SAMCO FUND INC, 497, 1999-06-15

SAMCO FUND INC
497, 1999-06-15

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SAMCO FUNDS, INC.

SAMCO AGGREGATE FIXED INCOME FUND CLASS A SHARES

Samco INTERMEDIATE FIXED INCOME FUND CLASS A SHARES

The SAMCO Aggregate Fixed Income Fund (the "Fixed Income Fund") and the SAMCO
Intermediate Fixed Income Fund (the "Intermediate Fixed Income Fund") are
non-diversified investment portfolios of SAMCO Funds, Inc. an open-end
management investment company (the "Fund").

The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this propectus. Any
representation to the contrary is a criminal offense.
committing a crime.

The date of this Prospectus is dated June 14, 1999

TABLE OF CONTENTS
PAGE
RISK/RETURN SUMMARY 1
FIXED INCOME FUND 1
INTERMEDIATE FIXED INCOME FUND 2
PRINCIPAL INVESTMENT RISKS 3
RISK/RETURN BAR CHARTS AND TABLES 4
RISK/RETURN SUMMARY: FEE TABLE 4
FUND MANAGEMENT 5
PURCHASE OF SHARES 7
REDEMPTION OF SHARES 7
ADDITIONAL INFORMATION 8
DESCRIPTION OF INVESTMENTS 9
INVESTMENT LIMITATIONS 12
FINANCIAL HIGHLIGHTS 13

RISK/RETURN SUMMARY

The following is a summary of certain key information about each of the
Fund's Portfolios, including investment objectives, principal investment
strategies and principal investment risks. A more detailed description of the
allowable investment strategies, allowable investments and their associated
risks will follow.

FIXED INCOME FUND

Investment Objective: The Fixed Income Fund's investment objective is to provide
investors with a total return which consistently exceeds the total return of the
broad U.S. investment grade bond market as measured by the Lehman Brothers
Aggregate Bond Index (the "LBA Benchmark").

Principal Investment Strategies: The Fixed Income Fund seeks to achieve its
objective through superior selection and emphasis on current income while
maintaining a duration neutral position. A duration neutral position means that
the investment adviser of the Fixed Income Fund does not take a duration
position against the LBA Benchmark. Duration measures the expected life of a
debt security on a present value basis. The present duration of the LBA
Benchmark is 4.7 years. At least 65% of the Fixed Income Fund's total assets
will be invested in the broad universe of available U.S. dollar fixed income
securities.

Investment Management Approach:
Seix Investment Advisors Inc. (the
"Investment Adviser") will manage
the Fixed Income Fund based on its
fixed income approach which is
founded upon four cornerstones:
1. Targeted Duration: The Fixed Income Fund will be managed with a
duration that is close to the duration of the LBA Benchmark. Value is
added through sector and security management.
2. Yield Tilt: Although the Fixed Income Fund is managed on a total
return basis, a premium is placed on income. Income is considered the
most powerful contributor to fixed income returns. Non-Treasury
sectors generally play a dominant role in the Fixed Income Fund.
3. Comprehensive Sector Construction:
Sector allocation is generally determined through a research driven
process, depending on value areas within the fixed income market. Since
the Fixed Income Fund does not take a duration position, the Investment
Adviser allows larger than average allocations to different sectors.
The Fixed Income Fund will usually maintain an overweighting in
obligations of domestic or foreign corporations and an underweighting
of United States Treasury securities, giving the Fixed Income Fund
potentially higher income than the LBA Benchmark with accompanying
risk.

4. Proprietary Analytics: Because of the growing complexity of
the bond market, the Investment Adviser believes that the use of
financial investment techniques which it developed internally is key to
identifying value and to adequately controlling risk.

Credit Quality: The Fixed Income Fund may only invest in investment
grade securities that are those rated by one or more nationally
recognized statistical rating organizations (NRSROs) in one of the four
highest rating categories at the time of purchase (e.g. AAA, AA, A or
BBB by Standard & Poor's Corporation (Standard & Poor's), Duff & Phelps
Credit Rating Co. ("Duff & Phelps"), or Fitch Investors Service, Inc.,
(Fitch) or Aaa, Aa, A or Baa by Moody's Investors Service, Inc.
(Moody's). If the security is unrated, it must meet, in the judgement
of the Investment Adviser, the above minimum credit quality standards.

Principal Investments: The Fixed Income Fund will principally invest in
the following securities: obligations issued or guaranteed by the
United States Government, obligations of domestic or foreign
corporations or other entities, obligations of domestic or foreign
banks, mortgage-and-asset backed securities, obligations backed by the
full faith and credit of the United States, and obligations issued or
guaranteed by United States Government agencies, Government-Sponsored
Enterprises (GSE's) or instrumentalities where the Fixed Income Fund
must look principally to the issuing or guaranteeing agency for
ultimate repayment.

Principal Risks: A loss of money on your investment in the Fixed Income Fund, or
the underperformance of the Fixed Income Fund relative to other investments
could occur due to certain risks. These include: interest rate risk, credit
risk, prepayment risk, and non-diversification risk.

INTERMEDIATE FIXED INCOME FUND

Investment Objective: The Intermediate Fixed Income Fund's investment objective
is to provide investors with a total return which consistently exceeds the total
return of the intermediate portion of the broad U.S. investment grade bond
market as measured by the Lehman Brothers Intermediate Government Corporate
Index (the "LBI Benchmark").

Principal Investment Strategies: The Intermediate Fixed Income Fund seeks to
achieve its objective through superior selection and emphasis on current income
while maintaining a duration neutral position. A duration neutral position means
that the investment adviser of the Intermediate Fixed Income Fund does not take
a duration position against the LBI Benchmark. Duration measures the expected
life of a debt security on a present value basis. The present duration of the
LBI Benchmark is 3.4 years. At least 65% of the Intermediate Fixed Income Fund's
total assets will be invested in the broad universe of available U.S. dollar
fixed income securities.

2. Yield Tilt: Although the Intermediate Fixed Income Fund is managed
on a total return basis, a premium is placed on income. Income is
considered the most powerful contributor to fixed income returns.
Non-Treasury sectors generally play a dominant role in the Intermediate
Fixed Income Fund.
3. Comprehensive Sector Construction: Sector
allocation is generally determined through a research driven process,
depending on value areas within the fixed income market. Since the
Intermediate Fixed Income Fund does not incur any duration risk, the
Investment Adviser allows larger than average allocations to different
sectors. The Intermediate Fixed Income Fund will usually maintain an
overweighting in obligations of domestic or foreign corporations and an
underweighting of United States Treasury securities, giving the
Intermediate Fixed Income Fund potentially higher income than the LBI
Benchmark with accompanying risk.
4. Proprietary Analytics: Because of
the growing complexity of the bond market, the firm believes that the
use of financial investment techniques which it developed internally is
key to identifying value and to adequately controlling risk.

Principal Investments: The Intermediate Fixed Income Fund will
principally invest in the following securities: obligations issued or
guaranteed by the United States Government, obligations of domestic or
foreign corporations or other entities, obligations of domestic or
foreign banks, mortgage-and-asset backed securities, obligations backed
by the full faith and credit of the United States, and obligations
issued or guaranteed by United States Government agencies,
Government-Sponsored Enterprises (GSE's) or instrumentalities where the
Intermediate Fixed Income Fund must look principally to the issuing or
guaranteeing agency for ultimate repayment.

Principal Risks: A loss of money on your investment in the Intermediate Fixed
Income Fund, or the underperformance of the Intermediate Fixed Income Fund
relative to other investments could occur due to certain risks. These include:
interest rate risk, credit risk, prepayment risk, and non-diversification risk.

<PAGE>

PRINCIPAL INVESTMENT RISKS

"Risk" is the chance that you may lose on an investment or that it will not earn
as much as you expect. In general, the greater the risk, the greater the
possibility of losing money. The possibility exists that investment decisions of
portfolio managers of the Fund will not accomplish what they are designed to
achieve. No assurance can be given that a Portfolio's investment objective will
be achieved.

The risks associated with each Portfolio depend on its investment strategy and
the types of securities it holds. The specific risks affecting each Portfolio
will be indicated in the individual portfolio descriptions in this prospectus.
General risks associated with each Portfolio's investment policies and
strategies are as follows:

Banking industry Investing in bank obligations will expose an investor to
risks associated with the banking industry
risk: such as interest rate and credit risks.

Credit risk: The risk that a security issuer or a counterparty to
a contract will default or not be able to honor a financial
obligation.

Interest rate Bond prices fluctuate with changing interest rates and vary
inversely with market interest rates. In risk: general, bonds increase in value
when interest rates fall and decrease in value when interest rates
rise. Further, for a given change in interest rates, longer
duration bonds usually fluctuate more in price than shorter
duration bonds.

Market risk: The market value of a security may increase or
decrease over time. Such fluctuations can cause a security
to be worth less than the price originally paid for it or
less than it was worth at an earlier time. Market risk may
affect a single issuer, entire industry or the market as a
whole.

Non-diversification
risk: A portfolio is diversified when it spreads investment
risk by placing assets among a large number of investments.
A non-diversified portfolio concentrates its assets
among fewer securities. Non-diversification can intensify
risk should a particular investment suffer from adverse
market conditions.

Prepayment risk: Investing in mortgage-backed and other asset-backed
securities carries risks of faster or slower than expected
prepayment of principal which affect the duration and
return of the securities.

POTENTIAL Year 2000 risk

Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be affected adversely if the computer systems
used by the Investment Advisor, Administrator and/or other service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. This is commonly known as the "Year 2000 Problem" ("Y2K
Problem"). The advisor and administrator are taking steps that they believe are
reasonably designed to address the Y2K Problem with respect to their computer
systems and in obtaining reasonable assurances that comparable steps are being
taken by the Fund's other major service providers. At this time, however, there
can be no assurance that these steps will be sufficient to avoid any adverse
impact to the Fund, nor can there be any assurance that the Y2K Problem will not
have an adverse effect on the companies whose securities are held by the Fund or
on global markets or economies, generally. Foreign companies may have greater
exposure to the Y2K Problem than U.S. companies due to less sophisticated
testing procedures.

RISK/RETURN BAR CHARTS AND TABLES
(Class A Shares of the Fixed Income Fund Indicated)

The bar chart and table shown below indicate the risks of investing in the Fixed
Income Fund. The bar chart shows changes in the yearly performance of the Fixed
Income Fund as compared to a selected broad based index. The past performance of
the Fixed Income Fund does not necessarily indicate how it will perform in the
future.

During the 1 year period shown in the Fixed Income Fund's bar chart, the
highest quarterly return was 3.181% (quarter ending 9/30/98) and the lowest
quarterly return was 0.586% (quarter ending 12/31/98).

The Fixed Income Fund's total return for the period from 1/1/99 to 3/31/99 was
_0.098%.

- ----------------------------------------------- ------------------------- ---------------------------- ------------------------
Average Annual Total Returns (for the Past 1 Year Past 5 Years Since Inception*
period(s) ended December 31, 1998)
- ----------------------------------------------- ------------------------- ---------------------------- ------------------------
- ----------------------------------------------- ------------------------- ---------------------------- ------------------------

- ----------------------------------------------- ------------------------- ---------------------------- ------------------------
- ----------------------------------------------- ------------------------- ---------------------------- ------------------------
SAMCO Aggregate Fixed Income Fund** 7.82% N/A 8.01%
- ----------------------------------------------- ------------------------- ---------------------------- ------------------------
- ----------------------------------------------- ------------------------- ---------------------------- ------------------------
Lehman Brothers Aggregate Bond Index 8.67% N/A 8.91%
- ----------------------------------------------- ------------------------- ---------------------------- ------------------------
</TABLE>

* Date of Inception: 12/30/1997
** The name of the Portfolio was changed on June
10, 1999 by the Board of Directors from SAMCO Fixed Income Portfolio to SAMCO
Aggregate Fixed Income Fund.

We have not included the performance
returns of the Intermediate Fixed Income
Fund since it has not commenced investment operations yet.

RISK/RETURN SUMMARY: FEE TABLE

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

- ---------------------------------------------------------------- ------------------------ -------------------------------------
Shareholder Fees Fixed Income Fund Intermediate Fixed Income Fund
(Fees Paid Directly From Your Investment)
- ---------------------------------------------------------------- ------------------------ -------------------------------------
Sales Loads None None
Redemption Fees None None
Exchange Fee None None
Annual Fund Operating Expenses
(Fees Paid From Fund Assets)
Management Fees 0.25% 0.25%
Other Expenses (a) 0.78% 0.55%
Total Annual Fund Operating Expenses (b) 1.03% 0.80% (c)
- ---------------------------------------------------------------- ------------------------ -------------------------------------
</TABLE>

(a) Other Expenses include fees for shareholder services, custodial,
administration, dividend disbursing and transfer agency fees, legal and
accounting fees, printing costs and registration fees.

(b) The Investment Adviser and Administrator have voluntarily agreed to limit
the total expenses of the Fixed Income Fund and Intermediate Fixed Income Fund
(excluding interest, taxes, brokerage and extraordinary expenses) to annual
rates of 0.45% of their average daily net assets for an indefinite time period.
There is no specific time period for how long the voluntary expense limitations
will last, and such waivers may be cancelled at any time. As long as these
temporary expense limitations continue, it may lower the Fixed Income Fund and
Intermediate Fixed Income Fund's expenses and increase their total returns. In
the event the Investment Adviser and Administrator remove such expense caps, the
Fixed Income Fund and Intermediate Fixed Income Fund's expenses may increase and
their total returns may be reduced depending on their total assets. For the
fiscal year ended October 31, 1998, the Investment Adviser and Administrator
waived fees in the amount of 0.58% in the Fixed Income Fund.

(c) As the Intermediate Fixed Income Fund has not commenced investment
operations, these expenses are estimates based upon the expected expenses that
the Intermediate Fixed Income Fund would incur
in the current fiscal year.

Example. This example is intended to help
you compare the cost of investing in each
of the Portfolios of the Fund with the
cost of investing in other mutual funds.

The example assumes that:
o You invest $10,000 in the Portfolio for the time periods indicated; o Your
investment has a 5% return each year; and o The Portfolio's operating expenses
remain the same.

The results apply whether or not you redeem your investment at the end of each
period. Although your costs may be higher or lower, based on these assumptions
your costs would be:

- ----------------------------------- ------------------------- ---------------------------------------
Fixed Income Fund Intermediate Fixed Income Fund
- ----------------------------------- ------------------------- ---------------------------------------
1 Year $105 $82
3 Years $328 $255
5 Years $569
10 Years $1,259
- ----------------------------------- ------------------------- ---------------------------------------
</TABLE>

FUND MANAGEMENT

Board of Directors

The Board of Directors of the Company
consists of five individuals who are
responsible for the overall supervision of
the operations of the Fund and perform the
various duties imposed on the directors of
investment companies by the 1940 Act. The
Fund's Directors are Christina Seix, John
G. Talty, Peter J. Bourke, John E. Manley,
Sr., and John R. O'Brien. Additional
information about the Directors and the
Fund's executive officers may be found in
the Statement of Additional Information
under the heading "Management of the
Fund."

Investment Adviser
.
Seix Investment Advisors Inc., established in 1992, is a registered investment
adviser that specializes in professional fixed income management for
corporations, public funds, endowments, foundations and hospitals. The
Investment Adviser currently has approximately $3.7 billion in assets under
management. The Investment Adviser is located at 300 Tice Boulevard, Woodcliff
Lake, N.J. 07675. Seix Investment Advisors Inc. acts as the investment adviser
to the Fund and provides the Fund with management and investment advisory
services. The advisory agreement with the Investment Adviser provides that,
subject to the direction of the Board of Directors of the Fund, the Investment
Adviser is responsible for the actual management of the Fund. The responsibility
for making decisions to buy, sell or hold a particular security rests with the
Investment Adviser, subject to review by the Board of Directors. The Investment
Adviser also is obligated to provide all the office space, facilities, equipment
and personnel necessary to perform its duties under the Advisory Agreement.

Payment of Fund Expenses

Fund expenses directly attributable to a Portfolio are charged
to that Portfolio; other expenses are allocated proportionately
among all the Portfolios in relation to their net assets. As
compensation for the services rendered by the Investment
Adviser under the Advisory Agreements, each Portfolio pays the
Investment Adviser a monthly advisory fee. This advisory fee
is calculated by applying the following annual percentage rates
to such Portfolio's average daily net assets for the month:

- ---------------------------------------- -------------
Fund Name Rate
- ---------------------------------------- -------------
- ---------------------------------------- -------------
Fixed Income Fund 0.25%
- ---------------------------------------- -------------
- ---------------------------------------- -------------
Intermediate Fixed Income Fund 0.25%
- ---------------------------------------- -------------

For the period beginning December 30, 1997 to October 31, 1998,
the amount of advisory fees (net of waivers and reimbursements)
paid by the Fixed Income Fund was $ 44,287. Due to its
inactive status, no advisory fees were incurred by the
Intermediate Fixed Income Fund for the period ended October 31,
1998.

Portfolio Managers

The Fund will be managed using a team approach with all of the portfolio
managers listed below contributing investment expertise in their respective
areas.

Christina Seix, CFA, Chairman, CEO & Chief Investment Officer Formerly, Chairman
& CEO, Head of Investment Policy, MacKay-Shields Total Investment Experience: 24
years BA, Fordham University, Mathematics; MA, SUNY, Mathematics

John Talty, CFA, President & Senior
Portfolio Manager
Formerly, Chief Fixed Income Strategist,
J.P. Morgan Securities
Total Investment Experience: 16 years
B.A., Connecticut College, Economics, Phi
Beta Kappa, Magna Cum Laude

Barbara Hoffmann, Managing Director and
Senior Portfolio Manager
Formerly, Senior Portfolio Manager,
MetLife Investment Management Co.
Total Investment Experience: 18 years
BS, University of Maine,
Education/Mathematics

Michael McEachern, CFA, Director and
Senior Portfolio Manager
Formerly, Vice President, Fixed Income,
American General Corp.
Total Investment Experience: 13 years
BA, University of California, Operations
Research; MBA, Rice University,
Accounting/Public Administration

Joseph Calabrese, Director and Senior
Portfolio Manager
Formerly, Director, Fixed Income, MetLife
Insurance Company
Total Investment Experience: 10 years
BS, New Jersey Institute of Technology,
Industrial Engineering; MBA, New York
University, Finance

Purchase Of Shares

There is no sales charge imposed by the Fund. The minimum initial
investment in the Class A shares of each Portfolio in the Fund is $1,000,000.
The minimum investment may be waived at any time at the discretion of the
investment adviser. Additional purchases may be of any amount.

The offering of shares of the Fund is continuous and purchases of
shares of the Fund may be made Monday through Friday, except for the holidays
declared by the Federal Reserve Banks of New York or Boston (a "Business Day").
At the present time, these holidays are: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Memorial Day, Fourth of July, Labor Day, Columbus Day,
Veterans Day, Thanksgiving, and Christmas. The Fund's shares are offered at a
public offering price equal to the net asset value next determined after receipt
of a purchase order.

In order to purchase shares on a particular Business Day, subject to
the offering dates described above, a purchaser must submit a completed Account
Application Form (and other required documents) and call the Investors Capital
Services, Inc., a branch office of the Distributor at (800) 762-4848, or within
the City of New York, (212) 332-5211 prior to 4:00 p.m. Eastern time to inform
the Fund of the incoming wire transfer. If Federal funds are received by the
Fund that same day, the order will be effective on that day. If the Fund
receives notification on a non-business day, or after 4:00 p.m. Eastern time, or
if Federal funds are received by the Transfer Agent after 4:00 p.m. Eastern
time, such purchase order shall be deemed received as of the next business day.
Shares purchased will begin accruing dividends on the day Federal funds are
received.

Purchases of shares must be made by wire transfer of Federal funds.
Please note that the shareholder's bank may impose a charge to execute the wire
transfer. The wiring instructions for purchasing shares of the Fund are:

Investors Bank & Trust Company
Boston, MA
ABA # 011-001-438
Acct: 303030303
Benf: (name of Portfolio)
F/F/C (Shareholder's Account at Fund)

Redemption Of Shares

The Fund will redeem all full and fractional shares of each Portfolio
in the Fund upon request of shareholders. The redemption price is the net asset
value per share next determined after receipt by the Transfer Agent of proper
notice of redemption as described below. If such notice is received by the
Transfer Agent by 4:00 p.m. Eastern time on any Business Day, the redemption
will be effective on the date of receipt. If such notice of redemption is
received by the Transfer Agent after 4:00 p.m. Eastern time, the redemption of
the shareholder shall be effective on the following Business Day. Payment will
ordinarily be made by wire on the next Business Day but within no more than
seven days from the date of receipt. If the notice is received on a day that is
not a Business Day or after the above-mentioned cut-off times, the redemption
notice will be deemed received as of the next Business Day.

There is no charge imposed by the Fund to redeem shares of the Fund;
however, a shareholder's bank may impose its own wire transfer fee for receipt
of the wire. Redemptions may be executed in any amount requested by the
shareholder up to the amount such shareholder has invested in the Fund.

To redeem shares, a shareholder or any authorized agent (so designated
on the Account Application Form) must provide the Transfer Agent with the dollar
or share amount to be redeemed, the account to which the redemption proceeds
should be wired (which account shall have been previously designated by the
shareholder on its Account Application Form), the name of the shareholder and
the shareholder's account number. Shares redeemed receive dividends up to and
including the day preceding the day the redemption proceeds are wired.

A shareholder may change its authorized agent or the account designated
to receive redemption proceeds at any time by writing to the Transfer Agent with
an appropriate signature guarantee. Further documentation may be required when
deemed appropriate by the Transfer Agent.

A shareholder may request redemption by calling the Transfer Agent at
(800) 247-0473. Telephone redemption is made available to shareholders of the
Fund on the Account Application Form. The Fund and the Transfer Agent may employ
reasonable procedures designed to confirm that instructions communicated by
telephone are genuine. If either the Fund or the Transfer Agent does not employ
such procedures, it may be liable for losses due to unauthorized or fraudulent
instructions. The Fund or the Transfer Agent may require personal identification
codes and will only wire funds through pre-existing bank account instructions.
No bank instruction changes will be accepted via telephone.

ADDITIONAL INFORMATION

Dividends and Distributions

Dividends are automatically reinvested in additional Class A shares of
the Fund on the last day of each month at the net asset value per share on the
last Business Day of that month unless shareholders indicate their desire to
receive dividends in cash (payable on the first Business Day of the following
month) on the Account Application Form. In the event that the Fund realizes net
long-term capital gains (i.e., with respect to assets held more than 18 months),
it will distribute them at least annually by automatically reinvesting (unless a
shareholder has elected to receive cash) such long-term capital gains in
additional shares of the Fund at the net asset value on the date the
distribution is declared.

The net investment income (including accrued but unpaid interest and
amortization of original issue and market discount or premium) of the Fund will
be declared as a dividend payable monthly to shareholders of record as of the
last Business Day of each month. The Fund will also declare, to the extent
necessary, a net short-term capital gain dividend once per year. Dividends are
paid on the first Business Day of the month.

Determination of Net Asset Value

The net asset value per share of the Fund is calculated by the Fund's
Accounting Agent as of 4:00 p.m. Eastern time on each Business Day the Fund is
open. The net asset value per share of each class of the Fund is computed by
dividing the sum of the value of the securities held by the Fund plus any cash
or other assets (including interest and dividends accrued but not yet received)
minus all liabilities (including any accrued expenses that are specific to that
class) by the total number of shares outstanding at such time, rounded to the
nearest cent. Expenses, including the investment advisory fees payable to the
Investment Adviser, are accrued daily.

The following methods are used to calculate the value of the Fund's assets:
(1) all portfolio securities for which over-the-counter market quotations are
readily available (including asset-backed securities) are valued at the latest
bid price; (2) deposits and repurchase agreements are valued at their cost plus
accrued interest unless the Investment Adviser determines in good faith, under
procedures established by and under the general supervision of the Fund's Board
of Directors, that such value does not approximate the fair value of such
assets; and (3) the value of other assets will be determined in good faith by
the Investment Adviser at fair value under procedures established by and under
the general supervision of the Fund's Board of Directors. The procedures
establish guidelines for the Board to follow in pricing securities in the Fund
for which market quotations are not readily available. These securities will be
priced by the Fund's Pricing Committee and then reported to the Board seeking
ratification of the price by the Board at its next quarterly meeting.

Taxes

The following discussion is only a brief summary of some of the
important tax considerations affecting each Portfolio of the Fund and its
shareholders. No attempt is made to present a detailed explanation of all
federal, state, local and foreign income tax considerations, and this discussion
is not intended as a substitute for careful tax planning. Accordingly, potential
investors are urged to consult their own tax advisers with specific reference to
their own tax situation.

Distributions paid by a Portfolio of the Fund from net investment
income are designated by the Portfolio as "ordinary income dividends" and,
whether paid in cash or reinvested in additional shares, will be taxable to the
Portfolio's shareholders that are otherwise subject to tax as ordinary income.
Distributions made from a Portfolio's net capital gain which are designated by
the Portfolio as "capital gains dividends" are taxable to shareholders as
long-term capital gains, regardless of the length of time the shareholder has
owned the Portfolio's shares. Each Portfolio of the Fund expects that its
distributions will represent primarily ordinary income to shareholders.
Shareholders receiving distributions from the Portfolio in the form of
additional shares will be treated for federal income
tax purposes as receiving a distribution in an amount equal to the net asset
value of the additional shares on the date of such a distribution. Each
shareholder will receive an annual statement detailing the tax status of
Portfolio distributions for each year.

Gain or loss, if any, recognized on the sale or other disposition of
shares of a Portfolio of the 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 1 year . A loss realized on a sale or exchange of shares may be
disallowed if other shares 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 Portfolio of the Fund are generally
taxable to the shareholders at the time the dividend or distribution is made.
Any dividend declared in October, November or December of any year,
however, that is payable to shareholders of record on a specified date in such
month will be deemed to have been received by the shareholders and paid by
a Portfolio of the Fund on December 31 of such year in the event such
dividends are actually paid during January of the following year.

A Portfolio of the 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 Portfolio of the Fund with the
shareholder's correct taxpayer identification number, (ii) the Internal Revenue
Service ("IRS") notifies the Portfolio of 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.

DESCRIPTION OF INVESTMENTS

Each Portfolio of the Fund may invest in the securities defined below
in accordance with their listing of allowable investments and any quality or
policy constraints.

Agencies

The Fund may invest in agencies which are securities that are not
guaranteed by the United States Government, but which are issued, sponsored or
guaranteed by a federal agency or federally sponsored agency such as the Student
Loan Marketing Association or any of several other agencies.

Bank Obligations

The Fund may invest in obligations of domestic and foreign banks,
including time deposits, certificates of deposit, bankers' acceptances, bank
notes, deposit notes, Eurodollar time deposits, Eurodollar certificates of
deposit, variable rate notes, loan participations, variable amount master demand
notes, and custodial receipts. Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of time at a stated
interest rate. Certificates of deposit are negotiable short-term obligations
issued by commercial banks or savings and loan associations against funds
deposited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is adjusted periodically
prior to their stated maturity based upon a specified market rate. A bankers'
acceptance is a time draft drawn on a commercial bank by a borrower usually in
connection with an international commercial transaction (to finance the import,
export, transfer, or storage of goods). The Fund will not concentrate more than
25% of its total assets in domestic bank obligations. Domestic bank obligations
include instruments that are issued by United States (domestic) banks; United
States branches of foreign banks, if such branches are subject to the same
regulations as United States banks; and foreign branches of United States banks,
if the Investment Adviser determines that the investment risk associated with
investing in instruments issued by such branches is the same as that of
investing in instruments issued by the United States parent bank, in that the
United States parent bank would be unconditionally liable in the event that the
foreign branch fails to pay on its instruments. Bank obligations entail varying
amounts of interest rate and credit risk, with the lowest-rated and
longest-dated bank obligations entailing the greatest risk of loss to the Fund.

CMOs--Collateralized Mortgage Obligations

The Fund may purchase collateralized mortgage obligations which are
derivatives that are collateralized by mortgage pass-through securities. Cash
flows from the mortgage pass-through securities are allocated to various
tranches (a "tranche" is essentially a separate security) in a predetermined,
specified order. Each tranche has a stated maturity - the latest date by which
the tranche can be completely repaid, assuming no prepayments - and has an
average life the average of the time to receipt of a principal payment weighted
by the size of the principal payment. The average life is typically used as a
proxy for maturity because the debt is amortized (repaid a portion at a time),
rather than being paid off entirely at maturity, as would be the case in a
straight debt instrument.

Corporates

The Fund may invest in corporates which are debt instruments issued by
private corporations. Bondholders, as creditors, have a prior legal claim over
common and preferred stockholders of the corporation as to both income and
assets for the principal and interest due to the bondholder. The Fund will buy
corporates subject to any quality constraints. If a security held by the Fund is
downgraded, the Fund may retain the security if the Investment Adviser deems
retention of the security to be in the best interests of the Fund.

Floaters

Floaters--Floating and Variable Rate Obligations are debt obligations
with a floating or variable rate of interest, i.e. the rate of interest varies
with changes in specified market rates or indices, such as the prime rate, or at
specified intervals. Certain floating or variable rate obligations may carry a
demand feature that permits the holder to tender them back to the issuer of the
underlying instrument, or to a third party, at par value prior to maturity.

Foreign Government and International and
Supranational Agency Debt Securities

The Fund may purchase U.S. dollar denominated debt obligations issued
or guaranteed by foreign governments or their subdivisions, agencies, and
instrumentalities, and debt obligations issued or guaranteed by international
agencies and supranational entities.

Investment Grade Debt Securities

The Fund may invest in investment grade securities that are those rated
by one or more NRSROs in one of the four highest rating categories at the time
of purchase (e.g. AAA, AA, A or BBB by Standard & Poor's, Fitch, Duff & Phelps,
or Aaa, Aa, A or Baa by Moody's). Securities rated BBB or Baa represent the
lowest of four levels of investment grade securities and are regarded as
borderline between definitely sound obligations and those in which the
speculative element begins to predominate. Mortgage-backed securities, including
mortgage pass-throughs and collateralized mortgage obligations (CMOs), deemed
investment grade by the Investment Adviser, will either carry a guarantee from
an agency of the U.S. Government or a private issuer of the timely payment of
principal and interest (such guarantees do not extend to the market value of
such securities or the net asset value per share of the Fund) or, in the case of
unrated securities, be sufficiently seasoned that they are considered by the
Investment Adviser to be investment grade quality. The Investment Adviser may
retain securities if their ratings fall below investment grade if it deems
retention of the security to be in the best interests of the Fund. The Fund may
hold unrated securities if the Investment Adviser considers the risks involved
in owning that security to be equivalent to the risks involved in holding an
Investment Grade Security.

Mortgage-Backed Securities and Asset-Backed Debt Securities

Mortgage-backed debt securities are secured or backed by mortgages or
other mortgage-related assets. Such securities may be issued by such entities as
Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"),
commercial banks, savings and loan associations, mortgage banks, or by issuers
that are affiliates of or sponsored by such entities. Other asset-backed
securities are secured or backed by assets other than mortgage-related assets,
such as automobile and credit card receivables, and are issued by such
institutions as finance companies, finance subsidiaries of industrial companies,
and investment banks. The Fund will purchase only asset-backed securities that
the Investment Adviser determines to be liquid. The Fund will not purchase
mortgage backed or asset-backed securities that do not meet the above minimum
credit standards.

An important feature of mortgage-and asset-backed securities is that
the principal amount is generally subject to partial or total prepayment at any
time because the underlying assets (i.e., loans) generally may be prepaid at any
time. If an asset-backed security is purchased at a premium to par, a prepayment
rate that is faster than expected will reduce yield to maturity, while a
prepayment rate that is slower than expected will have the opposite effect of
increasing yield to maturity. Conversely, if an asset-backed security is
purchased at a discount, faster than expected prepayments will increase, while
slower than expected prepayments will decrease, yield to maturity. It should
also be noted that these securities may not have any security interest in the
underlying assets, and recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.

Municipal Debt Securities

The Fund may, from time to time, purchase municipal debt securities when, in the
Investment Adviser's opinion, such instruments will provide a greater return
than taxable instruments of comparable quality. It is not anticipated that such
securities will ever represent a significant portion of the Fund's assets. Fund
distributions that are derived from interest on municipal debt securities will
be taxable to shareholders in the same manner as distributions derived from
taxable debt securities.

Preferred Stock

The Fund may invest in preferred stock which is non-voting ownership
shares in a corporation which pay a fixed or variable stream of dividends.

Repurchase Agreements
Repurchase agreements are transactions by which the Fund purchases a
security and simultaneously commits to resell that security to the seller (a
bank or securities dealer) at an agreed upon price on an agreed upon date
(usually within seven days of purchase). The resale price reflects the purchase
price plus an agreed upon market rate of interest which is unrelated to the
coupon rate or date of maturity of the purchased security. Such agreements
permit the Fund to keep all its assets at work while retaining overnight
flexibility in pursuit of investments of a longer term nature. The Investment
Adviser will continually monitor the value of the underlying collateral to
ensure that its value, including accrued interest, always equals or exceeds the
repurchase price.

When-lssued and Forward Commitment
Securities

The Fund may purchase securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. In such
transactions, instruments are bought with payment and delivery taking place in
the future in order to secure what is considered to be an advantageous yield or
price at the time of the transaction. Delivery of and payment for these
securities may take more than a month after the date of the purchase commitment,
but will take place no more than 120 days after the trade date. No income
accrues prior to delivery on securities that have been purchased pursuant to a
forward commitment or on a when-issued basis. However, interest is generated on
the short-term investments that are segregated for the settlement of these
securities. At the time the Fund enters into a transaction on a when-issued or
forward commitment basis, a segregated account consisting of cash or liquid
securities equal to the value of the when-issued or forward commitment
securities will be established in the Fund and maintained in the Fund and will
be marked to market daily. A short term investment in this segregated account
may not have a duration that exceeds 180 days. Forward commitments, or delayed
deliveries, are deemed to be outside the normal corporate settlement structure.
They are subject to segregation requirements; however, when a forward commitment
purchase is made to close a forward commitment sale, or vice versa, the
difference between the two may be netted for segregation purposes until
settlement date.

Zero Coupon Debt Securities

The Fund may invest in zero coupon debt securities (bonds that pay no
interest but are originally sold at an original issue discount). Because they do
not pay interest until maturity, zero coupon securities tend to be subject to
greater fluctuation of market value in response to changes in interest rates
than interest-paying securities of similar maturities.

INVESTMENT LIMITATIONS

The Fund may not:

(1) borrow money (including entering into
reverse repurchase agreements);

(2)make loans except that it may enter
into Repurchase Agreements;

(3)invest more than 25% of the total assets of the Fund in the securities of
issuers having their principal activities in any particular industry, except for
tax-exempt obligations issued or guaranteed by the U.S. government, its
agencies, GSE's, instrumentalities or by any state, territory or any possession
of the United States or any of their authorities, agencies, instrumentalities or
political subdivisions, or with respect to repurchase agreements collateralized
by any of such obligations. For purposes of this restriction, supranational
issuers will be considered to comprise an industry as will each foreign
government that issues securities purchased by the Fund. In the case of Asset
Backed Securities, the industry will be defined by the underlying assets in each
trust. (For example, credit card receivables and auto loans would each be
considered separate industries); and

(4) invest the cash securing a forward commitment in mortgage backed
securities in investments that have a duration exceeding 180 days.

The limitations contained above may be changed only with the
affirmative vote of the holders of a majority of the Fund's outstanding voting
securities, as defined in the Investment Company Act of 1940. The percentage
limitations contained above as well as elsewhere in this Prospectus and in the
Statement of Additional Information apply only at the time of purchase and the
Fund will not be required to dispose of securities upon subsequent fluctuations
in market value.

The Fund has the following non-fundamental investment policies:

(1) it will not invest in the securities of any company which has a primary line
of business in the manufacture and sale of tobacco products;

(2) the Intermediate Fixed Income Fund will not engage in the strategy
of establishing or rolling forward TBA mortgage commitments; and

(3) the Intermediate Fixed Income Fund will not, at the time of
purchase, invest more than 15% of its net assets in securities rated BBB by
Standard & Poor's, Duff & Phelps, or Fitch
or Baa by Moody's.

Investment policies that are non-fundamental may be changed at any time
by the Board of Directors of the Fund and do not require shareholder approval.

<PAGE>

The financial highlights table is intended to help you understand the
financial performance for the period of the Fixed Income Fund's operations.
Certain information reflects financial results for a simple Fixed Income Fund
share. The total returns in the tables represent the rate that an investor would
have earned (or lost) on an investment in the Fixed Income Fund, assuming
reinvestment of all dividends and distributions. This information has been
audited by Ernst & Young, whose report, along with the Fund's financial
statements, are included in the Annual Report, which is available upon request.

============================================================================================================================
Fixed Income Fund*
FINANCIAL HIGHLIGHTS
(in whole dollars except where otherwise indicated)

============================================================================================================================
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD Period From 12/30/97** to
10/31/98
- ---------------------------------------------------------------------------------------------- =============================
Per Share Data
Net asset value at beginning of period $10.00
- ---------------------------------------------------------------------------------------------- =============================
Increases From Investment Operations
Net investment income 0.21
Net realized gains on investments 0.46
============================================================================================== =============================
Total from investment operations 0.67
- ---------------------------------------------------------------------------------------------- =============================
Less Distributions
Distributions from net investment income (0.41)
- ---------------------------------------------------------------------------------------------- =============================
Net asset value at end of period $10.26
- ---------------------------------------------------------------------------------------------- =============================
Total Return (a) 6.87%
============================================================================================== =============================
Ratios/Supplemental Data
Net assets, end of period (000's) $43,899
Ratio of expenses to average net assets (b) 0.45%
Ratio of expenses to average net assets before expense waivers 1.03%
And reimbursements of other expenses (b)
Ratio of net investment income to average net assets (b) 5.17%
Portfolio Turnover Rate 478%
============================================================================================== =============================
</TABLE>

(a) Not annualized
(b) Annualized
* The name of the Portfolio was changed on June 10, 1999 by the Board of
Directors from SAMCO Fixed Income Portfolio to SAMCO Aggregate Fixed
Income Fund.
** Commencement of operations

<PAGE>

This Prospectus contains a concise statement of information investors should
know before they invest in the Fund. Please retain this Prospectus for future
reference. Additional information about the Fund's investments is available in
the Fund's annual and semi-annual reports to shareholders, as well as the
Statement of Additional Information (SAI). The SAI provides more detailed
information about the Portfolios, including their operations and investment
policies. A current SAI is on file with the Securities and Exchange Commission
and is incorporated by reference and is legally considered a part of this
Prospectus. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.

The Fund's SAI, annual, semi-annual reports, and other information are
available, without charge, upon request by contacting Investors Capital
Services, Inc., a branch office of AMT Capital Securities, L.L.C., 600 Fifth
Avenue, New York, NY 10020 at their toll free telephone number (800) 762-4848
[or (212) 332-5211, if within New York City].

Information about the Fund (including the SAI) can be reviewed and copied at the
Commission's Public Reference Room in Washington D.C. Information on the
operation of the public reference room may be obtained by calling the Commission
at 1-800-SEC-0330. Reports and other information about the Fund are available on
the Commission's Internet site at http://www.sec.gov. Copies of this information
may be obtained, upon payment of a duplicating fee, by writing the Public
Reference Section of the Commission, Washington D.C. 20549-6009.

Fund's Investment Company Act File
number: 811-8323.

STATEMENT OF ADDITIONAL INFORMATION
(Class A shares only)

SAMCO Funds, Inc.
SAMCO AGGREGATE FIXED INCOME FUND
SAMCO Intermediate Fixed income
FUND
600 Fifth Avenue, 26th Floor
New York, New York 10020
(212) 332-5211

SAMCO Aggregate Fixed Income Fund (the "Fixed Income Fund") and SAMCO
Intermediate Fixed Income Fund (the "Intermediate Fixed Income Fund") are
investment portfolios of SAMCO Funds, Inc. (the "Fund") an open-end management
investment company. Shares of each of the Portfolios of the Fund may be
purchased through Investors Capital Services, Inc., a branch office of AMT
Capital Securities, LLC. (the "Distributor").

This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of the Fund, dated June 14, 1999 (the
"Prospectus"), which has been filed with the Securities and Exchange Commission
(the "Commission") and can be obtained, without charge, by calling or writing
the Distributor at the telephone number or address stated below. This Statement
of Additional Information incorporates by reference the Prospectus.

Distributed by: AMT Capital Securities, LLC.
600 Fifth Avenue, 26th Floor
New York, New York 10020
(212) 332-5211
(800) 762-4848 (outside New York City)

The date of this Statement of Additional Information is June 14, 1999

<PAGE>

TABLE OF CONTENTS PAGE

Organization of the Fund 1
Management of the Fund 1
Investment adviser and advisory agreements 2
Administrator 3
Control persons and principal holders of securities 3
Distribution of fund shares 4
Supplemental description of investments 4
Supplemental descriptions of risks 6
Investment restrictions 12
Portfolio turnover 13
Portfolio transactions 13
Tax considerations 13
Shareholder information 15
Service providers 16
Organization and description of capital stock 16
Calculation of performance data 17
Quality rating descriptions 17
Financial statements 19

<PAGE>

ORGANIZATION OF THE FUND

The authorized capital stock of the Fund consists of 2,500,000,000
shares with $.001 par value. Every share issued by the Fund has equal voting
rights; shareholders receive one vote for each share held. All shares issued and
outstanding are fully paid and non-assessable, transferable, and redeemable at
their net asset value at the option of the shareholder. Shares have no
preemptive or conversion rights.

The shares of the Fund have non-cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
Directors can elect 100% of the Directors if they choose to do so, and, in such
event, the holders of the remaining less than 50% of the shares voting for the
election of Directors will not be able to elect any person or persons to the
Board of Directors.

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS AND OFFICERS

The Fund is managed by its Board of Directors. The Directors and
officers of the Fund and their principal occupations during the past five years
are set forth below. An asterisk (*) has been placed next to the name of each
director who is an "interested person" of the Fund, as such term is defined in
the Investment Company Act of 1940, as amended (the "1940 Act"), by virtue of
his affiliation with the Fund or the Fund's investment adviser, Seix Investment
Advisors Inc. (the "Investment Adviser").

Name, Address and Age Office Principal Occupation During Past Five Years
*Christina Seix Director Seix Investment Advisors Inc., Chairman and Chief
300 Tice Blvd. Investment Officer 1992-Present
Woodcliff Lake, NJ 07675
Age: 48
*John G. Talty Director Seix Investment Advisors Inc., President 1993-Present
300 Tice Blvd.
Woodcliff Lake, NJ 07675
Age: 40
*Peter J. Bourke Director Seix Investment Advisors Inc.,Managing Director 1993-Present
300 Tice Blvd. Assistant Secretary
Woodcliff Lake, NJ 07675
Age: 47
John R. O'Brien Director Retired
275 Manor Road
Ridgewood, NJ 07450
Age: 66
John E. Manley, Sr. Director Consultant to Mutual of America
86505 Holmes April 1996- March 1997
Chapel Hill, NC 27514 Senior Vice President, Mutual of America
Age: 64 July 1985-March 1996
Carla E. Dearing Assistant Treasurer Investors Capital Services, Inc., (Formerly AMT Capital
Investors Capital Services, Inc. Services, Inc.), President, 1/92 - present; AMT Capital
600 Fifth Avenue, 26th Floor Advisers, Inc., Principal and Senior Vice President, 1/92 -
New York, NY 10020 5/98; Morgan Stanley & Co., Vice President, 11/88 - 1/92.
Age: 35
William E. Vastardis Treasurer, Secretary Investors Capital Services, Inc., (Formerly AMT Capital
Investors Capital Services, Inc. Services, Inc.), Managing Director 7/92 - present; Vanguard
600 Fifth Avenue, 26th Floor Group Inc., Vice President, 1/87 - 4/92.
New York, NY 10020
Age: 41

</TABLE>

No employee of the Investment Adviser nor the Distributor receives any
compensation from the Fund for acting as an officer or director of the Fund. The
Fund pays each director who is not a director, officer or employee of the
Investment Adviser or the Distributor or any of their affiliates, a fee of $500
for each meeting attended, and each of the Directors receive an annual retainer
of $1,000 which is paid in quarterly installments.

Director's Compensation Table
Fiscal Year Ended October 31, 1998

Director Aggregate Compensation Pension -or Estimated Total Compensation
From Registrant Retirement Benefits Annual From Registrant
Accrued As Part of benefits Upon and Fund Complex
Fund Expenses Retirement Paid to Directors
John E. Manley, Sr. $2,500 $0 $0 $2,500
John R. O'Brien $2,500 $0 $0 $2,500

</TABLE>

By virtue of the responsibilities assumed by the Investment Adviser and the
Distributor and their affiliates under their respective agreements with the
Fund, the Fund itself requires no employees in addition to its officers.

Directors and officers of the Fund collectively owned less than 1% of the Fund's
outstanding shares as of October 31, 1998.

<PAGE>

INVESTMENT ADVISER AND ADVISORY
AGREEMENTS

Seix Investment Advisors Inc., established in 1992, is a registered
investment adviser that specializes in professional fixed income management for
corporations, public funds, endowments, foundations and hospitals. Christina
Seix may be deemed a "controlling person" of the Investment Adviser on the basis
of her ownership of the Investment Adviser's stock.

Pursuant to the terms of the advisory agreements between each Portfolio
of the Fund and the Investment Adviser (the "Advisory Agreements"), the
Investment Adviser, subject to the control and supervision of the Fund's Board
of Directors and in conformance with the stated investment objectives and
policies of each Portfolio of the Fund, shall manage the investment and
reinvestment of the assets of the Fund. In this regard, it is the responsibility
of the Investment Adviser to make investment decisions for the Fund and to place
the Fund's purchase and sales orders for investment securities.

The Advisory Agreements shall remain in effect for two years following
its date of execution and thereafter will automatically continue for successive
annual periods, so long as such continuance is specifically approved at least
annually by (a) the Board of Directors or (b) the vote of a "majority" (as
defined in the 1940 Act) of a Portfolio's outstanding shares voting as a single
class; provided, that in either event the continuance is also approved by at
least a majority of the Board of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Investment Adviser by vote cast in
person at a meeting called for the purpose of voting on such approval.

The Advisory Agreements are terminable without penalty on not less than
60 days' notice by the Board of Directors or by a vote of the holders of a
majority of a Portfolio's outstanding shares voting as a single class, or upon
not less than 60 days' notice by the Investment Adviser. The Advisory Agreements
will terminate automatically in the event of their "assignment" (as defined in
the 1940 Act).

The Investment Adviser pays all of its expenses arising from the
performance of its obligations under the Advisory Agreements, including all
executive salaries and expenses of the directors and officers of the Fund who
are employees of the Investment Adviser or its affiliates, and office rent of
the Fund. Subject to the expense reimbursement provisions described in the
Prospectus under "Fund Expenses," other expenses incurred in the operation of
the Fund are borne by each Portfolio of the Fund, including, without limitation,
investment advisory fees, brokerage commissions, interest, fees and expenses of
independent attorneys, auditors, custodians, accounting agents, transfer agents,
taxes, cost of stock certificates and any other expenses (including clerical
expenses) of issue, sale, repurchase or redemption of shares, expenses of
registering and qualifying shares of the Fund under federal and state laws and
regulations, expenses of printing and distributing reports, notices and proxy
materials to existing shareholders, expenses of printing and filing reports and
other documents filed with governmental agencies, expenses of annual and special
shareholders' meetings, fees and expenses of Directors of the Fund who are not
employees of the Investment Adviser or its affiliates, membership dues in the
Investment Company Institute, insurance premiums and extraordinary expenses such
as litigation expenses.

As compensation for its services, the Investment Adviser receives
monthly compensation at the annual rate of 0.25% of the average daily net assets
of each Portfolio of the Fund. The Investment Adviser may waive all or part of
its fee from time to time in order to increase the net income available for
distribution to shareholders of a Portfolio of the Fund. The Fund will not be
required to reimburse the Investment Adviser for any advisory fees waived. In
addition, the Investment Adviser and the Administrator have voluntarily agreed
to limit the total expenses of Class A Shares of each Portfolio of the Fund
[(excluding taxes, interest, brokerage, and extraordinary expenses)] to an
annual rate of 0.45% of the Fund's average daily net assets for an indefinite
time period. As long as this temporary expense limitation continues, it may
lower a Portfolio's expenses and increase its total return. In the event the
Investment Adviser and/or the Administrator remove the expense cap, a
Portfolio's expenses may increase and its total return may be reduced depending
on the total assets of the Portfolio of the Fund.

The Advisory Agreement of the Fixed Income Fund was approved on October
9, 1997 by the Fund's Directors, including a majority of the Directors who are
not interested persons (as defined in the 1940 Act) of the Fund or the
Investment Adviser. The Advisory Agreement of the Intermediate Fixed Income Fund
was approved on June 10, 1999 by the Fund's Directors, including a majority of
the Directors who are not interested persons of the Fund or the Investment
Adviser.

For the period beginning December 30, 1997 to October 31, 1998, the amount of
advisory fees (net of waivers and reimbursements) paid by the Fixed Income Fund
was $0. The Intermediate Fixed Income Fund has not commenced investment
operations yet and has not incurred any advisory fees.

ADMINISTRATOR

The administration agreement (the "Administration Agreement") between
the Fund and Investors Capital Services, Inc., the "Administrator," will remain
in effect for a period of five successive annual periods. The Administrator
provides for, or assists in managing and supervising all aspects of, the general
day-to-day business activities and operations of the Fund other than investment
advisory activities, including custodial, transfer agency, dividend disbursing,
accounting, auditing, compliance and related services. The Fund pays the
Administrator a monthly fee at the annual rate of 0.15% of the Fund's average
daily net assets and the Administrator is entitled to reimbursement from the
Fund for its out-of-pocket expenses incurred under the Administration Agreement.

For the period beginning December 30, 1997 to October 31, 1998, the
amount of administration fees (net of waivers and reimbursements) paid by the
Fund was $41,667.

CONTROL PERSONS and PRINCIPAL HOLDERS OF SECURITIES

As of May 30, 1999, the following shareholders were deemed to be a "control
person" of the Fund as such term is defined in the 1940 Act.

Name and Address of Nature of Beneficial Percent
Title of Class Beneficial Owner Ownership of Fixed Income Fund
-------------- ----------------- ---------- ------------

Class A Shares of Common American College of Cardiology 911 Direct Ownership 45.9%
Stock, $.001 per Share Old Georgetown Road, Bethesda, MD
20814

As of May 30, 1999, the following persons held 5 percent or more of the
outstanding shares of the Class A shares of the Fixed Income Fund:

Name and Address of Nature of Beneficial Percent of Fixed
Title of Class Beneficial Owner Ownership Income Fund

Class A Shares of Common American College of Cardiology 911 Direct Ownership 45.9%
Stock, $.001 per Share Old Georgetown Road, Bethesda, MD
20814
Class A Shares of Common Regional Transportation Authority Direct Ownership 24.2%
Stock, $.001 per Share Pension Plan P O Box 1443, Chicago
IL 60690-1443
Class A Shares of Common ENRON Direct Ownership 14.4%
Stock, $.001 per Share Corporation PO
Box 92956, Chicago, IL 60675
Class A Shares of Common NOITU Individual Account Pension Direct Ownership 9.0%
Stock, $.001 per Share Plan 148-06 Hillside Ave. Jamaica,
NY11435

</TABLE>

The amount of shares of the Fund owned by all the officers, directors, and
members of the advisory board of the Fund as a group own is less than 1% of the
Fund's outstanding securities.

DISTRIBUTION OF FUND SHARES

Shares of the Fund are distributed by the Distributor pursuant to the
distribution agreement (the "Distribution Agreement") between the Fund and the
Distributor, which is subject to the approval of the Fund's Board of Directors.
No fees are payable by the Fund pursuant to the Distribution Agreement, and the
Distributor bears the expense of its distribution activities. The Fund and the
Distributor have agreed to indemnify one another against certain liabilities.

SUPPLEMENTAL DESCRIPTIONS OF
INVESTMENTS

The investment objective of the Fixed Income Fund is to provide
investors with a total return which consistently exceeds the total return of the
broad U.S. investment grade bond market as measured by the Lehman Brothers
Aggregate Bond Index. The investment objective of the Intermediate Fixed Income
Fund is to provide investors with a total return which consistently exceeds the
total return of the intermediate portion of the broad U.S. investment grade bond
market as measured by the Lehman Brothers Intermediate Government Corporate
Index. The different types of securities in which a Portfolio of the Fund may
invest, subject to its investment objective, policies and restrictions, are
described in the Prospectus under "Descriptions of Investments." Additional
information concerning the characteristics of certain of the investments of a
Portfolio of the Fund is set forth below. Each Portfolio of the Fund is
permitted to invest in the same types of securities. Any reference to the term
Fund in the following section is intended to include both Portfolios of the
Fund.

Bank Obligations. The Fund limits its investments in
U.S. bank obligations to obligations of U.S. banks that in
the Investment Adviser's opinion meet sufficient creditworthiness
criteria.

The Fund limits its investments in foreign bank obligations to
obligations of foreign banks (including U.S. branches of foreign banks) that, in
the opinion of the Investment Adviser, are of an investment quality comparable
to obligations of U.S. banks in which the Fund may invest.

Eurodollar and Yankee Obligations. Eurodollar bank
obligations are dollar-denominated certificates of deposit and time
deposits issued outside the U.S. capital markets by foreign
branches of U.S. banks and by foreign banks. Yankee bank
obligations are dollar- denominated obligations issued in
the U.S. capital markets by foreign banks.

Investment Funds. The Fund is permitted to invest in investment funds
and will make such investments only where appropriate given that the Fund's
shareholders will bear indirectly the layer of expenses of the underlying
investment funds in addition to their proportionate share of the expenses of the
Fund.

Mortgage-Backed Securities.
Mortgage-backed securities are securities which represent ownership
interests in, or are debt obligations secured entirely or primarily by,
"pools" of residential or commercial mortgage loans or other
mortgage-backed securities (the "Underlying Assets"). In the case
of mortgage-backed securities representing ownership interests
in the Underlying Assets, the principal and interest payments on
the underlying mortgage loans are distributed monthly to the holders
of the mortgage-backed securities. In the case of
mortgage-backed securities representing debt obligations
secured by the Underlying Assets, the principal and interest
payments on the underlying mortgage loans, and any
reinvestment income thereon, provide the funds to pay debt
service on such mortgage-backed securities.

Certain mortgage-backed securities represent an undivided fractional
interest in the entirety of the Underlying Assets (or in a substantial portion
of the Underlying Assets, with additional interests junior to that of the
mortgage-backed security), and thus have payment terms that closely resemble the
payment terms of the Underlying Assets.

In addition, many mortgage-backed securities are issued in multiple
classes. Each class of such multi-class mortgage-backed securities ("MBS"),
often referred to as a "traunche", is issued at a specific fixed or floating
coupon rate and has a stated maturity or final distribution date. Principal
prepayment on the Underlying Assets may cause the MBSs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all or most classes of the MBSs on a periodic
basis, typically monthly or quarterly. The principal of and interest on the
Underlying Assets may be allocated among the several classes of a series of a
MBS in many different ways. In a relatively common structure, payments of
principal (including any principal prepayments) on the Underlying Assets are
applied to the classes of a series of a MBS in the order of their respective
stated maturities so that no payment of principal will be made on any class of
MBSs until all other classes having an earlier stated maturity have been paid in
full.

Municipal Instruments. Municipal notes may include such instruments as
tax anticipation notes, revenue anticipation notes, and bond anticipation notes.
Municipal notes are issued by state and local governments and public authorities
as interim financing in anticipation of tax collections, revenue receipts or
bond sales. Municipal bonds, which may be issued to raise money for various
public purposes, include general obligation bonds and revenue bonds. General
obligation bonds are backed by the taxing power of the issuing municipality and
are considered the safest type of bonds. Revenue bonds are backed by the
revenues of a project or facility such as the tolls from a toll bridge.
Industrial development revenue bonds are a specific type of revenue bond backed
by the credit and security of a private user. Revenue bonds are generally
considered to have more potential risk than general obligation bonds.

Municipal obligations can have floating, variable or fixed rates. The
value of floating and variable rate obligations generally is more stable than
that of fixed rate obligations in response to changes in interest rate levels.
Variable and floating rate obligations usually carry rights that permit the Fund
to sell them at par value plus accrued interest upon short notice. The issuers
or financial intermediaries providing rights to sell may support their ability
to purchase the obligations by obtaining credit with liquidity supports. These
may include lines of credit, which are conditional commitments to lend, and
letters of credit, which will ordinarily be irrevocable, both issued by domestic
banks or foreign banks which have a branch, agency or subsidiary in the United
States. When considering whether an obligation meets the Fund's quality
standards, the Investment Adviser will look at the creditworthiness of the party
providing the right to sell as well as to the quality of the obligation itself.

Municipal securities may be issued to finance private activities, the
interest from which is an item of tax preference for purposes of the federal
alternative minimum tax. Such "private activity" bonds might include industrial
development revenue bonds, and bonds issued to finance such projects as solid
waste disposal facilities, student loans or water and sewage projects

Other Asset-Backed Securities.
The Fund may invest in other asset-backed securities (unrelated to
mortgage loans) including securities backed by
automobile loans and credit card receivables.

Repurchase Agreements. When participating in repurchase agreements, the
Fund buys securities from a vendor (e.g., a bank or securities firm) with the
agreement that the vendor will repurchase the securities at the same price plus
interest at a later date. Repurchase agreements may be characterized as loans
secured by the underlying securities. Such transactions afford an opportunity
for the Fund to earn a return on available cash at minimal market risk, although
the Fund may be subject to various delays and risks of loss if the vendor
becomes subject to a proceeding under the U.S. Bankruptcy Code or is otherwise
unable to meet its obligation to repurchase. The securities underlying a
repurchase agreement will be marked to market every business day so that the
value of such securities is at least equal to the value of the repurchase price
thereof, including the accrued interest thereon.

In addition, repurchase agreements may also involve the securities of
certain foreign governments in which there is an active repurchase market. The
Investment Adviser expects that such repurchase agreements will primarily
involve government securities of countries belonging to the Organization for
Economic Cooperation and Development ("OECD"). Transactions in foreign
repurchase agreements may involve additional risks.

U.S. Treasury and U.S. Government Agency Securities.
U.S. Government Securities include instruments issued by the U.S.
Treasury, including bills, notes and bonds. These instruments are
direct obligations of the U.S. Government and, as such, are
backed by the full faith and credit of the United States. They
differ primarily in their interest rates, the lengths of their
maturities and the dates of their issuances. In addition, U.S.
Government Securities include securities issued by instrumentalities of the
U.S. Government, such as the Government National Mortgage Association
("GNMA"), which are also backed by the full faith and credit of the
United States. U.S. Government Agency Securities include
instruments issued by instrumentalities established or sponsored by the U.S.
Government, such as the Student Loan Marketing Association ("SLMA"), the
Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). While these securities are issued,
in general, under the authority of an Act of Congress, the U.S.
Government is not obligated to provide financial support to the
issuing instrumentalities.

Variable Amount Master Demand Notes. Variable amount master demand
notes permit the investment of fluctuating amounts at varying rates of interest
pursuant to direct arrangements between the Fund (as lender) and the borrower.
These notes are direct lending arrangements between lenders and borrowers, and
are generally not transferable, nor are they ordinarily rated by either Moody's
Investors Service, Inc., Standard & Poor's Corporation, Fitch Investors Service,
Inc., or Duff & Phelps Credit Rating Co.

Zero Coupon Securities and Custodial Receipts. Zero coupon securities
include securities issued directly by the U.S. Treasury, and U.S. Treasury bonds
or notes and their unmatured interest coupons and receipts for their underlying
principal (the "coupons") which have been separated by their holder, typically a
custodian bank or investment brokerage firm. A holder will separate the interest
coupons from the underlying principal (the "corpus") of the U.S. Treasury
security. A number of securities firms and banks have stripped the interest
coupons and receipts and then resold them in custodial receipt programs with a
number of different names, including "Treasury Income Growth Receipts" ("TIGRS")
and "Certificate of Accrual on Treasuries" ("CATS"). The underlying U.S.
Treasury bonds and notes themselves are held in book-entry form at the Federal
Reserve Bank or, in the case of bearer securities (i.e., unregistered securities
which are owned ostensibly by the bearer or holder thereof), in trust on behalf
of the owners thereof. Counsel to the underwriters of these certificates or
other evidences of ownership of the U.S. Treasury securities have stated that
for Federal tax and securities law purposes, in their opinion, purchasers of
such certificates, such as the Fund, most likely will be deemed the beneficial
holders of the underlying U.S. Treasury securities.

Recently, the Treasury has facilitated transfer of
ownership of zero coupon securities by accounting
separately for the beneficial ownership of particular interest
coupon and corpus payments on Treasury securities through the
Federal Reserve book-entry record-keeping system. The
Federal Reserve program as established by the Treasury
Department is known as "Separate Trading of Registered Interest and
Principal of Securities" ("STRIPS"). Under the STRIPS
program, the Fund can be able to have its beneficial ownership of
zero coupon securities recorded directly in the book-entry
record-keeping system in lieu of holding certificates or other
evidences of ownership of the underlying U.S. Treasury
securities.

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

SUPPLEMENTAL DISCUSSION OF RISKS
ASSOCIATED WITH THE FUND'S
INVESTMENT POLICIES AND INVESTMENT
TECHNIQUES

The risks associated with the different types of securities in which the Fund
may invest are described in the Prospectus under "Risks Associated With the
Fund's Investment Policies and Investment Techniques." Additional information
concerning risks associated with certain of a Portfolio's investments is set
forth below. Each Portfolio of the Fund is permitted to invest in the same types
of securities. Any reference to the term Fund in the following section is
intended to include both Portfolios of the Fund.

Eurodollar and Yankee Obligations. Eurodollar and Yankee obligations
are subject to the same risks that pertain to domestic issues, notably credit
risk, market risk and liquidity risk. Additionally, Eurodollar (and to a limited
extent, Yankee) obligations are subject to certain sovereign risks. One such
risk is the possibility that a sovereign country might prevent capital, in the
form of dollars, from flowing across their borders. Other risks include: adverse
political and economic developments; the extent and quality of government
regulation of financial markets and institutions; the imposition of foreign
withholding taxes; and the expropriation or nationalization of foreign issuers.

Futures contracts. The Fund may enter into contracts for the purchase
or sale for future delivery (a "futures contract") of fixed-income securities or
foreign currencies, or contracts based on financial indices including any index
of U.S. Government Securities, foreign government securities or corporate debt
securities. U.S. futures contracts have been designed by exchanges which have
been designated as "contracts markets" by the CFTC, and must be executed through
a futures commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on a number of exchange
markets and, through their clearing corporations, the exchanges guarantee
performance of the contracts as between the clearing members of the exchange.
The Fund will enter into futures contracts that are based on debt securities
that are backed by the full faith and credit of the U.S. Government, such as
long-term U.S. Treasury Bonds, Treasury Notes, GNMA-modified pass-through
mortgage-backed securities and three-month U.S. Treasury Bills.

The Fund would purchase or sell futures contracts to attempt to protect
the U.S. dollar-equivalent value of its securities from fluctuations in interest
or foreign exchange rates without actually buying or selling securities or
foreign currency. For example, if the Fund expected the value of a foreign
currency to increase against the U.S. dollar, the Fund might enter into futures
contracts for the sale of that currency. Such a sale would have much the same
effect as selling an equivalent value of foreign currency. If the currency did
increase, the value of the securities in the portfolio would decline, but the
value of the futures contracts to the Fund would increase at approximately the
same rate, thereby keeping the net asset value of the Fund from declining as
much as it otherwise would have.

Although futures contracts by their terms call for the actual delivery
or acquisition of securities or currency, in most cases the contractual
obligation is fulfilled before the date of the contract without having to make
or take delivery of the securities or currency. The offsetting of a contractual
obligation is accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for delivery in the
same month. Such a transaction, which is effected through a member of an
exchange, cancels the obligation to make or take delivery of the securities or
currency. Since all transactions in the futures market are made, offset or
fulfilled through a clearinghouse associated with the exchange on which the
contracts are traded, the Fund will incur brokerage fees when it purchases or
sells futures contracts.

At the time a futures contract is purchased or sold, the Fund must
allocate cash or securities as a deposit payment ("initial margin"). It is
expected that the initial margin on U.S. exchanges may range from approximately
3% to approximately 15% of the value of the securities or commodities underlying
the contract. Under certain circumstances, however, such as periods of high
volatility, the Fund may be required by an exchange to increase the level of its
initial margin payment. Additionally, initial margin requirements may be
increased generally in the future by regulatory action. An outstanding futures
contract is valued daily and the payment in cash of "variation margin" may be
required, a process known as "marking to the market." Each day the Fund will be
required to provide (or will be entitled to receive) variation margin in an
amount equal to any decline (in the case of a long futures position) or increase
(in the case of a short futures position) in the contract's value since the
preceding day.

Futures contracts entail special risks. Among other things, the
ordinary spreads between values in the cash and futures markets, due to
differences in the character of these markets, are subject to distortions
relating to (1) investors' obligations to meet additional variation margin
requirements, (2) decisions to make or take delivery, rather than entering into
offsetting transactions and (3) the difference between margin requirements in
the securities markets and margin deposit requirements in the futures market.
The possibility of such distortion means that a correct forecast of general
market, foreign exchange rate or interest rate trends by the Investment Adviser
may still not result in a successful transaction.

Although the Investment Adviser believes that use of such contracts and
options thereon will benefit the Fund, if the Investment Adviser's judgment
about the general direction of securities market movements, foreign exchange
rates or interest rates is incorrect, the Fund's overall performance would be
poorer than if it had not entered into any such contracts or purchased or
written options thereon. For example, if the Fund had hedged against the
possibility of an increase in interest rates which would adversely affect the
price of debt securities held in its portfolio and interest rates decreased
instead, the Fund would lose part or all of the benefit of the increased value
of its assets which it had hedged because it would have offsetting losses in its
futures positions. In addition, particularly in such situations, if the Fund has
insufficient cash, it may have to sell assets from its portfolio to meet daily
variation margin requirements. Any such sale of assets may, but will not
necessarily, be at increased prices which reflect the rising market.
Consequently, the Fund may have to sell assets at a time when it may be
disadvantageous to do so.

The Fund's ability to establish and close out positions in futures
contracts and options on futures contracts will be subject to the development
and maintenance of a liquid market. Although the Fund generally will purchase or
sell only those futures contracts and options thereon for which there appears to
be a liquid market, there is no assurance that a liquid market on an exchange
will exist for any particular futures contract or option thereon at any
particular time. Where it is not possible to effect a closing transaction in a
contract to do so at a satisfactory price, the Fund would have to make or take
delivery under the futures contract or, in the case of a purchased option,
exercise the option. In the case of a futures contract that the Fund has sold
and is unable to close out, the Fund would be required to maintain margin
deposits on the futures contract and to make variation margin payments until the
contract is closed.

Under certain circumstances, exchanges may establish daily limits in
the amount that the price of a futures contract or related option contract may
vary either up or down from the previous day's settlement price. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit. The daily limit governs only price movements
during a particular trading day and therefore does not limit potential losses
because the limit may prevent the liquidation of unfavorable positions. Futures
or options contract prices could move to the daily limit for several consecutive
trading days with little or no trading and thereby prevent prompt liquidation of
positions and subject some traders to substantial losses.

Buyers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the use of futures generally. In addition, there
are risks associated with foreign currency futures contracts and their use as
hedging devices similar to those associated with options on foreign currencies
described above. Further, settlement of a foreign currency futures contract must
occur within the country issuing the underlying currency. Thus, the Fund must
accept or make delivery of the underlying foreign currency in accordance with
any U.S. or foreign restrictions or regulations regarding the maintenance of
foreign banking arrangements by U.S. residents and may be required to pay any
fees, taxes or charges associated with such delivery that are assessed in the
country of the underlying currency.

Illiquid and Restricted Securities. Under the 1940 Act, the Fund may
invest up to 15% of the value of its assets in illiquid assets. Illiquid assets
are investments that are difficult to sell at the price at which such assets are
valued by the Fund within seven days of the date a decision to sell them is
made. Securities treated as illiquid assets include: over-the-counter options;
repurchase agreements, time deposits, and dollar roll transactions maturing in
more than seven days; loan participations; securities without readily available
market quotations, including interests in private commingled investment vehicles
in which the Fund might invest; and certain restricted securities. Iliiquid and
restricted securities, including private placements, are generally subject to
legal or contractual restrictions on resale. They can be eligible for purchase
without SEC registration by certain institutional investors known as "qualified
institutional buyers."

The Board of Directors of the Fund may consider certain restricted
securities (including but not limited to Rule 144A and Section 4(2) commercial
paper) liquid if such securities meet specified criteria established by the
Fund's Board of Directors. Due to the absence of an organized market for such
securities, interim valuations of the market value of illiquid securities used
in calculating Fund net asset values for purchases and redemptions can diverge
substantially from their true value, notwithstanding the application of
appraisal methods deemed appropriate and prudent by the Fund's Board and the
Fund's independent accountants. Due to possible restrictions on the
transferability of illiquid securities, forced liquidation of such securities to
meet redemption requests could produce large losses. Although, the 1940 Act
permits the Fund to invest up to 15% of its assets in these securities; the
Investment Adviser does not anticipate investing over 5% of the Fund's assets in
these securities.

Mortgage and Other Asset-Backed Securities. Prepayments on securitized
assets such as mortgages, automobile loans and credit card receivables
("Securitized Assets") generally increase with falling interest rates and
decrease with rising interest rates; furthermore, prepayment rates are
influenced by a variety of economic and social factors. In general, the
collateral supporting non-mortgage asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments. In addition to prepayment risk, borrowers on the underlying
Securitized Assets may default in their payments creating delays or loss of
principal.

Non-mortgage asset-backed securities involve certain risks that are not
presented by mortgage-backed securities. Primarily, these securities do not have
the benefit of a security interest in assets underlying the related mortgage
collateral. Credit card receivables are generally unsecured and the debtors are
entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due. Most issuers of
automobile receivables permit the servicers to retain possession of the
underlying obligations. If the servicer were to sell these obligations to
another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related automobile receivables. In
addition, because of the large number of vehicles involved in a typical issuance
and technical requirements under state laws, the trustee for the holders of the
automobile receivables may not have an effective security interest in all of the
obligations backing such receivables. Therefore, there is a possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.

Some forms of asset-backed securities are relatively new forms of
investments. Although the Fund will only invest in asset-backed securities that
the Investment Adviser believes are liquid, because the market experience in
certain of these securities is limited, the market's ability to sustain
liquidity through all phases of a market cycle may not have been tested.

Options on Foreign Currencies.
The Fund may purchase and sell (or write) put and call options
on foreign currencies to protect against a decline in the U.S.
dollar-equivalent value of its portfolio securities or payments
due thereon or a rise in the U.S. dollar-equivalent cost of
securities that it intends to purchase. A foreign currency put
option grants the holder the right, but not the obligation, at
a future date to sell a specified amount of a foreign currency to
its counterparty at a predetermined price. Conversely,
a foreign currency call option grants the holder the right, but
not the obligation, to purchase at a future date a specified
amount of a foreign currency at a predetermined price.

As in the case of other types of options, the benefit to the Fund
deriving from the purchase of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In addition, where currency
exchange rates do not move in the direction or to the extent anticipated, the
Fund could sustain losses on transactions in foreign currency options which
would require it to forego a portion or all of the benefits of advantageous
changes in such rates.

The Fund may write options on foreign currencies for hedging purposes.
For example, where the Fund anticipates a decline in the dollar value of foreign
currency denominated securities due to adverse fluctuations in exchange rates it
could, instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most likely not be
exercised, and the decrease in value of portfolio securities will be offset by
the amount of the premium received.

Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar costs of securities to be acquired, the Fund
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Fund to hedge such
increased costs up to the amount of the premium. As in the case of other types
of options, however, the writing of a foreign currency option will constitute
only a partial hedge up to the amount of the premium, and only if rates move in
the expected direction. If this movement does not occur, the option may be
exercised and the Fund would be required to purchase or sell the underlying
currency at a loss which may not be fully offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund also may be
required to forego all or a portion of the benefits that might otherwise have
been obtained from favorable movements in exchange rates.

Options on Futures Contracts. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security or currency. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying securities or currency, it may or may not be less
risky than ownership of the futures contract or the underlying securities or
currency. As with the purchase of futures contracts, when the Fund is not fully
invested it may purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates or a change in foreign exchange
rates.

The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the security or foreign currency which
is deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, the Fund will retain the
full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Fund's portfolio holdings. The writing of
a put option on a futures contract constitutes a partial hedge against
increasing prices of the security or foreign currency which is deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is higher than the exercise price, the Fund will retain the full amount
of the option premium which provides a partial hedge against any increase in the
price of securities which the Fund intends to purchase. If a put or call option
the Fund has written is exercised, the Fund will incur a loss that will be
reduced by the amount of the premium it receives. Depending on the degree of
correlation between changes in the value of its portfolio securities and changes
in the value of its futures positions, the Fund's losses from existing options
on futures may to some extent be reduced or increased by changes in the value of
portfolio securities.

The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, the Fund may purchase a put option on a futures contract to hedge its
portfolio against the risk of rising interest rates.

The amount of risk the Fund assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.

Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts is
relatively new. The ability to establish and close out positions in such options
is subject to the maintenance of a liquid secondary market. To mitigate this
problem, the Fund will not purchase or write options on foreign currency futures
contracts unless and until, in the Investment Adviser's opinion, the market for
such options has developed sufficiently that the risks in connection with such
options are not greater than the risks in connection with transactions in the
underlying foreign currency futures contracts. Compared to the purchase or sale
of foreign currency futures contracts, the purchase of call or put options
thereon involves less potential risk to the Fund because the maximum amount at
risk is the premium paid for the option (plus transaction costs). However, there
may be circumstances when the purchase of a call or put option on a foreign
currency futures contract would result in a loss, such as when there is no
movement in the price of the underlying currency or futures contract, when use
of the underlying futures contract would not.

Options on Securities. The Fund may also enter into closing sale
transactions with respect to options it has purchased. A put option on a
security grants the holder the right, but not the obligation, at a future date
to sell the security to its counterparty at a predetermined price. Conversely, a
call option on a security grants the holder the right, but not the obligation,
to purchase at a future date the security underlying the option at a
predetermined price.

The Fund would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio or securities it
intends to purchase. If the Fund purchased a put option and the value of the
security in fact declined below the strike price of the option, the Fund would
have the right to sell that security to its counterparty for the strike price
(or realize the value of the option by entering into a closing transaction), and
consequently would protect itself against any further decrease in the value of
the security during the term of the option.

Conversely, if the Investment Adviser anticipates that a security that
it intends to acquire will increase in value, it might cause the Fund to
purchase a call option on that security or securities similar to that security.
If the value of the security does rise, the call option may wholly or partially
offset the increased price of the security. As in the case of other types of
options, however, the benefit to the Fund will be reduced by the amount of the
premium paid to purchase the option and any related transaction costs. If,
however, the value of the security fell instead of rose, the Fund would have
foregone a portion of the benefit of the decreased price of the security in the
amount of the option premium and the related transaction costs.

The Fund would purchase put and call options on securities indices for
the same purposes as it would purchase options on securities. Options on
securities indices are similar to options on securities except that the options
reflect the change in price of a group of securities rather than an individual
security and the exercise of options on securities indices are settled in cash
rather than by delivery of the securities comprising the index underlying the
option.

Transactions by the Fund in options on securities and securities
indices will be governed by the rules and regulations of the respective
exchanges, boards of trade or other trading facilities on which the options are
traded.

Considerations Concerning Options. The writer of an option receives a
premium which it retains regardless of whether the option is exercised. The
purchaser of a call option has the right, for a specified period of time, to
purchase the securities or currency subject to the option at a specified price
(the "exercise price"). By writing a call option, the writer becomes obligated
during the term of the option, upon exercise of the option, to sell the
underlying securities or currency to the purchaser against receipt of the
exercise price. The writer of a call option also loses the potential for gain on
the underlying securities or currency in excess of the exercise price of the
option during the period that the option is open.

Conversely, the purchaser of a put option has the right, for a
specified period of time, to sell the securities or currency subject to the
option to the writer of the put at the specified exercise price. The writer of a
put option is obligated during the term of the option, upon exercise of the
option, to purchase securities or currency underlying the option at the exercise
price. A writer might, therefore, be obligated to purchase the underlying
securities or currency for more than their current market price or U.S. dollar
value, respectively.

The Fund may purchase and sell both exchange-traded and OTC options.
Currently, although many options on equity securities and options on currencies
are exchange-traded, options on debt securities are primarily traded in the
over-the-counter market. The writer of an exchange-traded option that wishes to
terminate its obligation may effect a "closing purchase transaction." This is
accomplished by buying an option of the same series as the option previously
written. Options of the same series are options with respect to the same
underlying security or currency, having the same expiration date and the same
exercise price. Likewise, an investor who is the holder of an option may
liquidate a position by effecting a "closing sale transaction." This is
accomplished by selling an option of the same series as the option previously
purchased. There is no guarantee that either a closing purchase or a closing
sale transaction can be effected.

An exchange-traded option position may be closed out only where there
exists a secondary market for an option of the same series. For a number of
reasons, a secondary market may not exist for options held by the Fund, or
trading in such options might be limited or halted by the exchange on which the
option is trading, in which case it might not be possible to effect closing
transactions in particular options the Fund has purchased with the result that
the Fund would have to exercise the options in order to realize any profit. If
the Fund is unable to effect a closing purchase transaction in a secondary
market in an option the Fund has written, it will not be able to sell the
underlying security or currency until the option expires or deliver the
underlying security or currency upon exercise or otherwise cover its position.

Exchange-traded options in the United States are issued by a clearing
organization affiliated with the exchange on which the option is listed which,
in effect, guarantees every exchange-traded option transaction. In contrast, OTC
options are contracts between the Fund and its counterparty with no clearing
organization guarantee. Thus, when the Fund purchases OTC options, it relies on
the dealer from which it purchased the OTC option to make or take delivery of
the securities underlying the option. Failure by the dealer to do so would
result in the loss of the premium paid by the Fund as well as the loss of the
expected benefit of the transaction. The Investment Adviser will only purchase
options from dealers determined by the Investment Adviser to be creditworthy.

Exchange-traded options generally have a continuous liquid market
whereas OTC options may not. Consequently, the Fund will generally be able to
realize the value of an OTC option it has purchased only by exercising it or
reselling it to the dealer who issued it. Similarly, when the Fund writes an OTC
option, it generally will be able to close out the OTC option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to which the Fund originally wrote the OTC option. Although the Fund will enter
into OTC options only with dealers that agree to enter into, and that are
expected to be capable of entering into, closing transactions with the Fund,
there can be no assurance that the Fund will be able to liquidate an OTC option
at a favorable price at any time prior to expiration. Until the Fund is able to
effect a closing purchase transaction in a covered OTC call option the Fund has
written, it will not be able to liquidate securities used as cover until the
option expires or is exercised or different cover is substituted. In the event
of insolvency of the counterparty, the Fund may be unable to liquidate an OTC
option. In the case of options written by the Fund, the inability to enter into
a closing purchase transaction may result in material losses to the Fund. For
example, since the Fund must maintain a covered position with respect to any
call option on a security it writes, the Fund may be limited in its ability to
sell the underlying security while the option is outstanding. This may impair
the Fund's ability to sell the Fund security at a time when such a sale might be
advantageous.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the options market until they
reopen. Because foreign currency transactions occurring in the interbank market
involve substantially larger amounts than those that may be involved in the use
of foreign currency options, investors may be disadvantaged by having to deal in
an odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.

The use of options to hedge the Fund's foreign currency-denominated
portfolio, or to enhance return raises additional considerations. As described
above, the Fund may, among other things, purchase call options on securities it
intends to acquire in order to hedge against anticipated market appreciation in
the price of the underlying security or currency. If the market price does
increase as anticipated, the Fund will benefit from that increase but only to
the extent that the increase exceeds the premium paid and related transaction
costs. If the anticipated rise does not occur or if it does not exceed the
amount of the premium and related transaction costs, the Fund will bear the
expense of the options without gaining an offsetting benefit. If the market
price of the underlying currency or securities should fall instead of rise, the
benefit the Fund obtains from purchasing the currency or securities at a lower
price will be reduced by the amount of the premium paid for the call options and
by transaction costs.

The Fund also may purchase put options on currencies or portfolio
securities when it believes a defensive posture is warranted. Protection is
provided during the life of a put option because the put gives the Fund the
right to sell the underlying currency or security at the put exercise price,
regardless of a decline in the underlying currency's or security's market price
below the exercise price. This right limits the Fund's losses from the
currency's or security's possible decline in value below the exercise price of
the option to the premium paid for the option and related transaction costs. If
the market price of the currency or the Fund's securities should increase,
however, the profit that the Fund might otherwise have realized will be reduced
by the amount of the premium paid for the put option and by transaction costs.

The value of an option position will reflect, among other things, the
current market price of the underlying currency or security, the time remaining
until expiration, the relationship of the exercise price to the market price,
the historical price volatility of the underlying currency or security and
general market conditions. For this reason, the successful use of options as a
hedging strategy depends upon the ability of the Investment Adviser to forecast
the direction of price fluctuations in the underlying currency or securities
market.

Options normally have expiration dates of up to nine months. The
exercise price of the options may be below, equal to or above the current market
values of the underlying securities or currency at the time the options are
written. Options purchased by the Fund that expire unexercised have no value,
and therefore a loss will be realized in the amount of the premium paid (and
related transaction costs). If an option purchased by the Fund is in-the-money
prior to its expiration date, unless the Fund exercises the option or enters
into a closing transaction with respect to that position, the Fund will not
realize any gain on its option position.

The Fund's activities in the options market may result in higher
portfolio turnover rates and additional brokerage costs. Nevertheless, the Fund
may also save on commissions and transaction costs by hedging through such
activities rather than buying or selling securities or foreign currencies in
anticipation of market moves or foreign exchange rate fluctuations.

Repurchase Agreements. The use of repurchase agreements involves
certain risks. For example, if the seller of the agreements defaults on its
obligation to repurchase the underlying securities at a time when the value of
these securities has declined, the Fund may incur a loss upon disposition of
them. If the seller of the agreement becomes insolvent and subject to
liquidation or reorganization under the Bankruptcy Code or other laws, a
bankruptcy court may determine that the underlying securities are collateral not
within the control of the Fund and therefore subject to sale by the trustee in
bankruptcy. Finally, it is possible that the Fund may not be able to
substantiate its interest in the underlying securities. While the Fund's
management acknowledges these risks, it is expected that they can be controlled
through stringent security selection criteria and careful monitoring procedures.

INVESTMENT RESTRICTIONS

The Fund has adopted the investment restrictions listed below relating to the
investment of each Portfolio of the Fund's assets and its activities. These
investment restrictions apply to each Portfolio of the Fund. These are
fundamental policies that may not be changed without the approval of the holders
of a majority of the outstanding voting securities of the Fund (which for this
purpose and under the 1940 Act means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares). The Fund may not:
(1) borrow money, including entering into reverse repurchase agreements; (2)
make loans except that it may enter into repurchase agreements; (3) issue senior
securities; (4) purchase securities on margin (although deposits referred to as
"margin" will be made in connection with investments in futures contracts, as
explained above, and the Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of securities); (5)
underwrite securities of other issuers; (6) invest in companies for the purpose
of exercising control or management; (7) purchase or sell real estate (other
than marketable securities representing interests in, or backed by, real
estate); or (8) purchase or sell physical commodities or related commodity
contracts.

Whenever an investment policy or limitation states a maximum percentage of the
Fund's assets that may be invested in any security or other asset or sets forth
a policy regarding quality standards, such standard or percentage limitation
shall be determined immediately after and as a result of the Fund's acquisition
of such security or other asset. Accordingly, any later increase or decrease in
a percentage resulting from a change in values, net assets or other
circumstances will not be considered when determining whether that investment
complies with the Fund's investment policies and limitations.

The Fund's investment policies (other than its investment objective) are not
fundamental and may be changed by the Board of Directors of the Fund without the
approval of shareholders.

Illiquid Securities. The staff of the Commission has taken the position
that purchased OTC options and the assets used as cover for written OTC options
are illiquid securities. Therefore, the Fund has adopted an investment policy
pursuant to which it generally will not purchase or sell OTC options if, as a
result of such transaction, the sum of the market value of OTC options currently
outstanding that are held by the Fund, the market value of the underlying
securities covered by OTC call options currently outstanding that were sold by
the Fund and margin deposits on the Fund's existing OTC options on futures
contracts exceed 15% of the net assets of the Fund, taken at market value,
together with all other assets of the Fund that are illiquid or are not
otherwise readily marketable. This investment policy applies to each Portfolio
of the Fund. This policy as to OTC options is not a fundamental policy of the
Fund and may be amended by the Directors of the Fund without the approval of the
Fund's or the Fund's shareholders. However, the Fund will not change or modify
this policy prior to a change or modification by the Commission staff of its
position.

PORTFOLIO TURNOVER

Each Portfolio of the Fund may engage in portfolio trading when
considered appropriate, but short-term trading will not be used as the primary
means of achieving its investment objective. The portfolio turnover rate of the
Fixed Income Fund for the period ended October 31, 1998 was 478%. However, there
are no limits on the rate of portfolio turnover, and investments may be sold
without regard to length of time held when, in the opinion of the Investment
Adviser, investment considerations warrant such actions. Higher portfolio
turnover rates, such as rates in excess of 400%, and short-term trading involve
correspondingly greater commission expenses and transactions costs. Further,
high turnover rates, such as rates in excess of 400%, generate higher short-term
capital gains. For a more detailed description of short-term capital gain
treatment, please refer to the section entitled "Tax Considerations."

PORTFOLIO TRANSACTIONS

The debt securities in which each Portfolio of the Fund invests are
traded primarily in the over-the-counter market by dealers who are usually
acting as principal for their own account. On occasion, securities may be
purchased directly from the issuer. Such securities are generally traded on a
net basis and do not normally involve either brokerage commissions or transfer
taxes. Each Portfolio of the Fund enters into financial futures and options
contracts which normally involve brokerage commissions.

The cost of executing transactions will consist primarily of dealer
spreads. The spread is not included in the expenses of a Portfolio of the Fund
and therefore is not subject to the expense cap described above under
"Investment Adviser and Advisory Agreement"; nevertheless, the incurrence of
this spread, ignoring the other intended positive effects of each such
transaction, will decrease the total return of the Fund. However, the Investment
Adviser will buy one asset and sell another only if the Investment Adviser
believes it is advantageous to do so after considering the effect of the
additional custodial charges and the spread on a Portfolio's total return.

All purchases and sales will be executed with major dealers and banks
on a best net price basis. No trades will be executed with the Investment
Adviser, their affiliates, officers or employees acting as principal or agent
for others, although such entities and persons may be trading contemporaneously
in the same or similar securities.

For the period beginning December 30, 1997 and ending October 31, 1998,
the amount of brokerage commissions paid by the
Fixed Income Fund was $0.

TAX CONSIDERATIONS

The following summary of tax consequences, which does not purport to be
complete, is based on U.S. federal tax laws and regulations in effect on the
date of this Statement of Additional Information, which are subject to change by
legislative or administrative action.

Qualification as a Regulated Investment Company

The Fixed Income Fund has qualified, and intends to continue
to qualify, to be treated as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended (the
"Code"). The Intermediate Fixed Income Fund intends to qualify as
a RIC. In order for a Portfolio to qualify as a RIC it must, among
other things:
a. derive at least 90% of its gross
income each taxable year, from dividends, interest, payments (with
respect to securities loans and gains from the sale or
other disposition of securities or foreign currencies) or other income
(including gains from options, futures or forward
contracts) derived from its business of investing in
securities or foreign currencies (the "Qualifying Income Requirement");
b. diversify its holdings so that, at the end of each quarter of the
Portfolio's taxable year:
i) at least 50% of the Portfolio's asset market value is represented by
cash and cash items (including receivables), U.S. Government Securities,
securities of other RICs and other securities, with such other securities of
any one issuer limited to an amount not greater than 5% of the value of the
Portfolio's total assets and not greater than 10% of the outstanding voting
securities of such issuer and
ii) not more than 25% of the value of the Portfolio's total assets is
invested in the securities of any one issuer (other than U.S. Government
Securities or the securities of other RICs); and
c. distribute at least 90% of its investment company taxable income (which
includes, among other items, interest and net short-term capital gains in
excess of net long-term capital losses).

The U.S. Treasury Department has the authority to promulgate regulations,
pursuant to which, gains from foreign currency (and options, futures and forward
contracts on foreign currency) not directly related to a RIC's principal
business of investing in stocks and securities would not be treated as
qualifying income. To date, such regulations have not been promulgated.

If a Portfolio does not qualify as a RIC for any taxable year, all of
its taxable income will be taxed to the Portfolio at corporate
rates. For each taxable year the Portfolio qualifies as a RIC, it
will not be subject to federal income tax on that part of its
investment company taxable income and net capital gains (the excess
of net long-term capital gain over net short-term capital loss) it
distributes to its shareholders. In addition, to avoid a
nondeductible 4% federal excise tax, the Portfolio must distribute
during each calendar year an amount at least equal to the sum
of :
a. 98% of its ordinary income (not taking into account any
capital gains or losses), determined on a
calendar year basis;
b. 98% of its capital gains in excess of capital losses, determined
in general on an October 31 year-end basis; and any undistributed amounts
from previous years.

Each active Portfolio intends to distribute all of its net income and gains by
automatically reinvesting such income and gains in additional Portfolio shares.
Each active Portfolio will monitor its compliance with all of the rules set
forth in the preceding paragraph.

Distributions
Generally, shareholders will be treated as if the Portfolio had
distributed income and gains to them and they reinvested such amounts
in Portfolio shares--even though no cash distributions have been
made to shareholders. The distribution of ordinary
income and net realized short-term Portfolio capital gains will be
taxable to shareholders as ordinary income. Each Portfolio's
distribution of any net long-term capital gains designated
as capital gain dividends by the Portfolio will be taxable to the
shareholders as long-term capital gain. This is the case regardless
of how long they have held their shares. None of the amounts
treated as distributed to a Portfolio's shareholders will be
eligible for the corporate dividends received deduction. A
distribution will be treated as paid on December 31 of the current
calendar year, if the Portfolio:
a. declares it during October, November or December, and
b. the distribution has a record date in such a month, and
c. it is paid by the Portfolio during January of the following calendar
year. Such distributions will be
taxable to shareholders in the calendar year in which the distributions are
declared, rather than in the calendar year in which the distributions are
received. Each Portfolio will inform shareholders of the amount and tax
status of all amounts treated as distributed to them in a calendar year in
January of the following calendar year.

Sale of Shares
Upon the sale or other disposition of Portfolio shares, or upon receipt of a
distribution in complete liquidation of a Portfolio, a shareholder usually will
realize a capital gain or loss. This loss may be long-term or short-term,
generally depending upon the shareholder's holding period for the shares. For
tax purposes, a loss will be disallowed on the sale or exchange of shares if the
disposed of shares are replaced (including shares acquired pursuant to a
dividend reinvestment plan) within a period of 61 days. The 61 day time window
begins 30 days before and ends 30 days after the sale or exchange of such
shares. Should a disposition fall within this 61 day window, the basis of the
acquired shares will be adjusted to reflect the disallowed loss. Any loss
realized by the shareholder on its disposition of Fund shares held by the
shareholder for six months or less, will be treated as a long term capital loss,
to the extent of any distributions of net capital gains deemed received by the
shareholder, with respect to such shares.

Zero Coupon Securities A Portfolio's investment in zero coupon securities will
result in Portfolio income, equal to a portion of the excess of the amortized
face value of the securities over their issue price (the "original issue
discount"), prior amortized value or purchased cost for each year that the
securities are held. This is so, even though the Portfolio receives no cash
interest payments during the holding period. This income is included when
determining the amount of income the Portfolio must distribute to maintain its
status as a RIC and to avoid the payment of Federal income tax and the 4% excise
tax.

Backup Withholding A Portfolio may be required to withhold U.S. federal income
tax at the rate of 31% of all amounts deemed to be distributed as a result of
the automatic reinvestment by the Portfolio of its income and gains in
additional shares of the Portfolio. The 31% rate applies to shareholders
receiving redemption payments who:
a. fail to provide the Portfolio with their correct taxpayer
identification number;
b. fail to make required certifications,
c. have been notified by the Internal Revenue Service that they are
subject to backup withholding.

Backup withholding is not an additional tax. Any amounts withheld will be
credited against a shareholder's U.S. federal income tax liability. Corporate
shareholders and certain other shareholders are exempt from such backup
withholding.

Foreign Shareholders
A foreign shareholder, qualifying
as a non-resident alien, a foreign
trust or estate, foreign
corporation, or foreign
partnership ("foreign
shareholder") may have to pay U.S.
tax depending on whether the
Portfolio income is "effectively
connected" with a U.S. trade or
business carried on by the shareholders.

If a foreign shareholder's
Portfolio income is not "effectively
connected" with a U.S. trade or
business, the distributions of
investment company taxable income
will be subject to a U.S. tax of
30% (or lower treaty rate).

If a foreign shareholder's
Portfolio income is effectively
connected with a U.S. trade or
business, then:
a. distributions of investment
company taxable income,
b. capital gain dividends, and
c. any gain realized upon the
redemption, sale or exchange of shares
of the Portfolio
will be subject to U.S. Federal
income tax at the graduated rates
applicable to U.S. citizens or
domestic corporations. Such
shareholders may also be subject
to the branch profits tax at a 30%
rate.

The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may differ from those described herein. Foreign
shareholders are advised to consult their own tax advisers regarding investment
tax consequences in a Portfolio.

Other Taxes
A Portfolio may be subject to state, local or foreign taxes in any jurisdiction
where the Portfolio is deemed to be doing business. In addition, Portfolio
shareholders may be subject to state, local or foreign taxes on Portfolio
distributions. In many states, Portfolio distributions derived from interest on
certain U.S. Government obligations may be exempt from taxation. Shareholders
should consult their own tax advisers concerning these matters.

SHAREHOLDER INFORMATION

Certificates representing shares of each Portfolio of the Fund will not
be issued to shareholders. Investors Bank & Trust Company, the Fund's transfer
agent (the "Transfer Agent"), will maintain an account for each shareholder upon
which the registration and transfer of shares are recorded, and any transfers
shall be reflected by bookkeeping entry, without physical delivery. Detailed
confirmations of each purchase or redemption are sent to each shareholder.
Monthly statements of account are sent which include shares purchased as a
result of a reinvestment of a Portfolio's distributions.

The Transfer Agent will require that a shareholder provide requests in
writing, accompanied by a valid signature guarantee form, when changing certain
information in an account (i.e., wiring instructions, telephone privileges,
etc.). Neither the Fund, the Administrator, nor the Transfer Agent will be
responsible for the validity of written or telephonic requests.

The Fund reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption of the Fund by making
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value
(redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting the securities to cash.

SERVICE PROVIDERS

Custodian and Accounting Agent
Investors Bank & Trust Company, 200 Clarendon Street, Boston, Massachusetts
02116, is Custodian and Accounting Agent for the Fund.

Transfer and Dividend Disbursing Agent
Investors Bank & Trust Company, 200 Clarendon Street, Boston, Massachusetts
02116, is Transfer Agent for the sheares of the Fund, and Dividend Disbursing
Agent for the Fund.

Legal Counsel
Dechert Price & Rhoads, 30 Rockefeller Plaza, New York, New York 10112, is legal
counsel for the Fund.

Independent Auditors
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, is the
independent auditor for the Fund. Ernst & Young LLP also renders accounting
services to the Investment Adviser.

ORGANIZATION AND DESCRIPTION OF
CAPITAL STOCK

The Fund was incorporated on August 4, 1997 as a Maryland corporation
and is authorized to issue 2,500,000,000 shares of Common Stock, $0.001 par
value. The Fund's shares have no preemptive, conversion, exchange or redemption
rights. Each share has equal voting, dividend, distribution and liquidation
rights. All shares of a class of the Fund, when duly issued, will be fully paid
and nonassessable. Shareholders are entitled to one vote per share. All voting
rights for the election of directors are noncumulative, which means that the
holders of more than 50% of the shares can elect 100% of the Directors then
nominated for election if they choose to do so and, in such event, the holders
of the remaining shares will not be able to elect any Directors. The foregoing
description is subject to the provisions contained in the Fund's Articles of
Incorporation and By-laws.

The Board of Directors is authorized to reclassify and issue any
unissued shares of the Fund without shareholder approval. Accordingly, in the
future, the Directors may create additional series of portfolios with different
investment objectives, policies and restrictions. Any issuance of shares of
another series would be governed by the 1940 Act and Maryland law.

The Fund also issues another class of shares which may have different
operating and other expenses. For more information about other classes of the
Fund's shares, investors should contact the Distributor at the address or phone
number set forth on the cover of this Statement of Additional Information.

<PAGE>

CALCULATION OF PERFORMANCE DATA

Each Portfolio may, from time to time, include the yield and total
return in reports to shareholders or prospective investors. Quotations of
yield for a Portfolio will be based on all investment income per share during a
particular 30-day (or one month) period (including dividends and interest),
less expenses accrued during the period ("net investment income"), and are
computed by dividing net investment income by the maximum, offering price
per share on the last day of the period, according to the following formula
which is prescribed by the Commission:

YIELD = 2[( a - b + 1)6 - 1]
cd

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

Quotations of average annual total return will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5 and 10 years (up to the life of the
Portfolio), calculated pursuant to the following formula which is prescribed
by the SEC:

P(1 + T)n = ERV

Where P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV =the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period.

All total return figures assume that all dividends are
reinvested when paid.

The total return as defined above for the Fixed Income Fund for the period
ended October 31, 1998, and since the commencement of operations
(December 30, 1997 to October 31, 1998) is as follows:

Since Inception: 6.87% (not
annualized)

QUALITY RATING DESCRIPTIONS

Standard & Poors Corporation

AAA. Bonds rated AAA are highest grade debt obligations.
This rating indicates an extremely strong capacity to pay principal
and interest.

AA. Bonds rated AA also qualify as high-quality
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from AAA
issues only in small degree.

A. Bonds rated A have a strong capacity to pay principal
and interest, although they are more susceptible to the adverse
effects of changes in circumstances and economic conditions.

BBB. Bonds rated BBB are regarded as having adequate capacity to pay
interest or principal. Although these bonds normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and principal.

The ratings AA to D may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.

Municipal notes issued since July 29, 1984 are designated "SP-1",
"SP-2", and "SP-3". The designation SP-1 indicates a very strong capacity to pay
principal and interest. A "+" is added to those issues determined to possess
overwhelming safety characteristics.

A-1. Standard & Poor's Commercial Paper ratings are current assessments
of the likelihood of timely payments of debts having original maturity of no
more than 365 days. The A-1 designation indicates the degree of safety regarding
timely payment is very strong.

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

Moody's Investors Service, Inc.

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

A. Bonds which are rated A possess many favorable investment attributes
and may 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. Baa rated bonds are considered 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.

Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. 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.

Moody's ratings for state and municipal and other short-term
obligations will be designated Moody's Investment Grade ("MIG"). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of the
first importance in long-term borrowing risk are of lesser importance in the
short run.

MIG-1. Notes bearing this designation are of the best quality enjoying
strong protection from established cash flows of funds for their servicing or
from established and broad-based access to the market for refinancing, or both.

MIG-2. Notes bearing this designation are of favorable quality, with
all security elements accounted for, but lacking the undeniable strength of the
previous grade. Market access for refinancing, in particular, is likely to be
less well established.

P-1. Moody's Commercial Paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. The designation "Prime-1" or "P-1" indicates
the highest quality repayment capacity of the rated issue.

P-2. Issuers have a strong capacity for repayment of short-term
promissory obligations.

Thomson Bankwatch, Inc.

A. Company possess an exceptionally strong balance sheet and earnings
record, translating into an excellent reputation and unquestioned access to its
natural money markets. If weakness or vulnerability exists in any aspect of the
company's business, it is entirely mitigated by the strengths of the
organization.

A/B. Company is financially very solid with a
favorable track record and no readily apparent weakness. Its
overall risk profile, while low, is not quite as favorable as
companies in the highest rating category.

IBCA Limited

A1. Short-term obligations rated A1 are supported by a very strong
capacity for timely repayment. A plus sign is added to those issues determined
to possess the highest capacity for timely payment.

FINANCIAL STATEMENTS

The Fund's audited Financial Statements, including the Financial Highlights, for
the period ended October 31, 1998 appearing in the Annual Report to Shareholders
and the report thereon of Ernst & Young LLP, independent auditors, appearing
therein are hereby incorporated by reference in this Statement of Additional
Information. The Annual Report to Shareholders is delivered with this Statement
of Additional Information to shareholders requesting this Statement of
Additional Information.

<PAGE>

The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is
not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.

SAMCO FUNDS, INC.

SAMCO AGGREGATE FIXED INCOME FUND CLASS B SHARES

Samco INTERMEDIATE FIXED INCOME FUND CLASS B SHARES

The SAMCO Aggregate Fixed Income Fund (the "Fixed Income Fund") and the SAMCO
Intermediate Fixed Income Fund (the "Intermediate Fixed Income Fund") are
non-diversified investment portfolios of the SAMCO Funds, Inc. an open-end
management investment company (the "Fund").

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.

The date of this Prospectus is June 14, 1999

<PAGE>

TABLE OF CONTENTS
PAGE
RISK/RETURN SUMMARY 1
FIXED INCOME FUND 1
INTERMEDIATE FIXED INCOME FUND 2
PRINCIPAL INVESTMENT RISKS 3
RISK/RETURN BAR CHARTS AND TABLES 4
RISK/RETURN SUMMARY: FEE TABLE 4
FUND MANAGEMENT 6
PURCHASE OF SHARES 7
REDEMPTION OF SHARES 7
ADDITIONAL INFORMATION 8
DESCRIPTION OF INVESTMENTS 10
INVESTMENT LIMITATIONS 12

<PAGE>

RISK/RETURN SUMMARY

FIXED INCOME FUND

Investment Management Approach: Seix Investment
Advisors Inc. (the "Investment Adviser") will
manage the Fixed Income Fund based on its fixed
income approach which is founded upon four
cornerstones:
1. Targeted Duration: The Fixed Income Fund will be managed with a
duration that is close to the duration of the LBA Benchmark. Value is
added through sector and security management.
2. Yield Tilt: Although the Fixed Income Fund is managed on a total
return basis, a premium is placed on income. Income
is considered the most powerful contributor to
fixed income returns. Non-Treasury sectors
generally play a dominant role in the Fixed Income
Fund.
3. Comprehensive Sector Construction: Sector
allocation is generally determined through a
research driven process, depending on value areas
within the fixed income market. Since the Fixed
Income Fund does not rake a duration position, the
Investment Adviser allows larger than average
allocations to different sectors. The Fixed Income
Fund will usually maintain an overweighting in
obligations of domestic or foreign corporations and
an underweighting of United States Treasury
securities, giving the Fixed Income Fund
potentially higher income than the LBA Benchmark
with accompanying risk.
4. Proprietary Analytics: Because of the
growing complexity of the bond market, the
Investment Adviser believes that the use of
financial investment techniques which it developed
internally is key to identifying value and to
adequately controlling risk.

INTERMEDIATE FIXED INCOME FUND

Investment Management Approach: The Investment
Adviser will manage the Intermediate Fixed Income Fund based on its
fixed income approach which is founded upon four cornerstones: 1.
Targeted Duration: The Intermediate Fixed Income Fund will be managed
with a duration that is close to the duration of the LBI Benchmark.
Value is added through sector and security management. 2. Yield Tilt:
Although the Intermediate Fixed Income Fund is managed on a total
return basis, a premium is placed on income. Income is considered the
most powerful contributor to fixed income returns. Non-Treasury sectors
generally play a dominant role in the Intermediate Fixed Income Fund.
3. Comprehensive Sector Construction: Sector allocation is generally
determined through a research driven process, depending on value areas
within the fixed income market. Since the Intermediate Fixed Income
Fund does not incur any duration risk, the Investment Adviser allows
larger than average allocations to different sectors. The Intermediate
Fixed Income Fund will usually maintain an overweighting in obligations
of domestic or foreign corporations and an underweighting of United
States Treasury securities, giving the Intermediate Fixed Income Fund
potentially higher income than the LBI Benchmark with accompanying
risk. 4. Proprietary Analytics: Because of the growing complexity of
the bond market, the firm believes that the use of financial investment
techniques which it developed internally is key to identifying value
and to adequately controlling risk.

<PAGE>

PRINCIPAL INVESTMENT RISKS

"Risk" is the chance that you may lose on an investment or that it will
not earn as much as you expect. In general, the greater the risk, the greater
the possibility of losing money. The possibility exists that investment
decisions of portfolio managers of the Fund will not accomplish what they are
designed to achieve. No assurance can be given that a Portfolio's investment
objective will be achieved.

Banking industry Investing in bank obligations will expose an investor to
risk: risks associated with the banking industry
such as interest rate and credit risks.

Credit risk: The risk that a security issuer or a counterparty to
a contract will default or not be able to honor a financial
obligation.

Non-diversification
risks: A portfolio is diversified when it spreads investment risk
by placing assets among a large number of investments.
A non-diversified portfolio concentrates its assets among
fewer securities. Non-diversification can intensify risk
should a particular investment suffer from adverse market
conditions.

POTENTIAL Year 2000 risk

RISK/RETURN BAR CHARTS AND TABLES
(Class A Shares of the Fixed Income Fund indicated)

During the 1 year period shown in the Fixed Income Fund's bar chart, the highest
quarterly return was 3.181% (quarter ending 9/30/98) and the lowest quarterly
return was 0.586% (quarter ending 12/31/98).

The Fixed Income Fund's total return for the period from 1/1/99 to 3/31/99 was
_0.098%.

The above chart gives overall returns for the calendar year 1/1/98 through
3/31/98

* Date of Inception of Class A Shares of the Fixed Income Fund: 12/30/1997
** The returns in the table are for shares in Class A of the Fixed Income
Fund which are not offered in this Prospectus. The Fixed Income Fund expects
that the annual returns of the Class B shares would be substantially similar
to the returns of Class A because both classes of shares invest in the
same portfolio of securities, and the returns would differ only to the extent
that the two classes of shares have different expenses. An example of the
different class fees are the 12b-1 fees in the amount of 0.25% of the average
daily net assets of the Fixed Income Fund which the Class B Shares have and
which the Class A Shares do not. The name of the Portfolio was changed on
June 10, 1999 by the Board of Directors from SAMCO Fixed Income Portfolio to
SAMCO Aggregate Fixed Income Fund.

We have not included the performance returns of the
Intermediate Fixed Income Fund since it has not commenced investment operations
yet.

RISK/RETURN SUMMARY: FEE TABLE

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

- ---------------------------------------------------------------- ------------------------ -------------------------------------
Shareholder Fees Fixed Income Fund Intermediate Fixed Income Fund
(Fees Paid Directly From Your Investment)
- ---------------------------------------------------------------- ------------------------ -------------------------------------
Sales Loads None None
Redemption Fees None None
Exchange Fee None None
Annual Fund Operating Expenses
(Fees Paid From Fund Assets)
Management Fees 0.25% 0.25%
Distribution (12b-1) and/or service Fees 0.25% 0.25%
Other Expenses (a) 0.78% 0.55%
Total Annual Fund Operating Expenses (b) 1.28% 1.05% (c)
- ---------------------------------------------------------------- ------------------------ -------------------------------------
</TABLE>

(a) Other Expenses include fees for shareholder services, custodial,
administration, dividend disbursing and transfer agency fees, legal and
accounting fees, printing costs and registration fees. (b) The Investment
Adviser and Administrator have voluntarily agreed to limit the total expenses of
the Fixed Income Fund and the Intermediate Fixed Income Fund (excluding
interest, taxes, brokerage and extraordinary expenses) to annual rates of 0.70%
of the Fund's average daily net assets for an indefinite time period. There is
no specific time period for how long the voluntary expense limitation will last,
and such waiver may be cancelled at any time. As long as these temporary expense
limitations continue, it may lower the Fixed Income Fund and Intermediate Fixed
Income Fund's expenses and increase their total returns. In the event the
Investment Adviser and Administrator remove such expense caps, the Fixed Income
Fund and Intermediate Fixed Income Fund's expenses may increase and their total
returns may be reduced depending on their total assets. For the fiscal year
ended October 31, 1998, the Investment Adviser and Administrator waived fees in
the amount of 0.58% in the Fixed Income Fund. (c) As the Intermediate Fixed
Income Fund has not commenced investment operations, these expenses are
estimates based upon the expected expenses that the Intermediate Fixed Income
Fund would incur in the current fiscal year.

Example. This example is intended to help you compare the
cost of investing in each of the Portfolios of the Fund with
the cost of investing in other mutual funds.
The example assumes that:
o You invest $10,000 in the Portfolio for the time periods indicated; o Your
investment has a 5% return each year; and o The Portfolio's operating expenses
remain the same.

The results apply whether or not you redeem your investment at the end of each
period. Although your costs may be higher or lower, based on these assumptions
your costs would be:

- ----------------------------------- ------------------------- ---------------------------------------
Fixed Income Fund Intermediate Fixed Income Fund
- ----------------------------------- ------------------------- ---------------------------------------
1 Year $130 $107
3 Years $406 $334
5 Years $702
10 Years $1545
- ----------------------------------- ------------------------- ---------------------------------------

</TABLE>

FUND MANAGEMENT

Board of Directors

The Board of Directors of the Company consists of
five individuals who are responsible for the overall
supervision of the operations of the Fund and perform the
various duties imposed on the directors of investment
companies by the 1940 Act. The Fund's Directors are
Christina Seix, John G. Talty, Peter J. Bourke, John E.
Manley, Sr., and John R. O'Brien. Additional information
about the Directors and the Fund's executive officers may be
found in the Statement of Additional Information under the
heading "Management of the Fund."

Investment Adviser
.
Seix Investment Advisors Inc., established in 1992, is a registered investment
adviser that specializes in professional fixed income management for
corporations, public funds, endowments, foundations and hospitals. The
Investment Adviser currently has approximately $3.6 billion in assets under
management. The Investment Adviser is located at 300 Tice Boulevard, Woodcliff
Lake, NJ 07675. Seix Investment Advisors Inc. acts as the investment adviser to
the Fund and provides the Fund with management and investment advisory services.
The advisory agreement with the Investment Adviser provides that, subject to the
direction of the Board of Directors of the Fund, the Investment Adviser is
responsible for the actual management of the Fund. The responsibility for making
decisions to buy, sell or hold a particular security rests with the Investment
Adviser, subject to review by the Board of Directors. The Investment Adviser
also is obligated to provide all the office space, facilities, equipment and
personnel necessary to perform its duties under the Advisory Agreement.

Payment of Fund Expenses

- --------------------------------------- ---------------
Fund Name Rate
- --------------------------------------- ---------------
- --------------------------------------- ---------------
Fixed Income Fund 0.25%
- --------------------------------------- ---------------
- --------------------------------------- ---------------
Intermediate Fixed Income Fund 0.25%
- --------------------------------------- ---------------

The Fund will be managed using a team approach with all of the portfolio
managers listed below contributing investment expertise in their respective
areas.

Portfolio Managers

John Talty, CFA, President & Senior Portfolio Manager
Formerly, Chief Fixed Income Strategist, J.P. Morgan
Securities
Total Investment Experience: 16 years
B.A., Connecticut College, Economics, Phi Beta Kappa, Magna
Cum Laude

Barbara Hoffmann, Managing Director and Senior Portfolio
Manager
Formerly, Senior Portfolio Manager, MetLife Investment
Management Co.
Total Investment Experience: 18 years
BS, University of Maine, Education/Mathematics

Michael McEachern, CFA, Director and Senior Portfolio Manager
Formerly, Vice President, Fixed Income, American General
Corp.
Total Investment Experience: 13 years
BA, University of California, Operations Research; MBA, Rice
University, Accounting/Public Administration

Joseph Calabrese, Director and Senior Portfolio Manager
Formerly, Director, Fixed Income, MetLife Insurance Company
Total Investment Experience: 10 years
BS, New Jersey Institute of Technology, Industrial
Engineering; MBA, New York University, Finance

Purchase Of Shares

There is no sales charge imposed by the Fund, nor does the Fund impose
sales commissions (loads). The minimum initial investment in the Fund is $1,000;
additional purchases may be of any amount.

The offering of shares of the Fund is continuous and purchases of shares of the
Fund may be made Monday through Friday, except for the holidays declared
by the Federal Reserve Banks of New York or Boston (a "Business Day"). At the
present time, these holidays are: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Memorial Day, Fourth of July, Labor Day, Columbus
Day, Veterans Day, Thanksgiving, and Christmas. The Fund's shares are
offered at a public offering price equal to the net asset value next determined
after receipt of a purchase order.

In order to purchase shares on a particular Business Day,subject to the offering
dates described above, a purchaser must submit a completed Account Application
Form (and other required documents) and call the Investors Capital Services,
Inc., a branch office of the Distributor at (800) 762-4848, or within the City
of New York, (212) 332-5211 prior to 4:00 p.m. Eastern time to inform the Fund
of the incoming wire transfer. If Federal funds are received by the Fund that
same day, the order will be effective on that day. If the Fund receives
notification on a non-business day, or after 4:00 p.m. Eastern time, or if
Federal funds are received by the Transfer Agent after 4:00 p.m. Eastern time,
such purchase order shall be deemed received as of the next business day. Shares
purchased will begin accruing dividends on the day Federal funds are received.

Investors Bank & Trust Company
Boston, MA
ABA # 011-001-438
Acct: 303030303
Benf: (Name of Portfolio)
F/F/C (Shareholder's Account at Fund)

Redemption Of Shares

The Fund will redeem all full and fractional shares of the Fund upon
request of shareholders. The redemption price is the net asset value per share
next determined after receipt by the Transfer Agent of proper notice of
redemption as described below. If such notice is received by the Transfer Agent
by 4:00 p.m. Eastern time on any Business Day, the redemption will be effective
on the date of receipt. If such notice of redemption is received by the Transfer
Agent after 4:00 p.m. Eastern time, the redemption of the shareholder shall be
effective on the following Business Day. Payment will ordinarily be made by wire
on the next Business Day but within no more than seven days from the date of
receipt. If the notice is received on a day that is not a Business Day or after
the above-mentioned cut-off times, the redemption notice will be deemed received
as of the next Business Day.

ADDITIONAL INFORMATION

Dividends and Distributions

Dividends are automatically reinvested in additional Class B shares of
the Fund on the last day of each month at the net asset value per share on the
last Business Day of that month unless shareholders indicate their desire to
receive dividends in cash (payable on the first Business Day of the following
month) on the Account Application Form. In the event that the Fund realizes net
long-term capital gains (i.e., with respect to assets held more than 18 months),
it will distribute them at least annually by automatically reinvesting (unless a
shareholder has elected to receive cash) such long-term capital gains in
additional shares of the Fund at the net asset value on the date the
distribution is declared.

Determination of Net Asset Value

Rule 12b-1 Plan

The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act. Under this Plan, the Fund may pay a quarterly distribution related
fee at an amount not to exceed 0.25% of the average daily value of the Fund's
net assets. Such amounts received under the Plan are to be used for payments to
qualifying dealers for their assistance in the distribution of the Fund's shares
and the provision of shareholder services and for other expenses such as
advertising costs and the payment for the printing and distribution of
prospectuses to prospective investors. Because these fees are paid out of the
Fund's assets on an on-going basis, over time these fees will increase the cost
of your investment and may cost you more than paying other types of sales
charges.

Taxes

Distributions paid by a Portfolio of the Fund from net investment
income are designated by the Portfolio as "ordinary income dividends" and,
whether paid in cash or reinvested in additional shares, will be taxable to
Portfolio shareholders that are otherwise subject to tax as ordinary income.
Distributions made from the Portfolio's net capital gain which are designated by
the Portfolio as "capital gains dividends" are taxable to shareholders as
long-term capital gains, regardless of the length of time the shareholder has
owned Fund shares. Each Portfolio of the Fund expects that its distributions
will represent primarily ordinary income to shareholders. Shareholders
receiving distributions from the Portfolio in the form of additional shares
will be treated for federal income tax purposes as
receiving a distribution in an amount equal to the net asset value of the
additional shares on the date of such a distribution. Each shareholder will
receive an annual statement detailing the tax status of Portfolio distributions
for each year.

Gain or loss, if any, recognized on the sale or other disposition of
shares of o Portfolio of the 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 1 year. A loss realized on a sale or exchange of shares may be
disallowed if other shares are acquired within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of.

DESCRIPTION OF INVESTMENTS

Each portfolio of the Fund may invest in the securities defined below
in accordance with their listing of allowable investments and any quality or
policy constraints.

Agencies

Bank Obligations

CMOs--Collateralized Mortgage Obligations

The Fund may purchase collateralized mortgage obligations which are
derivatives that are collateralized by mortgage pass-through securities. Cash
flows from the mortgage pass-through securities are allocated to various
tranches (a "tranche" is essentially a separate security) in a predetermined,
specified order. Each tranche has a stated maturity - the latest date by which
the tranche can be completely repaid, assuming no prepayments - and has an
average life - the average of the time to receipt of a principal payment
weighted by the size of the principal payment. The average life is typically
used as a proxy for maturity because the debt is amortized (repaid a portion at
a time), rather than being paid off entirely at maturity, as would be the case
in a straight debt instrument.

Corporates

Floaters

Foreign Government and International and Supranational
Agency Debt Securities

Investment Grade Debt Securities

Mortgage-Backed Securities and Asset-Backed Debt Securities

Municipal Debt Securities

The Fund may, from time to time, purchase municipal debt securities
when, in the Investment Adviser's opinion, such instruments will provide a
greater return than taxable instruments of comparable quality. It is not
anticipated that such securities will ever represent a significant portion of
the Fund's assets. Fund distributions that are derived from interest on
municipal debt securities will be taxable to shareholders in the same manner as
distributions derived from taxable debt securities.

Preferred Stock

The Fund may invest in preferred stock which is non-voting ownership
shares in a corporation which pay a fixed or variable stream of dividends.

When-lssued and Forward Commitment Securities

Zero Coupon Debt Securities

<PAGE>

INVESTMENT LIMITATIONS

The Fund may not:

(1) borrow money (including entering into reverse repurchase agreements);

(2) make loans except that it may enter into Repurchase Agreements;

(3) invest more than 25% of the total assets of the Fund in the securities of
issuers having their principal activities in any particular industry, except for
tax-exempt obligations issued or guaranteed by the U.S. government, its
agencies, GSE's, instrumentalities or by any state, territory or any possession
of the United States or any of their authorities, agencies, instrumentalities or
political subdivisions, or with respect to repurchase agreements collateralized
by any of such obligations. For purposes of this restriction, supranational
issuers will be considered to comprise an industry as will each foreign
government that issues securities purchased by the Fund. In the case of Asset
Backed Securities, the industry will be defined by the underlying assets in each
trust. (For example, credit card receivables and auto loans would each be
considered separate industries); and

(4) invest the cash securing a forward commitment in mortgage backed
securities in investments that have a duration exceeding 180 days.

The limitations contained above may be changed only with the
affirmative vote of the holders of a majority of the Fund's outstanding voting
securities, as defined in the Investment Act of 1940 as amended (the "1940
Act"). The percentage limitations contained above as well as elsewhere in
this Prospectus and in the Statement of Additional Information apply only at
the time of purchase and the Fund will not be required to dispose of securities
upon subsequent fluctuations in market value.

The Fund has the following non-fundamental investment policies:

(1) it will not invest in the securities of any company which has a primary
line of business in the manufacture and sale of tobacco products;

(2)the Intermediate Fixed Income Fund will not engage in the strategy of
establishing or rolling forward TBA mortgage commitments; and

(3)the Intermediate Fixed Income Fund will not, at the time of
purchase, invest more than 15% of its net assets in securities rated BBB by
Standard & Poor's, Duff & Phelps, or Fitch or Baa by Moody's.

Investment policies that are non-fundamental may be changed at any time
by the Board of Directors of the Fund and do not require shareholder approval.

Fund's Investment Company Act File number: 811-8323.

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
(Class B shares only)

SAMCO Funds, Inc.
SAMCO Aggregate Fixed Income Fund
SAMCO Intermediate Fixed income Fund
600 Fifth Avenue, 26th Floor
New York, New York 10020
(212) 332-5211

Distributed by: AMT Capital Securities, LLC.
600 Fifth Avenue, 26th Floor
New York, New York 10020
(212) 332-5211
(800) 762-4848 (outside New York City)

The date of this Statement of Additional Information is June 14, 1999

<PAGE>

TABLE OF CONTENTS

PAGE
Organization of the Fund 1
Management of the Fund 1
Investment adviser and advisory agreement 2
Administrator 3
Control persons and principal holders of securities 3
Distribution of fund shares 3
Supplemental description of investments 4
Supplemental descriptions of risks 6
Investment restrictions 12
Portfolio turnover 13
Portfolio transactions 13
Tax considerations 13
Shareholder information 15
Service providers 16
Organization and description of capital stock 16
Calculation of performance data 17
Quality rating descriptions 18

<PAGE>

ORGANIZATION OF THE FUND

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS AND OFFICERS

Name, Address and Age Office Principal Occupation During Past Five Years
*Christina Seix Director Seix Investment Advisors Inc., Chairman and Chief
300 Tice Blvd. Investment Officer 1992-Present
Woodcliff Lake, NJ 07675
Age: 48
*John G. Talty Director Seix Investment Advisors Inc., President 1993-Present
300 Tice Blvd.
Woodcliff Lake, NJ 07675
Age: 40
*Peter J. Bourke Director Seix Investment Advisors Inc., Managing Director 1993-Present
300 Tice Blvd. Assistant Secretary
Woodcliff Lake, NJ 07675
Age: 47
John R. O'Brien Director Retired
275 Manor Road
Ridgewood, NJ 07450
Age: 66
John E. Manley, Sr. Director Consultant to Mutual of America
86505 Holmes April 1996- March 1997
Chapel Hill, NC 27514 Senior Vice President, Mutual of America
Age: 64 July 1985-March 1996
Carla E. Dearing Assistant Treasurer Investors Capital Services, Inc., (formerly AMT Capital
Investors Capital Services, Inc. Services, Inc.), President, 1/92 - present; AMT Capital
600 Fifth Avenue, 26th Floor Advisers, Inc., Principal and Senior Vice President, 1/92 -
New York, NY 10020 5/98; Morgan Stanley & Co., Vice President, 11/88 - 1/92.
Age: 35
William E. Vastardis Treasurer, Secretary Investors Capital Services, Inc., (formerly AMT Capital
Investors Capital Services, Inc. Services, Inc.), Managing Director 7/92 - present; Vanguard
600 Fifth Avenue, 26th Floor Group Inc., Vice President, 1/87 - 4/92.
New York, NY 10020
Age: 41
</TABLE>

Director's Compensation Table
Fiscal Year Ended October 31, 1998

Director Aggregate Compensation Pension or Estimated Total Compensation
From Registrant Retirement Benefits Annual From Registrant
Accrued As Part of benefits and Fund Complex
Fund Expenses Upon Paid to Directors
Retirement
John E. Manley, Sr. $2,500 $0 $0 $2,500
John R. O'Brien $2,500 $0 $0 $2,500
</TABLE>

<PAGE>

INVESTMENT ADVISER AND ADVISORY
AGREEMENT

ADMINISTRATOR

The administration agreement (the "Administration Agreement") between
the Fund and Investors Capital Services, Inc., the "Administrator" will remain
in effect for a period of five successive annual periods. The Administrator
provides for, or assists in managing and supervising all aspects of, the general
day-to-day business activities and operations of the Fund other than investment
advisory activities, including custodial, transfer agency, dividend disbursing,
accounting, auditing, compliance and related services. The Fund pays the
Administrator a monthly fee at the annual rate of 0.15% of the Fund's average
daily net assets and the Administrator is entitled to reimbursement from the
Fund for its out-of-pocket expenses incurred under the Administration Agreement.

CONTROL PERSONS and PRINCIPAL
HOLDERS OF SECURITIES

As of May 30, 1999, there were no "control persons" nor "principal holders of
securities" in the Class B shares of the Fixed Income Fund as that term is
defined in the Investment Company Act of 1940, as amended.

DISTRIBUTION OF FUND SHARES

Distribution Agreement. Class B Shares of the Fund are distributed by
the Distributor pursuant to the distribution agreement (the "Distribution
Agreement") between the Fund and the Distributor, which is subject to the
approval of the Fund's Board of Directors. No fees are payable by the Fund
pursuant to the Distribution Agreement, and the Distributor bears the expense of
its distribution activities. The Fund and the Distributor have agreed to
indemnify one another against certain liabilities.

Distribution Plan. Each Portfolio of the Fund has adopted a
Distribution Plan and related agreements pursuant to Rule 12b-1 under the 1940
Act, which provides that investment companies may pay distribution expenses,
directly or indirectly, pursuant to a distribution plan adopted by the
investment company's board and approved by its shareholders. Under the
Distribution Plan, Class B Shares of each Portfolio of the Fund make assistance
payments to brokers, financial institutions and other financial intermediaries
("payee(s)") for shareholder accounts ("qualified accounts") as to which a payee
has rendered distribution assistance services to the Class B shares at an annual
rate of 0.25% of the average net asset value of the Class B shares.
Substantially all such monies are paid by the Investment Adviser to payees for
their distribution assistance with any remaining amounts being used to partially
defray other expenses incurred by the Investment Adviser in distributing each
Portfolio of the Fund's shares. In addition to the amounts required by the
Distribution Plan, the Investment Adviser may, in its discretion, pay additional
amounts from its own resources. The rate of any additional amounts that may be
paid will be based upon the Investment Adviser's analysis of the contribution
that a payee makes to the Class B Shares of each Portfolio of the Fund by
increasing assets under management and reducing expense ratios and the cost to
the Class B Shares of each Portfolio of the Fund if such services were provided
directly by the Class B Shares of each Portfolio of the Fund or other authorized
persons. The Investment Adviser will also consider the need to respond to
competitive offers of others, which could result in assets being withdrawn from
the Class B Shares of each Portfolio of the Fund and an increase in the expense
ratio for the Class B Shares of each Portfolio of the Fund. The Investment
Adviser may elect to retain a portion of the distribution assistance payments to
pay for sales material or other promotional activities. The Directors have
determined that there is a reasonable likelihood the Distribution Plan will
benefit the Class B Shares of each Portfolio of the Fund and its shareholders.

The Glass-Steagall Act prohibits all entities which receive deposits
from engaging to any extent in the business of issuing, underwriting, selling,
or distributing securities, although national and state chartered banks are
permitted to purchase and sell securities upon the order and for the account of
their customers. Those persons who wish to provide assistance in the form of
activities not primarily intended to result in the sale of Fund shares (such as
administrative and account maintenance services) may include banks, upon advice
of counsel that they are permitted to do so under applicable laws and
regulations, including the Glass-Steagall Act. In such event, no preference will
be given to securities issued by such banks as investments and the assistance
payments received by such banks under the Distribution Plan may or may not
compensate the banks for their administrative and account maintenance services
for which the banks may also receive compensation from the bank accounts they
service. It is Fund management's position that payments to banks pursuant to the
Distribution Plan for activities not primarily intended it result in the sale of
Fund shares, such as administrative and account maintenance services, do not
violate the Glass-Steagall Act. However, this is an unsettled area of the law
and if a determination contrary to management's position is made by a bank
regulatory agency or court concerning payments to banks contemplated by the
Distribution Plan, any such payments will be terminated and any shares
registered in the bank's name, for its underlying customer, will be registered
in the name of that customer. Financial institutions providing distribution
assistance or administrative services for the Fund may be required to register
as a securities dealer in certain states.

Under the Distribution Plan, the Fund's Controller or Treasurer reports
quarterly the amounts and purposes of assistance payments. During the
continuance of the Distribution Plan the selection and nomination of the
disinterested Directors are at the discretion of the disinterested Directors
currently in office.

The Distribution Plan and related agreements were duly approved by Class B
shareholders of each Portfolio and may be terminated at any time by a vote of a
majority of the outstanding voting securities or by vote of the disinterested
Directors. The Distribution Plan and related agreements may be renewed from year
to year if approved by a vote of the majority of the Board of Directors, and by
the vote of a majority of the disinterested Directors cast in person at a
meeting called for the purpose of voting on such renewal. The Distribution Plan
may not be amended to increase materially the amount to be spent for
distribution without Class B shareholder of each Portfolios' approval. All
material amendments to the Distribution Plan must be approved by a vote of the
Board of Directors and of the disinterested Directors, cast in person at a
meeting called for the purpose of such vote.

SUPPLEMENTAL DESCRIPTIONS OF
INVESTMENTS

The investment objective of the Fixed Income Fund is to provide investors with a
total return which consistently exceeds the total return of the broad U.S.
investment grade bond market as measured by the Lehman Brothers Aggregate Bond
Index. The investment objective of the Intermediate Fixed Income Fund is to
provide investors with a total return which consistently exceeds the total
return of the intermediate portion of the broad U.S. investment grade bond
market as measured by the Lehman Brothers Intermediate Government Corporate
Index. The different types of securities in which a Portfolio of the Fund may
invest, subject to its investment objective, policies and restrictions, are
described in the Prospectus under "Descriptions of Investments." Additional
information concerning the characteristics of certain of the investments of a
Portfolio of the Fund is set forth below. Each Portfolio of the Fund is
permitted to invest in the same types of securities. Any reference to the term
Fund in the following section is intended to include both Portfolios of the
Fund.

Bank Obligations.
The Fund limits its investments in U.S. bank obligations to
obligations of U.S. banks that in the Investment Adviser's opinion
meet sufficient creditworthiness criteria.

Eurodollar and Yankee
Obligations. Eurodollar bank obligations are dollar-denominated
certificates of deposit and time deposits issued outside the U.S.
capital markets by foreign branches of U.S. banks and by
foreign banks. Yankee bank obligations are dollar-
denominated obligations issued in the U.S. capital markets by
foreign banks.

Investment Funds. The Fund is permitted to invest in investment funds and will
make such investments only where appropriate given that the Fund's shareholders
will bear indirectly the layer of expenses of the underlying investment funds in
addition to their proportionate share of the expenses of the Fund.

Mortgage-Backed Securities.
Mortgage-backed securities are securities which represent ownership
interests in, or are debt obligations secured
entirely or primarily by, "pools" of residential or commercial
mortgage loans or other mortgage-backed securities (the
"Underlying Assets"). In the case of mortgage-backed securities
representing ownership interests in the Underlying Assets, the
principal and interest payments on the underlying mortgage loans are
distributed monthly to the holders of the mortgage-backed
securities. In the case of mortgage-backed securities
representing debt obligations secured by the Underlying Assets,
the principal and interest payments on the underlying
mortgage loans, and any reinvestment income thereon,
provide the funds to pay debt service on such mortgage-backed
securities.

Other Asset-Backed Securities.
The Fund may invest in other asset-backed securities (unrelated
to mortgage loans) including securities backed by
automobile loans and credit card receivables.

U.S. Treasury and U.S.
Government Agency Securities.
U.S. Government Securities include instruments issued by the U.S.
Treasury, including bills, notes and bonds. These instruments are
direct obligations of the U.S. Government and, as such, are
backed by the full faith and credit of the United States. They
differ primarily in their interest rates, the lengths of their
maturities and the dates of their issuances. In addition, U.S.
Government Securities include securities issued by
instrumentalities of the U.S. Government, such as the Government
National Mortgage Association ("GNMA"), which are also backed by
the full faith and credit of the United States. U.S. Government
Agency Securities include instruments issued by
instrumentalities established or sponsored by the U.S. Government,
such as the Student Loan Marketing Association ("SLMA"), the Federal
National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). While these securities are issued,
in general, under the authority of an Act of Congress, the U.S.
Government is not obligated to provide financial support to the
issuing instrumentalities.

SUPPLEMENTAL DISCUSSION OF RISKS
ASSOCIATED WITH THE FUND'S
INVESTMENT POLICIES AND INVESTMENT
TECHNIQUES

The risks associated with the different types of securities in which
the Fund may invest are described in the Prospectus under "Risks Associated With
the Fund's Investment Policies and Investment Techniques." Additional
information concerning risks associated with certain of a Portfolio's
investments is set forth below. Each Portfolio of the Fund is permitted to
invest in the same types of securities. Any reference to the term Fund in the
following section is intended to include both Portfolios of the Fund.

At the time a futures contract is purchased or sold, the Fund must
allocate cash or securities as a deposit payment ("initial margin"). It is
expected that the initial margin on U.S. exchanges may range from approximately
3% to approximately 15% of the value of the securities or commodities underlying
the contract. Under certain circumstances, however, such as periods of high
volatility, the Fund may be required by an exchange to increase the level of its
initial margin payment. Additionally, initial margin requirements may be
increased generally in the future by regulatory action. An outstanding futures
contract is valued daily and the payment in cash of "variation margin" may be
required, a process known as "marking to the market". Each day the Fund will be
required to provide (or will be entitled to receive) variation margin in an
amount equal to any decline (in the case of a long futures position) or increase
(in the case of a short futures position) in the contract's value since the
preceding day.

Options on Foreign Currencies. The Fund may purchase and sell (or
write) put and call options on foreign currencies to protect against a decline
in the U.S. dollar-equivalent value of its portfolio securities or payments due
thereon or a rise in the U.S. dollar-equivalent cost of securities that it
intends to purchase. A foreign currency put option grants the holder the right,
but not the obligation, at a future date to sell a specified amount of a foreign
currency to its counterparty at a predetermined price. Conversely, a foreign
currency call option grants the holder the right, but not the obligation, to
purchase at a future date a specified amount of a foreign currency at a
predetermined price.

INVESTMENT RESTRICTIONS

The Fund's investment policies (other than its investment objective) are not
fundamental and may be changed by the Board of Directors of the Fund without the
approval of shareholders.

PORTFOLIO TURNOVER

Each Portfolio of the Fund may engage in portfolio trading when
considered appropriate, but short-term trading will not be used as the primary
means of achieving its investment objective. Although each Portfolio of the Fund
cannot accurately predict its portfolio turnover rate, it is not expected to
exceed 400% in normal circumstances. However, there are no limits on the rate of
portfolio turnover, and investments may be sold without regard to length of time
held when, in the opinion of the Investment Adviser, investment considerations
warrant such actions. Higher portfolio turnover rates, such as rates in excess
of 400%, and short-term trading involve correspondingly greater commission
expenses and transactions costs. Further, high turnover rates, such as rates in
excess of 400%, generate higher short-term capital gains. For a more detailed
description of short-term capital gain treatment, please refer to the section
entitled "Tax Considerations."

PORTFOLIO TRANSACTIONS

usually acting as principal for their own account. On occasion,
securities may be purchased directly from the issuer. Such securities are
generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes. Each Portfolio of the Fund enters into financial
futures and options contracts which normally involve brokerage commissions.

TAX CONSIDERATIONS

Qualification as a Regulated Investment Company

Each active Portfolio has qualified, and intends to continue to qualify, to be
treated as a regulated investment company ("RIC") under the Internal Revenue
Code of 1986, as amended (the "Code"). To qualify as a RIC, a Portfolio must,
among other things:
a. derive at least 90% of its gross income each taxable year, from
dividends, interest, payments (with respect to securities loans
and gains from the sale or other disposition of securities or
foreign currencies) or other income (including gains from
options, futures or forward contracts) derived from its
business of investing in securities or foreign
currencies (the "Qualifying Income Requirement");

b. diversify its holdings so that, at the end of each quarter of the P
ortfolio's taxable year:
i) at least 50% of the
Portfolio's asset market value is represented by cash and cash items (including
receivables), U.S. Government Securities, securities of other RICs and other
securities, with such other securities of any one issuer limited to an amount
not greater than 5% of the value of the Portfolio's total assets and not greater
than 10% of the outstanding voting securities of such issuer and
ii) not more than 25% of the value of the Portfolio's total assets is
invested in the securities of any one issuer (other than U.S. Government
Securities or the securities of other RICs); and
c. distribute at least 90% of its investment company taxable income (which
includes, among other items, interest and net short-term capital gains in
excess of net long-term capital losses).

Each Portfolio intends to distribute all of its net income and gains each year.
Each active Portfolio will monitor its compliance with all of the rules set
forth in the preceding paragraph.

Distributions

Generally, shareholders will be treated as if the Portfolio had
distributed income and gains to them and they reinvested such amounts
in Portfolio shares--even though no cash distributions have been
made to shareholders. The distribution of ordinary
income and net realized short-term Portfolio capital gains will be
taxable to shareholders as ordinary income. Each Portfolio's
distibution of any net long-term capital gains designated
as capital gain dividends by the Portfolio will be taxable to the
shareholders as long-term capital gain. This is the case regardless
of how long they have held their shares. None of the amounts
treated as distributed to a Portfolio's shareholders will be
eligible for the corporate dividends received deduction. A
distribution will be treated as paid on December 31 of the current
calendar year, if the Portfolio:
a. declares it during October, November or December, and
b. the distribution has a record date in such a month, and
c. it is paid by the Portfolio during January of the following calendar
year. Such distributions will be
taxable to shareholders in the calendar year in which the distributions are
declared, rather than in the calendar year in which the distributions are
received. Each Portfolio will inform shareholders of the amount and tax
status of all amounts treated as distributed to them in a calendar year in
January of the following calendar year.

Sale of Shares
Upon the sale or other disposition of Portfolio shares, or upon receipt of a
distribution in complete liquidation of a Portfolio, a shareholder
usually will realize a capital gain or loss. This loss may be long-term
or short-term,
generally depending upon the shareholder's holding period for the shares. For
tax purposes, a loss will be disallowed on the sale or exchange of shares if the
disposed of shares are replaced (including shares acquired pursuant to a
dividend reinvestment plan) within a period of 61 days. The 61 day time window
begins 30 days before and ends 30 days after the date of the sale or
exchange of such shares. Should a disposition fall within this 61 day window,
the basis of the
acquired shares will be adjusted to reflect the disallowed loss. Any loss
realized by the shareholder on its disposition of Fund shares held by the
shareholder for six months or less, will be treated as a long term capital
loss, to the extent of any distributions of net capital gains deemed received
by the shareholder, with respect to such shares.

Foreign Shareholders
A foreign shareholder, qualifying as a non-resident alien, a foreign
trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder") may have to pay U.S.
tax depending on whether the Portfolio income is "effectively
connected" with a U.S. trade or business carried on by the shareholders.

If a foreign shareholder's Portfolio income is not "effectively
connected" with a U.S. trade or business, the distributions of
investment company taxable income will be subject to a U.S. tax of
30% (or lower treaty rate).

If a foreign shareholder's Portfolio income is effectively
connected with a U.S. trade or business, then:
a. distributions of investment company taxable income,
b. capital gain dividends, and
c. any gain realized upon the redemption, sale or exchange of shares
of the Portfolio will be subject to U.S. Federal income tax at the
graduated rates applicable to U.S. citizens or domestic
corporations. Such shareholders may also be subject
to the branch profits tax at a 30% rate.

SHAREHOLDER INFORMATION

The Transfer Agent will require that a shareholder provide requests in
writing, accompanied by a valid signature guarantee form, when changing certain
information in an account (i.e., wiring instructions, telephone privileges,
etc.). Neither the Fund, the Administrator, or the Transfer Agent will be
responsible for the validity of written or telephonic requests.

SERVICE PROVIDERS

Custodian and Accounting Agent
Investors Bak & Trust Company, 200 Clarendon Street, Boston, Massachusetts
02116, is Cusdodian and Accounting Agent for the Fund.

Transfer and Dividend Disbursing Agent
Investors Bank & Trust Company, 200 Clarendon Street, Boston, Massachusetts
02116, is Transfer Agent for the shares of the Fund, and Dividend Disbursing
Agent for the Fund.

Legal Counsel
Dechert Price & Rhoads, 30 Rockefeller Plaza, New York, New York 10112, is
legal counsel for the Fund.

ORGANIZATION AND DESCRIPTION OF
CAPITAL STOCK

CALCULATION OF PERFORMANCE DATA

Each Portfolio may, from time to time, include the yield and total
return in reports to shareholders or prospective investors. Quotations of
yield for a Portfolio will be based on all investment income per share during a
particular 30-day
(or one month) period (including dividends and interest), less expenses accrued
during the period ("net investment income"), and are computed by dividing net
investment income by the maximum, offering price per share on the last day of
the period, according to the following formula which is prescribed by the
Commission:

YIELD = 2[( a - b + 1)6 - 1]
cd

Quotations of average annual total return will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in a Portfolio over periods of 1, 5 and 10 years (up to the life of
the Portfolio), calculated pursuant to the following formula which is
prescribed by the SEC:

P(1 + T)n = ERV

All total return figures assume that all dividends are
reinvested when paid.

<PAGE>

QUALITY RATING DESCRIPTIONS

Standard & Poors Corporation

AAA. Bonds rated AAA are highest grade debt obligations.
This rating indicates an extremely strong capacity to pay
principal and interest.

AA. Bonds rated AA also qualify as high-quality
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from AAA
issues only in small degree.

A. Bonds rated A have a strong capacity to pay principal
and interest, although they are more susceptible to the adverse
effects of changes in circumstances and economic conditions.

The ratings AA to D may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.

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

Moody's Investors Service, Inc.

Baa. Baa rated bonds are considered 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.

P-2. Issuers have a strong capacity for repayment of short-term
promissory obligations.

Thomson Bankwatch, Inc.

IBCA Limited

A1. Short-term obligations rated A1 are supported by a very strong
capacity for timely repayment. A plus sign is added to those issues determined
to possess the highest capacity for timely payment.