LIPPER FUNDS INC, 485BPOS, 1997-04-30

LIPPER FUNDS INC
485BPOS, 1997-04-30

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As filed with the Securities and Exchange Commission on
April 30, 1997

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 [ ]
PRE-EFFECTIVE AMENDMENT NO. __ [ ]

POST-EFFECTIVE AMENDMENT NO. 3 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 5 [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 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)
|_| 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.

Registrant has previously elected to and hereby continues its election
to register an indefinite number of shares pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. Registrant filed its Rule 24f-2
Notice for the fiscal year ended December 31, 1996 on February 27, 1997.

<PAGE>

THE LIPPER FUNDS, INC.

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ------------- --------

<S> <C> <C>
PART A

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

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

Item 3. Condensed Financial Information.................. Financial Highlights

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.............................. Included in the Registrant's Annual
Report to Shareholders dated
December 31, 1996

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
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION

<S> <C> <C>
PART B

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

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

Item 12. General Information and History.................. Not Applicable

Item 13. Investment Objective and Policies................ Investment Objective and Policies;
Investment Limitations

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

Item 15. Control Persons and Principal
Holders of Securities ........................... Management of the Company;
Principal Holders of Securities

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
</TABLE>

PART C

Information required to be included in Part C is set forth under the appropriate
item so numbered in Part C to 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 Bond 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 Bond 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.

o The High Income Bond 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.

o 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.

o 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.

Continued on Page 2

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.

April 30, 1997

<PAGE>

Continued from Cover

Shares of the U.S. Government Money Market Fund--Vista SharesSM 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--Vista SharesSM 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 BOND 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 BOND 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 Bond 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 Bond 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 Bond 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 April 30, 1997 (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.

2
<PAGE>

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 .............................................. 4
COMPANY EXPENSES ................................................ 7
FINANCIAL HIGHLIGHTS ............................................ 10
INVESTMENT OBJECTIVES AND POLICIES .............................. 13
INVESTMENT LIMITATIONS .......................................... 20
THE TRANSFERS ................................................... 21
RISK FACTORS AND SPECIAL CONSIDERATIONS ......................... 21
PURCHASE OF SHARES .............................................. 24
DISTRIBUTION AND SERVICE PLANS .................................. 26
REDEMPTION OF SHARES ............................................ 28
EXCHANGE PRIVILEGE .............................................. 30
VALUATION OF SHARES ............................................. 31
MANAGEMENT OF THE COMPANY ....................................... 32
DIVIDENDS ....................................................... 35
TAXES ........................................................... 35
PERFORMANCE INFORMATION ......................................... 37
ADDITIONAL INFORMATION .......................................... 39
DESCRIPTION OF RATINGS .......................................... Appendix A

THE LIPPER FUNDS, INC. IS NOT AFFILIATED WITH LIPPER ANALYTICAL SERVICES, INC.

3
<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:

o 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 Bond Fund and the U.S. Equity Fund. The U.S. Adviser is an 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 Bond Fund and the
U.S. Equity Fund is also an employee of Lipper or one of its affiliates. Lipper
is a privately owned investment management and investment banking firm founded
in 1987. At December 31, 1996, Lipper managed assets having an aggregate market
value on a gross basis of $2.9 billion on behalf of its institutional and high
net worth clients. Lipper offers complementary investment strategies in
intermediate term high yield bonds, hedged convertible securities, investment
grade bonds, U.S. and European equities and preferred stocks.

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 $5 billion in assets under management at
December 31, 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

<PAGE>

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."

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."

Due to the continuous nature of Rule 12b-1 fees, long-term shareholders of
Retail Shares of each Fund 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. 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.

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 a
subsequent investment minimum. Each Fund reserves the right to vary any initial
or subsequent investment minimum at any time.

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."

<PAGE>

DIVIDENDS AND CAPITAL GAINS

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

The High Income Bond 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 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."

6
<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:

HIGH
INCOME U.S. EUROPE
BOND EQUITY EQUITY
SHAREHOLDER TRANSACTION EXPENSES 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

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

</TABLE>

<PAGE>

HIGH
INCOME U.S. EUROPE
BOND EQUITY EQUITY
SHAREHOLDER TRANSACTION EXPENSES FUND FUND FUND
-------------------------------- ------- ------ -------

<S> <C> <C> <C>
Service Fees
Premier Shares ........................................... None None None
Retail Shares ............................................ None None None
Group Retirement Plan Shares. ............................ 0.25% 0.25% 0.25%

Other Expenses (after reimbursement) (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
(after reimbursement) (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%

</TABLE>

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

(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 and based on actual expenses incurred during the
1996 fiscal year, the ratio of "Other Expenses" to average daily net assets
of (i) High Income Bond Fund would be 0.32%, 0.39% and 0.35% for Premier
Shares, Retail Shares and Group Retirement Shares, respectively, (ii) U.S.
Equity Fund would be 1.23%, 1.45% and 1.09% for Premier Shares, Retail
Shares and Group Retirement Shares, respectively and (iii) Europe Equity
Fund would be 0.48%, 0.52% and 0.49% for Premier Shares, Retail Shares and
Group Retirement Shares, respectively. "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.

(2) Absent voluntary reimbursements and based on actual expenses incurred
during the 1996 fiscal year, the ratio of "Total Annual Operating
Expenses" to average daily net assets of (i) High Income Bond Fund would
be 1.27%, 1.59% and 1.55% for Premier Shares, Retail Shares and Group
Retirement Shares, respectively, (ii) U.S. Equity Fund would be 2.28%,
2.75% and 2.39% for Premier Shares, Retail Shares and Group Retirement
Shares, respectively and (iii) Europe Equity Fund would be 1.78%, 2.07%
and 2.04% for Premier Shares, Retail Shares and Group Retirement Shares,
respectively.

8
<PAGE>

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:

HIGH
INCOM U.S. EUROPE
BOND EQUITY EQUITY
FUND FUND FUND
Premier Shares ----- ----- ------
1 Year .................................... $ 10 $ 11 $ 16
3 Years ................................... $ 32 $ 35 $ 50
5 Years ................................... $ 55 $ 61 $ 87
10 Years .................................. $122 $134 $190

Retail Shares
1 Year .................................... $ 13 $ 14 $ 19
3 Years ................................... $ 40 $ 43 $ 58
5 Years ................................... $ 69 $ 74 $100
10 Years .................................. $151 $162 $217

Group Retirement Shares
1 Year .................................... $ 13 $ 14 $ 19
3 Years ................................... $ 40 $ 43 $ 58
5 Years ................................... $ 69 $ 74 $100
10 Years .................................. $151 $162 $217

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 holders of
Retail shares of each Fund 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."

9
<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 for the
period ended December 31, 1996 for the High Income Bond Fund, U.S. Equity Fund
and Europe Equity Fund. The information presented below has been audited by
Price Waterhouse LLP, the Company's independent accountants, whose unqualified
opinion thereon is included in the Annual Report, which is available upon
request and without charge. The following should be read in conjunction with the
financial statements including the notes thereto, which are also contained in
the Annual Report.

HIGH INCOME BOND FUND

GROUP RETIREMENT
PREMIER SHARES RETAIL SHARES PLAN SHARES
-------------- ------------- -----------------
APRIL 1, APRIL 11, APRIL 12,
1996** TO 1996*** TO 1996*** TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>

NET ASSET VALUE, BEGINNING OF PERIOD ........................... $ 10.00 $ 9.91 $ 9.93
-------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (1) .................................... 0.68 0.62 0.62
Net Realized and Unrealized Gain on Investments .............. 0.21 0.34 0.32
-------- ------ ------
Total from Investment Operations .......................... 0.89 0.96 0.94
-------- ------ ------
DISTRIBUTIONS:
Net Investment Income ........................................ (0.68) (0.66) (0.66)
Net Realized Gain ............................................ (0.03) (0.03) (0.03)
-------- ------ ------
Total Distributions ....................................... (0.71) (0.69) (0.69)
-------- ------ ------
NET ASSET VALUE, END OF PERIOD ................................. $ 10.18 $10.18 $10.18
======== ====== ======
TOTAL RETURN(2) ................................................ 9.23% 10.04% 9.78%
======== ====== ======
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (000's) .............................. $102,945 $ 845 $2,198
Ratios After Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets ............................... 1.00%* 1.25%* 1.25%*
Net Investment Income to Average Net Assets .................. 9.01%* 8.95%* 8.91%*
Ratios Before Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets ............................... 1.27%* 1.59%* 1.55%*
Net Investment Income to Average Net Assets .................. 8.74%* 8.61%* 8.61%*
Portfolio Turnover Rate ........................................ 74% 74% 74%

</TABLE>

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

* Annualized.
** Commencement of Fund operations.
*** Initial offering of shares by the Fund.

(1) The effect to net investment income per share of voluntarily waived fees
and reimbursed expenses was:

PERIOD ENDED
DECEMBER 31, 1996
-----------------
Premier Shares ........................... $0.02
Retail Shares ............................ $0.02
Group Retirement Plan Shares ............. $0.02

(2) Total return would have been lower had the U.S. Adviser not waived or
reimbursed certain expenses during the period ended December 31 1996.
Returns are not annualized.

<PAGE>

U.S. EQUITY FUND
<TABLE>
<CAPTION>

GROUP RETIREMENT
PREMIER SHARES RETAIL SHARES PLAN SHARES
-------------- ------------- ----------------
JANUARY 2, JANUARY 4, JANUARY 4,
1996** TO 1996*** TO 1996*** TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1996 1996
<S> <C> <C> <C>

NET ASSET VALUE, BEGINNING OF PERIOD ................................. $ 10.00 $ 10.00 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (1) .......................................... 0.18 0.11 0.07
Net Realized and Unrealized Gain on Investments .................... 1.81 1.86 1.91
------- ------- -------
Total from Investment Operations ................................ 1.99 1.97 1.98
------- ------- -------
DISTRIBUTIONS:
Net Investment Income .............................................. (0.19) (0.17) (0.18)
Net Realized Gain .................................................. (0.34) (0.34) (0.34)
In Excess of Net Realized Gain ..................................... (0.08) (0.08) (0.08)
------- ------- -------
Total Distributions ............................................. (0.61) (0.59) (0.60)
------- ------- -------
NET ASSET VALUE, END OF PERIOD ....................................... $ 11.38 $ 11.38 $ 11.38
======= ======= =======
TOTAL RETURN(2) ...................................................... 19.81% 19.62% 19.69%
======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (000's) .................................... $15,098 $ 613 $ 452
Ratios After Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets ..................................... 1.10%* 1.35%* 1.35%*
Net Investment Income to Average Net Assets ........................ 1.68%* 1.31%* 1.29%*
Ratios Before Expense Waiver and/or Reimbursement:

Expenses to Average Net Assets ..................................... 2.28%* 2.75%* 2.39%*
Net Investment Income to Average Net Assets ........................ 0.50%* (0.09)%* 0.25%*
Portfolio Turnover Rate .............................................. 117% 117% 117%
Average Broker Commission Rate ....................................... $0.0445 $0.0445 $0.0445

</TABLE>

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

* Annualized.
** Commencement of Fund operations.

*** Initial offering of shares by the Fund.

(1) The effect to net investment income per share of voluntarily waived fees
and reimbursed expenses was:

PERIOD ENDED
DECEMBER 31, 1996
------------------
Premier Shares ............................... $0.13
Retail Shares ................................ $0.12
Group Retirement Plan Shares ................. $0.06

(2) Total return would have been lower had the U.S. Adviser not waived or
reimbursed certain expenses during the period ended December 31, 1996.
Returns are not annualized.

11
<PAGE>

EUROPE EQUITY FUND
<TABLE>
<CAPTION>

GROUP RETIREMENT
PREMIER SHARES RETAIL SHARES PLAN SHARES
--------------- ------------- -----------------
APRIL 1, APRIL 11, APRIL 12,
1996** TO 1996*** TO 1996*** TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1996 1996
------------ ------------ -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ......................... $ 10.00 $ 9.93 $ 9.92
-------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (1) .................................. 0.04 (0.01) (0.02)
Net Realized and Unrealized Gain on Investments ............ 1.62 1.73 1.74
-------- ------- -------
Total from Investment Operations ........................ 1.66 1.72 1.72
-------- ------- -------
DISTRIBUTIONS:
Net Investment Income ...................................... (0.02) (0.01) (0.01)
Net Realized Gain .......................................... (0.39) (0.39) (0.39)
-------- ------- -------
Total Distributions ..................................... (0.41) (0.40) (0.40)
-------- ------- -------
NET ASSET VALUE, END OF PERIOD ............................... $ 11.25 $ 11.25 $ 11.24
======== ======= ========
TOTAL RETURN(2) .............................................. 16.68% 17.37% 17.40%
======== ======= ========
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (000's) ............................ $ 62,942 $ 609 $ 195
Ratios After Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets ............................. 1.60%* 1.85%* 1.85%*
Net Investment Income to Average Net Assets ................ 0.53%* (0.13)%* (0.43)%*
Ratios Before Expense Waiver and/or Reimbursement:
Expense to Average Net Assets .............................. 1.78%* 2.07%* 2.04%*
Net Investment Income to Average Net Assets ................ 0.35%* (0.35)%* (0.62)%*
Portfolio Turnover Rate ...................................... 34% 34% 34%
Average Broker Commission Rate ............................... $ 0.0746 $0.0746 $0.0746

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

* Annualized.

** Commencement of Fund operations.

*** Initial offering of shares by the Fund.

(1) The effect to net investment income per share of voluntarily waived fees
and reimbursed expenses was:

PERIOD ENDED
DECEMBER 31, 1996
-----------------
Premier Shares ............................ $0.01
Retail Shares ............................. $0.02
Group Retirement Plan Shares .............. $0.01

(2) Total return would have been lower had the European Adviser not waived or
reimbursed certain expenses during the period ended December 31, 1996.
Returns are not annualized.

<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 BOND FUND

The High Income Bond Fund's investment objective is high current income.
The High Income Bond 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
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

<PAGE>

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.

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."

<PAGE>

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 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 principally based in Eastern Europe or other
emerging market 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 subsidiary of Assicurazioni Generali S.p.A., the Italian insurance
company, 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.

<PAGE>

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 issuers,
see "Risk Factors and Special Considerations--Risk of Investment in Foreign
Securities."

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 depository 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
depository 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 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

<PAGE>

(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 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.

ZERO COUPON SECURITIES, PAY-IN-KIND BONDS AND DISCOUNT OBLIGATIONS. The
High Income Bond Fund may invest in zero coupon securities and pay-in-kind
bonds. In addition, certain of the High Income Bond 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 Bond Fund also may
purchase pay-in-kind bonds. 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 Bond
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 Bond Fund will
elect similar treatment for any market discount with respect to Discount
Obligations. Accordingly, the High Income Bond 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

<PAGE>

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 but which can be sold to qualified
institutional buyers in accordance with Rule 144A under the 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 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
through the adoption of a "master-feeder" structure pursuant to which each Fund
would invest all of its assets in a no-load, open-end management investment
company having the same

<PAGE>

investment objective and policies and substantially the same investment
restrictions as those applicable to the Fund, as described below under
"Investment Limitations."

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.

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

<PAGE>

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
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.

<PAGE>

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. A Fund would invest all or substantially all of its assets in another
registered investment company in connection with the adoption by the Company of
a "master-feeder" structure.

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 investment
management would be performed by or on behalf of such other investment company.

THE TRANSFERS

Each of the High Income Bond 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
greater with respect to investments in fixed income securities with longer
maturities than investments in

<PAGE>

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 Bond 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 Bond
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 Bond 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 Bond 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 Bond 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
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 Bond Fund's ability to sell securities at their fair value. In addition,
the High Income Bond 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 Bond Fund's portfolio may become illiquid and the
proportion of the High Income Bond 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 Bond Fund may
invest. See Appendix A to this Prospectus for a description of such ratings.
Achievement of the High Income Bond Fund's investment objective may be more

<PAGE>

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 Bond 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 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 a Fund.
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 Fund's 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 Fund's net asset value and any net investment income and capital
gains to be distributed in U.S. dollars to shareholders of 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.

<PAGE>

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.

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
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 Bond 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
Internal Revenue Code of 1986, as amended (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 on a distribution that economically represents a
return of a portion of the purchase price of their shares. See "Performance
Information" below for 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."

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. Group Retirement Plan Shares of each Fund are subject
to a

<PAGE>

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.

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;

(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 _______________

<PAGE>

(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
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.

<PAGE>

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
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

<PAGE>

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.

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:

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. 02108.

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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;

(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 GUARANTEES

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.
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

<PAGE>

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 Securities and
Exchange Commission (the "SEC"). Investors may incur brokerage charges on the
sale of securities so received in payment of redemptions.

EXCHANGE PRIVILEGE

The Exchange Privilege enables investors to purchase, in exchange for
shares of a Fund, shares of certain other funds of the Company, 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.

<PAGE>

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:

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, Labor Day (observed), 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 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.

31
<PAGE>

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").

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 Bond Fund and the U.S.
Equity Fund. The U.S. Adviser is an 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 Bond Fund and the U.S. Equity
Fund is also an officer or employee of Lipper or one of its affiliates. Lipper
is a privately owned investment management and investment banking firm founded
in 1987. At December 31, 1996, Lipper managed assets having an aggregate market
value on a gross basis of $2.9 billion on behalf of its 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 Bond 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.

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 director of New Holland N.V., 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 is an Executive Vice President of the U.S. Adviser and of
Lipper and Co-Manager of Lipper Convertibles, L.P. ("Lipper Convertibles"), 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,

32
<PAGE>

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 Lipper Convertibles. He has managed Lipper Convertibles
since 1989, and has been a trader with Lipper Convertibles since its inception
in 1985. Prior to joining Lipper Convertibles, 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 the portfolio manager for the High Income Bond 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 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 Lipper Convertibles 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 is a joint venture between subsidiaries of Lipper and Prime S.p.A.
("Prime"). Prime is a subsidiary of Assicurazioni Generali S.p.A., the Italian
insurance company. 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 $5 billion of assets under
management as of December 31, 1996 from domestic and international investors.

Francesco Taranto, the Managing Director of Prime, joined in 1987 as a
Managing Director of PrimeGest S.p.A. an affiliate of Prime. 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 Prime, he served for four years as the General Manager
of Interbancaria Gestione, a prominent Milan-based mutual fund company.

33
<PAGE>

Guido Guzzetti is the portfolio manager for 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 a Director and investment officer
of UniGest S.p.A., a mutual fund management company with approximately $800
million under management. From 1981-1986, 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.

FUND ADVISORY FEE
---- ------------
High Income Bond 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. The Advisers may from
time to time pay certain Participating Dealers out of their investment advisory
fees, past profits or other sources available to them for providing certain
administrative services to their customers. Such compensation does not represent
an additional expense to a Fund or its shareholders.

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 corporate affiliate 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

34
<PAGE>

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.

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 Bond 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
net investment income (i.e., 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 income for such taxable year. However, a Fund would be
subject to federal corporate income tax (currently at a maximum rate of 35%) on
any undistributed net investment 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 securities and certain other investments 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 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 net investment
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

35
<PAGE>

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 in the year of receipt. Any dividend or distribution 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 paid
during January of the following year will be treated as received by the
shareholders as of December 31 of such 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
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.

36
<PAGE>

Funds investing in foreign securities may be required to pay withholding or
other taxes to foreign governments on dividends and interest. Shareholders will
bear the cost of any foreign taxes but may be able to claim a foreign tax credit
or deduction for these foreign taxes.

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 and qualified retirement plans 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 Bond 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.

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 Bond 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

37
<PAGE>

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.

The investment performance of each of the Funds through December 31, 1996
is illustrated below. Performance information for the High Income Bond 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 Bond 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 Bond
Fund and the Europe Equity Fund are in all material respects equivalent to those
of the corresponding Partnerships. While the High Income Bond 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 Bond 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 (1)
-------------------

U.S. EQUITY FUND
Premier Shares 19.81%
Retail Shares 19.62%
Group Retirement Plan Shares 19.69%
<TABLE>
<CAPTION>
12 MONTHS AVERAGE ANNUAL
ENDED DEC. 31 (1) RETURN SINCE INCEPTION
----------------- ----------------------
<S> <C> <C>
HIGH INCOME BOND FUND
Premier Shares 11.00% 10.22%
Retail Shares 10.82% 10.18%
Group Retirement Plan Shares 10.77% 10.17%

EUROPE EQUITY FUND
Premier Shares 21.92% 11.50%
Retail Shares 21.78% 11.48%
Group Retirement Plan Shares 21.69% 11.46%
- ----------------
<FN>

(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 Bond 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. Fee waivers and reimbursements were in effect for the
Funds during 1996 without which total returns would have been lower.
</FN>
</TABLE>

38
<PAGE>

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 270 Park Avenue, New York 10017, 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 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.

39
<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.

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.

40
<PAGE>

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.

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.

41
<PAGE>

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.

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.

42
<PAGE>

INVESTMENT ADVISERS
Lipper & Company, L.L.C and
Prime Lipper Asset Management
101 Park Avenue, 6th floor
New York, NY 10178
(212) 883-6333

ADMINISTRATOR AND TRANSFER AGENT
Chase Global Funds Services Company
73 Tremont Street, 9th floor
Boston, MA 02108
1-800-LIPPER9

CUSTODIAN
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017

LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017

INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036

THE LIPPER FUNDS, INC.

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

Prospectus and
New Account Application

<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

April 30, 1997

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 Bond 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 Bond Fund and the U.S. Equity Fund, the "Funds"). This Statement of
Additional Information should be read in conjunction with the Funds' Prospectus
dated April 30, 1997 (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 ......................................... 2
Investment Limitations ..................................................... 8
Additional Purchase Information ............................................ 9
Additional Redemption Information .......................................... 9
Valuation of Shares ........................................................ 10
Management of the Company .................................................. 10
Principal Holders of Securities ............................................ 14

Distribution and Service Plans ............................................. 20
Additional Information Concerning Taxes .................................... 21
Performance Data ........................................................... 22
Additional Information Concerning Fund Shares .............................. 23
Counsel .................................................................... 24
Auditors ................................................................... 24
Financial Statements ....................................................... 24

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of the High Income Bond 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 Bond 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 Bond 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 includes 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 or accounts,
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, pursuant to procedures adopted by the Advisers.
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 aggregate the securities to be
sold or purchased for the Funds with those to be sold or purchased for such
other portfolios or accounts in order to obtain best execution.

The Funds will not execute portfolio transactions through, acquire
portfolio securities issued by 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.

The portfolio turnover rate of a Fund 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."

2
<PAGE>

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 and the U.S. Postal
Service.

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 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 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.

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

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<PAGE>

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 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 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 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 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).

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<PAGE>

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 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.

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.

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<PAGE>

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 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 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

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<PAGE>

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.

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.

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<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 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 other assets 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 assets 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 assets 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 assets 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.

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

8
<PAGE>

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.

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.

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.

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

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<PAGE>

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,
U.S. securities will be valued at the mean between the closing bid and asked
prices and European securities will be valued at the last sale price on the
principal market on which such securities are traded. Equity Securities traded
on the NASDAQ National Market System for which no sales prices are available, or
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. Fixed income securities may be valued on the basis
of valuations provided by brokers and/or a pricing service which uses
information with respect to transactions in fixed income securities, quotations
from dealers, comparable securities and various relationships between securities
in determining value. Such valuations may reflect bid or mean between bid and
asked prices for securities. 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 or other sources. 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
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.

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

Kenneth Lipper(1) Director, Chairman of President of Lipper & Company,
101 Park Avenue the Board and L.L.C. since 1995; President of
New York, NY 10178 President Lipper & Company, Inc. since 1986;
Age: 55 President of Lipper & Company,
L.P. since 1991; director of New Holland
N.V.; 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(1) Executive Vice Executive Vice President of Lipper
101 Park Avenue President, Treasurer & Company, L.L.C. since 1995;
New York, NY 10178 and Secretary Executive Vice President of Lipper
Age: 49 & Company, Inc. since 1990;
Executive Vice President of Lipper
& Company, L.P. since 1991.

</TABLE>

10
<PAGE>

Steven Finkel Executive Vice Executive Vice President of Lipper
101 Park Avenue President & Company, L.L.C. since 1995;
New York, NY 10178 Executive Vice President of Lipper
Age: 50 & Company, Inc. since 1987;
Executive Vice President of Lipper
& Company, L.P. since 1991.

Martin Maltz(2)(3) Director Principal Scientist, Xerox
25 Dunrovin Lane Corporation.
Rochester, NY 14618
Age: 56

Irwin Russell(2)(3) Director Attorney, Law Offices of Irwin E.
433 North Camden Drive, #1200 Russell since November 1992; Of
Los Angeles, CA 90210 Counsel, Rudin and Appel (November
Age: 71 1989 to November 1992); Director,
The Walt Disney Company.

Stanley Brezenoff(2)(3) Director Chief Executive Officer,
510 E. 23rd Street Maimonides Medical Center, since
New York, NY 10010 February 1995; Executive Director,
Age: 60 Port Authority of New York and New
Jersey (September 1990 to February
1995).

Kristina H. McDonough Vice President Vice President, Marketing and
101 Park Avenue Business Development, Lipper &
New York, NY 10178 Company, L.P., since 1992; Vice President
Age: 34 of Marketing and Research, Prime Lipper
Asset Management, since 1992;
previously employed by Citicorp
and Citicorp Securities Markets,
Inc.

Karl O. Hartmann Assistant Secretary Senior Vice President, Secretary
Chase Global Funds Services Company and General Counsel of Chase
73 Tremont Street Global Funds Services Company,
Boston, MA 02108-3913 since November, 1991; Senior Vice
Age: 42 President, Secretary and General
Counsel of Leland, O'Brien, Rubinstein
Associates, Inc., from November, 1990 to
November, 1991.

Ellen Watson Assistant Secretary Supervisor of State Regulation, Chase Global
Funds Services Company Chase Global Funds Services
73 Tremont Street Company, since November, 1991.
Boston, MA 02108-3913
Age: 39

Helen A. Robichaud Assistant Secretary Vice President and Associate
Chase Global Funds Services Company General Counsel of Chase Global
73 Tremont Street Funds Services Company since
Boston, MA 02108-3913 August 1994; Associate Counsel of
Age: 45 440 Financial Group of Worcester,
Inc., from 1993 to August 1994; Counsel,
Palmer & Dodge, from 1991 to 1993.

John M. Corcoran Assistant Treasurer Assistant Vice President, Manager
Chase Global Funds Services Company of Administration, Chase Global
73 Tremont Street Funds Services Company since
Boston, MA 02108-3913 October, 1993; Audit Manager,
Age: 32 Ernst & Young, from August, 1987
to September, 1993.
</TABLE>

11
<PAGE>

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

(1) Director considered by the Company to be an "interested person" of the
Company as defined in the 1940 Act.
(2) Audit Committee Member.
(3) Nominating Committee Member.

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 Funds 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 paid to each
director of the Company during the Company's initial fiscal year ending December
31, 1996:

<TABLE>
<CAPTION>
================================================================================================
(1) (2) (3) (4) (5)

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

<S> <C> <C> <C> <C>
Kenneth Lipper 0 0 0 0

Abraham Biderman 0 0 0 0

Irwin Russell $7,500 0 0 $7,500

Martin Maltz $7,500 0 0 $7,500

Stanley Brezenoff $7,500 0 0 $7,500
</TABLE>

In addition, the aggregate reimbursement to directors for travel and
out-of-pocket expenses for the initial fiscal year ending December 31, 1996 was
$8,955.72.

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 serves 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. The
advisory agreements with respect to the High Income Bond Fund and the U.S.
Equity Fund were approved by the Company's Board of Directors on December 14,
1995, and each Fund's initial shareholders on March 28, 1996 and December 28,
1995. The advisory agreement with respect to the Europe Equity Fund was most
recently approved by the Company's Board of Directors on December 18, 1996, and
by the shareholders of the Fund on March 13, 1997. 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 December 14, 1997 (or in the case of the Europe
Equity Fund, December 27, 1997) 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

12
<PAGE>

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.

For the fiscal year ended December 31, 1996, the High Income Bond Fund
and U.S. Equity Fund paid advisory fees of $344,390 and $0, respectively. During
this period the U.S. Adviser voluntarily waived advisory fees of $198,834 for
the High Income Bond Fund and $99,280 for the U.S. Equity Fund. For the fiscal
year ended December 31, 1996, the Europe Equity Fund paid advisory fees of
$383,796 and the European Adviser waived advisory fees of $74,333.

Administrator

Chase Global Funds Services Company (the "Administrator"), a corporate
affiliate of The Chase Manhattan Bank, located at 73 Tremont Street, Boston,
Massachusetts 02108, has agreed to provide the following services to the
Company: (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 of each Fund's shares for sale under state securities laws.
During the fiscal period from April 1, 1996 through December 31, 1996 the
administrative services fees paid to the Administrator by the High Income Bond
fund and Europe Equity Fund totaled $164,042 and $96,187, respectively. During
the fiscal year ended December 31, 1996, the administrative services fees paid
to the Administrator by the U.S. Equity Fund totaled $76,284.

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.

Custodian and Transfer Agent

The Chase Manhattan Bank (the "Custodian") is located at 270 Park Avenue,
New York, NY 10017, 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 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

13
<PAGE>

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 registration 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."

PRINCIPAL HOLDERS OF SECURITIES

The following lists shareholders of record who hold 5% or more of the
outstanding securities of the Funds as of March 31, 1997. Shareholders who own
greater than 25% of the shares of a class are deemed to be controlling persons
of such class.

Fund Percentage
Held

High Income Bond Fund
Premier Shares

John Byrne 27.34%
H. Enterprises International Inc.
120 S. Fifth Street, Suite 2300
Minneapolis, MN 55402

(1) First Trust National Association 10.18%
Agent Frey Group
Tax Escrow
Mutual Funds A/C 33317961
c/o Jerry Trenda Wabash Management Inc.
4005 IDS Center 80 South 8th St.
St. Paul, MN 55402

Henry J. Leir 5.71%
Charitable Reminder Trust
U/A DTD 11/9/81
c/o Steven Rosenthal
641 Lexington Avenue
New York, NY 10022

Hadassah Medical Relief Association Inc. 5.41%
c/o Sheryl L. Weinstein
50 West 58th Street
New York, NY 10019

14
<PAGE>

Fund Percentage
Held

Retail Shares

James R. Jacks 16.22%
760 N. La Cienega
Los Angeles, CA 90069

First Trust Corp Trustee 7.24%
FBO Dr. Henry Lipner
IRA 137269-0001 DTD 12/4/95
P.O. Box 173301
Denver, CO 80217-3301

Michael Hadge 6.29%
333 W. 21st Rw
New York, NY 10011-3064

Solomon Feigenbaum 6.18%
Cust Martin Feigenbaum
UGMA/NY
1755 51st Street
Brooklyn, NY 11204

Christina Frole 6.08%
and Vito Catania
JT Ten
139 Ardsley St.
Staten Island, NY 10306

Virginia Jerman 6.08%
770 Anderson Ave. 16R
Cliffside, NJ 07010

Linda Strafaci 5.93%
and Edward Strafaci
JT Ten
15 Liberty Knoll
Colts Neck, NJ 07722

Lauren Anderson 5.56%
Apt. 8A
420 E. 79th St.
New York, NY 10021

Gerald S. Nagel 5.42%
and Hadasa Nagel
JT Ten
500A Grand St. 11-C
New York, NY 10002-4128

15
<PAGE>

Fund Percentage
Held

Group Retirement Plan Shares

Jacques C. Nordeman 49.78%
and Peter Grimm Trustee
FBO Nordeman Grim Inc. 401(k)
Profit Sharing Trust
DTD 1/1/76
717 Fifth Avenue
New York, NY 10022

Serino Coyne, Inc. 23.02%
Profit Sharing Plan and Trust
W.J. Livolsi, Jr., Authorized Individual
1515 Broadway 36th Floor
New York, NY 10036

Lipper & Company Salary Savings Plan 21.41%
101 Park Ave 6th Floor
New York, NY 10178-0694

(2) U.S. Equity Fund
Premier Shares

Kenneth and Evelyn Lipper Foundation 58.97%
Lipper & Company
101 Park Ave
New York, NY 10178

Kenneth Lipper, Trustee 13.51%
FBO Joseph Gruss Settlor Trust
U/A DTD 07/22/92
101 Park Avenue
New York, NY 10178

Kenneth Lipper, Trustee 6.34%
UWIL Joseph Gruss Trust
FBO Evelyn G. Lipper Desendants
101 Park Avenue
New York, NY 10178

Sue L. Morris Kendi 5.14%
240 E. 27th Street 19-J
New York, NY 10016

16
<PAGE>

Fund Percentage
Held

Retail Shares

Michael Black, Trustee 28.15%
FBO The Black 1989 Trust
U/A DTD 9/25/89
760 N. La Cienega Boulevard
Los Angeles, CA 90069

Trust FBO Joshua A. Lewin 16.59%
c/o Mr. Andrew Lewin
99 Greenacres Ave
Scarsdale, NY 10583

Trust FBO Nathaniel J. Lewin 15.45%
c/o Mr. Andrew Lewin
99 Greenacres Ave
Scardale, NY 10583

Lauren Anderson 9.31%
Apt. 8A
420 E. 79th Street
New York, NY 10021

Michael D. Loprete 8.47%
9 Cindy Lane
Holmdel, NJ 07733

Gemini Investment Company 5.77%
9 Cindy Lane
Holmdel, NJ 07733

J. Paul Amaden 5.02%
and Christine B. Amaden
JT Ten
P.O. Box 407
East Hampton, NY 11937

Group Retirement Plan Shares

Serino Coyne, Inc. 44.81%
Profit Sharing Plan & Trust
W.J. Livolsi, Jr., Authorized Individual
1515 Broadway 36th Floor
New York, NY 10036

Lipper & Company Salary Savings Plan 44.41%
101 Park Ave 6th Floor
New York, NY 10178-0694

17
<PAGE>

Fund Percentage
Held

International Postal Consultants Inc. 5.50%
401K Profit Sharing Plan & Trust
U/A DTD 01/01/94
One Madison Street
East Rutherford, NJ 07073

J. Paul Amaden, Trustee 5.14%
FBO J Edward Gay, Jr. Agency Inc.
Money Purchase Plan
P.O. Box 5004
East Hampton, NY 11937

(3) Europe Equity Fund
Premier Shares

Evelyn and Kenneth Lipper Foundation 10.96%
Lipper & Company
101 Park Avenue
New York, NY 10178

Evelyn Gruss Lipper 8.11%
Grantor Trust
U/A DTD 12/23/88
c/o Kenneth Lipper\
101 Park Avenue
New York, NY 10178

Trust 6.76%
FBO Evelyn Lipper
U/A DTD 12/10/48
c/o Kenneth Lipper
101 Park Avenue
New York, NY 10178

Lipper & Company LP 6.25%
c/o Steven Finkel
101 Park Avenue
New York, NY 10178

Michael D. Eisner 5.21%
283 Bel Air Road
Los Angeles, CA 90077

Hyman Goldman Trustee 5.15%
FBO Hyman Golden Grandchildren Trust
U/A DTD
1245 Veeder Drive
Hewlett Bay Park, NY 11557-2512

18
<PAGE>

Fund Percentage
Held

Retail Shares

Lee Caldecot Chubb, Trustee 35.30%
FBO Chubb Family Trust
U/A DTD 8/15/90
410 23rd Street
Santa Monica, CA 90402-3281

Suzanne E. Russell 18.72%
10590 Wilshire Blvd., 1402
Los Angeles, CA 90024

Michael Black, Trustee 14.77%
FBO The Black 1989 Trust
DTD 9/25/89
760 N. La Cienga Blvd.
Los Angeles, CA 90069

Lauren Anderson 9.10%
Apt. 8A
420 E. 79th Street
New York, NY 10021

Irwin E. Russell 8.32%
10590 Wilshire Blvd., 1402
Los Angeles, CA 90024

Group Retirement Plan Shares

Serino Coyne, Inc. 54.66%
Profit Sharing Plan & Trust
W.J. Livolsi, Jr., Authorized Individual
1515 Broadway 36th Floor
New York, NY 10036

Lipper & Company Salary Savings Plan 40.95%
101 Park Avenue, 6th Floor
New York, NY 10178-0694

As of March 31, 1997, all directors and officers as a group owned
beneficially (as the term is defined in Section 13(d) under the Securities and
Exchange Act of 1934) 1,528,196.563 shares, or 14.4 % of the Premier Shares of
the High Income Bond Fund; less than 1% of the Retail Shares of the High Income
Bond Fund; 65,360.153 shares, or 21.6% of the Group Retirement Plan Shares of
the High Income Bond Fund; 932,874.234 shares, or 79.9% of the Premier Shares of
the U.S. Equity Fund; less than 1% of the Retail Shares of the U.S. Equity Fund;
40,720.89 shares, or 44.5% of the Group Retirement Plan Shares of the U.S.
Equity Fund; 2,421,840.552 shares, or 40.2% of the Premier Shares of the Europe
Equity Fund; 21,297.373 shares, or 29.1% of the Retail Shares of the Europe
Equity Fund; and 21,903.396 shares, or 45.3% of the Group Retirement Plan Shares
of the Europe Equity Fund outstanding on such date.

19
<PAGE>

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 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).

In accordance with the Retail Distribution Plan, the High Income Bond
Fund, U.S. Equity Fund and Europe Equity Fund paid fees of $824, $1,028 and
$829, respectively, to the Distributor as compensation for the distribution of
the Funds' Retail Shares during the fiscal year ended December 31, 1996.

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.

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.

In connection with the shareholder servicing fees of their Group
Retirement Plan Shares, the High Income Bond Fund, U.S. Equity Fund and Europe
Equity Fund paid fees of $2,743, $499 and $193, respectively, during the fiscal
year ended December 31, 1996.

20
<PAGE>

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.

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, securities or currencies; (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 (other than foreign currency 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 RICs 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 RICs) 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 short-term capital gains (which are taxed at the same rates as
ordinary income) is 39.6%.

A portion of the dividends of net investment income received by
corporate shareholders from a Fund may qualify for the federal dividends
received deduction generally available to corporations. The dividends received
deduction for corporate shareholders may be reduced if the securities with
respect to which dividends are received by a Fund are (1) considered to be
"debt-financed" (generally, acquired with borrowed funds), (2) held by a Fund
for less than 46 days (91 days in the case of certain preferred stock) or (3)
subject to certain forms of hedges or short sales. The amount of any dividend
distribution eligible for the corporate dividends received deduction will be
designated by a Fund in a written notice within 60 days of the close of the
taxable year.

A Fund may be subject to certain taxes, including without limitation,
taxes imposed by foreign countries with respect to its income and capital gains.
If a Fund qualified as a RIC, certain distribution requirements are satisfied
and more than 50% of the value of the Fund's total assets at the close of any
taxable year consists of stock or securities of foreign corporations, which for
this purpose may include obligations of foreign governmental issuers, the Fund
may elect, for United States federal income tax purposes to treat any foreign
country's income without withholding taxes paid by the Fund that can be treated
as income taxes under the United States income tax principles, as paid by its
shareholders.

A 4% non-deductible excise tax is imposed on RICs 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.

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 a Fund purchases shares in certain foreign investments, called
"passive foreign investment companies" ("PFICs"), the Fund may be subject to
U.S. federal income tax on a portion of any "excess distribution" or gain from
the disposition of shares even if the income is distributed as a taxable
dividend by the fund to its shareholders. Additional charges in the nature of
interest may be imposed on either a Fund or its shareholders with respect to
deferred taxes arising from the distribution or gains. If a Fund were to invest
in a PFIC and (if the Fund received the necessary information available from the
PFIC, which may be difficult to obtain) elected to treat the PFIC as a
"qualified electing fund" under the Code (a "QEF"), in lieu of the foregoing
requirements, the Fund might be required to include in income each year a
portion of the ordinary earnings and net capital gains of the PFIC, even if not
distributed to the Fund, and the amounts would be subject to the 90% and excise
tax distribution requirements described above. Because of the expansive
definition of a PFIC, it is possible that a Fund may invest a portion of its
assets in PFICs.

If for any taxable year a Fund does not qualify for tax treatment as a
RIC, 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

21
<PAGE>

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 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.

Net investment income earned by a Fund will be distributed to its
shareholders. In general, a Fund's net investment income will be its investment
company taxable income 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
net investment 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 Bond Fund may quote yield information, for one or more classes of
its 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 the High Income Bond 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 years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment made at
the beginning of the 1-, 5-, or 10 year periods 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.

22
<PAGE>

Thirty Day Yield

The High Income Bond 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:

YIELD 2[(a-b)/CD+1)^6-1]

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 recive 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 Bond 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 Bond 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 Bond Fund as of December 31,
1996 was 7.83% for the Premier Shares, 7.57% for the Retail Shares and
7.58% 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 Bond 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
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.

23
<PAGE>

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 LLP, 36 South Charles Street
Baltimore, Maryland 21201-3018.

AUDITORS

Price Waterhouse LLP acts as the Company's independent accountants and
has offices at 1177 Avenue of the Americas, New York, New York 10036. The
financial statements included in this Statement of Additional Information have
been so included in reliance on the report of the Company's independent
accountants, given on the authority of that firm as experts in auditing and
accounting.

FINANCIAL STATEMENTS

The financial statements and financial highlights for the Company for
the period ended December 31, 1996, which appear in the Company's 1996 Annual
Report to Shareholders, and the report thereon of Price Waterhouse LLP, the
Fund's independent accountants, also appearing therein, which were previously
filed electronically with the Securities and Exchange Commission, are
incorporated herein by reference.

24
<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 Bond Fund, U.S. Equity
Fund and Europe Equity Fund for the periods ended December 31,
1996.

Included in Part B of the Registration Statement:

(i) Statement of Assets and Liabilities dated December 31, 1996.

(ii) Independent Auditors' Report dated December 31, 1996.

(iii) Portfolio of Investments for the High Income Bond Fund dated
December 31, 1996.*

(iv) Portfolio of Investments for the U.S. Equity Fund dated December
31, 1996.*

(v) Portfolio of Investments for the Europe Equity Fund dated
December 31, 1996.*

(vi) Statement of Assets and Liabilities for The Lipper Funds, Inc.
dated December 31, 1996.*

(vii) Statement of Operations for The Lipper Funds, Inc. for the
period ended December 31, 1996.*

(viii) Statement of Changes in Net Assets for The Lipper Funds, Inc.
for the period ended December 31, 1996.*

* Incorporated by reference to the Annual Report of The
Lipper Funds, Inc. filed on March 6, 1997. [Accession
Number 0000950110-97-000410]

(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.*

<PAGE>

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

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

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

11 - - Independent Accountants' Consent. (filed herewith)

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. (filed herewith)

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.*

* 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.

<PAGE>

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 March 31, 1997

Premier Shares of the Lipper High
Income Bond Fund, par value $.001 per share...................... 96

Retail Shares of the Lipper High Income Bond Fund,
par value $.001 per share........................................ 31

Group Retirement Plan Shares of the Lipper High Income
Bond Fund, par value $.001 per share............................. 8

Premier Shares of the Lipper U.S. Equity Fund,
par value $.001 per share........................................ 13

Retail Shares of the Lipper U.S. Equity Fund,
par value $.001 per share........................................ 14

Group Retirement Plan Shares of the Lipper U.S. Equity Fund,
par value $.001 per share........................................ 5

Premier Shares of the Prime Lipper Europe Equity Fund,
par value $.001 per share........................................ 72

Retail Shares of the Prime Lipper Europe Equity Fund,
par value $.001 per share........................................ 14

Group Retirement Plan Shares of the Prime Lipper Europe
Equity Fund, par value $.001 per share........................... 4

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.

<PAGE>

Item 28. Business and Other Connections of Investment Advisers

Reference is made to the Sections entitled "Management of the
Company" 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 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, 270 Park Avenue, New York, New York 10017
Chase Global Funds Services Company, 73 Tremont Street, Boston,
Massachusetts 02108

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, the 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 30th day
of April, 1997.

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 Board April 30, 1997
Kenneth Lipper (principal executive officer),
President and Director

* Executive Vice President, April 30, 1997
Abraham Biderman Treasurer (principal financial
and accounting officer) and
Secretary

* Director April 30, 1997
Stanley Brezenoff

Director
Martin Maltz

* Director April 30, 1997
Irwin E. Russell

*By: /s/ Steven Finkel April 30, 1997
-------------------------
Steven Finkel as
Attorney-in-Fact

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statment of Additional Information
constituting part of this Post-Effective Amendment No. 3 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 14, 1997, relating to the financial statements and financial highlights
of The Lipper Funds, Inc., which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the heading "Financial Highlights" in the
Prospectus and under the headings "Auditors" and "Financial Statements" in the
Statement of Additional Information.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 25, 1997

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<NAME> LIPPER FUNDS, INC.
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<NAME> U.S. EQUITY FUND, RETAIL SHARES
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<NAME> LIPPER FUNDS, INC.
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<NAME> LIPPER FUNDS, INC.
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<NAME> LIPPER FUNDS, INC.
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<NAME> HIGH INCOME BOND FUND, PREMIER SHARES
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<NAME> LIPPER FUNDS, INC.
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<NAME> HIGH INCOME BOND FUND, RETAIL SHARES
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<ARTICLE> 6
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<NAME> LIPPER FUNDS, INC.
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<NAME> HIGH INCOME BOND FUND, GROUP RETIREMENT PLAN SHARES
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