Fund's securities include, among other things,
(1) changes in the actual and perceived creditworthiness of the issuers of such
securities, (2) social, economic or political factors, (3) factors affecting
the industry in which the issuer operates, such as competition or technological
advances and (4) factors affecting the issuer directly, such as management
changes, labor relations, collapse of key suppliers or customers, or material
changes in overhead. There is no assurance that the Funds will achieve their
investment objectives.

High Yield Securities

The High Income Fund will invest all or substantially all of its assets in
high yield securities, commonly known as "junk bonds". High yield securities
are those securities rated below investment grade (i.e., rated below "Baa" by
Moody's or below "BBB" by S&P) and unrated securities of comparable quality.
Securities rated below investment grade and comparable unrated securities
involve greater risk, including greater price volatility and a greater risk of
default in the timely payment of principal and interest, than higher rated
securities. Under rating agency guidelines, securities which are rated in the
category "B" (the lowest category in which the High Income Fund may make an
initial investment) generally lack characteristics of a desirable investment,
and assurance of interest and principal payments or of maintenance and other
terms of the contract over any long period of time may be small. Such
securities are considered speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligations. Unrated securities deemed comparable to these rated securities
will have similar characteristics. Accordingly, it is possible that these types
of factors could, in certain instances, reduce the value of securities held by
the Fund with a commensurate effect on the value of Fund shares. Therefore, an
investment in the Fund should not be considered as a complete investment
program.

The secondary markets for high yield securities are not as liquid as the
secondary markets for higher rated securities. The secondary markets for high
yield securities are characterized by relatively few market makers and
participants in the market are mostly institutional investors, including
insurance companies, banks, other financial institutions and mutual funds. In
addition, the trading volume for high yield securities is generally lower than
that for higher-rated securities. Moreover, the secondary markets for high
yield securities could contract under adverse market or economic conditions
independent of any specific adverse changes in the condition of a particular
issuer. These factors may have an adverse effect on the High Income Fund's
ability to dispose of particular portfolio investments and may limit its
ability to obtain accurate market quotations for purposes of valuing securities
and calculating net asset value. If the High Income Fund is not able to obtain
precise or accurate market quotations for a particular security, it will become
more difficult for the Board of Directors to value the High Income Fund's
portfolio securities and the Directors may have to use a greater degree of
judgment in making such valuations. Furthermore, adverse publicity and investor
perceptions about lower-rated securities, whether or not based on fundamental
<PAGE>
analysis, may tend to decrease the market value and liquidity of such
lower-rated securities. Less liquid secondary markets may also affect the High
Income Fund's ability to sell securities at their fair value. In addition, the
High Income Fund is permitted to invest up to 15% of its net assets in illiquid
securities, which may be more difficult to value and to sell at fair value. If
the secondary markets for high yield securities contract due to adverse
economic conditions or for other reasons, certain previously liquid securities
in the High Income Fund's portfolio may become illiquid and the proportion of
the High Income Fund's assets invested in illiquid securities may increase.

The ratings of securities by Moody's and S&P are a generally accepted
barometer of credit risk. They are, however, subject to certain limitations
from an investor's standpoint. The rating of an issuer is heavily weighted by
past developments and does not necessarily reflect probable future conditions.
There is frequently a lag between the time a rating is assigned and the time it
is updated. In addition, there may be varying degrees of difference in credit
risk of securities within each rating category in which the High Income Fund
may invest. See Appendix A to this Prospectus for a description of such
ratings. Achievement of the High Income Fund's investment objective may be more
dependent on the U.S. Adviser's credit analysis of issuers than would be the
case if the Fund invested in higher quality securities.
While the market values of securities rated below investment grade and
comparable unrated securities tend to react less to fluctuations in interest
rate levels than do those of higher-rated securities, the market values of
certain of these securities also tend to be more sensitive to individual issuer
developments and changes in economic conditions than higher-rated securities.
In addition, such securities generally present a higher degree of credit risk.
Issuers of these securities are often highly leveraged and may not have more
traditional methods of financing available to them, so that their ability to
service their debt obligations during an economic downturn or during sustained
periods of rising interest rates may be impaired. The risk of loss due to
default in payment of interest or principal by such issuers is significantly
greater than with investment grade securities because such securities
frequently are subordinated to the prior payment of senior indebtedness.

Many fixed income securities contain call or buy-back features which
permit the issuer of the security to call or repurchase it. Such securities may
present risks based on payment expectations. If an issuer exercises such a
"call option" and redeems the security, a Fund may have to replace the called
security with a lower yielding security, resulting in a decreased rate of
return for the Fund.

Risks of Investment in Foreign Securities
The Europe Equity Fund will primarily invest, and the High Income Fund and
the U.S. Equity Fund will from time to time invest, in obligations of foreign
corporate and government issuers. Securities of non-U.S. issuers may trade in
U.S. or foreign securities markets. Securities of non-U.S. issuers involve
certain considerations and risks not typically associated with investing in
securities of U.S. companies or the U.S. Government, including uncertainties
regarding future social, political and economic developments, the possible
imposition of foreign withholding taxes on interest income payable on
<PAGE>
securities held by a Fund, the possible seizure or nationalization of foreign
assets and the possible establishment of foreign government laws or
restrictions that might adversely affect the payment of interest on debt
securities held by the Fund. Foreign securities markets may have substantially
less volume and may be smaller, less liquid and subject to greater price
volatility than U.S. markets. Delays or problems with settlement in foreign
markets could affect the liquidity of a Fund's foreign investments and
adversely affect performance. Investment in foreign securities also may result
in higher brokerage and other costs and the imposition of transfer taxes or
transaction charges. Investment by a Fund in non-U.S. issuers may be restricted
or controlled to varying degrees. These restrictions may limit or preclude
investment in certain issuers or countries and may increase the costs and
expenses of the Fund. In addition, the repatriation of both investment income
and capital from some countries requires governmental approval and if there is
a deterioration in a country's balance of payments or for other reasons, a
country may impose temporary restrictions on foreign capital remittances
abroad. Even where there is no outright restriction on repatriation of capital,
the mechanics of repatriation may affect certain aspects of the operation of a
Fund. A Fund could be adversely affected by delays in, or a refusal to grant
any required governmental approval for repatriation of capital, as well as by
the application to the Fund of any restrictions on investments. In addition,
there may be less publicly available information about a non-U.S. issuer than
about a U.S. issuer, and non-U.S. issuers may not be subject to the same
accounting, auditing and financial recordkeeping standards and requirements as
U.S. issuers. Finally, in the event of a default in any such foreign
obligations, it may be more difficult for a Fund to obtain or enforce a
judgment against the issuers of such securities. Because a Fund may invest in
the securities of foreign issuers which are denominated in foreign currencies,
the strength or weakness of the U.S. dollar against such foreign currencies
will account for part of the Funds' investment performance. A decline in the
value of any particular currency against the U.S. dollar will cause a decline
in the U.S. dollar value of a Fund's holdings of securities denominated in such
currency and, therefore, will cause an overall decline in the Funds' net asset
value and any net investment income and capital gains to be distributed in U.S.
dollars to shareholders of the Fund.

Other Investments, Investment Policies and Investment Strategies; Prior History

Certain risks and special considerations of certain of the investment
practices in which the Funds may engage are described above under "Investment
Objectives and Policies - Other Investments and Investment Strategies."

Derivatives involve special risks, including possible default by the other
party to the transaction, illiquidity and, to the extent the Adviser's view as
to certain market movements is incorrect, the risk that the use of Derivatives
could result in greater losses than if they had not been used. Use of put and
call options could result in losses to a Fund, force the purchase or sale of
portfolio securities at inopportune times or for prices higher or lower than
current market values, or cause a Fund to hold a security it might otherwise
not purchase or sell. The use of currency transactions could result in a Fund's
incurring losses as a result of the imposition of exchange controls or the
inability to deliver or receive a specified currency in addition to exchange
<PAGE>
rate fluctuations. Losses resulting from the use of Derivatives will reduce a
Fund's net asset value, and possibly income, and the losses may be greater than
if Derivatives had not been used. Additional information regarding the risks
and special considerations associated with Derivatives appears in the Statement
of Additional Information.

As stated above under "The Transfers," each of the High Income Fund and
the Europe Equity Fund were formed as a successor investment vehicle for a
corresponding Partnership. Neither Partnership was registered under and
subject to the provisions of the 1940 Act, pursuant to an exemption from
registration for entities which have fewer than 100 holders. As unregistered
entities, neither Partnership was required to comply with the requirements of
the 1940 Act, or the diversification, distribution and other requirements
imposed by the Code. To the extent that a Fund acquired securities in
a Transfer that have appreciated in value from the date originally acquired
by its corresponding Partnership, the Transfer may have adverse tax
consequences to investors who acquire shares of the Fund in the continuous
offering. To the extent that a Fund sells such securities, new shareholders
may be taxed onm a distribution that economically represents a return of a
portion of the purchase price of their shares. The U.S. Equity Fund has
no prior operating history. See "Performance Information" below for
further information regarding the historical investment performance
of the Partnerships.

PURCHASE OF SHARES

Shares of each class of each Fund may be purchased without any sales
charge through the Distributor, through certain investment dealers, banks and
financial services firms that provide distribution, administrative or
shareholder services to the Funds ("Participating Dealers"), or by mailing a
purchase order directly to the Transfer Agent, at their net asset value next
determined after the purchase order is received. The Distributor and
Participating Dealers are responsible for forwarding orders they receive to the
Transfer Agent by the applicable times described below on the same day as their
receipt of the orders to permit purchase of shares as described above, and
their failure to do so will result in investors not receiving that day's net
asset value. See "Valuation of Shares."

Premier Shares of each Fund are offered for sale to purchasers (other than
purchasers eligible to purchase Group Retirement Plan Shares) who invest a
minimum of $1,000,000 in the Fund. The Company and the Distributor reserve the
right to waive or reduce the minimum initial investment with respect to certain
accounts. Retail Shares of a Fund are offered for sale to purchasers who invest
a minimum of $10,000 in the Fund ($2,000 with respect to Individual Retirement
Accounts). Retail Shares of each Fund are subject to an ongoing 12b-1 fee at an
annual rate of up to 0.25% of their average daily net assets. See "Distribution
and Service Plans."

Group Retirement Plan Shares of a Fund are offered for sale with no
minimum investment requirement to retirement plans, including, but not limited
to, qualified 401(k) plans, provided such plans meet the required number of
eligible employees or the required amount of assets, and deferred compensation
plans under 403(b)(7) of the Code. Group Retirement Plan Shares of each Fund
are subject to a service fee of up to 0.25% of their average daily net assets.
See "Distribution and Service Plans." Investors should contact the Distributor
at the address and telephone number set forth on the cover of this Prospectus
<PAGE>
for further information regarding the eligibility requirements for Group
Retirement Plan Shares.

Each Fund has established a subsequent investment minimum of $2,500 for
its Premier and Retail Shares. Individual Retirement Accounts are subject to a
$250 subsequent investment minimum. Group Retirement Plan Shares are not
subject to any subsequent investment minimum. Each Fund reserves the right to
vary any initial or subsequent investment minimum at any time.
Purchase orders received by the Distributor or a Participating Dealer and
transmitted to the Transfer Agent prior to the close of regular trading on the
New York Stock Exchange, Inc. (the "NYSE"), generally 4:00 p.m., New York time,
on any day net asset value is calculated are priced according to the net asset
value of the purchased class of shares determined on that day. Purchase orders
received by the Transfer Agent after the close of regular trading on the NYSE
are priced as of the time the net asset value per share of the relevant class
is next determined. See "Valuation of Shares." Payment is generally due to the
Distributor or a Participating Dealer on the third business day (the
"Settlement Date") after the trade date. Investors who make payment prior to a
Settlement Date may permit the payment to be held in their brokerage accounts
or may designate a temporary investment for such payment until the Settlement
Date. Each Fund reserves the right to reject any purchase order and to suspend
the offering of its shares for a period of time.

Initial Investments by Mail

Shares of a Fund may be purchased by completing and signing an account
application and mailing it, together with a check payable to "The Lipper Funds,
Inc.", to:
The Lipper Funds, Inc.
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798

Payment for the purchase of shares received by mail will be credited to an
investor's account at the net asset value per share of the purchased class of
shares of a Fund next determined after receipt.

Initial Investment by Wire
Shares of a Fund may also be purchased by wiring Federal Funds to the
Company's custodian (see instructions below). In order to insure prompt
crediting of the Federal Funds wire, it is important to follow these steps:

(a) The investor must telephone the Transfer Agent (toll-free 1-800-
LIPPER9) and provide name, address, telephone number, social security or tax
I.D. number, the Fund and class of shares to be purchased, the amount being
wired and the name of the bank wiring the funds. (Investors with existing
accounts should also notify the Transfer Agent prior to wiring funds). An
account number will then be provided;
<PAGE>
(b) The investor must instruct his or her bank to wire the specified
amount to the Company's custodian as follows:

The Chase Manhattan Bank
New York, N.Y. 10003
ABA # 0210-0002-1
DDA Acct. #910-2-753168
F/B/O The Lipper Funds, Inc.
Ref: [Name of Fund]
Account Number ______________
Account Name _______________
(c) The investor must forward a completed and signed account application
to the Transfer Agent, and mail a copy of the account application (manually
signed) to the Company at the address set forth above under "Initial
Investments by Mail" as soon as possible. It is important that investors
forward the account application to the Transfer Agent and the Company in a
timely manner, since shares of the Funds will not be redeemed, exchanged or
transferred until the Transfer Agent receives the shareholder's account
application. Federal Funds purchases will be accepted only on days on which
both the NYSE and the Company's custodian are open for business.

Additional Investments

An investor may add to his or her account by purchasing additional shares
of the same class of a Fund's shares by mailing a check to the Transfer Agent
(payable to "The Lipper Funds, Inc.") at its address set forth above under
"Initial Investments by Mail" or by wiring funds to the Company's custodian
using the procedures set forth above under "Initial Investment by Wire." It is
important that the account number, account name, and the Fund and class of
shares to be purchased are specified on the check or wire to ensure proper
crediting to the investor's account.
In order to ensure that wire orders are invested promptly, investors are
requested to notify the Transfer Agent prior to the wire date. Mail orders must
include the "Invest by Mail" stub which accompanies each Fund's confirmation
statement.

Other Purchase Information

Each Fund reserves the right, in its sole discretion, to suspend the
offering of its shares or reject purchase orders when, in the judgment of
management, such suspension or rejection is in the best interests of the Fund.
Purchases of shares will be made in full and fractional shares calculated
to three decimal places. In the interest of economy and convenience,
certificates for shares will not be issued except at the written request of the
shareholder. Certificates for fractional shares, however, will not be issued
under any circumstances. Investors should note that it is considerably more
difficult to redeem shares held in certificate form.

As stated above, shares of each Fund may be purchased by customers of
Participating Dealers. Participating Dealers may impose additional or different
<PAGE>
conditions or other account fees on the purchase and redemption of Fund shares.
Each Participating Dealer is responsible for transmitting to its customers a
schedule of any such fees and information regarding any additional or different
conditions regarding purchases and redemptions. Shareholders who are customers
of Participating Dealers should consult their Participating Dealer for
information regarding these fees and conditions. Certain Participating Dealers
may receive compensation from the Company, the Distributor, the Advisers, or
any of the Advisers' affiliates. A salesperson and any other person entitled to
receive compensation for selling or servicing Fund shares may receive different
compensation with respect to sales of one class of shares over another.

Participating Dealers may enter confirmed purchase orders on behalf of
their customers. If you buy shares of a Fund in this manner, your Participating
Dealer must transmit your investment order to the Transfer Agent prior to 4:00
p.m. on a business day to receive the net asset value of the purchased class
determined on the same day. Participating Dealers are solely responsible to
their customers for the timely transmission of all purchase and redemption
requests, investment information, documentation and money.

DISTRIBUTION AND SERVICE PLANS

The Company's Board of Directors has adopted a distribution plan for the
Retail Shares of each Fund pursuant to Rule 12b-1 under the 1940 Act (the
"Retail Distribution Plan"), and a shareholder servicing plan for the Group
Retirement Plan Shares of each Fund (the "Group Retirement Servicing Plan").
Potential investors should read this Prospectus in light of the terms governing
the agreement between their Participating Dealers and the Distributor.

Retail Distribution Plan

Under the Retail Distribution Plan, each Fund, at the expense of its
Retail Shares, pays the Distributor for distributing the Fund's Retail Shares
at an annual rate of up to 0.25 of 1% of the value of the average daily net
assets of such Fund's Retail Shares. The Distributor may pay one or more
Participating Dealers a fee in respect of distribution of a Fund's Retail
Shares. The Distributor determines the amounts, if any, to be paid to
Participating Dealers under the Retail Distribution Plan and the basis on which
such payments are made. The Retail Distribution Plan also provides that the
Advisers may pay Participating Dealers out of their investment advisory fees,
their past profits or any other source available to them. From time to time the
Distributor may defer or waive receipt of fees under the Retail Distribution
Plan while retaining the ability to be paid under the Retail Distribution Plan
thereafter. The foregoing fees payable under the Retail Distribution Plan are
payable without regard to actual expenses incurred.

Group Retirement Servicing Plan
The Company intends to enter into servicing agreements pursuant to which
Participating Dealers and sometimes the Distributor will render certain support
services to their customers who are beneficial owners of Group Retirement Plan
Shares. Such services are intended to supplement the services provided by the
<PAGE>
Company's administrator and Transfer Agent. Under the Group Retirement
Servicing Plan, each Fund, at the expense of its Group Retirement Plan Shares,
may pay one or more Participating Dealers and/or the Distributor up to 0.25 of
1% (on an annualized basis) of the value of the average daily net assets of
such Fund's Group Retirement Plan Shares for providing one or more of the
following services to such customers: establishing and maintaining accounts and
records relating to customers that invest in Group Retirement Plan Shares;
processing dividend and distribution payments from a Fund on behalf of
customers; arranging for bank wires; providing sub-accounting with respect to
Group Retirement Plan Shares beneficially owned by customers or the information
necessary for sub-accounting; forwarding shareholder communications from the
Funds (such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to customers; assisting
in processing purchase, exchange and redemption requests from customers and in
placing such orders with the Company's service contractors; assisting customers
in changing dividend options, account designations and addresses; providing
customers with a service that invests the assets of their accounts in Group
Retirement Plan Shares pursuant to specific or pre-authorized instructions;
providing information periodically to customers showing their positions in
Group Retirement Plan Shares and integrating such statements with those of
other transactions and balances in customers' other accounts with the
Participating Dealer; responding to customer inquiries relating to the services
performed by the Participating Dealer or the Distributor; responding to
customer inquiries concerning their investments in Group Retirement Plan
Shares; and providing other similar shareholder liaison services. Fees payable
under the Group Retirement Servicing Plan are not paid to Participating Dealers
or the Distributor with respect to other classes of shares of the Funds.
Investors who are or anticipate becoming beneficial owners of Group Retirement
Plan Shares should read this Prospectus in light of the terms and fees
governing their accounts with Participating Dealers.

Other

Banking laws and regulations, including the Glass-Steagall Act as
currently interpreted by the Board of Governors of the Federal Reserve System,
prohibit banks generally from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks from purchasing mutual fund shares
as agent for a customer. Accordingly, banks will be engaged to act as
Participating Dealers only to perform administrative and shareholder servicing
functions. The Company believes that banks, subject to banking laws and
regulations, may perform such administrative and shareholder servicing
functions without violation of such banking laws or regulations. However,
future changes in legal requirements relating to the permissible activities of
banks and their affiliates, as well as future interpretations of present
requirements, could require banks to discontinue providing such administrative
and shareholder servicing functions. If banks were required to discontinue
providing all or a part of such functions, alternative means for continuing the
servicing of such customers would be sought.
<PAGE>
In addition, state securities laws on this issue may differ from
interpretations of federal law expressed herein and banks and other financial
institutions may be required to register as dealers pursuant to state laws.

REDEMPTION OF SHARES

Shareholders may request redemption of their shares at any time. When a
redemption request is received in proper form, a Fund will redeem the shares at
the next determined net asset value of the class of shares being redeemed. The
proceeds paid to a shareholder upon redemption may be more or less than the
amount invested depending upon the net asset value of the shares being redeemed
at the time of redemption. If a shareholder holds shares in more than one class
or Fund, any request for redemption must specify the Fund and class of shares
being redeemed. In the event of a failure to specify which Fund and class, or
if the investor owns fewer shares of a class than specified, the redemption
request will be delayed until the Transfer Agent receives further instructions
from the Distributor or a Participating Dealer, or if the shareholder's account
is not with the Distributor or a Participating Dealer, from the shareholder
directly.

Each Fund normally transmits redemption proceeds for credit to the
shareholder's account at the Distributor or a Participating Dealer at no charge
within seven days after receipt of a redemption request. Generally, these funds
will not be invested for the shareholder's benefit without specific
instruction, and the Distributor will benefit from the use of temporarily
uninvested funds. A shareholder who pays for shares by personal check will be
credited with the proceeds of a redemption of those shares only after the
purchase check has been collected, which may take up to 15 days or more. A
shareholder who anticipates the need for more immediate access to his or her
investment should purchase shares with Federal Funds, by bank wire or with a
certified or cashier's check. Shares will not be redeemed until the Transfer
Agent has received the shareholder's account application.

If an investor in Premier Shares or Retail Shares of any Fund reduces the
value of his or her account to below $500,000, in the case of Premier Shares,
or $1,000, in the case of Retail Shares, such account may be subject to
redemption by the Fund, but only after the investor has been given at least 30
days in which to increase his or her account balance to more than such required
minimum account balance. Investors in Group Retirement Plan Shares are not
subject to such a minimum account balance requirement. To the extent that
shares in an investor's account are redeemed by a Fund, the investor could
reinvest in any class of shares of the Fund at a later date provided that any
eligibility requirements with respect to investing in the Fund were met at such
time. In addition, a Fund may redeem shares involuntarily or suspend the right
of redemption as permitted under the 1940 Act, or under certain special
circumstances described in the Statement of Additional Information under
"Additional Redemption Information."
Shares of each Fund may be redeemed in one of the following ways:
<PAGE>
Redemption through the Distributor or a Participating Dealer

Redemption requests may be made through the Distributor or a Participating
Dealer. A shareholder desiring to redeem shares represented by certificates
must also present such certificates to the Distributor or a Participating
Dealer endorsed for transfer (or accompanied by an endorsed stock power),
signed exactly as the shares are registered. Redemption requests involving
shares represented by certificates will not be deemed received until such
certificates are received by the Transfer Agent in proper form. The Transfer
Agent is located at 73 Tremont Street, Boston, MA. 02208.

Redemption by Mail

Redemption requests also may be mailed to the Transfer Agent at the
following address:

The Lipper Funds, Inc.
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, Massachusetts 02208-2798
A mailed request to redeem shares must include the following:

(a) Stock certificates representing the shares redeemed, if issued;

(b) A letter of instruction or a stock assignment specifying the number
of shares or dollar amount to be redeemed, as well as the Fund and class being
redeemed, signed by all registered owners of the shares in the exact names in
which they are registered;

(c) Any required signature guarantees (see "Signature Guarantees" below);
and
(d) Other supporting legal documents in the case of estates, trusts,
guardianships, custodianships, corporations, pension and profit sharing plans
and other organizations.

Shareholders who are uncertain of the requirements for redemption should
call 1-800-LIPPER9.

Signature Guarantee
To protect investors, the Company and the Transfer Agent from fraud,
signature guarantees are required for certain redemptions. Signature guarantees
are required for (1) redemptions where the proceeds are to be sent to someone
other than the registered shareholder(s) or the registered address, or (2) when
the registered shareholder requests a transfer of shares to another person(s).
The purpose of signature guarantees is to verify the identity of the party who
has authorized a redemption.

Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Exchange Act. Eligible guarantor institutions
include banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.
<PAGE>
A complete definition of eligible guarantor institutions is available from the
Transfer Agent. Broker-dealers guaranteeing signatures must be members of a
clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees. Signature guarantees
will be accepted from any eligible guarantor institution which participates in
a signature guarantee program.

The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
must specify the total number of shares, Fund and class of shares to be
redeemed; or (3) on all stock certificates tendered for redemption (in the
event that all shares being redeemed are held in certificated form).

Redemption by Telephone

Provided that an investor has previously established a telephone
redemption privilege when completing an account application, a request for
redemption of shares may be made by calling the Transfer Agent at 1-800-LIPPER9
and requesting that redemption proceeds be mailed to the investor or wired to
his or her bank. If an investor selects a telephone redemption privilege, the
investor authorizes the Transfer Agent to act on telephone instructions from
any person representing himself or herself to be the investor or a
representative of the investor's Participating Dealer, and reasonably believed
by the Transfer Agent to be genuine. The Company will require the Transfer
Agent to employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does not
follow such procedures, it may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Company nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be genuine.
When redeeming shares by telephone, an investor must have ready his or her name
and account number, as well as Fund name, Social Security number or tax I.D.
number and account address.

To change the name of the commercial bank or the account designated to
receive redemption proceeds, a written request must be sent to the Transfer
Agent at its address set forth above under "Redemption by Mail." Requests to
change the bank or account must be signed by each shareholder and each
signature must be guaranteed. An investor cannot redeem shares by telephone if
he or she holds stock certificates for the shares. Please contact 1-800-LIPPER9
for further details.

Redemption in Kind

If the Board of Directors of the Company determines that it would be
detrimental to the best interests of the remaining shareholders of a Fund to
make payment wholly or partly in cash, a Fund may pay redemption proceeds in
whole or in part by a distribution of readily marketable securities held by the
Fund in lieu of cash in conformity with applicable rules of the SEC. Investors
may incur brokerage charges on the sale of securities so received in payment of
redemptions.
<PAGE>
EXCHANGE PRIVILEGE

The Exchange Privilege enables investors to purchase, in exchange for
shares of a Fund, shares of certain other funds in the Lipper Group of Funds,
to the extent such shares are offered for sale in the investor's state of
residence and the purchase meets the minimum investment and other eligibility
requirements of the Fund into which the investor is exchanging. If an investor
desires to use the Exchange Privilege, he or she should consult the Distributor
or his or her Participating Dealer to determine if it is available and whether
any other conditions are imposed on its use.

To use the Exchange Privilege, an investor or his or her Participating
Dealer acting on his or her behalf must give exchange instructions to the
Transfer Agent by mail, or by telephone if the investor has previously
established the telephone exchange privilege, as further described below.
Shares will be exchanged at the next determined net asset value. No fees
currently are charged to shareholders directly in connection with exchanges,
although the Company reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC.

Before any exchange, an investor should carefully read the portions of
this Prospectus relating to the new Fund in which he or she wishes to invest
or, if the investor wishes to exchange into a fund not described in this
Prospectus, he or she must obtain and should carefully review a copy of the
current prospectus of the fund into which he or she wishes to exchange.

Exchanges may be subject to limitations as to amounts or frequency, and to
other restrictions established by the Company's Board of Directors to assure
that exchanges do not disadvantage the Funds or their shareholders. Shares held
in broker "street name" may not be exchanged by mail or telephone; an investor
must contact his or her Participating Dealer to exchange such shares. The
Company reserves the right to reject any exchange request in whole or in part.
The Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
The exchange of shares of one Fund for shares of another is treated for
federal income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable
gain or loss.

Exchange By Mail

In order to exchange shares by mail, an investor must include in the
exchange request his or her account number for his or her current Fund, the
name of his or her current Fund and the class which he or she wishes to
exchange from, the name of the Fund into which he or she wishes to exchange,
and the documents described in the procedures set forth above under "Redemption
of Shares - Redemption by Mail." The request to exchange shares must be sent
to:
<PAGE>
The Lipper Funds, Inc.
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798

Exchange By Telephone

Provided that an investor has previously established the telephone
exchange privilege when completing an account application, he or she may
request an exchange of shares by calling the Transfer Agent at 1-800-LIPPER9.
If an investor selects a telephone exchange privilege, he or she authorizes the
Transfer Agent to act on telephone instructions from any person representing
himself or herself to be the investor or a representative of the investor's
Participating Dealer, and reasonably believed by the Transfer Agent to be
genuine. The Company will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm
that instructions are genuine and, if it does not follow such procedures, it
may be liable for any losses due to unauthorized or fraudulent instructions.
Neither the Company nor the Transfer Agent will be liable for following
telephone instructions reasonably believed to be genuine. When exchanging
shares by telephone, an investor should have ready his or her name and account
number with the current Fund, the name of the current Fund and the class of
such Fund which he or she wishes to exchange, the name of the Fund into which
he or she wishes to exchange, his or her Social Security number or tax I.D.
number and account address.

Transfer of Registration
An investor may transfer the registration of any Fund shares to another
person by writing to the Transfer Agent at the address set forth above under
"Redemption of Shares-Redemption by Mail."

VALUATION OF SHARES

The net asset value per share of each class of shares of each Fund is
calculated Monday through Friday, except on days on which the NYSE is closed.
Currently, the NYSE is closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day (observed), Independence Day (observed), Labor Day, Thanksgiving
Day and Christmas Day.
The net asset value per share of each class of shares of a Fund is
determined as of the close of regular trading on the NYSE, and is computed by
dividing the value of the net assets of the Fund attributable to that class by
the total number of shares of that class outstanding. Generally, a Fund's
investments are valued at market value or, in the absence of a market value
with respect to any securities, at fair value as determined by or under the
direction of the Company's Board of Directors. Short-term investments that
mature in 60 days or less are valued at amortized cost whenever the Board of
Directors determines that amortized cost reflects the fair value of those
investments. Occasionally, events which affect the values of such securities
may occur between the times at which they are determined and the close of the
<PAGE>
NYSE and will therefore not be reflected in the computation of a Fund's net
asset value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value as
determined in good faith by or under procedures established by the Company's
Board of Directors. Further information regarding the Company's valuation
policies is contained in the Statement of Additional Information.

MANAGEMENT OF THE COMPANY

General

The business and affairs of the Company are managed under the direction of
the Company's Board of Directors. The Board of Directors approves all
significant agreements between the Company and the persons or companies that
furnish services to the Company, including agreements with the Distributor,
Advisers, administrator, custodian and Transfer Agent. The day-to-day
operations of the Company are delegated to the Advisers with respect to each
Fund and to the Company's administrator. The Statement of Additional
Information contains general background information regarding each director and
executive officer of the Company.

Investment Advisers

Each of the Advisers is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"). Neither of
the Advisers has previously served as an investment adviser to an investment
company registered under the 1940 Act.

The U.S. Adviser.

Lipper & Company, L.L.C., located at 101 Park Avenue, New York, New York
10178, serves as investment adviser to the High Income Fund and the U.S. Equity
Fund (the "U.S. Adviser"). The U.S. Adviser is a recently formed affiliate of
Lipper, which acts as the Fund's distributor. The U.S. Adviser was organized
by Lipper in connection with the expansion of its investment management
business to include the management of registered investment companies. Each of
the U.S. Adviser's officers or employees involved in managing the High Income
Fund and the U.S. Equity Fund is also an officer or employee of Lipper. Lipper
is a privately owned investment management and investment banking firm founded
in 1987. At June 30, 1996, Lipper managed assets having an aggregate market
value on a gross basis of $2.7 billion on behalf of more than 225 institutional
and high net worth clients. Lipper offers complementary investment strategies
in intermediate term high yield bonds, hedged convertible securities,
investment grade bonds, and U.S. and European equities and preferred stocks.
Lipper served as the general partner and investment adviser to the Partnership
corresponding to the High Income Fund since the inception of the Partnership.
Lipper also serves as the general partner to several other private investment
partnerships organized in the U.S. or offshore. Lipper is also registered as a
broker-dealer with the SEC and the NASD.
<PAGE>
Kenneth Lipper is the President of the U.S. Adviser, and has been
President of Lipper (together with its predecessor, Lipper & Company, Inc.)
since 1986. Mr. Lipper was a General Partner of Lehman Brothers Inc. from 1969
to 1975 and a General Partner and Managing Director of Salomon Brothers Inc
from 1976 to 1982. He subsequently served as Deputy Mayor of New York City from
1983 to 1985. Mr. Lipper is the author of the novel "Wall Street" and the
screenplay "City Hall". He graduated from Columbia University and Harvard Law
School and is a member of the New York State Bar. As a specialist in corporate
finance since 1969, Mr. Lipper has held all levels of responsibility as an
adviser to corporations in mergers, tender offers, convertible issues, asset
valuations and other investment banking transactions. Since 1986, Mr. Lipper
has supervised the investment management and investment banking operations of
the U.S. Adviser. He is a trustee of the Rockefeller Brothers Fund, a member of
the Federal Reserve Bank of New York's International Advisory Board and a
Senior Financial Adviser to the New York City Council. Mr. Lipper also serves
on the Harvard Executive Committee on University Resources, and the Visitor's
Committee of the Kennedy School of Government at Harvard University.

Abraham Biderman, a certified public accountant, is an Executive Vice
President of the U.S. Adviser and of Lipper and Co-Manager of Lipco Partners,
L.P., a limited partnership under management by the U.S. Adviser. Mr. Biderman
joined Lipper & Company, Inc. in 1990. He was the Commissioner of the New York
City Department of Housing, Preservation and Development from 1988 to 1989, and
in that capacity was responsible for the largest housing development project in
the United States. He was the Commissioner of the New York City Department of
Finance from 1986 to 1988, responsible for the collection of over $20 billion a
year in tax and other revenues. Mr. Biderman also served as a Special Advisor
to former Mayor Edward I. Koch from 1985 to 1987 and was an Assistant to then-
Deputy Mayor Kenneth Lipper from 1983 to 1985.
Edward Strafaci is the Director of Fixed Income Money Management for the
U.S. Adviser and for Lipper. Mr. Strafaci is principally responsible for the
trading operations of Lipco Partners. He has managed Lipco Partner's
convertible and fixed income activities since 1989, and has been a trader with
Lipco Partners since its inception in 1985. Prior to joining Lipco Partners,
Mr. Strafaci was a trader at Dean Witter Reynolds Inc. from 1984 to 1985. Mr.
Strafaci received his M.B.A. and B.A. from St. John's University.

Wayne Plewniak is responsible for the day-to-day investment activities of
the High Income Fund. Mr. Plewniak is an employee of the U.S. Adviser and
joined Lipper in 1991. Prior to joining Lipper, he served as a Senior
Investment Analyst for Bell Atlantic Corporation from 1988 to 1991,
concentrating on private placement and high-yield investments. From 1986 to
1988, Mr. Plewniak worked for Paribas North America in its Merchant Banking
department. Mr. Plewniak holds an M.B.A. from Georgetown University and a B.S.
in Industrial Engineering from Rochester Institute of Technology.

The U.S. Equity Fund is managed by an Investment Committee comprised of
Mr. Lipper, Nancy Friedman and Michael Visovsky. Nancy Friedman is an employee
of the U.S. Adviser. Ms. Friedman joined Lipper in 1993 and is a Vice President
in charge of equity research for Lipper. Prior to joining Lipper, she served as
a Securities Analyst at Lehman Brothers Inc. from 1985 to 1993. From 1982 to
1985, Ms. Friedman worked for Merrill Lynch & Co. as a Securities Analyst in
<PAGE>
its Capital Markets department. Ms. Friedman received her B.A. from Barnard
College, Columbia University and her M.B.A. from New York University. Michael
Visovsky is an employee of the U.S. Adviser and is the Director of Research for
Lipper. Mr. Visovsky is responsible for all of the U.S. Adviser's and Lipper's
equity research operations. Mr. Visovsky has been responsible for research for
the convertible arbitrage portfolio of Lipco Partners since its inception in
1985, including all equity research related to the management of such
portfolio. Previously, Mr. Visovsky was a research analyst at Dean Witter
Reynolds Inc. He received a law degree from Brooklyn Law School and is a member
of the New York State Bar. Mr. Visovsky received his M.B.A. from New York
University and his B.B.A. from Baruch College (CUNY).

The European Adviser.

Prime Lipper Asset Management, located at 101 Park Avenue, New York, New
York 10178, serves as investment adviser to the Europe Equity Fund (the
"European Adviser" and, together with the U.S. Adviser, the "Advisers"). The
European Adviser is a joint venture between subsidiaries of Lipper and Prime
S.p.A. ("Prime"). Prime is a subsidiary of Fiat S.p.A. Prime, through
subsidiaries and affiliates, is among the largest asset managers in Italy, and
specializes in management of portfolios invested in European issuers, with
approximately $4 billion of assets under management as of June 30, 1996 from
domestic and international investors.

Francesco Taranto, the Managing Director of Prime, joined the Prime Group
in 1987 as a Managing Director of PrimeGest S.p.A. Mr. Taranto's market
experience dates from 1959, and he is responsible for the overall supervision
of portfolio management of all mutual funds advised by Prime. As Chairman of
the Investment Committee of Prime, Mr. Taranto oversees the development and
implementation of investment strategy and asset allocation policy. Prior to
joining the Prime Group, he served for four years as the General Manager of
Interbancaria Gestione, a prominent Milan-based mutual fund company.

Guido Guzzetti is responsible for the day-to-day investment activities of
the Europe Equity Fund. Mr. Guzzetti has been associated with Prime since 1987.
He is responsible for the overall investment process of Prime's Europe Growth
investment strategy and for the research and development of structured asset
management products for institutional investors. Mr. Guzzetti is also Managing
Director and Chief Investment Officer of UniGest S.p.A., a mutual fund
management company with approximately $200 million under management. From 1982-
1986, Mr. Guzzetti was an information system analyst and sales representative
at IBM. Prior to that he was a researcher on mathematical and numerical
modeling at ENI. Mr. Guzzetti holds a B.A. in Physics from Milan University.

Compensation

For its services under its investment advisory agreement with the Company
with respect to each Fund, each Adviser is entitled to receive an annual fee
computed daily and paid monthly at the annual rates set forth below. From time
to time, an Adviser may voluntarily waive for a period of time all or a portion
of the fee to which it is entitled under its investment advisory agreement with
the Company with respect to a particular Fund.
<PAGE>
Fund Advisory Fee
---- ------------
High Income Fund 0.75%
U.S. Equity Fund 0.85%
Europe Equity Fund 1.10%

The investment advisory fees for the U.S. Equity Fund and the Europe
Equity Fund are higher than the investment advisory fees paid by most
investment companies, a universe of companies which includes money market funds
and other investment companies that invest primarily in low risk instruments,
and investment companies which are not actively managed such as index funds.
The Advisers believe, however, that such fees are within the range of fees
charged by investment advisers to investment companies that have comparable
investment objectives, policies and strategies to those of the Funds.

Distributor

Lipper & Company, L.P., located at 101 Park Avenue, New York, New York
10178, serves as the Company's distributor. The Distributor is entitled to
receive an annual distribution fee with respect to each Fund's Retail Shares,
and may receive all or a portion of the annual service fee, if any, paid with
respect to a Fund's Group Retirement Plan Shares. See "Distribution and
Services Plans."

Administrator
Chase Global Funds Services Company, a wholly owned subsidiary of The
Chase Manhattan Bank, serves as the Company's administrator (the
"Administrator"). The Administrator calculates the net asset value of each
class of shares of each Fund's shares and generally assists in all aspects of
the Company's administration and operation. As compensation for its services,
the Company pays the Administrator a monthly fee at the annual rate of 0.20% of
the value of the Company's average daily net assets up to and including $200
million; 0.10% of the Company's average daily net assets in excess of $200
million up to and including $400 million; and 0.05% of the Company's average
daily net assets in excess of $400 million. The Administrator is located at 73
Tremont Street, Boston, MA 02108.

Expenses

Each Fund's expenses include taxes, interest, fees and salaries of the
Company's directors and officers who are not directors, officers or employees
of the Company's service contractors, SEC fees, state securities qualification
fees, costs of preparing and printing prospectuses for regulatory purposes and
for distribution to existing shareholders, advisory and administration fees,
charges of the custodian and of the transfer and dividend disbursing agent,
certain insurance premiums, outside auditing and legal expenses, costs of
shareholder reports and shareholder meetings and any extraordinary expenses.
Each Fund also pays for brokerage fees and commissions (if any) in connection
with the purchase and sale of portfolio securities. Each Fund's expenses are
allocated to a particular class of its shares based on either expenses
identifiable to such class or the relative net assets of such class and the
<PAGE>
other classes of its shares. The Advisers have agreed to reimburse the Funds to
the extent required by applicable state law for certain expenses that are
described in the Statement of Additional Information.

DIVIDENDS

The policy of each Fund is to distribute its investment income and net
realized capital gains, if any. Shares of a Fund begin accruing dividends on
the business day following the day a purchase order is priced and continue to
accrue dividends up to and including the day that such shares are redeemed.
Unless a shareholder instructs that dividends and capital gains distributions
on shares of a class be paid in cash and credited to the shareholder's account
at the Distributor or a Participating Dealer, dividends and capital gains
distributions will be reinvested automatically in additional shares of the same
class at the net asset value of that class at the time of reinvestment.

The High Income Fund intends to distribute substantially all of its net
investment income to shareholders monthly. The U.S. Equity Fund and the Europe
Equity Fund intend to distribute substantially all of their net investment
income annually. Each Fund intends to distribute net realized capital gains, if
any, with the last dividend for the calendar year.

Dividends paid by each class of a Fund's shares will be calculated at the
same time and in the same manner and will be in the same amount, except that
the expenses attributable solely to a particular class will be borne
exclusively by that class. Shares subject to payments under a Fund's
Distribution or Service Plan will receive lower per share dividends than shares
not subject to such payment because of the higher expenses borne by such
shares.
Each shareholder or its authorized representative will receive an annual
statement detailing the amount of any dividends and distributions made during
each year and their federal tax qualification.

TAXES

Each Fund intends to qualify and elect to be treated as a regulated
investment company for federal income tax purposes under Subchapter M of the
Code. If so qualified, a Fund will not be subject to federal income taxes on
its investment company taxable income (as that term is defined in the Code,
determined without regard to the deduction for dividends paid) and net capital
gain (the excess of a Fund's net long-term capital gain over its net short-term
capital loss), if any, that it distributes to its shareholders in each taxable
year. To qualify as a regulated investment company, a Fund must, among other
things, distribute to its shareholders at least 90% of its net investment
company taxable income for such taxable year. However, a Fund would be subject
to corporate income tax at a rate of 35% on any undistributed income or net
capital gain. A Fund must also derive less than 30% of its gross income in each
taxable year from the sale or other disposition of certain securities held for
less than three months (the "30% limitation"). If in any year a Fund should
fail to qualify as a regulated investment company, the Fund would be subject to
<PAGE>
federal income tax in the same manner as an ordinary corporation, and
distributions to shareholders would be taxable to such holders as ordinary
income to the extent of the earnings and profits of the Fund. Distributions in
excess of earnings and profits will be treated as a tax-free return of capital,
to the extent of a holder's basis in its shares, and any excess, as a long- or
short-term capital gain.

Each Fund intends to distribute substantially all of its investment
company taxable income each year. Such distributions, whether paid in cash or
reinvested in additional shares, of net investment income will be taxable as
ordinary income. Federal income taxes for distributions to an IRA or a
qualified retirement plan are deferred under the Code. A portion of such
dividends may qualify for the dividends-received deduction generally available
for corporate shareholders under the Code. Distributions to shareholders of net
capital gain that are designated by a Fund as "capital gains dividends,"
whether paid in cash or reinvested in additional shares, will be taxable as
long-term capital gains regardless of how long the shares have been held by
such shareholders. Shareholders receiving distributions in the form of
additional shares will be treated for federal income tax purposes as receiving
a distribution in an amount equal to the fair market value of the additional
shares on the date of such a distribution.
Gain or loss, if any, recognized on the sale or other disposition of
shares of a Fund will be taxed as capital gain or loss if the shares are
capital assets in the shareholder's hands. Generally, a shareholder's gain or
loss will be a long-term gain or loss if the shares have been held for more
than one year. If a shareholder sells or otherwise disposes of a share of a
Fund before holding it for more than six months, any loss on the sale or other
disposition of such share shall be treated as a long-term capital loss to the
extent of any capital gain dividends received by the shareholder with respect
to such share. A loss realized on a sale or exchange of shares may be
disallowed if other shares of the same Fund are acquired within a 61-day period
beginning 30 days before and ending 30 days after the date that the shares are
disposed of.

Dividends and distributions by a Fund are generally taxable to the
shareholders at the time the dividend or distribution is made. Any dividend
declared by a Fund in October, November or December of any calendar year,
however, which is payable to shareholders of record on a specified date in such
a month and not paid on or before December 31 of such year will be treated as
received by the shareholders as of December 31 of such year, provided that the
dividend is paid during January of the following year.

Each Fund may engage in hedging. See "Investment Objective and Policies -
Other Investments and Investment Strategies - Hedging and Derivatives." Such
transactions will be subject to special provisions of the Code that, among
other things, may affect the character of gains and losses realized by a Fund
(that is, may affect whether gains or losses are ordinary or capital),
accelerate recognition of income to a Fund and defer recognition of certain of
a Fund's losses. These rules could therefore affect the character, amount and
timing of distributions to shareholders. In addition, these provisions (1) will
require a Fund to "mark-to-market" certain types of positions in its portfolio
(that is, treat them as if they were closed out) and (2) may cause a Fund to
<PAGE>
recognize income without receiving cash with which to pay dividends or make
distributions in amounts necessary to satisfy the distribution requirements for
avoiding income and excise taxes. The extent to which a Fund may be able to use
such hedging techniques and continue to qualify as a regulated investment
company may be limited by the 30% limitation discussed above. Each Fund intends
to monitor its transactions, will make the appropriate tax elections and will
make the appropriate entries in its books and records when it acquires any
forward contracts, options or hedged investment in order to mitigate the effect
of these rules and prevent disqualification of the Fund as a regulated
investment company.

Each Fund may be required to withhold federal income tax at a rate of 31%
("backup withholding") from dividends and redemption proceeds paid to non-
corporate shareholders. This tax may be withheld from dividends if (i) the
shareholder fails to furnish the Fund with the shareholder's correct taxpayer
identification number, (ii) the Internal Revenue Service ("IRS") notifies the
Fund that the shareholder has failed to report properly certain interest and
dividend income to the IRS and to respond to notices to that effect, or (iii)
when required to do so, the shareholder fails to certify that he or she is not
subject to backup withholding.
Ordinary income dividends paid by a Fund to shareholders who are non-
resident aliens or foreign entities will be subject to a 30% withholding tax
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law or the income is "effectively connected" with a
U.S. trade or business. Generally, subject to certain exceptions, capital gain
dividends paid to non-resident shareholders or foreign entities will not be
subject to U.S. tax. Non-resident shareholders are urged to consult their own
tax advisers concerning the applicability of the U.S. withholding tax.

The foregoing discussion is only a brief summary of the important federal
tax considerations generally affecting each Fund and its shareholders. As noted
above, IRAs receive special tax treatment. No attempt is made to present a
detailed explanation of the federal, state or local income tax treatment of
each Fund or its shareholders, and this discussion is not intended as a
substitute for careful tax planning. Accordingly, potential investors in each
Fund should consult their tax advisers with specific reference to their own tax
situation.

The Transfers

As discussed above under "The Transfers," to the extent that the High
Income Fund or the Europe Equity Fund acquired securities in a Transfer that
have appreciated in value from the date originally acquired by its
corresponding Partnership, the Transfer may have adverse tax consequences to
investors who acquire shares of the Fund in the continuous offering after the
Transfer. If either such Fund sells securities acquired in a Transfer that have
appreciated in value from the date they were acquired by its corresponding
Partnership, the amount of any gain with respect to such securities (including
any appreciation in value from the date they were acquired by the Partnership
through the date of the Transfer) would be taxable to all shareholders,
including new shareholders as well as those shareholders who were former
limited partners of the Partnership.
<PAGE>
PERFORMANCE INFORMATION

From time to time, the "total return," "yield" and "effective yield" of
each class of shares of a Fund may be quoted in advertisements or reports to
shareholders. Total return figures show the average percentage change in the
value of an investment from the beginning date of the measuring period to the
end of the measuring period. These figures reflect changes in the price of a
Fund's class of shares and assume that any income dividends and/or capital
gains distributions made by the Fund during the period were reinvested. These
figures also take into account the distribution fee payable with respect to
each Fund's Retail Shares and the service fee, if any, payable with respect to
each Fund's Group Retirement Plan Shares. See "Distribution and Service Plans."

Total return figures will be given for the recent one-, five- and ten-year
periods, if available, and may be given for other periods as well, such as on a
year-by-year basis. With respect to the High Income Fund and the Europe Equity
Fund, total return figures for each class of shares will include the
performance of the predecessor Partnership to each such Fund, as described
below. When considering average annual total return figures for periods longer
than one year, it is important to note that the total return for any one year
in the period might have been greater or less than the average for the entire
period. "Aggregate total return" figures may be used for various periods,
representing the cumulative change in value of an investment for the specific
period (again reflecting changes in prices and assuming reinvestment of
dividends and distributions). Aggregate total return may be shown by means of
schedules, charts or graphs and may indicate subtotals of the various
components of total return (that is, change in the value of initial investment,
income dividends and capital gains distributions). Because of the differences
in distribution and service fees and certain other expenses, the performance of
each of the classes of each Fund will differ.

The Company may make available information as to the yield and effective
yield on a Fund over a thirty-day period, as calculated in accordance with the
SEC's prescribed formula. The effective yield assumes that the income earned by
an investment in shares of the Fund is reinvested in shares of the same class
and will therefore be slightly higher than the yield because of the compounding
effect of this assumed reinvestment.
In reports or other communications to shareholders or in advertising
materials, performance of a Fund may be compared with that of other mutual
funds or classes of shares of other mutual funds, as listed in the rankings
prepared by independent services that monitor the performance of mutual Funds,
or other industry or financial publications such as Barron's, Business Week,
CDA Investment Technologies, Inc., Changing Times, Forbes, Fortune,
Institutional Investor, Investors Business Daily, Money, Morningstar Mutual
Company Values, The New York Times, USA Today and The Wall Street Journal.
Performance figures are based on historical earnings and are not intended to
indicate future performance. The Statement of Additional Information contains a
further description of the methods used to determine performance. Investors may
contact the Distributor to obtain current performance figures.
<PAGE>
The investment performance of each of the Funds through June 30, 1996 is
illustrated below. Performance information for the High Income Fund and the
Europe Equity Fund for periods prior to April 1, 1996 reflects the performance
of each Fund's predecessor Partnership. The predecessor Partnership to the
High Income Fund commenced operations on February 1, 1992, while the
predecessor Partnership to the Europe Equity Fund commenced operations on
January 13, 1992. The investment objectives and policies of the High Income
Fund and the Europe Equity Fund are in all material respects equivalent to
those of the corresponding Partnerships. While the High Income Fund and the
Europe Equity Fund are managed in a manner that is in all material respects
equivalent to the management of the corresponding Partnership, each such Fund
is subject to certain restrictions on its activities under the 1940 Act and the
Code to which its corresponding Partnership was not subject. Had the
Partnerships been registered under the 1940 Act and subject to the provisions
of the Code, their investment performance may have been adversely affected.
Operating expenses incurred by the High Income and Europe Equity Funds (before
any voluntary fee waivers and reimbursements) are expected to be higher than
the expenses that would have been incurred by its corresponding Partnership.
Past performance of a Fund (including where applicable its corresponding
Partnership) should not be considered as indicative of the Fund's future
performance.

TOTAL RETURN

Since Inception <F(1)>

U.S. Equity Fund

Premier Shares 5.10%
Retail Shares 5.10%
Group Retirement Plan Shares 5.10%

12 Months Average Annual
Ended June 30<F(1)> Return Since Inception

High Income Fund

Premier Shares 8.04% 9.43%
Retail Shares 8.01% 9.43%
Group Retirement Plan Shares 8.00% 9.42%

Europe Equity Fund

Premier Shares 18.71% 10.03%
Retail Shares 18.71% 10.03%
Group Retirement Plan Shares 18.71% 10.03%
<PAGE>
[FN]
<F(1)> The U.S. Equity Fund commenced investment operations on January 2,
1996. The U.S. Equity Fund's Retail and Group Retirement Plan Shares
were introduced on January 4, 1996. The High Income Fund and the
Europe Equity Fund's Retail and Group Retirement Plan Shares were
introduced on April 11 and April 12, respectively. Performance
information for the Retail and Group Retirement Plan Shares prior to
their introduction dates reflects the performance of the Funds'
Premier Shares which are not subject to shareholder servicing or
distribution expenses borne by these classes of shares.

ADDITIONAL INFORMATION

The Company was incorporated in Maryland on August 22, 1995. The
authorized capital stock of the Company consists of 10,000,000,000 shares
having a par value of $.001 per share. The Company's Charter currently
authorizes the issuance of three series of shares, one series corresponding to
each of the Funds, and three classes of shares with respect to each series,
Premier Shares, Retail Shares and Group Retirement Plan Shares. The Company's
Board of Directors may, in the future, authorize the issuance of additional
series of capital stock representing shares of additional investment Funds or
additional classes of shares of the Funds.

Shares of each class of the Fund represent interests in the Fund in
proportion to the net asset value of each class. Each Fund's expenses are
allocated to each class of the Fund's shares based upon expenses identifiable
by class or the relative net assets of the class and the other classes of its
shares.

All shares of the Company have equal voting rights and will be voted in
the aggregate, and not by series or class, except where voting by series or
class is required by law or where the matter involved affects one series or
class. Under the corporate law of Maryland, the Company's state of
incorporation, and the Company's By-Laws (except as required under the 1940
Act), the Company is not required and does not currently intend to hold annual
meetings of shareholders for the election of directors. Shareholders, however,
do have the right to call for a meeting to consider the removal of one or more
of the Company's directors if such a request is made, in writing, by the
holders of at least 10% of the Company's outstanding voting securities.
All shares of the Company, when issued, will be fully paid and
nonassessable.

The Chase Manhattan Bank is located at 4 Chase MetroTech Center, Brooklyn,
NY 11245, and serves as custodian of the Company's investments.

Chase Global Funds Services Company is located at 73 Tremont Street,
Boston, MA 02108, and serves as the Company's transfer agent.

The Company sends shareholders a semi-annual and audited annual report,
which includes listings of investment securities held by the Company at the end
of the period covered. In an effort to reduce the Company's printing and
mailing costs, the Company may consolidate the mailing of its semi-annual and
<PAGE>
annual reports by household. This consolidation means that a household having
multiple accounts with the identical address of record would receive a single
copy of each report. In addition, the Company may consolidate the mailing of
its Prospectus so that a shareholder having multiple accounts would receive a
single Prospectus annually. Any shareholder who does not want this
consolidation to apply to his or her account should contact the Transfer Agent.
Shareholders may direct inquiries regarding the Company to 1-800-LIPPER9.
<PAGE>
APPENDIX A

DESCRIPTION OF RATINGS

A description of the rating policies of Moody's and S&P with respect to
bonds and commercial paper appears below.

Moody's Investors Service's Corporate Bond Ratings
Aaa - Bonds which are rated "Aaa" are judged to be of the best quality and
carry the smallest degree of investment risk. 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 qualities
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa - Bonds which are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba - Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B - Bonds which are rated "B" generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance and 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.
<PAGE>
Ca - Bonds which are rated "Ca" represent obligations which are
speculative in high degree. Such issues are often in default or have other
marked shortcomings.

C - Bonds which are rated "C" are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers "1", "2" and "3" to certain of its
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.

Standard & Poor's Ratings Group Corporate Bond Ratings

AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to repay principal and
pay interest.
AA - Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and differs from "AAA"
issues only in small degree.

A - Bonds rated "A" have a strong capacity to repay principal and pay
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

BBB - Bonds rated "BBB" are regarded as having an adequate capacity to
repay principal and pay interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to repay principal and pay
interest for bonds in this category than for higher rated categories.

BB-B-CCC-CC-C - Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded,
on balance, as predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
CI - Bonds rated "CI" are income bonds on which no interest is being paid.

D - Bonds rated "D" are in default. The "D" category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired unless S&P believes that such payments
will be made during such grace period. The "D" rating is also used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

The ratings set forth above may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
<PAGE>
Moody's Investors Service's Commercial Paper Ratings

Prime-1 - Issuers (or related supporting institutions) rated "Prime-1"
have a superior ability for repayment of senior short-term debt obligations.
"Prime-1" repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well- established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well- established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2 - Issuers (or related supporting institutions) rated "Prime-2"
have a strong ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.

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

Not Prime - Issuers rated "Not Prime" do not fall within any of the Prime
rating categories.

Standard & Poor's Ratings Group Commercial Paper Ratings

A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. The four categories are as follows:

A-1 - This highest category 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".
A-3 - Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.

B - Issues rated "B" are regarded as having only speculative capacity for
timely payment.

C - This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
<PAGE>
D - Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
<PAGE>
Prospectus

August __, 1996
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Statement of
Additional Information incorporated herein by reference, in connection with the
offering made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company or its Distributor. This Prospectus does not constitute an offering by
the Company or by the Distributor in any jurisdiction in which such offering
may not lawfully be made.

Table of Contents

Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . .18
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . .28
The Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Risk Factors and Special Considerations . . . . . . . . . . . . . . . . . .31
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Distribution and Service Plans . . . . . . . . . . . . . . . . . . . . . .38
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Valuation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Management of the Company . . . . . . . . . . . . . . . . . . . . . . . . .45
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . .53
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . .55
Description of Ratings . . . . . . . . . . . . . . . . . . . . . .Appendix A

The Lipper Funds, Inc. is not affiliated with Lipper Analytical Services, Inc.

<PAGE>
Lipper High Income Bond Fund

Lipper U.S. Equity Fund

Prime Lipper Europe Equity Fund

The Lipper Funds, Inc.

101 Park Avenue

New York, NY 10178

For information call 1-800-LIPPER 9

August 29, 1996

The Lipper Funds, Inc. (the "Company") is an open-end investment company
which offers three diversified portfolios: Lipper High Income Bond Fund (the
"High Income Fund"), Lipper U.S. Equity Fund (the "U.S. Equity Fund") and Prime
Lipper Europe Equity Fund (the "Europe Equity Fund" and, together with the High
Income Fund and the U.S. Equity Fund, the "Funds"). This Statement of
Additional Information should be read in conjunction with the Funds' Prospectus
dated August 29, 1996 (which may be amended or supplemented from time to time)
(the "Prospectus"), and is incorporated by reference in its entirety into the
Prospectus.

This Statement of Additional Information is not itself a prospectus and is
authorized for distribution only when preceded or accompanied by a prospectus.
No investment in shares of the Funds should be made solely upon the information
contained herein. Copies of the Prospectus may be obtained without charge by
writing or calling the Company at the address and telephone number set forth
above. Capitalized terms used but not defined herein have the same meanings as
in the Prospectus.

TABLE OF CONTENTS

Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . 3

Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Additional Purchase Information . . . . . . . . . . . . . . . . . . . . . . 15

Additional Redemption Information . . . . . . . . . . . . . . . . . . . . . 16

Valuation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Management of the Company . . . . . . . . . . . . . . . . . . . . . . . . . 18

Principal Holders of Securities . . . . . . . . . . . . . . . . . . . . . . 24

Distribution and Service Plans . . . . . . . . . . . . . . . . . . . . . . 28
<PAGE>
Additional Information Concerning Taxes . . . . . . . . . . . . . . . . . . 29

Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Additional Information Concerning Fund Shares . . . . . . . . . . . . . . . 33

Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

The investment objective of the High Income Fund is high current income.
The investment objective of the U.S. Equity Fund and the Europe Equity Fund is
capital appreciation. The following policies supplement the description of each
Fund's investment objective and policies in the Prospectus.

Portfolio Transactions

Subject to the general control of the Company's Board of Directors, Lipper
& Company, L.L.C., the investment adviser to the High Income Fund and the U.S.
Equity Fund (the "U.S. Adviser"), and Prime Lipper Asset Management, the
investment adviser to the Europe Equity Fund (the "European Adviser" and,
together with the U.S. Adviser, the "Advisers") are responsible for making
decisions with respect to, and placing orders for, all purchases and sales of
portfolio securities for the Fund(s) for which each serves as investment
adviser. The High Income Fund's portfolio transactions will occur primarily
with issuers, underwriters and major dealers acting as principals, and the U.S.
Equity Fund's and the Europe Equity Fund's portfolio transactions may consist
of such transactions. Such transactions are normally on a net basis which does
not involve payment of brokerage commissions. The cost of securities purchased
from underwriters includes an underwriter's commission or concession, and the
prices at which securities are purchased from and sold to dealers include an
undisclosed dealer spread. Transactions on foreign securities exchanges may
involve the payment of negotiated brokerage commissions, which may vary among
different brokers, or the payment of fixed brokerage commissions. In making
portfolio investments, the Advisers seek to obtain the best net price and the
most favorable execution of orders. To the extent that the execution and price
offered by more than one broker or dealer are comparable, the Advisers may, in
their discretion, effect transactions in portfolio securities with brokers or
dealers who provide the Advisers with research advice or other services.
Research advice and other services furnished by brokers through whom the Funds
effect securities transactions may be used by the Advisers in servicing
accounts in addition to the Funds, and not all such services will necessarily
benefit the Funds.

With respect to over-the-counter transactions, the Funds, where possible,
will deal directly with the dealers who make a market in the securities
involved except in those circumstances where better prices and execution are
available elsewhere.

Investment decisions for each Fund are made independently from those for
the other Funds or other investment company portfolios or accounts advised by
the Advisers. Such other portfolios may also invest in the same securities as
the Funds. When purchases or sales of the same security are made at
substantially the same time on behalf of such other portfolios, transactions
are averaged as to price, and available investments allocated as to amount, in
a manner which the Advisers believe to be equitable to each portfolio,
including the Funds. In some instances, this investment procedure may adversely
affect the price paid or received by the Funds or the size of the position
obtainable for a Fund. To the extent permitted by law, the Advisers may
<PAGE>
aggregate the securities to be sold or purchased for the Funds with those to be
sold or purchased for such other portfolios in order to obtain best execution.

The Funds will not execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter into
repurchase agreements with the Advisers or any affiliated person (as such term
is defined in the Investment Company Act of 1940, as amended (the "1940 Act"))
of the Advisers, except to the extent permitted by the Securities and Exchange
Commission (the "SEC"). The Funds will not purchase securities during the
existence of any underwriting or selling group relating thereto of which the
Advisers or any affiliate thereof is a member, except to the extent permitted
by the SEC. Under certain circumstances, the Funds may be at a disadvantage
because of these limitations in comparison with other investment company
portfolios which have similar investment objectives but are not subject to such
limitations.

It is anticipated that the annual portfolio turnover rate generally will
not exceed 75%, in the case of the High Income Fund, 125%, in the case of the
U.S. Equity Fund, and 40%, in the case of the Europe Equity Fund. This rate is
calculated by dividing the lesser of sales or purchases of portfolio securities
for any given year by the average monthly value of the Fund's portfolio
securities for that year. For purposes of this calculation, no regard is given
to securities having a maturity or expiration date at the time of acquisition
of one year or less. Portfolio turnover directly affects the amount of
transaction costs that are borne by each Fund. Higher portfolio turnover
results in the incurrence of higher transaction costs.In addition, the sale of
securities held by a Fund for not more than one year will give rise to
short-term capital gain or loss for federal income tax purposes. The federal
income tax requirement that each Fund derive less than 30% of its gross income
from the sale or other disposition of stock or securities held less than three
months may limit a Fund's ability to dispose of its securities. See "Additional
Information Concerning Taxes."

Additional Information on Portfolio Instruments and Certain Investment
Strategies

U.S. Government Obligations. Examples of the types of U.S. government
securities that may be held by the Funds include, in addition to U.S. Treasury
Bills, the obligations of the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, Federal National
Mortgage Association, Federal Financing Bank, General Services Administration,
Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home
Loan Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit
Banks, Federal Land Banks, Federal Farm Credit Banks, Maritime Administration,
Resolution Trust Corporation, Tennessee Valley Authority, U.S. Postal Service
and Washington D.C. Armory Board.

Depositary Receipts. A purchaser of unsponsored Depositary Receipts may
not have unlimited voting rights and may not receive as much information about
the issuer of the underlying security as with sponsored Depositary Receipts.
Depositary Receipts evidence ownership of underlying securities issued by
either a non-U.S. or a U.S. corporation that have been deposited with a
<PAGE>
depositary or custodian bank. Depositary Receipts may be issued in connection
with an offering of securities by the issuer of the underlying securities or
issued by a depositary bank as a vehicle to promote investment and trading in
the underlying securities. ADRs are receipts issued by U.S. banks or trust
companies in respect of securities of non-U.S. issuers held on deposit for use
in the U.S. securities markets. GDRs, EDRs and other types of Depositary
Receipts are typically issued by a U.S. bank or trust company and traded
principally in the U.S. and other international markets.

Bank Obligations. Bank obligations include negotiable certificates of
deposit, bankers' acceptances, fixed time deposits and deposit notes. A
certificate of deposit is a short-term negotiable certificate issued by a
commercial bank against funds deposited in the bank and is either
interest-bearing or purchased on a discount basis. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in
connection with an international commercial transaction. The borrower is liable
for payment as is the bank, which unconditionally guarantees to pay the draft
at its face amount on the maturity date. Fixed time deposits are obligations of
branches of United States banks or foreign banks which are payable at a stated
maturity date and bear a fixed rate of interest. Although fixed time deposits
do not have a market, there are no contractual restrictions on the right to
transfer a beneficial interest in the deposit to a third party. Fixed time
deposits subject to withdrawal penalties and with respect to which a Fund
cannot realize the proceeds thereon within seven days are deemed "illiquid" for
the purposes of the ninth investment limitation set forth under "Investment
Objective and Policies--Investment Limitations" below. Deposit notes are notes
issued by commercial banks which generally bear fixed rates of interest and
typically have original maturities ranging from eighteen months to five years.

Banks are subject to extensive governmental regulations that may limit
both the amounts and types of loans and other financial commitments that may be
made and the interest rates and fees that may be charged. The profitability of
this industry is largely dependent upon the availability and cost of capital
funds for the purpose of financing lending operations under prevailing money
market conditions. Also, general economic conditions play an important part in
the operations of this industry and exposure to credit losses arising from
possible financial difficulties of borrowers might affect a bank's ability to
meet its obligations. Bank obligations may be general obligations of the parent
bank or may be limited to the issuing branch by the terms of the specific
obligations or by government regulation. Investors should also be aware that
securities of foreign banks and foreign branches of U.S. banks may involve
investment risks in addition to those relating to domestic bank obligations.
Such risks include future political and economic developments, the possible
seizure or nationalization of foreign deposits, and the possible adoption of
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. In addition, foreign branches of
U.S. banks and foreign banks may be subject to less stringent reserve
requirements and non-U.S. issuers generally are subject to different
accounting, auditing, reporting and recordkeeping standards than those
applicable to U.S. issuers.
<PAGE>
Convertible Securities. A unique feature of convertible securities is that
as the market price of the underlying security declines, convertible securities
tend to trade increasingly on a yield basis, and so may not experience market
value declines to the same extent as the underlying security. When the market
price of the underlying security increases, the price of the convertible
securities tends to rise as a reflection of the value of the underlying
security. Fixed income convertible securities are investments that provide for
a stable stream of income with generally higher yields than common stocks. Of
course, like all fixed income securities, there can be no assurance of current
income because the issuers of the fixed income convertible securities may
default on their obligations. Convertible securities, however, generally offer
lower interest or dividend yields than non-convertible securities of similar
quality because of the potential for capital appreciation. A fixed income
convertible security, in addition to providing fixed income, offers the
potential for capital appreciation through the conversion feature, which
enables the holder to benefit from increases in the market price of the
underlying security. There can be no assurance of capital appreciation,
however, because securities prices fluctuate. Convertible securities generally
are subordinated to other similar but non-convertible securities of the same
issuer, although convertible bonds, as corporate debt obligations, enjoy
seniority in right of payment to all equity securities, and convertible
preferred stock is senior to common stock of the same issuer. Because of the
subordination feature, however, convertible securities typically have lower
ratings than similar non-convertible securities.

Repurchase Agreements. The repurchase price under the repurchase
agreements described in the Prospectus generally equals the price paid by a
Fund plus interest negotiated on the basis of current short-term rates (which
may be more or less than the rate on the securities underlying the repurchase
agreement). Securities subject to repurchase agreements will be held by the
Company's custodian, sub-custodian or in the Federal Reserve/Treasury
book-entry system. Repurchase agreements are considered to be loans by a Fund
under the 1940 Act. Each Fund will enter into repurchase agreements only with
counterparties determined to be creditworthy in accordance with standards
adopted by the Company's Board of Directors.

Reverse Repurchase Agreements. Reverse repurchase agreements are
considered to be borrowings by a Fund under the 1940 Act. Reverse repurchase
agreements involve the risk that the market value of the portfolio securities
sold by a Fund may decline below the price of the securities such Fund is
obligated to repurchase. Each Fund will enter into reverse repurchase
agreements only with counterparties determined to be creditworthy by its
Adviser.

Loans of Portfolio Securities. Each Fund has the ability to lend
securities from its portfolio to brokers, dealers and other financial
organizations. There is no investment restriction on the amount of securities
that may be loaned. The Funds may not lend their portfolio securities to the
Advisers or their affiliates without specific authorization from the SEC. Loans
of portfolio securities by the a Fund will be collateralized by cash, letters
of credit or securities which are consistent with its permitted investments,
which will be maintained at all times in an amount equal to at least 100% of
the current market value of the loaned securities. From time to time, the Funds
<PAGE>
may return a part of the interest earned from the investment of collateral
received for securities loaned to the borrower and/or a third party, which is
unaffiliated with the Funds or the Advisers, and which is acting as a "finder."
With respect to loans by a Fund of its portfolio securities, such Fund would
continue to accrue interest on loaned securities and would also earn income on
loans. Any cash collateral received by a Fund in connection with such loans
would be invested in securities in which such Fund is permitted to invest.

When-Issued and Delayed Delivery Securities. Each Fund may purchase
securities on a "when issued" or delayed delivery basis (i.e., for delivery
beyond the normal settlement date at a stated price). When a Fund agrees to
purchase when-issued or delayed delivery securities, the custodian will set
aside cash or liquid portfolio securities equal to the amount of the commitment
in a separate account. Normally, the custodian will set aside portfolio
securities to satisfy a purchase commitment, and in such a case a Fund may be
required subsequently to place additional assets in the separate account in
order to ensure that the value of the account remains equal to the amount of a
Fund's commitment. It may be expected that a Fund's net assets will fluctuate
to a greater degree when it sets aside portfolio securities to cover such
purchase commitments than when it sets aside cash. When a Fund engages in
when-issued or delayed delivery transactions, it relies on the seller to
consummate the trade. Failure of the seller to do so may result in such Fund
incurring a loss or missing an opportunity to obtain a price considered to be
advantageous.

Illiquid and Restricted Securities. Each Fund may not invest more than 15%
of its assets in illiquid securities, including securities that are illiquid by
virtue of the absence of a readily available market or legal or contractual
restrictions on resale. Securities that have legal or contractual restrictions
on resale but have a readily available market are not considered illiquid for
purpose of this limitation.

The SEC has adopted Rule 144A under the Securities Act of 1933, as amended
(the "1933 Act"), which allows for a broader institutional trading market for
securities otherwise subject to restrictions on resale to the general public.
Rule 144A establishes a "safe harbor" from the registration requirements of the
1933 Act for resales of certain securities to qualified institutional buyers.
The Advisers anticipate that the market for certain restricted securities such
as institutional commercial paper and institutional municipal securities will
expand further as a result of this regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and non-U.S. issuers, such as the PORTAL System sponsored by the
National Association of Securities Dealers, Inc.

Each Adviser will monitor the liquidity of restricted and other illiquid
securities under the supervision of the Board of Directors. In reaching
liquidity decisions with respect to Rule 144A securities, the Advisers will
consider, among others, the following factors: (1) the unregistered nature of a
Rule 144A security; (2) the frequency of trades and quotes for a Rule 144A
security; (3) the number of dealers wishing to purchase or sell the Rule 144A
security and the number of other potential purchasers; (4) dealer undertakings
to make a market in the Rule 144A security; (5) the trading markets for the
Rule 144A security; and (6) the nature of the Rule 144A security and the nature
<PAGE>
of the marketplace trades (e.g., the time needed to dispose of the Rule 144A
security, the method of soliciting offers and the mechanics of the transfer).

Appendix A to the Prospectus contains a description of the relevant rating
symbols used by nationally recognized rating agencies for obligations that may
be purchased by the Funds.

Additional Information Regarding Hedging and Derivatives

As described in the Prospectus, each Fund is authorized to use various
hedging and investment strategies to hedge market risks (such as broad or
specific market movements and interest rates, or other factors relevant to the
Fund's investments, such as commodity prices or rates of inflation), to manage
the effective maturity or duration of debt instruments held by the Fund, or to
seek to increase the Fund's income or gain. A detailed discussion of
Derivatives (as defined below) that may be used by the Advisers on behalf of
the Funds follows below. The Funds will not be obligated, however, to use any
Derivatives and make no representations as to the availability or use of these
techniques at this time or at any time in the future. "Derivatives," as used
herein, refers to the purchase and sale (or writing) of exchange listed and
over-the-counter ("OTC") put and call options on securities, securities
indices, currencies and other financial instruments, and entering into currency
forward contracts.

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

A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer the obligation to buy, the underlying
security, index or other instrument at the exercise price. A Fund's purchase of
a put option on a security, for example, might be designed to protect its
holdings in the underlying instrument (or, in some cases, a similar instrument)
against a substantial decline in the market value of such instrument by giving
such Fund the right to sell the instrument at the option exercise price. A call
option, upon payment of a premium, gives the purchaser of the option the right
to buy, and the seller the obligation to sell, the underlying instrument at the
exercise price. A Fund's purchase of a call option on a security, index or
other instrument might be intended to protect such Fund against an increase in
the price of the underlying instrument that it intends to purchase in the
future by fixing the price at which it may purchase the instrument. An
"American" style put or call option may be exercised at any time during the
option period, whereas a "European" style put or call option may be exercised
only upon expiration or during a fixed period prior to expiration. Exchange-
listed options are issued by a regulated intermediary such as the Options
Clearing Corporation ("OCC"), which guarantees the performance of the
obligations of the parties to the options. The discussion below uses the OCC as
an example, but is also applicable to other similar financial intermediaries.
<PAGE>
OCC-issued and exchange-listed options, with certain exceptions, generally
settle by physical delivery of the underlying security, although in the future,
cash settlement may become available. Index options are cash settled for the
net amount, if any, by which the option is "in-the-money" (that is, the amount
by which the value of the underlying instrument exceeds, in the case of a call
option, or is less than, in the case of a put option, the exercise price of the
option) at the time the option is exercised. Frequently, rather than taking or
making delivery of the underlying instrument through the process of exercising
the option, listed options are closed by entering into offsetting purchase or
sale transactions that do not result in ownership of the new option.

A Fund's ability to close out its position as a purchaser or seller of an
OCC-issued or exchange-listed put or call option is dependent, in part, upon
the liquidity of the particular option market. Among the possible reasons for
the absence of a liquid option market on an exchange are: (1) insufficient
trading interest in certain options, (2) restrictions on transactions imposed
by an exchange, (3) trading halts, suspensions or other restrictions imposed
with respect to particular classes or series of options or underlying
securities, including reaching daily price limits, (4) interruption of the
normal operations of the OCC or an exchange, (5) inadequacy of the facilities
of an exchange or the OCC to handle current trading volume or (6) a decision by
one or more exchanges to discontinue the trading of options (or a particular
class or series of options), in which event the relevant market for that option
on that exchange would cease to exist, although any such outstanding options on
that exchange would continue to be exercisable in accordance with their terms.

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

OTC options are purchased from or sold to securities dealers, financial
institutions or other parties (collectively referred to as "Counterparties" and
individually referred to as a "Counterparty") through a direct bilateral
agreement with the Counterparty. In contrast to exchange-listed options, which
generally have standardized terms and performance mechanics, all of the terms
of an OTC option, including such terms as method of settlement, term, exercise
price, premium, guarantees and security, are determined by negotiation of the
parties. It is anticipated that any Fund authorized to use OTC options will
generally only enter into OTC options that have cash settlement provisions,
although it will not be required to do so.

Unless the parties provide for it, no central clearing or guarantee
function is involved in an OTC option. As a result, if a Counterparty fails to
make or take delivery of the security or other instrument underlying an OTC
option it has entered into with a Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, such Fund will lose
any premium it paid for the option as well as any anticipated benefit of the
transaction. Thus, a Fund's Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
<PAGE>
met. A Fund will enter into OTC option transactions only with U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York as
"primary dealers," or broker-dealers, domestic or foreign banks, or other
financial institutions that its Adviser deems to be creditworthy. In the
absence of a change in the current position of the staff of the SEC, OTC
options purchased by a Fund and the amount of such Fund's obligation pursuant
to an OTC option sold by such Fund (the cost of the sell-back plus the in-the-
money amount, if any) or the value of the assets held to cover such options
will be deemed illiquid.

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

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

Each Fund reserves the right to purchase or sell options on instruments
and indices which may be developed in the future to the extent consistent with
applicable law, such Fund's investment objective and the restrictions set forth
herein.

Each Fund may purchase and sell put options on securities (whether or not
it holds the securities in its portfolio) and on securities indices. A Fund
will not sell put options if, as a result, more than 50% of such Fund's assets
would be required to be segregated to cover its potential obligations under put
options. In selling put options, a Fund faces the risk that it may be required
to buy the underlying security at a disadvantageous price above the market
price.

Options on Securities Indices and Other Financial Indices. Each Fund may
purchase and sell call and put options on securities indices and other
financial indices. In so doing, a Fund can achieve many of the same objectives
it would achieve through the sale or purchase of options on individual
securities or other instruments. Options on securities indices and other
financial indices are similar to options on a security or other instrument
except that, rather than settling by physical delivery of the underlying
instrument, options on indices settle by cash settlement; that is, an option on
an index gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the index upon which the option is based
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option (except if, in the case of an OTC option, physical
delivery is specified). This amount of cash is equal to the excess of the
closing price of the index over the exercise price of the option, which also
<PAGE>
may be multiplied by a formula value. The seller of the option is obligated, in
return for the premium received, to make delivery of this amount. The gain or
loss on an option on an index depends on price movements in the instruments
comprising the market, market segment, industry or other composite on which the
underlying index is based, rather than price movements in individual
securities, as is the case with respect to options on securities.

Options on Currencies. Each Fund may purchase and sell put and call
options on foreign currencies for the purposes of protecting against declines
in the U.S. dollar value of foreign portfolio securities and anticipated
dividends on such securities and against increases in the U.S. dollar cost of
foreign securities to be acquired. Each Fund may use options on currency to
cross-hedge, which involves writing or purchasing options of one currency to
hedge against changes in exchange rates for a different currency, if there is a
pattern of correlation between the two currencies. As with other kinds of
options transactions, however, the writing of an option on foreign currency
will constitute only a partial hedge, up to the amount of the premium received.
A Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against exchange
rate fluctuations; however, in the event of exchange rate movements adverse to
a Fund's position, the Fund may forfeit the entire amount of the premium plus
related transactions costs. In addition, a Fund may purchase call or put
options on a currency for non-hedging purposes when its Adviser anticipates
that the currency will appreciate or depreciate in value, but securities
denominated in that currency do not present attractive investment
opportunities. Currency transactions are subject to risks different from other
portfolio transactions, as discussed below under "Risk Factors."

Forward Foreign Currency Exchange Contracts. Each Fund may enter into
forward foreign currency exchange contracts ("forward contracts") which provide
for the purchase or sale of an amount of a specified currency at a future date.
Purposes for which such contracts may be used include protecting against
fluctuations in the value of a foreign currency against the U.S. dollar between
the trade date and settlement date when a Fund purchases or sells securities,
locking in the U.S. dollar value of dividends declared on securities held by a
Fund and generally protecting the U.S. dollar value of securities held by a
Fund against exchange rate fluctuation.

Combined Transactions. A Fund may enter into multiple transactions,
including multiple options transactions, multiple interest rate transactions
and any combination of options and interest rate transactions, instead of a
single Derivative, as part of a single or combined strategy when, in the
judgment of its Adviser, it is in the best interests of such Fund to do so. A
combined transaction will usually contain elements of risk that are present in
each of its component transactions. Although combined transactions will
normally be entered into by a Fund based on its Adviser's judgment that the
combined strategies will reduce risk or otherwise more effectively achieve the
desired portfolio management goal, it is possible that the combination will
instead increase the risks or hinder achievement of such Fund's management
objective.
<PAGE>
Risk Factors. Derivatives have special risks associated with them,
including possible default by the Counterparty to the transaction, illiquidity
and, to the extent an Adviser's view as to certain market movements is
incorrect, the risk that the use of the Derivatives could result in losses
greater than if they had not been used. Use of put and call options could
result in losses to a Fund, force the sale or purchase of portfolio securities
at inopportune times or for prices higher than (in the case of put options) or
lower than (in the case of call options) current market values, or cause a Fund
to hold a security it might otherwise sell.

The use of options transactions entails certain special risks. In
particular, options markets could be illiquid in some circumstances and certain
over-the-counter options could have no markets. As a result, in certain
markets, a Fund might not be able to close out a transaction without incurring
substantial losses. Although a Fund's use of options transactions for hedging
should tend to minimize the risk of loss due to a decline in the value of the
hedged position, at the same time it will tend to limit any potential gain to
the Fund that might result from an increase in value of the position.

Currency hedging involves some of the same risks and considerations as
other transactions with similar instruments. Currency transactions can result
in losses to a Fund if the currency being hedged fluctuates in value to a
degree or in a direction that is not anticipated. Further, the risk exists that
the perceived linkage between various currencies may not be present or may not
be present during the particular time that a Fund is engaging in hedging.
Currency transactions are also subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be adversely affected by
government exchange controls, limitations or restrictions on repatriation of
currency, and manipulations or exchange restrictions imposed by governments.
Currency exchange rates may fluctuate based on factors extrinsic to the issuing
countries' economies.

Losses resulting from the use of Derivatives will reduce a Fund's net
asset value, and possibly income, and the losses can be greater than if
Derivatives had not been used.

Risks of Derivatives Outside the United States. When conducted outside the
United States, Derivatives may not be regulated as rigorously as in the United
States, may not involve a clearing mechanism and related guarantees, and will
be subject to the risk of governmental actions affecting trading in, or the
prices of, foreign securities and other instruments. The value of positions
taken as part of non-U.S. Derivatives also could be adversely affected by: (1)
other complex foreign political, legal and economic factors, (2) lesser
availability of data on which to make trading decisions than in the United
States, (3) delays in a Fund's ability to act upon economic events occurring in
foreign markets during non-business hours in the United States, (4) the
imposition of different exercise and settlement terms and procedures and margin
requirements than in the United States and (5) lower trading volume and
liquidity.
<PAGE>
Use of Segregated and Other Special Accounts. Use of many Derivatives by a
Fund will require, among other things, that such Fund segregate cash, liquid
high grade debt obligations or other assets with its custodian, or a designated
sub-custodian, to the extent such Fund's obligations are not otherwise
"covered" through ownership of the underlying security or financial instrument.
In general, either the full amount of any obligation by a Fund to pay or
deliver securities or assets must be covered at all times by the securities or
instruments required to be delivered, or, subject to any regulatory
restrictions, an amount of cash or liquid high grade debt obligations at least
equal to the current amount of the obligation must be segregated with the
custodian or sub-custodian. The segregated assets cannot be sold or transferred
unless equivalent assets are substituted in their place or it is no longer
necessary to segregate them. A call option on securities written by a Fund, for
example, will require such Fund to hold the securities subject to the call (or
securities convertible into the needed securities without additional
consideration) or to segregate liquid high grade debt obligations sufficient to
purchase and deliver the securities if the call is exercised. A call option
sold by a Fund on an index will require such Fund to own portfolio securities
that correlate with the index or to segregate liquid high grade debt
obligations equal to the excess of the index value over the exercise price on a
current basis. A put option on securities written by a Fund will require such
Fund to segregate liquid high grade debt obligations equal to the exercise
price.

OTC options entered into by a Fund, including those on securities,
financial instruments or indices, and OCC-issued and exchange-listed index
options will generally provide for cash settlement, although such Fund will not
be required to do so. As a result, when a Fund sells these instruments it will
segregate an amount of assets equal to its obligations under the options. OCC-
issued and exchange-listed options sold by such Fund other than those described
above generally settle with physical delivery, and such Fund will segregate an
amount of assets equal to the full value of the option. OTC options settling
with physical delivery or with an election of either physical delivery or cash
settlement will be treated the same as other options settling with physical
delivery.

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

The Prospectus summarizes certain investment limitations that may not be
changed without the affirmative vote of the holders of a majority of a Fund's
outstanding shares (as defined below under "Additional Information Concerning
Fund Shares"). Investment limitations numbered 1 through 8 below may not be
changed with respect to a Fund without such vote of shareholders; investment
limitations 9 through 12 may be changed at any time with respect to a Fund by a
vote of the Company's Board of Directors without shareholder approval.

1. A Fund may not purchase the securities of any one
issuer if as a result more than 5% of the value of its total assets would
be invested in the securities of such issuer, except that up to 25% of the
value of its total assets may be invested without regard to this 5%
limitation and provided that there is no limitation with respect to
investments in U.S. Government Securities, and provided further that a
Fund may invest all or substantially all of its assets in another
registered investment company having the same investment objective and
policies and substantially the same investment restrictions as those with
respect to such Fund.

2. A Fund may not borrow money, except that each Fund may
borrow money from banks or enter into reverse repurchase agreements, in
each case for temporary or emergency purposes only (not for leveraging or
investment), in aggregate amounts not exceeding 33-1/3% of the value of
its total assets at the time of such borrowing. For purposes of the
foregoing investment limitation, the term "total assets" shall be
calculated after giving effect to the net proceeds of any borrowings and
reduced by any liabilities and indebtedness other than such borrowings.
Additional investments will not be made by a Fund when borrowings exceed
5% of its total net assets.

3. A Fund may not issue senior securities, except as
permitted under the 1940 Act.

4. A Fund may not purchase any securities which would
cause 25% or more of the value of its total assets at the time of such
purchase to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry;
provided that there is no limitation with respect to investments in U.S.
Government Securities, and provided further, that a Fund may invest all or
substantially all of its assets in another registered investment company
having the same investment objective and policies and substantially the
same investment restrictions as those with respect to such Fund.

5. A Fund may not make loans, except that it may purchase
or hold debt instruments in accordance with its investment objective and
policies, may lend its portfolio securities as described in its Prospectus
and may enter into repurchase agreements with respect to portfolio
securities.

6. A Fund may not act as an underwriter of securities,
except insofar as it may be deemed an underwriter under applicable
securities laws in selling portfolio securities.
<PAGE>
7. A Fund may not purchase or sell real estate or real
estate limited partnerships, provided that it may purchase securities of
issuers which invest in real estate or interests therein.

8. A Fund may not purchase or sell commodities unless
acquired as a result of ownership of securities or other instruments (but
this shall not prevent a Fund from purchasing or selling options and
futures contracts or from investment in securities or other instruments
backed by or indexed to, or representing interests in, physical
commodities or investing or trading in Derivatives), or invest in oil, gas
or mineral exploration or development programs or in mineral leases.

9. A Fund may not invest more than 15% of the value of
its assets in securities that are illiquid, provided, however, that a Fund
may invest all or substantially all of its assets in another registered
investment company having the same investment objective and policies and
substantially the same investment restrictions as those with respect to
such Fund.

10. A Fund may not purchase securities on margin, make
short sales of securities or maintain a short position, except that a Fund
may make short sales against the box and except in connection with
Derivatives.

11. A Fund may not write or sell puts, calls, straddles,
spreads or combinations thereof except in connection with Derivatives.

12. A Fund may not purchase securities of other investment
companies except as permitted under the 1940 Act or in connection with a
merger, consolidation, acquisition or reorganization.

In order to permit the sale of a Fund's shares in certain states, such
Fund may make commitments more restrictive than the investment policies and
limitations above. Should a Fund determine that any such commitments are no
longer in its best interest, it will revoke the commitment by terminating sales
of its shares in the state involved. If a percentage restriction set forth
above is adhered to at the time a transaction is effected, later changes in
percentages resulting from changes in value or in the number of outstanding
securities of an issuer will not be considered a violation. However, with
respect to investment restriction 2 above, to the extent that asset coverage
with respect to borrowings falls at any time below 300%, then the Fund will
within three business days or such longer period as the SEC may prescribe,
reduce the amount of borrowings so that asset coverage shall be at least 300%.

ADDITIONAL PURCHASE INFORMATION

Information on how to purchase and redeem shares of each Fund is included
in the Prospectus. The issuance of a Fund's shares is recorded on such Fund's
books, and certificates for shares are not issued unless expressly requested in
writing to the Transfer Agent. Certificates are not issued for fractional
shares.
<PAGE>
ADDITIONAL REDEMPTION INFORMATION

Under the 1940 Act, a Fund may suspend the right of redemption or postpone
the date of payment upon redemption for any period during which the New York
Stock Exchange is closed, other than customary weekend and holiday closings, or
during which trading on said Exchange is restricted, or during which (as
determined by the SEC by rule or regulation) an emergency exists as a result of
which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (A Fund may also
suspend or postpone the recordation of the transfer of its shares upon the
occurrence of any of the foregoing conditions.) Each Fund is obligated to
redeem shares solely in cash up to $250,000 or 1% of such Fund's net asset
value, whichever is less, for any one shareholder within a 90-day period. Any
redemption beyond this amount will also be in cash unless the Board of
Directors determines that conditions exist which make payment of redemption
proceeds wholly in cash unwise or undesirable. In such a case, a Fund may make
payment wholly or partly in readily marketable securities or other property,
valued in the same way as such Fund determines net asset value. Redemption in
kind is not as liquid as a cash redemption. Shareholders who receive a
redemption in kind may incur transaction costs, if they sell such securities or
property, and may receive less than the redemption value of such securities or
property upon sale, particularly where such securities are sold prior to
maturity.

VALUATION OF SHARES

Because of the differences in distribution fees, service fees and class-
specific expenses, the per share net asset value of each class of each Fund may
differ. The following is a description of the procedures used by each Fund in
valuing its assets.

Securities traded on an exchange will be valued on the basis of the last
sale price on the principal market on which such securities are traded, on the
date on which the valuation is made or, in the absence of sales in such market,
at the mean between the closing bid and asked prices. Over-the-counter
securities will be valued on the basis of the bid prices at the close of
business on each day, or, if market quotations for those securities are not
readily available, at fair value, as determined in good faith by the Company's
Board of Directors. Securities which are traded both in the over-the-counter
market and on a stock exchange will be valued according to the broadest and
most representative market. Securities may be valued by independent pricing
services which use prices provided by market-makers or estimates of market
values obtained from yield data relating to instruments or securities with
similar characteristics. Short-term obligations with maturities of 60 days or
less are valued at amortized cost, which constitutes fair value as determined
by the Company's Board of Directors. Amortized cost involves valuing an
instrument at its original cost to a Fund and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the instrument. All other
<PAGE>
securities and other assets of a Fund will be valued at fair value as
determined in good faith by the Company's Board of Directors.
<PAGE>
MANAGEMENT OF THE COMPANY

Directors and Officers

The Board of Directors of the Company is responsible for the overall
management and operations of each Fund. The Company's directors and executive
officers, their addresses, ages, principal occupations during the past five
years and other affiliations are as follows:

<TABLE>

Position with the Principal Occupations During
Name, Address and Age Company Past 5 Years and Other Affiliations
- - - --------------------- ----------------- -----------------------------------
<S> <C> <C>

Kenneth Lipper<F1> Director, Chairman of President of Lipper & Company, L.L.C. since 1995;
101 Park Avenue the Board and President President of Lipper & Company, Inc. since 1986;
New York, NY 10178 President of Lipper & Company, L.P. since 1991;
Age: 54 trustee of the Rockefeller Brothers Fund; member
of the Federal Reserve Bank of New York's
International Advisory Board; Senior Financial
Adviser to the New York City Counsel; member of
the Harvard Executive Committee on University
Resources; member of the Visitor's Committee of
the Kennedy School of Government at Harvard
University.

Abraham Biderman<F1> Director, Executive Vice Executive Vice President of Lipper & Company,
101 Park Avenue President, Treasurer and L.L.C. since 1995; Executive Vice President of
New York, NY 10178 Secretary Lipper & Company, Inc. since 1990; Executive Vice
Age: 47 President of Lipper & Company, L.P. since 1991.

Steven Finkel Executive Vice President Executive Vice President of Lipper & Company,
101 Park Avenue L.L.C. since 1995; Executive Vice President of
New York, NY 10178 Lipper & Company, Inc. since 1987; Executive Vice
Age: 48 President of Lipper & Company, L.P. since 1991.

Martin Maltz<F2><F3> Director Principal Scientist, Xerox Corporation.
25 Dunrovin Lane
Rochester, NY 14618
Age: 54
<PAGE>
Irwin Russell<F2><F3> Director Attorney, Law Offices of Irwin E. Russell since
433 North Camden Drive, #1200 November 1992; Of Counsel, Rudin and Appel
Los Angeles, CA 90210 (November 1989 to November 1992); Director, The
Age: 69 Walt Disney Company.

Stanley Brezenoff<F2><F3> Director Chief Executive Officer, Maimonides Medical
510 E. 23rd Street Center, since February 1995; Executive Director,
New York, NY 10010 Port Authority of New York and New Jersey
Age: 58 (September 1990 to February 1995).

Kristina H. McDonough Vice President Vice President, Marketing and Business
101 Park Avenue Development, Lipper & Company, L.P., since 1992;
New York, NY 10178 previously employed by Citicorp and Citicorp
Age: 33 Securities Markets, Inc.

Karl O. Hartmann Assistant Secretary Senior Vice President, Secretary and General
Chase Global Funds Services Counsel of Chase Global Funds Services Company,
Company since November, 1991; Senior Vice President,
73 Tremont Street Secretary and General Counsel of Leland, O'Brien,
Boston, MA 02108-3913 Rubinstein Associates, Inc., from November, 1990
Age: 40 to November, 1991.

Ellen Watson Assistant Secretary Supervisor of State Regulation, Chase Global
Chase Global Funds Services Funds Services Company, since November, 1991.
Company
73 Tremont Street
Boston, MA 02108-3913
Age: 38

Michael Leary Assistant Treasurer Assistant Treasurer, Chase Global Funds Services
Chase Global Funds Services Company, since December 1993; Audit Manager,
Company Ernst & Young, from August, 1988 to December,
73 Tremont Street 1993.
Boston, MA 02108-3913
Age: 30
<PAGE>
John M. Corcoran Assistant Treasurer Assistant Vice President, Manager of
Chase Global Funds Services Administration, Chase Global Funds Services
Company Company since October, 1993; Audit Manager, Ernst
73 Tremont Street & Young, from August, 1987 to September, 1993.
Boston, MA 02108-3913
Age: 30

<FN>

<F1> Director considered by the Company to be an "interested person" of the
Company as defined in the 1940 Act.

<F2> Audit Committee Member.

<F3> Nominating Committee Member.
</TABLE>

For so long as the Retail Distribution Plan remains in effect, the
directors of the Company who are not "interested persons" of the Company, as
defined in the 1940 Act, will be selected and nominated by the directors who
are not "interested persons" of the Company.

No officer or employee of either Adviser or Chase Global Fund Services
Company, the Company's administrator, receives any compensation from the
Company for acting as an officer or director of the Company. The Company pays
each director who is not a director, officer or employee of either Adviser or
any of their affiliates, a fee of $8,000 per annum plus $500 per quarterly
meeting attended and reimburses them for travel and out-of-pocket expenses. Set
forth below is information regarding the aggregate amount of fees estimated to
be received by each director of the Company during the Company's initial fiscal
year ending December 31, 1996:
<PAGE>
<TABLE>

Pension or Total Compensation
Aggregate Retirement Benefits Estimated Annual From Fund and Fund
Compensation Accrued as Part of Benefits Upon Complex to
Name of Board Member from Company Company Expenses Retirement Board Member
- - - ---------------------------------------- --------------- --------------------- ------------------ ----------------------

<S> <C> <C> <C> <C>
Kenneth Lipper 0 0 0 0
Abraham Biderman 0 0 0 0
Irwin Russell $ 10,000 0 0 $ 10,000
Martin Maltz $ 10,000 0 0 $ 10,000
Stanley Brezenoff $ 10,000 0 0 $ 10,000
</TABLE>

In addition, the Company estimates that the aggregate reimbursement to
directors for travel and out-of-pocket expenses for the initial fiscal year
ending December 31, 1996 will be approximately $17,000.

By virtue of the responsibilities assumed by the Advisers, Chase Global
Funds Services Company and their affiliates under their respective agreements
with the Company, the Company itself requires no employees other than its
officers.

Investment Advisers

Each Fund's Adviser will serve as its investment adviser pursuant to a
separate written advisory agreement approved by the Company's Board of
Directors, including a majority of the directors who are not "interested
persons" (as defined in the 1940 Act) of the Company or the Adviser, on
December 14, 1995. The services provided by each Fund's Adviser under its
advisory agreement with such Fund and the fees paid to each Adviser are
described in the Prospectus under "Management of the Company." The Advisers
bear all expenses in connection with the performance of their services and pay
the salaries of all officers or employees who are employed by the Advisers and
the Company. Unless sooner terminated, each advisory agreement will continue in
effect until for an initial two-year period and from year to year thereafter if
such continuance is approved at least annually by the Company's Board of
Directors or by a vote of a majority (as defined under "Additional Information
Concerning Fund Shares") of the outstanding shares of the relevant Fund and, in
either case, by a majority of the directors who are not parties to such
agreement or "interested persons" of any party by votes cast in person at a
meeting called for such purpose. Each advisory agreement is terminable by the
Company or the Adviser on 60 days' written notice, and will terminate
immediately in the event of its assignment.
<PAGE>
Administrator

Chase Global Funds Services Company (the "Administrator"), a wholly owned
subsidiary of The Chase Manhattan Bank, N.A., has agreed to provide the
following services: (i) assist generally in supervising each Fund's operations,
providing and supervising the operation of an automated data processing system
to process purchase and redemption orders, providing information concerning the
Funds to their shareholders of record, handling shareholder problems,
supervising the services of employees whose principal responsibility and
function is to preserve and strengthen shareholder relations and monitoring the
arrangements pertaining to the Company's agreements with Participating Dealers;
(ii) prepare reports to the Funds' shareholders and prepare tax returns and
reports to and filings with the SEC; (iii) compute the net asset value per
share of each class of each Fund; (iv) provide the services of certain persons
who may be elected as directors or appointed as officers of the Company by the
Board of Directors; and (v) maintain the registration or qualification of each
Fund's shares for sale under state securities laws.

Distributor

Lipper & Company, L.P. (the "Distributor") distributes the Funds' shares
continuously on a best efforts basis pursuant to an agreement which is
renewable annually. The Distributor pays the cost of printing and distributing
prospectuses to persons who are not shareholders of the Funds (excluding
preparation and printing expenses necessary for the continued registration of
the Funds' shares) and of preparing, printing and distributing all sales
literature. See "Distribution and Service Plans." The Distributor may act as
distributor for other investment companies.

Payment for Fund shares is due and shares of the Funds are issued
generally on the third business day following the day the public offering price
is next determined after a purchase order is received (the "Settlement Date").
When payment is made by the investor prior to a Settlement Date, unless
otherwise directed by the investor, the funds will be held as a free credit
balance in the investor's brokerage account, and the Distributor or a
Participating Dealer may benefit from the temporary use of the funds. The
investor may designate another use for the funds prior to the Settlement Date.
If the investor instructs the Distributor or a Participating Dealer to invest
the funds in a money market fund, the amount of the investment will be included
as part of the average daily net assets of both the relevant Fund and the money
market fund, and in the event the Distributor or its affiliates serve both
funds in an investment advisory capacity, the Distributor will benefit from the
fact that it (or its affiliates) is receiving fees from both such funds for
managing these assets computed on the basis of their average daily net assets.
The Company's Board of Directors has been advised of the benefits to the
Distributor and Participating Dealers resulting from delayed settlement
procedures and will take such benefits into consideration when reviewing the
advisory and distribution and service agreements for continuance.
<PAGE>
Custodian and Transfer Agent

The Chase Manhattan Bank, N.A. (the "Custodian"), is located at 4 Chase
MetroTech Center, Brooklyn, N.Y. 11245, and serves as the Company's custodian
pursuant to a custody agreement. Under the custody agreement, the Custodian
holds the Fund's portfolio securities and keeps all necessary accounts and
records. For its services, the Custodian receives a monthly fee based upon the
month-end market value of securities held in custody and also receives
securities transaction charges, including out-of-pocket expenses. The assets of
the Company are held under bank custodianship in compliance with the 1940 Act.

Chase Global Funds Services Company is located at 73 Tremont Street,
Boston, MA 02108, and serves as the Company's transfer agent. Under the
transfer agency agreement, the Transfer Agent maintains the shareholder account
records for the Company, handles certain communications between shareholders
and the Company, distributes dividends and distributions payable by the Company
and produces statements with respect to account activity for the Company and
its shareholders. For these services, the Transfer Agent receives a monthly fee
computed separately for each class of each Fund's shares and is reimbursed
separately by each class for out-of-pocket expenses.

Expenses

Each Fund's expenses include taxes, interest, fees and salaries of the
Company's trustees and officers who are not directors, officers or employees of
the Company's service contractors, SEC fees, state securities qualification
fees, costs of preparing and printing prospectuses for regulatory purposes and
for distribution to existing shareholders, advisory and administration fees,
charges of the custodian and of the transfer and dividend disbursing agent,
certain insurance premiums, outside auditing and legal expenses, costs of
shareholder reports and shareholder meetings and any extraordinary expenses.
Each Fund also pays for brokerage fees and commissions (if any) in connection
with the purchase and sale of portfolio securities. Each Fund's expenses are
allocated to a particular class of its shares based on either expenses
identifiable to such class or the relative net assets of such class and the
other classes of its shares. In addition, the Retail Shares of each Fund bear a
distribution fee in accordance with the Retail Servicing Plan, and the Group
Retirement Plan Shares of each Fund may bear a service fee in accordance with
the Group Retirement Servicing Plan. See "Distribution and Service Plans."
Each Adviser has agreed that if, in any fiscal year, the expenses borne by the
Fund(s) it advises exceed the applicable expense limitations imposed by the
securities regulations of any state in which shares of such Fund(s) are
registered or qualified for sale to the public, it will reimburse such Fund(s)
for any excess to the extent required by such regulations. Unless otherwise
required by law, such reimbursement would be accrued and paid on the same basis
that the advisory fees are accrued and paid by such Fund(s). California is the
only state which currently imposes such an expense limitation. The limitation
is 2.5% of the first $30 million of average net assets, 2.0% of the next $70
million of average net assets and 1.5% of the remaining average net assets.
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES

The following lists shareholders of record who hold 5% or more of the
outstanding securities of the Funds as of July 18, 1996. Shareholders who own
greater than 25% of the shares of a class are deemed to be controlling persons
of such class.
Percentage
Fund Held
---- -----------
High Income Bond Fund
Premier Shares
---------------------

John Byrne 24%
H. Enterprises International Inc.
120 S. Fifth Street, Suite 2300
Minneapolis, MN 55402

(1) Bank Leumi Trust Company of New York 16.55%
c/o Anthony Mauro
Controllers Division
139 Centre Street
New York, NY 10013

First Trust National Association 9.56%
Agent Frey Group
Tax Escrow
Mutual Funds A/C 33317961
P.O. Box 64010
St. Paul, MN 55164

Henry J. Leir 5.37%
Charitable Reminder Trust
U/A DTD 11/9/81
c/o Margurite M. Riposanu
641 Lexington Avenue, 26th Floor
New York, NY 10022

Hadassah Medical Relief Association Inc. 5.08%
c/o Sheryl L. Weinstein
50 West 58th Street
New York, NY 10019

Retail Shares
-------------

First Trust Corp Trustee 18.87%
IRA 137269-0001 DTD 12/4/95
FBO Henry Dr Lipner
357 Mayfair Drive South
Brooklyn, NY 11234
<PAGE>
Kenneth Lipper Trustee 16.64%
TUW Jerome Lipper
Trust Under Article 6th
c/o Lipper & Co.
101 Park Avenue, 6th Floor
New York, NY 10178

Marion Strafaci 16.54%
and Edward J. Strafaci
JT Ten
78 Alter Avenue
Staten Island, NY 10314

Judith Rosenthal 16.37%
401 East 80th Street, Apt. 12E
New York, NY 10021

Solomon Feigenbaum 12.48%
Cust Martin Feigenbaum
UGMA/NY
1755 51st Street
Brooklyn, NY 11204

Murray Peters 8.28%
and Charlotte Peters
JT Ten
3614A Crabapple Trl
Lake Worth, FL 33467

Chana Feigenbaum 5.81%
and Martin Feigenbaum
JT Ten
Apt. 202
1004 Madison Avenue
Lakewood, NJ 08701

Group Retirement Plan Shares
----------------------------

Jacques C. Nordeman 95%
and Peter Grimm Trustee
FBO Nordeman Grim Inc. 401(k)
Profit Sharing Trust
DTD 1/1/76
717 Fifth Avenue
New York, NY 10022
<PAGE>
(2) U.S. Equity Fund
Premier Shares
----------------

Kenneth Lipper, Trustee 47.05%
FBO Kenneth & Evelyn
Lipper Foundation
101 Park Avenue
New York, NY 10178

Kenneth Lipper, Trustee 36.27%
UWIL Joseph Gruss Trust
U/A/ DTD 07/22/92
101 Park Avenue
New York, NY 10178

Kenneth Lipper, Trustee 14.7%
FBO Joseph Gruss
Settlor Trust
U/A DTD 7/22/92
101 Park Avenue
New York, NY 10178

Retail Shares
-------------

Trust FBO Joshua A. Lewin 29.57%
c/o Mr. Andrew Lewin
800 Third Avenue, 25th Floor
New York, NY 10022

Trust FBO Nathaniel J. Lewin 27.53%
c/o Mr. Andrew Lewin
800 Third Avenue, 25th Floor
New York, NY 10022

Michael D. Loprete 15.09%
9 Cindy Lane
Holmdel, NJ 07733

Gemini Investment Company 10.29%
9 Cindy Lane
Holmdel, NJ 07733

J. Paul Amaden 7.14%
and Christine B. Amaden
JT Ten
P.O. Box 407
East Hampton, NY 11937

Group Retirement Plan Shares
----------------------------

International Postal Consultants Inc. 61.45%
401K Profit Sharing Plan & Trust
U/A DTD 01/01/94
One Madison Street
East Rutherford, NJ 07073
<PAGE>
J. Paul Amaden, Trustee 30.09%
FBO J Edward Gay, Jr. Agency Inc.
Money Purchase Plan
P.O. Box 5004
East Hampton, NY 11937

Lipper & Company Salary Savings Plan 7.17%
101 Park Avenue, 6th Floor
New York, NY 10178-0694

(3) Europe Equity Fund
Premier Shares
------------------

Evelyn and Kenneth Lipper Foundation 11.99%
Lipper & Company
101 Park Avenue
New York, NY 10178

Evelyn Gruss Lipper 8.88%
Grnt the Trust
U/A DTD 12/23/88
c/o Kenneth Lipper
101 Park Avenue
New York, NY 10178

Trust 7.45%
FBO Evelyn Lipper
U/A DTD 12/10/48
c/o Kenneth Lipper
101 Park Avenue
New York, NY 10178

Lipper & Company LP 6.84%
c/o Steven Finkel
101 Park Avenue
New York, NY 10178

Michael D. Eisner 5.7%
283 Bel Air Road
Los Angeles, CA 90077

Hyman Goldman Trustee 5.64%
FBO Hyman Golden Grandchildren Trust
U/A DTR
1245 Veeder Drive
Hewlett Bay Park, NY 11557

<PAGE>
Retail Shares
-------------

Lee Caldecot Chubb, Trustee 54.8%
FBO Chubb Family Trust
U/A DTD 8/15/90
410 23rd Street
Santa Monica, CA 90402-3281

Suzanne E. Russell 29.1%
10590 Wilshire Blvd., 1402
Los Angeles, CA 90024

Irwin E. Russell 12.91%
10590 Wilshire Blvd., 1402
Los Angeles, CA 90024

Group Retirement Plan Shares
----------------------------

Prime Lipper Asset Management 74.41%
101 Park Avenue, 6th Floor
New York, NY 10178

Lipper & Company Salary Savings Plan 25.44%
101 Park Avenue, 6th Floor
New York, NY 10178-0694

DISTRIBUTION AND SERVICE PLANS

Retail Distribution Plan

Rule 12b-1 (the "Rule") adopted by the SEC under the 1940 Act provides,
among other things, that an investment company may bear expenses of
distributing its shares only pursuant to a plan adopted in accordance with the
Rule. Because some or all of the fees paid by the Retail Shares of each Fund to
the Distributor and to certain Participating Dealers could be deemed to be
payment of distribution expenses, the Company's Board of Directors has adopted
such a plan with respect to the Retail Shares of each Fund (the Retail
Distribution Plan). The Company's Board of Directors believes that there is a
reasonable likelihood that the Retail Distribution Plan will benefit each Fund
and the holders of its Retail Shares. In some states, banks or other financial
services firms effecting transactions in Retail Shares may be required to
register as dealers pursuant to state law. The Funds' Premier Shares and Group
Retirement Plan Shares do not bear distribution fees.

Quarterly reports of the amounts expended under the Retail Distribution
Plan with respect to each Fund, and the purposes for which such expenditures
were incurred, must be made to the Board of Directors of the Company for its
review. In addition, the Retail Distribution Plan provides that it may not be
amended to increase materially the costs which the Retail Shares of any Fund
may bear pursuant to such plan without shareholder approval of the holders of
such Fund's Retail Shares, and that other material amendments of the Retail
Distribution Plan must be approved by the Board of Directors of the Company,
and by the directors who are neither interested persons of the Company nor have
<PAGE>
any direct or indirect financial interest in the operation of such plan or in
any agreements entered into in connection with such plan, by vote cast in
person at a meeting called for the purpose of considering such amendments. The
Retail Distribution Plan and any agreements entered into in connection with
such plan are subject to annual approval with respect to each Fund by such vote
of the Board of Directors of the Company cast in person at a meeting called for
the purpose of voting on the Retail Distribution Plan. The Retail Distribution
Plan may be terminated at any time with respect to any Fund by vote of a
majority of the directors who are not interested persons and have no direct or
indirect financial interest in the operation of such plan or in any agreements
entered into in connection with such plan or by vote of a majority of the
Retail Shares of a Fund. Any agreement entered into in connection with the
Retail Distribution Plan may be terminated without penalty at any time, by such
vote. Each such agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).

Group Retirement Servicing Plan

As stated in the Prospectus, in accordance with the Group Retirement
Servicing Plan, the Company intends to enter into servicing agreements pursuant
to which Participating Dealers and sometimes the Distributor will, as agent for
their customers, render certain support services to their customers who are
beneficial owners of Group Retirement Plan Shares. Such services are intended
to supplement the services provided by the Company's Administrator and Transfer
Agent, and are described in the Prospectus. Servicing agreements between the
Company and Participating Dealers and/or the Distributor with respect to a
Fund's Group Retirement Plan Shares will be terminable by either party at any
time without penalty. As of the date of this Statement of Additional
Information, the Company has not entered into any such servicing agreements.

Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Funds in connection with the investment of fiduciary
monies in the Funds. Institutions, including banks regulated by state banking
authorities and the Board of Governors of the Federal Reserve System and
investment advisers and other money managers subject to the jurisdiction of the
SEC, the Department of Labor or state securities commissions are urged to
consult their legal advisers before investing fiduciary monies in the Funds.

ADDITIONAL INFORMATION CONCERNING TAXES

The following discussion is only a brief summary of certain additional tax
considerations affecting the Funds and their shareholders. No attempt is made
to present a detailed explanation of all federal, state and local tax concerns,
and the discussion set forth here and in the Prospectus is not intended as a
substitute for careful tax planning. Investors are urged to consult their own
tax advisers with specific questions relating to federal, state or local taxes.
<PAGE>
In General

Each Fund intends to qualify as a regulated investment company (a "RIC")
under Subchapter M of the Code and to continue to so qualify. Qualification as
a RIC requires, among other things, that a Fund: (a) derive at least 90% of
its gross income in each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
stock, securities or foreign currencies, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stocks or securities; (b) derive less than 30% of its gross
income in each taxable year from the sale or other disposition of any of the
following held for less than three months: (i) stock or securities, (ii)
options, futures, or forward contracts, or (iii) foreign currencies (or foreign
currency options, futures or forward contracts) that are not directly related
to its principal business of investing in stock or securities (or options and
futures with respect to stocks or securities) (the "30% limitation"); and (c)
diversify its holdings so that, at the end of each quarter of each taxable
year, (i) at least 50% of the market value of such Fund's assets is represented
by cash, cash items, U.S. government securities, securities of other regulated
investment companies and other securities with such other securities limited,
in respect of any issuer, to an amount not greater than 5% of the value of such
Fund's assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its assets is invested in the securities
(other than U.S. government securities or the securities of other regulated
investment companies) of any one issuer.

Investors should consider the tax implications of buying shares just prior
to distribution. Although the price of shares purchased at that time may
reflect the amount of the forthcoming distribution, those purchasing just prior
to a distribution will receive a distribution which will nevertheless be
taxable to them.

Gain or loss, if any, on the sale or other disposition of shares of a Fund
will generally result in capital gain or loss to shareholders. Generally, a
shareholder's gain or loss will be a long-term gain or loss if the shares have
been held for more than one year. If a shareholder sells or otherwise disposes
of a share of a Fund before holding it for more than six months, any loss on
the sale or other disposition of such share shall be treated as a long-term
capital loss to the extent of any capital gain dividends received by the
shareholder with respect to such share, or shall be disallowed to the extent of
any exempt-interest dividend. Currently, the maximum federal income tax rate
imposed on individuals with respect to net realized long-term capital gains is
limited to 28%, whereas the maximum federal income tax rate imposed on
individuals with respect to net realized short-term capital gains (which are
taxed at the same rates as ordinary income) is 39.6%.

A 4% non-deductible excise tax is imposed on regulated investment
companies that fail currently to distribute an amount equal to specified
percentages of their ordinary taxable income and capital gain net income
(excess of capital gains over capital losses). Each Fund intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and any capital gain net income prior to the end of each calendar year to avoid
liability for this excise tax.
<PAGE>
Each Fund may make investments that produce income that is not matched by
a corresponding cash distribution to such Fund, such as investments in
obligations that have original issue discount (i.e., an amount equal to the
excess of the stated redemption price of the security at maturity over its
issue price), or market discount (i.e., an amount equal to the excess of the
stated redemption price of the security at maturity over its basis immediately
after it was acquired if such Fund elects to accrue market discount on a
current basis. Because such income may not be matched by a corresponding cash
distribution to a Fund, such Fund may be required to dispose of other
securities to be able to make distributions to its investors. The extent to
which a Fund may liquidate securities at a gain may be limited by the 30%
limitation discussed above.

If for any taxable year a Fund does not qualify for tax treatment as a
regulated investment company, all of such Fund's taxable income will be subject
to tax at regular corporate rates without any deduction for distributions to
such Fund's shareholders. In such event, dividend distributions to shareholders
would be taxable as ordinary income to the extent of such Fund's earnings and
profits, and would be eligible for the dividends received deduction in the case
of corporate shareholders.

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

Each Fund's net long-term capital gains will be distributed at least
annually. The Funds will generally have no tax liability with respect to such
gains, and the distributions, whether paid in cash or reinvested in additional
shares, will be taxable to each Fund's shareholders as long-term capital gains,
regardless of how long a shareholder has held such Fund's shares. Such
distributions will be designated as a capital gain dividend in a written notice
mailed by a Fund to its shareholders not later than 60 days after the close of
such Fund's taxable year.

Investment company taxable income earned by a Fund will be distributed to
its shareholders. In general, a Fund's investment company taxable income will
be its taxable income (for example, any short-term capital gains) subject to
certain adjustments and excluding the excess of any net long-term capital gain
for the taxable year over the net short-term capital loss, if any, for such
year. A Fund will be taxed on any undistributed investment company taxable
income of such Fund. To the extent such income is distributed by a Fund, it
will be taxable to such Fund's shareholders as ordinary income, whether paid in
cash or reinvested in additional shares.

PERFORMANCE DATA

From time to time, each Fund may quote total return information, and the
High Income Fund may quote yield information, for one or more classes of its
<PAGE>
shares in advertisements or in reports and other communications to shareholders
and compare total return and yield on one or more classes of its shares to that
of other funds or accounts with a similar objective and to relevant indices.
Total return for each of the High Income Fund and the Europe Equity Fund will
include the performance of a corresponding limited partnership which was the
predecessor entity to each Fund.

Average Annual Total Return

Under the rules of the SEC, funds advertising performance must include
"average annual total return" figures computed according to a formula
prescribed by the SEC. The formula can be expressed as follows:

P(1 + T)n=ERV

Where: P = a hypothetical initial payment of $1,000.
T = average annual total return
n = number of year
ERV = Ending Redeemable Value of hypothetical $1,000 investment
made at the beginning of a 1-,5-, or 10 year period at the
end of the 1-,5-, or 10-year period (or fractional portion
thereof), assuming reinvestment of all dividends and
distributions.

Aggregate Total Return

"Aggregate total return" figures represent the cumulative change in the
value of an investment in a class of a Fund's shares for the specified period
and are computed by the following formula:

AGGREGATE TOTAL RETURN = ERV - P
-------
P

Where: P = a hypothetical initial payment of $10,000.

ERV = Ending Redeemable Value of a hypothetical $10,000 investment
made at the beginning of a 1-, 5-, or 10-year period at the
end of the 1-, 5-, or 10-year period (or fractional portion
thereof), assuming reinvestment of all dividends and
distributions.

Thirty Day Yield

The High Income Fund may advertise the yield on one or more classes of its
shares based on a 30-day (or one month) period, computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula:

<PAGE>
Yield 2[(a-b+1)6-1]
---
cd

Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period

Under this formula, interest earned on debt obligations for purposes of
"a" above, is calculated by (1) computing the yield to maturity of each
obligation held by the High Income Fund based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last day of each month, or, with respect to obligations purchased during the
month, the purchase price (plus actual accrued interest), (2) dividing that
figure by 360 and multiplying the quotient by the market value of the
obligation (including actual accrued interest as referred to above) to
determine the interest income on the obligation in the High Income Fund's
portfolio (assuming a month of 30 days) and (3) computing the total of the
interest earned on all debt obligations during the 30-day or one month period.
Undeclared earned income, computed in accordance with generally accepted
accounting principles, may be subtracted from the maximum offering price
calculation required pursuant to "d" above.

The thirty-day yield of the High Income Fund June 30, 1996 was 8.05% for
the Premier Shares, 7.57% for the Retail Shares and 8.01% for the Group
Retirement Plan Shares.

Each Fund may also from time to time include in advertisements a total
return figure that is not calculated according to the formulas set forth above.
Any such figure, and any quotation of the High Income Fund's performance stated
in terms of yield (whether or not based on a 30-day period), will be given no
greater prominence than the information prescribed under SEC rules.

Each Fund's performance will vary from time to time depending upon market
conditions, the composition of such Fund's portfolio and operating expenses.
Consequently, any given performance quotations should not be considered
representative of the performance of any class of a Fund's shares for any
specified period in the future. Because performance will vary, it may not
provide a basis for comparing an investment in a Fund's shares with certain
bank deposits or other investments that pay a fixed yield for a stated period
of time. Investors comparing a Fund's performance with that of other mutual
funds should give consideration to the nature, quality and maturity of the
respective investment companies' portfolio securities and market conditions.

ADDITIONAL INFORMATION CONCERNING FUND SHARES

As used in this Statement of Additional Information and the Prospectus, a
"majority of the outstanding shares," when referring to the 1940 Act approvals
to be obtained from shareholders in connection with matters affecting any
particular portfolio of the Company (such as each Fund) (e.g., approval of
investment advisory contracts) or any particular class (e.g., approval of the
<PAGE>
plan of distribution with respect to the Retail Shares of each Fund) means the
lesser of (1) 67% of the shares of that particular portfolio or class, as
appropriate, represented at a meeting at which the holders of more than 50% of
the outstanding shares of such portfolio or class, as appropriate, are present
in person or by proxy, or (2) more than 50% of the outstanding shares of such
portfolio or class, as appropriate.

The By-Laws of the Company provide that the Company shall not be required
to hold an annual meeting of shareholders in any year in which the election of
directors to the Company's Board of Directors is not required to be acted upon
under the 1940 Act. The law under certain circumstances provides shareholders
with the right to call for a meeting of shareholders to consider the removal of
one or more directors. To the extent required by law, the Company will assist
in shareholder communication in such matters.

Shares of each class of a particular portfolio of the Company (such as
each Fund) are entitled to such dividends and distributions out of the assets
belonging to that class as are declared in the discretion of the Company's
Board of Directors. In determining the net asset value of a class of a
portfolio, assets belonging to a particular class are credited with a
proportionate share of any general assets of the Company not belonging to a
particular class of a portfolio and are charged with the direct liabilities in
respect of that class of the portfolio and with a share of the general
liabilities of the Company which are normally allocated in proportion to the
relative net asset values of the respective classes of the portfolios of the
Company at the time of allocation.

In the event of the liquidation or dissolution of the Company, shares of
each class of a portfolio are entitled to receive the assets attributable to it
that are available for distribution, and a proportionate distribution, based
upon the relative net assets of the classes of each portfolio, of any general
assets not attributable to a portfolio that are available for distribution.
Shareholders are not entitled to any preemptive rights.

Subject to the provisions of the Company's Charter, determinations by the
Board of Directors as to the direct and allocable liabilities and the allocable
portion of any general assets of the Company with respect to a particular
portfolio or class are conclusive.

COUNSEL

Simpson Thacher & Bartlett (a partnership which includes professional
corporations), 425 Lexington Avenue, New York, New York 10017-3954, serves as
counsel to the Company. The validity of the shares under Maryland law has been
passed upon for the Company by Piper & Marbury, Baltimore, Maryland.

AUDITORS

Price Waterhouse L.L.P. acts as the Company's independent auditors and has
offices at 1177 Avenue of the Americas, New York, New York 10036. The
financial statement included in this Statement of Additional Information has
been so included in reliance on the report of the Company's independent
<PAGE>
auditors, given on the authority of that firm as experts in auditing and
accounting.

FINANCIAL STATEMENTS

The financial statements for the Company for the period ended June 30,
1996 are incorporated by reference to the Company's Semi-Annual Report to
Shareholders for the period ended June 30, 1996.
<PAGE>
Report of Independent Accountants

In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Lipper U.S. Equity
Fund (the "Fund"), one of the series portfolios of The Lipper Funds, Inc., at
December 27, 1995, in conformity with generally accepted accounting principles.
This financial statement is the responsibility of the Fund's management; our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit of this financial statement in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.

Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
December 28, 1995
<PAGE>
THE LIPPER FUNDS, INC.

LIPPER U.S. EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES

DECEMBER 27, 1995

ASSETS:

Cash . . . . . . . . . . . . . . . . . . . . . . . . $100,000
Deferred organization costs (Note 1) . . . . . . . . 77,863

--------
177,863
--------

LIABILITIES:

Deferred organization costs payable (Note 1) . . . . 77,863

Net Assets (applicable to 10,000 shares of beneficial $100,000
interest of Premier class issued and outstanding (par
value .001), 1,111,111,111 shares authorized. No ========
Retail or Group Retirement Plan shares issued.) . . .

Net asset value, offering and redemption price $10.00
per share of Premier class ========

Note 1 Organization:

Lipper U.S. Equity Fund (the "Fund") is one of the series of The Lipper Funds,
Inc. (the "Company") which was incorporated under Maryland law on August 22,
1995. The Fund has had no operations to date other than matters relating to
its organization and registration of the Company as an open-end management
investment company under the Investment Company Act of 1940 (the "1940 Act")
and the sale and issuance of 6,667 Premier class shares to Lipper & Company,
L.L.C. for $66,667 and 3,333 Premier class shares to Prime Lipper Asset
Management, an affiliate of Lipper & Company, L.L.C., for $33,333 on December
27, 1995. Lipper & Company, L.L.C. is the adviser to the Fund and Lipper High
Income Bond Fund, which are two of the three separate investment series of the
Company. Prime Lipper Asset Management is the adviser to the third of the
three investment series of the Company, Prime Lipper Europe Equity Fund.
Lipper & Company, L.L.C. has agreed to advance all of the costs incurred in
connection with the organization and initial registration of the Fund, and the
Fund has agreed to reimburse the adviser for such costs. If any of the initial
shares are redeemed by any holder thereof during the amortization period, the
redemption proceeds will be reduced by the unamortized organization expenses in
<PAGE>
the same proportion as the number of initial shares redeemed bears to the
number of initial shares outstanding at the time of redemption. The portion of
costs incurred and to be incurred by the Company allocated to the Fund's
organization and registration, estimated at $77,863, will be amortized on a
straight line basis for a period of 60 months beginning at the commencement of
operations of the Fund.

Note 2 Investment Advisory Agreement:

The Fund has entered into an investment advisory agreement with Lipper &
Company, L.L.C. (the "Adviser") to manage the investment of the assets of the
Fund. For services performed under the agreement, the Fund will pay the
Adviser a fee calculated daily and paid monthly at an annual rate of .85% of
the average daily net assets of the Fund. The Adviser has voluntarily
undertaken to reimburse Fund expenses to the extent necessary to limit the
total operating expenses of the Fund to 1.10% of the Premier Share's average
daily net assets for any fiscal year or portion thereof that the limitation is
in effect. The voluntary reimbursement is limited to the extent of the
Adviser's investment advisory fee. The Adviser will continue this
reimbursement until further notice.

Note 3 Administration Agreement:

Chase Global Funds Services Company provides administrative, fund accounting,
dividend disbursing, and transfer agent services pursuant to a Mutual Funds
Service Agreement between the Company and The Chase Manhattan Bank, N.A.
("Chase"). For services performed under the agreement, the Company will pay
Chase an annual fee computed daily and paid monthly, based on the combined
aggregate average daily net assets of the Company, as follows: .2% of the
first $200 million, .1% of the next $200 million, and .05% over $400 million.
Administration fees payable by each Fund are determined in proportion to the
relative average daily net assets of the respective Fund for the period paid.
Chase is entitled to an annual minimum fee of $70,000 per series.

Note 4 Class of Shares and Distribution and Shareholder Servicing Plans:

Each series of the Company is authorized to offer three separate classes of
shares - Premier, Retail, and Group Retirement Plan shares. The outstanding
shares presented in this financial statement relate to the Premier class
shares. No Retail or Group Retirement shares have been issued prior to the
date of this financial statement.

Pursuant to a distribution agreement between the Company and Lipper & Company,
L.P. (the "Distributor"), the Distributor will act as the distributor of the
shares of each series. The Distributor will be the primary distributor and
will be entering into selling arrangements with third-party distributors. In
connection with a distribution plan for the Retail shares pursuant to Rule
12b-1 of the 1940 Act, the Fund has agreed to compensate the Distributor for
its services at a rate which may not exceed .25% of the average daily net
assets on an annual basis applicable to the Retail class of shares. Such fees
are accrued daily and paid monthly. The distribution plan provides that the
<PAGE>
Distributor will use these fees to finance activities that promote the sale of
the Retail class shares.

The Company, on behalf of the Group Retirement Plan class of shares of each
series, intends to enter into shareholder servicing agreements with third
parties which will render certain support services to their customers who are
beneficial owners of Group Retirement Plan shares. Under the Group Retirement
Servicing Plan, each series at the expense of its Group Retirement Plan shares,
will pay these third parties up to .25% of the average daily net asset value on
an annual basis of the Group Retirement Plan shares of that series. The fee
will be accrued daily and paid monthly. The services to be provided under the
Group Retirement Servicing Plan include communication and correspondence with
shareholders as well as assistance to shareholders regarding shareholder
activity, furnishing reports to shareholders, and maintaining shareholder
records.

<PAGE>
THE LIPPER FUNDS, INC.

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements:

Included in Part A of the Registration Statement:

(i) Financial Highlights for the High Income Fund, U.S.
Equity Fund and Europe Equity Fund for the periods ended
June 30, 1996 (unaudited).

Included in Part B of the Registration Statement:

(i) Statement of Assets and Liabilities dated
December 27, 1995

(ii) Independent Auditors' Report dated December 28, 1995

(iii) Portfolio of Investments for the High Income Fund
dated June 30, 1996 (unaudited).*

(iv) Portfolio of Investments for the U.S. Equity Fund
dated June 30, 1996 (unaudited).*

(v) Portfolio of Investments for the Europe Equity
Fund dated June 30, 1996 (unaudited).*

(vi) Statement of Assets and Liabilities for The Lipper
Funds, Inc. dated June 30, 1996 (unaudited).*

(vii) Statement of Operations for The Lipper Funds,
Inc. for the period ended June 30, 1996 (unaudited).*

(viii) Statement of Changes in Net Assets for The Lipper
Funds, Inc. for the period ended June 30, 1996
(unaudited).*

* Incorporated by reference to the Semi-Annual Report of
The Lipper Funds, Inc. filed on August 27, 1996. [Accension
Number 0000950110-96-000981]

(b) Exhibits:

Exhibits
Number Description

1 - - Registrant's Amended and Restated Articles of
Incorporation.**

2 - - Registrant's Amended and Restated By-Laws.*

3 - - None.

4(a) - - Form of Stock Certificate for Premier Shares of common
stock.*

4(b) - - Form of Stock Certificate for Retail Shares of common
stock.*

4(c) - - Form of Stock Certificate for Group Retirement Plan
Shares of common stock.*

5(a) - - Form of Investment Advisory Agreement between
Registrant and Lipper & Company, L.L.C. relating to
the High Income Fund.***

5(b) - - Form of Investment Advisory Agreement between
Registrant and Lipper & Company, L.L.C. relating to
the U.S. Equity Fund.***

5(c) - - Form of Investment Advisory Agreement between
Registrant and Prime Lipper Asset Management relating
to the Europe Equity Fund.***

6 - - Form of Distribution Agreement between Registrant and
Lipper & Company, L.P.***

7 - - None.

8 - - Form of Custody Agreement between Registrant and The
Chase Manhattan Bank, N.A.**

9 - - Form of Administration Agreement between Registrant
and Chase Global Funds Services Company.**

10 - - Opinion and Consent of Piper & Marbury.*

11 - - Independent Auditors' Consent.****

12 - - None.

13 - - Form of Purchase Agreement among Registrant, Lipper &
Company, L.L.C. and Prime Lipper Asset Management.*

14 - - None.

15(a)- - Form of Retail Distribution Plan.**

15(b)- - Form of Group Retirement Servicing
Plan.**

16 - - Total Return.*

17 - - Financial Data Schedules.

18 - - Form of Multiclass Plan.**

19(a)- - Powers of Attorney for Kenneth Lipper, Abraham
Biderman and Stanley Brezenoff.**

19(b)- - Power of Attorney for Irwin Russell.*

19(c)- - Power of Attorney for Martin Maltz.

* Incorporated by reference to Pre-Effective Amendment No. 2
to Registration Statement filed on December 29, 1995.
** Incorporated by reference to Pre-Effective Amendment No. 1
to Registration Statement filed on December 20, 1995.
*** Incorporated by reference to Registration Statement filed
on October 10, 1995.
**** Incorporated by reference to Post-Effective Amendment No. 1
to Registration Statement filed February 15, 1996.

Item 25. Persons Controlled by or under Common Control with Registrant

None.

Item 26. Number of Holders of Securities

Number of Record
Holders at
Title of Class June 30, 1996
Premier Shares of the Lipper High
Income Bond Fund,
par value $.001 per share. . . . . . . . 57

Retail Shares of the Lipper High
Income Bond Fund,
par value $.001 per share. . . . . . . . 9

Group Retirement Plan Shares
of the Lipper High Income Bond Fund,
par value $.001 per share. . . . . . . . . . . . 4
<PAGE>
Premier Shares of the Lipper
U.S. Equity Fund,
par value $.001 per share. . . . . . . . 6

Retail Shares of the Lipper U.S.
Equity Fund,
par value $.001 per share. . . . . . . . 10

Group Retirement Plan Shares of
the Lipper U.S. Equity Fund,
par value $.001 per share. . . . . . . . . . . 53

Premier Shares of the Prime
Lipper Europe Equity Fund,
par value $.001 per share. . . . . . . 5

Retail Shares of the Prime
Lipper Europe Equity Fund,
par value $.001 per share. . . . . . . 2

Group Retirement Plan Shares of
the Prime Lipper Europe Equity Fund,
par value $.001 per share. . . . . . . . . . . 0

Item 27. Indemnification

Reference is made to Article VII of Registrant's Articles of
Incorporation, Article IV of Registrant's By-laws, and subsections 4.1 and 4.2
of the Distribution Agreement between the Registrant and Lipper & Company, L.P.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant understands that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

Item 28. Business and Other Connections of Investment Advisers

Reference is made to the Sections entitled "Management
Arrangements" in the Prospectus and the Statement of Additional
Information.

The list required by this Item 28 of officers and directors of
Lipper & Company, L.L.C., together with information as to any other
business, profession, vocation or employment of a substantial nature engaged
in by such officers, directors and partners during the past two years, is
incorporated by reference to Schedules to Form ADV filed by Lipper & Company,
L.L.C. pursuant
<PAGE>
to the Investment Advisers Act of 1940, as amended (the "Advisers Act") (SEC
File No. 801-50666).

The list required by this Item 28 of officers, directors and
partners of Prime Lipper Asset Management, together with information
as to any other business, profession, vocation or employment of a
substantial nature engaged in by such officers, directors and partners
during the past two years, is incorporated by reference to Schedules B
and D of Form ADV filed by Prime Lipper Asset Management pursuant to the
Advisers Act (SEC File No. 801-41430).

Item 29. Principal Underwriters

(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or exclusive
distributor: None.

(b) The information required by this Item 29(b) with respect to each
director, officer and partner of Lipper & Company, L.P. is incorporated by
reference to the Form BD filed by Lipper & Company, L.P. pursuant to the
Securities Act of 1934, as amended (SEC File No. 8-030161).

Item 30. Location of Accounts and Records

All accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of
1940 and the rules thereunder will be maintained at the offices of:

Lipper & Company, L.L.C., 101 Park Avenue, New York, New York 10178;
The Chase Manhattan Bank, N.A., 4 Chase MetroTech Center, Brooklyn,
New York 11245; Chase Global Funds Service Company, 73 Tremont Street,
Boston, Massachusetts 02208

Item 31. Management Services

Not applicable.

Item 32. Undertakings

(a) Not applicable.

(b) Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting upon the
question of removal of one or more of Registrant's
directors when requested in writing to do so by the
holders of at least 10% of Registrant's outstanding
shares of common stock and, in connection with such
meeting, to assist in communications with other
shareholders in this regard, as provided under Section
16(c) of the Investment Company Act of 1940.
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, Registrant certifies that it meets
all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act and has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of New York and State of
New York on the 28th day of August, 1996.

THE LIPPER FUNDS, INC.

By /s/ Steven Finkel
Steven Finkel
Executive Vice President

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

Signature Title Date

* Chairman of the August 28, 1996
Kenneth Lipper Board (principal
executive officer),
President and
Director

* Executive Vice August 28, 1996
Abraham Biderman President, Treasurer
(principal financial
and accounting
officer) and Director

* Director August 28, 1996
Stanley Brezenoff

* Director August 28, 1996
Martin Maltz

* Director August 28, 1996
Irwin E. Russell

*By: /s/ Steven Finkel August 28, 1996
Steven Finkel as
Attorney-in-Fact

<ARTICLE> 6
<CIK> 0001000072
<NAME> LIPPER FUNDS, INC.
<SERIES>
<NUMBER> 031
<NAME> EUROPE EQUITY FUND, PREMIER SHARES
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
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<DIVIDEND-INCOME> 483,183
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<EXPENSES-NET> (193,631)
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<GROSS-EXPENSE> 222,981
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<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.06
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<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0001000072
<NAME> LIPPER FUNDS, INC.
<SERIES>
<NUMBER> 032
<NAME> EUROPE EQUITY FUND, RETAIL SHARES
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-11-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 44,400,429
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<NAME> LIPPER FUNDS, INC.
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<NAME> EUROPE EQUITY FUND, GROUP RETIREMENT PLAN SHARES
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<S> <C>
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<NAME> LIPPER FUNDS, INC.
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<NAME> U.S. EQUITY FUND, PREMIER SHARES
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<NAME> LIPPER FUNDS, INC.
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<NAME> U.S. EQUITY FUND, RETAIL SHARES
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<S> <C>
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</TABLE>

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<NAME> LIPPER FUNDS, INC.
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<NAME> U.S. EQUITY FUND, GROUP RETIREMENT PLAN SHARES
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<S> <C>
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</TABLE>

<ARTICLE> 6
<CIK> 0001000072
<NAME> LIPPER FUNDS, INC.
<SERIES>
<NUMBER> 011
<NAME> HIGH INCOME BOND FUND, PREMIER SHARES
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<S> <C>
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</TABLE>

<ARTICLE> 6
<CIK> 0001000072
<NAME> LIPPER FUNDS, INC.
<SERIES>
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<NAME> HIGH INCOME BOND FUND, RETAIL SHARES
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<S> <C>
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</TABLE>

<ARTICLE> 6
<CIK> 0001000072
<NAME> LIPPER FUNDS, INC.
<SERIES>
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<NAME> HIGH INCOME BOND FUND, GROUP RETIREMENT PLAN SHARES
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<S> <C>
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